THE LIBRARY OF THE UNIVERSITY OF CALIFORNIA LOS ANGELES SCH0((5pftL/^ bender-Moss Co. \ TRUSTS FOR BUSINESS PURPOSES BY WILLIAM C. DUNN OF THE CHICAGO BAR CHICAGO CALLAGHAN AND COMPANY 1922 Copyright 19^2 By WILLIAM C. DUNN r ' L 191^ PREFACE. In all probability no part of our law is so well settled as that in reference to trusts and trustees ; a rule on this subject laid down in one section of the country is usually adopted and ap- plied in another. The reason for this is readily found in that the principles underlying the trust are the same throughout the country irrespective of state lines. This of course is not true of the corporation, for each state has its own acts and no state is bound by the interpretation of the corporate law of a sister state. The trust as a business organization may easily be investi- gated under : First : The source of its rights and its status in the law. Second: The relation of trustee and beneficiary, and the rights and duties of each, and Third: The effect of legislation on the trust. In this con- nection it is of interest to note that the trust may engage and do all things which an individual may do ; and so far the only restriction sought to be placed on the individual is in banking and insurance. In the preparation of this work, reports were examined and not reference works, and where possible the language of the decision is used, with the thought in mind that the busy lawyer is more interested in the law expressed by the court than the deductions of a law writer. In one sense this may be consid- ered a digest of the law as to the trust; and in another, a com- (iii) 670793 iv Pref'ace;. pilation of selected, leading cases which bear directly on the trust as used for business purposes. This volume is ofifered to lawyers and the pviblic with the hope that a closer acquaintance and a better understanding of the trust as a business organization may be acquired. December 15, 1922. William C. Dunn. FOREWORD. For many years past, corporation law has been changing con- stantly ; business has been affected to such an extent by these changes that it now asks if there is not some stable mode of organization to which it might attach. At the forty-fourth an- nual convention of the American Bar Association at Cincinnati, Ohio, in August, 1921, Elihu Root, distinguished lawyer and former Secretary of State, said: "Modification of the prin- ciples of law is going on at greater speed and in larger scope than ever before, changes in the administration of law have forced themselves even to the attention of the public. The ap- plication of law is so widely different from that of fifty years ago that some guiding line must be found." Business men carrying on trade and commerce have felt the full force of this statement far more than any other body of men in this country, for they have had to meet it, and without choice are compelled to comply with the ever-changing corporate law. , In our forty-eight states, some of the legislatures meet every year and some of them every other year, and upon an examina- tion of their statutes scarcely one will be found in the last decade where the legislature has not passed some act in refer- ence to corporations; in some cases amendments have been made and in others the corporate law has been revised and reenacted in its entirety. This procedure is perfectly natural, for with the expansion of business, the corporation law, of necessity, must change to meet the new problems presented in the business world. The corporation being a creature of the (v) vi Foreword. law, depends for its existence on a franchise and can do only what the state grants in the way of a privilege; this is the chief reason why new rules must constantly be made and added to a much over-burdened business conducted under corporate or- ganization. While this is true of the corporation, it has no application to the trust, for the principles underlying the latter form of business organization are entirely different from those of the corporation in that the trust is not a creature of the law, it is not beholding to the state for a franchise nor does it exist by reason of any grant or privilege; its position in the law is that of a right — the same as the right of an individual — to alienate property and to contract, and this right is protected in our law, and by our Constitution. The foreign corporation law brings added amioyance and ex- pense to concerns doing an interstate business. In the early days of our country, when business was local, state lines were scarcely ever crossed, and business was not worried about for- eign corporation acts; but today it has expanded and become so centralized that state lines mean nothing more than de- markations where additional fees may be collected as a foreign corporation tax. With the progress of our country, the expansion of business, the amendments and changes in our corporate law to meet this development, we have a situation in which the state, through its corporate law with its rules and regulations, is a dominant fig- ure in the world of business. This condition was brought about not by any particular thought or design, it is evolutionary and it is here as a problem. Years ago there was great controversy over the church and state which eventually led to the separation of the two ; today business asks if there is not a way whereby it may be divorced from an increasing political domination. Government in its inception lias for its purpose the protection Foreword. vii of property; but where business is subservient to the state, socialism or paternaHsm prevails. The state, as a matter of course, should protect the citizens from fraud and imposition, and the police powers properly applied are sufficient to meet any emergency or contingency and are adequate for suitable regulation, but controlling business by use of the corporate law is quite another question. The express companies long ago realized the impracticability of the corporation law; they found how unsuitable it was for them to comply with all the foreign corporation laws of the different states in which they might transact business, and they solved their difficulty by adopting a form of organization some- thing akin to a trust. In general, the organization under which they operated and conducted one of the largest businesses in the country, may be described as an association or joint-stock com- pany with trust powers; several decisions are reported in this work which show in detail the exact character of their organiza- tion. Like the express companies fifty years ago, business in general is casting about today for an organization that will be permanent in form, one that knows no state boundaries, one where personal liability is limited, and one that will permit it to do business in any part of the country without being ham- pered by state lines and a foreign corporation tax. All of this may be done under a pure trust, and this form of organization properly applied to present needs and for legitimate ends, will, in a great measure, relieve business from certain burdens, most of which are political. The principles of law underlying the trust are thoroughly settled and well established. The application of these prin- ciples to modern business is becoming better understood each day; business men and lawyers in groups here and there throughout the country have applied the trust as a business or- viii Foreword. ganization to all kinds of enterprise and commerce. The list following will give some idea of the use to which the trust has been put in the different states and the diverse character of industry conducted under its organization; citations wherein the various concerns were in litigation are also given : COTTON MILLS AND PRINT WORKS. Garner & Company of New York. Thorn v. DeBreteuil, 179 N. Y. 64, 71 N. E. 470. Reported under Estoppel. STREET CAR LINES IN CHICAGO AND INDIANA. Chicago City and Connecting Railways Collateral Trust. Venner v. Chicago Ry. Co., 258 111. 523, loi N. E. 949. Reported under Public Policy. PATENTS. Mayo v. Moritz, 151 Mass. 481, 24 N. E. 1083. HOTEL. Estate of John Plankinton, Milwaukee. Upham V. Plankinton, 152 Wis. 275, 140 N. W. 5. FERRY BOAT. Whitman v. Porter, 107 Mass. 522. MANUFACTURING. Pepperell Manufactory Company. Malley v. Bowditch, 259 Fed. 809, 7 A. L. R. 608. Reported under Taxes. Foreword. ix BUILDING AND LOAN ASSOCIATION. The Great American Home Saving Institution. State V. Lee, 233 S. W. 20. Reported under Distinguished from Other Organizations. FOUNDRY. Froelich Estate. In re Froelich Est., 50 Misc. Rep. 103, 100 N. Y. Sup. 436. TOWN-SITE COMPANY. Denver Townsite Company. Spotswood V. Morris, 12 Idaho 360, 85 Pac. 1094, 6 L. R. A. (N. S.) 665. LUMBER AND SALT. Loud V. Winchester, 52 Mich. 174, 17 N. W. 784. COLLECTION OF RENTS. The Wachusett Realty Trust. Crocker v. Malley, 249 U. S. 223, 63 L. Ed. 573, 2 A. L. R. 180 1, 39 Sup. Ct. 270. Reported under Trust as an Entity. WAGON FACTORY. Pittsburgh Wagon Works. In re Pittsburgh Wagon Works Estate, 204 Pa. 432, 54 Atl. 316. Reported under Trust Property. FoRJiWORD. STEAM RAILWAYS. Caney River Railway Co. Wright V. Caney River Ry. Co., 151 N. C. 529, 66 S. E. 588, 19 Am. Case 384. Reported under Trust Property. HARDWARE BUSINESS. Simmons Hardvi^are Co., St. Louis, Mo. BUILDING AND REAL ESTATE. Norwood Land and Building Assn. Hart V. Seymoure, 147 111. 598, 35 N. E. 246. HOSPITAL. IMartin-Copeland Company. Rhode Island Hospital Trust Co. v. Copeland, 39 R. I. 193, 98 Atl. 273. Reported under Trusts Distinguished from Other Organi- zations. GENERAL MERCHANDISE. Nathan Connally. Connally v. Lyons, 82 Tex. 664, 18 S. W. 799, 27 Am. St. Rep. 935. Reported under Liability of Trustees. ROYALTY ON MACHINES. McKay Sewing Machine Association. Gleason v. McKay, 133 Mass. 419. Reported under Taxes. Foreword. xi REAL ESTATE. Daggett Building Association. Howe V. Morse, 174 Mass. 491, 55 N. E. 213. Reported under Deed of Trust. Homan's Real Estate Trust. Priestley v. Burrill, 230 Mass. 452, 120 N. E. 100. Reported under Trust Property. OIL. Davis-Coggins Oil Company. Davis V. Hudgins (Texas) 225 S. W. 73. Reported under Receivership. Texline-Burk Oil Co. Bingham v. Graham (Texas) 220 S. W. 105. Reported under Beneficiaries. TABLE OP CONTENTS. FOREWORD. CHAPTER I. DEED OF TRUST OR TRUST INSTRUMENT. 1 — Definition. 2 — Formality in Creating. 3 — Mtist be Written. A — For What Purpose May Be Created. 5 — Consideration. 6 — Elements. 7 — Construing. 8 — Trustees Take Title at Time of Execution and Delivery. 9 — Who May Create. 10 — Trust May he Created by Will or Deed. 11 — Trust Distinguished From a Gift. 12 — Amendraents. 13 — Notice — Recording. 14 — Seal — Definition and History. 15 — Termination of Trust. (a) By Instrument. (b) By Trustor. (c) By Trustee. (d) By Beneficiary. (e) From Other Causes. 16 — Rule Against Perpetuities. 17 — Purpose of Rule. 18 — Applies to Trust Estates and Personal Property. 19 — Equitable Interest is in Shareholders. 20— Beneficiaries Not Entitled to Partition. CHAPTER II. VALIDITY. Rights Distinguished Feom Law. 21 — In General. 22 — Sale of Beneficial Interest in Reference to Security Act. 23 — Illinois Security Act in Reference to Common Law Com- panies. 24 — Common Law as Affected by Statute, (xiii) xiv Table of Contents. The Trust as aw Entity. 25 — In General. 26 — A Trust to Distribute Income. 27 — Functions of Trustee and Beneficiary Differentiated. Public Policy. 28 — In General. 29 — A Trust for Operating Street Car Lines. 30 — Powers Given to Trustees. 31 — Trustees Subject to Committee. 32 — Stockholders May Pool Interests. 33 — Directors Elected by Trustees. 34 — Consolidation by Trust Agreement. 35 — Transferring Shares to Qualify Director. 36 — Trust Does Not Imply Incorporation. 37 — Merger Not Contrary to Law. 38 — Summary. CHAPTER III. TRUSTOR— CREATOR— SETTLOR. 39— WTio May Be. 40 — May Create for His Benefit and Others. 41 — May Act as Trustee. 42 — Revocation of Instrument. CHAPTER IV. TRUST PROPEIRTY. 43 — In General. 44 — Purchasing by Trustee. 45 — Purchasing Beneficial Interests by Trustee. 46 — Mingling With Other Property. 47 — Following. 48 — Liability — Expenses — Fees. 49 — Trust Estates in Reference to Torts. 50 — Provision for Trustee's Duties. 51 — Trustee Liable in his Official Capacity. 52 — Liability May be Limited by Stipulation. 53 — Not Liable for Trustee's Private Debts, 54 — Distribution. 55 — Shareholders' Interest — Personalty. 56 — Shareholders' Interest — Real Estate. CHAPTER V. CERTIFICATES— BENEFICIAL. INTERESTS— SHARES. 57 — History. 58 — English Rule. Tabl^ of Contents. xv 59 — 'American Rule. 60 — Partnership Shares — Legal. 61 — Bubble Act not Applicable to America. 62 — Beneficial Interest Passes to Legal Representative at Death. 63 — Profits and Losses Follow Certificate. 64 — Transferability. 65 — Sale of in Reference to Security Act. CHAPTER VI. INTERSTATE COMMERCE. 66 — In General. 67 — Trust Not Subject to Foreign Corporation Acts. 68 — Unincorporated Not Evibraced in Word Corporation. Trust Protected in Trade Name. 69 — In General. 70 — Business Name Protected by Injunction. 71—^oint Stock Company and Partnership Distinguished From Corporation. 72 — Foreign Corporation Act Not Applicable to Organization Created by Contract. 73 — Trust May Use Trade Name for Legitimate Purpose. 74 — Right of Trust to do Interstate Business. CHAPTER VII. BENEFICIARIES— SHAREHOLDERS. 15— Who May Be. 76 — Rights in General. 77 — Wrongs to Beneficiaries May be Presented to the Court by Petition. 1^— Beneficiaries Entitled to Information From Trustees. 79 — Where Fraud, Bad Faith, or Mismanagement is Shown Shareholders May Ask for Receiver. 80 — Procedure in Appointment of Receiver. 81 — Officers May be Elected by Trustees. S2— 'Shareholders May Sue for Themselves and Others. 83 — Appointment of Receiver Discretionary With Court. 84 — Beneficiaries May Have Trustees Removed for Cause. 85 — In Emergency, Receiver May be Appointed Ex Parte With- out Notice. 86 — Right to Accounting. 87 — Right to Protect Trust Property or Funds. 88 — Rights Against Trustees and Others. 89 — Right to Reimbursement. 90 — Right to Transfer and Assign Interest. 91 — May Act as Trustees. 92 — Liability. xvi Table op Contents. 93 — Not Liable as Partners. 94 — Ratification. CHAPTER VIII. TRUSTEES IN GENERAL. 95 — Appointment of. 96 — Holders of Legal Title. 97 — Act as a Unit. 98 — Act by Majority. 99 — Cotrustees. 100 — Substituted Trustees. 101 — Attorneys as Trustees. CHAPTER IX. POWERS OF TRUSTEES. 102 — Express. 103 — Implied. 104 — Discretionary. 105 — Personal. 106 — Incidental. 107 — Restricted. CHAPTER X. DUTIES OF TRUSTEES. 108 — To Manage Property for Shareholders. 109 — To Carry Out the Trust. 110 — Substituted Trustee May Follow Business Methods of Predecessor. Ill — To Account. 112 — To Keep Books. 113 — To Use Prudence and Care. 114 — To Exercise Good Faith and Sound Discretion. CHAPTER XI. LIABILITY OF TRUSTEES. 115 — Personal. 116 — Partnership Liability Not Applicable to Beneficiaries. 117 — Mere knowledge of Creditor Not Sufficient to Exempt Trus- tee from Personal Liability. 118 — For Mismanagement. 119 — For Acts of Others. 120 — For Negligence. 121 — For Misappropriation. Table of Contents. xvii 122— 'Extent of. 123 — lAmitation of. 124 — NonliaMUty. CHAPTER XII. COMPENSATION OF TRUSTEES. 125 — Fixed l)y Instrument. 126 — Reasonahle. 127 — Excessive. 128 — Commission. 129 — Alloiced by Court. 130 — Forfeiture of. 131 — Reimbursement. 132 — Expenses of Trust in General. 133 — Attorneys' fees. CHAPTER XIII. REMOVAL OF TRUSTEES. 134 — Jurisdiction. 135 — In General. 136 — For Breach of Trust. 137 — For Neglect or Misuse of Trust Property. 138 — For Holding Conflicting Interest. 139 — Death of Trustee — Survivorship. CHAPTER XIV. TRUST DISTINGUISHED FROM OTHER ORGANIZATIONS. Not a Partnership. 140 — In General. 141 — What Constitutes Partnership. 142 — Difference Bettveen Trust and Partnership. 143 — Shareholders Not Associated. 144 — Acts of Parties Decisive in Determining Intention. 145 — Trustee May Ask Instructions of Court. 146 — Declaration of Trust Determining Factor in What is Created. 147 — Profit Sharing in Relation to Partnership. 148 — Where Trustees Are Masters, a Trust is Created. Not Stjbject to Cobpoeation Acts. 149 — In general. 150 — Rights of Certificate Holders. 151 — Cash Surrender Value of Trust Certificate. 152 — Duties of Directors. 153 — Trustee's Certificate Assignable. xviii Table of Contents. 154 — Trust Agreement Does Not Create a Partnership. 155 — Liability Limited to Trust Funds. 156 — Corporation Act Not Applicable to Trust. 157 — Trust Protected in Trade Name. 158 — Business Under Trust Agreement Enjoys no Special Privilege. .159 — Building and Loan Business May be Conducted as a Trust in Missouri. English Rule. 160 — In General. 161 — Meaning of Word Business. 162 — What Constitutes Doing Business. 163 — What is Doing Business for Gain. IQi— Trust for Investment — Distinguished From Doing Busi- ness. 165 — Company, Association, and Partnership Defined. 166 — Trust Deed Does Not Constitute an Association. 167 — Distinction Between Trustee and Director. 168 — Trustees Are Associated. 169 — Certificate Holders Not Associated. 170 — A Trust is Not Embraced in the Words Association, Com- pany or Partnership. CHAPTER XV. EQUITY. 171 — Jurisdiction. 172 — Restricted Jurisdiction. 173 — Cannot Create a Trust. 174 — Trustees May Seek Instructions From the Court. 175 — May Remove Trustees. 176 — May Appoint Trustees. CHAPTER XVI. LACHES. 177 — In General. 178 — Actions Barred by. 179 — Actions Not Barred by. ISO— Estoppel. CHAPTER XVII. TAXES. 181 — Trust Not Subject to Tax Under Corporation Act. 182 — Not Subject to Capital Stock Tax. 183 — Not Subject to Franchise Tax. Tabli: of Contents. xix 184 — Stamp Tax. 185 — Franchise Tax DistinguisTied From Stamp Tax. 186 — Income Tax. CHAPTER XVIII. THIRD PARTIES— CREDITORS. 187 — Taking or Dealing With Trust Py-operty With Notice. 188 — Creditors of Trust. CHAPTER XIX. BANKRUPTCY. 189 — In General. 190 — Receivership. 191 — Not Necessary for All Beneficiaries to Join in Suit for Receiver. 192 — Evidence Must ie Positive as to Wrongdoing of Trustee Before Court Will Appoint Receiver. CHAPTER XX. BUSINESS AND LEGISLATION. 193 — In General. 194 — Banking Limited to Corporations. 195 — Regulation is not Prohibition. 196 — Insurance Limited to Corporations. 197 — Police Potoers in General. 198 — Insurance in Relation to Police Poiver. 199 — Modern Legislation. 200 — Regulation of Business Under Police Power. 201 — Corporations 7vith Exclusive Privileges — Monopolies. 202 — Issuing Bank Notes not a Private Right. 203 — Exclusive Grant to a Class is Prohibition, not Regulation. 204 — Banking Act of South Dakota. 205 — Franchise Distinguished from a Right. 206 — Privilege to Issue Currency is a Franchise. 207 — Citizens Have Rights Which the Sovereign May Not Usurp by Franchise. 208 — Police Power Defined. 209 — Business May be Regulated, but not Prohibited. 210 — Individual Rights Guaranteed. 211 — Pursuit of Lawful Business is a Right. CHAPTER XXI. ESSENTIALS IN PREPARING TRUST INSTRUMENT. 212 — Trust Property. XX Table; of Conte^nts. 213 — Duration of Trust. 2U—Seal. 215 — Purpose of Trust. 216 — Beneficial Interests. 217 — Committee of Beneficiaries. 218 — Partnership Liability. 219 — lAability Limited. APPENDIX. (References are to Pages.) EXHIBITS. The Wachusett Realty Trust. (Income from a Mill.) 420 Davis Coggins Oil Co. (Oil Business.) 426 Pepperell Manufacturing Co. (A trust for manufacturing pur- poses. ) 437 Martin-Copeland Co. (A hospital maintained and operated un- der Trust Agreement.) 454 Pietsch, Mathilde. (Trust for benefit of Trustor.) 468 Haulman, Harry I. (Trust agreement and will.) 471 Plankinton, John. (Declaration of Trust in form of will.).... 475 Pennyroyal Development Company. (Oil.) 484 Great American Home Savings Institution. (Building and loan association. ) 503 Denver Townsite Company. (A land company.) 520 Oakala Pood Association. (Canning and ice plant.) 525 Homan Real Estate Trust Deed. (Real Estate.) 553 Boston Real Estate Trust Agreement. (Real Estate.) 559 "Warren Chambers Declaration of Trust. (Real Estate.) 564 American Manufacturing Company. (Manufacturing and Sale of tractors. ) 570 A general form of a trust agreement 585 Domestic Products Company. (A general sales organization.) . . 611 Chicago City and Connecting Railway Collateral Trust. (A trust agreement for operating street car lines.) 625 The Co-Operators of America. (Retail and Wholesale Grocery.) 685 The Guaranty and Accident Lloyds. (Insurance.) 729 Table of Cases 744 Index. TRUSTS FOR BUSINESS PURPOSES CHAPTER I. DEED OF TRUST. I — Definition. A trust is an equitable obligation, either expressed or im- plied, resting upon a person by reason of a confidence reposed in him, to apply or deal with property for the benefit of some other person or for the benefit of himself and another or others, according to such confidence; it is holding of property subject to a duty of employing it or applying its proceeds according to directions given by the person from whom it was derived.^ Again a trust has been defined as a confidence reposed in one or more persons, by and for the benefit of others, with respect to property held by the former for the others' benefit; the person in whom this confidence is reposed who holds title to the property in question is the trustee, and the person for whose benefit the property is so held by the trustee is the beneficiary — cestui que trust, or as referred to in the Roman law — the fidei-commissarius.*^ 1 Templeton V. Bockler, 73 Ore. Union, 200 Ala. 23, 75 So. 335; 494, 144 Pac. 405. Keplinger v. Keplinger, 185 Ind. 2 Teal V. Pleasant Grove Local 81, 113 N. E. 292. (I) 2 Trusts for Business Purposes. In its technical sense, a trust is the right, enforceable solely in equity, to the beneficial enjoyment of property, the legal title of which is vested in another and implies separate co- existence of the legal and the equitable titles vested in differ- ent persons at the same time; in its more comprehensive sense the term embraces every bailment, every transaction by agent or factor, every deposit, and every matter in which the slight- est trust or confidence exists.' The word trust, however, is frequently employed to indicate duties, relations, and re- sponsibilities which are not strictly and technically trusts.* 2 — Formality in Creating. No particular formality is necessary in the creation of a trust ; any agreement or contract in writing made by the per- son having the power of disposition of property, agreeing or directing that a certain fund or parcel of property be held or dealt with for the benefit of others, raises a trust in favor of such others against the person making the agreement.^ Nor is it necessary in order to declare a trust, that the words 'trust' and 'trustee' or equivalent words be used where the intention to create a trust clearly appears from the language actually employed.^ This was also the rule at common law f 3 Bowes V. Cannon, 50 Col. 262, Mo. 642, 43 S. W. 617; Taber v. 116 Pac. 336. Bailey, 22 Cal. App. 617, 135 Pac. 4Holsapple v. Schrontz, 65 975; Moulden v Train, 199 Mo. Ind. App. 390, 117 N. E. 547. App. 509, 204 S. W. 65; Pem- 5 Richards v. Wilson, 62 Ind. broke Academy v. Epsom School App. 4, 112 N. E. 7S0; St. Cath- Dist., 75 N. H. 408, 75 Atl. 100; erine's Cemetery v. Fidelity Teal v. Pleasant Grove Local Trust Co., 152 Ky. 797, 154 S. W. Union, Supra; Laws v. Christ- 29; Wood v. Owen, 133 Ga. 751, mas, 178 N. C. 359, 100 S. E. 587. 66 S. E. 951; Austin v. Wilcox- 7 Smith v. Smith (Ky.), 121 S. son, 149 Cal. 24, 84 Pac. 417. W. 1002. 6 In re Soulard's Estate, 141 Deed of Trust. 3 the instrument, however, should be clear and concise as to parties and object. W'hile the foregoing is the general rule as to the formality in creating a trust, some states have statutory provisions for the establishment of express trusts and these statutes should be conformed to strictly.^ 3 — Must be Written. It is a well settled rule of law that a trust of personal prop- erty may be created by parol and its existence proved by oral testimony, but the evidence must be clear and explicit as to the subject-matter, parties, and purpose, and leave no room for a reasonable doubt that a trust is intended.^ Express trusts concerning real estate must be in writing to satisfy the statute of frauds.^** Business trusts which may own personal property, or real estate, or carry on commerce and trade, should, without doubt, be in writing; trusts created by the direct and positive act of the parties by some writing or deed or will, directly and expressly pointing out the property, persons, and purposes of the trust, are called direct or 'ex- press' trusts.^^ SKoehler v. Koehler (Ind.), 10 Moulden v. Train, Supra; 121 N. E. 450. Nolan v. Guggerty, 187 la. 980, 9 Carroll v. Woods, 132 Mo. 174 N. W. 706; In re Mahin's App. 492, 111 S. W. 885; Wieh- Estate, 161 la. 459, 143 N. W. teiichter v. Miller, 276 Mo. 322, 420. 208 S. W. 39; St. Catherine's H St. Catherine's Cemetery v. Cemetery v. Fidelity Trust Co., Fidelity Trust Co., Supra; U. S. Supra; Citizens' Natl. Bank v. Fidelity Co. v. Smith, 147 S. W. McKenna, 168 Mo. App. 254, 153 54. S. W. 521. 4 Trusts for Business Purposes. 4 — For What Purposes May he Created. The owner of real estate can specifically appropriate rents and profits to a named purpose, or create a trust in them sepa- rate and apart from the title to the real estate ;^^ or the prop- erty itself may be the subject of a trust just the same as personal property ; there seems to be no limitation on property, personal or real, or other property rights that may be the subject of a trust. ^' Any right, interest or thing which may be the subject of property, or Avhich the law recognizes as valuable, may be granted or transferred in trust.^* The law recognizes the right of the owner of property to deed it in trust, it also protects the trust property in all business, commerce and trade which is not contrary to law. The general rule is that a trust may be created for all purposes for which an individual may use property or property rights. 5 — Consideration. For ordinary purposes it is unnecessary to the validity of a declaration of trust for it to be based on a consideration passing to the trustee; for upon delivery of the declaration of trust a perfect and complete trust is established which will be enforced, although voluntary. ^^ This rule applies only where the trust is created by voluntary disposition and is a completed transac- tion.^^ The common-law rule was that a consideration was 12 Gisborn v. Charter Oak Life Bailey, 22 Cal. App. 617, 135 Pac. Ins. Co., 12 Sup. 277. 975; Nichols v. Emery, 109 Cal. l3FIaulman v. Haiilman, 164 323, 41 Pac. 1089. la. 471, 145 N. W. 930. 16 Reynolds v. Thompson, 161 14 Burke V. Burke, 259 111. 262, Ky. 772, 171 S. W. 379; Fisher 102 N. E. 293. V. Hempton Transp. Co., 136 15 Schumacher v. Dolan, 154 Mich. 218, 98 N. W. 1012. la. 207, 134 N. W. 624; Taber v. Deed of Trust. 5 necessary in a deed of bargain and sale in order to prevent a resulting trust; however, this has been abolished by statute in most of the states. ^^^ Where a trust deed recites a valuable consideration, contains apt words of conveyance, is under seal, and is delivered to the trustee who receives the deed and agrees to carry out all the trusts therein stipulated, the legal title to the property — ^as be- tween the parties — passes to the trustee even without delivery.^''' When a valuable consideration exists between an alleged trustee and beneficiary, a court of equity may deem a contract to de- clare a trust as equivalent to an actual declaration.^^ 6 — Elements. While no particular words are necessary to create a valid trust, the writing of the trustor must, however, express a decla- ration or grant by him of an estate or interest containing all the essential elements of a trust.^^ These essentials of a valid trust are (i) sui juris trustor, (2) a designated beneficiary, (3) a designated trustee, (4) a fund or property so distin- guished as to pass title to the trustee,^'' (5) the necessary writ- ing stating the object of the trust. In addition to the neces- sary elements, the trustor must do everything that can be done I6J Campbell v. Noble, 145 Ala. Austin v. Cahill, 99 Tex. 172, 88 233, 41 So. 745. S. W. 542. 17 Kelly V. Snow, 185 Mass. 20 Brown v. Spohr, 87 App. 288, 70 N. E. 89. Div. 522, 84 N. Y. Sup. 995; Kahn 18 Austin V. Young, 90 N. J. v. Tierney, 133 App. Div. 897, Eq. 47, 106 Atl. 395. 120 N. Y. Sup. 663; Conley v. l9Nortbrip v. Burge, 225 Mo. Daughters of Republic (Tex.), C41, 164 S. W. 584; Bay Bis- 156 S. W. 197; Central Trust Co. cayne Co. v. Baile, 73 Fla. 1120, v. Gaffney, 157 App. Div. 501, 75 So. 860; Floyd v. Smith, 59 142 N. Y. Sup. 902. Fla. 485, 51 So. 537; City of 6 Trusts for Business Purposks. — the character of the property comprising the trust being con- sidered — to transfer the property to the trustee in such mode as will effectually pass title.^^ Acceptance of a trust is essen- tial to the vesting of title in the trustee.^^ The signing by the trustee of a deed creating a trust and his acknowledgment of the same, constitutes a complete acceptance of the trust.^^ The trustee's signature may be made by initials and may be placed on any part of the declaration of trust, providing he signs for the purpose of giving authority to the instrument.^* The better rule, however, is for the trustee to sign his full name in the proper place on the instrument. The trust is said to be executed when no act is necessary to be done to give it effect. ^^ 7 — Construing Trust Instrument. Though no particular form of words or the use of the words 'trust' or 'trustee' is necessary to create a trust, the intention to create it must be clear and the writing must be reasonably certain with reference to the subject-matter, the beneficiaries, the nature and quantity of their interests, and the manner in which the trust is to be perf ormed.^^ It has been said also that the creation of a trust does not depend upon the use of any particular language or form of expression, but upon the mean- ing of the language employed when fairly construed in the light of the circumstances, relation, and situation of the parties; if 21 State V. Ellison, 216 S. W. Eq. 47, 10 Atl. Rep. 178. 967; Loring v. Hildreth, 170 25 Massey v. Huntington, 118 Mass. 328, 49 N. E. 652. 111. 80, 7 N. E. 269; State v. Elli- 22 Brandon v. Carter, 119 Mo. son, 216 S. W. 967; Skeen v. 572, 24 S. W. 1035. Marriott, 22 Utah 73, 61 Pac. 23 Dayton v. Stewart, 99 Md. 296. 643, 59 Atl. 281. 26 Otjen v. Frohbach, 148 Wis. 24McVay v. McVay, 43 N. J. 301, 134 N. W. 832. Deed of Trust. 7 the intent to create a trust is clear and the essential elements may be fairly deduced from the language employed, the trust will not fail for the lack of more adequate expression.^''' The modern and better rule is that the intention to create should be set forth clearly ; there should be no room for doubt in the language used in the instrument of trust which is to be used for business purposes.^^ Where the meaning of a con- tract is doubtful, the fact that the parties thereto adopt a par- ticular construction and for many years acquiesce in and act upon it, should lead a court without hesitation to adopt that construction as the proper one.^^ Where the language of a trust is ambiguous, it must, if possible, be construed in favor of the beneficiaries and against the trustee.^*' The court in con- struing a trust must look to the instrument creating it and con- strue it subject to the rules governing the interpretation of contracts. ^^ The court, in determining whether a trust or a partnership is created, will consider what the parties did and will not consider what they intended to do, unless there is a doubt as to what they did.^^ If the words of a trust deed are plain and unambiguous, there is no necessity for judicial inter- pretation.^^ The law of the place where the trustor resided at the time of the execution governs the construction of a trust. ^* Whether a trust is created or not is a question of fact in each 27Holsapple v. Schrontz, 65 Cal. App. 664, 121 Pac. 407. Iiid. App. 390, 117 N. E. 547; 31 Ringrose v. Gleadall, supra. Cahlan v. Bank of Lassen Co., 32 Williams v. Inhabitants of 11 Cal. App. 533, 105 Pac. 765; Milton, 215 Mass. 1, 102 N. E. Carr v. Carr, 15 Cal. App. 480, 355. 115 Pac. 261. 33 Crown v. Cohn, 88 Ore. 642, 28 Skeen v. Marriott, supra. 172 Pac. 804. 29 Nickerson v. Atchison T. 34 Curtis v. Curtis, 185 App. & S. F., 17 Fed. 408. Div. 391, 173 N. Y. Sup. 103. 30 Ringrose v. Gleadall, 17 8 Trusts i^or Business Purposes. case and the court in determining the fact will give effect to the situation and relation of the parties, the nature and situation of the property, and the purpose or object which the settlor had in view in making the disposition.^^ One of the leading cases on the construction of a trust in- strument is Haulman v. Haulman;^^ in this case Harry Haul- man gave $2500. in trust and the same day executed a will (copies of both instruments will be found in the Appendix). Upon his death his wife in a petition sought to declare the trust invalid and asked that the property transferred in trust be de- clared a part of the estate. The court held that the trust was valid ; that the property had passed irrevocably to the trustees ; that a person had a right to dispose of property in trust either by will or deed ; that the declaration of trust affected only such property as was delivered to the trustees ; that the petition was wrongfully brought and was properly dismissed. The points in the case are discussed in the decision which in substance is as follows: 8 — Trustees Take Title at Time of Bxeciition and Delivery- The plaintiff was the widow of one Harry Haulman; the de- fendants were the executors of his will. The action v/as brought by the plaintiff to have the defendants removed as executors of the will on the ground that they had in their pos- session a certain sum of money received by them from Harry Haulman before his death, as she alleged under some sort of an an-angement between them, by which they were to pay to the deceased interest upon the money held by them; tliat they failed to account for the same as any portion of the estate; that they filed an inventory of the personal property of the 35 Lynn V. Lynn, 135 111. 18. 86 164 la. 471, 145 N. W. 930. Deed of Trust. 9 [HAULMAN V. HAULMAN.] said Harry Haulman and therein made no mention of the money so received and held by them. The defendants an- swered plaintiff's petition by setting forth that the money so held by them was no part of the estate of Harry Haulman but was a trust estate ; that the will executed by Harry Haulman at the time of the execution of the trust instrument was duly pro- bated and that the plaintiff elected to take her distributive share in the estate of the said Harry Haulman. The plaintiff then filed the following motion: "And now comes Mary C. Haul- man, widow of Harry Haulman, deceased, and upon the answer of executors to petition of Mary C. Haulman for their removal, and the admissions in said answer contained, moves this honor- able court to order, adjudge, and decree that said Mary C. Haulman is entitled to a one-third interest in all the property of said Harry Haulman, including the $2,500 in said answer mentioned, and that the said executors be required to amend their inventory filed herein so as to include said $2,500 therein." The motion was denied ; the court especially finding that the $2,500, with its accumulations, mentioned in the trust deed, was no part of the estate of Harry Haulman, and that the plaintiff was not entitled to participate therein. From this or- der, the appeal was taken. The appellant relied upon five points for reversal : (i) There was no executed gift by virtue of the trust in- strument, for an executed gift is inconsistent with the declara- tion of trust. (2) A trust instrument vests in the trustees only such es- tate as is necessary to enable them to execute the trust. (3) Equity will not interpose to perfect a defective gift or voluntary settlement. (4) The instrument was not executed in compliance with the statute governing wills, and therefore was ineffective as a 10 Trusts for Business Purposes.. [HAULMAN V. H^VULMAN.] testamentary disposition of property. It was equally ineiTectivc to evidence a gift inter vivos. (5) The fact that in the will testator required the trustees to "keep and care for my property the same as I have this day directed them to do in an article of trust and that they follow out the provisions of said trust fully, and, at the end of five years from my decease that they make an equal distribution of my property to my children," does not make the trust instru- ment a part of said will, and so give to said instrument vitality as a testamentary disposition of property. The court, in dis- posing of the points raised by appellant, in substance said that a proper determination of the controversy involved a construc- tion of the declaration of trust and the will; the rights of the parties to the money in controversy had to be determined from a consideration of these instnunents alone. There is no question but that any property, real or personal, may be transferred and conveyed by the owner to a trustee, to be held by the trustee for the use and benefit of others ; that the owner of property may transfer the legal title to another, to be held, controlled, and managed by the other for the use and benefit of others designated by him. It is true that, where the use and benefit and enjoyment of the thing conveyed is deferred until after the death of the owner, and where, by the terms of the instrument, the convey- ance does not become effectual until after the death of the grantor, and the legal title remains in the grantor until such time, the instrument is, of necessity, testamentary in its char- acter, and can be enforced only as such. To make it efifectual, the instrument of conveyance must op- erate in praesenti. It must transfer the title, dominion, and control over the thing to the trustee at the time of its execution and delivery, and, when this is done, the enjoyment of the thing Deed oe Trust. ii [HAULMAN v» HAULMAN.] conveyed may be postponed until after the death of the grantor, or postponed to any future time. Tlie benefits to be derived from the grant may be postponed, without the instrument losing any of its efficiency as a trust instrument, or without afifecting, in the least, the trust character of the conveyance. In all in- struments where a trust is created in one for the use and benefit of another, the party creating the trust must release all power of disposition over the fund. 9 — Who May Create. It is fundamental law that any person of lawful age and sound mind has a legal right to turn over personal property of whatever character into the hands of another, to be held and used for the benefit of some person designated therein as bene- ficiary, and that, when this is done, whether by written instru- ment or parol, the beneficiary obtains an immediate and vested interest in the subject of the trust, and the party creating the trust cannot revoke or disaffirm the same, unless such power of revocation has been reserved, in express terms, at the time of the creation of the trust. The owner of personal property has the absolute right to dispose of it to whomsoever he sees fit, with or without consideration and subject only to those lim- itations as to creditors, and such a disposition, when fully con- summated, becomes binding upon him and upon all claiming by, through, or under him.^"^ As said in Cameron v. Cameron :^^ "In a case of this kind the only inquiry need be whether the deed of the husband is 37 Jones V. Nicholas, 151 Iowa 549, 42 N. W. 439; Lewis v. 362, 130 N. W. 125; Love v. Curnutt, 130 Iowa 423, 106 N. Blauw, 61 Kan. 496, 59 Pac. 1059, W. 914. 48 L. R. A. 257, 78 Am. St. Rep. 38 Reported in 10 Smedes & 334; Forney v. Remey, 77 Iowa .M. (Miss.) 394, 48 Am. Dec. 759. 12 Trusts for Business Purposes. [HAULMAN V. HACLMAN.] absolute and irrevocable or not. It is the undoubted right and privilege of a husband to dispose of his personal estate in any manner he thinks proper in his own lifetime, and thus to cut off his widow from dower in such property ; and a voluntary conveyance will be good against the claims of the widow." 10 — Trust May Be Created By Will or Deed. In determining whether an instrument is a deed or a will, the main question is : Did the maker intend to convey an estate or interest tliat should vest before his death, and immediately upon the execution of the instrument, or did he intend that all the interest and estate afiected by the instrument should pass only after his death? If the instrument passed a present estate, and passed the title and right to possession to the property involved, immediately upon its execution to the trustee named therein, it is effectual, although the enjoyment of the thing conveyed in the parties named as beneficiaries is postponed to a future date. All that is necessary is that the donor or grantor should have absolutely parted with his interest, and have ef- fectually put such interest beyond his reach.^^ In Re Estate of Podhajsky,*° it is said: "It is immaterial whether we call the transaction now under consideration (and we might remark this is a case very much like the one at bar) a gift by the deceased to his daughters, or a trust established by him for their benefit. Indeed, a voluntary trust is simply a device by w4iich a donor effectuates a gift, either of property or of its beneficial use and enjoyment, to a designated donee. 39Vosburg V. Mallory, 155 rico, 140 Ind. 533, 40 N. E. 50, Iowa 165, 135 N. W. 577; Lane 49 Am. St. Rep. 213. V. Ewing, 31 Mo. 75, 77 Am. Dec. 40 137 Iowa 742, 115 N. W. 590. 632. See also, Wilson v. Car- Deed of Trust. 13 [HAULMAN V. HAULMAN.] Even a gift oiusa mortis may be effected by delivery to a third person in trust for the donee, although the gift does not come to the knowledge of the donee, and is not accepted by him until after the death of the donor. The acts of the trustee or third person receiving the property for the benefit of the donee are deemed to be in the interest of the latter, and the acceptance of the gift is presumed."*^ It has even been held that a reserved power in the grantor to recall the grant which has not been exercised during the life of the grantor, does not destroy the effectivenes.^5 of the grant.*^ In Lewis v. Curnutt, supra, the court said : "The same pur- pose to direct and control the disposition of property beyond the life of the owner is very frequently accomplished through a trustee who may be appointed by will, or by deed, or by other suitable declaration of trust. Subject only to the condition that the purpose of the trust be not in contravention of the com- mand or policy of the law, the right and power of the owner of property to thus dispose of it is elementary."*^ The general rule is that one may do with his property as he pleases. He may dispose of it by will in any way that suits his fancy or his judgment. He may give it all to a stranger and thus disinherit his relatives. He may give it all to natural persons or to corporations capable of taking. He may give it directly, or create trusts which the law allows ; and this general power of disposition he possesses down to the last hour of conscious, intelligent existence. Whether the trust be created 41 Clough V. Clou^, 117 Mass. 42 Lippold v. Lippold, 112 83; Gerrish v. Institution, 128 Iowa 134, 83 N. W. 809, 84 Am. Mass. 159, 35 Am. Rep. 365. See St. Rep. 331; Newton v. Dealer, also, Dettmerr v. Behrens, 106 41 Iowa 334. Iowa 585, 76 N. W. 853, 68 Am. 43 Hollis v. Drew Seminary, St. Rep, 326. 95 N. Y. 166. 14 Trusts for Business Purposes [HAULMAN V. HAULMAN.] bv will or by deed, if it be lawful — and the intent can be fairly ascertained from the examination of the instrument — the courts will uphold and enforce it, for the intent of the settlor in tlie creation of trusts is w^hat the courts look to, and that intent is to be carried into effect, unless it contravenes some public policy of the law. It is further said in I^ewis v. Curnutt, supra : "Moreover, it must be remembered that it is not necessary in any case to the establishment of a trust that any beneficial in- terest shall pass to the trustee. From its very nature, a trust involves the idea of a separation of the beneficial interest from the legal title. When a trust is executed by the delivery of a simple conveyance to the trustee, that act and instrument serve to pass an immediate present interest to the cestui que trust, no matter how far in the future tlie enjoyment of the benefit thus provided may be deferred." 1 1 — Trust Distinguished from a Gift. In Forney v. Remey,** it was expressly decided that one owning property, real or personal, may transfer and convey the same to a trustee, to be held for his own benefit, or for other beneficiaries. The instrument in this Forney Case, upon its face, was a conveyance in trust for the benefit of the grantor and others who were named as beneficiaries upon the face of the instrument. The instrument assigned, transferred, and conveyed certain accounts and personal property to a certain person named as trustee, a schedule of which was attached. Following the naming of the trustee, and the transfer of the property in the instrument set out, the trustor made provision that the trustee named in the instrument should hold the prop- erty, and, after deducting from the interest, rents, income, and 44 77 Iowa 549, 42 N. W. 439. Deed 01^ Trust. 15 [HAULMAN V. HAULMAN.] profits any expense attending the execution of the trust, the trustee should pay to the trustor all the interests, rent, and in- come, and profits arising from such property, such payments to be made during her natural life, and at the death of the donor or trustor the property to be distributed among those named therein as beneficiaries. The court said: "The plaintiff's counsel insist that the instrument witnesses a gift inter vivos * * * is not valid, for the reason that it is testamentary in its character. It is plain that the conveyance is not a gift inter vivos. The grantor herself is named as the first beneficiary, re- taining the power to direct the investment of the funds arising from the property. The other beneficiaries can, under the in- strument, receive no benefits from the property until after the death of the grantor. Nothing further need be said in order to refute utterly plaintiff's position that the instrument witnesses a gift inter vivos." Further: "The property, under the instru- ment, passes to the defendant, who takes it as a trustee, and holds it subject to the terms of the trust. The title passes— in praesenti ; it does not await the death of the grantor. She lost ownership and control of the property by the execution of the deed. There is nothing in the conveyance suggesting an ide;i of a future power of disposition retained by the grantor. She could not revoke the grant, nor in any way change its terms and conditions." Many more cases might be cited in support of the defendants' claim ; but the court did not deem it necessary to make refer- ence to them, for the reason that every question raised in the case had been fully and fairly met and decided by the court, and each case was amply supported by well-considered cases from other states. The question in this case then is : Do the instruments herein relied upon meet the requirements of the law as hereinbefore i6 Trusts for Business Purposes. [HAULltfAN T. HAULMAN.] Stated ? The instrument under consideration provides : 'T will place in the hands of my two sons, H. E. Haulmaii and B. T. Haulman, the sum of $2,500.00." It appears that on the date of the execution of this instrument he did place $2,500 in the hands of these two sons. It appears that he placed this money in their hands as trustees, not only of that sum, but any and all other sums that might be added to it ; that he placed it in trust with them for the use and benefit of his children named in the instrument. Harry Haulman, the creator of the trust, had. at the time the instrument was executed, $2,500 in money ; he paid this money to the defendants, to be held by them in trust for his children ; by the instrument, he created them trustees of the fund, and retained no control over the fund, no right to withdraw it from their hands, or direct its disposition other than is shown in the instrument creating the trust. This money, so delivered to these trustees, was never withdrawn by Harry Haulman. and was in the hands of the defendants, as trustees, under the trust instrument, at the time this action was commenced. It is true that in the instrument he directed his trustees as to the manage- ment of the fund, but assumed no control over the management of it himself, and directed his trustees, upon his death, to dis- tribute the fund to the beneficiaries named in the trust deed, as therein provided. It is true that the trust deed and the will undertake to dis- pose of and control property not shown to have been in exist- ence at the time of the making of the trust deed and will, and property which does not appear to have ever been delivered by him to the trustees. This does not affect the trust character of the property in controversy, which was, in fact, delivered to and retained by, the trustees under the trust deed, and which is the property in controversy here. The will in no way changes Dti.T> OF Trust. 17 [HATJLMAN v. HAULltfAN.] or attempts to change the disposition of this fund in the hands of the trustees. Nor is it in any way inconsistent with the pro- visions of the trust deed. Thus a proper construction of this instrument shows tliat the property in controversy under the instrument in question passed to these defendants as trustees; that they took it, and were holding it at the time this action was commenced, subject to the terms of the trust ; that the title to this money passed to these trustees immediately upon the execution and delivery of the trust deed and the property; that the maker of the trust deed retained no personal control over the property after the execution of the instrument and the delivery of the same to the trustees; that, by the execution and delivery of the deed and the property to these trustees, he then lost ownership and control of the property. The instrument itself suggests that he retained no power over the property that would enable him, in the future, to make any other different disposition than was provided for in the instrument. He could not revoke it, or in any way cliange its terms and conditions. The legal title passed to the trustees. The beneficial interest passed to his children. Both the legal title and the beneficial interest passed, upon the delivery of the instrument and the other property, to the trustees, and the instrument itself shows that that was his pur- pose and intent. He had a legal right to make the instrument at the time. He had a legal right to transfer the property direct, if he chose, to the beneficiaries named therein. If he had done so, no question could possibly have arisen such as we have before us now. He chose, however, to pass the legal title to these defendants, and the beneficial interest to the beneficiaries named in his deed. Having parted with both, nothing remained in him, at the time of his death, that could possibly pass to his executors under the will. i8 Trusts for Business Purposes. THAULMAN V. HAULMAN.l The cases cited by counsel for appellant fail to support their position that the instrument in question is not a trust deed,, operating in praesenti. The instrument itself, upon its face, under the holdings of this court heretofore referred to, shows that the instrument is not a testamentary writing, and does not witness a gift inter vivos. Without reviewing the cases cited by appellant, we are satisfied with the holdings of this court heretofore made, which an examination shows are amply supported by the best authority. The court decided that the trust was valid; that the lower court properly dismissed the plaintifit's petition. 1 2 — Amendment. When once a trust has been effectually created, it cannot afterwards be altered or revoked by the person who created it;*^ nor can the trustees or the court, to promote better the interests of the beneficiaries, change or alter the trust, because the judgment of the settlor in respect to the matter is the law of the trust ;*^ nor can the trustees by subsequent declarations or agreements modify, vary, or amend the original trust, if the trust instrument does not provide for such modification.*' While all the parties in interest — providing they are of legal age — may terminate the trust, they have the same right to vary, amend and modify as in any other contract.*^ The general rule is that once a trust is created and put into operation, it cannot be amended, this does not apply where the 45 Skeen v. Marriott, 22 Utah 48 Klugh v. Seminole Secur- 73, 61 Pac. 296. ities Co., 103 S. C. 120, 87 S. E. 46 Upliam V. Plankinton, 152 644. See Trust Estates — Sears Wis. 275, 140 N. W. 5. 2nd. Ed. 370-97. See Note 47 47 Burling v. Newlands, 112 L. R. A. 136 for amendments Cal. 476, 44 Pac. 810. to beneficial associations. Dked of Trust. 19 instrument itself specifically provides for amendments. A person with power to create, without doubt, may provide for amendments necessary to carry out the spirit of the trust so long as no vested rights under the trust are afifected or im- paired. The trust agreement may provide that amendments be inade by the trustees and ratified by all or by a majority of them ; or it may provide that amendments be made by the trustees and ratified by two-thirds or a majority of the share- holders. A great number of trusts have been before the courts which had provisions in them for modification or termination of the instrument by a majority or two-thirds of the share- holders. In one there was a provision that two-thirds of the sliareholders by a vote at a meeting called for the purpose, might sooner terminate, or renew the trust.*^ In another it was provided that with the written consent of a majority in interest of the beneficiaries, a vacancy among the trustees might be filled, or the trust itself might be modified.^" 13 — Notice — Recording. The object in recording an instrument is to give notice to all people of the interest and rights one has in reference to the document recorded. The acts of the state in which a trust has its principal office would be the determining factor in re- cording the declaration of a trust organized solely for the pur- pose of dealing in and holding personal property. If there is any provision in a trust for the present or future holding of or dealing in real estate, it must be recorded the same as any other deed. People have the right to know, and should know, with 49 Davis V. Hudgius, (Tex.) 223, 63 L. Ed. 573, 2 A. L. R. 225 S. W. 73. 1601, 39 Sup. Ct. 270. 60 Crocker v. Malley, 249 U. S. 20 Trusts for Business Purposes. whom they are deahng; and for that reason the trust instru- ment in Hmiting the habihty of the trustees should provide for actual notice to all people who contemplate doing or actually do business with the trust. This actual notice should be brought home to all parties by a clause in the trust itself, and all con- tracts and documents should specifically state that the trustees act in their trust capacity only. Where the act does not defi- nitely provide for recording, it is not sufficient notice to third parties to record the declaration of trust; personal notice should be given in addition. The question of personal notice cannot be overly emphasized; the rule is to record the declaration of trust and also provide for personal notice to all parties who deal with the trust through its trustees. 14 — Seal — Definition and History. A seal is the impression made on a document by an instru- ment such as an engraved metallic plate. At common law and in earlier times, a seal meant an impression made on wax or other material which would take and retain an impression. Seals were introduced by the Normans and used in fact as a signature at a time when each man had his signet and es- cutcheon with engraving designating the individual. Lord Coke said a seal was wax with an impression ; when this was true in the early part of the seventeenth century, the question of seal or no seal, deed or no deed, was matter to be decided by inspection. In process of time other materials than wax were used, but the impression was still considered as important and its existence was still to be tried by inspection. Later, the scroll seems to have been used habitually as a seal, even before statutes on the subject.^^ 61 Cromwell v. Tate, 7 Leigh (Va.) 301, 30 Am, Dec. 506. Deed of Trust. 21 The right on an individual to use a seal has never been chal- lenged,^^ the decisions universally assume that where the in- dividual adopts and uses a seal it is done as a matter of right. The trustee being an individual and a citizen,^^ unquestionably has the right to adopt and use a seal ; once a seal has been used the presumption is that the use is lawful.^* If the trustee con- templates the use of a seal, the declaration of trust should es- pecially provide for such use. The sealing of an instrument is a prima facie evidence that it has been duly executed ; that the seal -was used by the proper officers is not conclusive as it may be shown that it was not affixed officially.^^ As to informal documents, the use of the seal has been abolished by statute in nearly all of the states; for that reason the statute of the state in which the trust is to maintain its home office, should be consulted in the drawing of a declaration of trust. 15 — Termination of Trust. (a) By Instrument. Usually the life of a trust should be provided for in the in- strument together with the manner and time of termination — the latter not to violate the rule of perpetuities. Where the in- strument recites the time of expiration and it is not in violation of law, the court cannot, before expiration of the term of a trust, decree dissolution without consent of all parties in in- terest.^^ It is a general rule that a valid trust in property created with intention expressed or necessarily implied that it 52 Johnson v. Crawley, 25 Ga. 111. 655, 26 N. E. 640, 25 A. S. R. 316, 71 Am. Dec. 173. 401. 63 See Chapters on Interstate 55 24 R. C. L. 695. Commerce and Validity. 66 Metcalfe v. Union Trust 64Mullanphy v. Schott, 135 Co., 87 App. Div. 144, 85 N. Y. Sup. 183. 22 Trusts for Business Purposes. shall endure for a specified time and for specified objects, is due to be carried out according: to such intent.^"' '& (b) By Trustor. As a general rule the trustor loses control over the property deeded in trust, and his right, powers and duties as such donor are at an end when the trust is complete. The fact that a deed creating a trust contains no power of revocation, and is with- out consideration and voluntary, is not sufficient grounds for setting it aside at a suit of the trustor. ^^ In a suit by a settlor to set aside a deed creating a trust which contains no power of revocation, evidence should be conclusive to show that the ab- sence of a power of revocation was due to a mistake or mis- understanding on the part of complainant;^^ for once a trust has been effectually created, it cannot afterwards be altered or revoked by the person who created it.®® (c) By Trustees. Where a trust has been created and a trustee appointed and given possession of the trust estate, the trust cannot be de- stroyed by the failure or omission of the trustee to perform all of his duties promptly. Acts of omission of the trustee in performing the details of the trust will not destroy it.®^ The trustees have no right or power to terminate the trust; but where the trust has been legally terminated, the trustee may 67 Upham V. Plankinton, 152 60 Skeen v. Marriott, 22 Utah Wis. 275, 140 N. W. 5. 73, 61 Pac. 296. 68 Dayton v. Stewart, 99 Md. 61 Bay Biscayne Co. v. Baile, 643, 59 Atl. 281. 73 Fla. 1120, 75 So. 860. 69 Dayton v. Stewart, Supra. De;ed of Trust. 23 invoke the jurisdiction of equity to partition the property among the beneficial owners.^*^ (d) By Beneficiaries. An active trust which requires the exercise of discretion by the trustee, cannot be terminated at the will of the benefi- ciaries;^^ but if all the parties interested in the trust property are sui juris, the trustees and beneficiaries may, by agreement, terminate the trust.^* This rule, of course, would not apply where any of the parties are under disability, or where the settlor makes known, expressly or plainly, his intention that such power should not exist ;^^ or where some of the parties are infants.^^ (e) from Other Cause. Regardless of the nominal duration of an estate given to a trustee, it continues in equity no longer than the thing sought to be secured by the trust demands. When that demand has been fully satisfied, and although the trust may not have ceased by expiration of time, if all the parties who are or who may be interested in the trust property are in existence and are sui juris and they agree thereto, a court of equity may decree the termination of the trust.^'' The termination or satisfaction of a trust may be presumed from lapse of time or gross laches in its enforcement amounting to acquiescence.^^ No trust can 62Rackem.ann v. Tilton, 236 66 Anderson v. Williams, 262 111. 49, 86 N. E. 168. 111. 308, 104 N. E. 059. 63 Easton v. Demuth, 179 Mo. 67 In Re Stafford's Estate, 258 App. 722, 162 S. W. 294. Pa. 595, 102 Atl. 222. 64 Cowie V. Strohmeyer, 150 68 Jones v. Haines, 79 N. J. Wis. 401, 136 N. W. 956. Eq. 110, 80 Atl. 943. 65 Cowie V. Strohmeyer, Supra. 24 Trusts for Business Purposes. survive the purpose of its creation, when that is accomplished it must, of necessity, terminate.^^ 1 6 — Rule Against Perpetuities. A perpetuity is defined to be a limitation taking the subject thereof out of commerce for a longer period of time than a life or lives in being and twenty-one years beyond, and, in case of a posthumous child, a few months more — ^allowing for the time of gestation. Gilbert, in his treatise on Uses, defines it to be such a limitation of property as renders it inalienable be- yond the period allowed by law. Lewis, in his treatise on Per- petuities, defines it to be "a future limitation, whether execu- tory or by way of remainder, and of either real or personal property, which is not to vest until after the expiration of, or will not necessarily vest within, the period fixed and prescribed by law for the creation of future estates and interests, and which is not destructible by the persons for the time being en- titled to the property, subject to future limitation, except with the concurrence of the individual interested under that limi- tation."70 The true object of the rule against perpetuities is to prevent the creation of interests on remote contingencies. Its efifect in removing restrictions on the immediate conveyance of property is only an incident. It is not the alienability of an interest de- pendent on a remote contingency, but its utterly uncertain value, which furnished the sufficient justification, if it was not the original ground, of the rule against perpetuities. If there is a 69 Kahn v. Tierney, 135 App. 70 Waldo v. Cummings, 45 111. Div. 897 Sup. Ct., 120 N. Y. Sup. 421; Hart v. Seymour, 147 111, 663; Winters v. March, 139 Tenn. 598, 35 N. E. 246. 496, 202 S. W. 73. Deed of Trust. 25 gift over of an estate on a remote contingency, the market value of the interest of the present owner will be greatly re- duced, while the executory gift will sell for very little; or in other words, the value of the present interest plus the value of the executory gift will fall far short of what would be the value of the property if there were no executory interest.''^ In the case of Edgerly v. Barker, in discussing the rule against perpetuities, the court in substance said that while the reasons for the rule are not fully stated generally, its applica- tion may require a wide view of public policy, including the legal nature and design of property, the reasonable extent of any owner's posthumous control, and the economic and moral effects of realty and personalty being largely held in trusts of long duration for mere accumulation or for purposes of en- tailment. Divers evils could be materially increased and unduly perpetuated if the law allowed long-continued accumulations of estates in trust for future private use, or appropriations to maintain grantees or legatees and their heirs forever or for many generations, without effort or care on their part and without ability to waste or lose the capital devoted to their support. The most universal and effectual way of abandoning property is by death of the occupant, when — ^both the actual possession and intention of keeping possession ceasing — the property, which is founded upon such possession and intention, ought also to cease; for, naturally speaking, the instant a man ceases to be, he ceases to have any dominion; else if he had a right to dispose of his acquisitions one moment beyond his life, he would also have a right to direct their disposal for a million of ages after him, which would be highly absurd and incon- 71 Edgerly v. Barker, 66 N. H. 434, 31 Atl. 900, 28 L. R. A. 328. 26 Trusts for Business Purposes. venient. All property must therefore cease upon death, con- sidering man as absolute individuals and unconnected with civil society. 17 — Purpose of Rule. In the same case in a further discussion of Perpetuities, the court said that whatever may have been the origin of proprie- tary rights, the power of grantors and testators to control the tenure, possession, use and alienation of property after it ceases to be theirs is one of the subjects on which the interests of society are sufficiently clear and strong to be evidence of com- mon law. By tliat law an owner's imposition of unreasonable restrictions upon the legal and equitable titles of his successors is not one of the rights of which property consists; and the common-law elements of ov.-nership are not extinguished by a statute conferring or regulating the power of alienation by deed or will. An inability to postpone the vesting of an estate for an unreasonable time is one of many instances of a proprietor's loss of control when he parts with his title. The rule against remoteness is not a detached doctrine, but a broader principle applied to the creation of remote interests. The policy of the law, where a man dies leaving an infant son, restrains alienation until such infant attains twenty-one; and as such infant may not be born until nine or ten months after the death of its father, the power of alienation is, of course, suspended during that period. As the law imposes such suspension of the power of alienation on the infant, so it will permit such suspense by the owner for a like period, for whether it arises from the act of the law or of the party, the efifect will be the same in relation to the interest of the public in the property which is what is consulted in the doctrine of Deed of Trust. 27 perpetuities.'^'^ Estates may be unalienable for lives in being and twenty-one years merely because a life may be an infant or an en ventre sa mere.'^3 Tbe established length of time during which the vesting may be suspended is during a life or lives in being, the period of gestation, and the infancy of such posthumous child ; the twenty-one years are introduced to provide for the minority of a child born, and a few months are allov/ed to let in a posthumous child.''^* Taylor v. Biddall'^ is one of the first cases reported in which so great an excess as twenty-one years after a life or lives in being was allowed. That, however, was a, case of infancy, and it was on account of that infancy that the vest- ing was postponed. This case was allowed by and was the foundation of, the decision in Stephens v. Stephens,''^ which was also a case of infancy; it was on account of that infancy that the vesting of the estate was postponed. These decisions, therefore, do not distinctly or necessarily establish the position that a term in gross for twenty-one years, without any refer- ence to infancy, after a life or lives in esse, will be good by way of executory devise; but there is nothing in them neces- sarily to confine it to cases of infancy. The limit is a life or lives in being, and twenty-one years afterwards, without refer- ence to the infancy of any person whatever. This will not tie up the alienation an unreasonable length of time. In the case of Cadell v. Palmer,"^' it was held that although a period of twenty-one years can be allowed without an infant, a period of nine months cannot be allowed without gestation. 72 Fearne, Remainders, 321, Mass. 3-38, 5 Am. Dec. 66, Gray- Powell's note. Perpetuities, Sec. 171-6. 73Arden, M. R. in Thellusson 75 2 Mod. 289 (1677). V. Woodford (1799), 4 Ves. Jr. 76 Cas. t. Talb. 232 (1736). 227, 337. 77 10 Bing. 140-2-4-51 Id. 74Hawley v. Northampton, 8 (1833), 1 Clark & F. 372. 28 Trusts for Busineiss Purposes. A devise to trustees for the support of the testator's children during their lives, the remainder to his grandchildren (born and unborn) when the youngest is forty years old, is an un- reasonable suspension of the grandchildren's future estate. The vesting of their remainder can not be postponed beyond the time when the youngest is twenty-one.'^ So the general rule against perpetuity forbids the creation of future interest in real estate which will not necessarily vest within a life or lives in being at the creation of the interest, and twenty-one years thereafter; and the purpose of the rule is to prevent the crea- tion of interest to take effect upon the happening of remote contingencies.''^ 1 8 — Rule Applies to Trust Estates and Personal Property. The rule against perpetuities applies as well to trust estates as to legal estates and trusts for accumulations are confined strictly within the rule. Future equitable interests are subject to the same rule in this respect as similar legal interests. ^° A trust violating the rule against perpetuities may be proceeded against by proper authorities and estopped from further and future business.®^ In the case of Howe v. Morse a bill was filed against the Daggett Building Association.^^ a trust, to de- clare it void as violating the rule against perpetuity, and for the further reason that it imposed an illegal restraint upon aliena- 78Marston v. Carter, 12 N. H. 63 Am. St. 230, (Note) 11 L. R. 159-62; Dennett v. Dennett, 40 A. 85. N. H. 498-503, 43 N. H. 499-501; 80 Howe v. Hodge, 152 111. 252, Wood V. Griffin, 46 N. H. 230-4. 38 N. E. 1083. 79 Brown v. Brown, 247 111. 81 Green v. Pavey, 150 111. 513, 528. 93 N. E. 357; Bigelow v. 37 N. E. 842. Cady, 171 111. 229, 48 N. E. 974, 82 Howe v. Morse, 174 Mass. 491, 55 N. E. 213. I Deed of Trust. 29 [HOWE V. MORSE.] tion. The court in passing on the issues raised said that the plaintiffs were not entitled to a winding up of the trust, and a sale of the property for the trust offended neither as to aliena- tion nor as to perpetuity. The facts and the law handed down by the court are in substance as follows : "Is this trust void as creating a perpetuity or imposing an illegal restrain upon alienation?" the court asks, and then says that the right of a shareholder to convey his own shares or interests, under the trust, is in no way restricted. It was con- tended that illegality was found in the circumstance that no sale of the corpus of the trust and no termination of the trust could necessarily occur within the period of a life or lives in being at the time of the creation of the trust and twenty-one years ; that the provision that the certificate holders should not have partition of the land and could compel its sale only by a three-fourths vote, worked an illegal restraint upon alienation. The trustees took legal title to allow the association, through its directors, to manage the land and to enjoy its rent and in- come, and to sell the land free of trusts, at the will of the association, with a further provision for the termination of the trust by vote of the association at any time after July i, 1895. Leases for more than five years and sales could be made only in accordance with an affirmative vote of three-fourths of the shares, and a like vote was necessary to terminate the trust. 19 — Equitable Interest is in Shareholders. The shareholders for the time being had the whole equitable estate in the corpus of the trust, and could at all times sell and transfer their equitable estates at their own pleasure, and the trustee held the legal title in fee in trust to do with the land whatever might be required by the owners of the equitable 30 Trusts for Business Purposes. " rHOWE V. MORSE.] estate ; which owners had full capacity, at all times and at their own option, to require a sale of the land discharged of the trust, or the immediate termination of the trust after a period of five years and a few days — the owners of the equitable es- tate being a voluntary association, the beneficial interests in which were represented by shares and the association acting by vote of the shareholders. That the directions of the association to the trustees are to be given by three- fourths votes, rather than by majority votes, is immaterial, since it can not be said that one is more im- probable than the other. Either is a reasonable way of de- claring the will of the association, and there is no provision that a vote to sell or to end the trust must be passed within any stated period, or at all. Such a trust for the convenience of an unincorporated association in renting and selling land, under which the land is held for no other purpose ; where the income is not accumulated but is distributed as it accrues ; where the land is to be sold free of trusts at the will of the association ; where the whole equitable interest in the trust is at every moment vested absolutely in those who at that moment are shareholders and ne^'er can become vested in any other persons save by act of the absolute owners or by operation of law upon their property and not by force of any limitation contained in the deed of trust — the equitable interests so vested being also constantly vendible by their several owners without let or hindrance as well as subject to their debts and passing like other property upon death by virtue not of the deed of trust but of the general laws governing the disposition of the prop- erty of decedents — withdraws no property from commerce and is not within the reason or the terms of what is called the "rule against perpetuities." The trust in this case involves no future limitations, no restraint upon alienation, and no accumulation Deed of Trust. 31 IHOWE V. MOBSE.] either of income or of principal. The provisions by which the trust fund may be at some time held for the benefit of persons not shareholders at its inception, and who may become such at a period more remote than that allowed by the rule, are not future limitations made by the trust deed in the sense in which the word "limitation" is used in speaking of the operation of the rule. If there shall ever be a shareholder other than those in which the whole equitable estate was absolutely vested at the inception of the trust, that shareholder will not take his interest by virtue of a limitation in the trust deed, but because of his succession, by virtue of the general principles of law, to the property of the original shareholder. The new shareholder, with reference to the rule, is in the same situation as a person who, after the expiration of all lives which were in being when a fee or an estate tail was created, and of a further period of 21 years, takes the fee by the operation of the law which makes property vendible by, or descendible from, the owner, and not by virtue of a limitation in the instrument which created the fee. The entire ownership is never for a moment uncertain or unvested, and at every moment each owner can freely dispose of his property, and at each moment it can be transferred to his creditor by the ordinary processes of the law, and at each mo- ment the trust can be terminated at the will of the owners of the equitable interest. The case is not like any of those relied on by the plaintiffs. The statement that "it is impossible to take in succession forever without a capacity, and a capacity to take in succession cannot be without incorporation," quoted from the case of Sutton's Hospital,^^ is there made of a corporation administering a public charity, it being contended that the in- corporation was void because the foundation was not made be- 83 10 Coke, 26b. 32 Trusts for Business Purposes. IHOWE V. MORSE.] fore the grant of the letters patent incorporating the hospital, and the statement does not import that perpetual succession can- not exist save in cases of holding by corporations. We see no proper application to the present case of the statement quoted. Carne v. Long,^* and Carrier v. Price,^^ were gifts to societies whose members took no personal beneficial interest in the property which had to be kept for the purposes of the society and could not be disposed of by the members for the time being. These cases, there being no public cliarity, were simply private trusts, and the gifts were bad because the mem- bers of the society for the time being did not have power to alienate the estate.'^ It is said that in the case of voluntary societies for whose use land is, in efl;ect, held in perpetuity, as in the case of the inns of court, whenever the number of benchers to whom the fee of the land is conveyed as joint tenants is considerably re- duced, the surv'ivors cause the land to be conveyed to all the then hving benchers. But the benchers are not expected to use these lands for their personal benefit. The plain purpose is to keep the lands forever for the use of the voluntary asso- ciation as a society charged with certain duties and enjoying certain rights, connected in a general way with the administra- tion of the law, and which is inconsistent with any personal interest in, or control over, the land on the part of the in- dividual benchers. Such cases are therefore like those already examined. So, too, the present case is clearly distinguishable from Winsor v. Mills.^' 20 — Beneficiaries not Entitled to Partition. The provision in the present trust, tliat the shareholders are 84 2 De Gex, F. & J. 75, In re 86 Gray, Perp. 409, note 2 Button, 4 Exch. Div. 54. Mars. Perp. 300. 85 (1891) 3 Ch. 159. 87 157 Mass. 362, 32 N. E. 352. De;ed or Trust. 33 FHOWE V. MORSE.l not to have any interest or title in the trust property itself, and no right to call for partition, and tliat the shares shall be personal property, is not a restraint upon alienation, since the alienation of the legal and the equitable ownerships is provided for. It does not appear, and cannot be assumed, that the per- sons who organized the association and became its shareholders had title to the land held by the trustees. Their whole interest comes through the shares which are vendible without restraint. In Winsor v. Mills, supra, Philbrick, who held the title, owned two undivided thirds of the land and held the remaining un- divided third in trust for Mills, under an explicit agreement that no sale or conveyance of the land, or of any part thereof, or of any interest therein, should be made by Philbrick, his heirs or assigns, except upon the written consent of Mills, his heirs or assigns ; and there was also a provision by which a part of the land might be purchased by Mills, or his heirs or assigns, at a special price, at any time before the land should be other- wise sold or disposed of. These were restraints upon aliena- tion, and were held void, because they might continue too long. The purpose of the trust was to prevent the alienation of the land, and to keep it out of commerce. Neither of the owners could convey his own share in the property, and the land was intentionally tied up. The court is of opinion that the ruling at the hearing was correct ; tliat the trusts set forth were not void as creating a perpetuity or imposing an illegal restraint upon alienation ; and that the plaintiffs are not entitled to a winding up of the trust and a sale of the property, as prayed. They are entitled, upon the findings of the report, to an account, and also to receive regular accounts in the future, and a decree accordingly should be entered. CHAPTER II. VALIDITY. Rights Distinguished From Law. 21 — In General. The only limitation placed on the trust in its development is that its purpose shall be not illegal or against the public policy of the state. In contemplating the trust as a business organiza- tion one of the first questions to present itself is, under what law is it organized and from what source does it receive its privileges and powers. The corporation, being a creature of the law, we may turn to the act under which it is organized and there find all the privileges set forth which it may exercise and enjoy. With the trust we are confronted with an entirely dif- ferent situation, for it is not organized under any particular law, but comes into being from a right — a right which a free people may exercise in contracting, and alienating property. The trust as used in modern business has been confused with the common law, it in no way depends for its existence on the common law, only in so far as the common law protects com- mon law rights. As a medium for business, the trust has been used a great deal in England and Germany and is being developed and em- ployed more and more each day in the different states here. With this expansion of the trust the question of its legality is raised constantlv and will have to be answered to the satisfac- tion of business and manufacturing enterprise before it can (34) Validity. 35 come into universal use. From earliest times the English courts have recognized the rights of individuals to form joint stock companies and make contracts independent of statute and the common law; the people exercised this right and the com- mon law protected them in that right.^^ The courts in this country refer often to common law rights — a phrase which distinguishes from the common law. In reference to an insur- ance case in Ohio,^^ the court uses this language : "There was no class of business, the transaction of which, as a matter of private right, was better recognized at common law than that of making contracts of insurance upon the lives of individuals." Different courts in our country have said repeatedly that any right, interest or thing which may be the subject of property may be conveyed in trust ; in fact every kind of a vested right which the law recognizes as valuable may be transferred in trust.^*' The only limitation which has been placed on the trust, as stated above, is that its purpose shall be not illegal or against the public policy of the state. In some form or other, the trust has been before the courts in practically every state in the union, and in most cases the particular questions have been passed on without the origin of the trust being considered or its existence as a matter of right being debated. ^^ Following our colonial days, we not only rec- 88 In re Mexican and S. A. Co., Lamb, 11 Cal. App. 717, 106 Pac. 27 Beav. 474; 6 L. R. A. (N. S.) 254; Sears Trust Estates, 2nd 665. Edition 370; Thompson-Business 89 State V. Ackerman, 51 Ohio Trusts 16. St. 163, 37 N. E. 828, 24 L. R. A. 91 Hart v. Seymour (1893), 298. 147 III. 598, 35 N. E. 246, 7 A. 90 Burke v. Burke, 259 111. L. R. 613; Mallory v. Russell 262, 102 N. E. 293; Venner v. (1887), 71 Iowa 63, 6 Am. Rep. Chicago City Ryl Co., 258 111. 776, 32 N. W. 102; Hoadley v. 523, 101 N. E. 949; Thomas v. Essex County (1870), 105 Mass. 36 Trusts for Business Purposes. ognized and followed the English rule as to rights and priv- ileges, but also specifically set forth in the Declaration of Independence "that all men are created equal ; that they are endowed by their Creator with certain unalienable rights; that among these are life, liberty, and the pursuit of happiness; that to secure these rights governments are instituted among men." Here we have an expression of rights which governments are organized to uphold; the law being simply the means of main- taining and protecting these rights. Section i of article 2 of the Constitution of Illinois says : "That all men are by nature free and independent, and have certain inherent and inalienable rights. Among these are life, liberty, and the pursuit of happiness." Section 2 of article 2 of the Constitution is as follows: "No person shall be deprived of life, liberty, or property without due process of law." The vSupreme Court of Illinois, in the case of Bessette v. People,^** said that the constitutional guaranties secured by these pro- visions include the right of the citizen to follow his individual preference in the choice of an occupation. ^^ The general prop- osition that the enjoyment by the citizen of the privilege of pursuing an ordinary calling or trade upon terms of equality with all others in similar circumstances is a general part of his rights of liberty and property which has been assented to by 519; Frost v. Thompson (1914), 204 Pa. 432, 54 Atl. 316; Con- 219 Mass. 360, 106 N. E. 1009; nelly v. Lyons (1891), 82 Tex. Cross V. Jackson (1843), 5 Hill. 664, 21 Am. St. Rep. 935, 18 S. 478; King v. Townshend (1894), ' W. 799. 141 N. Y. 358, 36 N. E. 513; 92 193 111. 334, 62 N. E. 215. Merchants Nat. Bank v. Wehr- 93 Black, Const. Law, pp. 404, mann (1903), 69 Ohio St. 160, 68 411; Ruhstrat v. People, 185 111. N. E. 1004; In Re Pittsburg 133; 49 L. R. A. 181, 57 N. E. 41. Wagon Works' Estate (1903), I Validity. 37 the Supreme Court of the United States.^* The court, in Bessette v. People, supra, further stated that the right to fol- low any of the common occupations of life is an inalienable right. It was formulated as such under the phrase 'pursuit of happiness' in the Declaration of Independence which com- menced with the fundamental proposition that 'all men are created equal ; that they are endowed by their Creator with certain inalienable rights ; and among these are life, liberty, and the pursuit of happiness.' This right is a large ingredient in the civil liberty of the citizen. It was also said in the case of Allgeyer v. Louisiana, supra, that the liberty of pursuit — the right to follow any of the ordinary callings of life— is one of the privileges of a citizen of the United States. In Braceville Coal Co. V. People,^^ the court said that liberty, as tlrnt term is used in the Constitution, means not only freedom of the citizen from servitude and restraint, but is deemed to embrace the right of every man to be free in the use of his powers and faculties, and to adopt and pursue such avocation or calling as he may choose, subject only to the restraints necessary to secure the common welfare. In discussiong this question of rights further, the Supreme Court of Illinois, in another case,^^ says that the terms 'life,' 'liberty,' and 'property' are representative terms, and intended to cover every right to which a member of the body politic is entitled under the law. These terms include the right of self-defense, freedom of speech, religious and polit- ical freedom, exemption from arbitrary arrests, the right freely to buy and sell as others may. Indeed, they may embrace all 94 Powell V. Pennsylvania, 127 95 147 111. 66, 22 L. R. A. 340, U. S. 678, 32 L. ed. 253, 8 Sup. 35 N. E. 62. Ct. Rep. 992; Allgeyer v. Louisi- 96 Gillespie v. People, 188 111. ana, 165 U. S. 578, 41 L. ed. 832, 176, SO Am. St. 176, 52 L. R. A. 17 Sup. Ct. Rep. 427. 283. 38 ■ Trusts f'or Busini:ss Purpose;s. our liberties, personal, civil, and political, including the rights to labor, to contract, to terminate contracts, and to acquire property. None of these liberties and rights can be taken away, except by due process of law.^' The rights of life, lib- erty, and property embrace whatever is necessary to secure and effectuate the enjoyment of those rights. The rights of liberty and of property include the right to acquire property by labor and by contract.^^ In this last sentence the court expressly states that an inalienable right is the right to contract, and in its first and last analysis the trust is nothing more or less than a contract. It is the alienation of property with or without consideration ; it is created by the mutual acts of the parties. In a case before the Federal court,^^ the question as to the right of a trust to carry on a manufacturing business was not involved, but the court clearly decided that the trust derived none of its right, qualities or benefits from any statute. From this it might be argued that the trust is a creature of the com- mon law. In a Llassachusetts case,^*'^ the question of the rights and privileges of the trust was put in issue in relation to taxa- tion on what was termed an association ; the court said that the association was not a corporation ; that it was merely a partner- ship with all the incidents and responsibiHties of a partnership; that it enjoyed no franchise confirmed upon it by legislature: that it did not ask for or enjoy any corporate or special priv- ilege; that it had constituted its partnership under its common law rights and such legal agreements as it chose to make. Here the court expressly recognized the common law right to contract 97 2 Story, Const. 5th ed. Sec. Fed. 809, 170 C. C. A. 609, 7 A. 1950. L. R. 608. 98 Ritchie V. People, 155 111. lOO Gleason v. McKay, 134 98, 29 L. R. A. 79, 40 N. E. 454. Mass. 419. 99Malley v. Bowditch, 259 Validity. 39 as distinguished from the common law. In a New York case,^ where the question of right was involved, it was said that the relation which parties assume in creating associations is wholly the product of their mutual agreements and depends in no re- spect upon the grant or authority of the state; it is founded on the rights of citizens individually to join their capital and enterprise by contract. This doctrine is in keeping with an Indiana case,^ which expresses the view that the trust is a citizen and entitled to all the rights and privileges of an indi- vidual. In the case of Spotswood v. Morris,^ which involves a trust organized in Idaho for the purpose of dealing in land, the court not only adopts the view expressed in the Winchester V. Coleman case just cited, but also emphasizes the common Jaw right to contract. Trusts for business purposes are quite commonly referred to as common law companies, and they are generally referred to as organized under the common law. From the foregoing decisions it would seem that the phrase "common law company" as referring to a trust is a misnomer, for they are created in this country, as in England, under the right of citizens to contract. A case before the Appellate court of Illinois,* in which a trust was involved in litigation over the sale of some of its securities, is of interest for the reason that the attorneys on both sides as well as the court, followed the theory that the trust was a creature of the common law. The facts in the case as taken from the decision are in substance as follows : 1 Winchester v. Coleman, 133 146. N. Y. 279, 16 L. R. A. 183, 31 3 12 Idaho 360, 85 Pac. 1094, N. E. 96. 6 L. R. A. (N. S.) 665. 2 Farmers Loan & Trust Co. v. 4 Kinross v. Cooper, App, Ct Chicago & A. Ry. Co., 27 Fed. 111., Feb. 1922. 40 Trusts for Busineiss Purposes. 22 — Sale of Beneficial Interests — In Reference to Security Act. John W. Kinross, John J. Cooper, Sam W. Cassaway and WilHam J. Peck, who claimed to be trustees of the American Manufacturing Company, of Peoria, which was alleged to be a joint stock or common law company, took judgment by confes- sion in the Circuit Court of Peoria County against one W. D. Cooper, for $1142.35, upon two promissory notes for $500.00 each; Cooper asked to have the judgment vacated with leave to plead, which was allowed. He then filed the general issue and six special pleas, all of which were subsequently withdrawn except the sixth and seventh special pleas. A general and spe- cial demurrer was filed by the trust through its trustees to the special pleas ; on a hearing the demurrer was overruled. The trustees elected to stand by the demurrer, whereupon judgment was entered in favor of W. D. Cooper, and from that judg- ment the trustees' appeal was prosecuted. The sixth and seventh special pleas filed by W. D. Cooper (appellee) set vip in substance that the American Manufactur- ing Company and appellee entered into an agreement whereby appellee was to purchase ten shares of the capital stock of the American Manufacturing Company at the par value of $100.00 each, and the notes were made, executed and delivered in con- sideration therefor ; that the American Manufacturing Com- pany was not a corporation, either domestic or foreign, but was an unincorporated association holding itself out as an or- ganization under the common law in force in the State of Illi- nois; that it had not qualified its stock, and participation cer- tificates for sale in Illinois pursuant to the terms and provisions of the Illinois securities law of 1919, and by reason thereof the sale in question was void and the consideration for which the notes were executed wholly failed. Cooper further sets out Validity. 41 [KINROSS V. COOPER.] as his defense to the notes that the Trust was a common law company and that it failed to comply with the Security Act. The trust, by its demurrer, admits tliat it is a common law com- pany; this, in effect, eliminates from the controversy the trust question, and leaves the court to determine whether a common law company, in the sale of its securities, is subject to the Se- curity Act. Had the trust denied that it was a common law company and set forth that it was organized by the trustor under his right to contract, an entirely different question would have been presented to the court than the one to determine the right of a common law company to sell its shares without com- plying with the Security Act. The court, in passing on the question, said : "The sole question upon this appeal is whether or not the Illinois Securities Law includes within its scope a declaration of trust or common law company." 23 — Illinois Security Act in Reference to Common Law Companies. Ttie Illinois Securities Act, Kurd's Statutes of 1919. page 2672, is entitled "An Act relating to the sale or other dis- position of securities and providing penalties for the violation thereof." Section 2 defines securities under the act to include stocks, bonds, debentures, notes, participating certificates, cer- tificates of shares or interest, pre-organization certificates, sub- scription certificates evidencing shares in trust estates or associations, and profit sharing certificates. In the same section the word 'issuer' as used in the Act is defined to include every person and every company, trust, partnership or association in- corporated or unincorporated heretofore or hereafter formed for any lawful purpose and organized under the laws of this state or any other foreign state or country which shall issue 42 Trusts for Busine;ss Purposes. [KINROSS V. COOPER.] any security sold or offered for sale to any person or persons in this state. Section 3 divides securities into four classes : A, B, C, and D. It seems to be conceded that the stock issued in this case comes under Class D. It is admitted that prior to the sale set out in the pleas, the provisions of sections 9 and TO were not complied with relative to statements and documents to be filed with the Secretary of State. Section 37 provides that every sale of stock in violation of the provisions of the act and where the act is not complied with shall be void. The court in commenting on the theory advanced by the trust said : "The contention of appellants is that a joint stock company or common law company does not come within the provisions of Section 2 ; that the term 'laws of this state/ as used in Section 2, does not include the common law ; that in order to bring the issuer of stock within the act, two things are required, first: that the issuer must be formed for a lawful purpose, and second : that it must be organized under the laws of this state or a foreign state or country, and if it is not so organized such issuer does not come within the terms of the act. It is also urged that a common law company is not organized under the laws of this state or any foreign state or country but is based upon a written instrument or contract be- tween the shareholders and the trustees, and the contract cre- ates a trust estate ; that the contract or deed of trust in this case was recorded in the recorder's office of Peoria County, and, therefore, became a public document whereby the public is charged with notice of its contents." The trustees argued that they were not organized under the laws of Illinois or any foreign state or country, but that their trust was based upon a written contract between the share- holders and the trustees ; the trouble with that argument is that in their pleadings they admit they are organized under the Validity. 43 [KINROSS V. COOPER.] common law. The court in discussing this point says: 'In support of this position appellant cites the case of Elliott v. Freeman^ which involved a federal corporation tax act which by its terms was to include 'all corporations now or hereafter organized under the laws of the United States or of any state or territory in the United States, or under the act of Congress applicable to Alaska or the District of Columbia.' It was there held by the Supreme Court of the United States that the word 'laws' means statutes, and that a common law company was not within the terms of the act. It is insisted that the word 'laws' in the Illinois Act is used with the limitation placed upon it by the Supreme Court of the United States, and that to give it any other meaning would be a violation of Section lo. Article i, of the Federal Constitution, and Article 2, Section 14 of the Con- stitution of Illinois, which prohibit laws impairing the obliga- tion of contract. There is no question in this case as to the con- stitutionality of the Illinois securities law. That question was not raised in the trial court and is not raised in this court. Since the briefs and arguments have been filed in this case the Supreme Court, in the case of Stewart v. Brady ,6 has held that this law is constitutional. The only question on this appeal, therefore, is whether the Illinois Securities Act includes com- mon law companies. 24 — Common Lazv as Effected by Statute. The common law until repealed by legislative enactment is in full force and effect in this state. (Kurd's Statute 19 19, Chapter 28, Section i. Page 680.) The laws of this state in- chide the constitution, statutes and rules applied in the admin- 5 220 U. S. 178, 55 L. ed. 424, 6 Stewart v. Brady, 300 111. 31 Sup. Ct. Rep. 360. 425, 133 N. E. 310. 44 Trusts for Business Purposes. TKINBOSS V. COOPER.] istration of justice as construed and applied by the courts of last resort in this state. To this may be added the common law. In Hunt v. Chicago & Dummy Ry. Co.' the question raised was the construction of the lUinois constitution as to the duties of the attorney general. The constitution authorizes the attorney general to pcrfcnn such duties as may be pre- scribed by law and defendants urged that the words 'prescribed by law' meant that the attorney general sliall perform such duties as shall be prescribed by any law, statutory or otherwise, and on Page 289 the court says : 'The common law of Eng- land, having been expressly adopted in this state, is as much a part of our law — wherever it is applicable and so far as it has not been changed by statute — ^as are the statutes them- selves ; and a duty required of the attorney general by the rules of the common law is as much a duty required of him by law as though it were imposed by the expressed mandate of the statute.' If the common law is a part of the law of this state, then a corporation organized under the common law would come within the provisions of Section 2, notwithstanding the decision in the Elliott case to the contrary. This is a question of construction under the laws of the state of Illinois, and it is not a question of construction under the laws of the United States. Section 2 includes every person, company, trust, part- nership or association incorporated or unincorporated hereto- fore or hereafter formed and organized under the laws of this state. The legislature intended under this section to include all organizations either at common law or under a statute. Cooper contended that the American Manufacturing Com- pany exercised practically all of the functions of a corporation but that under the laws of this state it was in fact a partnership 7 Hunt V. Chicago & Dummy Ry. Co., 20 111. App. 282. Validity. 45 [KINROSS V. COOPER.] and not a common law company. In support of this conten- tion, the case of Pilsen Brewing Co. v. Wallace,^ was cited where it was held that a company which is not a corporate body is a partnership composed of the officers and subscribers to the articles of the association. Many other cases were cited in support of this position. The court, in a summary of its decision, said: "If the American Manufacturing Company were a partnership, it would be required to comply with the provisions of the law the same as an individual or a corpora- tion. It made no difference, so far as the decision of this question was concerned, whether the appellant company was a common law company or was a partnership, for the reason that in either case it came within the provisions of the statute. There was no attempt to comply with the law. The sale of the shares was void and for that reason the demurrer was declared properly overruled to the sixth and seventh pleas." There is no question but that the common law is a part of the law of Illinois ; luit this trust was not organized under the common law, for there is no part of the common law applicable to trusts, except in that the common law upholds a common law right. It was erroneously assumed by both sides of the case in their pleadings that the American Manufacturing Com- pany was a common law company. The argument of the trustees was that they existed as a matter of right, if their pleadings had been such that the court could have passed on that question, undoubtedly it would have followed the cases previously cited wherein a right was distinguished from the law. Trusts are organized as a matter of right; and the law is simply a means of protecting the interests under that right, or 8 Pilsen Brewing Co. v. Wal- 8 A. L. R. 579. lace, 291 111. 59, 125 N. E. 714, 46 Trusts i^or Busine;ss Purposes. as said by Justice Field, in the slaughter-house cases,^ "Rights are the gift of the creator which the law does not confer, but only recognizes."^® The Trust as an Entity. 25 — In General. In different jurisdictions and different courts, trusts have been called 'associations,' 'unincorporated companies,' and 'part- nerships.' In all probability this confusion is caused mainly by loosely drawn instruments wherein the liability of the trustees and beneficiaries is not clearly defined or properly limited, or by failure of the court to recognize the trust as an entity. In a Texas case^^ where the trustees were not under the super- vision of the beneficiaries, but were in exclusive control of the property, the court in passing on the trust as an entity said: "The first question arising on the appeal is whether the agree- ment entered into between the parties to the suit, and under the terms on which they organized and were conducting the business in which they were engaged, created a partnership or an unincorporated joint-stock company, or a trust as distin- guished from a partnership or such company. We have exam- ined the trust agreement in question and the authorities at our command bearing upon the subject as carefully as we have been able to do, and conclude that said agreement created a 'trust' and not a company, association, or partnership." This 9 83 U. S. 16 Wall. 97, 21 L. "Business and Legislation." ed. 415. 11 Davis v. Hudgins, 225 S. W. 10 See State r. Scougal, 3 S. D. 73. This case is reported in full 55, 51 N. "W. 858, 15 L. R. A. 477; herein under the paragraph ou 44 Am. St. Rep. 756. This case Receiver in Bankruptcy. is reported in full under chapter Validity. 47 decision is emphasized by the United States Supreme Court in Crocker v. Malley,^'' in differentiating between a trust and an association. The court makes it clear that a pure trust, active and functioning as such, has a standing in law as a trust. In this case the trust was organized for the purpose of collecting rents and income. Taxes were assessed against it as a joint stock association, which were paid; the trust then filed suit to recover taxes paid under protest to the collector of internal revenue. The taxes were assessed to the plaintiffs as a joint- stock association within the meaning of the Income Tax Act of October 3, 1913, c. 16, Section II, G (a), 38 Stat. 114, 166, 172. and were levied in respect to dividends received from a corpora- tion that itself was taxable upon its net income. The plaintiffs maintained they were not an association but simply trustees, and subject only to the duties imposed upon fiduciaries by Section II, D. The Circuit Court of Appeals decided that the plaintiffs together, it would seem, with those for whose benefit they held the property, were an association and ordered judg- ment for the defendant, reversing the judgment of the District Court.^^ The facts taken from the reports in substance are as follows : 26 — A Trust to Distribute Income. A Maine paper manufacturing corporation with eight share- holders, had its mills on the Nashua River in Massachusetts and owned outlying land to protect the river from pollution. In 1912 a corporation was formed in Massachusetts. The Maine corporation conveyed to it seven mills and let to it an eighth that was in process of construction, together with the 12 249 U. S. 223, 63 L. ed. 573, 270. 2 A. L, R. 1601, 39 Sup. Ct. Rep. 13 250 Fed. 817. 48 Trusts for Busine;ss Purpose;s. [CROCKER V. >L\rLEY.] outlying lands and tenements, on a long lease, receiving the stock of the Massachusetts corporation in return. The Maine corporation then transferred to the plaintiffs as trustees, the fee of the property subject to lease, leaving the Massachusetts stock in their hands, and was then dissolved. By the terms of the declaration of trust the plaintiffs declared that they held the real estate and all other property at any time received by them thereunder, subject to the provisions thereof, "for the benefit of the cestui que trusts (who shall be trust beneficiaries only, without partnership, associate or other relation whatever inter sese)'" upon trust to convert the same into money, and distribute the net proceeds to the persons then holding the trustees' receipt certificates — the time of distribution being left to the discretion of the trustees, but not to be postponed be- yond the end of twenty years after the death of specified per- sons then living. In the meantime, the trustees were to have the powers of ow^ners. They were to distribute what they determined to be fairly distributable net income according to the interests of the cestui que trusts, but could apply any funds in their hands for the repair or development of the property held by them, or the acquisition of other property, pending con- version and distribution. The trust was organized and put in force because of the determination of the Maine corporation to dissolve without waiting for the final cash sale of its real estate and was declared to be for the benefit of the eight share- holders of the Maine Company who were to receive certificates subject to transfer and subdivision. Then followed a more de- tailed statement of the power of the trustees and provision for their compensation, not exceeding one per cent of the gross income unless with the written consent of a majority in interest of the cestui que trusts. A similar consent was required for the filling of a vacancy among the trustees, and for a modifica- Validity. 49 [CROCKER V. >IAXLEV.] tion of the terms of the trust. In no other matter had the beneficiaries any control. The title of the trust was fixed for convenience as The Massachusetts Realty Trust. Taxes were assessed against this trust on the theory that it was an associa- tion; the court upon examining the instrument creating the trust said : "The declaration of trust on its face is an ordinary real estate trust of the kind familiar in A'lassachusetts unless in the particular that the trustees' receipt provides that the holder has no interest in any specific property and that it purports only to declare the holder entitled to a certain fraction of the net proceeds of the property when converted into cash 'and mean- time to income.' The only property expressly mentioned is the real estate not transferred to the Massachusetts corporation. Although the trustees in fact have held the stock of that cor- poration and liave collected dividends upon it, their doing so is not contemplated in terms by the instrument. It does not ap- pear very clear that the eight Maine shareholders might not have demanded it, had they been so minded. The function of the trustees is not to manage the mills, but simply to collect the rents and income of such property as may be in their hands, with a large discretion in the application of it, but with a recog- nition that the receipt holders are entitled to it, subject to the exercise of the powers confided to the trustees. In fact, the whole income, less taxes and similar expenses, has been paid over in due proportion to the holders of the receipts." 27 — Functions of Trustees and Beneficiaries — Distinguished. The question as to the rights and powers of the certificate holders was involved in this case"; their rights and the extent of their actions govern in determining whether the instrument 50 Trusts for Business Purposes. [CROCKER V. MAXLEY.] created a trust, partnership or association. The court taking up this provision in the instrument said: "There can be Httle doubt that in Massachusetts this arrangement would be held to create a trust and nothing more. The certificate holders are in no way associated together, nor is there any provision in the instrument for any meeting to be held by them. The only act under the declaration of trust which they can do is consent to an alteration of the trust and to the other matters that we have mentioned. They are confined to giving or withholding as- sent, and the giving or withholding it is not to be had in a meeting but is to be given by them individually. The sole right of the cestuis que trust is to have the property administered in their interest by the trustees who are the masters, to receive income while the trust lasts, and their share of the corpus when the trust comes to an end."^* The trust was assessed as an association under Section II, G (a) but the contention of the trustees was that they were not an association, but a pure trust, and as fiduciaries they were called upon only to make a return of the net income of the per- son for whom they acted— as provided in Section II, D. The court, in deciding this, said : "The question is whether a differ- ent view is required by the terms of the present act. As by D referred to, trustees and associations acting in a fiduciary ca- pacity have the exemption that individual stockholders have from taxation upon dividends of a corporation that itself pays an income tax, and as the plaintiffs undeniably are trustees, if they are to be subjected to a double liability the language of the statute must make the intention clear."^^ In commenting further on this question, the court said : 14 Wiliams v. Milton, 215 151-3, 38 Sup. Ct. 53, 62 L. ed. Mass. 1, 102 N. E. 355. 211; United States v. Isham, 17 16 Gould V. Gould, 245 U. S. Wall. 496, 504, 21 L. ed. 728. Validity. 51 [CROCKER V. jVL4L.L,EV.] "The requirement of G (a) is that the normal tax therein- before imposed upon individuals shall be paid upon the entire net income accruing from all sources during the preceding year 'to every corporation, joint-stock company or association, and every insurance company organized in the United States, no matter how created or organized, not including partnerships.' The trust that lias been described would not fall under any familiar conception of a joint-stock association, whether formed under a statute or not.^^ If we assume that the words 'no mat- ter how created or organized' apply to 'association,' and not only to 'insurance company,' still it would be a wide departure from normal usage to call the beneficiaries here a joint-stock association when they are admitted not to be partners in anv sense, and when they have no joint action or interest and no control over the fund. On the other hand, the trustees, by themselves, cannot be a joint-stock association within the mean- ing of the act, unless all trustees with discretionary powers are such, and the special provision for trustees in D is to be made meaningless. We perceive no ground for grouping the two — beneficiaries and trustees — together in order to turn them into an association, by uniting their contrasted functions and pow- ers, although they are in no proper sense associated. It seems to be an unnatural perversion of a well-known institution of the law. We do not see either that the result is affected by any tech- nical analysis of the individual receipt holder's rights in the income received by the trustees. The description most in ac- cord with what has been the practice would be that, as the re- ceipts declare, the holders until distribution of the capital were 16 Smith V. Anderson, 15 Ch. Freeman, 220 U. S. 178, 186, 31 D. 247, 273-4-7, 282; Elliott v. Sup. Ct. 360, 55 L. ed. 424. 52 Trusts for Business Purposes. [CROCKER V. 3IALLEY.] entitled to the income of the fund, subject to an unexercised power in the trustees in their reasonable discretion to divert it to the improvement of the capital. But even if it were said that the receipt holders were not entitled to the income as such until they got it, we do not discern how that would turn them into a joint stock company. IMoreover the receipt holders did not get it and the question is what portion it was the duty of the trustees to withhold. We presume that the taxation of corpoi-ations and joint-stock companies upon dividends of cor- porations that themselves pay the income tax was for the pur- pose of discouraging combinations of the kind now in disfavor, by which a corporation holds controlling interests in other cor- porations which in their turn may control others, and so on, and in this way concentrates a power that is disapproved. There is nothing of that sort here. Upon the whole case, we are of opinion that the statute fails to show a clear intent to subject the dividends on the Massachusetts corporation's stock to the extra tax imposed by G (a). The plaintiffs as they themselves alleged in their claim, were the persons taxed, whether they were called an association or trustees. They were taxed too much. If the United States retains from the amount received by it the amount that it should have received, it cannot recover that sum in a subse- quent suit. Judgment of the Circuit Court of Appeals reversed. Judgment of the District Court affirmed." In this case we have the language of the United States Su- preme Court giving validity to the trust as a business organiza- tion : "we perceive no ground for grouping the two — bene- ficiaries and trustees — together in order to turn them into an association, by uniting their contrasted functions and powers, although they are in no proper sense associated." This rule laid down from our court of last resort, recognizing the trust I Validity. 53 as an entity, establishes the law we are to follow. Trust ajrree- ments which properly set forth the powers and duties of the trustees, with limitation on the beneficiaries, come within this rule i^'' trusts of this character will have no trouble on that score in other jurisdictions. Public Policy. 28 — In General. It would seem to be almost unnecessary to discuss the trust in its relation to the public policy of the state, in view of its validity and the recognition of its rights, established by the judiciary of the country. However, there are three decisions spoken of freely, and in some instances they have been used as an argument as to why the trust, as such, is against the public policy of the state; two of these are in Ohio and in neither of these was the trust question involved. The third is an Illinois case, and in that one there is no reference to the trust being against public policy. One of the Ohio cases is known as the State v. Manufac- turers Mutual Fire Association ;i8 in this case proceedings were instituted to oust the Mutual Fire Association from exercising the franchise of a corporation under the laws of Ohio. The petition stated that the Manufacturers Mutual Fire Association iTConnally v. Lyons, 82 Texas Anderson, 15 Ch. D. 247; State 664, 18 S. W. 799, 21 Am. St. v. Lee, 233 S. W. 20. See Trust Rep. 935; Williams v. Milton, Not partnership, under Trusts 215 Mass. 1, 102 N. E. 355; Distinguished From Other Or- Rhode Island Hospital Trust v. ganizations. Copeland, 39 R. I. 193, 98 Atl. 18 50 Ohio St. 145, 33 N. E. 273; Mayo v. Moritz, 151 Mass. 401, 24 L. R. A. 252. 481, 24 N. E. 1083; Smith v. 54 Trusts for Business Purposes. was a corporation duly incorporated under the laws of the State of Ohio. The association was organized under a special act providing for the Manufacturers Mutual Insurance Asso- ciation; it was found that it violated the act in question; that it had been exercising powers and franchises not authorized by the statute; and for these reasons the prayer in the petition of ouster was granted. There was no question of a trust involved, so the decision, while it has been used in reference to trusts, has no application whatever. The other Ohio case is State v. Ackerman;^^ it is said that the Attorney General of Ohio cites this case in support of his contention that proceedings in quo warranto may be brought against any association of persons who act in the state without being legally incorporated.^^ The facts in that case show that an organization was put together for the purpose of writing insurance in the state of Ohio ; a copy of the agreement will be found in the appendix herein, and is interesting reading from the viewpoint of an association. The petition was filed against C. F. Ackerman and ninety-nine other persons who were transacting the business of guarantee and accident insurance in the state of Ohio under the name of the Guarantee and Ac- cident Lloyds, New York, to oust them from carrying on that business, because they had not complied with the laws of the state or received any authority from it to do business of that kind. Ohio has a statute which provides that quo warranto may be maintained first, against a person wlio unlawfully ex- ercises a franchise; second, against an association of persons who act as a corporation within the state without being legally incorporated; the action in this case was to prosecute on both grounds. 19 51 Ohio St. 163, 37 N. E. 20 Sears, 2nd Ed. 344. 828, 24 L. R. A. 298. Validity. 55 It was claimed that the laws of Ohio did not apply to the defendants because they were not a corporation, company, or association, or acting as such; but that in making contracts of insurance each individual acted for himself. However, the court did not adopt that view, but said that an examination of their articles of agreement showed that they had associated themselves together in a business under a common name, and that the capital was under the control of a board of managers; that the language of the petition showed sufficiently that the defendants in transacting the business of insurance in the state were exercising unlawfully a franchise within the state, and were acting as a corporation therein without being legally in- corporated. In reaching its decision, the court cites the Illinois case, Green v. People.^^ This latter case does not touch on the question of trust ; that issue was not raised, so the decision throws no light on the subject of the trust as operating against public policy. If, however, the defendants had been a pure trust engaged in the insurance business, we might have had some law applicable to the trust problem. This case will be discussed in connection with the report of the Attorney Gen- eral of Illinois, which report, on page 422, Quarterly No. 4, 1919, reads as follows : "The transfer of property to a 'man- ager' and a 'subscribers' committee' of five persons, giving them general and complete supervision and management in the pui- chase and improvement of real estate with the right of mort- gage, exchange or sale, etc., the title to all of the property to be in the 'manager,' or in such person or corporation as he may designate, absolving the 'manager' and the 'subscribers' com- mittee' from liability for error of judgment, and limiting the liability to all participants to the amount subscribed, evidenced 21 150 111. 513, 37 N. E. 842. 56 Trusts for Business Purposes. by subscription certificates, may or may not constitute the cer- tificate holders partners, but the arrangement or agreement is against public policy in that it attempts to permit the exercise of corporate powers without corporate safeguards." On Page 425 of the same report, the Attorney-General, in writing to the Secretary of State in reference to a syndicate agreement, says : "As to such an organization being against the policy of this State by reason of the fact that the agreement seeks to limit the liability of the certificate holders and makes said certificates negotiable as set forth in Sections 7 and 14 of said agreement, I desire to call your attention to the case of Green, et al., v. People, ex rel., in which the court held that: 'An association or number of persons in the business of insur- ance, by professedly limiting their liability to the amount of money contributed by each, and assuming to give perpetuity to the business by making membership certificates trans ferrable by the assignment of the member or his personal representa- tive, will thereby act as a corporation, and will be liable to judgment of ouster. And the fact that such persons may be held mdividually liable upon policies of insurance which they may have issued, will not relieve them of the charge of having acted as a corporation.' " The case of Green v. People, supra, is the third case cited occasionally as upholding the theory that it is against the public policy of the State of Illinois for a business to be conducted under a trust agreement. On examining this case we find that some parties organized, and then engaged in the insurance busi- ness; in their organization they limited their liability to the amount of money contributed by each, and assumed to give perpetuity to the business. Had this organization been before the court as a pure trust, it would have been bad in these two features. First, the liabilitv should have been limited to the Validity. 57 assets of the organization, and not to what was paid in by the organizers. Second, by trying to give perpetuity to the or- ganization, they violated one of the fundamental elements of the trust — the Rule against Perpetuities. Either one of these reasons would have been sufficient to bar these parties from Illinois or any other state as a trust, irrespective of what business it might be engaged in ; but this argues nothing for or against the trust, for the trust, as such, was in no way involved in the case or in the findings of the court. A trust correctly formed cannot properly be designated a corporation, partner- ship, association, or anything but a trust. ^^ In this decision there is not a word, either expressed or implied that it is il- legal, improper, or against the public policy of the State of Illinois for a business to be carried on under a trust agreement. Referring again to the Attorney-General's Report of Illinois for 1919, we find this language on page 350: "Even if the agreement were interpreted to create a valid trust, I think that the trustees in selling and in advertising for sale these securities by which the trust fund is to be increased, must be held to comprise an association." The Supreme Court of Texas an- swers this squarely^^ by saying that the trust is a trust pure and simple, and is not to be called something it is not ; further the United States Supreme Court says i^* "We perceive no ground for grouping the two beneficiaries and trustees — to- gether in order to turn them into an association." Again on page 427 the report reads as follows: "WHiile there may be some difference in the articles of association in the case above referred to and that of the Reilly Syndicate, it appears from said opinion that the policy of this state is against 22 See Paragraph — Trust as 23 Davis v. Hudgins, Supra, an Entity. 24 Croclver v. Malley, Supra, 58 Trusts for Business Purposes. such organizations." In other words, the office of the Attorney- General of Illinois takes the position that it is against the public policy of the State of Illinois for a business to be carried on as a trust. 29 — A Trust for Operating Street Car Lines. Opposed to this opinion is the Supreme Court of Illinois in the case of Venner v. Chicago City Railways Company, ^^ in which case other questions such as a committee in conjunction with trustees; common ownership of stock; transferring stock to qualify directors; stockholders pooling their interests for common gain or controlling the management, competition and consolidation are also passed on. The case grew out of a trust which was organized for the purpose of taking over five cor- porations that were operating street car lines, some of them in Chicago, Cook County, Illinois, and some of them in Indiana. The corporations which composed the trust and the number of shares of capital stock of each, and their par value, were as follows : No. of Shares Par Value Chicago City Railway Company. ... 180,000 $18,000,000 Calumet and South Chicago Ry. Co.. 50,000 5,000,000 Southern Street Railway Company. . 8,000 800,000 Hammond, Whiting & E. Chicago Ry. Co 10,000 1,000,000 Chicago and Western Ry. Co 720 72,000 On January ist, 19 19, Ira M. Cobe and John W. McKinnon held all of this stock, except 10,281 shares of the Chicago City Railway Company, together with $7,674,000 of the bonds of the corporations except the Chicago City Railways Company. By a written agreement they assigned all these shares of stocks 85 258 111. 523, 101 N. E. 949. Validity. 59 [VENNER V, CHICAGO CITY BY. CO.] and bonds to Elbert H. Gary, Albert J. Earling and Samuel M. Felton, as Trustees. The trust made provision for the holding and voting by the trustees of the stock of the different corpora- tions, and for the creation of a committee. Clarence H. Ven- ner, one of the stockholders in the Chicago City Railway Com- pany, filed a bill in the Superior Court of Cook County, in behalf of himself and all other stockholders similarly situated, for the purpose of having the trust declared illegal and void ; of enjoining the transfer, holding or voting by the trustees of said trust of any shares of stock in the Chicago City Railway Company or the performance of any other act in pursuance of the said agreement; of enjoining the combining, merging, consolidating or uniting of the property, franchises, earnings, capital stock or management of the Chicago City Railway Com- pany with those of other defendant corporations, or any of them, or with those of the elevated railroads in the city of Chicago. Answers were filed, and cause was heard on the pleadings and evidence, a decree was rendered dismissing the bill for want of equity, and the complainant appealed. The defendants to the bill were the Chicago City Railway Company and its directors, four other street railway companies, viz., the Calumet and South Chicago Railway Company, the Hammond, Whiting and East Chicago Electric Railway Com- pany, the Southern Street Railway Company and the Chicago and Western Railway Company, Ira M. Cobe, John W. Mc- Kinnon, the firm of J. P. Morgan & Company, the trustees an' brought a groundless suit for an accounting against his trustee; but the solicitor's fees and the expenses of the trustee in defense thereof are to be paid out of the complainant's share in the trust estate and not charged against the estate generally or against a general fund which the co-beneficiaries would have to contribute.^^ 93 — Not Liable as Partners. The shareholders are not made co-partners, nor liable as such for the expenses incurred by the trustees.** 94 — Ratification. The general rule is that a trustee can not take part in a transaction in \\'hich he has an interest adverse to the share- holders, but where this situation occurs, the latter, by retaining the consideration and not electing to terminate the contract, ratify it.** A trustee can not deal to his personal advantage with the trust estate, yet a shareholder can not allege an act on the part of his trustee to be a breach of trust which has been done under his sanction, procurement, or concurrence.*^ Where a shareholder — with full knowledge of all the facts — "assents to a purchase by the trustee, and the price paid is ade- quate, he can not set aside the sale, though the trustee may make large profits by his purchase.*' A shareholder whose trustee has made investment from trust funds in improper se- curities may retain the securities and thereby ratify the wrong; 93 Patterson v. Northern Trust from other Organizations. Co., 207 111. App. 361, 286 111. 95 Phillips v. Sanger Lumber 564, 122 N. E. 55. Co., 130 Cal. 431, 62 Pac. 749. 94 Mayo V. Moritz, 24 N. E. 96 Ungrich v. Ungrich, 131 1083. See Partnership under App. Div. 24, 115 N. Y. Sup. 413. paragraph Trusts Distinguished 97 Ungrich v. Ungrich, Supra. Be;ne;i='iciarie;s or Shareholders. 169 or reject them and claim damages for wrongful investment; or claim damages and charge the securities that belong to the wrongdoer with a lien for the damages suffered. ^^ For a share- holder to be estopped by ratification and acquiescence from complaining of an unauthorized investment by the trustee, he must have known of all the facts and been apprised of his legal rights,^^ and in addition he must know how the facts would affect his rights in equity. ^^^ 98 In Re Mendel's Will, 164 589, 48 N. E. 128. Wis. 136, 159 N. W. 806. 100 Internatl. Trust Co. v. 99 White V. Sherman, 163 111. CHAPTER VIII. TRUSTEES IN GENERAL. 95 — Appointment of. The creator of a trust has the power not only to designate the original trustees in the trust agreement, but also to provide for the appointment of successive trustees. Where an ap- pointment is made under such power, the new trustee becomes vested with the title to the trust property and is clothed with the same powers as if he had been named originally ; no con- veyance need be made to him by the former trustee or his rep- resentatives — if he be dead.^ A trust, valid at its inception is never permitted to fail for lack of a trustee ; e. g., a conveyance in trust to two, one capable of taking and one not, will not be- come invalid by reason of the death of the competent trustee.* A trustee, having accepted appointment as such and having re- ceived the trust fund, will be estopped from questioning the creation of the trust, and from denying the right of the bene- ficiary to the trust fund.' Upon the refusal of a trustee to act, equity will either compel him to act, or will appoint another trustee in his place.* A trust can not fail for want of a trustee, or by the refusal of all the trustees to accept the trust ;^ equity Preston (Wyo.), 156 Pac. 1128. 3 Boehmer v. Silvestone, 95 1 Yates V. Yates, 255 111. 66, Ore. 154, 186 Pac. 26. 99 N. E. 360; Stein v. Safe Dep. 4 Anderson v. Phegley, 57 Ore. & Trust Co., 127 Md. 206, 96 Atl. 172, 110 Pac. 975. 349. 5 Adams v. Adams, 86-80 U. S. 2 Farmers' Loan & Trust Co. Sup. Ct. 504. V. C. & A. Ry. Co., 27 Fed. 146. (170) Trustee;s in GeineraIv. 171 will not permit a trust to fail for want of a trustee,*^ but will appoint one to execute the trustJ 96 — Hold Legal Title. Under the common law, the legal estate in the hands of a trustee possesses precisely the same properties, characteristics and incidents as if the trustee were the absolute owner. ^ Even though exclusive legal title to trust property is vested in the trustee,^ he is merely the depositary of the legal title and his estate is but a power that may be exercised,^'' for the equitable title or ownership is in the beneficiaries. The rule is, the abso- lute ownership of property is suspended by the creation of a trust which vests the estate in the trustee^^ who comes into ex- istence with the declaration of trust; he is the delegate of the trustor or creator, and needs no sanction from any further authority but derives his title from the instrument per se.^'* A trustee takes such estate as the purposes of the trust require and if a fee is necessary he takes it.^^ A trust contemplates the holding of property by one for the benefit of another, hence the same person may not at the same time be both sole trustee and sole beneficiary of the same interest.^* At common law the appointment of new trustees in succes- sion, not in execution of a special power, does not vest title in 6 Hill V. Hill (Okla.), 152 Pac. Lum. Co. (Tex. Civ. App.), 123 1122. S. W. 1162. 7 Brock V. Conkwright, 179 Ky. 11 Dorman v. Balestier, 175 555, 200 S. W. 962. N. Y. Sup. 677. 8 Randolph v. Hinck, 288 111. 12 In re Hoyt, 103 Misc. Rep. 99, 123 N. E. 273. 614, 170 N. Y. Sup. 846. 9 Welsh V. City of Boston, 221 13 Nixon v. Nixon, 268 111. 524, Mass. 155, 109 N. E. 174. 109 N. E. 294. 10 Arnold v. Southern Pine 14 Weeks v. Frankel, 197 N. Y. 304, 90 N. E. 969. 172 Trusts for Business Purposes. the new trustees without conveyance. ^^ This rule has been changed by statute in a majority of the states and, of course, does not apply where the instrument provides that the title to property held by the trustees shall vest in their successors. The rule is also well established that where one of two or more trustees disclaims, the remaining trustee or trustees are vested with all the powers of the trust necessary to carry out the purpose.^^ 97 — Act as a Unit. In the absence of special agreement or special powers granted to the trustees, they act as a unit, for trustees of a trust estate hold as joint tenants unless there is a provision to the contrar}'. On the death of one trustee, administration of the trust de- volves on the survivors and does not pass to the heirs. ^''^ The rule that a trust or power delegated to two or more jointly must be jointly executed applies as well to trusts coupled v/ith an interest as to cases of mere naked powers.^^ Where the granting of a lease of trust property is an important and mate- rial act in the way of carrying out the trust, requiring an exer- cise of the judgment and discretion of both the trustees, it is necessary for both of them to execute the lease in order to make a valid instrument. ^^ One of several trustees in whom confidence has been reposed jointly, with no power given to him to act singly — either expressly or by implication — can not 16 Glazier v. Everett, 224 Mass. 17 Reichert v. Mo. & 111. Coal 184, 112 N. E. 1009. Co., 231 111. 238, 83 N. E. 166. 16 Stein V. Safe Dep. & Trust 18 Dingman v. Boyle, 285 111. Co., 127 Md. 206, 96 Atl. 349; In 144, 120 N. E. 487. re Kellogg, 214 N. Y. 460, 108 19 Hoosier Mining Co. v. Un- N. E. 844. ion Trust Co., 173 Ky. 505, 191 S. W. 305. Trustee;s in General. 173 sell the trust property without the consent of the others. ^•' In law, there is not such a person as an acting trustee apart from his cotrustees, all who accept the office being acting trustees.^^ 98 — Act by Majority. Where there are several trustees, the instrument creating the trust may grant the trustees the power of acting by majority, and in the absence of such power, all must join in the deed.^^ While this seems to be the general rule, still in cases of urgent emergency, a majority might convey or bind the trust prop- erty ;^^ and where there are three trustees, two of them as such might sell and assign trust property with the consent or con- currence of the third.2* In spite of the rule tliat trustees can not delegate their power, they may be bound where they consent and concur in the actions of a single trustee, when he acts as agent for the others. ^^ Hence the action of a single one of joint trustees may be ratified, if done in the legal way, by his co- trustees; "ratification" of a contract implying the giving of consent to, or the sanctioning of, its terms.^^ In the same man- ner, a contract, signed by the associate name of trustees and sealed without formal authority, becomes binding on the trust if a majority of the trustees expressly or impliedly by parol afterward adopt it.'^' 20 Dodge V. Lacey (Tex.), 216 App. Div. 532, 76 N. Y. Sup. S. W. 400. 625. 21 Dingman v. Boyle, Supra. 25 Bunn v. City of Laredo 22 Page V. Gillett, 26 Colo. App. (Tex.), 213 S. W. 320. 204, 141 Pac. 866. 26 Hoosier Mining Co. v. Un- 23 Page V. Gillett, Supra. ion Trust Co., Supra. 24 Fritz V. City Trust Co., 72 27 Rand v. Farquhar, 226 Mass. 91, 115 N. E. 286. 174 Trusts for Business Purposes. 99 — Cotrustees. A trustee in general is responsible only for his own acts or defaults, and, except for his own fraud or negligence, is not liable for the trust property which has been in the exclusive possession and under the sole control of a cotrustee.^^ But if a trustee informs the beneficiaries of suspicious acts of his co- trustee, he is not relieved from liability arising from repetition of such conduct when he takes no steps to protect the trust funds in the future.^^ In so far as a cotrustee, though less active in management than his associate, participates in illegal acts resulting in loss to the trust, he and his estate must respond in damages.30 f^g general rule is that where property is vested in three trustees, with power to bring suits, etc., one of them has no authority to institute a suit without the knowledge and consent of his cotrustees ;3i but where a trustee has com- mitted a breach of trust, his cotrustee may, with or without the beneficiary or shareholder, sue to restore the property .^^ 100 — Substituted Trustees. Where a trust deed gives the power to appoint a substituted trustee in case the original trustee refuses or fails to act, the appointment confers no title on the substituted trustee if made before the original trustee resigns or is removed.^^ But when the substituted trustee qualifies in place of the prior trustee, 28Anier. Bonding Co. v. Rich- 40 Atl. 883; Appeal of Fesmire, ardson, 214 Fed. 897. 134 Pa. 67, 19 Atl. 502. 29 In re Adams' Estate, 221 Pa. 31 McGeorge v. Bigstone Gap 77, 70 Atl. 436. Imp. Co., 88 Fed. 599. 80 Meldon v. Devlin, 31 App. 82 Clemens v. Heckscher, 185 Div. 146, 53 N. Y. Sup. 172; Pa. 476, 40 Atl. 80. Barroll v. Foreman, 88 Md. 188, 33 Chesnutt v. Gann, 76 Tex. 150, 13 S. W. 274. .Trustees in General. i75 the trust in his hands is coextensive with and is as effective as if he had been named in the instrument originally .^^ Though a successor in a trust is not liable for the defaults or miscon- duct of his predecessor, yet he must obtain all the property of the trust, and for this purpose should investigate the acts of his predecessor and recover from him whatever belongs to the trust estate.^' loi — Attorneys as Trustees. Ordinarily, in the absence of statutory restrictions, any per- son may be appointed a trustee who is capable of confidence of holding real and personal property and of executing the trust. Though it is the custom of courts and the better practice to select a resident of the state as a trustee, yet they are not with- out power to appoint a non-resident ; and there is no inherent incapacity in a married woman becoming a trustee and exer- cising the legal judgment and discretion belonging to that char- acter.36 Attorneys at law may be trustees either in trusts pre- pared by other parties, or in instruments prepared by them- selves, and as such trustees, they are entitled to the same cotnpensation as oilier trustees.^' Where a trustee is also an attorney and renders legal services in connection with the trust estate, he will, in a proper case, be entitled to be paid for bis professional services out of the common fund, as though the two capacities were separate.^^ 84Hayden v. Hayden, 178 N. 36 26 Ruling Case Law, 1272. C. 259, 100 S. W. 515. 37 Locke v. Cope, 45 Okla, 69, 35 In re Lane's Will (Del.), 97 146 Pac. 416; Willis v. Clymer, Atl. 587; In re Froelich's Estate, 66 N. J. Eq. 284, 57 Atl. 803. 50 Misc. Rep. 103, 100 N. Y. Sup. 38 Taylor v. Denny, 118 Md. 436. 124, 84 Atl. 369. CHAPTER IX. POWERS OF TRUSTEES. 1 02 — Express. The express powers are those which are set forth in the instrument authorizing the trustees to perform certain acts and duties; no particular form of words is necessary to create a power in the trustees, but it is essential that the intent to create the power appear,^® for a trustee of an express trust derives his power from the instrument creating it and such instrument furnishes the measure of his obligation.*" The power to act as a trustee does not come from the court, but is found in the instrument creating the trust.*^ Where trustees are invested with the legal estate, a power conferred on them is a power coupled with an interest which survives on the death of one of them, and may be executed by the survivor.*^ Where trustees are empowered by the instrument creating the trust to sell the estate, or do any specific acts, they may be compelled to per- form specifically in accordance with the instrument.*^ 103 — Implied. Where a trustee conforms with the provisions of a trust in their true spirit and meaning, he may adopt measures and do 39 Crawford v. El Paso Land 41 Reeder v. Reeder, 184 la. 1, Imp. Co. (Tex. Civ. App.), 201 168 N. W. 122. S. W. 233. 42 Loring v. Marsh, 70-73 U. S. 40 Ainsa v. Mercantile Trust 802. Co., 174 Cal. 504, 163 Pac. 898. 43 Crawford v. El Paso Land Imp. Co., Supra. (176) Powers of Trustees. 177 acts which, though not specified in the trust instrument, are imphed in its general directions and are reasonable and proper means for making them effectual.** \Miere a trust deed ex- pressly or impliedly authorizes the trustee to sell realt}' be- longing to the trust estate, no action of the court is necessary to effect a proper execution of the power thus conferred.*^ If a trustee is authorized to take up a mortgage and hold the property for favorable disposal, he has implied power to re- mortgage the property awaiting advantageous sale.*^ It being the duty of a trustee to protect the trust estate from waste, in- vasion, or trespass, and to defend suits against himself with respect to the trust subject, he has implied power to employ counsel therefor at the expense of the trust fund.*''^ When a trustee who has possession of lands belonging to the trust estate is charged with the payment of debts, but has no power of sale, he has implied authority to lease upon such terms and conditions as usually prevail in the city or county in which the land is situated.*^ If a trustee is cliarged with a duty which cannot be performed without a power of sale, and no power of sale is expressly given, a power of sale will be implied.*^ The words "invest and manage" ordinarily would not impart or imply a power of sale, but it has been held that where a con- trary intention cannot be found in the instrument taken as a whole, a sale might be made.^® 44Kipp V. O'Melweney, 2 Cal. 72 S. E. 701. App. 142, 83 Pac. 264. 48 Crown v. Cohn, 88 Ore. 642, 45 Crown V. Cohn, 88 Ore. 642, 172 Pac. 804. 172 Pac. 804. 49 Robinson v. Robinson, 105 46 Gilbert v. Penfield, 124 Cal. Me. 68, 72 Atl. 883. 234, 56 Pac. 1107. 50 Robinson v. Robinson, Su- 47 Stull V. Harvey, 112 Va. 816, pra. 178 Trusts for Business Purposes. 104 — Discretionary. An instrument may prescribe all the steps to be taken by the trustee in all matters of detail likely to arise in the administra- tion of the trust, but leave such incidental matters to the dis- cretion of the trustees; however, this does not defeat the trust.^^ This discretionary power annexed to the office of trus- tee and intended to form an integral part of it, will survive to a trustee succeeding the original trustee; but it is otherwise where the powers are arbitrary and independent of the trust and not an integral part of it, for the discretion then would be personal.^2 Discretionary' power jointly confided to three trus- tees by name to give all or any part of the fund to a certain person, can not, after the death of one of them, be carried out by the survivors.^' A trustee may be empowered to hold or convey property according to his judgment; to collect the prin- cipal of securities and reinvest; but he may exercise his discre- tion only in doing authorized things ; he cannot hold securities transferred to him which he is not authorized to hold.^* Trustees having general power to invest personalty and pay the income to shareholders, without direction as to the character of the securities in which the investment shall be made, may, after making an investment, sell the securities and reinvest in others, if prudent to do so.^^ If trustees are given discretion- ary power of investment and reinvestment, such power does not make it necessary that they be invested with the fee.^^ A trust agreement may provide that a sale cannot be made at 51 Hoyt V. Bliss, 93 Conn. 344, 54 Babbit v. Fidelity Trust Co., 105 Atl. 699. 72 N. J. Eq. 745, 66 Atl. 1076. 62 Wilmington Trust Co. v. 55 Citizens' Natl. Bank v. Jef- Jacobs, 9 Del. Ch. 77, 77 Atl. 78. ferson, 88 Ky. 651, 11 S. W. 767. 63 Dillard v. Dillard, 97 Va. 56 in re Spreckels' Estate, 162 434, 34 S. E. 60. Cal. 559, 123 Pac. 371. PowDRs OF Trustees. 179 other than a specified price except on consent; if consent can- not be procured, the trustee may use his discretion to com- promise claims according to his best judgment, using due care and good faith." A trustee may follow the tactics of a pru- dent business man to secure a fair return of income and at the same time maintain the corpus of the principal intact.^^ Where a testamentary trust provides that the trustees may sell the property and reinvest as often and in the manner they see fit, it clothes the trustee with discretionary power to dispose of any part of the trust fund to pay the inheritance tax.^^ Where a discretionary power is vested in trustees to alienate real estate belonging to the trust, a purchaser is not bound to make in- quiry as to whether the trustees have properly exercised their powers.^® A trustee of realty may have full power to sell the same, but his discretion as to the investment of the proceeds of the sale will not be interfered with if the rights of the beneficiaries have not been jeopardized; and the purchaser is not required to see that the proceeds are invested according to the trust.^^ A trustor may endow trustees with very wide discretion, and so long as they keep within the limits of fairness, the courts may not arbitrarily interfere with or control the manner in which they shall discharge their duty.^* A court of equity may restrain a trustee from abusing his power, but it can not control the exercise of the discretion vested in him by the trust agree- ment.^* Nor will a trustee's exercise of a discretionary power 57 Brackett v. Middlesex Bank 61 Campbell v. Virginia-Caro- Co., 89 Conn. 645, 95 Atl. 12. lina Chem. Co., 68 S. C. 440, 47 58 Warren v. Pazolt, 203 Mass. S. E. 716. 328, 89 N. E. 381. 62 Keating v. Keating, 182 la. 59 Shaw V. Bridgers, 161 N. C. 1056, 165 N. W. 74. 246, 76 S. E. 828. 63 Brackett v. Middlesex Bank. 60 Dickson v. N. Y. Biscuit Co., Co., Supra. 211 111. 468, 71 N. E. 1058. i8o Trusts for Business Purposes. be reviewed by the court unless his action or refusal to act is arbitrary and unreasonable.^* Where a discretionary power is conferred on trustees to alienate real estate belonging to the trust, a court of equity will never interfere therewith in the absence of allegation and proof of actual fraud or collusion of the parties to the conveyance.^^ 105 — Personal. Where a power is a matter of personal confidence which is to be executed in the discretion of the trustee, it cannot be extended beyond the express words and clear intention of the trustor, and cannot be exercised by a trustee appointed by the court upon the death of the original trustee,^^ for the power conferred upon a trustee which involves personal confidence in him, terminates with his death.^' Where the power conferred on the trustee is not a personal one, but is one belonging to the office and one such as could be exercised by his successor, then the power survives to the new trustee appointed.^^ A trustee may or may not have an interest or share in the trust property, if he has, he may convey his interest just the same as any other shareholder.^^ Generally, a trustee may resign at any time and so a resignation in the manner pointed out by the trust instrument will be valid.''''' 64 stein V. Safe Dep. & Trust 68 Vernoy v. Robinson, 133 Ga. Co., 127 Md. 206, 96 Atl. 349. 653, 66 S. E. 928; Jencks v. Safe 65 Dickson v. New Y. Biscuit Dep. & Trust Co., 120 Md. 626, Co., Supra. 87 Atl. 1031. eewhitaker v. McDowell, 82 69 Anderson v. Phegley, 57 Conn. 195, 72 Atl. 938; Woddrop Ore. 172, 110 Pac. 975. V. Weed, 154 Pa. 307, 26 Atl. 375. 70 Stearns v. Fraleigh, 39 Fla. 67 Russell V. Hartley, 83 Conn. 603, 23 So. 18. 654, 78 Atl. 320. Powers of Trustees. i8i 1 06 — Incidental. A trustee invested with the control of property and not ex- pressly or impliedly prohibited from incurring expenses for improvements, may make improvements, and on a settlement of his account, receive credit therefor.'^ Where a trust deed em- powers trustees to take possession of, manage, control, lease, mortgage, sell, and convey the land constituting the trust es- tate and invest the proceeds as the trustees shall deem ad- visable, the trustees have power, in consideration of the lessee's covenant to place buildings on the land which would enhance the value of the trust estate, to give option to a purchase^^ Where trustees are given full power to sell, mortgage, lease, and reinvest the proceeds in their discretion, they have power to buy in an outstanding claim as a cloud on their titleJ^ The doctrine that one acting in two different capacities cannot con- tract with himself does not prevent a trustee of different trust estates from transferring securities of one estate to himself as trustee of another estate. If he acts in good faith within the limits of his authority, and the full value of the securities trans- ferred is paid by one estate and received by the other, and the intention to transfer title is carried out so far as it can be without making a formal assignment, the transfer will be re- garded in equity as executed as against a subsequent trans- feree who wrongfully obtains the securities from the trustee.'* It is proper for the trustee to cliarge the estate with the services of the lawyers engaged to draw up the trust instrument and give advice concerning the accomplishment of the object of 71 White V. Hall, 113 Va. 427, 73 Hull v. Chaffin, 54 Fed. 437. 74 S. E. 212. 74 French v. Hall, 198 Mass. 72 Crown v. Cohn, 88 Ore. 642, 147, 84 N. E. 438. 172 Pac. 804. i82 Trusts for Business Purposes. the trustor.'^ A trustee lias power to employ counsel to assist in the management of the trust, and to burden the trust estate with a lien for counsel's servicesJ^ In like manner the trust estate may employ counsel either to resist an effort to remove a trustee without cause or to bring about a removal where suffi- cient cause is shown; and procure the appointment of a new trustee in place of the one so removed.'' A trustee is always charged with good faith and discretion, and he should not be penalized for settling a claim which in the exercise of good business judgment he deemed it wise to settle.'^ 107 — Restricted. Where a trust provides that the trustees shall at all times keep the premises free from any and all incumbrances other than a mortgage referred to in the deed, the execution by the trustees of another mortgage would be in contravention of the trust and void.'^ While a trustee has power to make whatever repairs are necessary for the preservation of the estate, a trus- tee of land under a deed, not expressly authorized to make large or extensive improvements, has no power to erect buildings thereon; his contract therefor is not binding on the trust es- tate.®° If trustees lease land for a term extending unreason- ably beyond the period that the trust is likely to continue, the excess only will be void.^^ A trustee has no inherent power 75 Babbit v. Fidelity Trust Co., 79 Gardiner v. Cord, 145 Cal. 72 N. J. Eq. 745, 66 Atl. 1076. 157, 78 Pac. 544. 76 Dolph V. Cincinnati B. & C. 80 Maynard v. Columbus, 150 R. Co., 56 Ind. App. 137, 103 N. Ky. 817, 150 S. W. 1019. E. 14. 81 In re Hubbell Trust, 135 77Jessup V. Smith, 223 N. Y. la. 637, 113 N. W. 512; Gomez 203, 119 N. E. 403. v. Gomez, 81 Hun. 566, 31 N. Y. 78 Mann v. Day, 199 Mich. 88, Sup. 206. 165 N. W. 643. Powers of Trustees. 183 to sell the trust property, either expressly or by clear implica- tion ; he has only such powers as are given by the instrument.^* A trustee has no authority to appoint his successor unless such authority is expressly conferred on him.^^ A trustee, without express authorization, cannot invest the funds in speculative stocks without personal liability ;8* nor can he take money com- mitted to his care under cover of an investment and loan it to himself. ^^ Neither can a trustee by his own voluntary act, change his capacity and convert himself into a mere debtor.^^ One of two cotrustees has no power to use a note belonging to the trust fund which is payable to both trustees for payment of his individual debt, nor can he indorse his cotrustee's name thereon without his consent.^'' 82 Wisdom V. Wilson, 127 S. W. 589, 48 N. E. 128. 1128; Crawford v. El Paso Land 85 Carrier v. Carrier, 226 N. Y. Imp. Co., Supra. 114, 123 N. E. 135. 83 Birmingham Belt R. Co. v. 86 Marshall v. Marshall, 11 Gerganous, 142 Ala. 238, 37 Colo. App. 505, 53 Pac. 617. South. 929. 87 Barroll v. Foreman, 88 Md. 84 White V. Sherman, 163 111. 188, 40 Atl. 883. CHAPTER X. DUTIES OF TRUSTEES. 1 08 — To Manage Property for Shareholders. A trustee with or without joint beneficial interest in the trust property is accountable only for the management of the prop- erty in the mode pointed out by the settlor in the trust instru- ment, as an ordinarily prudent business man would be required to do under like circumstances.®* He performs this duty by managing, preserving, improving, and keeping the property in a wav that will be beneficial to the shareholders, as expressed or implied in the declaration of trust.*^ Just so is it the duty of a trustee, not only to hold and manage the property for the shareholders, but also to disburse the proceeds to the benefi- ciaries according to the terms or circumstances of the creation of the trust in and out of the estate.^" Where the instnunent provides for the continuing of business so long as a certain profit is obtainable, the business should be continued by the trustee while such profit is being obtained.^^ While a court of equity may empower trustees to sell, mort- gage, improve, lease or otherwise deal in property, in contem- plation that expectant interests shall be carefully safeguarded so that the corpus of the estate shall be kept intact until ter- mination of the trust; still the only change permissible is in 88 Wilson V. Smoot, 186 Ky. cal Union, 200 Ala. 23, 75 So. 194, 216 S. W. 129. 335. 89 Wilson V. Smoot, Supra. 91 In re Froelich's Estate, 50 90 Teal V. Pleasant Grove Lo- Misc. Rep. 103, 100 N. Y. Sup. 436. (184) Duties of Trustees. 185 the form of the property for the purpose of conserving- the principal.^2 a trustee's duty is to the trust and he may not abandon the trust and substitute another in his place as trustee, but must proceed in the execution of the trust and cannot ter- minate it by his act or default.^^ If a trustee obtains knowl- edge of facts that would defeat the title of the beneficiaries and give it to another, he is not justified in communicating the facts to the other person ; his duty is to manage the property for the beneficiaries and not make admissions prejudicial to the rights of the beneficiaries.^* Nor can a trustee rid himself of the duty to warn and to denounce, if there is improvidence or oppression which he may discover.^^ 109 — To Carry Out the Trust. It is the duty of each trustee, and of the court, to carry out the trust, and a trustee cannot relieve himself of this duty by agreement with his co-trustees to look after only certain parts of the trust property.^^ A trustee cannot justify his failure to perform the duties of the trust by showing that no one asked him to perform them.^'^ Being the agent of both parties, it is his duty to look to the rights and interests of the trust debtor as well as to those of the trust creditor; he is bound to act impartially between them.^^ A trustee must invest the trust fund as directed, so that it may yield an income to the bene- 92 Lee V. Albro, 91 Ore. 211, Gas & Elec. Co., 224 N. Y. 483, 178 Pac. 784. 121 N. E. 378. 93 Anderson v. Pliegley, 57 Ore. 96 Hayes v. Pratt, 13 Sup. Ct. 172, 110 Pac. 975. Rep. 503. 94Boehmer v. Silvestone, 95 97 Cotton v. Rand (Ky.), 92 S. Ore. 154, 186 Pac. 26. W. 266. 95 Globe Woolen Co. v. Utica 98 Hartman v. Evans, 38 Va. 669, 18 S. E. 810. i86 Trusts for Business Purposes. ficiary;^^ if it becomes necessary in carrying out the trust to employ counsel to protect the trust, it may be done, just the same as it is the duty of a trustee against whom legal proceed- ings have been instituted to employ counsel, and, as incident thereto, to appropriate so much of the trust estate as is neces- sary to compensate him reasonably for his services. Even where the trustee absconds, and so loses his right to an allow- ance for services and counsel fees, as between the trust estate and himself, the counsel employed by him has a right of action against the shareholders to whom he has rendered necessary and beneficial services.^®" When the trustees carry out the spirit of the trust and con- duct the business along the same general lines as the testator did in his lifetime or according to the will of the trustor, then it may be said that the trustees are fulfilling their trust and are free from attack from any source. This principle is shown clearly in the following case :^ One Andrew Froelich, de- ceased, created a trust estate in a foundry by will ; the original trustee having resigned, a substitute trustee was appointed who kept the foundry in operation under the trust. The substitute trustee was met with opposition in filing his accounts ; the lan- guage of the court in sustaining the trustee's position is of such import that it is given herein in full : "The substituted trustee, on presenting his accounts for set- tlement, is met by several objections which will be taken up in the order in which they are stated, as follows : First, whether or not the trustee should have paid rent for the foundry of the deceased for the use of the same in carrying on the business 99 Smith V. Robinson, 83 N. J. i In re Froelich's Estate, 50 Eq. 384, 90 Atl, 1063. Mis. Rep. 103, 100 N. Y. Sup. 100 Manderson v. Appeal, 113 436. Pa. 631, 6 Atl. 893. Duties of Trustees. 187 of the deceased; second, whether the business should be con- tinued by the substituted trustee ; third, whether the trustee should not be charged with the amount of loss arising from the conduct of the business during the administration; fourth, whether the trustee should not be charged with salary paid to himself ; fifth, whether the trustee should not be charged with the entertainment moneys expended by him ; sixth, whether or not Caroline Wolf is entitled to certain rents by virtue of the decease of her infant daughter; seventh, whether the trustee is entitled to commissions. Most of these provisions arise in consequence of a trust which was created by the deceased and which directed the trus- tees to use all the property pertaining to such business as was left by the testator for that purpose. There was also a fur- ther provision which gave all of the residuum of the estate to the trustees, to collect the rents and income therefrom and pay the same to certain beneficiaries designated by the deceased. It appears that part of the estate of the deceased was a certain foundry, and the trustees, in their management of the estate, charged against the business the rent for the foundry and paid the amount so charged into the trust of the residuum of the estate. The present trustee has refused to do this, and con- tends that, while the method adopted by the preceding trustees, under which this was done, produced no harm either to the estate or to the beneficiaries thereunder, there was no obligation upon him to do the same, as, when the testator gave all of the property pertaining to his business in trust to continue the said business, he must necessarily have included the foundry. I think this contention is correct. There is no more reason why the trustees should charge themselves with rent for the foundry than there is that they should charge themselves for the hire of the various tools and ai)pliances required in such i88 Trusts for Business Purposes. business. It will be observed, of course, tbat the net result to the beneficiaries under the trust is not afifected, no matter which course is adopted, as in the one case it simply means that the income derived from the trust pertaining to the real estate is larger, whereas in the other case it means that the income de- rived from the trust in regard to the business is the larger. In other words, this is solely a matter of bookkeeping. But the real importance of the question arises in connection with the proviso in relation to the carrying on of the business, which directs that the same shall be discontinued when the trustees' management of the business fails to produce a certain amount of profit ; and the question, therefore, of what are the run- ning expenses of such business, becomes very important in de- termining whether the trustees have continued such business for a longer period than was permitted by the testator. The disposal of the above question practically disposes of the second question as to whether the limitation under which the business was to be conducted has been reached or not, as, if the amount which has been charged up for rent be held not to be one of the expenses of such business within the contemplation of the deceased, then the limitation contained in his will has not been reached. In this connection I might say there are sev- eral items charged as expenses of the business which, in my judgment, should not be regarded as rumiing expenses but as items in the way of renewal. These items are in the nature of the purchase of new horses and other matters of that kind. no — Substituted Trustee May Follozv Business Methods of Predecessor. As to the question of the loss incurred in the business during the administratorship of the substituted trustee, it appears that Duties of Trustees. 189 there is no direct proof that there has been any loss occasioned by any lack of attention on the part of svich trustee, and the contestant is the last person in the world in a position to make any such suggestion. Her doing so is one of the most amazing pieces of affrontery tliat has, in my judgment, ever been dis- played in a court of justice. The contestant, the widow of the deceased, was originally one of the trustees. As such trustee, she was allowed to receive 10 per cent of the profits of the busi- ness for her compensation in managing the same. It appears, also, that, instead of taking personal control and management of such business, she employed one Wolf to manage the same for her, for which he was paid a large salary. The present substituted trustee, who is her son, occupied a subordinate posi- tion in the business. After a period of time, it appears the contestant married this man Wolf. Subsequently she rendered her account as trustee and resigned. With the money for the commissions which were due her a new company was formed, in which Wolf, her husband and foreman of the business of the deceased, was the president, but to which he did not con- tribute a dollar of his own money. He immediately started such business in active opposition to the business which he had been managing for her when she was trustee of this estate. It was under these circumstances that the son of the deceased was appointed a substituted trustee. He has taken charge of the same and run it to the best of his ability. There is not a particle of testimony as to any specific act of neglect or omis- sion on his j>art, or any suggestion that, under any other kind of management, under the peculiar circumstances which he had to contend with, any better results could have been obtained, other than the fact that the receipts of the business under his management have not been as great as under that of the pre- vious trustee. To permit this contestant, the former trustee. 190 Trusts for Business Purposes. who, as the tool of her husband, is doing her utmost to destroy this business, to use so much of the destruction she has wrought as a means of punishing her son, is in my judgment absolutely without reason. If there is any person who should merit the censure of the court, it is the mother who would treat her son in any such unnatural way as this and the man who would use the means obtained by his marriage in endeavoring to destroy the property left by his predecessor, the first husband of this woman. The statement of this question brings us to the proposition contained in the fourth objection. As I have stated, the con- testant got her commissions in full, and her husband, who had practically performed her own work, also received a salary as manager of the company. The substituted trustee did not at- tempt to obtain his money by any such subterfuge as that, but increased his salary which he had been getting while working in that business, though to a sum which was much less than that which had been previously drawn by his stepfather. I appreciate the contention that the commissions of an executor or trustee are the ordinary measure of his compensation. But where this estate had been run for years with the concession that it was necessary to have a manager for the business, and where this trustee simply carried on the practice adopted by the prior trustee at a reduced expense to the estate, it does not seem to me that it can now be urged for the first time that such a salary should not be permitted. Certainly this contestant, who has not only benefited by this course, but to an extent which enables her to go into a business to destroy that left by the testator, is the last person who should be given any serious consideration by a court of justice in her views on the subject. The determination of this question will, therefore, dispose of Duties of Trustees. 191 the seventh objection in relation to the commissions of this substituted trustee. The fifth proposition is in relation to what is known as entertainment moneys. It appears to have been conceded since the death of the testator that in the conduct of the business it was necessary that certain items should be expended for the entertainment of buyers in order that by so doing their good will could be secured. This practice has been recognized by expenditures which have been approved of in all of the pre- vious accounts and has been continued by the substituted trus- tee herein. There is nothing to show that the amounts which he expended have been improper or incorrect. It stands to reason that such items cannot necessarily be accompanied by vouchers, so that the trustee could give a careful statement in regard to the same, as he would do in the case of the ordinary items of an executor's or administrator's account. It is but fair to assume that, as this was a practice which was carried on by the business during the life of the testator who, in directing his trustees to carry on such business, appreciated that this would be a necessary matter for them to attend to in order that the business might be managed with the same degree of profit as was attained during his lifetime." Ill — To Account. A trustee may be held to a strict accounting and to the exer- cise of the utmost fidelity towards the beneficiaries.' Where he is called upon to account, the burden of making a proper ac- counting is upon him, and upon his failure to do so all in- tendments are against him.^ So a trustee may be called upon 2 Arnold v. South. Pine Lum. 3 Stockwell v. Stockwell's Co. (Tex. Civ. App.), 123 S. W. Estate, 92 Vt. 489, 105 Atl. 30. 1162. 192 Trusts for Business Purposes. to account for a single item or transaction, and is not relieved by showing that for other items he was not liable.* A trustee who has once actually received the funds of the trust estate can- not discharge himself from accounting to the shareholders by showing they were lost by his own neglect. In such case a suit against him by the shareholders to recover the estate is not based upon his neglect, but upon his actual receipt of the estate ; the case is not varied if the suit be against the devisee to the delinquent trustee.^ If a trustee uses the balances of the trust funds for his own benefit, without accounting for the profits so realized, he may be cliarged with all profit and re- moved for breach of trust.^ For where a trustee by fraud or concealment makes a profit out of the sale of the trust prop- erty, the profit belongs exclusively to the beneficiary; but it is necessary to show that the profit was made at the beneficiary's expense, and that it was part of his property and would have been gained by him had the trustee performed his duties."" Where a trustee purchases bonds with trust funds and turns them over to the trust estate at an enhanced price — treating the difference as his individual profit — the investment must be regarded as the estate's from the time of the purchase.^ In an action for an accounting where the trustees admit they have received the property, the burden is on them to show that they liave exercised reasonable skill, prudence, and judgment;^ for the trustees must prove the credits claimed, ^° and that services 4 Joseph V. Herzig, 135 App. Va. 648, 66 S. E. 859. Div. 141, 120 N. Y. Sup. 34. 8 Campbell v. Campbell, 8 Fed. SLindsley v. Dodd, 53 N. J. 460. Eq. 69, 30 Atl. 896. 9 Ashley v. Wlnkley, 209 Mass. 6 Bobb V. Bobb, 89 Mo. 411, 4 509, 95 N. E. 932. S. W. 511. 10 Stockwell v. Stockwell's Es- 7 Heckscher v. Blanton, 111 tate, Supra. Duties of Trustees. 193 performed by counsel were for the trust estate and not for themselves individually.^^ 112 — To Keep Books. A trustee must keep accurate accounts of all his transactions and render a true statement supported by proper vouchers ; if he does not, every presumption of fact is against him and he cannot impose upon the shareholders the obligation to prove that he has actually received what he should have received, or that he has not expended what he claims to have paid out.^^ It is the duty of a trustee to keep a true and accurate account of his trust and make due and proper reports thereof, and make payments due without delay.^^ Where a trustee has negligently failed to keep true accounts or has refused to account, all pre- sumptions are against him on a settlement.^* Where he fails to keep his accounts in an intelligent manner, the penalty is to cliarge him with the value of the use of the trust property for the purpose to which it is devoted, and to credit the sum with legitimate expenses and reasonable compensation.^^ 113 — To Use Prudence and Care. A trustee must use such care for the safety of the trust fund as a man of ordinary prudence might use in business of a similar nature; he is held to a strict accountability for a faith- 11 Mann v. Day, 199 Mich. 88, well v. Stockwell's Estate, 165 N. W. 643. Supra. 12 Red Bud Realty Co. v. 14 Bone v. Hayes, 154 Cal. 759, South., 96 Ark. 281, 131 S. W. 99 Pac. 172; Smith v. Robinson, 340. S3 N. J. Eq. 384, 90 Atl. 1063. 13 Smallwood v. Lawson, 183 15 Wilson v. Smoot, 186 Ky. Ky. 189, 208 S. W. 808; Stock- 194, 216 S. W. 129. 194 Trusts for Business Purposes. fill performance of the duties of his trust.^^ It is not required that the trustee exercise extraordinary care, but only the care required of a man of common prudence in his own business ;^'' for he is not an insurer of the property or a guarantor of any income therefrom, and will be held to the use of only ordinary care in making it income-producing. ^^ A trustee's obligation to his trust is satisfied by the exercise of the same degree of dili- gence that a man of ordinary caution would be expected to exercise in the care of his own property under the same circum- stances.^^ Whether a trustee exercises common prudence in any particular case is a question for the jury ^^^ when he is wanting in common prudence in the management of the trust fund and a loss results, he will be surcharged.^^ 114 — To Exercise Good Faith and Sound Discretion. In the general management of the trust, the trustees are not liable for the consequences of an error in judgment, unless the error is such as to show that either they acted in bad faith or failed to exercise sound discretion. ^^ Good faith and sound dis- cretion, as those terms are understood by reasonable men of good judgment, are the standard by which the conduct of trus- 16 Boehmer v. Silvestone, 95 Ore. 154, 186 Pac. 26; Wylie v. Bushnell, 277 111. 484, 115 N. E. 618, Winder v. Nock, 104 Va. 759, 52 S. E. 561; Bourquin v. Bourquln, 120 Ga. 115, 47 S. E. 639. 17 Klugh V. Seminole Secur- ities Co., 103 S. C. 120, 87 S. E. 644. 18 Dillivan v. German Sav. Bank (la.), 124 N. W. 350; In re Darlington's Estate, 245 Pa. 212, 91 Atl. 486. 19 American Bonding Co. v. Richardson, 214 Fed. 897. 20 Klugh V. Seminole Secur- ities Co., Supra. 21 In Re Hart's Estate, 203 Pa. 480, 53 Atl. 364. 22 Taft V. Smith, 186 Mass. 31, 70 N. E. 1031; Klugh v. Seminole Securities Co., Supra; Dillivan V. German Savings Bank, Supra; Clay V. Thomas, 178 Ky. 199, 198 S. W. 762. Duties of Trustees. 195 tees is to be measured. ^^ Whether a trustee acts in good faith and exercises sound discretion will be determined with refer- ence to the situation at the time of the transaction, and not in the light of subsequent events which could not have been reasonably anticipated.^* Where the trust instrument leaves large discretion in the management of the trust to the trustees, it is not within the province of the court to direct them how to exercise such discretion ; it is their duty to use their own discretion, in the exercise of which, within legal limitations, they will be protected. ^^ But the burden of proof of the "exer- cise of good faith and sound discretion" is cast upon the trus- tee, under the peculiar facts in a case;^^ and though a trustee is required to exercise good faith and reasonable diligence, he is not an insurer against losses occasioned by the bad faith of his co-trustee.'^' The rule is that trustees are bound to a fair exercise of their judgment and to the unselfish exercise of good faith; while supine negligence or wilful default will render them liable, mere errors of judgment will not.'^^ But where the trustee acts in good faith and employs such vigilance, sagacity, diligence, and prudence as, in general, prudent men of discretion and intelli- gence employ in like matters in their own affairs, they are not responsible for errors of judgment.^^ They must, however, follow the terms prescribed by the deed of trust, and if there 23 Kimball v. Whitney, 233 Dep. & Trust Co., 82 N. J. Eq. Mass. 321, 123 N. E. 665. 518, 91 Atl. 734. 24Taft V. Smith, Supra; War- 27 In re Adams' Estate, 221 ren v. Pezolt, 203 Mass. 328, 89 Pa. 77, 70 Atl. 436. N. B. 381. 28 Ainsa v. Mercantile Trust 25Bartlett v. Pickering, 113 Co., 174 Cal. 504, 163 Pac. 898. Me. 96, 92 Atl. 1008. 29 Costello v. Costello, 209 N. 26 Beam v. Patterson Safe Y. 252, 103 N. E. 148. 196 Trusts for Business Purposes. is any material failure in this regard, their acts may be invalid, or they may be guilty of a breach of trust.^" 30 McCaughn v. Young, 85 Miss. 277, 37 So. 839. CHAPTER XL LIABILITY OF TRUSTEES. 115 — Personal. A trustee acting in his fiduciary capacity without properly Hmiting his liability will be held personally bound by contracts he makes as such trustee; the mere use of the name of trustee will not discharge him, but to protect himself from individual liability he must expressly stipulate therefor ;^^ for in the ab- sence of special limitation, a contract by a trustee relative to the trust property binds him personally.^^ The rule seems to be that a trustee holding a trust estate, with general power of management, is personally bound by contracts which he makes as trustee, unless there is an express provision showing that both parties agree to relieve him from personal liability.^' If a trustee contracts with a broker to sell property, without ref- erence to the capacity in which he holds it — omitting to exempt himself from personal liability — ^and the broker intends in good faith to look to the trustee individually for his commission with- out regard to the manner or capacity in which he might con- vey the property, the trustee is personally bound.^* So where trustees contract for work and material on a building and do not exempt themselves from personal responsibility or provide 81 Feldman v. Preston, 194 217 Mass. 438, 105 N. E. 445, Mich. 352, 160 N. W. 655; Bried 33 Knipp v. Bagby, 126 Md. V. Mintrup, 203 Mo. App. 567, 461, 95 Atl. 60. 219 S. W. 703. 34 Bried v. Mintrup, Supra; 32 Hussey v. Arnold, 185 Mass. Knipp v. Bagby, Supra. 202, 70 N. E. 87; Carr v. Leahy, (197) 198 Trusts for Business Purposes. that the other party look to the trust estate for payment, by adding the word "trustee" to their names,^^ they are bound personally. If trustees, in transferring a trust estate, violate any legal or equitable duty or contravene principles which the law cliarges them to observe, to the beneficiaries' injury, they are guilty of constructive fraud, regardless of their motive or in- tention ; a purpose to defraud is not essential to constructive fraud as the law regards the act which gives rise thereto as fraudulent per se.^^ But the fact alone that a trustee is without authority to bind the estate will not, of itself, render him personally liable upon executory contracts where no such lia- bility was intended by either party. ^' A trustee who, in a set- tlement out of court, allows illegal credits upon the account of his predecessor, will be liable to the shareholders for the amount so allowed.^^ So a trustee who pays out trust funds pursuant to the court's direction outside the scope of any subject-matter of such court's jurisdiction is personally respon- sible therefor.^^ A trustee who has converted trust funds to his own use, by investing them in his own name, may be held for the conversion, the investment proving unprofitable. It is not a sufficient excuse for purchasing in his own name that he might want to sell without the delay of an application to the court.*" One of the leading cases in which a trustee was held liable for the debts of the trust is Connally v. Lyons ;*^ herein the 35 Philip Carey Co. v. Pingree, 39 Cowie v. Strohmeyer, 150 223 Mass. 352, 111 N. E. 857. Wis. 401, 136 N. W. 956. 36Costello V. Costello, 209 N. 40 White v. Sherman, 163 111. Y. 252, 103 N, E. 148. 589, 48 N. E. 128. 37 Bried v. Mintrup, Supra. 41 82 Tex. 664, 18 S. W. 799, 38 Ashley v. Holman, 44 S. C. 27 Am. St. Rep. 935. 145, 21 S. E. 624. Liability of Truste;es. 199 [CONNALLY v. LYONS.] trustee made no effort to limit his liability to the trust estate or to the business of the trust. The plaintiff Lyons knew that the business was being carried on as a trust, but that in itself was not sufficient to enable the trustee to escape liability. It is necessary for the trustee, not only to have his liability lim- ited in the trust agreement at the time of his appointment, but also to bring this home to the people with whom he contracts ; and if that had been done in this case, the question of personal liability of the trustee would have been entirely eliminated. The facts and the opinion in the case are summarized as follows : Action by W. H. Lyons & Company against Nathan Con- nally to recover the value of merchandise; judgment for the plaintiffs; defendant appeals; affirmed. On February 25, 1875, M. A. T. Connally executed and delivered a written instrument conveying her entire mercantile business to her father, C. P. Connally, in trust, to conduct the business until the grantor's youngest brother would, if living, be 25 years of age, when the property, with its increase, was to be divided among the beneficiaries. The grantor reserved to herself a ninth un- divided interest, with power to draw it out at will, and gave to her father one-ninth absolutely, and to each of her brothers one-ninth ; and the deed provided that the father might, at his option, pay to any one of the brothers the share of such brother. The father was to receive $1000 per annum for his services; none of the brothers were to have power to force a settlement until the expiration of the trust. On March 24, 1882 — C. P. Connally, the father, having died previously — the district court of Hopkins County appointed defendant Nathan Connally, who was one of the beneficiaries, as trustee. Defendant accepted the appointment and continued to operate the business in the name of Connally & Company 200 Trusts for Business Purposes. [CX)NNALLY v. LYONS.] under which it had been carried on by the prior trustee, until January 20, 1886, when the property was attached. A few days before the attachment, defendant, acting for Connally & Company, drew from the bank $4,286, and it does not appear what disposition was made thereof. 116 — Partnership Liability Not Applicable to Beneficiaries. The decision, in the main, follows : Appellant's first, second and eighth assignments of error raise the question of parties as presented by his exceptions to the petition, but only on the ground tliat the persons who were claimed to be necessary par- ties were such as beneficiaries in a trust, and not as partners. If Connally & Company were a partnership, all of the partners would be necessary parties to an action of debt for the price of the goods. It is not necessary to consider whether they would be in a suit for the value of the goods, if the possession thereof was obtained by the fraudulent representations of the defend- ant, because the court arrived at no conclusion that the goods were fraudulently obtained. But if Connally & Company was a trust estate, managed by the defendant as trustee, it is clear that the beneficiaries of the trust would not be necessary parties to a suit for a debt incurred in the management of the trust if the trustee should be personally liable therefor ; and this ques- tion will be considered under another assignment raising that question. Mere participation in profits does not constitute a partnership, although there should be a contract from v/hich they were derived.'*^ There was no contract of partnership in this case. The defendant, Nathan Connally, acted as trustee under an appointment from the court, and had the entire control and sole management of the business. There was no right of 48Buzard v. Bank, 67 Tex. 89, 2 S. W. Rep. 54. Liability oi^ Trusteeis. 201 [CONNALLY v. LYONS.] control whatever reserved in the instrument executed by M. A. T. Connally to her father, C. P. Connally, as trustee, either for herself or for the beneficiaries as such. A test of partnership is the right of control over the property or profits, or to make disposition thereof. *3 Inhere was no right whatever in the brothers of the grantor, who were beneficiaries therein, either to control or withdraw their several interests. From the terms of the instrument, the business was to be conducted until the youngest was 25 years of age, or, if he died before that time, to such a time as he would have been 25 if he had lived. We must also infer that at least some of the beneficiaries were minors, and it will not be contended that they could be partners, although the instrument might indicate a partnership. The finding of the court is further strengthened by the fact that there is no instrument of facts brought up with the record, and there may have been proof of other facts to sustain his con- clusion that Nathan Connally was the trustee of a trust estate. We think, however, that a proper construction of the instru- ment alone would lead to the same conclusion. There was no evidence to make the beneficiaries partners by holding out, but such a partner would not be a necessary party. 117 — Mere Knowledge of Creditor Not Sufficient to Exempt Trustee from Personal Liability. Appellant's ninth and tenth assignments of error are as fol- lows: The court erred in its conclusions of fact and law in finding the estate of Connally & Co. was a trust estate and Nathan Connally was trustee of same; and finding, 'further, that goods, wares, and merchandise mentioned in plaintiflf's petition were sold and delivered to Connally & Co. by plaintiffs, 43 1 Bates, Partn. Sec. 37. 202 Trusts for Business Purposes. rCONNALLY v. LYONS.] and then rendering judgment against defendant, Nathan Con- nally, for the debt here sued on. The court erred in its finding of law that defendant, Nathan Connally, would be liable for said debt personally because he failed to make a contract with plaintiff exempting him from said liabilities. As we are of the opinion that a trust estate was created by the instrument of conveyance from M. A. T. Connally to her father, C. P. Connally, it remains only to consider, under the above assignments, whether or not the trustee, the defendant, was personally liable for the goods purchased by him for the trust estate from plaintiffs. Trustees of a corporate body, with defined powers, are not personally liable, and such has been the recognized rule in this state from the early decisions.** But whether or not the trustee of a voluntary association or a trust estate is personally liable has not been before our supreme court in any case that we can find. That such trustees should be held personally liable is reasonable, because they have in their own hands the means wherewith to reimburse themselves, and should not assume a debt for the benefit of an estate of which they have the sole management and control, without prospect of funds for payment thereof. If this principle needed to be enforced by way of illustration, it may be done by the fact that the defendant, a few days before the attachment, withdrew from the bank the deposit of Connally & Company amounting to over $4,000 in cash. In Hill on Trustees (533) the doctrine is broadly stated that "a trustee who carried on any trade with the trust assets for the benefit of the cestuis que trustent. will be responsible to the creditors, not only to the extent of the trust assets, but also with the whole of his own property; and 44 Traynham v. Jackson, 15 McHugh, 39 Tex. 348; Snyder v. Tex. 170, 65 A. D. 152; Dyer v. Wiley, 59 Tex. 449. Sullivan, 18 Tex. 771; College v. Liability oi^ Trustees. 203 [CONNAI.LY V. LYONS.] he may be made bankrupt and proceeded against in the same manner as any other trader; it is immaterial that the trade is carried on by him in consequence of an express direction in the trust instrument, although the trust property will doubtless be primarily liable to the creditors, and will be first applied so far as it will go in discharge of the liabiHties." Purchases by trustees, when made in obedience to the trust, impose upon them a personal liability. The seller must look to them for payment, and they must look to the trust estate for reimbursement. *5 Although the plaintiffs knew that the defendant was conduct- inf? the mercantile business of which he had the control and management as trustee for the benefit of the persons men- tioned in the conveyance from M. A. T. Connally to her father, C. P. Connally, and charged the goods when sold to Connally & Company, the defendant was nevertheless personally liable to the plaintiffs for the price of the goods, and it was not nec- essary first to establish the account as a debt against the trust estate. This rule is not only in accordance with the authorities, but is a salutary rule in the interest of common justice. Since the trustee was personally liable, it v/as not necessary that the beneficiaries should be made parties to the suit. The account sued on was not barred by limitation when plaintiff's first amended original petition was filed, so it is necessary to inquire whether or not the amended petition set up a new cause of action. It appears from the petition that the account was not 46 Taylor v. Davis' Adm'x., 110 (Mass.), 24 N. E. 202 and Asso- U. S. 330, 4 Sup. Ct. Rep. 147 Hewitt V. Plielps, 105 U. S. 400 Sanford v. Howard, 29 Ala. 684 ciation v. McAllister (Mass.), 26 N. E. 862. Tlie Alabama case is where a guardian was held New V. Nicoll, 73 N. Y. 127, 29 liable; it is also reported in 68 Am. Rep. 111. Amer. Dec. 101, which see for This doctrine is also recog- note as to executors and admin- nized in Mason v. Pomeroy istrators. 204 Trusts for Business Purposes. [CONNAXLY V. LYONS.] due for a time after the date of the items from which two years would extend past the fiUng of the amended petition. So the demurrer setting up hmitation was properly overruled by the court. We conclude that there was no error in the judg- ment of the court below, and that the same should be affirmed. Ii8 — For Mismanagement. Where duties are conferred by an express trust, its terms must be conformed to by the trustees, and for failure to do so they are liable for any loss to the shareholders.*^ So if trus- tees are guilty of mismanagement or maladministration, and the beneficiaries of the trust are justified in suing them to re- cover or secure the trust estate in their hands, the attorney's fees of the trustees for resisting such an action will not be allowed out of the trust estate.*'^ It is the duty of a trustee to look after trust property, and where he causes the trust estate to be repaired improperly and negligently, he is not shielded from personal liability by reason of his trusteeship ; his negligence is his individual misfeasance.*^ An instrument creating a trust may direct precisely that funds be invested in certain bonds or securities ; if the investment is made otherwise, the amount so invested should be surcharged to the trustee.*^ Where a trustee refuses to receive a dividend from an in- solvent debtor of the trust estate, he will be treated as if he had in fact received and failed to invest the money. ^° If money is deposited in the bank in such a manner that it is not under 46Klugli V. Seminole Secur- Div. 387, 168 N. Y. Sup. 808. ities Co., 103 S. C. 120, 87 S. E. « Internatl. Trust Co. v. 645. Preston (Wyo.), 156 Pac. 1128. 47Melson v. Travis, 133 Ga. 60 Backus v. Crane, 87 N. J. 710, 66 South. 936. Eq. 229, 100 Atl. 900. 48 Trani r. Gerard, 181 App. Liability of Trustees. 205 the trustee's own exclusive control — ^as where money is depos- ited so that it can be drawn without the concurrence of another person — it is at the peril of the trustee, and he is liable for any loss occasioned thereby.^^ For the rule is that where a loss lias occurred which must fall upon one of two persons, it must be borne by him whose act occasioned it.^^ 119 — For Acts of Others. The trustees of a trust estate operating- as a business com- pany are individually the masters of the servants engaged therein, and may not absolve themselves of personal liability for breach of masters' duty toward such servants. ^^ pQj- ^vhere trustees appoint an agent to collect rents from trust property, the trustees are liable for collections made.^* Just the same as the trustees are held responsible for property intrusted to an agent and he appropriates the property to his own use.^^ Trus- tees are also liable for their attorney's misappropriation of the trust funds where they permit him to collect money at various times during a period of years without making an effort to recover any of the sums, and retain the attorney after they should liave known of his misappropriation of the trust funds.^^ The acceptance of a trusteeship involves a duty, and where one of two trustees surrenders to his co-trustee the en- tire control of all the personalty and expenditures, and makes no attempt to verify his associate's accounts, he is liable for his associate's default; for while as a general rule a trustee is 61 Boehmer v. Silvestone, 95 54 Dillivan v. German Savings Ore. 154, 186 Pac. 26. Bank (la.), 124 N. W. 350. 62 Cochran v. Richmond & A. 65 Boehmer v. Silvestone, Su- R. Co., 91 Va. 339, 21 S. E. 664. pra. 63 Fisheries Co. v. McCoy 66 McRoberts v. Carmeal (Tex. Civ. App.), 202 S. W. 343. (Ky.), 44 S. W. 442. 2o6 Trusts for Business Purposes. responsible only for his own acts or defaults, yet, if by any affirmative act or any omission of duty he facilitates a breach of trust, he is liable. ^''^ A trustee who permits his cotrustee to use funds of the estate, giving his note for the amount, is accountable to the trust for the amount so used.^* Where trus- tees are not diligent in the protection and care of the trust prop- erty, they may be liable for embezzlement of trust funds by a third trustee. ^^ 1 20 — For Negligence. Where a trustee is negligent or unfaithful, he is responsible for the amount the property coming into his hands ought to vield,^® for when trustees accept the office they should bear in mind that the law knows no such person as a passive trustee and that they cannot sleep upon their trust. If such trustee remains quiet for any reason and suffers some other to do all the business, he is as answerable for the money as if he load conducted the business. If a loss occurs from any want of attention, care or diligence in him after his acceptance, he may be held responsible for not taking such action as was called for. A trustee will be held responsible for failure to do that which he ought to do, as well as for his acts of positive mis- conduct. He must respond in damages for any neglect of duty, express or implied.^^ The rule is that trust estates cannot be mulcted for personal injuries sustained through the negligence of the trustees in relation thereto.^^ Where a trustee learns 57 Caldwell v. Graham, 115 60 Candelaria v. Miera, 18 N. Md. 122, 80 Atl. 839. M. 107, 134 Pac. 829. 58 In re Cozzens' Estate, 15 N. 61 Holmes v. McDonald, 226 111. Y. Sup. 771. 169, 80 N. E. 714. 59 In re Graham Estate, 218 62 Xorling v. Allee, 10 N. Y. Pa. 357, 67 Atl. 462. Sup. 97. LiABiuTY OF Trustees. 207 of any matters relating to mismanagement or misapplication of trust funds by his co-trustee, his failure to take steps to pre- vent the same renders him liable for the resulting loss: also, if through the negligence of a trustee, his cotrustee is permitted to convert the trust funds to his own use, the failure to exer- cise diligence renders him liable for the loss.*^^ A trustee may be negligent in seeking to restore trust property which his co-trustee without his concurrence, may have sold and not ac- counted for in full to the estate, but this would not deprive the estate of its right to receive the full proceeds of the sale.^* There is no special rule prohibiting the investment of trust funds in the stocks and bonds of private corporations, and in case of loss, the question of liability depends upon whether the trustee acted with fidelity and with the care and diligence of a prudent man.^^ ^ trustee will not be exonerated from liability for a wrongful diversion of the funds of his trust where the declaration of trust provides that he should be liable only for the result of his own gross negligence or bad faith, or where he is guilty of wilful or intentional breach of trust committed by acting plainly beyond his powers.^^ 121 — Por Misappropriation. Where a trustee misappropriates trust funds or property, he is liable, and the property or funds so misappropriated may be impressed with a preferential lien in favor of the beneficiaries, though the money of the trust estate was commingled with 63 In re Adams' Estate, 221 65 Scoville v. Brock, SI Vt. Pa. 77, 70 Atl. 436. 405, 70 Atl. 1014. 64 Fritz V. City Trust Co., 72 66 Digney v. Blanchard, 226 App. Div. 532, 76 N. Y. Sup. Mass. 33.5, 115 N. E. 424; In re 625. Mallon's Estate, 110 App. Div. N. Y. 61, 97 N. Y. Sup. 23. 2o8 Trusts for Business Purposes. other money of the trustee or of his estate ; it is the duty of the substituted trustee to assert a preferential Hen on the general assets of the trustees or of his estate for the benefit of the beneficiaries.^'' That a trustee reposes great confidence in his co-trustee does not excuse his failure to protect the funds against a misappropriation of them by such co-trustee, nor does the illness of a trustee before the default of his co-trustee ex- cuse his failure to guard the interests of the beneficiaries where he had knowledge before his illness of the acts of his co-trustee which should have put him on guard against the subsequent misappropriation.^^ It is no excuse, nor is it a defense to a proceeding against the trustee and his surety for misappropriation of the funds, that the trustor was insane at the time the trust was created.^^ In addition to the liability of trustees for misappropriation of trust funds, third parties may be held liable where it is shown that the third party knowingly participated in the breach of trustJO 122 — Extent of Trustees' Liability. If a trustee fails to use ordinary care in making trust prop- erty produce income, he is liable for the reasonable income value thereof ; where he uses ordinar}^ and reasonable care in managing the trust fund, he is only to be charged with the actual receipts less proper expenditures.'^ He is also charge- 67Cottmg V. Berry, 50 Colo. Div. 501, 142 N. Y. Sup. 902. 217, 114 Pac. 641. 70 Perry v. German & Blae- 68 In re Adams' Estate, 221 baum, 66 W. Va. 566, 60 S. E. Pa. 77, 70 Atl. 436. 604; Swift v. Williams, 68 Md. 69 Wright V. Clark, 81 Miss. 236, 11 Atl. 835. 527, 142 N. Y. Sup. 812; Central 71 Dillivan v. German Sav. Trust Co. V. Gaffney, 157 App. Bank (la.), 124 N. W. 350. Liability of Trustees. 209 able with interest on sums he may retain for himself which he should pay over to the beneficiaries^'' and where a trustee fails to pay over to his successor as trustee all of the trust fund re- ceived from his predecessor, he is liable on his bond for the deficit to his successor.''^' The rule is that all profits derived from the trust property become a part of the trust, and a trustee is liable for secret profits even though the transaction from which they arise benefits his trusty the beneficiary is entitled not only to a part, but to all, of the benefits.'* Where a trustee is negligent in selling stock and there is a loss, he should be sur- charged with the difference between the market value of the stock at the time he should have sold it, and the lower price at which it subsequently sold.'''^ Where two trustees have been guilty of a breach of trust, the court may determine the order in which they shall stand answerable for the loss by making one primarily liable, and the other secondarily -^^ or the loss may be divided between the trustees guilty of neglect or breach of trust.''^ 123 — Limitation of Trustees' Liability. Where the trustees' liability is sought to be limited to the trust property, the trust instrument should especially provide against personal liability ; this provision of limited lia'bility should be embodied in all contracts and instruments, and in all dealings with third parties by the trustees^^ Under certain cir- 72 In re Bosler's Estate, 161 76 McCartin v. Administrator Pa. 457, 29 Atl. 57. of Traphagen, 43 N. J. Eq. 323, 73 Bogard v. Planters' Banlt & 11 Atl. 156. Trust Co. (Ky.), 112 S. W. 872. 77 Fisheries Co. v. McCoy 74KeeIy v. Black, 90 N. J. Eq. (Tex. Civ. App.), 202 S. W. 343. 439, 107 Atl. 825. 78 Hussey v. Arnold, 185 Mass. 76 Babbit v. Fidelity Trust Co., 202, 70 N. E. 87. 72 N. J. Eq. 745, 66 Atl. 1076. 2IO Trusts for Business Purposes. cumstances, trustees and members of an incorporated associa- tion may limit their liability as to some torts ; and in special instances even relieve the trust estate, since it is not contrary to public policy to stipulate against liability for negligence ex- cept where relation of master and servant or passenger and carrier exists.'''^ The principle of law under which trustees limit their liability is thoroughly discussed in the case of Shoe and Leather Na- tional Bank v. Dix.^® There the trustees as such, signed a note; they expressly stipulated against personal liability. In a suit to subject them personally to the amount of the note, the court held that inasmuch as they had limited their liability, Jt was not within the power of the court to change the trust lia- bility to a personal one. This is one of the leading cases on the subject of limited liability. The note in question was set out in this language: February i6, 1871. $53,000. For value received, we as trustees, but not individually, promise to pay to the Boston Water Power Company or order, the sum of fifty-three thou- sand dollars in five years from this date, with interest to be paid semi-annually at the rate of seven per centum per annum during said term, and for such further time as said principal sum or any part thereof shall remain unpaid. Signed in Presence of P. H. Sears. Geo. P. Sanger, Joseph Dix, R. A. Ballou, Trustees. This note was secured by a mortgage of real estate in Boston; 79 Fisheries Co. v. McCoy, Su- 80 123 Mass. 148, 25 Am. Rep. pra. 49. Liability of Trustees. 211 [SHOE & LEATHER NATL. BANK v. DIX] the proceedings and findings of the court are substantially as follows : On February 16, 187 1, the association, through its said trus- tees, caused a purchase of property from the Boston Water Power Company to be effected and the conveyance to be made to the defendants, "as they are trustees for the Brookline Av- enue Associates as hereinafter set forth." "To have and to hold the granted premises, with all the privileges, easements and appurtenances thereto belonging, to the said Sanger, Dix and Ballou, as joint tenants and not as tenants in common, and to their heirs and assigns and to the survivor of them and his heirs and assigns forever, in trust nevertheless for the Brook- line Avenue Associates for the following purposes : to take hold, mortgage, lease, manage and improve the same according to the exercise of their best discretion, with full power in the trustees or trustee for the time being in the exercise of such discretion, to sell at public or private sale any portion or the whole of the real estate hereby conveyed, and to make, execute and deliver good and sufficient deeds to convey the same in fee simple free from the trusts hereby created." At the same time with the execution and delivery of the deed, a mortgage back to the Boston Water Power ' Company in part payment of the purchase money was executed by the defend- ants, and the note secured thereby — being the note in question — given, which was indorsed to the plaintiff. The mortgage was never assigned to the plaintiff, having been foreclosed by sale on November 4, 1875. If, upon these facts, the defendants were liable, they were to be defaulted, judgment to be ordered against the defendant Dix for a sum stated, to be proved against his estate in bank- ruptcy, but no execution to issue against him personally and against the defendant Sanger; otherwise, judgment was to be 212 Trusts for Business Purposes. [SHOE & LEATHER NATL. BANK v. DIX] ordered for the defendants. The court, in passing on the facts above, said tliat the question whether the defendants have made themseh'es personally responsible must be determined by the terms of the note itself. In determining the proper interpreta- tion of any written contract, the court will give full effect to all the terms in which it is expressed. Those terms will not be modified by extrinsic evidence tending to show that the real intention of the parties was something different from what the language imports. They will be taken in their plain, ordinary and popular sense, except where it may be qualified by some special usage, or where the context evidently shows that the parties in some particular case had a dift'erent intent. It is no part of the business of the court to make or alter a contract for the parties. Even if it be found that the contract according to its true meaning, has no legal validity or fails to becomxe opera- tive, it is not for the court, in order to give it operation, to sup- pose a meaning which the parties have not expressed, and which it is certain they did not entertain. It must be assumed that all the language used in the contract was selected with some pur- pose and is to be of some effect. If a party, therefore, in a contract into which he voluntarily enters, and not in the execu- tion of any official trust or duty, makes it an express stipulation that he is acting for somebody else, and is in no event to be personally liable, he certainly cannot be rendered so by law.^^ In a question as to the meaning of a contract, the want of apt words to create a personal responsibility is not to be supplied by the alteration or enlargement of its terms. In applying these familiar and elementary rules of construc- tion to the case now before us, we find that the defendants promised "as trustees but not individually." The construction 81 Sedgwick, J., in Sumner v. Williams, 8 Mass. 162, 184. Liability of Trustees, 213 rSHOE & LEATHER NATL. BANK v. DIXl contended for by the plaintiffs would require us to strike out the words "but not individually ;" although in so doing we should not only alter the contract, but should impose upon them a liability which apparently they took special pains to avoid. It is to be borne in mind that this was not a case of agents acting for an undisclosed or unknown principal, and is, there- fore, readily distinguishable from Winsor v. Griggs,^^ and cases of that class. Neither was it an attempt by the defend- ants to bind property over which they had no legal control. By the terms of the deed they had power to mortgage, lease and manage the property at their discretion, but for the benefit and on the account of the equitable owners, namely, the mem- bers of the Brookline Avenue Association. In this respect the case differs from Thacher v. Dinsmore,^^ and other cases of that class, in which a party promising "as guardian," etc., was held to have made himself personally liable. Neither can it be said that the term "trustees" was used as a mere description of the general relation or office which the person signinp- the paper holds to another person or to a cor- poration, without indicating that the particular signature is made in the execution of the office and agency. In this respect the case differs from Tucker Manuf. Co. v. Fairbanks.^* It often has happened that an agent for another person, or the treasurer of a corporation, has made himself personally respon- sible by the form of words in which he has expressed himself in a written contract, when he may have intended to bind his principal only. Cases in which this question has been raised have often been before this and other courts, and the authori- ties have recently been collected and reviewed in several of our 82 5 Cush. 210. V. Fuller, 6 Mass. 58. 83 5 Mass. 299. Also Forster 84 98 Mass. 101. 214 Trusts for Business Purposes. [SHOE & LEATHER NATL. BANK v. DIX.] own decisions. ^^ But we believe no case can be found in which a promise "as trustee," etc., accompanied with an express dis- claimer of personal liability, would fail to exempt him. It is contended that if these defendants are not liable upon the contract as a note, then nobody is liable. Even if such were the fact, it would not be in the power of the court, as we have already seen, to alter the contract for the purpose of giving it validity. In deciding whether the defendants have or have not bound themselves, we need not decide whether they have or have not bound their principals.*^ But, even if the written con- tract should fail of taking effect as a negotiable note, it might still be operative as an acknowledgment of unpaid debt which the mortgage was intended to secure. It may be that this was all that the original parties intended, or supposed to be material. They may have considered the mortgage sufficient security without the personal responsibility of the trustees. Our conclusion, therefore, is that, without proof that the de- fendants, as trustees, liave funds of the association in their hands applicable to this debt, no action can be maintained against them. No evidence to that effect having been offered, we must order judgment for the defendants. 1 24 — Non-Liability. If a trustee contracting for the benefit of a trust wants to protect himself from individual liability on a contract, he must stipulate that he is not to be responsible personally, and that the other party is to look solely to the trust estate.*' Trustees cannot be held personally liable on a contract expressly restrict- ing liability to the trust fund, which it was within their au- 85 Slawson v. Loring, 5 Allen 98 Mass. 101. 340; Barlow v. Lee Congrega- 86 Abbey v. Chase, 6 Cush. 54. tional Society, 8 Allen 460; 87 Taylor v. Davis, 110 U. S. Tucker Manuf. Co. v. Fairbanks, 335, 4 Sup. Ct. 147, 28 L. Ed. 163. Liability of Trustees. 215 thority to make, because they failed properly to execute the contract ;^^ nor is a minority trustee personally liable on a con- tract which he did not personally make, merely because a ma- jority of the trustees authorized it.^^ A trustee should not be surcharged for a loss arising from a mere error of judgment when not guilty of any willful neglect or fraud.^° A trustee will not be liable for tax penalties which accrue against the trust estate while he is endeavoring in good faith to protect it from liability for the taxes ;^i and a claim for expenses incurred in making an examination of the affairs of a trustee after it is discovered that he has defaulted, is not a charge for which the trustee's surety should be made to answer.^^ Noj- should a trustee be held accountable for money of the estate appropri- ated by a cotrustee to his own use, without the former's knowledge.^^ Trustees are not responsible for the acts of a deceased trus- tee unless they have expressly agreed to be responsible; e. g., if a bond for faithful performance is to be considered such an agreement, their liability must be fixed at least by suit on the bond, and not by suit on purely equitable grounds.^* Nor are the trustees liable for the proceeds of sales which come directly into the cotrustees' hands without coming into their possession or control, nor for rents of portions of the lands collected by their agent and by him paid over without their direction or knowledge to the cotrustee by whom they were converted.^^ 88 Rand V. Farquhar, 226 Mass. 92 U. S. Fid. & Guar. Co. v. 91, 115 N. E. 286. Douglas' Trustee, 134 Ky. 374, 89 Markel v. Peck, 168 Mo. 120 S. W. 328. App. 358, 151 S. W. 772. 93 lu re Cozzens' Estate, 15 90 Appeal of Bailey (Pa.), 5 N. Y. Sup. 771. Atl. 49. 8* Laurel Co. Ct. v. Trustees of 91 Denvir v. Park, 169 Mo. Laurel Co. Seminary, 93 Ky. 379, App. 335, 152 S. W. 604. 20 S. W. 258. CHAPTER XII. COMPENSATION OF TRUSTEES. 125 — Fixed by Instrument. Where compensation of a trustee is fixed by the deed of trust, the trust being of great magnitude, he will not be required to furnish free a place in which to give his attention to the busi- ness, where his clerk can work and where the mass of books and papers belonging to the trust estate can be kept.^^ A sub- stituted trustee, with all the powers and duties of the original trustee, is entitled to the same compensation as the original trustee, as provided for in the declaration of trust. A trust instrument may provide that each trustee receive a stipulated compensation per month for a period, of years — the duration of the trust; their right to such compensation is limited to the specified period and for any further services by reason of the trust being prolonged, their compensation must rest upon an award of the court on quantum meruit.^' Where a trust is to continue for a certain number of years — when distribution is to take place — and it directs that the managing trustee shall receive a specified amount annually for his services, the pro- vision for such trustee will last only the duration of the trust ; after such period, the managing trustee is entitled to reasonable compensation to be fixed by the court.^^ The general rule is that a trustee is entitled to have his commission paid out of the 95 Purdy V. Lynch, 145 N. Y. 97 In re Hanson's Estate, 159 462, 40 N. E. 232. Cal. 401, 114 Pac. 810. 96 Southern Ry. Co. v. Glenn's 98 Muhlke v. Tiedemann, 280 Adm'r., 98 Va. 309, 36 S. E. 395. 111. 534, 117 N. E. 708. (216) Compensation op Trustees. 217 principal of the trust fund where there have been no earnings, but where there are earnings the cost of managing and pre- serving the trust estate should be paid first out of the income.®^ 126 — Reasonable. Where the trust instrument does not provide for compensa- tion, it is a general principle in the administration of trusts that the trustee shall have reasonable compensation. 1^° Where the instrument creating a trust does not declare that the trustee shall be compensated for the services rendered in executing the trust, the court may allow him a reasonable compensation there- for.^ A trustee may find it necessary to employ brokers to sell real estate and distribute the proceeds, and if the sum paid out by him is reasonable compensation he should be allowed there- for.2 A trustee may be allowed reasonable compensation for ordinary services rendered in the discharge of the trust ; semble, he may be allowed extra compensation for extraordinary serv- ices required of him in the discharge of such trust.^ Where a trustee through error of judgment in an honest endeavor to protect the estate from a charge for taxes, permits the taxes to lapse and penalties to accrue, he does not thereby forfeit his right to compensation as trustee.* 99 Whittingham v. Schoen- 2 Rutherford v. Ott, 37 Cal. field's Trustee (Ky.), 68 S. W. App. 47, 173 Pac. 490. 116; Catt V. Wm. Knabe & Co. 3 TurnbuU v. Pomeroy, 140 Mfg. Co., 93 Va. 736, 26 S. E. Mass. 117, 6 N. E. 15; Jarrett v. 246. Johnson, 216 111. 212, 74 N. E. lOOHanscom v. Maiden & Mel- 756; Thomas v. Thomas, 97 rose Gas Lt. Co., 234 Mass. 379, Miss. 697, 53 So. 630. 125 N. E. 626. 4 Denvir v. Park, 169 Mo. App. 1 Patrick v. Patrick, 135 Ky. 335, 152 S. W. 604. 307, 122 S. W. 159. 2i8 Trusts for Business Purposes. 127 — Excessive. While trustees are allowed reasonable compensation for services rendered, the question of excessive compensation is governed entirely by the kind and character of services rendered in behalf of the shareholder and the trust property. A certain compensation may be allowed the trustees for the duration of the trust whose funds are well invested wherein no vexatious questions are involved in its administration ; this cannot be said to be inadequate if a deceased trustee, during his lifetime, re- ceived such compensation without suggestion of dissatisfac- tion.^ A fee for serv^ices as trustee may be found excessive if it appears that his accounting, though involving large sums, is comparatively short and simple.^ Where trustees contract to render their services for a certain sum, an extra allowance may be deemed improper if the services so rendered do not in- volve more time than was originally contemplated and there is no great responsibility requiring extraordinary compensation;"^ but where trustees, in carrying out the trust, perform services not contemplated originally, they may receive extra compensa- tion; if this extra is found excessive, it should be reduced.^ 128 — Commission to Trustees. Where no other provision has been made for the payment of the trustees' services, they may be paid a commission on the amount of business transacted ; or compensation may be paid on a reasonable per cent, using the total amount of the trust property as a basis ; or the trustees' commission may be based 6 Kilpatrick v. Robert, 278 Mo. 7 Easton v. Houston & T. C. 257, 212 S. W. 884. Ry. Co., 40 Fed. 189. 6 Marks v. Sample, 111 Ala. 8 Rackemann v. Tilton, 236 111. 637, 20 So. 791. 49, 86 N. E. 168. Compensation of Trustees. 219 upon a percentage of the income ; but compensation for services performed and liability incurred should be only fair, for that is all that the trustees are entitled to.^ The general rule seems to be that an allowance of five per cent commission on the in- come of the trust estate is not excessive where the wisdom of the trustee's conversion of the securities is not questioned, his re-investments are sound and made without unreasonable de- lay, and he promptly collects the interest.^® Where no extra- ordinary ser\'ices are rendered by a trustee, he will not be entitled to any compensation in excess of the regular commis- sion." However, allowance may be made to a trustee for extra and special services for which the rule seems to be based and apportioned according to the nature and responsibility of the trust, and the length, fidelity, and success of the service." 129 — Allowed by Court. The chancery court, in appointing a proper trustee, may award fairly adequate compensation, notwithstanding the pro- visions of the trust instrument ;i3 and where a trustee is entitled to commission and anything in addition is demanded, it must be allowed by the court.i* Where trustees in their first ac- count credit themselves with compensation for a certain period and it is allowed by the court, such allowance is usually con- clusive.i^ Courts of chancery, in the exercise of their discre- 9 Kilpatrick v. Robert, 278 Mo. Riper's Estate, 90 N. J. Eq. 217, 257, 212 S. W. 884. 107 Atl. 55. 10 In re Bosler's Estate, 161 13 In re Battin, 89 N. J. Eq. Pa. 457, 29 Atl. 57; Wilder v. 144, 104 Atl. 434. Hast (Ky.), 96 S. W. 1106. 14 Sartor v. Newberry Land & 11 Doom V. Howard (Ky.), 64 Security Co., 104 S. C. 184, 88 S. W. 469. S. E. 467. 12 0ffutt V. Divine's Ex'r. 15 In Re Hanson's Estate, 159 (Ky.), 53 S. W. 816; In re Van Cal. 401, 114 Pac. 810. 220 Trusts for Business Purposes. tion, may make an allowance of five per cent on the income and one and one-half per cent on the principal of the trust prop- erty for the trustee's compensation.^^ 130 — Forfeiture of Compensation. A trustee guilty of fraud or misconduct in the maangement of the estate is not entitled to compensation ;i'' and where trus- tees are guilty of a breach of trust, one of them converting trust property and the other acquiescing, all compensation may be denied. ^8 A trustee who repudiates the trust and claims the trust estate as his own property, involving it in litigation; who refuses to pay over to the beneficiary the income from the trust ; who files an account only when compelled to do so by law, and in such account places many unjustifiable charges, will be allowed neither commissions nor expenses. ^^ Where trus- tees keep no books — successive corrected statements being re- quired — ^and an accounting is reached only by compulsion, they are not entitled either to commissions or counsel fees f^ for the rule is that trustees who have been grossly negligent in the dis- charge of their duties and who failed to keep an account, are not entitled to commissions. 21 Commissions are a compensa- tion for faithful discharge of duty ; when trustees violate their duty and commingle money belonging to their beneficiaries with their own and use part or all of it for their own private pur- poses, they are not entitled to commissions.^'* 16 Central Trust Co. v. John- 19 Hanna v. Clark, 204 Pa. 145, son (Ky.), 74 S. W. 663. 53 Atl. 757. 17 Comingor v. Louisville 20 In re Reich's Estate, 230 Trust Co., 128 Ky. 697, 108 S. W. Pa. 55, 79 Atl. 151. 950. 21 Ward v. Shire (Ky.), 65 S. 18 Harvey v. Schwettman (Mo. W. 8. App.), 180 S. W. 413. 22Hoboken Trust Co. v. Nor- ton, 90 N. J. Eq. 314, 107 Atl. 67. Compensation of Trustee;s. 221 131 — Reimbursement of Trustees. Where a trustee uses his own money for the purposes of the trust, he is entitled to reimbursement f^ and this reimburse- ment may be made out of money in his hands which belongs to the trust.*^* Where a trustee, in executing his trust, makes ad- vances proper to be made, he is not only entitled to be reim- bursed, but also has a lien on the trust estate for repayment which is prior to any encumbrance imposed thereon by the beneficiary.^^ A trustee's right to reimbursement for reason- able expenditures in the employment of counsel in the interest of the estate rests upon the fact that he, and not the trust estate, is responsible to the attorney for his fees, and not upon the right of the trustee to be subrogated to any rights of the attor- ney against the estate.^^ But, when a trustee brings adversary proceedings to take trust property from the possession of those entitled to it in order that he may distribute it to those entitled adversely, and fails in his purpose, he cannot demand reim- bursement of his expenses from the trust fund, or contribution from those whose property he has sought to misappropriate.^' 132 — Expenses of Trustees in General. A trust fund must bear the necessary expenses of its admin- istration, and one who conducts a litigation for the benefit of such fund must be protected in the distribution of it for the 23 American Bonding Co. v. 564, 122 N. E. 58; Jessup v. State, 40 Ind. App. 559, 82 N. E. Smith, 223 N. Y, 203, 119 N. E. 548. 403. 24 Oellien v. Gait, 150 Mo. App. 26 Denvir v. Park, 169 Mo. 537, 131 S. W. 158. App. 335, 152 S. W. 604. 25 Turton v. Grant, 86 N. J. 27 Hobbs v. McLean, 117 U. S. Eq. 191, 96 All. 993; Patterson 567; Sommerset Ry. v. Pierce, 98 V. Nortliern Trust Co., 286 III. Me. 528, 57 Atl. 222 Trusts for Business Purposes. expenses incurred by him in the faithful performance of his duty. 28 Where one of many persons having a common interest in a trust fund, at his own expense, takes proceedings to save it from distribution and restore it to the purposes of the trust, he is entitled to reimbursement, either out of the fund or by proportional contribution from those who accept the benefits of his efforts.^ On the enforcement of a trust which the trus- tee attempts wrongfully to carry out or seeks to repudiate, the plaintiff is entitled to his costs and disbursements ;3*' but where a trustee brings on litigation in violation of his duty as trustee, the cost of the litigation should be taxed against him person- ally.^^ As one of the duties of their office, the trustees are to render from time to time an accounting ; when this is done the trust estate is charged with the cost of the accounting ; but when the trustees fail to account, and expenses are incurred by rea- son of their failure, then they may be compelled to pay the costs personally. ^2 133 — Attorney's Fees. A trustee is entitled to have his proper and necessary ex- penses incurred in the execution of his trust, out of the trust fund ; attorney's fees are proper expenses whenever it is needed to employ one in the management, care, or protection of the 28 Las Vegas Ry. & Power Co. Hobbs v. McLean, Supra. V. Trust Co. of St. L. Co., 17 30 Royal v. Royal, 30 Ore. 448, N. M. 286, 126 Pac. 1009; Som- 47 Pac. 828. merset Ry. v. Pierce, Supra; 31 Wiegand v. Woerner, 155 Hobbs V. McLean, Supra. Mo. App. 227, 134 S. W. 596. 29 Las Vegas Ry. Co. v. Trust 32 McCloskey v. Bowden, 82 N. Co. of St. L. Co., Supra; Som- J. Eq. 410, 89 Atl. 528. merset Ry. v. Pierce, Supra; Compensation of Trustees. 223 trust estate.3' Trustees, who in good faith engage counsel to aid in the execution of their trust, are entitled to pay them out of the trust fund,^* and they may also be reimbursed from the trust for expenses incurred in that behalf.^^ Where a trust by its terms is not to terminate until a certain time, and proceed- ings are brought before that time to terminate it, the trustees are entitled to an allowance of attorney's fees in resisting the proceedings.^^ Where the creator of a trust endeavors to re- pudiate it by legal action, and it becomes necessary for the trus- tee to employ counsel to protect same, the trustee is entitled to have his reasonable counsel fees, costs, and necessary expenses paid out of the trust estate.^''^ Where a trustee employs an at- torney to perform services beneficial to the trust, but is unable to pay him, such attorney may sue to charge the estate for his services. 38 33 Burney v. Atkinson Tenn. Ch., 54 S. W. 998; Berry v. Stigall, 125 Mo. App. 264, 102 S. W. 585; Fox v. Fox, 250 111. 384, 95 N. E. 498; Taylor v. Denny, 118 Md. 124, 84 Atl. 369. 34 Cochran v. Richmond A. R. Co., 91 Va. 339, 21 S. E. 664. 35 Hummel's Appeal (Pa.), 5 Atl. 669. 36 In re Hanson's Estate, 159 Cal. 401, 114 Pac. 810. 37 Bay Biscayne Co. v. Baile, 73 Fla. 1120, 75 So. 860. 38Jessup V. Smith, 223 N. Y. 203, 119 N. E. 403. CHAPTER XIII. REMOVAL OF TRUSTEES. 1 34 — Jurisdiction. A court of equity has inherent jurisdiction to remove a trus- tee, independent of statutory provisions, for the good cause shown ;^^ and in addition to the court's powder to remove a trustee, it may appoint another in his stead whenever there ex- ists a state of mutual ill feeling, based on misconduct or grow- ing out of his misbehavior, between him and the beneficiaries, and where his continuance in office would be detrimental to the execution of the trust, though there be no dishonesty.*^ But once a trustee is appointed by the court and he qualifies and ac- cepts the trust, such court has no inherent power as a court of equity to revoke the appointment, remove the trustee and ap- point his successor, without cause and without notice to him.*^ The rule, however, is different when a trustee denies the trust and refuses to perform it. Then a court of equity will appoint a new trustee in his place and the old trustee will not be en- titled to retain the property under cover of having an account as trustee, before paying over the net proceeds.*'' Where trust property is located in a certain county and the trust deed is there recorded, the court of that county has jurisdiction of a suit to remove the trustee, no judgment being asked against the trustee in personam.** 39Maydwell v. Maydwell, 135 tate, 125 Mo. 128, 28 S. W. 443; Tenn. 1, 185 S. W. 712. Parker v. Kelley, 166 Fed. 968. 40 May V. May, 17 Sup. Ct. 42 Irvine v. Dunham, 111 U. S. 824; In re Battin, 89 N. J. Eq. 327. 144, 104 Atl. 434. 43 Wheatcraft v. Wheatcraft, 41 Hitch V. Stonebraker's Es- 55 Ind. App. 283, 102 N. E. 42. (224) Removal of Trustees. 225 135 — Removal of — General. In an action for the removal of a trustee, it is not necessary that all the parties signing the indenture of trust act together ; if there are grounds for the removal of the trustee, he may be removed at the suit of one of the signers of the indenture.** Where trustees have managed the estate with strict fidelity and unusual ability, they will not be discharged because of mere strained relations between them and the shareholders which were probably due to the latter's own misconduct and misjudg- ment of the trustees ;*^ nor will they be removed for a mere failure to make reports ;*^ nor because of difference of opinion between them and the shareholders;*' nor for a discord exist- ing between them and the shareholders, unless it arose out of the misbehavior of the trustees;*^ nor where there is a mere disagreement between the trustees and the shareholders that in itself will not justify the removal of the trustees ;*^ for the ac- cepted doctrine is that justifiable cause must exist as grounds for removal. 136 — For Breach of Trust. Trustees are fiduciaries, their duty is to the trust and for a breach of this duty, they may be removed. If they are re- moved, as guilty of a breach of trust, they cannot complain that after their removal the court appointed only one instead of two 44 Barbour v. Weld, 201 Mass. 46 Wilson v. Smoot, 186 Ky. 513, 87 N. E. 909; Parker v. 194, 216 S. W. 129. Kelley, 166 Fed. 968; Jones v. 47 in re Price' Estate, 209 Pa. Jones, 8 Misc. Rep. 660, 30 N. Y. 210, 58 Atl. 280. Sup. 177. 48 Starr v. Wiley, 89 N. J. Eci. 45 Anderson v. Kemper, 116 79, 103 Atl. 865. Ky. 339, 76 S. W. 122. 49 Wylie v. Bushnell, 277 111. 484, 115 N. E. 618. 226 Trusts for Business Purposes. trustees — ^as required by the trust instrument.^*' In an action to remove trustees for breach of trust, a report concerning the trust property made by one of the trustees is inadmissible as against the other.^^ If a non-suit is negHgently permitted and injury results to the estate, the trustees are guilty of a breach of trust, and should be removed.^^ So is neglect by a trustee to invest moneys in his hands a breach of trust, and is ground for removal.^^ Where one of two trustees takes trust moneys out of the trust estate and treats it as his own, keeping no sep- arate account, he is guilty of a breach of trust and his cotrustee is also guilty of a breach of trust if he acquiesces in such con- duct; hence both might properly be removed.^* The rule is that in all cases the primary consideration is the welfare of the shareholders and the trust property as a whole, and trustees will or will not be removed, according to the necessity for such action, in order to protect the trust estate.^^ 137 — For Neglect or Misuse of Trust Property. Equity has power to remove a trustee for neglect of his duty — ^anything showing a lack of capacity, fidelity, or honesty — but not for any mere error of judgment or mistake as to the true construction of the trust under which he acts.^^ To justify the removal of a trustee, there must be a clear necessity for such action to save the trust property, and the misconduct must be such as to show want of capacity for or fidelity to the trust." 60 Harvey V. Schwettman (Mo. 54 Harvey v. Schwettman, Su- App.), 180 S. W. 413. pra. 61 Belding v. Archer, 131 N. C. 65 Langer v. Fargo Merc. Co. 287, 42 S. E. 800. (N. D.), 174 N. W. 90. 52 Belding v. Archer, Supra. 56 Williams v. Nichol, 47 Ark. 53Cavender v. Cavender, 114 254, 1 S. W. 243. U. S. 464, 57Wiegand v. Woerner, 115 Mo. App. 227, 134 S. W. 596. Removai, op Trustee;s. 227 But if the acts or omissions of a trustee show a want of reason- able fidelity to his trust, a court of equity will remove him;"^^ and so the use of the trust estate by. the trustee for his own benefit, or any neglect or mismanagement which impairs or jeopardizes such estate, will furnish sufficient ground for re- moval.^^ A trustee may be removed for misconduct in an ac- tion to cancel the trust, though the trust be a personal one.^® A proceeding to remove a trustee appointed under a written instrument is a proceeding in personam, and not in rem.^^ The complaint for mismanagement of an estate may allege all of the acts of the trustee in connection therewith from the time he assumed the management of the trust estate.^* 138 — For Holding a Conflicting Interest. As a matter of course a trustee may be a shareholder in the trust property, and if he is also a director of a corporation and tries to influence the trust to its detriment in favor of the cor- poration, he may be removed, for he occupies antagonistic re- lations to the trust.'^^ wiiere trustees loan a large part of the funds of the trust to some of their own members, and are about to divert the trust property to their personal advantage and the detriment of the trust, it is proper for the court to re- move them and appoint new trustees in their stead.^* Where a trust estate owns a majority of the stock of a corporation and one of the trustees makes every effort to derive personal ad- vantage from the trust, against the protest of his cotrustee, his 68 Cavender v. Cavender, Su- 62 Williamson v. Grider, 97 pra. Ark. 588, 135 S. W. 361. 59 Wheatcraft v. Wheatcraft, 63 Gartside v. Gartside, 113 Supra. Mo. 348, 20 S. W. 669. 60 Barbour V. Weld, Supra. 64 state v. Ausmus (Tenn. 61 Parker v. Kelley, Supra. Ch.), 35 S. W. 1021. 228 Trusts for Busine;ss Purposes. conduct may be considered a breach of trusty for which he may be removed. ^^ The personal interest of a trustee coming di- rectly in conflict with his duty to the trust justifies his removal without reference to the question of his good faith.^^ 139 — Death of Trustee — Sunuivorship. At common law several trustees hold as joint tenants ;®'' in most of the states, the estate of joint tenancy has been abol- ished by legislation excepting, however, as applicable to execu- tors and trustees. The rule seems to be that trustees are ex- cepted from the provision of the statute requiring a declaration in the trust instrument that the estate is in joint tenancy; and unless the deed of trust provides otherwise, the trustees hold as joint tenants, and upon the death of one of them, the title de- volves upon the survivor — nothing passing to the heirs or per- sonal representatives of the deceased trustee. ^^ The above rule is applicable only where there is more than one trustee ; the law seems to be well established in the case of a single trustee, that at his death the legal title of realty vests eo instanti in his heirs and title to all personal vests in his personal representatives which can be divested only by their voluntary conveyance or by an order of the court in a proceeding to which they are par- ties.^^ Naturally, the passing of this title to the heirs of per- 66 Elias V. Schweyer, 17 Misc. S. W. 367; Lenvine v. Gerardo, 707, 40 N. Y. Sup. 906. 60 N. Y. Misc. 261, 112 N. Y. eepyle v. Pyle, 137 App. 568, Sup. 192. 122 N. Y. Sup. 256. 69 Davis v. Lusk, 191 111. 620, 67 R. C. L. 1276. 61 N. E. 483; Gulick v. Bruere, 68Reichert v. M. & 111. Coal 42 N. J. Eq. 639, 9 Atl. 719; Co., 231 111. 238, 83 N. E. 166, Woodruff v. Woodruff, 44 N. J. 121 Am. St. Rep. 307; Oxley v. Eq. 349, 16 Atl. 4, 1 L. R. A. 380. Butler County, 121 Mo. 614, 26 Removai. of Trustees. 229 sonal representatives is subject to the trust.''® It is well settled that the author of a trust has the right to say in what manner a vacancy in the office of trustee shall be filled, and where this has been done through the deed creating the trust, the vacancy cannot be filled in any other way, unless there is a failure on the part of the remaining trustees to perform this duty, in which case a court of chancery will interpose.'^ 70 Lawrence v. Lawrence, 181 71 Golder v. Bressler, 105 111. 111. 248, 54 N. E. 918. 419. CHAPTER XIV. TRUSTS DISTINGUISHED FROM OTHER ORGANIZA- TIONS. Not a Partnership. 140 — In General. The language of the declaration of trust is the true guide in determining whether a partnership or a trust is created. In so far as possible in construing an instrument, the court will take into consideration the intention of the parties and will give ef- fect to their intention if no fundamental principles of law have been violated. The distinctive feature between a trust and a partnership is that of control and power, i. e., who controls the trust estate and who has the power to contract and subject it to liability. We have the answer to these two questions in the rule which determined whether a trust or a partnership was created in the case of Connally v. Lyons,''^^ wherein the court said: "There was no contract of partnership ; the trustee acted as such under an appointment from the court and had the entire control and sole management of the business ; there was no right of control whatever reserved in the instrument to the beneficiaries as such. A test of partnership is the right of control over the property or profits, or to make disposition thereof." Where the trustees hold title to all property and are free from the will of the beneficiaries, then a trust is created ; but if 78 82 Tex. 664, 18 S. W. 799, 21 A. St. Rep. 935. (230) Trusts Distinguished from Other Organizations. 231 the beneficiaries have the power to remove a trustee or in any way control his action in so far as he is fulfilling his duty as trustee, then a partnership is created. There are a great num- ber of decisions in which the question of partnership in trust instruments is taken up ; two of them may be considered leading cases on the subject of trusts distinguished from partnerships. The first one is Williams v. Inhabitants of MiltonJ^ in which the trust instrument and the relation of shareholders to the trustees was involved ; the court held that a trust was created and not a partnership. The case is reported substantially as follows : Taxes were assessed against the trustees of the Boston Per- sonal Property Trust on the theory that they were partners ; they, as trustees, filed suit stating that they were trustees and for that reason they asked for an abatement of the taxes as- sessed against them. The Boston taxes were assessed on the theory that the property held by the plaintiffs (the trustees) under that trust was partnership property to be assessed tmder St. 1909, c. 490, pt. I, sec. 27, in Boston where the partnership — if there was a partnership — had its place of business. The other taxes were assessed upon the theory that the property held by the plaintififs under that trust was held by them as trust property, the income of which was payable to another person and was to be assessed under St. 1909, c. 490, pt. i, sec. 23, cl. 5. It was contended in effect if not in terms that whatever was its true character the trust, for the purpose of taxation, was a partnership. Doubtless, the legislature might provide that a trust which was not a partnership should be treated as a part- nership for the purpose of taxation; but it has not done so. 73 215 Mass. 1, 102 N. E. 355. 232 Trusts for Business Purposes. fWILLJAMS V. INHABITANTS OF 3I1LTON.] What the legislature lias done is to provide that "personal prop- erty held in trust by an executor, administrator or trustee, the income of which is payable to another person, shall be assessed to the executor, administrator or trustee in the city or town in which such other person resides, if within the common- wealth," and if he resides out of the commonwealth, in the place where the trustee resides (St. 1909, c. 490, pt. i, sec. 23) ; and that "partners, whether residing in the same or in different cities or towns, may be jointly taxed under their firm name where their business is carried on, for all the personal property employed in such business, except ships or vessels." (St. 1909, c. 490, pt. I, sec. 27). That is to say, the legislature has pro- vided that the right to tax property as trust or as partnership property depends upon the real cliaracter of the proj^erty taxed. Under these enactments of the legislature, there is no room for holding that property which is in reality not partnership prop- erty can be taxed as partnership property. The right to tax property as trust or as partnership property depends upon wliat the character of the property taxed really is. The court here proceeds to a discussion of the principles on which the question of the true character of the Boston Personal Property Trust de- pends, and says that : 141 — What Constitutes Partnership. Where persons associate themselves together to carry on business for their mutual profit, they are none the less partners because (i) their shares in the partnership are represented by certificates which are transferable and transmissible, and be- cause (2) as a matter of convenience (if not of necessity in case of transferable and transmissible certificates) the legal title to the partnership property is taken in the name of a third Trusts Distinguished from Other Organizations. 233 person. The person in whose name the partnership property stands in such a case is perhaps in a sense a trustee. But speaking with accuracy, he is an agent who for the principal's convenience holds the legal title to the principal's property. Several instances of such partnerships are to be found in our reports. In Hoadley v. County Com'rs. of Essex,'* one Gor- don McKay executed a declaration of trust by which he de- clared that he held his patents for sewing the soles of boots and shoes to the vamps, his factory where machines were manufac- tured under these patents and the whole business theretofore carried on by him in trust, for such persons as should buy cer- tificates which were to be issued under that declaration of trust to the amount of 50,000 in number, the proceeds to be used in carrying on the factory and business assigned to and held by the trustee. The certificate holders were to be known as the AIcKay Sewing Machine Association and the business to be conducted by an executive committee to be chosen by them. This was held to create a partnership, and for that reason the shares were held not to be taxable to the holders of them; there is a subsequent case involving the same association, where the same conclusion was reached.''* In Whitman v. Porter,''® cer- tain subscribers associated themselves together to buy a ferry- boat to be run between Agawam and Springfield ; the boat was to be conveyed to one of the subscribers "in trust" and the entire business was to be conducted by these trustees and their officers to be annually elected by the subscribers. The stock was assignable. These stockholders were held to be partners. In Phillips V. Blatchford,''' the money to carry on the business of manufacturing and selling grates was raised by the sale of 74 105 Mass. 519. 76 107 Mass. 522. 76Gleason v. McKay, 134 77 137 Mass. 510. Mass. 419. 234 Trusts for Business Purposes. transferable certificates issued under a somewhat similar declara- ration of trust which provided that the business should be car- ried on by a board of managers of whom the trustee was to be one, and the other members were to be elected by the share- holders. This also was held to be a partnership. In Ricker v. American Loan & Trust Co.,'^ the doctrine of these cases was extended to a case w^here the purpose of the association was to buy cars to be leased to a specified railroad. The persons pro- viding the purchase money were to have transferable certifi- cates, which certificates by the terms of the lease to the rail- road were to be paid in ten annual installments with six per cent, interest until paid. The certificate holders were declared in the declaration of trust to be an association, and all the business was to be transacted by a board of managers to be elected by them. The property of the association was to be held by the American Loan & Trust Company, as trustee. This also was held to be a partnership. Williams v. Boston,'^ was a similar case. The trust agreement in that case provided that the trust was established "for the purchase, development and disposition of" the former site of the Museum of Fine Arts in Boston. The property was to be held by trustees, but the shareholders had a right to remove the trustees, and meetings of the shareholders were to be held at which the shareholders might authorize or instruct the trustees in any manner and alter or amend the declaration of trust, or direct the trustees to end the trust, sell the property and distribute the proceeds. The original papers in the case show these to have been the facts in the case, although they are not stated in the report of that de- cision. The property of this association was held to be taxable as partnership property. 78 140 Mass. 346, 5 N, E. 284. 79 208 Mass. 497, 94 N. E. 808. Trusts Distinguished from Othe;r Organizations. 235 In Mayo v. Moritz,^° on the other hand, it was held that certificate holders under the declaration of trust there in ques- tion were not partners. In that case an inventor transferred his invention to trustees, to whom by the terms of the trust inden- ture, the patent was to be issued when it was allowed. The trust indenture provided for the issue of scrip to those who should furnish to the trustees the money necessary for the more advantageous disposition of the invention. The trust, on which the trustees were to hold the invention and the money produced by the issue of scrip, was to hold, manage and dispose of the invention or any part thereof, or interest therein upon such terms as to them (the trustees) or a majority of them should seem best, the net proceeds to be paid one-half to the inventor and the other half to the holders of the scrip or certificates. The scrip, called in the trust indenture scrip or certificates, was transferable. Vacancies in the office of trustees were to be filled by the remaining trustees. It was held that the scrip holders were not partners, and in that respect the case was "unlike Gleason v. McKay, and Phillips v. Blatchford", supra. 142 — Difference Between Trust and Partnership. The difference between Hoadley v. County Commissioners, (involving the same indenture as that in Gleason v. McKay, Whitman v. Porter, Phillips v. Blatchford, Ricker v. American Loan & Trust Co., and Williams v. Boston), on the one hand, and Mayo v. Moritz, on the other hand lies in the fact that in the former cases the certificate holders are associated together by the terms of the "trust" and are the principals whose in- structions are to be obeyed by their agent who, for their con- venience, holds the legal title to their property, the property is 80 151 Mass. 481, 24 N. E. 1083. 236 Trusts for Business Purtoses. their property, they are the masters ; wliile in iMayo v. Moritz, on the other hand, there is no association between the certificate holders, the property is the property of the trustees and the trustees are the masters. All that the certificate holders in this latter case had was a right to have the property managed by the trustees for their benefit. They had no right to manage it themselves, nor to instruct the trustees how to manage it for them. As was said by C. Allen, J., in this same case: "Tlie scrip holders are cestui s que trust, and are entitled to their share of the avails of the property when the same is sold," and that is all to which they were entitled. It was further said in the case of Mayo v. IMoritz that the scrip holders had a com- mon interest in the trust fund in the same sense that the mem- bers of a class of life tenants and the members of a class of remaindermen (among whom the income of a trust fund and the corpus are to be distributed respectively) have a common interest ; but there was no association among the certificate holders just as there is no association, although a common interest, among the life tenants or the remaindennen in an ordinary trust. Another decision in this commonwealth somewhat like Mayo v. Moritz is Hussey v. Arnold.*^ There is a case in England^^* in which the distinction between cases like Hoadley v. County Commissioners and Mayo v. Mor- itz was pointed out and established, and that case is now the established law in England. In this case (decided by the Court of Appeals in 1880) the trust deed provided for the purchase by trustees of shares in the capital stock of eleven different submarine telegraph companies. The money was to be fur- si 185 Mass. 202, 70 N. E. 87. v. Lathrop, 52 Mich. 106, 17 N. See, also, in this connection, W. 716. Makin v. Savings Institution, 23 81J Smith v. Anderson, 15 Ch. Me. 350, 41 Am. Dec. 389; Burt D. 247. Trusts Distinguished from Other Organizations. 237 nished by the subscribers to whom transferable certificates were to be issued. The income derived from the submarine shares and the proceeds of any sales of them were to be applied by the trustees (i) in paying 6 per cent, interest on the trust certificates issued under the trust; (2) in redeeming these trust certificates at $120; and finally, when (3) all the certificates had been redeemed, the surplus, if any, was to be divided among the former certificate holders. It was held that this was a trust and not a company, association, or partnership which had to be registered under Companies Act of 1862 (25 & 2^3 Vict. c. 89) Sec. 4. That act provided that "no company, asso- ciation or partnership shall be formed for the purpose of carry- ing on any other business (that is to say, any business other than banking) that has for its object the acquisition of gain by the company, association or partnership, or by the individual members thereof unless it is registered." This conclusion was reached on the ground that there is a difiference between a part- nership where money raised by the issue of transferable cer- tificates is to be held by so-called trustees who are really manag- ing agents, and a trust where money raised by the issue of transferable certificates is to be held by trustees properly so called, and that the distinction between the two is that which we have just stated in detail. The decision in Smith v. Anderson is the law of England to- day, although by reason of some special facts in that case and the way in which the question arose, doubts as to the conclu- sion reached in that case have been thrown out by two or three individual judges.^*^ 82 For the subsequent cases agents who hold the legal title see Crowther v. Thorley, 32 W. and trustees properly so called R. 330; In re Siddall, 29 Ch. D. is reaffirmed, see In re Thomas, 1; In re Jones (1898), 2 Ch. 83, 14 Q. B. D. 379, 383; In re Faure 91. For two cases where the Electric Accumulator Co., 40 Ch. distinction between managing D. 141, 151, 152. 238 Trusts for Business Purposes. 143 — Shareholders not Associated. This brings us to the question of the character of the Boston Personal Property Trust. It is plain that it is a trust and not a partnership. By the terms of the indenture of trust the prop- erty contributed by the certificate holders, or that bought with money contributed by them (the original trust property could be acquired in both ways by the terms of the indenture of trust) was to be held by the trustees in trust to pay the income to the holders of the certificates, and on the termination of the trust the trust fund or the proceeds thereof were to be divided among them. The certificate holders are throughout called "cestuis que trustent." The certificate holders, or cestui s que tmstent, are in no way associated together, nor is there any provision in the indenture of trust for any meeting to be held by them. The only act which (under the trust indenture) they can do is to consent to an alteration or amendment of the trust created by the indenture or to a termination of it before the time fixed in the deed. But they cannot force the trustees to make such alteration, amendment or termination. It is for the trustees to decide whether they will do any one of these things. All that the certificate holders can do is to give or withhold their consent to the trustee taking such action. And the giving or withholding of consent by the cestui s que trust is not to be had in a meeting but is to be given by them individually. As we have said, no meeting of the cestuis que trust for that or any other purpose is provided for in the trust indenture. The trustees of the Bos- ton Personal Property Trust have a right to sell the trust se- curities and reinvest the proceeds, and also a limited power to borrow on the security of the trust property. The certificate holders have a common interest in precisely the same sense that the mem.bers of a class of life tenants (among whom the in- Trusts Distinguished from Other Organizations. 239 come of a trust fund is to be distributed) have a common in- terest, but they are not socii, and it is the trustees, not the certificate holders, who are the masters of the trust propert}'. The sole right of the cestuis que trust is to have the property administered in their interest by the trustees who are the mas- ters, to receive income while the trust lasts, and their share of the corpus when the trust comes to an end. It has been urged by the learned counsel for the city of Boston that these certificate holders or cestuis que trustent are in effect carrying on the business of buying and selling securi- ties through the trustees as managing agents or directors, and he refers to two facts which (he argues) bear him out in that contention, namely: That the trustees on April i, 191 1, had on hand undivided income to the amount of $51,516.93, and a "surplus capital" amounting to $488,566.35. By the terms of the trust the trustees are authorized to set aside from time to time such portion of the net income as shall not be required for dividends for a "surplus fund," which surplus fund may be subsequently used by them in their discretion in payment of dividends. It appears that the face value of the outstanding certificates is $2,090,500. The surplus fund of undivided in- come therefore amounts to about 2>< per cent, of the corpus of the fund. The surplus capital of $488,566.35 is about 22K> per cent, of the face value of the outstanding certificates. That is not an extraordinary increase in the value of the corpus of the trust fund during a period of 18 years. But this contention brings out a fact in addition to those already referred to, which shows that the Boston Personal Property Trust is not a partner- ship, but a trust, and nothing but a trust. When persons en- gage as partners in buying and selling stocks, bonds and other securities for their mutual profit, the gains made by purchases and sales are profits of the partnership, divisible as such among 240 Trusts for Business Purposes. those entitled to the profits of the partnership. In case of a trust, on the other hand, any gain made by a change of invest- ments is an accretion belonging to the corpus of the trust fund and belongs to those who own the corpus of the fund. vSuch gains become part of the corpus as much as the original money contribution to the trust fund. On them the certificate holders or cestuis que trustent are entitled to income while the trust lasts, and to their share of them (because they are included in the corpus of the trust fund) when the trust ends and there is a distribution of the corpus among the cestuis que trust. That is the way in which the trustees of the Boston Personal Prop- erty Trust have dealt with gains made by changes of investment of the securities of that trust. That is to say, the trustees have treated gains from sales of securities not as profits of a partner- ship organized to buy and sell stock for a profit, but as gains on a change made in the vestments of a trust fund. It was largely with respect to the gains made by sales of the securities of the trust that the special circumstances in Smith V. Anderson raised a doubt as to that being a trust for invest- ment and not a "business that has for its object the acquisition of gain." It was provided in the trust deed in Smith v. Ander- son that the submarine telegraph sliares should not be sold un- less they brought a premium of 30 per cent., and that the pro- ceeds of such sales should be used in the same way that the annual income derived from the submarine telegraph shares should be used, namely, in paying interest on the trust certifi- cates and in retiring those certificates at $120.00 a share. They were issued originally at $90 per share. In that respect the trust in question in Smith v. Anderson was quite different from the Boston Personal Property Trust. There is nothing in the trust deed of the Boston Personal Property Trust which is in any way different from a trust under a will except tliat there Trusts Distinguished from Other Organizations. 241 are no limitations over, and the interests of the cestuis que trust are represented by transferable and transmissible certifi- cates. 144 — Acts of Parties Decisive in Determining Intention. Up to this time we have not alluded to the declaration in the indenture of trust here in question, that it v^^as the intention of the parties to it to create a trust and not a partnership. It is what the parties did that is decisive. If there had been doubt as to what they did, what they intended to do would have been a matter entitled to some consideration in determining what they did. It was stated in a passing remark made by this court :n Williams v. Johnson,^^ that in the trust before the court in that case the certificate holders were partners within the mean- ing of that word in St. 1909, c. 490, pt. i, sec. 2y. While that trust provided for meetings of the shareholders and in that re- spect for some association of and among them, an examination of the original papers shows that it was a trust and not a part- nership. This remark was in no way essential to the decision in Williams v. Johnson. In the Boston Personal Property Trust the property is the property of the trustees, to be managed for the benefit of the certificate holders, but to be managed by the trustees and not by the certificate holders. There is no association of or among the certificate holders. The rights of the certificate holders are limited to each receiving his share of the income of the trust investments during the continuance of the trust and his share of the corpus of the trust when the trust comes to an end. It is in every respect an investment trust and nothing more. 83 208 Mass. 544, 552, 95 N. E. 90. 242 Trusts for Business Purposes. It follows ( I ) that the property held by the plaintiff as trus- tees of the Boston Personal Property Trust was not taxable as partnership property, and that in the petition brought by them against the city of Boston they are entitled to an abatement ; and (2) that their property was taxable as property held in trust, the income of which was payable to another, and the taxes as- sessed by the assessors of the city of Waltham and by the as- sessors of the inhabitants of Milton and of Brookline were properly assessed, and that the petitions against those munici- palities should be dismissed. 145 — Trustees May Ask Instructions of Court. In the second case,^* the instrument creating the relationship among the parties was also declared a trust and not a partner- ship ; in that case a bill was filed asking for instructions by the complainant as executor and trustee under the will of William A. Copeland, late of the city of Providence, deceased. William A. Copeland deceased on March 14, 1913, leaving a last will and testament by which the complainant was appointed executor and also trustee under certain trusts thereby created. The property thus placed in trust included the 625 shares in the Martin-Copeland Company ; the complainant duly qualified as executor and had now reached the point in its administration of the estate where it \x2,s ready to transfer the residue to itself as trustee. It alleged that it had become uncertain as to some questions involving the interpretation of the agreement of August 8, 1912, under which the Martin- Copeland Company was organized ; and especially as to the liability of the holders of the so-called preferred stock thereof ; the liability of the trustee 84 Rhode Island Hospital 193, 98 Atl. 273. Trust Co. V. Copeland, 39 R. I. Trusts Distinguished from Other Organizations. 243 [RHODE ISLAND HOSPITAL TRUST CO. v. COPELAND.] when it should come to hold the same under the trusts imposed by the will of William A. Copeland ; and as to the proper man- agement and disposition of such stock by the trustee after it should have been duly transferred to it ; and formulated its re- quest for instructions as follows : (a) Whether under said agreement the persons interested therein, the holders of the so-called preferred stock, are or are not under individual and personal liability for any of the obliga- tions or indebtedness of the said trust or association, and, if so, whether the general estate of the said William A. Copeland beyond the amount represented by said shares remains and will remain liable until a transfer of said shares. (b) Whether your orator, as executor or trustee, can con- tinue to hold said shares of so-called preferred stock without making itself liable in its own corporate capacity for any obliga- tion or indebtedness of said trust or association. (c) Your orator is further in doubt whether, even if it will incur no personal liability under said agreement, it is proper for it to continue to hold as trustee all of said shares of stock, or any part of them, or whether it ought to convert into cash the whole or some part thereof, and reinvest the proceeds in other trust securities. 146 — Declaration of. Trust Determining Factor in What is Created. The first question to be determined is whether those inter- ested in the business of the Martin-Copeland Company, called stockholders, are personally liable to creditors as copartners. In other words, is the Martin-Copeland Company a copartner- ship, and the several holders of shares therein individually liable for its debts, or is it a true trust, where such holders are only 244 Trusts for Business Purposes. [RHODE ISLAND HOSPITAL TRUST CO. v. COPELAND.] cestuis que trustent? In considering this question, we must first look to the terms of the agreement of August 8, 19 12. It is entitled "An Agreement and Declaration of Trust." It com- mences with a declaration of trust, and its further provisions, embraced in some 40 paragraphs, may be briefly summarized. The name of the company is fixed ; provision is made for the issue of shares, preferred and common, to be represented by certificates ; the trustees are authorized to acquire, hold, and dispose of shares in the same manner as though they were not trustees; the shares are made transferable both by act of the party, owner, or by operation of law; the shareholders' rights are defined ; title to the property is to be in the trustees only ; they are given the most ample powers to deal with the property forming the subject-matter of the trust; they are authorized to make by-laws and regulations, to represent the shareholders in legal proceedings, to indemnify themselves or any of them from the trust property for liabilities incurred in the carrying out of the trust, and to determine what is income and what is capital for the purposes of the trust. The number of trustees is fixed at not more than four. They are authorized to appoint officers ; the authority of the officers is outlined; provision is made for the appointment of new trus- tees, and for authority to one or more of the trustees to dele- gate their powers to another of the trustees. They are author- ized to call meetings of the common shareholders at any time they see fit, and are required to do so on request of the holders of twenty-five per cent, of the common shares outstanding. Provision is made for the calling of meetings of the common shareholders; for the voting at such meetings by proxy and for share votes, 40 per cent of the outstanding common shares being required for a quorum. The trustees are empowered to fix the compensation of offi- Trusts Distinguished from Other Organizations. 245 [RHODE ISLAND HOSPITAL, TRUST CO. v. COPELAND.] cers and agents ; they are especially prohibited from binding the shareholders personally, and the latter are not to be liable for any assessment. The trustee's acts within the powers con- ferred by the agreement and declaration are done as trustees and not individually, and persons contracting with the trustees are required to look to the fund, and not to the trustees per- sonally, nor to the stockholders, for payment. No bond is re- quired of any trustee, and each is liable only for his own wilful breach of trust. Any one paying money or other property to the trustees is not required to see to the application of the money or property. The trustees are given power to declare dividends on both classes of shares, but the amount and payment of them is in the sole discretion of the trustees, except that preferred divi- dends shall be at the rate of 6 per cent per annum and no more, and they have priority over common dividends. They are empowered also to create a reserve or surplus fund. Provision is made for amending the agreement and declara- tion on certain conditions and in a certain manner. The trusts may be terminated by two-thirds vote of the common share- holders, and they are limited in any event to 21 years after the death of certain identified persons. Thereupon the afifairs of the trust are to be wound up in a specified manner. 147 — Profit Sharing in Relation to Partnership. The respondents have in their brief referred to and com- mented upon some of the earlier English cases in which the sharing of profits was the test applied in determining whether or not a partnership existed. While these cases are interesting and instructive, they do not demand any particular notice at 246 Trusts for Business Purposes. [RHODE ISLAND HOSPITAL, TRUST CO. v. COPELAND.] this time. In the year i860 the case of Cox v. Hickman,^^ after having passed through the inferior courts where the old "shar- ing profit" test had been appHed and a partnership found to exist, reached the House of Lords for final decision. The de- cision was unanimous. Lord Cranworth said in his opinion: "The law as to partnership is undoubtedly a branch of the law of principal and agent; and it would tend to simplify and make more easy the solution — the questions which arise on this subject, if this true principle were more constantly kept in view. Though the case of Cox v. Hickman may have brought into existence the test of principal and agent as embodied in a judicial decision, such test had long before been suggested, for we find in Story on Partnership, Sec. i (1841) : "Every partner is an agent of the partnership; and his rights, powers, duties, and obligations are in many respects governed by the same rules and principles as those of an agent. A part- ner, indeed, virtually embraces the character both of a principal and of an agent." In Cox v. Hickman, Smith & Son, Ironmongers, etc., were embarrassed. A creditors' meeting was held. The creditors could force bankruptcy, and through a trustee take possession of the plant and business. Instead, they elected five trustees, who took over the plant and business and ran the same for tlic creditors with a provision for its being turned back to Smith & Son when the creditors were paid. Two persons named as trustees, the defendants, who were also creditors, refused to act as trustees. A debt was contracted by the acting trustees; it was represented by a promissory note which was not paid. Suit was brought against the defendants to charge them as 86 8 H. L. 268. Trusts Distinguished from Other Organizations. 247 [rhode island hospital trust co. v, copeland.] partners because of their signing the deed and agreeing to take the profits of the business as conducted by the acting trustees, and upon this point Lord Cranworth said: •'I have hitherto considered the case as it would have stood if the creditors had been merely passively assenting parties to the carrjang on of the trade, on the terms that the profits should be applied in liquidation of their demands. But I am aware that in this deed special powers are given to the creditors, which, it was said, showed that they had become partners, even if that had not been the consequence of their concurrence in the previous trust. The powers may be described briefly as, first, a power of determining by a majority in value of their body, that the trade should be discontinued ; or, if not discon- tinued, then, secondly, a power of making rules and orders as to its conduct and management. These powers do not appear to me to alter the case. The creditors might, by process of law, liave obtained possession of the whole of the property. By the earlier provisions of the deed they consented to abandon that riffht, and to allow the trade to be carried on by the trustees. The efifect of these powders is only to qualify their consent. They stipulate for a right to withdraw it altogether, or, if not, then to impose terms as to the mode in which the trust to which they had agreed should be executed. I do not think that this alters the legal condition of the creditors. The trade did not become a trade carried on for them as principals, because they might have insisted on taking possession of the stock, and so compelling the abandonment of the trade, or because tliey might have prescribed terms on which alone it should be con- tinued. Any trustee might have refused to act, if he consid- ered the terms prescribed by the auditors to be objectionable. Suppose the deed had stipulated, not that the creditors might order the discontinuance of the trade or impose terms as to its 248 Trusts for Business Purposes. [RHODE ISLAND HOSPITAI. TRUST CO, v. COPELAND.] management, but that some third person might do so, if, on inspecting the accounts, he should deem it advisable; it could not be contended that this would make the creditors partners, if they were not so already. And I can see no difference be- tween stipulating for such a power to be reserved to a third person, and preserving it to themselves." In the case of Wells Stone Co. v. Grover,^^ where the situa- tion was practically the same as the case at bar, the court said : 148 — Where Trustees are Master a Trust is Created. "The trustee doubtless was accountable in equity for the faithful discharge of his duties as such trustee, and a court of equity might in a proper case interfere. But while the business was being managed by the trustee he was absolute master there- of — ^as much as though he himself had a beneficial interest therein. The assignor could not dictate how the trustee should conduct it, what purchases or sales he should make, or have the slightest voice in its affairs. It was the business of the trustee so long as the trust continued, the assignor having only an indirect interest in the successful management thereof. He was not the proprietor of the business, and .the trustee was not his agent. It is always the case that the trustee has no interest in the management of the affairs confided to him by the trust instrument, and that the cestui que trust is the only person bene- ficially interested therein. And yet it has never been held, or even supposed that the beneficiary is liable for debts contracted by the trustee in so handling the trust property as to create an income for such beneficiary." In Smith v. Anderson, supra, a case involving questions sim- ilar to the case at bar, James, L. J. said in overruling the Mas- se? N. D. 460, 75 N. W. 911, 41 L. R. A. 252 (1898). Trusts Distinguished from Other Organizations. 249 [RHODE ISLAND HOSPITAL TRUST CO. v. COPELAND.] ter of the Rolls: "I cannot find that this deed constitutes any association whatever between the persons; therefore, I cannot arrive at the conclusion that the certificate holders form an as- sociation within the meaning of the act of Parliament."' Com- ing now to the consideration of later cases involving the ques- tion as to what constitutes a partnership and what a true trust, the court finds in Williams v. Milton, supra, that there is a partnership relation when the certificate holders are associated together by the terms of the "trust" and are the principals whose instructions are to be obeyed by their agent who for their convenience holds the legal title to their property — the property being their property and they being the masters. On the other hand, if there is no association between the certificate holders, the property is the property of the trustees, and the trustees are the masters. Then the certificate holders have only a right to have the property managed for their benefit. They have no right to manage it themselves, nor to instruct the trus- tees how to manage it for them, and it becomes a true trust. As the court further said, quoting from Mayo v. Moritz :^'' "The scrip holders are cestui que trust, and are entitled to their sliare of the avails of the property when the same is sold." The scrip holders had a common interest in the trust fund, in the same sense that the members of a class of life tenants and the members of a class of remaindermen (among whom the in- come of a trust fund and the corpus are to be distributed re- spectively) have a common interest. But in Mayo v. Moritz, supra, there was no association among the certificate holders just as there is no association, although a common interest, among the life tenants or the remaindermen in an ordinary trust. The certificate holders or cestui que trustcnt as they are 87151 Mass. 481-4, 24 N. E. 1083. 250 Trusts for Business Purposes. [rhode island hospital trust co. v. copeland.] called in the trust deed, have a common interest in precisely the same sense that members of a class of life tenants (among whom the income of a trust fund is to be distributed) have a common interest, but they are not socii, and it is the trustees and not the certificate holders who are the masters of the trust property. The sole right of the cestuis que trust is to have the property administered in their interest by the trustees who are the masters, to receive income while the trust lasts and their share of the corpus when the trust comes to an end.^^ When we examine the agreement of August 8, 1912, under which the Martin-Copeland Company was organized, in the light of the authorities which we have cited, we cannot escape the conclusion that such agreement evidences both in intention and in law a true trust, and not a partnership. Not Subject to Corporation Acts. 149 — In General. Corporations are the creatures of franchise; they exist, not as a matter of right, but from a privilege granted by the state; they have a capital stock, a board of directors and ofificers. A trust is created as a matter of right, it has its estate the title and control of which is in the trustees, it may have transferable beneficial interests and officers. In effect, the functioning of these two organizations is practically the same, and for that reason the question is raised as to whether the trust may not be brought under the control of the corporation law. That the trust is not a corporation has been definitely and decisively set- 88 Also Hussey v. Arnold, 185 350, 41 Am. Dec. 389; Burt v. Mass. 202, 70 N. E. 87; Makin Lathrop, 52 Mich. 106, 17 N. W. V. Savings Institution, 23 Me. 716. Trusts Distinguished from Other Organizations. 251 tled;^^ if it is not a corporation, it may not be subjected to cor- poration acts for the reason that the underlying principles governing a trust are entirely different from those of a corpora- tion. The rules and regulations governing the latter are to be found in the statutes of the various states and in the corporate law which essentially is the authority for what a corporation may do. The trust is founded upon a right,^° it is organized as a right, and as such may do exactly what a citizen or an individual may do. The reverse is true of a corporation whose action is re- stricted to the law of its creation. The principle that the trust is not subject to the rule of law governing the corporation is set forth in the decision of State v. Lee.^^ In this case a trust was organized in St. Louis, Missouri, known as the Great American Home Savings Institution, for the purpose of con- ducting a building and loan association. The state refused to issue a certificate authorizing the trust to do business ; suit was instituted against the state in which the trust asked for a writ of mandamus commanding that the certificate of authorization to do business be issued to it. The state set forth that the peti- tioners were not a legal entity and not a trust ; but that they were a limited partnership and were subject to the corporate law of Missouri. The points raised in this case, the arguments advanced, and the unanimous decision of all the sitting judges that a trust is not subject to the corporation law, are of such value to this subject that the case is reported practically in full, as follows: 89 See Trust as an Entity. Baker-McGrew Co. v. Union S. Elliott V. Freeman, 220 U. S. 178, & T. Co., 125 Ark. 146, 188 S. W. 55 L. Ed. 424; Spotswood v. 802. Morris, 12 Idaho 360, 6 L. R. A. 90 See Rights Distinguished (N. S.) 665, 85 Pac. 1094; Glea- from Law. son V. McKay, 134 Mass. 419; 91 233 S. W. 20. 252 Trusts for Business Purposes. The Great American Home Savings Institution is a voluntary unincorporated association of individuals formed for the pur- pose of accumulating a fund or funds to be used under the terms of the trust agreement for the purpose of enabling the contributors to such fund or their assigns to secure a loan or loans for the purpose of acquiring a dwelling house or farm, or other income-producing property, or discharging a mortgage or other incumbrance thereon. The business intended to be car- ried on under said trust agreement is, to all practical intents and purposes, the same as the business now being conducted by corporations doing a building and loan association business in this state. Said trust agreement provides for the issuance of trustees' certificates in the amount not exceeding $100,000 to provide an initial fund which is in the nature of a permanent guaranty fund and furnishes funds to meet immediate loan demands, and is to stand as a guaranty to the maintenance of the loan and trust fund. The trust agreement further provides for the issuance of trust certificates on the monthly installment plan in denominations of $1,000 and multiples of $100 in excess thereof. The holders of said trust certificates are to pay there- on in monthly payments the sum of $6.50 per $1,000 face value for a period of 132 months. The loan and trust fund is created from these monthly payments by setting aside $6.20 per month out of each monthly payment after the first three payments, and said fund is to be maintained upon a 4 per cent basis, com- pounded monthly, which is the liability of the Great American Home Savings Institution on account of said fund. The Great American Home Savings Institution agrees to establish and maintain said loan and trust fund at all times unimpaired. The first three monthly payments of $6.50 and 30 cents of each sub- sequent payment of $6.50 per each $1,000 face value of certifi- Trusts Distinguished from Other Organizations. 253 cates shall belong to the general funds of the trust and will be available for overhead and operating expenses. The trust agreement further authorizes the issue of a "full- paid interest-bearing certificate" subject to the approval of the Supervisor of Building and Loan Associations. Hence the Great American Home Savings Institution has three sources available for raising funds to make loans to home builders: First, by the issuance of $100,000 of trustee certificates which cannot be issued for less than their par value ; second, the issu- ance of the installment trust certificates; and, third, the issu- ance of full-paid interest-bearing certificates. 150 — Rights of Certificate Holders. The owner of the trust certificate shall be entitled to a loan equal to its face value to be made from the "loan and trust fund" (or from funds created by the issuance of trustees' cer- tificates) in the order of written application made therefor and subject to the rights and priorities of other certificate owners — the security tendered for said loan being satisfactory. The said loan shall be made only for the purpose of the purcliase or building of a home, purchase of farm, or other improved in- come property, or making improvements thereon or paying ofl"* mortgage, deed of trust, or other incumbrances existing there- on. In the event a certificate owner does not avail himself of the borrowing privilege, then at the end of 1 1 years he collects his investment plus his share of the surplus profits earned in the "loan and trust fund," not to exceed $308 per $1,000 face value of the certificate, which means the maximum amount to be repaid on the $1,000 trust certificate held by one who has not exercised the loan privilege and has deposited 132 monthly payments of $6.50 (or a total of $858) is $1,308. However, $1,000 is the guaranteed liability of the institution. 254 Trusts for Business Purposes. Loans made from the loan and trust fund under the terms of the trust certificate are to be repaid by the borrower in 132 monthly installments of $11.19 per $1,000, which cover both principal and interest on the loan. In other words, any one who borrows $1,000 from the loan and trust fund repays the Great American Home Savings Institution in 132 monthly pay- ments of $11.19 each, or an aggregate of $1,477.08, which is a return of the principal v/ith interest at the rate of 7.72 per cent, per annum. By reference to the actuarial opinions of Messrs. Harvey and Shepherd, the sum of $6.20 per month set aside to the loan and trust fund from the $6.50 monthly payment by the holder of trust certificate for 132 months, less the first three payments, improved with interest at the rate of 7.72 per cent, earned on loans, will equal $1,248.37 at the end of the time. That is, the individual share of each certificate owner in this ftmd and its earnings at 7.72 per cent, interest will amount to $1,248.37 per $1,000 face value of certificate, and since the liability assumed on the certificate is limited to $1,000, this ac- tuarial opinion shows a surplus profit earned on the money set aside to the loan and trust fund for the "exclusive benefit and profit of certificate owners" of $248.37 on each individual cer- tificate of $1,000. But under the terms of the certificate "all surplus earnings from interest, fines, transfer, and waiver fees, cash surrender, and partial paid-up values" belong to the non- borrowing owners of trust certificates, to the "extent of, but not to exceed, a total surplus of $308 per $1,000 face value." So that the Great American Home Savings Institution does not profit by the earnings from these sources on account of the $6.20 placed in the loan and trust fund unless said earnings exceed $308 per $1,000. Trusts Distinguished from Other Organizations. 255 151 — Cash Surrender Value of Trust Certificate. The loan privilege provides that — "When loan is made for any of the purposes defined herein, this certificate may be surrendered, in v^hich event the owner shall be credited with its accrued value, equal to $6.20 of each monthly deposit made on each $1,000 face value of this certifi- cate less the first three, with interest at the rate of 6 per cent, per annum, which may be applied as part equity requirements for said loan or withdrawn in cash at the option of the owner." Trust certificates become nonforfeitable after four monthly deposits have been made ; that is, the holder may surrender his certificate and receive in lieu thereof a paid-up certificate for the total amount paid in, less the first three payments, which paid-up certificate matures 11 years from date with interest at 5 per cent, per annum. The trust certificate gives its owner a cash surrender priv- ilege at the end of 3 years or at the end of any year thereafter equal to $6.20 of each monthly deposit made, less the first three payments, with interest at the rate of 5 per cent, per annum thereon, plus its share of surplus earned, not to exceed 2 per cent, more, or certificate owner may borrow 80 per cent, of the accrued cash value after one year at 8 per cent, discount by giving certificates as collateral security. 152 — Duties of Directors. The affairs of the Great American Home Savings Institution are under the general direction of a board of directors selected by the holders of trustees' certificates. The board of directors shall cause a full and accurate set of books of account to be kept in which shall be kept a full record of all of the transac- tions of the institution, and a full report of the financial con- 256 Trusts for Business Purposes. dition shall be made by the president of the trust at all annual meetings of the trustees. The board of directors shall be charged with the duty of taking proper action by all proper methods in order to afford a proper and equitable administra- tion of the affairs and business of the trust. Under the plan of organization and operation and under the law which relators seek to do business, the trustees or managers of the Great American Home Savings Institution shall from time to time furnish such surety bonds to secure the faithful performance of their trusts as may be required by the Super- visor of Building and Loan Associations of Missouri, and the Great American Home Savings Institution shall be subject to the supervision and examination of the Supervisor of Building and Loan Associations of Missouri, similar, in so far as ap- plicable, to his supervision and examination of building and loan associations. 153 — Trustees' Certificates Assignable. This is not a case of a capitalized association seeking incor- poration, as a bank or trust company, which must have a certain proportion of its stock paid up. The statute provides "that no such association shall commence business in this state until it shall first submit to the Supervisor of Building and Loan Asso- ciations a detailed statement of its plan of doing business and a copy of the contracts proposed to be issued, and procure from him a certificate authorizing it to do business." Under this clear mandate, no steps can be taken towards the accumulation of a fund until the authority to do business has been obtained. The objection that the trustee certificates are assignable and trustees become or cease to be trustees by the mere purchase or sale of trust certificates, without any right in the creators and Trusts Distinguished from Other Organizations. 257 beneficiaries to object, is without merit. The right to sell is incident to ownership. We are unable to see any valid objection to the plan of doing business or the election of officers.^^ It is a matter that concerns the contracting parties, purely a matter of convention, unless contrary to the statute. An association being solely a creature of convention between the members, no check exists upon its power to enact such constitution or by-laws as the associates may choose to adopt, so long as they do not provide for the commission of illegal acts, are not in themselves contrary to public policy, or do not afifect vested interests. Such constitution and by-laws constitute a contract between the members, and are binding alike on the association and its members. The courts possess no power to pass on the question of the reasonableness of such rules and regulations as are agreed to by associates for the conducting of their joint affairs. It has been uniformly held, however, that the courts may, in a proper case construe and fix their meaning.^3 Counsel for relators sum up the matter in their brief : "No valid objection can be made that the trustee certificates are to be assignable. The assignability of such certificates has long been recognized at common law.''^* The trust agreement makes full provision for safeguarding the rights of the beneficiaries. It is shown by the best actuarial authority in this state that the plan is financially sound. In fact, this is conceded by the pleadings in this case, and respond- ent makes no point in that regard. When this is considered in connection with the further fact that the trustees managing 92 state ex rel. v. Swanger, 93 4 Cyc. 305. 190 Mo. 561, loc. cit. 570. 89 S. 94 King v. Webb, 14 East 406; W. 872, 2 L. R. A. (N. S.) 121, Warner & Roy v. Beers (N. Y.), 4 Ann. Cas. 563. 23 Wend. 103. 258 Trusts for Business Purposes. this trust are at all times subject to the control of a court of equity and by virtue of section 10263, supra, are under the constant supervision of the Supervisor of Building and Loan Associations of Missouri, it becomes difficult to conceive how stronger safeguards could be made to protect the investing public. 154 — Trust Agreement Does Not Create a Partnership. ■ In the brief, however, counsel for the amicus curiae contend that the relator association is a partnership, and it cannot limit its liabilit}'-. This issue is not made in the pleadings. If it were, it would be inconsistent with other contentions in the brief, that it is a bond investment company, a corporation, that it has no legal entity or artificial personality, that it is a co- operative association and a lottery. How can it be all these? How it can assume these protean characters at one and the same time is bewildering. The declaration that it is a corporation is a solemn negation that it is a partnership, or a joint-stock com- pany, or a bond investment company. The pleas are inconsist- ent and self-destructive.^^ If it is a lottery, it is an outlaw and all contracts made with it are void. Counsel cite, in support of their contention that it is a part- nership.^^ Ji-^dge Bond was there considering the liability of a member of a joint-stock company engaged in manufacturing and trading to its creditors. The learned jurist said, at page 63 : "While there is some variance in the authorities as to what steps must be taken before the members become liable in this 96 Wertheiner-Swartz Shoe Co. better, v. Ledbetter, 88 Mo. loc. V. McDonald, 138 Mo. App. 328, cit. 62, 31 Cyc. 150. loc. cit. 339, 122 S. W. 5; Barrett 96 Laney v. Fickel, 83 Mo. App. V. Donnelly, 38 Mo. 492; Led- 60. Trusts Distinguished from Other Organizations. 259 manner to third parties, all the cases are agreed that such lia- bility is consummate upon a showing that the member joined the association, attended its meetings, and consented to the engagement out of which the liability arose.^'^ The case at bar presents all these elements of liability in plaintiff's connec- tion with the company. He was therefore liable as a copartner with his other associates for the claim sued upon by him, since they were valid obligations against the joint-stock company itself." It is thus seen that the liability of the member was bottomed on his consent, while a partner is liable for the acts of the other partners in a trading concern within the scope of the partner- ship business, whether he consents or not.^' 155 — Liability Limited to Trust Funds. The limitations on the liability of members is found in paragraphs B and M of the articles of association, which read : "(B) That no trustee, director, or officer of said savings in- stitution shall be personally liable for any debts properly chargeable against said institution, or any fund or funds thereof. (M) That trustee certificates shall be issued to each trustee evidencing their interest in such form as the directors may pro- vide, and said certificates shall contain a clause providing that when the same has been paid in cash at its par value the liability of said trustee is limited to the funds invested therein." It must be remembered that this is a non-trading concern. In Coleman v. Knights of Honor,®^ Ji-^dge Rombauer said : 97 Hunnewell v. Willow 98 30 Cyc. 503 et seq. Springs Canning Co., 53 Mo. App. 99 18 Mo. App. 189, 194. 245. 26o Trusts for Business Purpose;s, "Nor can we see how the member or those claiming under him can be heard to assert that the rules established by the corporation in that regard were not reasonable. The member is a voluntary party to the compact, and as such bound by it unless it is in derogation of some charter right, or is otherwise invalid as contravening some paramount provision of law. A by-law may be void as to strangers, or members who do not assent to it, and yet good as a contract between members of the corporation who do assent to it." In State v. Stone,^*'" the defendant represented as agent an association of lOO residents of the state of New York who were conducting insurance upon the manner of the ancient Lloyds before said individuals had procured a license to do business in Missouri. By the terms of the agreement or articles of asso- ciation, each of the loo subscribers agreed to deposit $i,ooo, and it was stipulated that each subscriber should be separately liable to the amount authorized by him individually, and not jointly liable with the other subscribers. Judge Burgess said: "If, then, we are correct in our position in construing the statute as including and meaning individuals, there is no ap- parent reason why defendant could not have obtained from and why the insurance commissioner could not have issued to him a valid certificate under sections 5910 and 591 1 of the statute, if defendant had shown to him that those whom he represents had complied with the law in regard to insurance companies doing business in this state." In Hammerstein, Ex'r., v. Parsons,* syllabus i reads : "While the members of an unincorporated association are partners inter sese, their rights against each other miay be lim- 100 118 Mo. 388, 24 S. W. 164, 388. 25 L. R. A. 243, 40 Am. St. Rep. 2 38 Mo. App. 332. Trusts Distinguishe;d from Other Organizations. 261 [STATE V. I>EE.] ited by contract, and the constitittion and by-laws of the asso- ciation constitute a contract between them." So, while the question is not raised by the pleading and need not be considered, it is clear that it was competent for the members to contract as to their liability inter sese.^ 156 — Corporation Act not Applicable to Trusts. It is contended that relator must be incorporated before it can do business ; that the power to sue and be sued, to acquire, sell, and convey property, to do business as a legal entity and the powers incident thereto, are sovereign grants of powers possessed only by corporations, and it is, therefore, subject to the chapter on corporations. The answer to this contention is the statute itself. Section 10263, R- S., expressly exempts associations of the character mentioned there in from the other provisions of article 10, c. 90, R. S. The emergency clause of that act declares that "such associations are not prohibited by law and should be en- couraged." By that act the legislature declared the policy of the state. But it is said that the assumption of corporate powers with- out a sovereign grant, brings an unincorporated association within the definition of a corporation. The statute itself is the sovereign grant. Rut for this enactment, associations of the cliaracter authorized thereby could not exist. Respondent contends that these associations are corporations by force of section 11 of article 12 of our Constitution, which reads: "The term corporation as used in this article shall be con- strued to include all joint-stock companies or associations hav- 8 See citation from 4 Cyc. 305. 262 Trusts for Business Purposes. ing any powers or privileges not possessed by individuals or partnerships." In Williams v. U. S. Express Co.,* the defendant contended that, being a joint-stock company, it was not a suable entity, The court held (quoting section 2963, R. S. 1909, now section 9722. R. S. 1919, which is a copy of the section of the Constitu- tion referred to) that: "A joint-stock company at common law was a hybrid mid- way between a corporation and a partnership, e. g., it had di- rectors and officers, articles of association, a common capital divided into shares ; these shares represented the interest of the members, v/ere transferable without the consent of the other members ; hence there was no delectus personae, and the death of the member did not dissolve the compan3^^ Construing to- gether sections 2963 and 2990 of article i, c. 33, Revised Stat- utes 1909, and section 1760, art. 4, c. 21, Revised Statutes of 1909, we cannot but arrive at the conclusion that the defendant, being a joint-stock company, and, therefore, having powers and privileges not possessed by individuals and partnerships, must be treated as a corporation for the purposes of said chapters 33 and 21, and as such can "sue and be sued, complain and defend in any court of law or equity' as a legal entity." In Weihtuechter, et al. v. Miller,^ White, C, referring to Williams v. U. S. Express Co., supra, and other cases, shows that joint-stock companies have been recognized as entities en- titled to sue and be sued, and that the "legislature evidently understood that such associations (voluntary unincorporated associations) could be sued, for by the act of 191 5 they pro- 4195 Mo. App. 362, 191 S. W. Co. et al., 196 Mo. loc. cit. 536. 1087. 6 276 Mo. 633 loc. cit. 329, 208 6 State ex rel. Pearson v. S. W. 39. Louisiana & Missouri River R. Trusts Distinguished from Other Organizations. 263 vided a method for service of process upon them the same as upon corporations. Laws 191 5, p. 225." In Great Southern Fire Proof Hotel Co. v. JonesJ the court, in construing a similar article in the Constitution of Pennsyl- vania, said : "The only effect of that clause is to place the joint-stock companies or associations referred to under the restrictions imposed by that article upon corporations, and not to invest them with all the attributes of corporations." This contention was made in Spotswood v. Morris,^ and the section of the Idaho Constitution identical with section ii, supra, was cited. In disposing of the point Sullivan, J., said: "The association under consideration is not a corporation ex- ercising any of the powers or privileges of corporations not possessed by individuals or partnerships. It is a voluntary as- sociation. To possess or exercise powers or privileges of cor- porations requires a sovereign grant — a franchise which said association has not and does not profess to possess."^ The court noted the fact that eighteen states, among them Missouri, had practically identical sections defining corporations in their constitutions. It is obvious that the article of the Constitution and statute referred to do not by legislative fiat convert joint-stock com- panies or voluntary associations into corporations or require their incorporation before doing business. At common law voluntary unincorporated associations could not sue or be 7 177 U. S. 449, 20 Sup. Ct. 690, ganized as a matter of right re- 44 L. Ed. 842. quires no grant or franchise 8 12 Idaho 360, 85 Pac. 1094, 6 from the state. See "Rights Dis- L. R. A. (N. S.) 665. tinguished from Law." 9 Note: The trust being or- 264 Trusts for Business Purposes. [STATE V. LEE.l sued.i" By an amendment to Section 1760, R. S. 1909, suits may be brought against any such association "in the name it has selected." Section 1186, R. S. 1919. Respondent will not contend that this amendment required such societies to be in- corporated or made them corporations. The contention that the relator association is a bond invest- ment company and cannot do business v.-ithout compliance with sections 10333-10338, R. S. 1919, is unsound for the reason that it is not a corporation nor does it seek to do a bond investment business within the meaning of the statute referred to. Section 10263, I^- S. 1919, under which relator seeks to do business, is a part of article 10, c. 90, R. S. 1919, and expressly exempts associations organized under it from compliance with the other sections of that article. The legislature, in its wis- dom, has required that every association organized under this section shall submit to the Supervisor of Building and Loan Associations a detailed statement of its plans, etc., and procure from him a certificate authorizing it to do business, and im- poses on the Supervisor the duty of examining into such asso- ciation and if it is not in conflict with the laws and Constitution of this state, he shall issue his certificate authorizing it to do business. This requirement is exclusive. The relator is not required to obtain permission to do business from the State Bank Commissioner under section 11919, R. S. 1919, common- ly called the "Blue Sky Law." "Expressio unius est exclusio alterius." 157 — l^rust Protected in Trade Name. It is claimed in the return that the name of the association 10 Lilly V. Tobbein, 103 Mo. 477 Rep. 887. (8), 15 S. W. 618, 23 Am. St. Trusts Distinguished from Other Organizations. 265 "Great American Home Savings Institution" is an imitation of the American Home Building & Loan Association, a corpora- tion domiciled in the city of St. Louis, or is so near thereto as to be likely to mislead the public. It is admitted by the plead- ings that prior to the time relators applied for a certificate to do business relators were advised by the then Secretary of State that the name adopted "was available for their use. and that same did not conflict with any corporate name then in use in this state. The name of a corporation or of an unincorporated associa- tion is a necessary element of its existence, and the right to its exclusive use will be protected upon the same principle that per- sons are protected in the use of trade-marks.^^ In Supreme Lodge, Knight of Pythias, v. Improved Order Knights of Pythias,^2 jj- ^vas held that the latter name was not an infringe- ment on the former. The court said: "To me it is self-evident that no careful person could think that these two orders were identical, and, as lias been said, in cases of this class the question is whether the similarity is cal- culated to mislead the ordinary run of mankind. There cer- tainly is just as much distinction between these two names as there is between that of the Episcopal Church and the Reformed Episcopal Church, or that of the Presbyterian Church and the United Presbyterian Church." We think there is little, if any, resemblance between the name of the relator association and that of the American Home Building & Loan Association, at least none that is calculated to mislead the ordinary run of mankind. H State ex rel. v. McGrath, 92 12 113 Mich. 133, 71 N. W. 470, Mo. 355, loc. cit. 357, 5 S. W. 29, 38 L. R. A. 658. 5 C. J, 1343 (31). 266 Trusts for Business Purposes. 158 — Business Under Trust Agreement Enjoys No Special Privileges. Respondent contends that section 10263, R. S., denies the equal protection of the law, in violation of section i, art. 14 of the Amendments to the Constitution of the United States, in that it allows the association referred to to be licensed, super- vised, and examined without cost to such association, and throws the burden of the expense thereof upon the building and loan associations. Section 10230, R. S. 1919, provides that every incorporated building and loan association shall make semi-annual reports to the supervisor, and that with such re- port each association shall pay 25 cents for each $1,000 of assets shown by such report, which payments go into the state treasury to make up a fund known as the "building and loan supervision fund." The salaries of the supervisor and of his examiners and employees and the cost of maintaining the de- partment are paid out of this fund. Section 10263 makes no requirement of incorporated building and loan associations. Can the Missouri State League of Building and Loan Asso- ciations raise this question? It is not a party to this case, and cannot be heard to call in question the constitutionality of this act in an action between other parties. "Laws enacted by the legislature are presumed to be valid, and, even if defective because violative of some provision of the state Constitution, are not void, although they may in a proper case be voidable; that is, upon complaint by a party whose rights are impaired by such statute. Upon this point Cooley says : 'The statute is assumed to be valid, until some one complains whose riglits it invades.' 'Prima facie, and upon the face of the act itself, nothing will generally appear to show that the act is not valid ; and it is only when some person at- Trusts Distinguished from Other Organizations. 267 tempts to resist its operation, and calls in the aid of the judicial power to pronounce it void, as to him, his property or his rights, that the objection of unconstitutionality can be presented and sustained. Respect of the legislature, therefore, concurs with well-established principles of law in the conclusion that such an act is not void, but voidable only ; and it follows, as a necessary legal inference from this position, that this ground of avoidance can be taken advantage of by those only who have a right to question the validity of the act, and not by strangers."^^ We think it is a misconception that the statute grants to relator a special privilege or immunity. "Such association shall from time to time furnish such surety bonds to secure the faithful performance of their trust as such Supervisor of building and loan association shall reasonably re- quire, and be subject to his supervision and examination, sim- ilar in so far as applicable to his supervision and examination of building and loan associations." It cannot be reasonably inferred from this that this section grants or contemplates free inspection or free service in any respect. When the statute requires supervision and examina- tion similar in so far as applicable to the supervision of building and loan associations, it adopts and incorporates the statute referred to, so far as applicable, and by necessary implication entitled the Supervisor to the fees appertaining to such service. The laborer is worthy of his hire.^* It is said that section 10263, R. S., violates section 5 of ar- 13 state ex rel. v. Blake, 241 S. W. 317; State v. Bixman, 162 Mo. 100, loc. cit. 107, 144 S. W. Mo. 1 (3), 62 S. W. 828. 1096, Ann. Cas. 1913C, 1283. See, 14 36 Cyc. 1152; Crohn v. K. C. also, Ex Parte Tartar, 278 Mo. Home Tel. Co., 131 Mo. App. 313, 356, 213 S. W. 94-96; State v. 109 S. W. 1068. Bockstruck, 136 Mo. 335 (8), 38 268 Trusts for Business Purposes. tide 12 of the Constitution of Missouri, in that it permits cor- porations to conduct their business in such a manner as to in- fringe the general well-being of the state. Section 10263 has no reference to corporations. It deals solely with unincor- porated associations. But, aside from this, section 10263 sub- jects this class of societies to the wholesome supervision and examination of the Supervisor of Building and Loan Associa- tions. It is not seen that it permits them to conduct their business in a manner to infringe on the general well-being of the state. 159 — Building and Loan Business May be Conducted as a Trust in Missouri. Finally, it is said that section 10263, R. S., permits lotteries in violation of section 10 of article 14 of the Constitution. It authorizes the accumulation of a fund or funds for the purpose of enabling the contributors to such funds or their assigns to secure loans. A simple reading of the statute excludes every conception of a lottery. It forbids the issue of a certificate au- thorizing an association to do business if the business is in conflict with the laws and Constitution of the state. Section i o of article 14 of the Constitution outlaws lotteries. Criticism is made of the plan for making loans; that they must be made in the order of their application. Any other plan would savor of favoritism. Counsel cites Silver v. In- vestment Co.^^ The facts in that case show that the scheme was an unmitigated gamble, if a scheme in which the contribu- tor will always fail and the investment company can never lose may be so characterized. The difference between that case and the case at bar is the distance between the poles. 16 183 Mo. 41, 81 S. W. 1098. Trusts Distinguished from Other Organizations. 269 [8>UTH V. ANDERSON.] There are other suggestions made in the return; e. g., that the act of 1919 (section 10263) is void because the title is defective and because it is special and class legislation and vio- lative of public policy. Although they are not mentioned in the brief, we have considered these suggestions and find no merit in them. Courts cannot declare statutes void on the ground that they are against sound public policy and morals and hable to lead to corruption and oppression.^^ Finding, as we do, that the relators are clearly entitled to a certificate authorizing them to do business as an unincorporated association under section 10263, R. S. 1919, it is ordered that a peremptory writ be issued as prayed. All concur, except Elder and Woodson, JJ., not sitting. Engeish Rule. 160 — In General. The trust as a business organization has been and is being used quite extensively in England, as in this country ; it has had to stand the test of litigation, and the principles upon which it is founded are thorouglily sustained by the courts of that coun- try. There has been much litigation in reference to the trust problem in England, as to whether it was a partnership, or an association, or whether it was subject to their corporation act. These questions were all raised and involved in the case of Smith V. Anderson,^' and the same rule of law was laid down there as in this country that a trust as such has a distinct place in the law, separate and apart from partnerships, corporations and associations. Portions of the above case have been read into a great number of our decisions in upholding the trust as 16 8 Cyc. 778. 17 15 Ch, D. 247. 270 Trusts for Business Purposes. [SMITH V. ANDERSON.] a business organization. The logic and the decisiveness of the opinion in this case is of such a nature as to make it a leading case, both in England and this country. Tt is of such import- ance in the settlement of the law in reference to trusts that it is reported herewith in substance, as follows : The present action was commenced in March, 1879, by H. R. Smith, a holder of one certificate, on behalf of himself and all other holders of certificates, against the trustees. The state- ment of claim alleged tliat the defendants and the holders of certificates were an association of more than twenty persons, formed after the passing of the Companies Act, 1862, for the purpose of carrying on business that had for its object the ac- qviisition of gain by the association or the individual members thereof without being registered as a company under the Act, or in pursuance of any other Act, or of any letters patent ; and that the drawing the certificates for purchase by lot was a lottery or a transaction of the nature of a lottery and was con- trary to law ; and that the provisions relating to such drawing rendered the trust an illegal association. The plaintiff claimed to have the funds distributed among the certificate holders in proportion to the amounts subscribed or paid by them respec- tively for therr certificates, or otherwise according to their in- terests therein. The action came on for trial before the Master of the Rolls on the 19th of December, 1879. Jessel, M. R. : — This case has been argued before me, nominally with a view to distinguish it from Sykes v. Beadon,^^ but, of course, that is not the real meaning of the argument. It is, as Mr. Chitty told me candidly, and I am very glad of it, in order that the case 1811 Ch. D. 170. Trusts Distinguished from Other Organizations. 271 [SMITH V. ANDERSON.] may be taken to the Court of Appeal, where, of course, the decision of Sykes v. Beadon itself will be reviewed. There really are no substantial differences between that case and the present. 161 — Meaning of the Word Business. As regards the only point which was not elaborately dis- cussed in Sykes v. Beadon, the meaning of the word "business," I must say a few words. In Sykes v. Beadon the only point I had to consider was whether it was an association formed for the purpose of gain. The supposed distinction between an association formed for the purpose of gain and an association formed for the purpose of taking upon itself a business having for its object the purpose of gain was not there argued, but it has been argued since, and I have given an opinion upon it which I will repeat. First, what is the meaning of "any other business" ? Now "business" itself is a word of large and in- definite import. I have before me the last edition of Johnson's Dictionary, edited by Dr. Latham, and there the first meaning given of it is, "Employment, transaction of affairs" ; the second, "an affair"; the third, "subject of business, affair, or object which engages the care." Then there are some "other meanings, and the sixth is "something to be transacted." The seventh is, "something required to be done." Then taking the last edition of the Imperial Dictionary, which is a very good dictionary, we find it a little more definite, but with a remark which is worth reading: "Business, employment; that which occupies the time and attention and labour of men for the purpose of profit or improvement." That is to say, anything which occu- pies the time and attention and labour of a m.an for the purpose of profit is business. It is a word of extensive use and indefi- 2/2 Trusts for Business Purposes. [SanTH V. ANDERSON.] nite signification. Then, "Business is a particular occupation, as agriculture, trade, mechanics, art, or profession, and when used in connection with particular employments it admits of the plural that is, businesses." Therefore the Legislature could not well have used a larger word. In addition to the two dictionaries I have also looked at the case of Harris v. Amery,^^ in which forty-six people hired some land to carry on a farm, that is, they carried on the farm be- tween them. A single man carrying on a farm may farm his own land, but he is carrying on a business. Sometimes he is called a gentleman farmer, but he is still carrying on a business, and, of course, these forty-six persons were carrying on a busi- ness, and it was held that it was an illegal association under this very Act of Parliament, because there were m.ore than twenty of them. The passage I am about to read is from the judgment of that very eminent and lamented Judge Mr. Justice Willes :20 'Tt should seem, by the 25 & 26 Vict. c. 89, s. 4, that the Legislature, viewing the frauds which had been committed by large companies, and the great inconvenience which was found to arise by reason of the difficulty of enforcing claims and settling accounts between sui-viving members and execu- tors of deceased members, and otherwise, have thought fit to determine that no company, association, or partnership consist- ing of more than twenty persons, shall be formed for the pur- pose of carrying on any business that has for its object the ac- quisition of gain by the company or its members, unless registered under the Act. And I think it has done that by language which does not admit of any reasonable doubt. It is unnecessary to refer to authorities to show that 'business' has a more extensive signification than 'trade.' The earlier Bank- 19 Law Rep. 1 C. P. 148. 20 Law Rep. 1 C. P. 154. Trusts Distinguished from Other Organizations. 273 [SMITH V. ANDERSON.] rupt Acts did not embrace farmers : but it was never doubted that farming was a 'business' though not a 'trade.' Banking is not strictly a trade. Where land comes to a number of persons by operation of law, they cannot be said to be partners, and they may, consistently with the Act, farm it. But when we find an association like this, which is rendered illegal by an Act of Parliament, we cannot take notice of the agreement under which they become tenants, for the purpose of establishing a right in a Court of law, or hold that the occupation by one of their body is an occupation by all the m.embers of the illegal association." 162 — What Constitutes Doing Business. Now, knowing what "business" means, is there any distinc- tion between a person carrying on any other business which has for its object the acquisition of gain, and the words "formed for the purpose of the acquisition of gain" ? It must be a busi- ness to acquire gain, and really the words add nothing to it. "Formed for the purpose of gain," as I put it in Sykes v. Beadon,2i is the same thing. You cannot acquire gain by means of a com.pany except by carrying on some business or other, and I have no doubt if any one formed a company or associa- tion for the purpose of acquiring gain, he must form it for the purjxjse of carrying on a business by which gain is to be ob- tained. But whether that be so or not, I am clearly of opinion that where investment is made a business, or where the dealing in securities is made a business, it is a business within the pur- view of this Act. There are many things which in common col- loquial English would not be called a business, even when carried on by a single person, which would be so called when 8111 Ch. D. 170. 274 Trusts for Business Purposes. [S:MITH v. ANDERSON.] carried on by a number of persons. That is a distinction not to be forgotten, even if we were trying the question by the ordi- nary use of the English language. For instance, a man who is the owner of ofifices, that is, of a house divided into several floors and used for commercial purposes, would not be said to carry on a business because he let the offices as such ; but sup- pose a company was formed for the purpose of buying a build- ing, or leasing a house, to be divided into offices, and to be let out, should not we say, if that was the object of the company, that the company was carrying on business for the purpose of letting offices, or was an office-letting company, trying it by the use of ordinary colloquial language? The same observation may be made as regards a single individual buying or selling land, with this addition, that he may make it a business, and then it is a question of continuity. A man occasionally buys and sells land, as many landowners do, and nobody would say he was a land-jobber or dealer in land, but if a man made it his particular business to buy and sell land to obtain profit, he would be designated as a land-jobber or dealer in land. When you come to an association or company formed for a purpose, you say at once that it is a business, because there yon have that from which you would infer continuity ; it is formed to do that and nothing else, and, therefore, at once you would say that the company carried on a business. So in the ordinary case of investments, a man who has money to invest, invests his money and he may occasionally sell the investments and buy others, but he is not carrying on a business. But when you have an association formed, or where an individual makes it his continuous occupation — the business of his life to buy and sell securities — he is called a stock-jobber or share-jobber, and no- body doubts for a moment that he is carrying on business. So, if a company is formed for doing the very same thing, that is Trusts Distinguished from Other Organizations. 275 [SJnTH V. ANDERSON.] for investing money belonging to persons in the purchase of stocks and shares, and changing them from time to time, either with Hmited or unhmited powers, I should say there can be no question that they are carrying on a business, whether you call it a business of investment or a business of dealing in securities, or, as in the case before me, both the business of in- vestment and the business of dealing in securities. '& 163 — WJiat is Doing Business for Gain. Upon the other point, as to this company being formed for the acquisition of gain, can there be any doubt about it? The prospectus was not stated in the statement of claim, but it was admitted, and Mr. Chitty admitted it as if it were stated, so that it is before the Court and may properly be looked into, for in ascertaining whether the association was formed for that purpose, nothing can be more important than the prospectus. It is not to be formed for the purpose, unless registered as a company under this Act, and the prospectus tells me exactly what it was formed for. The prospectus is as good, or better evidence upon that point than the deed, but, of course, they must both be looked at to ascertain for what purpose the com- pany was formed. Was it for the acquisition of gain? I have discussed that question so fully in so many cases, and two of them are reported. In re Arthur Average Association,^^ and Sykes V. Beadon,^^ that it is not necessary for me to say any- thing more upon the view I take of the Act. But I must look at the prospectus as well as the deed to see whether the acquisi- tion of gain is really the purpose of the company. I have no doubt about it at all. To my mind it is as clear as anything can be, though it does not follow that it may not be equally 223 Ch. D. 522. 23 11 Ch. D. 170. 2^6 Trusts for Business Purposi;s. [SMITH V. ANDERSON.] clear the other way to some other mind or minds. The pubHc are invited by the prospectus to subscribe their money to buy the shares of the Submarine Cable Companies. They are told that they are to buy them at £90 a certificate. "The certificate is to bear 6 per cent, per annum, payable half yearly, making £6 13s. 4d. on the amount paid." That is a very accurate cal- culation. Therefore, they are to get £6 13s. 4d. upon surplus income to the extent of the available funds, by purchase in the open market or tender, or failing these means, by yearly draw- ings at £120. So that a certificate holder is to get a profit of £30 upon his £90 if he is lucky enough to be a drawer, or if they are bought by tender ; and there is to be "an equal rever- sionary distribution of the securities of the trust among the certificate holders as soon as the certificates have been re- deemed." Therefore, over and above £6, 13s. 4d. per cent., which is itself a very handsome profit, and not the ordinary rate of income derivable from investments, a certificate holder is to get £30 profit upon his £90, and also the equal reversion in distribution of the balance Avhen the certificates are all paid for. Those are the three first paragraphs of the prospectus. It is not an ordinary investment in any sense of the word ; it is a speculation with a view to a profit by means of the purchase of submarine Cable shares, and it would be an abuse of the term to call this an investment, though the purchase of specula- tive property in a sense, and in a very wide and lax sense, may be termed an investment. Then after naming the trustees, I come to the next paragraph, which is a very good illustration of what kind of investments we are dealing with. "The advantage of this form of investment, by distributing the risk over a num- ber of kindred undertakings, and making one insure the other, is peculiarly applicable to the class of property to be embraced in this trust." That is, the public are told it is risky property. Trusts Distinguished from Other Organizations. 277 [SMITH V. ANDERSON.] The next sentence is, "The public has already shewn its appre- ciation of the principle in the case of Foreign and Colonial Gov- ernment Securities, and it is believed that many would gladly avail themselves of the high returns yielded by Telegraph Cable Companies, if they were relieved from the fear of exceptional losses from accident or other causes which would be greatly lessened by such a combination." It is no ordinary investment, the public are afraid to touch it because it is risky, but if you distribute it in the shape of insurance by associating together you will diminish your risk, and thereby get a profit. The next sentence but one shews that the company was formed for a high rate of profit: "The trust will consist solely of the stocks, shares, or debentures of submarine cable companies, which offer, apart from accidental interruptions, the prospect of a high rate of profit." Then there is this fur- ther statement; "The selection and acceptance of the several securities, the proportions in each company to be included, and any purchase to be made, will be determined and undertaken by the trustees at their discretion, who will endeavour to secure a fair average, having regard to the ends in view." Then it is stated how the trustees are to apply the funds. First they are to pay a limited amount of expenses; then to pay interest on the certificates ; then there is to be a sinking fund for their re- demption ; then they say how they will be redeemed. Then, "Power will be reserved to the trustees to realize, at their dis- cretion, any securities belonging to the trust which reach a pre- mium of 30 per cent, on the purchase price." That is a dealing. The trustees are not to sell unless they get a large profit, but they are to sell when they get to 30 premium. Then it says : "Subject to any special circumstances calling for an earlier dissolution under the terms of the trust deed, it is intended that the trust should continue until all the certificates have been thus 2/8 Trusts for Business Purposes. [SMITH V. ANDERSON.] redeemed, when the trust securities will remain for distribution as a reversion. The trust will then be wound up, and the pro- ceeds be distributed pro rata among the holders of the coupons of reversion." This, then, is the purpose for which the company is formed. The certificate holders are not only to get the profit I have mentioned, but an ultimate profit — ^an ultimate distribution of the funds. That is no ordinary investment where the property is to remain invested ; on the contrary, all the certificates may be paid ofif out of income, it being a very large rate of profit, and then the securities are to be divided, the coupons giving the right to the reversion. The prospectus further states : "A person desirous of holding submarine cable shares can thus, by means of this trust, at a minimum of trouble and expense, di- minish the risk of investing in any one particular undertaking, by spreading his investment over a number of dilTerent under- takings, and reserve a portion of the extra interest as a sinking fund to pay off his capital; as for each £ioo invested he virtu- ally becomes a holder of pro rata investments in some eight or ten different securities, and in addition receives a bonus when his certificate is redeemed, and a pro rata participation in the ultimate reversion which will remain when the return of his capital has been accomplished. The advantages are, ( i ) Inter- est at £6 13s. 4d. per cent, on the amount subscribed. (2) Dis- tribution of risk" — not a term that persons use for ordinary/ investments. (3) Provision for redemption of certificates; if by purchase, securing for his property an enhanced market value, or, if drawn, a gain on £30 per certificate. The first part which I read used the term "profit," now we have the term "gain." Then, (4) A reversion eventually divisible equal to the whole of his original subscription. It is further stated that a draft of the trust deed may be seen. This trust deed was Trusts Distinguished from Other Organizations. 279 [SMITH V. ANDEBSON.l actually drawn after the investments were made, although I do not see that that makes much difference after having read the prospectus to see what the company was formed for. Then it is provided that the trustees are to hold the annual produce of the investments in trust, "first, in payment of all expenses dur- ing the preceding year, but so that the ordinary expenses for the year 1871, or in any subsequent year, include all remunera- tion to the trustees and auditors." They are called trustees, but they are, no doubt, directors. They are, like all directors, commercial trustees, but they are intended to be paid — not im- properly, because they really are directors and nothing else. There are two or three clauses in the deed which it is neces- sary to read to shew that there was a dealing in shares by this company, as well as an ordinary investment. An association for that purpose would, in my opinion, be within the mischief of the Act and within the words of the Act. It must not be supposed that I decide this case simply on the addition of the dealing clauses, but an association for the purpose of dealing would also be, in my opinion, within the mischief of the Act and the words of the Act also; consequently, it is as well to refer to them to shew that it is so. The i8th clause is this: "It shall be lawful for the trustees, at their discretion, to sell any of the said scheduled securities, if and when such security shall be capable of being sold in the market, and shall be sold by the trustees at a premium of not less than 30 per cent." So that the moment they rise to that the trustees may sell and take the profit, which is to be divided as we shall see presently. The 19th section provides that except when they get the 30 per cent, premium, none of the scheduled securities shall be sold or otherwise converted into money, unless in pursuance of a unanimous resolution passed at a meeting of the trustees 28o Trusts for Business Purposes. [S>UTH V. ANDERSON.] called with express notice of the object, at which there are present not less than four trustees. Out of the six managing parties four must concur at a meeting at which they are present to sell them, but subject to that limitation, they have a right to sell without any premium at all. Here, again, therefore, there is a second power of sale not referred to in the prospectus. Then the produce is to be applied as surplus, that is, in payment of interest and in payment for and purchasing of the certifi- cates. Then there is a proviso, "That it shall be lawful for the trustees, if it shall be so decided by a unanimous resolution of the trustees, at a meeting called with express notice of the object, at which all the trustees are present in person or by proxy, and such resolution shall be confirmed at a meeting of the certificate holders summoned for that purpose by advertise- ment in two London daily papers, to invest the produce of any such sale or conversion, or any part of the same, in the purchase of such securities of the same character as the scheduled securi- ties, as they shall select for that purpose." So there is a power not only to sell but to repurchase. I agree that, inasmuch as in this large association — ^and this is admitted by the learned counsel and has always been intended to be conceded — there are more than twenty persons, for I see on the prospectus there is not to be a company formed unless £400,000 is subscribed, you cannot get the assent of every individual, but power is given to the trustees at the general meeting. It is a part of their busi- ness, therefore, though no doubt a primary object, but it is an object, to deal in the securities in the way I have mentioned. The 22nd clause is this : "The trustees may deduct for the year 1871, and in every subsequent year, by way of remunera- tion to them for the trouble and responsibility undertaken by them, any sum not exceeding in the aggregate £1200 per an- num." So they are paid trustees, that is, they are directors of Trusts Distinguished from Other Organizations, 281 [S>IITH V. ANDERSON.] the company. They are persons who carry on the business of the company for payment, they employ their time and they are paid for it. I am not saying a word against that; T think it is a most rational thing that persons who employ their time for the benefit of others should be paid, but it shews their true character, for ordinary trustees of a settlement are not paid. Then it goes on : "The Trustees shall, once every year, by advertisement in some two public daily newspapers published in London, call together a meeting of the holders for the time being of the certificates." That is to shew what the certificate holders are. They are shareholders of the company and nothing else. They are called certificate holders, but it is very clear that they might be called shareholders. Many shareholders, when they are paid, are paid, as we know, by warrants to bearer, and that is what these are. Nobody is to get anything unless he produces his certificate. Then, "The proceedings of the said meeting shall, so far as may be, be conducted in the manner prescribed in Table A to the Companies Act, 1862." Not only is it a meeting of shareholders, although the deed calls it a meeting of certificate holders, but they actually adopt the pro- visions of the Act for the mode of conducting the business. "The business of the meeting sliall be" — that is the other use of the word "business" — "to receive and consider a report from the trustees on the condition and affairs of the trust; to appoint auditors to audit the accounts of the trustees" — that is, of the directors — "and to report to the next meeting of the holders of certificates ; to elect new trustees." Again put "di- rectors," and you have the ordinary business of a general meeting. It is the thinnest possible disguise. Then, "If it shall be unanimously decided by the trustees at a meeting called with express notice of the object, at which not less tlian four trus- tees are present in person or by proxy, tliat any extraordinary 282 Trusts for Business Purposes. [SJUTH T. ANDERSON.] expenses should be incurred, they may incur the same accord- ingly, subject to the same being confirmed by resolution of the certificate holders assembled at any general meeting." Then there is a provision in the 30th clause: "If any of the persons parties hereto" — that is, the trustees — "shall die or become in- capable to act, or sliall retire from the trusts, then and in every such case it shall be lawful for the general meeting of the cer- tificate holders by resolution to appoint a new trustee or new trustees in the place of the late trustee or trustees. That is giving the directors a lifehold directorship, but it is nothing more. Then the 32nd clause empowers the general meeting of certificate holders to require the trustees to enter into a new deed of covenant in the same form as this. It does appear to me that this is as plain a company or asso- ciation formed for the transaction of business for the purpose of gain as could be put fairly into words, if you change names and nothing more. If you call the certificate holders "share- holders," and call the trustees "Directors," and call the associa- tion a "company," changing those three names, you have about as simple a description of an ordinary company under the Act as I think you can well have. I am satisfied, as far as I am concerned, tliat this is not only within the words of the Act, but is the very thing, as explained by the judgment of Mr. Justice Willes, which the Act intended to prohibit for various reasons, and that this is a mere device, and a very transparent one, to endeavour to escape from the plain meaning of the enactment. I should have said that without any possibility of hesitation, were it not that I have been told that either this deed or some similar deed was settled in consultation by two very great legal luminaries at the Bar. That may be so, and if it is so, it will only form another instance among many which have come be- fore me shewing that where counsel are instructed to carry out Trusts Distinguished t'rom Other Organizations. 283 [SMITH V. ANDEKSOX.] an object they do their best to carry it out, and the more diffi- cult it is the more pains they take, and then valuing their work, not by its real result, but by the trouble it has caused them, they deceive themselves into the idea that they have succeeded in evading an Act of Parliament and have carried the purpose which they have been instructed to accomplish ; they produce that which satisfies themselves, although it satisfies no judicial authority when it comes to be considered by a Court of Justice. The judgment declared that the Submarine Cables Trust was an association consisting of more than twenty persons formed after the passing of the Companies Act, 1862, for the purpose of carrying on business that had for its object the acquisition of gain by the association, or by the individual members thereof, without being registered as a company under the said Act, or any other Act of Parliament, and ordered that the affairs of the association should be wound up; with consequential inquiries and directions. 164 — Trust for Investment — Distinguished from Doing Busi- ness. The Defendants appealed. The appeal came on to be heard on the 13th of July, 1880. Chitty, Q. C, and Speed, for the Appellants : — We say that this is not carrying on a business. It is a trust for investment ; the advantage being that the trustees can invest in a number of different securities of this class, so that the risk of loss by some proving bad is diminished, the average being good. Such an investment is not a "business." That word in its widest sense includes all the transactions of life, but that is not its meaning in the Companies Act, 1862. Again, if this be 284 Trusts for Business Purposes. [SMITH V. ANDERSON.] a business, the cestuis que trust are not associated for the pur- pose of carrying it on. They meet, indeed, but only for very limited purposes — they cannot control the investments and they cannot change the trustees who have the management. Sup- pose a coal owner left his colliery upon trusts for thirty of his grandchildren, vesting the whole management in the trustees ; the grandchildren cannot be treated as an association of thirty persons within the Act ; the trustees are the only persons carry- ing on the business, and so they are here. Cox v. Hickman^* shews that the certificate holders are not partners. "Business" in the Act means something in the nature of a trade. Reg. v. Whitmarsh,^^ under 7 & 8 Vict. c. no, is in our favour as to this not being a business. The case of In re Arthur Average Association^® is very different from this, and the question whether the association was legal was not finally decided by the Court of Appeal. Supposing, however, the decision of the Master of the Rolls in that case to be upheld, the holding that a mutual insurance company where the company as a body makes no gain is within the Act really does not bear upon the question whether a trust like this is within it. Sykes v. Beadon^' is very similar to the present case, but is a recent de- cision of the same Judge, and is in fact to be treated as under appeal, though in that case the trusts more nearly resembled the carrying on a business than here. In the present case the object simply was to invest in a class of stocks paying a large dividend, not to carry on anything like stockjobbing or specu- lating in shares. The pov/ers of changing investments are of a very limited description, and shew the intention that, except in special circumstances, the original securities should be retained. 24 8 H. L. C. 268. 26 Law Rep. 10 Ch. 542. ''5 15 Q. B. 600. 27 11 Ch. D. 170. Trusts Distinguished from Other Organizations, 285 [SHUTH V. ANDERSON.] Articles 18, 19, 20, shew that it was no part of the scheme to carry on a business in buying and selling shares, and the con- duct of the trustees shew that this was what was intended: hardly any change has been voluntarily made in the invest- ments. 165 — Company, Association and Partnership Defined. James, L. J. : — This case has been very fully argued, and we have had an opportunity of considering it since the time it was first argued before us. We, therefore, need not postpone our judgment. With all deference to the very clear opinion of the Master of the Rolls, I cannot concur in the construction which he has put upon the 4th section of the Companies Act, 1862. The Act was intended, as it appears to me, to prevent the mischief arising from large trading undertakings being carried on by large fluctuating bodies, so tliat persons dealing with them did not know with whom they were contracting and so might be put to great difficulty and expense, which was a public mischief to be repressed. The enactment upon which the ques- tion before us turns is as follows : — "No company, association, or partnership consisting of more than twenty persons shall be formed after the commencement of this Act for the purpose of carrying on any other business" (that is to say, any business other than banking) "That has for its object the acquisition of gain by the company, association, or partnership, or by the in- dividual members thereof, unless it is registered," &c. Now there are three words there, "company, association, or partner- ship." I cannot understand what the difference is between a company and an association. The word "association," in the sense in which it is now commonly used, is etymologically in- 286 Trusts for Business Purposes. rS>UTH V. ANDERSON.] accurate, for "association" does not properly describe the thing formed, but properly and etymologically describes the act of associating together, from which act of association there is formed a company or partnership. But I believe that according to the vernacular we use on these subjects the difference which the Act intended to draw between a company or association and an ordinar}^ partnership is this: An ordinary partnership is a partnership composed of definite individuals bound together by contract between themselves to continue combined for some joint object, either during pleasure or during a limited time, and is essentially composed of the persons originally entering into the contract with one another. A company or association (which I take to be synonymous terms) is the result of an arrangement by which parties intend to form a partnership which is constantly changing, a partnership to-day consisting of certain members and to-morrow consisting of some only of those members along with others who have come in, so that there will be a constant shifting of the partnership, a determina- tion of the old and a creation of a new partnership, and with the intention that, so far as the partners can by agreement be- tween themselves bring about such a result, the new partner- ship shall succeed to the assets and liabilities of the old partner- ship. This object as regards liabilities could not in point of law be attained by any arrangement between the persons them- selves unless the persons contracting with them authorized the change by a novation, or unless by special provisions in Acts of Parliament sanction was given to such arrangements. The Act says that no company, association, or partnership consisting of more than twenty persons shall be formed after the commencement of this Act. For what? "For the purpose of carrying on any business." Trusts Distinguished from Othi;r Organizations. 287 rSMITH V. ANDERSON.] 166 — Trust Deed Docs not Constitute an Association. It is contended that the trust deed before us constitutes an association of more than twenty persons formed "for the pur- pose of carrying on business." I am unable to agree with the IMaster of the Rolls in the conclusion that it does. I cannot find that this deed constitutes any association whatever between the persons who are supposed to be socii. One man goes with £90 in his hands and buys from the trustees a iioo certificate with all the chance of profit attaching to it. Another man goes the next day and takes his £90 to the same people and gets from them another certificate, by which he gets a right to share in the funds which they have in their hands. The first man knows nothing of the second, and the second knows nothing of the first; they have never come into any arrangement whatever as between themselves. There never lias been anything creating any mutual rights or obligations between those persons. They are from the first entire strangers who have entered into no contract whatever with each other, nor has either of them en- tered into any contract with the trustees or any trustee on be- half of the other, there being nothing in the deed pointing to any mandate or delegation of authority to anybody to act for the certificate holders as between themselves, and nothing, as it appears to me, by which any liability could ever be cast upon the certificate holders either as between themselves or as be- tween themselves and anybody else. Therefore, I cannot ar- rive at the conclusion that the certificate holders form an asso- ciation within the meaning of the Act of Parliament, any more than the persons who subscribe for debentures in a railway, or the Bolivian bondholders (whose case was before us in Wilson V. Church), or the creditors in Cox v. Hickman. Persons who have no mutual rights and obligations do not, according to my 288 Trusts for Business Purposes. [S>aTH V. ANDERSON.l view, constitute an association because they happen to have a common interest or several interests in something which is to be divided between them. But supposing that the certificate holders do constitute an as- sociation, it appears to me that it cannot, in any practical sense of the word ''business," in any sense in which any man of busi- ness would use that word, be said that the association was formed for the purpose of carrying on any business, either by themsehes or by any agent. I am unable to conceive any state of circumstances in which it could be averred that any contract had been made by or on behalf of the body of certificate hold- ers, either by any member of themselves or by any other agent or manager for them. Now, people cannot be said to carry on business when it is utterly inconsistent with what they have done and with what they have said, and inconsistent with the nature of the whole transaction that they should be parties directly or indirectly, either by themselves or through any agent for them, to any contract, or be liable for any act of misfeasance or neglect of any manager, agent, or servant. 167 — Distinction befzveen Trustee and Director. Again, if there is any business at all it is to be carried on by the trustees. Whatever is to be done is to be done by the trus- tees. Now, the Master of the Rolls appears, from his judg- ment, to have considered that these trustees were, in substance and in lav/, directors. With all deference to the Master of the Rolls, that appears to me a fallacy. To my mind the distinction between a director and a trustee is an essential distinction founded on the very nature of things. A trustee is a man who is the owner of the property and deals with it as principal, as owner, and as master, subject only to an equitable obligation to Trusts Distinguished from Other Organizations. 289 [SMITH T. ANDERSON.] account to some persons to whom he stands in the relation of trustee, and who are his cestuis que trust. The same individual may fill the office of director and also be a trustee having prop- erty, but that is a rare, exceptional, and casual circumstance. The office of director is that of a paid servant of the company. A director never enters into a contract for himself, but he enters into contracts for his principal, that is, for the company of whom he is a director nor can he be sued on them unless he exceeds his authority. That seems to me to be the broad dis- tinction between trustees and directors. Then, supposing that what is to be done here is to be done by the trustees, is what the trustees are to do under this deed the carrying on a business? In my opinion, nothing that is to be done under this deed by the trustees comes within the ordinary meaning of "business," any more than what is done by the trustees of a marriage settlement who have large properties vested in them, and who have very extensive powers of dispos- ing of the investments, changing the investments, and selling them and reinvesting in other investments, according to their discretion and judgment, with or without the consent of their cestuis que trust. That is not a business. No doubt there is power in the i8th, 19th, and 20th clauses of this deed to dispose of the investments and reinvest in some similar securities with the assent of the certificate holders. This appears to me to be no more than the power of varying investments which you would find in an ordinary trust deed, the consent of some of the cestuis que trust being required. The deed appears to me to be merely a trust deed of property for investment, the in- vestment being spread over a number of dififerent securities so as to enable persons who choose to invest their money in this way to avail themselves of that which I believe is one of the most certain things in the world, viz., what is called the doctrine 290 Trusts for Business Purposes. [SJHTH V. ANDERSON.] of averages, that is to say, tliat if a large number of different independent securities of a hazardous description are held to- gether the loss upon some will be compensated by the gain on the others, so that a tolerably uniform average rate of interest will be obtained. The object, and the legitimate object, of the persons who were invited to join in this company was to have an investment of their money under such circumstances that they might look to have a high dividend with a very consider- able security for the capital which they were investing in it. I can see nothing like an attempt at evading the Act or at doing anything but making investments upon a large scale, so as to obtain the benefit of the doctrine of averages. Under those cir- cumstances, I am of the opinion that the judgment of the Mas- ter of the Rolls must be discliarged and the action dismissed. 168 — Trustees are Associated. Brett, L. J. :— In this case it becomes necessary carefully to construe the Act of Parliament, and, in so doing, we must consider almost every word and almost every phrase in it, and we must translate, if possible, into the most accurate scientific form the idiomatic English which even in an Act of Parliament is often used, not in its strictly grammatical sense, but in a business sense. The 4th section of the Act is in a negative form, and enacts that no company, association, or partnership, consisting of more than twenty persons, shall be formed for the purpose of carry- ing on any business that has for its object the acquisition of gain, vniless it be registered. In order to come within this clause, there must be a joint relation of more than twenty per- sons for a common purpose, which common purpose, as it seems to me, must be the performing jointly a succession of acts. It Trusts Distinguished from Other Organizations. 291 [SMITH V. ANDERSON.] will not be sufficient if the relation exists for a purpose which is to be completed by the performance of one act. Moreover, they must be so related together as to form a company, or a partnership, or an association. I confess I have some difficulty in seeing how there could be an association for the purpose of carrying on a business which would be neither a company nor a partnership, but I should hesitate to say that, by the ingenuity of men of business, there might not some day be formed a rela- tion among twenty persons which, without being strictly either a company or a partnership — might yet be an association. But according to all ordinary rules of construction, if the associa- tion mentioned in sect. 4 is not, strictly speaking, a company or a partnership, it must be something of a similar kind. It must be a relation established between twenty persons or more "for the purpose of carrying on business," i. e., in order that such company, association, or partnership may carry on the business. The business, therefore, whatever the word "business" may mean, is to be carried on by those twenty persons or more. The expression "carrying on" implies a repetition of acts, and ex- cludes the case of an association formed 'for doing one particu- lar act which is never to be repeated. That series of acts is to be a series of acts which constitute a business. Now, the word "business" might in a grammatical sense include things which no ordinary person would call a business, and, inasmuch as the Legislature could not particularize every kind of business which they intended to include, they have, in order to confine the meaning of that large word "business," stated that it is to be a business "that has for its object the acquisition of gain." The association, then, must be formed in order to carry on a series of acts having the acquisition of gain for their object. We then come to deal with the expression "gain by the com- pany, association, or partnership, or by the individual members 292 Trusts for Business Purposes. rSMITH V. ANDERSON.] thereof." It seems to me that that expression is to be taken distributively, according to the former description of the con- gregation of persons. Where it is a joint stock company, or a corporation, or quasi corporation, and the individuals are mere shareholders, then the gain which is acquired by the business is a gain by the company, and not a gain by the individual share- holders. But where it is an ordinary partnership, or where it is an association which, not being a joint stock company or cor- poration, is more like to a partnership, there the gain will be not by the whole body as distinct from the individuals, but by the in- dividual partners. But the mode in v/hich the gain when obtained is to be dis- tributed does not seem to me to be the real point in this case. The real question is, whether there is here any association o[ persons at all for the purpose of carrying on a business within the meaning of this section, and if so, then who are those persons. This being my view of the construction of the statute, I cannot agree with the statement of the question by the ^Master of the Rolls in v'^ykes -v. Beadon ( i ) . He said that the point which he had to consider was whether there was an association or company formed for the purpose of gain either by the asso- ciation or by the individual members thereof. But he omitted words which I think were purposely put into this statute for a definite object, namely, that the statute meant to deal, not with people who were associated together for the purpose of obtain- ing gain, but with people who were associated together for the purpose of carr^-ing on a business having for its object the acquisition of gain. Let us now consider whether in the present case there were any persons associated for the purpose of carrying on any business such as is described in this clause. If there were such Trusts Distinguished from Other Organizations. 293 [SHUTH V. ANDERSON.] persons, they must have been either the trustees or the certifi- cate holders. In my opinion neither the one nor the other were associated together for the purpose of carrying on such a busi- ness as is described in the Act. I will take first the trustees themselves. The trustees were not, as I construe the deed, to enter upon a series of acts which, if successful, would obtain a gain. They were joined together for the purpose of once for all investing certain money which was delivered into their hands, and not for the purpose of obtaining gain from a repeti- tion of investments. In other words, they were not associated together for the purpose of speculating in shares. That was not their business. There was no reason why, when they had once made an investment, it should, under ordinary circum- stances, ever be changed. Therefore, it seems to me that the primary and substantial object of their associating together was not for the purpose of carrying on a business which, if success- ful, would result in the acquisition of gain. It is true that, under a special state of circumstances which is described in the 1 8th clause, it might be said that then what they would have to do under that clause and clause 20 might result in a gain. But even if a transaction under those clauses is to be considered as carried on for the purpose of gain, which I doubt, yet that is such a merely subsidiary part of the transactions described in the deed that it cannot be said to be a substantial part of what they have to do; and if the substantial part of what they have to do is not a business, a mere subsidiary provision will not bring them within the Act, as was decided in Reg. v. Whit- marsh^s and several other cases. I am of opinion, therefore, that the trustees were not associated for the purpose of carry- ing on a business within the meaning of the clause; and if they 28 15 Q. B. 600. 294 Trusts for Business Purposes. [SMITH V. ANDERSON.] were, they are nevertheless not within the clause because they are fewer than twenty. 169 — Certificate Holders not Associated. I now come to the case of the certificate holders. It seems to me that even if what had to be done under the deed was to be done by them by means of the trustees as their accents, never- theless they were not associated for the purpose of carrying on such a business as is contemplated by the 4th section, inasmuch as what was to be done under the deed did not constitute such a business. But supposing that this was such a business as is mentioned in the Act, were the certificate holders the persons who were to carry it on? It seems to me that they certainly were not. I take it that the persons called trustees in the deed are clearly trustees as distinguished from agents and from directors. The distinction has been pointed out by my Lord, and I entirely agree with it. If, indeed, although they were called trustees, the duties which they had to perform were really those of di- rectors, then, although they were called trustees, the legal effect of the deed would be that they would be directors, and if they are directors they are agents; but here it seems to me clear that according to the true construction of the deed they were not directors or agents, but trustees. If that be so, the certifi- cate holders, even if they were associated at all, were not asso- ciated for carrying on the business. It was not their business. They could not have been made liable for any contract made by the trustees. It was of course urged that they would be liable as undisclosed principals. But that assumes that the per- sons who made the contracts upon which they are to be liable are their agents authorized to bind them by their contracts, Trusts Distinguished from Other Organizations. 295 [S>UTH V. ANDERSON.] which is obviously not true. Therefore, even if there be here a business within the meaning of the section, yet it is not car- ried on by the certificate holders, who are not of the number of twenty or more ; and, therefore, in either view the case is not within the statute. That being so, I venture with great deference to differ from the Master of the Rolls in this case, as also from his decision in Sykes v. Beadon.^^ As regards the case of the Arthur Av- erage Association,^'' it is not perhaps absolutely necessary to determine whether the case of a mutual assurance association is within the statute or not, but I cannot help saying that the reasoning which brings me to the conclusion that the present case is not within the statute, appears to me to lead to the same conclusion with regard to a case of mutual assurance. I am inclined to think that no transaction within the association or company between the members of it can be taken into con- sideration in order to determine whether the company or asso- ciation was one formed to carry on a business within the mean- ing of this section. 'fc> 170 — ^ Trust is Not Embraced in the Words Association, Company or Partnership. Cotton, L. J. : — What we have to determine in this case is whether there is an association, company, or partnership within the meaning of the Act of 1862. In my opinion the question turns on Sect. 4 of that Act. Sect. 21 has been referred to, but I do not think that it has any material bearing on the question we have to consider, because the companies which are referred to in sect. 21 might register under sect. 6 of the Act. What we have to consider is 29 11 Ch. D. 170. 30 Law Rep. 10 Ch. 542. 296 Trusts for Business Purposes. [S>nTH V. ANDERSON.] not whether the persons under this trust deed, as I call it for the sake of shortness, could register under the Act, but whether they are bound to do so, and in default are an illegal association. As Sect. 4 has been fully discussed, I will not repeat its terms, but in order to arrive at the construction of the particular portion of the section upon which the question turns it is mate- rial to observe that it begins with a restriction as to companies carrying on a well-known business, the business of banking. Then comes a clause upon which the question turns, which is to apply to companies other than banking companies, with cer- tain exceptions. We have in the first part, without any refer- ence to gain or anything else, a description of the business which companies in the first part of it are formed to carry on. Then in the second part we liave a reference to companies car- rying on any other business, with this qualification, that the business must be one for the acquisition of gain by the company, association, or partnership, or by its members. That, in my opinion, shews that the words "for the purpose of carrying on any business which has for its object the acquisition of gain" are material, and that the section cannot properly be read as saying "any other association having for its object the acquisi- tion of gain." In my opinion there must be a company, asso- ciation, or partnership, which is formed for the purpose of car- rying on a business by itself or its agents. If it is formed for the purpose, it must register if it is v.'ithin the Act. Then the nature of that business is defined; it must be a business having for its object the acquisition of gain by the company or its members. I do not think it ver>' material to consider how far the word "association" differs from company or partner- ship, but I think we may say that if "association" is intended to denote something different from a company or partnership, it must be judged by its two companions between which it stands. Trusts Distinguished from Other Organizations. 297 [SJnTH V. ANDERSON.] and it must denote something where the associates are in the nature of partners. It seems to me (not that I think it mate- rial) that it might have been intended to hit the case which we have frequently seen, of a number of persons or a number of firms joining themselves together for the purpose of carrying on a particular adventure in order to make gain by it, as is very common where firms, one in London, another in Liver- pool, and another in the East Indies, join together in one or more adventures, the one to carry on the one part of the busi- ness, and the other to carry on the other. But, whatever may have been the object of using the word "association," what we have to consider, in my opinion, is whether this conglomeration, as I will call it, of the persons who subscribe their money under this trust deed, is an association formed to carry on any business within the meaning of this section having for its object the acquisition of gain. But, before giving my view as to that, I will state what I consider to be the effect of this deed. As I understand it, this is a scheme for enabling a large sum of money provided by various persons to be invested on a large aggregate of securities of different companies of a particular class, an aggregate in- cluding the securities of so many companies as to give a fair average in that particular class of security. It is obvious, then, upon the doctrine of averages referred to by Lord Justice James, that as they are securities which as a whole produce large profits, though some of them might not produce profit, yet if they were taken in a large number of companies there would in the result be a large yearly sum to be divided from the income of the aggregate of the investments, and when the capital comes to be divided the average result will be that the money of the contributors will be returned with a profit. That was the prin- ciple of the scheme. The investments were made in the names 298 Trusts for Business Purpose;s. [SMITH V. ANDERSON.] of trustees for a lars^er number of contributors. It was neces- sary to make provision for their conduct as to how decisions were to be come to by that body, as to what was to be done with regard to the general business of the trust, and moreover it was incident to the trust that there should be sometimes a change of investment. That is incidental to every trust, and is provided for in ordinary trusts, but here we have no doubt a provision which at first sight looks like carrying on a business. Clause 18 provides that under certain circumstances the securi- ties may be sold, and then by clause 20 they may be reinvested. If it appeared tliat the real object of the deed was that the trustees should speculate in investments, even though confined to this particular class, the case would have stood in a very diflFerent position. In my opinion there is nothing in that sort. This is not a provision that they shall make a profit by selling and buying again securities of this class whenever, in their opinion, the turn of the market makes it advisable so to do. The deed is in substance a trust deed, providing how they are to hold as trustees specified securities of a large amount with provisions enabling them in certain events to sell some of the securities, and enabling them when that is done, but only under special circumstances, to reinvest, not to speculate. In my opin- ion that is not a deed providing for carrying on a business with- in the meaning of the Act, it is a deed providing for the holding trust property, with such provisions only as are necessary to enable that to be conveniently done. I am of opinion, therefore, that there is no carrying on business within the meaning of the Act. But supposing that there is a business within the meaning of the Act, is there an association of more than twenty persons who are carrying it on by themselves or their agents? It was argued by Mr. Ince that the mere fact of these persons put- Trusts Distinguished from Other Organizations. 299 [SJHTH V. ANDERSON.] ting money, without any contract or communication with each other, into a bank to a common account to be invested by the trustees under the trusts of this deed, made them an association carrying on business for the purpose of gain. Wliat I have al- ready said as to the true construction of the 4th section shews that, in my opinion, that would not be carrying on business. They may do it for the purpose of profit, and most persons when they invest their money do it for the purpose of profit, that is to say, they expect to get a profit in the shape of divi- dends, and probably also expect that the investment will go up and will produce them a profit when hereafter they may wish to rea.lize. But, in my opinion, what must be shewn is that the association by themselves or by their agents carry on a business. Now, here, how can that be said ? That the certifi- cate holders do it by themselves can, I think, hardly be con- tended. All the power which the subscribers of this money had was to attend sometimes at meetings, and the meetings which were held most usually are those mentioned in clause 26. The only business done at them was to receive and consider a report from the trustees on the condition and affairs of the trust, to appoint auditors to audit the accounts, and to elect new trustees to fill up vacancies. It is impossible, in my opin- ion, to say that the certificate holders are by themselves in any way carrying on any business by reason of what is done at these meetings. Then clause 20 says that a reinvestment must be sanctioned at a meeting of the certificate holders summoned for that purpose. I have already dealt with the point that under clauses 18 and 20 there is not a power to speculate or to carry on a business, and really all that is here given to the certificate holders is the power to give such assent as cestuis que trust usually give for a change of securities when they are not in- capacitated by infancy or otherwise. Of course the number of 300 Trusts for Business Purposes. [SMITH V. ANDERSON.! cestuis que trust makes it necessary that that should be done in some way which will enable the majority to bind the minor- ity, as otherwise the assent of the cestuis que trust could never be effectually obtained, and, therefore, a form is adopted sim- ilar to the provisions in articles of association as to meetings of shareholders, but that is only matter of form. They meet as cestuis que trust to give their assent, not as members of the partnership joining to carry on and control the business of the partnership, even if it were a business. Then, can it be said that they carry on a business by their agents? In my opinion that cannot be maintained. The trus- tees here are the only persons who are dealing with the invest- ments, and they are dealing, not as agents for some principal, but as trustees in whom the property and the management of it are vested, and who have the power of changing the invest- ments and securities. Tliat is just like the case which often occurs where the executors or trustees of a will are directed to carry on a business. The fact that they are to account to others for the profits made is a matter utterly immaterial as between them and those with whom they deal. They deal with those persons as the only persons contracting, and hold themselves out as personally liable. Those persons have no right whatever as against the persons beneficially entitled, nor, except possibly in the case of a testator having directed a part of his assets to be employed in the trade, have they any claim whatever against the assets of the testator. Those dealing with executors so carrying on a business deal with them as with any other per- sons carrying on business and look to no one else, and even although the executors have a right of indemnity if they act properly, that in vo way affects or enlarges the contracts which they enter into with third parties. So far as there is any con- tract here to be entered into by the trustees it is only a change Trusts Distinguished from Othe;r Organizations. 301 [SJnTH V. ANDERSON.] of investment ; so far as there is any business to be carried on it is the business of the trustees, not as agents for principals be- hind, but their own business, that is to say, a business in which they contract as solely liable to outsiders, whatever may be their rights as against those for whom they are trustees. In my opinion, therefore, in this case the only alleged association of more than twenty, being the persons who have contributed their money, stand in this position, that they are not by themselves or their agents carrying on any business whatever. Therefore, in my opinion, this cannot be said to be an association prohibited by the Act. Of course, if the trustees are carrying on a busi- ness for the purpose of profit, as they are not twenty in number there could be no objection under the Act to their doing so. In my opinion the view which the Master of the Rolls took of this section of the Act of Parliament cannot be maintained, and the action must be dismissed. CHAPTER XV. EQUITY. 171 — Jurisdiction. Courts of equity have jurisdiction over all questions rela- tive to the establishment and preservation of trusts, and may act upon the application of any one interested.^^ The sub- ject of trusts and the control and regulation of trust estates are not properly cognizable by courts of law, but are ex- clusively within the jurisdiction of courts of equity,^^ for courts of equity, independent of statute, have inherent and exclusive jurisdiction over all kinds of trusts and trustees, whether the trust arises by express declaration and agreement or results by implication of law.^^ A court of equity in its jurisdiction over trusts is not bound by the technical rules of the common law, and will seek the intention of the grantor from the whole instrument.^* For the purpose of compelling an accounting, the existence of any confidential or fiduciary relation is sufficient to invoke the aid of a chancery court whenever the duty arising out of such relation rests upon one of the parties rendering an account to the other.^^ A court of equity has jurisdiction of a bill to administer a trust filed by a beneficiary in behalf of himself and all other beneficiaries. For example, facts may be alleged which show that the trus- SlHolbrook v. Fyffe, 164 Ky. Ark. 451, 142 S. W. 848. 435, 175 S. W. 977. 34 Buist v. Williams, 88 S. C. 32 McCoy V. McCoy, 30 Okla. 252, 70 S. E. 817. 379, 121 Pac. 176. 36 Wilson v. Kennedy, 63 W. 33Spradling v. Spradling, 101 Va. 1, 59 S. E. 736. (302) Equity. 303 tee, although without fault of his own, has been prevented from executing the trust in the manner contemplated, and that there are obstacles in the way of its proper and economical administration which the court can remove.^ In a suit to administer a trust, a court of equity acts in personam ; and where it has acquired full jurisdiction of the trustee and all other necessary parties, it m.ay direct the ad- ministration of the trust, although a part of the property consists of land not within its territorial jurisdiction.^'' A trustee may sue to impress the trust upon money in the hands of a stranger ; the bank in which the stranger has deposited the money is also within the jurisdiction of equity as there is no adequate remedy at law.^^ A testator may leave cer- tain real estate in trust for his children for life and the re- mainder to his grandchildren; equity has original jurisdic- tion to authorize the trustee to mortgage the interest of the life tenants to raise money .^^ A trust instrument may pro- vide that in administering the trust the trustees shall use their best judgment and not be liable or amenable to any court or person in the exercise thereof ; but upon allegation of fraud in the administration of the trust, a court of equity will take jurisdiction and investigate the manner in which the trust was administered, notwithstanding the exemption of the trust instrument to the contrary.*" A court of equity has jurisdiction to compel a trustee to pay funds into court awaiting final disposition, whether he has misappropriated 86 Memphis Sav. Bank v. 39 Shirkey v. Kirby, 110 Va. Houchens, 115 Fed. 96. 455, 66 S. E. 40. 87 Memphis Sav. Bank v. 40 Burch v. Gaston, 182 Ala. Houchens, Supra. 467, 62 So. 508. 38 Pennington v. Smith, 69 Fed. 188. 304 Trusts for Business Purposes. the fund or not.*^ Where trustees so disagree as to obstruct a prompt and proper execution of a trust, or act mala fide in its execution, a court of equity will interfere and compel them to perform the trust, or will itself execute it.*^ I J 2 — Ju risdic Ho n R estricted. Where a trust is discretionary, equity has no jurisdiction to interfere with its exercise so long as the trustee acts in good faith either in exercising or refusing to exercise the power vested in him ;*^ as equity will not interfere with a trustee in the proper discharge of the duties of his trust.** Nor will equity enforce an executory agreement, made with- out consideration to create a trust ;*^ nor when trustees are in existence and capable of acting, will a court of equity interfere to control them in the exercise of a discretion vested in them by the instrument under which they act.*^ 173 — Equity Cannot Create a Trust. While equity has jurisdiction to control the execution of a trust created, and to prevent a failure thereof, and in doubt- ful cases to direct trustees as to their duties,*''' and may de- clare and enforce a trust, it has no authority to create a trust or to make a contract for parties who do not see fit to make the contract themselves under circumstances where no 41 Bullock V. Anglemen, 82 N. 45 Central Trust Co. v. Gaff- J. Eq. 23, 87 Atl. 627. ney, 157 App. Div. 501, 142 N. Y. 42 Story V. Palmer, 46 N. J. Sup. 902. Eq. 1, 18 Atl. 363. 46 Nichols v. Eaton, 91 U. S. 43Glvens v. Clem, 107 Va. R. 717. 435, 59 S. E. 413. 47 Morris v. Boyd, 110 Ark. 44 Righter V. Riley, 42 W. Va. 468, 162 S. W. 69. 633, 26 S. E. 357. Equity. 305 trust could be implied or result by operation of law.*^ Where a trust instrument expressly limits investment of the trust funds to certain securities, it is not within the power of a court to change the terms of the trust in that particular by approving unauthorized investments.*^ Equity has no juris- diction to approve a compromise which in effect would alter the terms of the trust instrument.*** 174 — Trustees May Seek Instructions From the Court. A court of chancery has general jurisdiction of cases in which trustees seek instruction from the court in the per- formance of their duties, because the trustees are entitled to instruction and direction when in doubt.^^ Unless a trus- tee petitioning the court for instruction has real and serious doubts as to his duty,*^ and the advice of the court is required for the protection and discharge of his trust, the court is without jurisdiction to entertain such petition. ^^ Where no power is given to trustees to invest, reinvest or change the investment of personal property held thereunder, if such course is necessary, it is their duty to apply for leave to do so to the court.** A trustee's right to instruction from the court does not extend to the determination of questions not requir- ing any action by him or which should properly be submitted 48 Bliss V. Bliss, 20 Idaho 467, Stephenson v. Morris, 128 Wis. 119 Pac. 451. 242, 107 N. W. 343. 49 Internatl. Trust Co. v. 62 Crawford v. Nies, 224 Mass. Preston (Wye), 156 Pac. 1128. 474, 113 N. E. 408. 60 Morris v. Boyd, Supra. 53 Hill v. Moors, Supra. 61 Hill V. Moors, 224 Mass. 163, 54 Branch v. DeWolf, 28 R. I. 112 N. E. 641; Thorp v. Lund, 542, 68 Atl. 543. 227 Mass. 474, 116 N. E. 946; 3o6 Trusts for Business Purposes. to some other tribunal, but is confined to the discharge of bis present duties, and instruction will not be given where the rights of persons in ihe trust estate are contingent upon the happening of events which have not occurred.^^ The court is without jurisdiction to entertain a bill in equity for in- structions upon questions relating to the past administration of his trust ;^^ and the rule seems to be that the courts of one. state will not advise trustees as to their duties in the admin- istration of the trust concerning real estate located in another state." An application by a trustee to a court of equity for direc- tion and guidance as to the disposition of the trust funds, when not made in a suit then pending, should be by bill, and not by petition; and the applicant must be in possession of trust funds of which disposition is necessary to be made presently and must show that there are conflicting claims, or the probability thereof, and the existence of no other means of determining rights or demands, so as to protect the trustee from the risks of future liability or controversy.^* Where the entire control, management and charge of realty is committed to a trustee, primarily to administer it so as to produce by rentals the greatest practicable amount of new- revenue, and the trust is to extend in probability over a long but uncertain term, the trustee may, by approval of the court having jurisdiction of the matter, execute the trust by creating leases to continue beyond the life of the trust.^^ 65Tibbetts v. Tomkinson, 208 509, 56 Atl. 773. N. Y. 486, 102 N. E. 562; Hill 58 Staplyton v. Neeley, 44 Fla. V. Moors, Supra. 212, 32 So. 868. 56 Forbes v. Brigham, 232 59 Upham v. Plankinton, 152 Mass. 177, 122 N. E. 396. Wis. 275, 140 N. W. 5. 67 Thayer v. Fairchild, 25 R. I. Equity. 307 175 — May Remove Trustees. Where a just and proper discharge of a trust or the fiducial duties of the trustee are interfered with by reason of hos- tiUty between the trustor and trustee, or a change in trustees becomes advisable because the trust is not being properly con- ducted, such change can be made by the court,^'' for a court of equity may remove trustees and appoint others in their stead, when required for the preservation of the trust es- tate. ^^ The question of the removal of trustees is largely discretionary with the court, and its exercise of this discretion is not subject to revision on appeal, unless the discretion has been abused.^^ Where a trustee ignores the terms of the trust deed, a court of equity has jurisdiction to remove him and appoint a new one at the suit of the individual members of a committee appointed by the association to look after such trust, since they may sue for the benefit of all the numerous beneficiaries.^^ The filing of a bill by the trustee asking the instructions of the court as to the execution of the trust does not sus- pend the power to remove him given to the beneficiaries, but only subjects their action to the supervision of the court.^* The court will not remove a trustee on the application of a co-trustee, where the reasons for the removal relate to the management of the trust estate involving judgment and dis- cretion, where by reason of business experience the trustee €0 Smallwood v. Lawson, 183 62 Carrier v. Carrier, 226 N. Y. Ky. 189, 208 S. W. 808. 114, 123 N. E. 135. 61 McKenna v. O'Connell, 84 63 Guilfoil v. Arthur, 158 111. Misc. Rep. 582, 147 N. Y. Sup. ' GOO, 41 N. E. 1009. 922. 64 May v. May, 17 Sup. Ct. Rep. 824. ;5o8 Trusts for Business Purposes. is better qualified to act than the co-trustee.^^ 176 — May Appoint Trustees. Equity will not sufifer a trust to fail because of a vacancy in the trusteeship, however occasioned, whether by death, resignation, or otherwise, but will substitute a trustee to exe- cute the trust, with or without authorization by the instru- ment creating it.^^ The chancery court has power to appoint a trustee to administer a trust, where no trustee is in exist- ence, the identity of trustees being a matter of pure judicial discretion,^''^ and as the selection of a trustee is in the dis- cretion of the court — though the better practice requires the court to select a resident trustee — there may be circumstances justifying a departure therefrom.^^ Ky. St. Sec. 318 (Russell's St. Sec. 2301) providing that no trust shall be defeated for want of a trustee but equity may uphold the same by appointing trustees, etc., is but declaratory of the rule of equity on the subject; and where a trust is once prop- erly created, the incompetency, disability, or nonappointment of a trustee will not defeat it, as equity will administer and enforce the trust.^^ A court of equity has power under its general powers, as well as under Code Pub. Gen. Laws 1904, 65Pyle V. Pyle, 137 App. Div. Estate, 138 Cal. 552, 71 Pac. 707. 568, 122 N. Y. Sup. 256. 67 In Re Battin, 89 N. J, Eq. 66 Pollock V. House & Her- 144, 104 Atl. 434; Northrip v. mann, 84 W. Va. 421, 100 S. E. Purge, 225 Mo. 641, 164 S. W. 275; Brandon v. Carter, 119 Mo. 584. 572, 24 S. W. 1035; Rothenbreger 68 Dodge v. Dodge, 109 Md. V. Garrett, 224 Mo. 191, 123 S, W. 164, 71 Atl. 519. 574; Culver v. Lompoc Valley 69 Green's Adm'rs. v. Fidelity Sav. Bank, 22 Cal. App. 379, 134 Trust Co., 134 Ky. 311, 120 S. W. Pac. 355; Speer v. Colbert, 26 283. Sup. Ct. Rep. 202; In re Gay's Equity. 309 Art. 16, Sec. 90, authorizing the court to appoint a trustee upon the appointed one refusing to execute the trust, etc., to appoint a testamentary trustee on the death of the surviving trustee and on his heir renouncing the trust.''^® However, the chancery court is not obhged to appoint the same number of trustees provided for by the trust instru- ment, when it appoints a trustee to administer the trust; the number of trustees being a matter of pure judicial discre- tion.'^i Where a declaration of trust provides that in case of the death, resignation, or refusal to act of either of two trustees, a successor may be appointed by the court upon the application of the remaining trustee, if the instrument fails to provide any method of appointment in case both offices are vacant, trustees may then be appointed by the court upon the application of cestuis que trustent.'^^ Qn application of trustees for appointment in place of one deceased, the sur- vivors expressing their desire to resign, a chancery court may appoint a trust company where parties in interest assent.'^ Equity will appoint a trustee on application of one beneficiary under a trust deed, upon notice to the others, where the deed provides that in case of a vacancy the beneficiaries shall join in appointing a trustee, and the feehng between the bene- ficiaries is such that they will not so join.'''* 70 Dodge V. Dodge, Supra. 73 In re Battin, Supra. 71 In re Battin, Supra. 74 Cone v. Cone, 61 S. C. 512, 72 In re Borough of Kane, 177 39 S. B. 748. Pa. 638, 35 Atl. 874. CHAPTER XVL LACHES. 177 — In General. As to what constitutes laches in a trust, no general rule can be stated; for the most part, it depends upon the circum- stances in the particular caseJ^ A person is guilty of laches in equity only when his conduct, negligence, or delay has induced another to do something — or abstain from doing some- thing — whereby the latter would be injured if the former were allowed to enforce his rights, and the doctrine does not protect the fraudulent.'^ Though laches will run against an express trust, courts of equity apply the rule in such cases less readily than in cases of constructive trusts ; and rarely ever do so unless the circumstances disclose a defense in the nature of estoppel such as intervention of the rights of third persons, loss of evidence, death of parties and witnesses, settlement or disavowal of the trust acquiesced in by the ces- tui que trust, or the likeJ' While generally, as between trus- tee and shareholders, lapse of time is not a bar to the share- holders' action for accounting, yet where the trustee disclaims the trust to the knowledge of the shareholders and remains in unbroken possession, lapse of time may be relied upon as a defense.'* The refusal of a trustee to execute a deed in compliance with the trust agreement is a repudiation of the 75Rousli V. Griffith, 150 N. C. 77 Roush v. Griffith, Supra. 820, 65 S. E. 168. 78 Rouse v. Rouse, Supra, 96 76 Taber v. Bailey, 22 Cal. App. S. E. 986. 617, 135 Pac. 975. (310) Laches. 311 trust, which, if known to the complainants, opens the door to the defense of laches to a suit to enforce the trust.''^ 178 — Actions Barred by Laches. A person entitled to impeach a fraudulent transaction of a trustee must do so within a reasonable time, but what is a reasonable time depends upon the facts and circumstances of each case.^" The rule that where trustees join in executing a power of sale and if one receives the money, all will be responsible, will not be enforced where the one receiving is allowed to hold the money for a number of years with the consent of beneficiaries fully competent to act — no benefit being derived therefrom by the others.^^ Where for a num- ber of years trustees send beneficiaries statements showing a charge of a certain commission, by failing to object to such commission and by failing to apply for a statement of ac- count to the court, the beneficiaries are estopped from object- ing thereto when the statement is rendered to the court.^^ After the right to a deed has accrued by reason of a proportionate contribution to the work and expense necessary to obtain it. a delay of eight years will defeat a suit to enforce such right, where complainants have contributed nothing further to the subsequent development.^^ Where a petition against the executors of a deceased trus- tee to secure an accounting of the management and disposi- tion of a trust fund is not filed until more than five years after 79 Patterson v. Hewitt, 25 Sup. Laurel Co. Seminary, 93 Ky. 379, Ct. 35. 20 S. W. 258. 80 Branch v. Bulkley, 109 Va. 82 American Colon. Soc. v. 784, 65 S. E. 652. Latrobe, 132 Md. 524, 104 Atl. 81 Laurel Co. Court v. Trustees 120. 83 Patterson v. Hewitt, Supra. 312 Trusts for Business Purposes. the death of the trustee, and more than four years after the appointment of a substituted trustee; or until the final ac- count of the executors of the deceased trustee has been filed and confirmed and full distribution made thereunder; where the trustee's acts of which complaint is made were open to inspection ; and the petition contains no explanation or excuse for the delay in applying for an accounting, the petitioners may be barred by laches.®* While the purchase by a trustee of the interest of his cestui que trustent is regarded with dis- favor, laches will bar the right to relief.®^ If there has been no recognition of the trusteeship during a period of twenty years and the trust estate has ceased to exist, a bill to require an accounting by the administrator of a trustee is barred by laches, for the presumption is a settlement has been made.®^ 179 — Actions not Barred by Laches. Neither lapse of time, nor any defense analogous to the statute of limitations, can be set up by the trustee of an express trust as a defense to his ability to execute the trust ;®' and no laches can be imputed to a shareholder for not assert- ing his rights against the trustee, so long as the former ac- knowledges the trust relation.^® Action by the distributees of a trust fund on the trustee's bond for misappropriation of trust funds cannot be defeated on the ground of laches on the part of the distributees prior to the termination of the trust, since distributees' right to enforce distribution did not begin until such time; and the distributees' delay in bringing action 84 O'Malley v. Hears, 240 Pa. Ala. 276, 58 So. 201. 373, 87 Atl. 862. 87 Preston v. Walsh, 10 Fed. 85McRoberts V. Carneal (Ky.), 315. 44 S. W. 442. 88 Reynolds v. Sumner (111.), 86 Snodgrass v. Snodgrass, 176 14 N. E. 661, Laches. 3^3 on the trustee's bond to recover for misappropriation of the trust funds is no defense, where sureties were not preju- diced by such delay.89 In an action by the shareholders against the trustees to recover the trust estate, laches in the bring- ing of the suit cannot be imputed to the complainants until they are informed of some breach of the trust or culpable neg- ligence on the part of the trustees resulting in a loss, which the latter refuses to make good.^^ Laches will not become an equitable bar to the recovery of trust property by the share- holders so long as the trust relationship continues.^V Where a trustee misappropriates funds and conceals it until the time of his removal — the trust not terminating until later — distributees' delay in bringing action on the trustee's bond after the termination of the trust is not, as a matter of law, prejudicial delay .^^ Where a beneficiary, shortly after her trustee has carried out a fraudulent transaction with her concerning her prop- erty, appears not to have known that it was of a character that she could impeach until shortly before she sues to set it aside; her delay does not preclude relief, especially where the trustee is still in possession of the property without any material change in it, and it does not appear that he has been or wall be, prejudiced by the delay .^* 1 80 — Estoppel. One of the safe-guards of the trustees in addition to their liabilities being limited in the trust agreement to the trust 89 State V. Northrop, 93 Conn. 91 Marshall v. Marshall, 11 558, 106 Atl. 504. Colo. App. 505, 53 Pac. 617. 90 Lindsley v. Dodd, 53 N. J. 92 State v. Northrop, Supra. Eq. 69, 30 Atl. 896. 93 Branch v. Bulkley, Supra. 314 Trusts for Business Purposes. [THORN V. DE BRETEUIL.] property, is that when in doubt they can go to a court of equity for instruction and guidance. Once they secure a judicial construction of the trust, and act on the advice of the court, they will be protected in such action. This prin- ciple is well illustrated in Thorn v. De Breteuil.^^ In this case one William T. Garner, the owner of cotton mills and print works directed in his will that his mills and print works be conducted after his death according to a trust agreement which was made a part of his will. Originally there were four trustees ; upon the death of three of them, the survivor, Mr. Thorn brought an action as the sole surviving executor and trustee under the will, to obtain a judgment which should finally settle his accounts, discharge him from all further responsibility, and permit him to resign his office of trust in favor of a certain trustee named. He joined as parties de- fendant the three daughters of William T. Garner, deceased, who were his only children, their husbands, and their chil- dren. The principal question involved in the case was one of estoppel. The trustees at different periods filed their reports which were approved. At one time prior to the present ac- tion, they asked for a judicial construction of the will, and for instruction as to their powers and duties. It was then implied in the judgment rendered that the trustees were to carry on the business in the manner directed in the will; further, that all profits and gain not otherwise appropriated be added to the working capital of the estate. The question of estoppel as it arose in this case is of vital interest in con- sidering the trust question for the reason that the trustees were upheld in their acts when they followed the instructions 94 179 N. Y. 64, 71 N. E. 470. , Laches. S^S [THORN V. IJE BRETEUIL.l of the court. It was upon this theory that the upper court sustained the actions of the trustees in adding the profits gathered from years of business to the capital — although this addition of profits to the capital was in violation of a statute against accumulation. The trustees sought judicial knowl- edge as to their powers and duties ; they acted on the instruc- tions of the court; the upper court sustained them in such action. The court, in passing on the doctrine of estoppel and the other questions raised, in substance, said : " The well-settled general rule of estoppel, as stated in Pray V. Hegeman,^*" and as repeated more recently in Reich v. Cochran,95 jg "that the estoppel in a former judgment extends to every material matter within the issues which was ex- pressly litigated and determined, and also to those matters which although not expressly determined are comprehended and involved in the thing expressly stated and decided, whether they were or were not actually litigated or considered. It is not necessary to the conclusiveness of a former judgment that issue should have been taken upon the precise point con- troverted in the second action. Whatever is necessarily im- plied in the former decision is, for the purpose of the estoppel, deemed to have been actually decided." In Herman on Es- toppel,^^ a general rule is deduced from a number of cases that the principle of res adjudicata, which is a phase of es- toppel by record, "not only embraces what actually was de- termined, but also extends to every other matter which, under the issues, the parties might have litigated in the case; to everything within the knowledge of the parties which might have been set up as a ground of relief or defense. This 94* 98 N. Y. 351. 37 L. R. A. 805, 56 Am. St. Rep. 95 151 N. Y. 122, 45 N. E. 367, 607. 96 Sec. 125. 3i6 Trusts for Business Purpose;s. [THORN V. DE BRETEUIL.] latter statement may be thought rather broadly made, but it is not out of harmony with the reason for the rule of finality in judgments, namely, the policy and expediency of accom- plishing the ends of justice by a single decision upon the rights of parties. The rule has also been stated, upon the authorities, rather appropriately to this case, in this wise : That the estoppel of a judgment by a court of competent jurisdiction extends to those matters which, though not ex- pressly determined, are comprehended and involved in the thing expressly stated and decided. Hence it is not neces- sary to the conclusiveness of the former judgment that issue should have been taken upon the precise point controverted in the second action."^'' Was not the rule satisfied, in its essential and reasonable requirements, in this case? Is there room for doubt that the precise point now raised by the daughters of the testator was comprehended in what was decided in the construction suit? Upon that judgment, in 1879, the trustees have pro- ceeded with the business, accounting for the accumulation of the surplus income of the estate as part of the capital in their hands, and receiving the apparent approval of the beneficiaries and the express approval of the court. I do not think the ends of justice would be promoted by allowing the claims of the adult defendants. I should say that the point of this estoppel by record is not in this : that an issue was raised by way of suggestion in the complaint or of allegation in the answer in the construction suit as to the validity or invalidity of the direction in the second clause of the will ; but it is in this : that the trust in the will presented a dominating or conspicuous feature 97 Am. & Eng. Ency. of Law, vol. 24, p. 766. , Laches. 317 [THORN V. DE BKETEUIL.] in the aspect discussed, which the judgment in the construc- tion suit must have determined or impHedly did determine, and therefore was to be regarded as accepted by the parties in interest as the chart of the trustees' powers and duties. The decision of this court in Pray v. Hegeman, supra, is an authority much in point. Hegeman was executor and trus- tee under the will of Austin D. Moore, and testator's son, a beneficiary of a trust created thereunder, had brought an action against Hegeman to have the trust declared invalid as unlawfully suspending the power of alienation, and to re- cover the share of the estate and the accumulations. The judg- ment went against the plaintiff, and adjudged the trust pro- vision to be valid. Whether the will controverted the statute against accumulations was a question not specifically raised, nor specifically passed upon by the judgment. That case was affirmed in this court.^* Subsequently Pray, a judgment creditor of the younger Moore, brought an action against Hegeman, the executor and trustee, and Moore, to reach the accumulation in Hegeman's hands, as belonging to Moore. This court held,^^ upon a first trial that the accumulation directed by the will was illegal; but, because of, the im- perfect presentation of the facts, a new trial was ordered. Upon the second trial a son of Moore, an infant, set up as a bar the prior judgment in Moore v. Hegeman, and a judgment was had that the prior judgment pleaded constituted an es- toppel. When the case reached this court again, the judg- ment was sustained, i**® and in the opinion delivered by Judge Andrews, the general rule was stated as I have quoted it above. Judge Andrews observed that "the first action was, in general terms, to recover the whole trust estate on the ground 98 72 N. Y. 376. 100 98 N. Y. 351. 99 92 N. Y. 508. 3i8 Trusts for Business Purposes. [TIIOKN V. DE BRETEUIL.] that the entire trust was void. The present action is to recover the accumulations on the ground that the trust, though otherwise valid, was, as to the accumulations, void. If the plaintiff in the first action was entitled to a judgment estab- lishing his right to the accumulations, then manifestly this action was for the same cause. It must be true, as a general principle, that subordinate rights or questions which are branches of a larger right or question put in issue, and which under the pleadings may be determined, and as to which re- lief may be given in the action, although the principal or main relief is denied, are determined by a judgment on the merits denying all relief." The principle of the decision as to the estoppel worked by the previous judgment was in this : that whatever is necessarily implied in the former de- cision is, for the purpose of the estoppel, deemed to have been actually decided, and that it is not necessary to the con- clusiveness of the former judgment that issue should have been taken upon the precise point controverted in the second action. That was the situation in this action. When the exec- utors of Garner asked for a judicial construction of his will, and that their powers and obligations and the rights of the children should be declared and adjudged, it was implied in the judgment rendered that they were authorized to carry on the business in the manner directed in the will, and that the direction to add all profits and gains, not otherwise appro- priated, to the working capital of his estate was valid. To apply a test suggested by Judge Andrews in Pray v. Hegeman, if the defendants in the suit brought for the con- struction of Garner's will had appealed from the judgment and had raised the point that the direction as to the addition of profits to capital violated the statutes against accumula- tions, would not the appellate courts have been bound to Laches. 3^9 [THOKN V, DE BKETEUIL.] reverse the judgment so far as it determined that the ex- ecutors should carry on the testator's business as his will directed it to be done; there was in fact such an adjudication bearing upon the point now raised as to have rendered the judgment vulnerable upon appeal. But if that be so, then it is no unreasonable stretch to apply the rule of estoppel to this controversy. It seems to me that this case is brought well within the line of authorities to which counsel directed our attention, and which determine the conclusiveness of the estoppel of a prior judgment by the test of whether the issue in the subsequent action was involved upon the prior trial, and was expressly or impHedly determined as material to the judgment. When all is considered, it seems to be an irre- sistible conclusion that, if the judgment of 1879 had any ef- fect, it had that of giving authority to the executors to fol- low the testator's directions. The question stood plainly out in the will and in the pleadings. Knowledge of the statutes was chargeable to the court and to the guardian of the in- fant defendants. The acts of the plaintiff and of his former associates in the trust have not been questioned by those con- cerned in all the years intervening between the first judg- ment of 1879, and the commencement of this action in 1899. The testator's children, though infant defendants, were as much barred by the judgment in the construction suit as though they were adults.^ These infant defendants, the grand- children of the testator, were barred by that judgment equally with their mothers. Their interests were purely contingent and the court had before it all necessary parties having vested 1 Matter of Hawley, 100 N. Y. den's Ex'rs., 98 N. Y. 434. 206, 3 N. E. 68. Matter of Til- 320 Trusts for Business Purposes. [THORN V. DE BRETEUIL,.] interests, and through them these infant defendants were represented.** If the bar of an estoppel by record existed, it will not do to lift it through the suggestion that the accumulations are separable from the capital of the estate in the plaintiff's hands. The claims of these adult defendants were barred, or they were not. Not only the legal rule of finality operated, but equitable considerations of possible prejudice to remainder- men or of possible prejudice to the investment of the trust estate, militate against our holding otherwise. All other questions have been properly adjudged and I advise that the judgment of the Appellate Division be reversed in so far as it modified the judgment of the Special Term, and that that judgment be affirmed, with such modification, however, in its recitals, as that it shall adjudge that the adult defendants were estopped and barred from claiming that the provisions of the will were invalid, or that the daughters of the testator were severally entitled to receive any portion of the fund in the plaintiff's hands which represents the accumu- lations made by the executors and trustees. 2 Pray v. Hegeman, 98 N. Y. Lef. 386. 351; GifEord v. Hart, 1 Sch. & CHAPTER XVII. TAXES. i8i — Trust Not Subject to Tax Under Corporation Act. The physical assets of a trust are subject to taxation the same as any other property; but the corporation, in addition to this tax, is subject to a capital stock tax, a franchise tax, and special taxes under corporate acts. It has been said that "in the matter of taxation the advantage is decidedly with the business trust. The corporation must pay an organization tax, a property tax, a franchise tax, a state and federal capi- tal stock tax, and a state and federal income tax."2i The trust as such is not subject to taxation under a law providing for a corporate tax; this doctrine was expressed by the United States Supreme Court in the case of Eliot v. Freeman.^ In this case the Cushing Real Estate Trust was organized for the purpose of purchasing, improving, holding and selling lands and buildings in Boston. The government sought to tax this trust and another trust known as the Department Store Trust under an act which provided for "the doing of business by corporations, joint-stock companies or associa- tions, now or hereafter organized under the laws of the United States or of any state or territory" In construing this tax act in reference to trusts the court said : "The pertinent question in this connection is: are these trusts organized under the laws of the state? As we have con- 2i Thompson Business Trusts, 8 220 U. S. 178, 31 Sup. Ct. 38. 360, 55 L. Ed. 424. (321) 322 Trusts for Business Purpos^^s. strued the corporation tax act in Flint v. Stone Tracy Com- pany^^- the tax is imposed upon doing business in a corporate or quasi corporate capacity ; that is, with the facihty or ad- vantage of corporate organization. It was the purpose of the act to treat corporations and joint-stock companies similarly organized, in the same way, and assess them upon the facility in doing business which is substantially the same in both forms of organization. Joint-stock organizations are not in- frequently organized under the statute laws of a state, deriv- ing therefrom, in a large measure, the characteristics of a cor- poration. The language of the act, "now or hereafter organized under the laws of the United States,", etc., imports an organization deriving power from statutory enactment. The statute does not say under the law of the United States, or a state, or lawful in the United States or in any state, but is made applicable to such as are organized under the laws of the United States, etc. The description of the corporation or joint-stock association as one organized under the laws of a state at once suggests that they are such as are the creation of statutory law from which they derive their powers and are qualified to carry on their operations. A trust of the character of those here involved can hardly be said to be organized within the ordinary meaning of that term ; it certainly is not organized under statutory laws as corporations are. The difference between joint-stock associa- tions at common law and those organized under statutes is well recognized (2 Cook, Corp. Sec. 505) : "There is an essential difference between a joint-stock company as it exists at common law and a joint-stock company having extensive Si 220 U. S. 107, 55 L. Ed. 389, 31 Sup. Ct. 342. Taxes. 323 statutory powers conferred upon it by the state within which it is organized. The latter kind of joint-stock companies is found in England and in the State of New York. To such an extent have these statutory powers been conferred on joint-stock companies that the only substantial difference be- tween them and corporations is that the members are not ex- empt from liability as partners for the debts of the company." The two cases now under consideration embrace trusts which do not derive any benefit from and are not organized under the statutory laws of Massachusetts. Joint-stock com- panies of the statutory character are not known to the laws of that commonwealth.* These trusts do not have perpetual succession but end with lives in being and twenty years there- after. Entertaining the view that it was the intention of congress to embrace within the corporation tax statute only such cor- porations and joint-stock associations as are organized under some statute, or derive from that source some quality or benefit not existing at the common law, we are of the opin- ion that the real estate trusts involved in these two cases are not within the terms of the act. In that view the decrees in both cases will be reversed and the same remanded to the Circuit Court of the United States for the District of Mas- sachusetts, with directions to overrule the demurrers, and for further proceedings consistent with this opinion." 182 — Trust N'ot Subject to Capital Stock Tax. A trust in its aggregate may be represented by a certain number of beneficial interests, and these interests may be 4 Ricker v. American Loan & T. Co., 140 Mass. 346, 5 N. E. 284. 324 Trusts for Business Purposes. [PEOPLE, ex rel. WINCHESTER v. COLE3IAN.1 evidenced by transferable certificates; where this is true the trust as such is not subject to a corporation act which pro- vides for a capital stock tax. This principle is well set forth in the case of The National Express Company ;*i in this case the express company — a joint-stock association — was taxed on its capital under an act providing for a capital stock tax on corporations. The company contended that it was not a corporation and therefore not subject to a capital stock tax; this view was upheld in the lower and sustained by the Su- preme Court. The ruling on this question is in substance as follows : The National Express Company was taxed upon its capital on the ground that it had become a corporation within the meaning of the provision of the Revised Statutes which en- acts that "all money or stock corporations deriving an income or profit from their capital, or otherwise, shall be liable to taxation on their capital in the manner hereinafter prescribed. (i Rev. Stat. pt. I, chap. 13, title 4, Section i.) The com- pany was formed as a joint-stock company or association in 1853 by a written agreement of eight individuals with each other, the whole force and efifect of which, in constituting and creating the organization, rested upon the common- law rights of the individuals and their power to con- tract with each other. The relation they assumed was wholly the product of their mutual agreement and depend- ent in no respect upon the grant or authority of the state. It was entered into under no statutory license or per- mission, neither accepting, nor designed to accept, any fran- chise from the sovereign, but founded wholly upon the in- 4i People, ex rel. Winchester E. 96, 16 L. R. A. 183. V. Coleman, 133 N. Y. 279, 31 N. Taxes. 325 [PEOPLE, ex rel. WINCHESTER v. COLEMAN.] dividual rights of the associates to join their capital and enterprise in a relation similar to that of a partnership. A few years earlier the legislature had expHcitly recognized the existence and validity of such organizations founded upon contract and evolved from the common law rights of citizens ; Laws 1849, Chap. 258. That act provided that any joint-stock company or association which consisted of seven or more members might sue or be sued in the name of its president or treasurer, and with the same force and effect so far as the joint property and rights were concerned, as if the suit should be prosecuted in the names of the associates ; but the act explicitly disclaimed any purpose of converting the joint- stock associations, recognized as existing, into corporations by a section prohibiting any such construction; Section 5. In 1 85 1 the act was amended in its form and application, but in no respect material to the present inquiry. There is no doubt, therefore, that when the company was formed and went into operation, the law recognized a distinct and substantial difference between joint-stock companies and corporations, and never confused one with the other; and the existing statute which taxed the capital of corporations had no reference to or operation upon joint-stock companies or associations. But, two things have since occurred. The legislature, while steadily preserving the distinction of names, has, with equal persistence, confused the things by obliterat- ing substantial and characteristic marks of difference, until it is now claimed that the joint-stock associations have grown into and become corporations by force of the continued be- stowal upon them of corporate attributes. It is said, and very probably correctly said, that the legislature may create a corporation, without explicitly declaring it to be such, by the bestowal of a corporate franchise or corporate attributes, 326 Trusts for Business Purposes. [PEOPLE, ex rel. AAIXCHESTEB v. COLEMAN.] and the cases of banking associations are referred to as in- stances of actual occur rence.5 It is added that such result may happen even without the legislative intent and because the gift of corporate powers and attributes is tantamount to a corporate creation. It is then asserted that a series of stat- utes beginning with the act of 1849, ^^s ended in the gift to joint-stock associations of every essential attribute possessed by and characteristic of corporations (laws 1853, chap. 53; laws 1854, chap. 245; laws 1867, chap. 289); that the lines of distinction between the two, however, far apart in the beginning, have steadily converged, until they have melted into each other and become identical ; that every distinguish- ing mark and characteristic has been obliterated ; and no rea- son remains why joint-stock associations should not be, in all respects, treated and regarded as corporations. Some of this contention is true ; the case of People v. Wemple^ shows very forcibly how almost the full measure of corporate at- tributes has, by legislative enactment, been bestowed upon joint-stock associations, until the difference, if there be one, is obscure, elusive, and difficult to see and describe. And yet the truth remains that all along the line of legislation the distinctive names have been retained as indicative and repre- sentative of a difference in the organizations themselves. As recently as the acts of 1880 and 1881, which formed the subject of consideration in the Wemple case, the legis- lature, dealing w^ith the subject of taxation and desiring to tax business and franchises, imposed the liability upon "every corporation, joint-stock company, or association whatever, 5 Thomas v. Dakin, 22 Wend. Niagara County, Supra, 4 Hill 9; Bank of Watertown v. Water- 20. town, 25 Wend. 686; People v. 6 117 N. Y. 77, 6 L. R. A. 303, 52 Hun. 434. Taxes. 327 [PEOPLE, ex rel. WINCHESTER v. COLEM^VN.] now or hereafter incorporated or organized under any law of this state." It is significant that the words "or organized" were inserted by amendment, and evidently for the under- stood reason that joint-stock companies could not properly be said to be "incorporated" but might be correctly described as "organized" under the laws of the state. This persistent distinction in the language of the statutes I should not be in- cHned to disregard or treat as of no practical consequence, when seeking to arrive at the true intent and proper construction of the statute, even if I were unable to discover any practical or substantial difference between the two classes of organizations upon which it could rest or out of which it grew; for the distinction so sedulously and persistently observed would strongly indicate the legislative intent, and so the correct con- struction. But I think there was an original and inherent difference between the corporate and joint-stock companies known to our law, which legislation has somewhat obscured but has not destroyed, and that difference is the one pointed out by the learned counsel for the respondent, and which impresses me as logical, and well supported by authority. It is that the creation of the corporation merges in the artificial body and drowns in it the individual rights and liabilities of the mem- bers, while the organization of a joint-stock company leaves the individual rights and liabilities unimpaired and in full force. The idea was expressed' by the statement that the corporators lost their individuality and merged their individ- ual characters into one artificial existence ; and upon these au- thorities a corporation is defined, on behalf of the respondents, 7 Supervisors of Niagara Co. v. Livingston, 2 Denio 380. People, 7 Hill 512; Gift'ord v. 328 Trusts for Business Purposes. IPEOPI.E, ex rel. \\1NCHESTER v. COLEMAN.] to be "an artificial person created by the sovereign from natural persons and in which artificial person the natural per- sons of which it is composed become merged and nonexistent." I am conscious that legal definitions invite and provoke criti- cism, because the instances are rare in which they prove to be perfectly accurate; and yet this one offered to us may be ac- cepted, if it successfully bears some sufficient test. In putting it on trial we may take the nature of the individual liability of the corporators on the one hand and of the associates on the other for the debts contracted by their respective organizations, as a sufficient test of the difference between them, and contrast their nature and character. It is an essential and inherent char- acteristic of a corporation that it alone is primarily liable for its debts because it alone contracts them, except as that natural and necessary consequence of its creation is modified in the act of its creation by some explicit command of the statute which either imposes an express liability upon the corporators in the nature of a penalty or affirmatively retains and presences wlrnt would have been the common law liability of the members from the destruction involved in the corporate creation. In other words, the individual liability of the members, as it would have existed at common law, is lost by their creation into a corpora- tion, and exists thereafter only by force of the statute upon some new and modifying conditions, to some partial or changed extent, and so far preventing by the intervention of an express command the total destruction of individual liabilities which otherwise would flow from the inherent effect of the corporate creation. The penalties sometimes imposed are of course new statutory liabilities which never, at common law, rested upon the individual members. The retained liability occasionally es- tablished is in the nature and a parcel of such original liability^ 8 Rogert V. Decker, 131 N. Y. 490. Taxes. 329 [PEOPLE, ex rel. WINCHESTER v. COLEMAN.] but is retained by force of the express command of the statute, and in that manner saved from the destruction which otherwise would follow the simple creation of the corporation. Ordinarily these individual liabilities exist upon other than common-law conditions, and make the corporators rather sure- ties or guarantors of the corporation than original debtors, since in general their ability arises after the usual remedies against the corporation have been exhausted. But, where that is not so, the invariable truth is that the creation of the corpora- tion necessarily destroys the common-law liability of the in- dividual members for its debts, and requires at the hands of the creating power an affirmative imposition of new personal lia- bilities, or a specific retention of old ones from the destruction which would otherwise follow. Exactly the opposite is true of joint-stock companies. Their formation destroys no part or portion of their common-law liability for the debts con- tracted. Those debts are their debts, for which they must answer, permission to sue their president or treasurer is oiily a convenient mode of enforcing that liability but in no manner creates or saves it. The statute of 1853 did interfere with it; that act required, in the first instance, a suit against the presi- dent or treasurer, and so a preliminary exhaustion of the joint property. But that act was modal, and determined the pro- cedure, it suspended the common-law right, but recognized its existence. It has been held that the associations were not cor- porations, but mere partnership concerns.^ Even that mode or procedure has been modified by the Code, (Sees. 1922, 1923) so that the creditor, at his option, may sue the associates with- out first bringing his action against the president or treasurer. These last and quite recent enactments show that the legis- SWitherhead v. Allen, 4 Abb. App. Dec. 628. 330 Trusts for Business Purposes. [PEOPLE, ex rel. A\aNCHESTER v. COLEJIAN.] lative intent is still to preserve and not destroy the original dif- ference between the two classes of organizations ; to maintain in full force the common-law liability of associates, and not to substitute for it that of corporators; and, preserving in con- tinued operation that normal and distinctive difference, to evince a plain purpose not to merge the two organizations in one, or destroy the boundaries which separate them. That intent, once clearly ascertained, determines the construction to be adopted, and may be the only reliable test in view of the power of the state to clothe one organization with all the attributes of the other. The drift of legislation has been to lessen and obscure the original and characteristic difference. On the one hand, corporations have been created with positive provisions retain- ing more or less the individual liability of the members, and on the other, the joint-stock company has been clothed with most of the corporate attributes; but enough of the original differ- ence remains to show that our legislation not only carefully pre- serves the distinction of names, but sufficient, also, of the orig- inal difference of character and quality to disclose a clear intent not to merge the two. We may thus see upon what the legis- lative intent to preserve them as separate and distinct is founded, and what distinguishing characteristics remain. The formation of the one involves the merging and destruction of the common-law liability of the members for the debts, and requires the substitution of a new, or retention of the old, lia- bility by an affirmative enactment which avoids the inherent effect of the corporate creation ; in the other the common-law lia- bility remains unchanged and unimpaired and needing no statu- tory intervention to preserve or restore it. The debt of the corporation is its own debt, and not that of its members; the debt of the joint-stock company is the debt of the associates, however enforced. The creation of the corporation merges and Taxes. 331 [PEOPLE, ex rel. WINCHESTER v. COLEMAN.] drowns the liability of its corporators ; the creation of the stock company leaves unharmed and unchanged the liability of the associates. The one derives its existence from the contract of the individuals; the other, from the sovereignty of the state. The two are alike, but not the same. More or less they crowd upon and overlap each other, but without losing their identity ; and so, while we cannot say that the joint-stock company is a corporation, we can say that a joint-stock company is a partner- ship with some of the powers of a corporation.^" Beyond that we do not think it is our duty to go. 183 — Trust Not Subject to franchise Tax. The corporation comes into being and operates by reason of a franchise granted by the state ; the trust, however, comes into existence as a matter of right under contract of individuals. It neither exercises nor enjoys any franchise or special privilege from the state and for that reason there is no basis for a fran- chise tax being assessed against it. This principle is discussed and amplified in the case of Gleason v. McKay.^^ This case is recognized as a leading one on this subject, it has been cited and the doctrine expressed therein read into the decisions in a great number of states. It is reported herewith in substance as follows : This was an action by the treasurer of the Commonwealth against the trustee of the McKay Sewing Machine Association, to recover a tax assessed upon said association for the year 1879, in pursuance of the St. of 1878, c. 275. The case was submitted to the Superior Court, and, after judgment for the defendant, to this court on appeal on agreed facts. Previous 10 Van Aernam v. Bleistein, 11 134 Mass. 419. 102 N. Y. 470, 4 Cent. Rep. 635. 332 Trusts for Business Purposes. to May lo, i856, Gordon McKay had acquired, by invention, assignment or license, interests in letters patent of the United States for improvements in machinery for sewing the soles of boots and shoes to the vamps, and had been carrying on the business of manufacturing machines under these letters patent, and licensing shoe manufacturers to use them. From the pro- ceeds of the business, he had purchased land in Lawrence and built a machine shop on it for the manufacture of such machines and accumulated some personal property. The legal title in the business and in all the property, both real and personal, in- cluding the interests in the letters patent, was in himself ; but other persons were equitably interested in various proportions. On May lo, 1866, McKay executed an instrument under seal, in which, after reciting the foregoing facts, he declared that he had held and should continue to hold the business and property in trust for the benefit of all persons who were or might become interested therein, upon the terms and conditions therein set forth. Upon the execution of this instrument by McKay, all the persons then interested in the property or busi- ness signed an agreement in the following terms : "In consid- eration that the said Gordon McKay has agreed and does here- by bind himself and agree to deliver to each and every party having an interest in the property set forth in the foregoing certificate and declaration of trust, a certificate and declaration similar to the foregoing expressing the several interests of each party, in case all of the persons interested in said property shall sign this agreement, we do hereby severally bind ourselves and agree to receive from said McKay such certificate and declara- tion of trust as the sole evidence of our respective interests in the above described property; and upon the receipt thereof, any other certificate or evidence of title which we may hold to said property shall become cancelled and void and the same shall be Taxes. 333 FGLEASON v. McKAY.] surrendered to him, the said McKay." Each person then in- terested received a certificate signed by the trustee, certifying that he was the owner of a certain number of shares "in the property of the McKay Sewing Machine Association" and the "shares are transferable by an assignment in writing on this certificate, and a surrender of this certificate to the trustee." After the execution of the papers and issue of the certificates, the shareholders held a meeting on May 28, 1866, as provided for by the declaration of trust, and chose an executive commit- tee and adopted by-laws for the regulation of the business of the association. Since said date the business of the association was conducted by its executive committee under the provisions of said declaration and by-laws, McKay holding the legal title of all its property as trustee under said declaration, the title of the property never having passed from him. The place of busi- ness of the association was in Boston, except that it had a fac- tory in Lawrence for the manufacture of machines and tools. Except its machine shop in Lawrence and the tools and ma- chinery connected therewith, the property of the association and the value of its shares consisted chiefly of its interests in the letters patent. Its income was chiefly derived from license fees received from licensees of its machines, and the net amount of this in- come was divided from time to time, generally quarterly, among its members in proportion to their respective shares or interests. Its machines were all leased under a form of lease, the legal title to them remaining in McKay as trustee. On May I, 1879, there were 1216 of these machines in the hands of licensees distributed throughout the United States ; and the in- terest of McKay, trustee, and of said association therein, ex- clusive of the interest of the lessees, Avas taxed to said trustee for that year in Boston at the rate of $1 per machine. The total 334 Trusts for Business Purposes. FGLE^^SON V. McKAY.] value of the machines at that date — May i, 1879 — was on an average $100 for each machine which had been paid by each lessee on the delivery of the machine to him. By a provision in all of said leases, the lessee upon the termination of the lease, if he had complied with its terms, was entitled to the machine absolutely, upon the payment of $1 to the trustee. Whenever a member sold his shares, or any of them, new certificates were issued to the purchaser, and such purchasers thereupon became members of the association. Said shares were frequently sold and such sales reported at auction sales in Boston, and were subject of transfer upon assignment of cer- tificates of shares as set forth in said certificates; and upon such assignment, the assignee was entitled to receive new certifi- cates and to demand and receive of the association his propor- tionate share of the new profits of the association under said declaration and by-laws. Such shares were held by the person holding the certificate thereof, free from the control of any other person, and were subject to no restrictions or conditions whatever except such as were set forth in said certificate and declaration of trust. McKay, as trustee of said association, was taxed for its real estate, machinery and tools in Lawrence for the year 1879, as well as in all previous years, and the tax was duly paid; said real estate was assessed at $63,500 and said machinen^ and tools at $71,216. He was also taxed in said year for said associa- tion, on office furniture, money on hand, book accounts and in- terest in said machines in the hands of licensees, all valued at $52,291.99 and upon which he duly paid the assessed tax, amounting to $653.75. This valuation did not include the in- terests in the letters patent held by him, it being contended by the trustee that letters patent of the United States were not subject to taxation. Taxes. 335 [GLEASON V. McKAY.] The tax sought to be recovered in this action, $14,253.33, was assessed upon the aggregate value of the shares of the asso- ciation on May i, 1879 as ascertained by the tax commissioner in pursuance of the provisions of the St. of 1865, c. 283, after deducting therefrom only the value of said real estate, ma- chinery and tools taxed at Lawrence, said assessed valuation being $1,115,284. Upon notice of said taxation, the said trus- tee, in behalf of the association, duly applied to the board of appeal for a correction of said tax upon the ground that said valuation and assessment included the interest in said letters patent and also the personal property taxed in Boston, as it did in fact, at the same time claiming that no tax whatever was as- sessable against said trustee or association. Upon the hearing, the foregoing facts appeared, but the board of appeal declined to reduce or alter the amount of said valuation or assessment. Morton, C. J. "The principal question in this case is whether the St. of 1878, c. 275, as applied to the defendant, is constitu- tional. The first section of the statute provides that 'chapter 283 of the acts of the year 1865 and the acts in amendment thereof, are hereby extended to apply, so far as applicable, to companies, copartnerships and other associations having a loca- tion or place of business within this commonwealth, in which the beneficial interest is held in shares which are assignable without consent of the other associates specifically authorizing such transfer. And the tax provided for in said chapter 283 shall be paid by such company, copartnership or association, upon the aggregate value of the shares of said capital stock in the manner provided in said chapter for taxes upon corpora- tions.' The power of taxation, using the word in its generic sense as including all rates and impositions laid or levied upon the peo- ple, is conferred upon the legislature by the Constitution, and 336 Trusts for Business Purposes. [GLEASON V. McKAY.l is to be held and exercised subject to the Hmitations imposed by the Constitution.^" f ^g legislature is given the power "to impose and levy proportional and reasonable assessments, rates and taxes, upon all the inhabitants of, and persons resident and estates lying v^ithin the said commonwealth" and also power "to impose and levy reasonable duties and excises upon any pro- duce, goods, wares, merchandise and commodities whatsoever, brought into, produced, manufactured, or being within the same." Const. Mass. c. i, art. 4. It is clear that the statute in question was not intended to lay a tax upon property within the first of these clauses. It does not purport to do this. It merely extends to certain co- partnerships and associations the provisions of the St. of 1865, c. 283, which chapter has been held to levy an excise upon corporate franchises and not to lay a tax on property, and which chapter can be sustained as constitutional only upon the ground that it levies an excise.^^ Regarded as a tax on property, the tax we are considering would be invalid because not propor- tional; it would be an imposition upon certain property at a rate different from that to which other property in the common- wealth is subject. But, as we have said, it does not purport to be a tax on property. In lev)'ing an imposition under this stat- ute no inquiry is made as to what property liable to taxation, any copartnership or other association has which comes within its terms. Such property remains liable to taxation under the general laws. This imposition is based upon the aggregate value of the shares of said capital stock. Such shares, if they can be said to be property, are not property of the copartner- ship or association which is taxed, but of the individual part- 12 Oliver v. Washington Mills, Co., 104 Mass. 586; Common- 11 Allen 268. wealth v. Hamilton Mfg. Ck)., 12 13 Murray v. Berkshire Ins. Allen 298. Taxes. 337 [GLEASON V. McKAY.] ners or shareholders. It is very clear that this was intended as an excise upon some franchises or privileges sought to be held by the copartnerships or associations in supposed analogy to the franchises of corporations. And the question is whether this imposition can be upheld as such excise within the second clause of the Constitution cited above. In this clause, there are two limitations upon the power of the legislature in im- posing excises. They must be reasonable and they must be excises upon some produce, goods, wares, merchandise, or com- modities, brought into, produced, manufactured, or being with- in the commonwealth. It will not be seriously contended that the privileges or rights which are taxed by this statute can be properly described as either produce, goods, wares or merchandise. Do they fairly come within the terms "commodities" in the sense in which it is used in the Constitution? Ever since the adoption of the Constitution, the legislature in its practice and this court in its adjudications, have given a very broad and extensive meaning to this term. It has been repeatedly held that corporate fran- chises enjoyed by grant from the government are commodities and subject to an excise. So with corporate franchises granted by a foreign government, which by comity are permitted to be exercised within this commonwealth. So where the legislature has thought, upon considerations of public policy, that certain occupations or callings of a public or quasi public character should be carried on under governmental regulation, it has been usual to impose a reasonable fee for a license.^* This imposition is clearly not in the nature of a license fee, 14 Portland Bank v. Apthorp, Hamilton Mfg. Co., Supra; Com- 12 Mass. 252; Commonwealth v. monwealth v. Cary Imp. Co., 98 People's Five Cents Sav. Bk., 5 Mass. 19; Connecticut Ins. Co. v. Allen 428; Commonwealth v. Commonwealth, 133 Mass. 161. 338 Trusts for Business Purposes. [GLEASON V. 3IcKAY.] but is an excise upon a franchise or privilege. The right to levy excises upon franchises has never been extended further tlian to corporate franchises specially granted by the govern- ment, or enjoyed and exercised by its permission. The defendant in this case is not a corporation. It is merely a partnership, u'ith all the incidents and responsibilities of a partnership. The firm property is taxa])le at its business domi- cilii It enjoys no franchises conferred upon it by the legis- lature. It does not ask for or enjoy any corporate or special privileges. It has constituted its partnership under its common law rights and such legal agreements as it chooses to make. The peculiar feature that the interest of each member may be transferred without the special assent of the other members, is created by agreement of the partners under their natural rights at common law. We do not see how this peculiar feature can be called a commodity subject to a special excise, any more than the agreement of copartnership itself, or any clause or part of it, or any other agreement, right or mode of transacting any business, can be called a commodity, and so liable to taxation at the will of the legislature. If this tax can be upheld, it seems to us that the necessary result will be that the legislature has the power to select any business, occupation or calling carried on, or any natural right enjoyed under the protection of our laws, and impose upon it at its will a special tax or excise. This would be extending the meaning of the word "commodities" beyond any reasonable limits. Its effect would be to break down the limitations which the Constitution intended to impose upon the power of the legislature, for the purpose of securing the end that all sums necessary for the defence and support of the government should 16 Hoadley v. County Coramis- sioners, 105 Mass. 519. Taxes. 339 [GLEASON V. McKAY.] as far as practicable be raised by the equal taxation of the people. We are therefore of opinion that the St. of 1878, c. 275, so far as it applies to the defendant, is unconstitutional; judgment for the defendant." 184 — Stamp Tax. A trust may or may not have its estate represented by a certain number of beneficial interests ; and it may or may not have certificates to show the ownership of the beneficial in- terests. The trust agreement may give the number of beneficial interests representing the trust estate and also the names and number of the beneficial interests owned by the several individu- als; or the trust may have a beneficial interest record book in which are recorded the names and number of interests owned by individuals; but if the trust issues certificates, they are sub- ject to the stamp tax act, for the theory of this act is to provide a revenue from certificates irrespective of whether they are issued by a corporation, association, or trust. This question was determined in the case of Pepperell Manufacturing Com- pany, a trust,^^ which is in the main as follows : Brown, District Judge. "We are of the opinion that, on the original issue of the certificates of shares of the Pepperell Manufacturing Company, a manufacturing comixmy organized in the form of a trust under the common law, and deriving none of its rights, qualities or benefits from any statute, there was required by the provisions of section 5, schedule A of the War Tax Taw, so called, approved October 22, 1914 (38 Stats, pt. I, pp. 745, 753, 759, c. 331) a stamp tax of five cents on each $100 of face value or fraction thereof. 16 Malley v. Bowditch, 259 Fed. 809, 7 A. L. R. 608. 340 Trusts for Business Purposes. IMALLEY V. BOWDITCH.] By agreement and declaration of trust it was provided : "The capital of this trust shall be seven million six hundred and sixty-eight thousand dollars ($7,668,000) divided for the purpose of issuing certificates into 76,680 sliares of the par value of one hundred dollars each." There was thus provided a share capital as a basis for the issue of transferable certifi- cates evidencing a proportional interest therein and carrying with them certain rights while the company is a going concern and in its winding up. The defendants in error, the trustees, contend that these certificates are not "certificates of stock." The word "stock" however, is to be interpreted in connection with the accompany- ing words of the statute, "association, company, or corpora- tion." It is a term not peculiar to corporations, but a term equally applicable to the share capital or fund created by or in accordance with an agreement for the formation of an unincor- porated association or company. The contention of the trustees that "legislative action is essential to the creation of capital stock" is erroneous. If there is a distinction between the "cap- ital" and the "capital stock" of corporations in that the capital stock is fixed by the charter of a corporation but that the cap- ital used in its business may be either larger or smaller, there may be a like distinction between the joint stock or share cap- ital or a partnership or association — as fixed by the agreement of the partners — ^and the full amount of its property.^''^ An "association" or "company" equally with a corporation, 17 Lindley on Partnership (8th assets. Collier on Bankruptcy Eng. Ed.), 382 et seq. In Bank- (11th Ed.), pp. 1550, 1535. ruptcy Act Aug. 19, 1841, c. 9, Berthold et al. v. Goldsmith, 24 Sec. 14, 5 Stat. 448, and Act How. 541, 16 L. Ed. 762 the March 2, 1867, c. 176, Sec. 36, 14 term 'capital stock' was used in Stat. 534, the term 'joint stock' the same sense, was used to describe partnership Taxes. 341 [MALLEY V. BOVVDITCH.] may have a share capital distinct from its actual capital or prop- erty, irrespective of whether it is formed in a state without regulating statutes or in a state where by statute it is regulated and given some of the characteristics of a corporation. The present statute by the use of the terms "association" and "com- pany" covers those formed under the common law as well as those formed under or regulated by statute. It seems to us clear that the words "certificates of stock" contain no implica- tion of an intent to exclude common-law associations or com- panies. A certificate evidencing a transferable share or shares in the share capital of a manufacturing company, whether in- corporated, quasi incorporated, or wholly unincorporated, is properly described as a "certificate of stock." By agreement the certificates in question were issued as evi- dence of shares of a fixed capital, divided into a fixed number of shares of the par value of $100 each. We are called upon to apply a statute imposing stamp taxes on documents of a certain class, which assumes that these documents may be is- sued not only by corporations, but by associations and com- panies. These may have this in common — a share capital of fixed amount. Whether the share capital is fixed by agreement or under statutory authority seems immaterial, for the tax is not a franchise tax or a corporation tax, but a stamp tax or document tax. The difiference between corporations and unincorporated as- sociations being considered immaterial to the imposition of a stamp tax on documents, the different modes of realizing upon the shares of incorporated or unincorporated companies by the certificate holders must also be regarded as immaterial. Hav- ing that feature of resemblance which the statute fixes upon as the test of the imposition of a stamp tax, the dift'erence between these different bodies which are named in the statute has be- 342 Trusts for Business Purposes. [MALLEY V. BOWDlTCH.l come immaterial to the question before us. The suggestion of constitutional difficulties in adopting the construction for which the collector contends, and which we think right, does not seem of weight. In involves "no distinction founded upon an im- material difference between two kinds of partnerships," since the stamp tax is contingent upon the original issue of "certifi- cates of stock," just as a stamp tax on checks is contingent upon the issuing of checks. A stamp tax on documents discriminates between those who do and those who do not issue documents ; and a distinction be- tween unincorporated companies and associations which do and those which do not issue certificates of shares of stock is not unreasonable, nor founded upon an immaterial difference be- tween two kinds of partnerships. ^^ Nor do we regard it useful to consider whether the right of the certificate holder or share- holder is a chose in action or in the nature of a chose in action, or an equitable interest in property. The certificate is but a muniment of title — documentary evidence of ownership — and not the share itself. The thing taxed is not a chose in action, though it may be evidence of it. In a remote sense both a share of corporate stock and a certificate of a share in an unincor- porated company may be said to represent an interest in prop- erty. It is equally true that both may represent an interest in a share of capital fixed in amount, whether fixed by statute or by agreement. ^^z^— Franchise Tax Distinguished from Stamp Tax. In Eliot V. Freeman, ^^ construing the corporation tax law 18 Thomas v. United, 192 U. S. Ed. 415, 9 Ann. Cas. 736. 363-71, 24 Sup. Ct. 305, 48 L. Ed. 19 220 U. S. 178, 31 Sup. Ct. 481; Hatch v. Reardon, 204 U. S. 360, 55 L. Ed. 424. 152-8-9, 27 Sup. Ct. 188, 51 L. Taxes. 343 [MALIvEY V. BOWDITCH.] (Act Aug. 5, 1909, c. 6, 36 Stat. 11) it was held that the tax was imposed upon doing business in a corporate or quasi cor- porate capacity. But that case is clearly distinguishable from the present case since the present statute does not impose a franchise tax, but imposes a stamp tax upon various kinds of documents which may be issued by companies either incorpor- ated or quasi incorporated, "or for or in respect of the vellum, parchment, or paper upon which such instruments, matters, or things, or any of them are written or printed," etc. See section 5, 38 Stat. pt. I, p. 753. In interpreting the statute we find no sufficient reason for limiting the terms "association" and "company" to those which derive their powers from legislation. We have examined also the opinion of the Supreme Court in Crocker et al. v. Malley.^o reversing the judgment of this court. In that case the Supreme Court found that "The declaration of trust on its face is an ordinary real estate trust of the kind familiar in Massachusetts, unless in the particular that the trus- tees receipt provides that the holder has no interest in any spe- cific property and that it purports only to declare the holder entitled to a certain fraction of the net proceeds of the property when converted into cash and meantime to income." It was stated, however, in that case that: "The function of the trus- tees is not to manage the mills, but simply to collect the rents and income of such property as may be in their hands." Under the present declaration of trust it is provided that the name of the trust shall be Pepperell Manufacturing Company, and the trustees may be so designated and in that name the trustees shall, so far as practicable, conduct the business of the trust ; that the trustees shall employ and use the trust property 20 249 U. S. 223, 39 Sup. Ct. 270, 63 L. Ed. 573, 2 A. L. R. 1601. 344 Trusts for Business Purposes. [MALLEY V. BOWDITCH.] and assets in the carrying on of the business of manufacturing textile or other fabrics, etc. This is essentially different from an ordinary real estate trust of the kind familiar in Massachu- setts. If, under the decision of the Supreme Court, there may be doubt whether the term "association" is applicable, there seems no ground for serious doubt of the applicability of the term "company" used in the statute and made a part of the name and description of those persons who are to conduct the manufacturing business of the organization. In applying this stamp tax we find no substantial reason for distinction between this textile manufacturing company and other textile manu- facturing companies. The judgment of the District Court is reversed, and the case will be remanded to that court with direction to enter judgment for the defendant, and the plaintiff in error recovers costs in both courts." i86 — Income Tax. The Federal Income Tax of 191 3, under Section II, G (a) provided for taxes on incomes of corporations, joint-stock com- panies, or associations and insurance companies. Section II D provides for tax on the income of the individual and in addition reads as follows : "Trustees, executors, administrators, agents, receivers, conservators, and all persons, corporations or associa- tions acting in any fiduciary capacity, shall make and render a return of the net income of the person for whom they act." It was decided in the case of the Wachusett Real Estate trust,^^ that a trust for business purposes is subject to Section II D of the Federal Income Tax Act, and that the law is complied with 21 Crocker v. Malley, Supra. under Trust as an Entity. This case is reported in the main Taxes. 345 when the trustees as fiduciaries make return of the amounts which the beneficiaries are entitled to and receive as profits or income of the trust. No tax is paid on the income of the trust as such; however, the beneficiaries pay income tax on the in- dividual dividends or amounts they receive from the trust. In the case just cited an income tax was assessed against the trust as an association, the trust paid the tax under protest and then filed suit against the collector of internal revenue. The District Court of the United States for the District of Massachusetts, sustained the theory of the trustees, that they should not be taxed as an association but as a fiduciary as pro- vided in Section II D of the act. The collector of iniernal revenue appealed to the Circuit Court of Appeals and there the court held that the District Court was in error and that the trust was properly taxed on its income under Section II G (a) as an association. The trustees then appealed to the United States Supreme Court and there the court held that ''It would be a wide departure from normal usage to call the beneficiaries a joint-stock association when they are admitted not to be part- ners in any sense, and when they have no joint action or interest and no control over the fund. On the other hand, the trustees by themselves cannot be a joint-stock association within the meaning of the act unless all trustees with discretionary pow- ers are such, and the special provision for trustees in D is to be made meaningless. The recovery therefore will be from the United States; the plaintiffs — as they themselves alleged in their claim — were the persons taxed, whether they were called an association or trustees. They were taxed too much. Judg- ment of the Circuit Court of Appeals reversed; judgment of the District Court affirmed." CHAPTER XVIII. THIRD PARTIES— CREDITORS. 187 — Taking or Dealing with Trust Property with Notice. Trust funds and trust property are for the use and benefit of the shareholders exclusively, and one dealing with a trustee knowingly in violation of his trust, may be bound to the extent of the trustee's violation, for the rule is that one who receives with notice, money or property of a trustee in breach of the trust, becomes himself a trustee and is liable to account as such.^^ Where one has been dealing with a firm managed by three trustees whose names are printed on the letter-heads of the firm, any change in the letter-head is notice sufficient to put him on inquiry as to the change in the management of the busi- ness of the firm. 2* Once a person is put upon notice in dealing with trust property, it is his duty to ascertain the extent of the trustee's capacity to contract, for he cannot rely on the ap- parent scope of such authority. ^^ A trustee who uses the trust fund for purposes of speculation is violating the trust ; and persons who take the trust securities from him in connection with such a transaction with full notice that they are impressed with the trust, are bound to account for them.^^ Where the facts are sufficient to put a person deal- ing with trustees on inquiry as to the limitations on the powers and authority of the trustees, he wall be regarded as having con- 23 Donnelly v. Alden, 229 Mass. 25 Rand v. Farquahr, 226 Mass. 109, 118 N. E. 298. 91, 115 N. E. 286. 24Noyes v. Turnvull, 130 N. 20 English v. Mclntyre, 29 Y. 639, 29 N. E. 145. App. Div. 439, 51 N. Y. Sup. 697. (346) Third Parties — Creditors. 347 structive notice of the trust, and knowledge of the trustees vio- lation of the trust conditions will be chargeable to him.^''^ i88 — Creditors of Trust Company. The question as to whether parties dealing with trustees are creditors of the trustees personally or of the trust company, de- pends upon the authority of the trustees to bind the trust estate and whether the creditor accepts the trustees personally on the trust estate for the debt. Where the trust instrument expressly authorizes the trustee to invest the trust funds in merchandise — it being apparent that it is intended he should use them in his business — a party selling merchandise to the trustee may look to the estate for payment therefor.^s Contractors may agree witli trustees to erect a building and to look only to the trust fund for their compensation, and afterwards agree to do certain addi- tional work ; the question as to whether the additional work is a charge against the trustees personally or the trust estate is one of intention of the parties.^^ Where trustees are authorized to carry on a business and contract debts, with provisions that at the termination of the trust and before a transfer of the property, they shall be indemnified against any personal liability incurred in the proper execution of the trust, creditors may at the expiration of the trust period and before a transfer of the property, sue in equity to have the rights of the trustees for indemnity out of the trust fund enforced in their favor for the payment of their claims.^** 27 Ludington v. Mercantile 30 Mason v. Pomeroy, 151 Mass. Natl. Bank, 102 App. Dlv. 251, 164, 24 N. E. 202. See also: 92 N. Y. Sup. 454. Liability of Trustees, Limitation 28 Wadsworth, Rowland & Co. of Trustee's Liability, Liability V. Arnold, 24 R. I. 32, 51 Atl. of Beneficiaries, and Benefi- 1041. claries not liable as partners. 29 Rand v. Farqualir, Supra. CHAPTER XIX. BANKRUPTCY. 189 — In General. The bankruptcy act was intended not only to secure equality among creditors, but also to benefit the debtor in discharging him from his liabilities.^^ The releasing of the bankrupt from his debts is a most important consideration in determining whether trusts may be adjudged bankrupt. In a pure trust, properly drawn, the trustees hold title to all property, and their liability is limited by the trust agreement so there is no necessity for a discharge or a release as to them, because there is no lia- bility; the beneficiaries or shareholders are also exempt from liability and to this extent they should come under the same rule as the trustees. So it would seem that in a pure trust there is no one to discharge from liability and for that reason the bankruptcy act should not apply to it. The act itself is silent as to adjudication of a trust so, for the present at least, we shall have to look to the courts and their decisions and from that source draw our conclusions as to whether this form of business organization is subject to adjudication in bankruptcy. In its relation to the trust, the bankruptcy act was discussed in the case of the Co-Operative Society of America by Judge Evans of the District Court, Northern District of Illinois.*^ jn this case an involuntary petition in bankruptcy was filed; a motion was made by the trustees to dismiss the petition on the 313 R. C. L. 164. 29464), 275 Fed. 868. 32 In re Parker, et al. (No. (348) Bankruptcy. 349 [IN BE PARKER, et al.] ground tliat they were not insolvent and that they were not subject to the bankruptcy laws. The court said in passing on the motion : "The bankruptcy act was a general enactment of a remedial character, and should be liberally construed to effect the purposes of the enactment.^^ The general object of the act, as I understand it, is to secure an equal distribution of the assets of an insolvent party among the unsecured creditors. The respondents (the Co-Operative Society of America) assert that they are the trustees of a "common-law trust" or a "pure trust" or a "Massachusetts trust," and are not subject to the bankruptcy act, though engaged in a commercial enterprise of wide scope and in various fields. One is impressed therefore, at the outset, that if such a commercial enterprise is not subject to the bankruptcy act, it was an oversight on the part of con- gress. But, confessedly, the bankruptcy act must itself furnish the answer to this first query. In other words, if the bankruptcy act does not make business concerns, associations, or companies of the character of the respondents, subject to an adjudication in bankruptcy, this court must dismiss the petition. It likewise appears to me that if the bankruptcy act covers or includes com- panies like respondents, it must be by virtue of sections 4 and 5 of the act. These two sections define the parties who may be adjudged a voluntary bankrupt, as well as an involuntary bank- rupt. Examining section 4b, we can readily understand who is defined by the term "natural person." Likewise we may readily know who is meant by a "partnership" as used in sec- tion 5. With equal certainty we may understand what is meant by the term "corporation" as used in section 4b, but uncertainty may well arise over the term "unincorporated company." Re- 38 5 Cyc. 242. 350 Trusts for Business Purposes. [IN RE PARKEK, et al.l spondents ask the court to give this term a restricted meaning. But should the court do so, if the result of such a construction is to defeat in part, at least, the manifest purpose of the entire enactment ? The words "any unincorporated company" were not present in the act when it was originally introduced in congress. They were added in the committee. The term is comprehensive in its ordinary and usual meaning. When used with the other terms, "natural person," "corporation," and "copartnership" it completes the description of all subjects which may be adjudged bankrupts. It seems to me that its insertion in the act denotes a congressional intent to be inclusive in the characterization of organizations or of individuals subject to bankruptcy. If the words be given their normal meaning used as a part of the entire context, we can find nothing in the adjective "imincor- porated" that does not include respondents. The adjective plus the noun "company" is, of course, more elastic, more uncertain ; but, used in connection with the words "natural person" and "corporation," it is entitled to such a meaning as will cover that which is neither corporation, natural person, nor copartner- ship. A reading of section 4a strengthens this conclusion. There congress uses an expression which, properly construed in the light of the exceptions, includes everything that transacted business. Section 4b is not less comprehensive, but the excep- tions are more inclusive. These views find support in Collier on Bankruptcy .3* I recognize a contrary expression of opinion which may be found in Sears' work on Trusts." Considering all phases of this question, the court concludes 34 11th Ed. p. 154. In matter Sparta (Vadakin v. Cass et al.), of Associated Trusts (D. C.) 222 242 Fed. 235, 155 C. C. A. 75. Fed. 1012 and In re Order of Bankruptcy. 351 [IN RE PARKER, et aJ.] that the answer to the first query must be in the affirmative, i. e. that the Co-Operative Society of America, a trust, may be de- clared a bankrupt and made amenable to the present bankruptcy law. (Note.) In reaching its decision the court said it could readily understand that the trust was not included in the act under the terms "natural person" "partnership," or "corpora- tion" but was included under the term "unincorporated com- pany." In sustaining this theory the court reads other cases^* intO' the record which w^e shall examine briefly. In the Order of Sparta case the question of its being a trust was not in- volved, it was an unincorporated association, so for that reason this case may be dismissed from the present consideration. In the other case relied on by the court. In re Associated Trust, the court found the trust to be an unincorporated company. These decisions are predicated upon the theory that the trust with capital, shares and certificates — and carrying on a business — has no standing in law as a trust, but must be classed as an "unincorporated company," "association" or something other than what it really is. This theory cannot prevail for the courts time after time have recognized the trust — as such — for business purposes. (Note) Since the above was written tlie United States Cir- cuit Court of Appeals reversed the decision of Judge Evans, saying in part, (Judge Baker) If the alleged fact was the truth, if the only relationship between plaintiffs and defendants was that of beneficiaries and trustees of an express trust wherein the trustees had full title and con- trol and the beneficiaries had no title and no control beyond ap- pealing to a court to restrain waste and malfeasance, then the facts should have been pleaded so that a demurrer could test the question whether the bankrupcty statute infringes upon the other- wise exclusive jurisdiction of equity over trusts. 35 In re Associated Trust, 222 Fed. 1012; In re Order of Sparta, 242 Fed. 235, 155 C. C. A. 75. 352 Trusts for Business Purposes. [IN BE PARKER, et al.] In passing on the trust as an entity, the state of Texas says :^^ "The first question arising on the appeal is whether the agree- ment entered into between the parties to the suit, and under the terms on which they organized and were conducting the busi- ness in which they were engaged, created a partnership or an unincorporated company, or a trust as distinguished from a partnership or such company. We have examined the trust agreement in question and the authorities at our command bear- ing on the subject as carefully as we have been able to do, and conclude that said agreement created a 'trust' and not a com- pany, association, or partnership." It was argued by the distinguished lawyer, Joseph H. Choate, in the case of Rice v. Rockefeller ,2' that "this trust or consolida- tion of interests is not a corporation or an association, or a partnership. So far as it is anything legally tangible, it is an ordinary trust — the creation of a court of equity." This is the view adopted generally,^® the one followed by the United States Supreme Court for it says a trust is not a joint-stock association or company, and "we perceive no ground for grouping tlie two — ^beneficiaries and trustees — together in order to turn them into an association by uniting their contrasted functions and powers; although they are in no proper sense associated. It seems to be an unnatural perversion of a well known institution of the law."39 Clearly, a trust is a well-known institution of the law, and should not be termed — for bankruptcy or other pur- poses — an unincorporated company. 36 Davis V. Hudgins, 225 S. W. 38 Wrightington — Unincorpo- 73^ rated Associations Sears work 37 134 N. Y. 174, 31 N. E. 900, on Trusts, 7 A. L. R. 613. 17 L. R. A. 237, 30 Am. St. Rep. 39 Crocker v, Malley, 249 U. S. 658. 223. 39 Sup. Ct. Rep. 270, 63 L. Ed. 573, 2 A. L. R. 1801. Bankruptcy, 353 [davis v. hudgins.] 190 — Receivership. The question now arises if a trvist cannot be declared a bankrupt and is not subject to the bankruptcy law, what is the proper procedure in case of insolvency, dissipation of trust assets, and like conditions. Inasmuch as the trust is subject to a court of equity, a receiver may be appointed in all proper cases. The rights of the beneficiaries to have a receiver ap- pointed for a trust is discussed in the case of Davis v. Hud- kins.*° There the plaintiffs' application for the appointment of a receiver came on to be heard, and the demurrers were over- ruled. Then the court, apart from the sworn pleadings, heard the oral testimony of several witnesses introduced by the re- spective parties, and was of opinion that the application should be granted and thereupon by order and decree entered, ap- pointed R. Sneed Kimbrough receiver to take charge of, keep possession of, and hold subject to the further orders of the court, all of the assets and property owned or belonging to the Davis-Coggins Oil Company, a trust. From this order and judgment of the court, the defendant J. C. Davis for himself and the Davis-Coggins Oil Company appealed. In passing on the questions raised the court said : "The first question arising on the appeal is whether the agree- ment entered into between the parties to the suit, and under the terms on which they organized and were conducting the busi- ness in which they were engaged, created a partnership or an unincorporated joint-stock company, or a trust as distinguished from a partnership or such company. We have no statute de- fining an unincorporated joint-stock company or association, and we gather from decisiouL and elementary works that some 40 225 S. W. 73. See paragraph in emergency ex-parte and with- 85 — Receiver may be appointed out notice. 354 Trusts for Business Purposes. [DA>T[S V. HUDGINS.] of them combine the elements of both partnership and trust, while others are essentially trusts and not partnerships. This we think is undoubtedly true, but it is equally true that it is frequently a difficult problem to determine the line that divides them. We shall not undertake to point out this line of demarka- tion as shown by the authorities, but shall content ourselves, for the purposes of this opinion, with the statement that we have examined the trust agreement in question and the authori- ties at our command bearing upon the subject, as carefully as we have been able to do, and conclude that said agreement cre- ated a trust, and not a company, association, or partnership. The written articles of association here are very similar, in es- sential particulars, to those expressed in the instrument involved in the case of Bingham v. Graham,*^ and in that case it was held that the 'association' belonged to the class designated as 'trusts' by Mr. Wrightington in his work on Unincorporated Associations. If our conclusions that the trust agreement here in question created a trust as distinguished from a partnership is correct, then the contention of appellant to the effect that the suit ought to be abated for the want of necessary parties should not be sustained. 191 — N'ot Necessary for All Beneficiaries to Join in Suit for Receiver. The relation existing between the parties not being that of partners in the sense that the trust agreement created an ordi- nary partnership, it was not necessary that all of the stock- holders of the association be made parties to the suit. Wliile the rule is well established that all parties in interest ought to 41 (Tex.), 220 S. W. 105. Bankruptcy. 355 [DAVIS V. HCDGIKS.] be made parties, there are exceptions to the rule. . The case, as shown by the pleadings, is one in which the defendants, trus- tees, are sued by some of the beneficiaries, not only for them- selves, but for all the minority stockholders of the association, alle2"ing breach of trust, misapplication of trust funds and assets of the association for their own personal gain and profit, etc.. and praying for the appointment of a receiver. Although proper parties, it Avas not essential to the right of the named plaintiffs to bring and maintain this suit that all stockholders of the association not named as plaintiffs, but in whose behalf the suit was brought, should appear as active parties to the suit. We understand it is well established that suits in equity may be brought by or against some of the members of an associatio)i or trust like the one under consideration as representatives of all the members. This seems to be especially true in such cases where, as here, the defendants were managing officers or trus- tees. Such cases simply declare the equitable doctrine of virtual representation and the doctrine has in many cases been applied to members of unincorporated associations. The rule has been applied in a suit to enjoin a strike of laborers, the court holding that it was sufficient to bring in the leaders of the strike to represent the organization, regardless of their official relation to the society.*^ As an exception to the rule that all persons having an interest in the subject matter of an equity suit must be made parties, the doctrine of virtual representation, which originated at an early date, recognizes the right of a few persons to sue for themselves and all others similarly situated. Under this doc- trine, the persons who are not joined by name as parties are 42 American Steel v. Wire Fed. 598, 20 R. C. L. 669, sec. 9. Drawers, Nos. 1, 3, (C. C), 90 356 Trusts for Business Purposes. [DAVIS V. HUDGINS.] in a sense before the court. They have been called quasi par- ties and have been said to be parties even in substance and legal effect. In all cases to which the doctrine of representation ap- plies there must be joined as parties, persons who fairly repre- sent the interest or right involved so that it may be tried fairly and honestly. It is sufficient if the parties before the court enable it fairly and fully to adjudicate the question involved. The parties represented must have a common interest with those before the court and consequently the parties before the court cannot act as representatives if their interests are antagonistic to those who would be represented. The most frequent applica- tion of the doctrine of virtual representation is to members of a class. And while this doctrine has been applied to the mem- bers of a class who have a common or general interest, and it is difficult or inconvenient to make all of them parties, though they are not numerous, yet many decisions have established the rule that the doctrine applies only where the persons interested are numerous, so that it would be impracticable or inconvenient to make all of them parties. And so, a suit in equity may be brought by some of the members of an unincorporated associa- tion as representatives of all the members, whether organizeil for public or private purposes, and in some of the cases relating to members of such associations stress has been laid on the fact that the members were numerous. The doctrine of repre- sentation has also been recognized in cases of trusts, so that persons beneficially interested are considered as represented by one occupying a trust relation, especially when the cestuis que trusts are numerous, so that it would be impracticable to bring all of them before the court.*^ In section 11 of the authority just quoted, it is said: "Apart 43 Ruling Case Law, Vol. 20, Sec. 9. Bankruptcy. 357 [DAVIS V. HUDGINS.] from the question of the parties being numerous, the rule of representation has been applied to defendants representing as trustees all parties having a beneficial interest in the subject- matter." We think the plea of non-joinder of parties in this case was properly overruled. 192 — Evidence Must be Positive as to Wrong-doing of Trustee Before Court Will Appoint Receiver. The next question for consideration is whether or not the trial court was authorized under the evidence adduced, to appoint a receiver. Our conclusion is, this question should be answered in the negative. The hearing of the applica- tion for a receiver was not submitted and determined on the sworn pleadings of the parties. Apart therefrom, and as a basis for the court's action, oral testimony of witnesses was heard. Admitting for the purpose of this appeal that the appellees' petition showed a cause of action, and that the facts alleged were sufficient to justify the court in the exercise of a sound discretion to grant the prayer for a receiver, yet, in the opin- ion of this court, the testimony introduced and upon which the court evidently predicated its decision, was wholly in- sufificient to authorize the appointment of a receiver, and for that reason the judgment must be reversed. In reaching this conclusion we are not unmindful of the prevailing rule that the appointment of a receiver rests largely in the discretion of the court and that the appellate courts will not ordinarily interfere therein unless an abuse of dis- cretion appears. It is well said, however, that the remedy of a receivership is in all cases to be cautiously applied and that receivers should not be appointed except on a clear show- 358 Trusts for Business Purposes. [DAVIS V. HUDGIN8.] ing that the apphcant's rights imperatively demand it.** The record discloses the formation of a trust and that by the declaration of a trust executed, the management of all the affairs of the association so fonned was vested in a named board of trustees and their successors, the board having the power to elect a president, vice president, secretary and treas- urer, and to create such other offices and appoint such other officers as the board might deem proper. The instrument further vests the title to all property acquired or to be ac- quired by the association in such trustees as joint tenants. Upon the trustees is conferred, among other things, full power and authority, upon a majority vote of the board, to conduct the business and to do and perform all things which in their judgment might be necessary in the management and conduct of the business. The trustees by the instrument referred to are given the power and authority, not only to manage the property of the association, but, to "invest, reinvest, and dis- pose of the same and to collect and receive and distribute the income and profits therefrom for the benefit of the hold- ers of the certificates of shares from time to time issued and outstanding under said instrument in the manner and sub- ject to the stipulations and limitations therein contained." It is stipulated that "the trustees shall have and exercise the exclusive management and control of all property at any time belonging to the trust," with all the rights and powers of absolute owners thereof, subject only to the purposes of the agreement entered into; and in the conduct of the busi- ness to execute contracts in the names of the trustees as may be necessary or convenient; to purchase, contract for, lease 44 Galvin v. McConnell, 53 People's Inv. Co. v. Crawford Tex. Civ. App. 486, 117 S. W. 211; (Tex. Civ. App.), 45 S. W. 738. Bankruptcy. 359 [DAVIS V. HUDGINS.] or otherwise acquire such property as they may deem nec- essary or proper; and to sell and convey any part of the property of the trust. A detailed statement in this opinion of the testimony is impracticable. A careful examination of it, however, has convinced us that it is too lacking in probative force to justify the conclusion that defendants have been guilty of such fraud, mismanagement of the property and affairs of the association in question, or dissipation oi its assets as justified the ap- pointment of a receiver. The testimony of the witnesses of- fered by appellees as to some of the charges of wrong-doing on the part of the defendants is of a negative character and insufficient to sustain any of them that would warrant the appointment of a receiver, while the testimony of the wit- nesses offered by the defendants shows conclusively that no ground for the appointment of a receiver existed at the time of the hearing of the application therefor. The charge and contention that the trustees failed to call the annual meet- ings, or meeting, for the election of trustees as provided for in the trust agreement, is based upon the testimony of ap- pellees' witnesses, to the effect that they had no knowledge of any such calls, or meetings, whereas the testimony of the witnesses tendered by the defendants shows that such meet- ings, practically as directed by the terms of the trust agree- ment, were called. The charge that the trustees in control of the business of the association refused to permit the stockholders to investi- gate its affairs or to have a voice in the selection of the officers of the association is not sustained by the testimony of the plaintiff's witnesses and is disproved by the testimony of the defendants' witnesses. Besides the trust agreement, as we understand it, shows that the trustees were authorized and 360 Trusts for Business Purposes. [DAVIS V. HUDGINS.] empowered to select the company's officers. We do not think there is any testimony to warrant the conclusion that the defendants or trustees surrendered to J. C. Davis alone con- trol of the assets of the association. Nor do we think that the evidence warrants the conclusion that the books of the association were never opened by the trustees to the inspec- tion of the stockholders and no account of the disposition of its funds kept. On the contrary, we think it very con- clusively appears from the testimony in the record that books of the association were opened, and an account, whether entirely accurate or not, was kept. The purchase of the eleven acres of land described in plaintiffs' petition and the appropriation of $15,000 in payment therefor out of the money received from stockholders was not, we think, in ex- cess of or in violation of the powers vested in them by the terms of the trust agreement. This land, it appears, was purchased for the association, and is held by the trustees like other property over which they were given full and abso- lute control, for the benefit of the association. Nor do we think the issuance of what is termed "promotion stock" is in violation of the trust agreement or the authority given thereby to the trustees, or operated to render the company insolvent. Upon the w'hole we conclude that the facts presented fail to disclose any such invasions of the rights of the plaintiffs, or danger that the property of the association in question will not be preserved, as authorizes the appointment of a receiver. This court has heretofore said that the appointment of re- ceivers "is regarded as one of the most difficult and embar- rassing duties which a court of equity is called upon to per- form," and is not to be exercised doubtingly, but that the court must be convinced that the relief is needful and that it Bankruptcy. 361 [DAVIS V. HUDGINS.] is the appropriate means of securing an appropriate end.**^ The petition for the appointment of a receiver was verified by the affidavit of the plaintiff J. C. Wright, and should it be conceded that, had the application for the appointment of a receiver been submitted on the petition and answer and receiver appointed, we would not be warranted in disturb- ing the court's action, yet it is clear that the oral testimony of Mr. Wright given upon the hearing, as sent to this court, does not support the allegations of the petition sufficiently to justify the appointment made. 44s Harris v. Hicks, 13 Tex. Civ. App. 134, 34 S. W. 983. CHAPTER XX. BUSINESS AND LEGISLATION. 193 — In General. The business world is well aware of the cost and annoyance it has expended in the past due to the numerous changes and amendments tO' the corporation law with which it had to com- ply. Naturally it turns to the trust with the query, is it possible for the legislature to enact such laws that would force all business to organize as corporations? Thus far the legislature has applied its will only to banking and insurance. Some of this legislation has been sustained on the theory of regulation; some has been declared unconstitutional on the ground of class legislation and that it was an infringement on individual rights. Inasmuch as the trust is organized as a matter of right, it may be laid down as a general principle that any business the individual may engage in may also be deeded in trust, and, as such, be operated. However, the question is still an open one as regards the validity of legislative enactment compelling banks and in- surance companies to incorporate; both sides of this question will be presented hereinafter in well-argued cases. In Weed V. Bergh,*5 the court sustained the Wisconsin banl! BuSINi:SS AND LlIGISIvATlON. 375 [COMMONWEAXTH v. VROOMAN.] exercise may be limited by the frame or constitution of a particular government, but its natural limitations, in the ab- sence of a written constitution, are found in the situation and necessities of the state, and these must be judged of in the first instance by the government itself. It corresponds to the right of self-preservation in the individual. When the dan- gers that threatened the state come from without; the right of self-preservation is exercised in gathering armies and the means of public defence. When the dangers arise within the state, self-preservation requires their suppression. This is accomplished by the exercise of the police power which deals with all forms of disorder, and provides for the public wel- fare and the protection of citizens against the violence and the fraudulent conduct of each other. Now the question whether any particular subject is so re- lated to the public good as to justify the exercise of this power in its control, is one for the determination, in the first instance, of the lawmaking branch of the government. In dis- posing of it the legislature is subject to no limitations ex- cept such as the constitution of the state may impose. Within the lines set by constitutional provisions the power of the legislature is practically absolute; but if it is alleged that a given police regulation violates the fundamental law, a ques- tion is raised for the determination of the courts whose duty it is to apply the constitutional tests and adjudge the law to be void if it is in conflict with them. In this case we are to apply the first section of the bill of rights to the Act of 1870 in order to determine whether it can be enforced. If the act denies the inherent and inalienable right of the citizen to acquire, possess, and protect property — which is asserted by this section of the bill of rights — then the judgment of the court below was right and this appeal should be dismissed; m 376 Trusts for Business Purposes. [COMMONWEALTH v. VROOMAN.] but if this right is not denied, and the effect of the Act of 1870 is merely to regulate its exercise, then the judgment M should be reversed and the defendant should suffer the pen- alty of the law he has disregarded. j| Before entering upon this question, three preliminary obser- vations should be made: first, we must remember that the legal presumption is in favor of the constitutionality of the act because it expresses the judgment of the legislative branch of the government upon that question. The legislature has considered the question and passed upon it and this makes a prima facie case in favor of the law. We observe in the next place that this question is to be considered upon the state of the law as it is when the question is raised. Since 1870 the constitution of the state has been remodeled and many of its new provisions have been enforced by suitable legislation. Our question is not, therefore, whether the Act of 1870 was valid under the constitution as it then stood, but whether it was valid when its provisions were invoked against the defendant in 1894. Our third observation is that the question is not controlled by common-law maxims. The police power must necessarily enlarge its range as business expands and society develops. The proper office of statutes is to remedy the defects and modify the operation of common- law rules to meet changed conditions in society and increased volume and improved methods in business. 198 — Insurance in Relation to Police Pozver. We come now to inquire whether the business of insurance against loss by fire is at the present time a proper subject for the exercise of the police power of the state. In examining this question it is important to know something about the Business and Legislation. 377 [COMMONWEALTH v. VROOMAN.] magnitude of the business. The report of the insurance com- misssioner appointed under the laws of the state, covering the transactions of the year 1892 shows that risks were written in Pennsylvania during that year as follows: By stock companies of Pennsylvania $286,584,023 other states 412,489,251 U. S. Branches Foreign Companies 248,407,450 Mutual companies of Pennsylvania 137,328,820 $1,084,809,544 making the enormous total of one billion and nearly eighty-five millions of dollars. The losses paid in the same year as shown by the same report amounted to nearly seven and one-quarter millions of dollars. The total capital employed in the busi- ness of fire insurance in this state during the year was nearly two hundred sixteen and one-half millions of dollars. The premiums paid by the insured fell a little short of twelve mil- lions of dollars. Let us consider next the nature of the business. It is not like the sale of commodities for a present equivalent in value, but it is the purchase of indemnity against the risk of loss by fire that may happen at any time, and may not happen at all. The conditions necessary to the business of insurance are: (a) the existence of a known danger to which all prop- erty owners are exposed and against which they cannot ef- fectually protect themselves; (b) the strong probability that loss from this danger will fall upon but few of those who are exposed to it ; (c) the certainty that when the loss happens it will fall so heavily on those to whom it comes as to make pecuniary indemnity a matter of great importance; (d) some knowledge of the relative value of the property annually de- stroyed by fire to serve as a basis for calculating the risk 378 Trusts for Business Purposes. [COMMONWEALTH v. VROOMAN.] assumed by the insurer, and the amount of premium required to enable the insurer to meet losses and expenses and secure a fair return for the capital employed. In view of the magnitude and the nature of the insurance business it is apparent that the public is largely interested in all that relates to it. The security of policy holders requires : first, permanency in the custodian of the funds gathered from them and on which their indemnity in case of loss depends; second, an honest and competent administration of these funds ; third ; restraint against the division of the profits of the business whenever such division would injuriously affect the security of policy holders. How are these safeguards to be obtained? There is but one way in which they can be obtained and that is by means of general laws regulating the insurance business. Corporations derive their existence from the state and hold their franchises subject to legislative con- trol. They are subject to the visitorial power of common- wealth, and they may be, and are in fact, required to lay open before the several departments of state government, and before the public, the character and extent of their business, the profits realized, the dividends declared, and the investments made. The legality and business value of the methods, the economy, and financial strength of the management, and the value of the security provided for the holders of policies in any given company are therefore subjects upon which the proper state officers may be thoroughly informed, and which the public may investigate at will. Private individuals are not subject to the same visitorial power. They can not ordi- narily be compelled to disclose their business methods, their financial condition, or the character of their investments. They cannot be restricted in the use of either their capital or their profits as corporations may be. Those who deal with Business and Legislation. 379 [COMMONWEALTH v. VKOOMAN.] them must trust more to their personal integrity than the common experience shows to be safe. The state can com- pel a fair measure of fidelity in the management of these vast sums, and provide for the safety of the insured when, and only when, the business is in the hands of corporations. 199 — Modern Legislation on Insurance. In the next place it is important to consider what may be described as the trend of modern legislation on this subject. The states of the Union have severally entered upon legis- lation regulating insurance. In each an insurance department of the state government has been organized. A general super- vision and control of insurance companies has been assumed by the states and exercised through the insurance depart- ment. In our state this system of legislation began as early as 1 810 and it has grown in bulk and importance with the growth of business and the development of the resources of the state. It fixes the minimum of actual capital necessary to the organization of a corporation for insurance against fire, on the stock plan, at one hundred thousand dollars. It prohibits the division of profits in dividends to the injury of the reserve fund. It regulates the form of policy and re- quires the application to be attached to, or made part of, the policy. It requires each company to submit detailed state- ments of the business done, of its assets and liabilities, and to show its financial condition. It requires companies organized under the laws of other states or countries to make certain deposits in this state to secure those who are insured by them and to appoint some suitable agent on whom process may be served in actions brought against them. These regulations have been made from time to time as 380 Trusts for Business Purposes. [COMMONWEALTH v. VROO>IAN.] their importance has been felt by the public. They are all easy of enforcement against corporations. Some of them cannot be enforced against private persons or partnerships. As a matter of fact, the business has for many years been left to the corporations and regulations made to affect cor- porations have therefore met fully the public need. At this, time, however, private capital is seeking employment in this field and it signalizes its entry upon the field by a denial of the power of the state over it. The question has been raised by the corporations of other states, but I recall no case in which it has been raised by individuals. In Doyle v. Conti- nental Ins. Co. of New York,^* the Supreme Court of the United States stated the general rule thus: "A state has the right to impose conditions not in confiict with the Consti- tution of the United States on the doing of insurance busi- ness within its territory by an insurance company chartered by another state, or to exclude it altogether." 200 — Regulation of Business under Police Power. It would seem to follow logically that the state might require all persons desiring to enter upon the insurance business to comply with the same conditions, and if necessary, to obtain a charter of incorporation in order to meet such compliance. An effort is made to distinguish between regulation and prohibition and to hold that the Act of 1870 is a prohibition operating upon all natural persons for the benefit of corporations who are thus given an oppressive monopoly of the business of insurance against fire. But the prohibition is only such as is necessary to give effect to the regulation which the act prescribes. The act implies a declaration by the legislature that the business of in- 64 94 U. S. 535, 24 L. Ed. 148. I j! Busine;ss and Legisi^ation. 381 [COMMONWEALTH v. ATROOMAN.] surance against fire affects so many persons and involves such large sums of money, as to make it necessary for the public protection that it be subjected to the supervision and control of the government; that the supervision required is such that private persons can not be compelled to submit their business conduct to ; and then expressly declares that all persons desiring to embark in the business must procure a charter of incorpora- tion for that purpose because corporations are subject to the supervision and control of the state that creates them. This is regulative. It directs the business into the only channel that admits the necessary measure of control and it necessarily pro- hibits the business outside that channel. The traffic in intoxicating drinks is regulated by law ; but the regulation prohibits absolutely all persons from engaging in it unless they have first secured the permission of the state by obtaining a Hcense under the law. Here, as in the Act of 1870, we find permission to those who comply with the regulation, and prohibition to those who do not. The practice of medicine, the sale of drugs, and many other sorts of business are regu- lated by law ; but the regulation would be without effect if it did not include a prohibition directed against those not qualified, and enforce it with suitable penalties. The police power of a state may be exerted for the complete or the partial control of a given business. It may prohibit it absolutely to all persons for the purpose of suppression. It may permit it to some per- sons under certain restrictions in order to secure control over it and hold it within proper bounds.^^ The Sunday laws, the laws against gambling, against lotteries, against disorderly houses, the sale of liquors, the sale of oleomargarine, the sale of drugs and many similar laws afford instances of the exercise of the 55 stone V. Mississippi, 101 U. S. 814, 25 L. Ed. 1079. 382 Trusts for Business Purposes. [COM3IONTV'EAL.TH v. VBOOIAN.] police power for the complete suppression of a given line of em- ployment, or for its restriction and control. The Act of 1870 belongs to the latter class. It does not pro- hibit the business of insurance, but regulates it. It says to all persons interested: 'Tf you wish to embark in this business you must secure a charter of incorporation so as to subject your business to the visitorial power of the state. If you will not do this you must not engage in insurance against fire at all." This is not prohibition of the business, for the business is distinctly authorized. It is an effort to bring it under state supervision and control by requiring all who wish to enter the business to put themselves in a position where the insurance legislation of the state will reach them and the insurance depart- ment of the state can supervise their business and compel ob- servance of the law. Without going further into the discussion we may now state our conclusions applicable to the case before us: (i) The business of insurance against loss by fire is, by reason of its magnitude, its importance to property owners, and the nature of the business, a proper subject for the exercise of the police power of the state. (2) The Act of 1870 is a valid exercise of the police power, it does not prohibit but regulates the business. It excludes no one from engaging in it, but prescribes the preliminary qualifi- cation necessary for all alike, to entitle them to enter the business. ,(|i (3) The qualification is reasonable; it is open to all under general laws ; it is not burdensome ; its only effect is to secure adequate capital at the beginning and state supervision during the continuance of the business. (4) Upon the special verdict, judgment should have been entered in favor of the commonwealth and sentence should have Business and Legislation. 383 [COMMONWEALTH v. ATIOOMAN.] been pronounced under the Act of 1870. That this may now be done, the judgment is reversed, the record remitted and a procedendo awarded." 201 — Corporations with Exclusive Privileges are Monopolies. In the two preceding cases the doctrine is laid down that the legislature may prohibit individuals as such from engaging in the business of banking and insurance. The theory advanced and the one relied on in both cases is that the state may regu- late business of this character. The power of the state to regu- late is undisputed; but when the state grants to corporations the exclusive privilege to carry on certain business under the guise of regulation, an entirely different question is presented. It has been said that legislation of this character is unconstitu- tional for the reason it creates a monopoly in a certain class — regulation should not be, but is in fact, prohibition. This tenet is given in a dissenting opinion in the cases of Commonwealth V. Vrooman, supra, and State v. Scougal.^^ In substance, the dissenting opinion in the former case is as follows : The Act of the 4th of February, 1870, declares it to be a misdemeanor for any person to issue a policy of insurance against loss by fire or lightning, without authority being ex- pressly conferred so to do by a charter of incorporation issued according to law. On the 1 2th of March, 1894, the defendant issued a policy to James G. Kimball in the sum of $1,000 indemnifying him against loss by fire on his household furniture contained in his dwelling house in Philadelphia, without authority expressly conferred by an act of incorporation. For so doing, he was 66 3 S. D. 55, 51 N. W. 858, 15 L. R. A. 477, 44 Am. St. Rep. 756. 384 Trusts for Business Purposes. [commonwealth v. ^tioosian.] indicted and tried March 20, 1894. There was no dispute as to the facts, and the jury in a special verdict found them as stated. The court, being of opinion the act was unconstitu- tional, entered judgment on the verdict for defendant and there- upon the commonwealth appealed. Unquestionably, the legislature has the authority to enact any law not in conflict with the constitution of the state or of the United States. The right to limit the transaction of the business of fire insurance to incorporated associations is not in express terms, forbidden. But the right of natural persons to make contracts of indemnity against loss by fire or shipwreck was, for centuries before the adoption of the Constitution, a common-law right. All the authorities, without a single excep- tion, hold that under the constitutional right to acquire, possess, and protect property, there is necessarily included the right to make reasonable contracts concerning it, which contracts are protected by the Constitution. In this, all agree. And all agree, further, that the legislature may, in the exercise of its police power, absolutely forbid contracts which are inimical to public interests ; and may adopt suitable regulations of contracts for the protection of the public. The business of fire insurance being one which, from its nature, involves contracts with large numbers of persons in all parts of the commonwealth who have not the opportunities of gaining the information necessary to intelligent bargaining for their better security, the legislature may make such regula- tions as will protect them against fraud or imposition. It may require that all who desire to transact business with the public shall take out a license, shall make frequent reports of their financial condition, have fixed places of business where service of process can be had on them; that they shall deposit with the treasurer or other officer of the commonwealth, bonds or Business and Legislation. 385 [COMMONWEALTH v. VBOOSIAN.] Other securities in sufficient amount to guarantee those with whom they contract against loss; and generally, may make all reasonable rules for the regulation of such business. But can the legislature absolutely forbid the making of such a contract by individuals, and confer on corporations a monopoly of such business ? Is the business of fire insurance deleterious to the public? If so, the legislature may absolutely prohibit it. But no one contends that it is. On the contrary, it is admitted it is to the advantage of the public. The legislature admits this by ex- pressly authorizing artificial persons to conduct it. If such contracts be not injurious to the public, and may not be alto- gether prohibited, then where is the authority to prohibit one class — natural persons — from entering into them, and specific- ally empowering another and numerically a very much smaller class — ^artificial persons — ^to make them? In so doing the state grants a monopoly in a particular business to a particular class. As is said in substance in the slaughter-house cases^''' and many other cases, "all such grants relating to any known trade have been held by all the judges of England to be void at com- mon law as destroying the freedom of trade, discouraging labor and industry, restraining persons from getting an honest liveli- hood, and putting it in the power of the grantees to enhance the price of commodities." A contract of indemnity against loss by fire, being a common- law right, cannot by legislative grant be monopolized by a small class, unless it has become of such public concern as requires its exercise by the state or by a corporation to whom the state's 67 83 U. S. 16 Wall. 102, 21 L. lor v. Blatchford, 13 Allen 372, Ed. 417; Alger v. Thacher, 19 90 Am. Dec. 203. Pick. 54, 31 Am. Dec. 119; Tay- 386 Trusts for Business Purposes. [COMMONWEALTH v. VROOJIAN.] power is i immediately delegated. It may be admitted that the business of constructing and operating public highways for the carriage of goods and travelers is exclusively in the state and is of such immediate public interest that it can be transacted only by the state and such corporations as the state may spe- cially authorize. But, to carry on this business at all, involves a right of eminent domain which the state alone can exercise or grant and therefore it ought not to be exercised by private in- dividuals. There is not, and never was, a right in the individual to take private property for the construction and operation of a public highway on which to conduct for profit the business of transportation; but there was never a time that the individual had not the right to make a contract to indemnify his fellow against loss by fire. This act is not obnoxious to the constitu- tion because it authorizes corporations to insure against fire, but because it prohibits individuals doing a like business. It grants a monopoly of a particular business to a particular class ; prohibits all others from engaging in it. This the legislature may in the exercise of its police power in some cases do, it may declare that females shall not be employed in some avocations ; that children under a certain age shall not be employed in mines or factories ; that none but men of good repute shall sell liquor by retail ; and the wisdom of such legislation is not a question which the courts can consider, for it is adopted to promote the health, morals, and good order of the public. 202 — Issuing Banknotes not a Private Right. That in some of the states the legislature has restricted the business of banking to corporations, has no analogy to the case in hand. The banking intended to be restricted by the New York act was issuing of notes, receiving of deposits and dis- i Business and Legislation. 387 [COMMONWEALTH v. \TlOOMAN.] counting. In People v. Utica Ins. Co.,^^ it was held that the act was only a restraining and regulating act applying to asso- ciations of individuals ; that as to them, to do a banking busi- ness, they must have corporate authority ; that an individual was not prohibited from doing a banking business except as to issuing bank notes. It has always been held to be within the police power of the legislature to restrict the issuing of notes intended to pass as money, to corporations. It is a matter which concerns the entire public who have no opportunity in the hurry of every-day business transactions of life to ascertain the value of the promise which is tendered as money. But in a contract of indemnity, why should not the citizen make his contract when and where the price and security suits him best ? Why should the legislature take from the whole people their common-law right of contract for insurance and grant it to a particular class? Where is there the semblance of the constitu- tional exercise of the police power in this? Under the Corporation Act of 1874 and supplements, cor- porations for almost every business are authorized, such as sup- plying ice, printing and publishing, conducting hotels, drove- yards livery-stables, lumbering, quarrying, mining, brewing, distilling, improvement and sale of real estate. In fact, almost every kind of business can be transacted by incorporated com- panies. All concern the public. If this act be constitutional, the legislature can prohibit the transaction of any business if not conducted by corporations under the Act of 1874, and under the pain of imprisonment, forbid the individual engaging in any business whatever. 203 — Exclusive Grant to a Class is Prohibition, not Regulation. It is paternalism to assume that citizens are incapable of pru- 68 15 Johns. 358, 8 Am. Dec. Johns. 205. 243; Briston v. Barker, 14 388 TruSio r'OR Business Purposes. rCOMMONWEALTH v. VBOO>IAN.] dently contracting with reference to their property without an express grant of the state in the shape of corporate franchise to one of the contracting parties. It is an assumption that the citizen is a child, needing the tutelage and protection of the legislature in the ordinary affairs of business life or else it is a species of tyranny in government like that of Turkey where the rights to produce, manufacture and trade are all the subject of grant from the sultan. If the exercise of the right to con- tract to indemnif}^ be injurious to the public then it ought to be prohibited; if beneficial, it ought not to be monopolized by a few. The rule to be educed from Budd v. New York,^^ and all the cases where the police power of the state is discussed, is that while a business affected by a public interest may be regulated, yet when not inimical to the health, morals, or safety of the people, it can not be prohibited. I do not think an exclusive grant to a class is regulation; that is prohibition of all others and is therefore unconstitutional. The judgment in my opinion should be affirmed and the appeal dismissed. Sterret, Ch. J., and Green, J., concur in this dissent. 204 — Banking Act of South Dakota. In the case of Weed v. Bergh, supra, the Supreme Court of Wisconsin upheld the banking act of that state in its provision which excluded the individual as such from engaging in that business; in opposition to this opinion the Supreme Court of South Dakota declared its banking act unconstitutional as it sought to exclude the individual as such from engaging in the banking business in that state. This principle is set forth in 69 143 U. S. 523, 36 L. Ed. 250. S. 700, 25 L. Ed. 496. The Sinking-Fund Cases, 99 U. Business and LkgisIvATion. 389 rSTATE V. SCOUGAL.] the case of State of South Dakota v. Scougal^° and is as follows : This case comes before us on a writ of error issued on be- half of the state to the County Court of Yankton County to review the judgment of that court sustaining a demurrer to the information filed against the defendant in error, and quashing the same. The legislature of this state at its last session passed an act for the organization of state banks entitled, 'An Act to Provide for the Organization and Government of State Banks,' approved March 10, 1891, and constitutes chapter 27 of the Laws of 1891. The first section of the Act is as follows : "Associations for carrying on the business of banking under this title may be formed by any number of natural persons — not less than three — one-third of whom shall be residents of the state. They shall enter into articles of association which shall specify in general terms the object for which the association is formed, and may contain any other provisions not inconsistent with law which the association may see fit to adopt for the regula- tion of its business and the conduct of its affairs. These ar- ticles shall be signed by the persons uniting to form the associa- tion and a copy of them shall be forwarded to the secretary of state of the state of South Dakota." The second section pro- vides what the certificate of incorporation shall contain, and the third section provides for the manner of its execution, filing, etc. The fourth section confers upon such corporations or associations the following powers: (i) to adopt and use a corporate seal; (2) to have succession for twenty years; (3) to make contracts; (4) to sue and be sued; (5) to elect officers and prescribe their duties; (6) to make by-laws to govern and 60 3 S. D. 55, 51 N. W. 858, 15 L. R. A. 477, 44 Am. St. Rep. 756. 390 Trusts for Business Purposes. [STATE V. SCOUGAIi.l control the business; and (7) "to exercise by its board of di- rectors or duly authorized officers or agents, subject to law, all such incidental powers as shall be necessary to carry on the business of banking by discounting and negotiating promissory notes, bills of exchange, drafts and other evidences of debt, by receiving deposits, by buying and selling exchange, coin, and bullion, by loaning money on personal security." Section 2"] provides as follows : "It shall be unlawful for any individual, firm or corporation to continue to transact a banking business or to receive deposits for a period longer than six months immediately after the passage and approval of this Act, without first having complied with and organized un- der the provisions of this Act. Any person violating the pro- visions of this section, either individually or as an interested party in any association or corporation, shall be guilty of a mis- demeanor and on conviction thereof, be fined not less than five hundred dollars nor more tlian one thousand dollars, or im- prisonment in the county jail not less than ninety days or either or both, at the discretion of the court."' These are all the provisions of the law that it is necessary to give to a proper understanding of the questions presented for our decision. On the 22nd day of September, 1891, the state's attorney filed an information against the defendant in error in the county court of Yankton county containing eleven coimts, charging him in the various counts with carrying on the busi- ness of banking "by discounting and negotiating promissory notes, bills of exchange, drafts, and other evidences of debt, by receiving deposits, by buying and selling exchange coin, bullion, by loaning money on personal property," without hav- ing complied with the provisions of the Banking Act. A de- murrer was interposed to each count of the information on the ground that it did not state facts sufficient to constitute a public Business and Legislation. 391 [STATE V. SCOUGAL.] offense. The demurrer was sustained by the county court, and judgment rendered quashing the information. The principal ground rehed on to sustain the demurrer and judgment of the court below is the unconstitutionality of section 27 of the Act under which the information was filed, and this presents the only question we shall discuss or consider as the other objec- tions to the information were purely technical and, in our opin- ion, are without merit. The learned attorney-general contends : first, that the priv- ilege of banking is or may be made by the legislature a fran- chise, and as such, is subject to the control of the legislature of the state, and that it being a franchise, or made such, the legis- lature has the power of conferring upon or granting the privilege to such persons, associations, and corporations as it may deem proper, and of excluding all other persons from the exercise of such privilege ; and second, if the privilege of bank- ing is not a franchise and can not be made such by the legisla- ture, then the legislature by virtue of the police power vested in the state, may regulate the business and may under such power, prescribe the manner in which the business shall be conducted and may exclude all persons from exercising the privilege of banking, except in the manner prescribed by the law. The learned counsel for the defendant in error contend : first, that only banking privilege proper, namely : the privilege of is- suing demand notes to circulate as money, or as defined in the state constitution : the power "to issue bills or paper credit de- signed to circulate as money," constitutes, or can by legislative power be made, a franchise, and that carrjang on a banking busi- ness by exercising the incidental powers of banking specified in subdivision 7 of section 4 of the Act, is a right belonging to the citizens of the country generally, and not a franchise, and can not be made such by legislative power. Second : that under 392 Trusts for Business Purposes. [STATE V. SCOUGAL.l the police power vested in the state, the legislature niay regulate, but it can not prohibit or destroy, a business, calling, or occu- pation not necessarily offensive to the senses, injurious to the health, or otherwise detrimental to the public interest; that it is only trades, occupations, and pursuits that are at all times, and under all circumstances, necessarily offensive to the com- munity, or injurious to societ}', that can be absolutely prohibited by legislative action ; and that as the business of banking is not of this character, the legislature can not prohibit individuals from pursuing it, though, like all other classes of business, it may be regulated. And, third : they further contend that the Act conflicts with sections i, 2, and 18 of article 6 of the state constitution and section i, article 14 of the Constitution of the United States, in that the law makes an unjust discrimination in granting privileges and immunities to citizens, classes, and corporations which upon the same terms are not open to all, in that the law and particularly section 27, is an unlawful inter- ference with the liberty and property of the citizen, in that it discriminates against the individual citizen by conferring upon corporations the right to transact a banking business and pro- hibiting the same privilege to such individual citizen; and in that the Act deprives the individual citizen of his right to pur- sue a lawful calling, occupation, or business which is inoffensive and not injurious to the community. 205 — Franchise Distinguished from a Right. Are the incidental powers of banking conferred upon cor- porations by subdivision 7 of section 4 franchises or has the legislature power to make them such, and to prohibit individual citizens from exercising them? What is a franchise? Black- stone defines it as a "royal prerogative or branch of the king's Business and Legislation. 393 [STATE T. SCOUGAL.l prerogative, subsisting in the hands of a subject.''^! Chiei Justice Taney defines them as follows : "Franchises are special privileges conferred by government upon individuals, which do not belong to citizens of the country generally by common right. It is essential to the character of a franchise that it should be a grant from the sovereign authority and in this country no franchise can be held which is not derived from the law of the state.62 The qualification by the chief justice, "which does not belong to the citizens of the country generally by common right," is an important one, and constitutes the distinguishing feature of a franchise. What is meant by this qualification is made clear by Mr. Justice Bradley in a recent case decided by the Supreme Court of the United States. After quoting the above definition of a franchise given by Blackstone, he says: "No private person can establish public highway, public ferry, or railroad, or charge tolls for the use of the same, without au- thority from the legislature, direct or derived. These are fran- chises. No person can take another's propert}', even for public use, without such authority, which is the same as to say that the right of eminent domain can be exercised only by virtue of a legislative grant. This is a franchise. No persons can make themselves a body politic without legislative authority; cor- porate capacity is a franchise."^^ Of course, as the learned judge says, this list might be con- tinued indefinitely, but this quotation clearly illustrates the nature of a franchise. Over all public property, highways, navigable rivers and seas, over everything that belongs to the sovereign, the power of the government is absolute, whether 61 2 Bl. Com. 37. 63 California v. Central Pac. 62 Bank of Augusta v. Earle, R. Co., 127 U. S. 40, 32 L. Ed. 38 U. S. 13, Pet. 595, 10 L. Ed. 157. 311. 394 Trusts for Business PuRPOsi;s. rSTATE V. SCOUGAL.] that power is derived from the common law or from the state or the national Constitution. When, therefore, the state grants a right thus belonging to the government and not to the citizens generally as a matter of right, it is the grant of a franchise. But at common law, banking in all its branches was free to all, and belonged to the citizens of the country generally. 206 — Privilege to Issue Currency is a Franchise. In 1694 the British parHament chartered the Bank of Eng- land and conferred upon that bank the power to issue demand notes to circulate as money and prohibited large copartnerships and associations from issuing such notes. By our national Con- stitution the power to regulate the currency was conferred upon the national government. On the argument of the case of Bank of Augusta v. Earle, supra, Mr. Webster, in the course of his argument, after giving the history of banking in England and in this country, said: "So that the banking privilege of the Bank of England consisted simply in the privilege of issu- ing notes for circulation, while the privilege is forbidden to all other corporations and all large copartnerships or associations." And in defining banking powers properly belonging to a bank he said : "What is that, then, without which any institution is not a bank, and with which it is a bank? It is the power to issue promissory notes wath a view to their circulation as money." It has long been settled in this country that the privilege of issuing demand notes to circulate as money was a franchise — a public right — belonging to the national government, that might be granted by congress to individuals or corporations, and when not exercised by the national government, be exercised by the state governments. In an early case before the Supreme Court Business and Legislation. 395 rSTATE V. SCOUGAL.] of the United States, Mr. Justice Story, in a dissenting opinion, said: "The states may create banks as well as other corpora- tions upon private capital, and so far as this prohibition is con- cerned (the prohibition against emitting bills of credit by the sale) may rightfully authorize them to issue bank bills or notes as currency, subject always to the control of congress whose powers extend to the entire regulation of the currency of the country."^* This view of the power of the national govern- ment to regulate and to provide a national currency and grant the privilege to corporations and to prohibit all not authorized to exercise the franchise, was affirmed by the United States Supreme Court in Veazie Bank v. Fenno^^ wherein the chief justice in delivering the opinion of the court says: "Having thus, in the exercise of undisputed constitutional powers, under- taken to provide a currency for the whole country, it can not be questioned that congress may, constitutionally, secure the benefit of it to the people by appropriate legislation. To this end, con- gress has denied the quality of legal tender to foreign coins, and has provided by law against the imposition of counterfeit and base coin on the community. To the same end, congress may restrain by suitable enactments, the circulation as money of any notes not issued under its own authority. Without this power, indeed, its attempts to secure a sound and uniform cur- rency for the country must be futile." When, therefore, bank- ing is said to be a franchise, it must, we think, be understood as referring to the privilege of issuing demand notes to circu- late as currency. Judge Cooley, in speaking of bank currency, in a note to Cooley's Blackstone, says : "These securities are 64 Briscoe v. Bank of Common- 65 75 U. S. 8 Wall. 533, 19 L. wealth of Kentucky, 36 U. S. 11, Ed. 482. Pet. 257, 349, 9 L. Ed. 709, 745. 396 Trusts for Business Purposes. ESTATE V. SCOCGAL.] designed to circulate as money and they are not allowed to be issued except by persons duly authorized by statute. "^^ "Banking powers" when used in state constitutions, have been construed by several state courts to mean the power to issue notes to circulate as money. It is provided by the con- stitution of the state of Ohio that "no action of the General Assembly authorizing associations with banking powers shall ever take effect," etc., until submitted to a vote of the people. The supreme court of that state in a late case says : "The stat- ute in question does not assume to authorize the making or issuing of bills or notes to circulate as money, and the question is submitted for our determination whether it is within the meaning of the constitution." After an able discussion of the question, the court concludes that the phrase "associations with banking powers" relates only to banks of issue.^' The same view, was taken of the clause "with banking powers" in the constitution of Illinois ;^^ to the same effect is the decision of the Kansas Supreme Court as to the term "banks and cur- rency."^^ Mr. Chief Justice Taney in Bank of Augusta v. Earle, supra, commenting on the case State v. Stebbins'" says : "We are fully satisfied that the state never intended by its con- stitution to interfere with the right of purchasing and selling bills of exchange, and that the opinion of the court does not refer to transactions of this description when speaking of bank- ing as a franchise." We conclude our quotations as to the meaning of the term 66 2 Cooley's Bl. Com. 469, note 68 People v. Loewenthal, 93 21. 111. 191. 67 Dearborn v. North Western 69 Pape v. Capitol Bank of Sav. Bank, 42 Ohio. St. 617, 51 Topeka, 20 Kan. 440, 27 Am. Rep. Am. Rep. 851. 183. 70 1 Stew (Ala.) 312. Business and Legislation. 397 rSTATE V. SCOUGAL.] franchise as applied to banking powers, by a reference to our own Constitution. All the provisions referring to banking in that instrument are contained in article 18, and embrace three sections. The first is as follows : "If a general banking law shall be enacted, it shall provide for the registry and counter- signing by an officer of this state of all bills or paper credit designed to circulate as money, and require security to the full amount thereof to be deposited with the state treasurer in the approved securities of the state or of the United States, to be rated at ten per centum below their par value; and in case of their depreciation, the deficiency shall be made good by de- positing additional securities." The second section hmits the term of the duration of state banks and section 3 defines the liability of stockholders. It will be observed that the only bank- ing power referred to in the article is the power of issuing "bills or paper credit designed to circulate money." This, then, is the only banking power made a franchise under our constitution. All the other or incidental powers of banking are left to citizens as held by them at common law. And it may be proper to observe that in neither the charter granted by the British parlia- ment to the Bank of England, nor in the National Banking Law of the United States, is there any prohibition of the privilege of carrying on the business of banking, other than issuing demand notes to circulate as money by any individual, copartnership or corporation. These are all left free to pursue the business of banking as specified in section 27 of the Act under considera- tion. No one will, we apprehend, controvert the proposition that under the common law, banking in all its branches, was absolutelv free to all. 398 Trusts for Business Purposes. [STATE V. SCOUGAL.] 207 — Citizens Have Rights Which the Sovereign May Not Usurp by Franchise. We have seen in what manner and when the privilege of issuing bank-bills to circulate as money became a franchise in this country ; but as to the other or incidental powers of bank- ing specified in subdivision 7, section 4, we are unable to find that they ever became, either at common law or under the state or national Constitution, a franchise. These are privileges that always belonged to the citizens of the country generally. They never belonged to the sovereign, or pertained to sovereignty in any manner. They have never been conferred upon the na- tional government or the state government. Whence, then, did the legislature of this state derive its power to farm out these privileges to corporations, and to deny to the individual citizen the right to exercise them which he and his ancestors have from time immemorial possessed? Can the legislature create a fran- chise by depriving citizens of their rights, and then bestow it upon another at will? If it can, then the citizen lias no rights that may not be taken from him under this new theory of a franchise created by the legislature. Concede to the legislature the right to make the incidental powers of banking a franchise, under what principle of law can it be deprived of the power of making merchandising, blacksmithing, or farming, a fran- chise and conferring the privilege upon corporations only ? In our opinion, no such power exists in the legislature as that of creating a franchise out of the natural and common rights of the citizens. It must derive such power from the royal pre- rogatives of the sovereign of that country from whence our system of law is taken, or from the state or national Constitu- tion. In this case no such authority is shown. Hence we conclude that the individual citizen can not be Business and Legislation. 399 [STATE V. SCOUGAI..] deprived of a right always possessed by him — of conducting a banking business and exercising all the privileges of banking except that of issuing currency— and that right conferred upon corporations created by such legislature upon the theory that such a privilege is a franchise. From such an invasion of his rights the citizen is protected by the Constitution of the state. His right to liberty and property is held sacred under that Con- stitution, and unless he can be deprived of these rights by the lawful exercise of the police power of the state, the prohibition contained in the twenty-seventh section of the Act is unwar- ranted and void. These constitutional provisions will be dis- cussed more fully under the third proposition of counsel for the defendant in error. 208 — Police Power Defined. This brings us to the consideration of the police power of the state. Is it competent for the legislature, under that power, to deprive the individual citizen of his common-law right to carry on the business of banking by discounting paper, buying and selling bills of exchange, receiving deposits and loaning money? The police power is defined by Judge Cooley as fol- lows : "The pohce power of the state in a comprehensive sense, embraces the whole system of internal regulations by which the state seeks not only to preserve the public order and to prevent offenses against the state, but also to establish for the inter- course of the citizen with citizens, those rules of good manners and good neighborhood which are calculated to pre^'ent a con- flict of rights, and to insure to each the uninterrupted enjoyment of his own, so far as it is reasonably consistent with a like enjoyment of rights by others."''^^ This power, extending as it 71 Cooley, Const. Lim. 706. 400 Trusts i^or Business Purposes. rSTATE T. SCOUGAL.] does to the protection of life, health, comfort, and quiet of all persons, and the protection of all property within the state, is still possessed by the state, subject to the provisions of the constitutions, state and national. According to the maxim — sic utere tuo ut alienum non laedas — it must be within the range of legislative action to define the mode and manner in which one may so use his own rights as not to injure others — ■ subject to the provisions of the constitutions, state and national, and to those great fundamental principals enunciated in the Declaration of Independence. 209 — Business May be Regulated but not Prohibited. But under this power it is not competent for the state to pro- hibit the citizen from carrying on any trade, occupation or busi- ness that is not offensive to the community or injurious to so- ciety. The business may be regulated, but not prohibited. Mr. Tiedeman in his excellent work on the Limitations of Police Powers, says: 'Tn order to prohibit the prosecution of the trade altogether, the injury to the public which furnishes the justification for such a law must proceed from the inherent character of the business. Where it is possible to conduct the business without harm to the public, all sorts of police regula- tions may be instituted which may tend to suppress the evil. License may be required, the most rigid system of police regu- lations may be established, and heavy penalties may be im- posed for the infraction of the law; but if the business is not harmful, the prosecution of it can not rightfully be prohibited to one who will conduct the business in a proper and circum- spect manner. Such a one "would be deprived of his liberty without due process of law.'"'^'' 72 Tiedeman Pol. Powers, 290. Business and Legisi^ation. 401 [STATE V. SCOUGAL.] Again, the same author says : "It has been demonstrated and satisfactorily explained in its application to a sufficient number of parallel and similar cases in order to lay it down as an in- variable rule, that no trade can be subjected to police regulation of any kind unless its prosecution involves some harm or in- jury to the public or third persons, and in any case the regula- tion can not extend beyond the evil which is to be restrained. It has also been maintained, and I think satisfactorily estab- lished, that no trade can be prohibited altogether unless the evil is inherent in the character of the trade, so that the trade, however conducted, and whatever may be the character of the person engaged in it, must necessarily produce injury upon the public or upon individual third persons."'^ It necessarily fol- lows from the rules above laid down that, if a business is of- fensive to the community, or injurious to society, and is to be prohibited, it must be prohibited as to all. If it is regulated and controlled, it must be so regulated and controlled as to leave the business or calling free, under such restraints as the legislature may impose, to be exercised alike by all. The gov- ernment, under the guise of regulation, can not prohibit or de- stroy. It cannot deprive any citizen of his right to pursue a calling, occupation, or business, not necessarily injurious to the community, who is willing to comply with all reasonable regu- lations imposed upon it. It can never encroach upon the liberty of the citizen or invade the rights of property protected by the Constitution.'''* By the Act in question the state admits that banking is not, of itself, injurious to the community, as it confers upon cor- porations that may be organized under the Act, full power to 73 Tiedeman Pol. Powers, 301. 74 In Re Jacobs, 98 N. Y. 98, 50 Am. Rep. 636. 402 Trusts for Business Purposes. [STATE V. SCOUGAL.] carry on the business of banking as provided in the Act ; and the number of banking corporations that may be organized is not Hmited. It also permits individual citizens in towns con- taining less than 500 inhabitants to exercise the right of banl-:- ing, as specified in subdivision 7, section 4, under certain regu- lations in the Act. But by section 27 the state says individual citizens, either as individuals or copartnerships, except in towns of less tlian 500 population, are in the future prohibited from conducting the business of banking in any of its branches. The artificial persons created by the Act may carry on the business, but no natural person shall be permitted to do so. The banl^ E 188 vrs; N 74 E 278 vrs. South 87 E 258 vrs, a stake on the river bank; the same being the S E Corner of said Amazon Huston Survey; thence North 2091 vrs a stone; thence West 966 vrs a stone thence South 2358 vrs. to the place of beginning, this description and field notes is for the entire 372 acres and is known as Block No 23 of Cowherd Subdivision in Wichita County, Texas the 200 acres herein transferred is and under- stood to be the 200 acres off of the North end of the above described 372 acre tract, and to contain 200 acres of land and no more. 120 acres out of the S A & M G Ry; 120 acres of land out of the North East one fourth (%) of Section No Two (2) S A & M G Ry Survey, same being all of said ^ section, except 40 acres heretofore leased to Porter Farrell and being the same land conveyed to W T W^aggoner by W F George. And reference is made to the lease or contracts covering above described tracts of land, for the terms of same; and whereas the trustees for the purpose of defining the interest of the subscribers and their assigns in said property, have issued to the subscribers, in proportion to their several inter- ests negotiable certificates or evidences of interest as cestuis 428 Trusts for Business PuRPOs:es. que trustent to the number of two thousand (2,000) shares, of the part value of one hundred ($100.00) dollars, each. Now, Therefore the trustees hereby declare that they ac- cept and hold the property above described so transferred to them, as well as all other property which may hereafter be transferred to them, or which they may acquire as such trus- tees, together with the proceeds thereof, and all monies and securities accruing therefrom hereafter received by them in trust as joint tenants and not as tenants in common to man- age, invest, reinvest and dispose of the same, and to collect receive and distribute the income and profits therefrom for the benefit of the holders, from time to time of the certificates of shares from time to time, issued and outstanding here- under, in the manner and subject to the stipulations and limi- tations herein contained, to-wit; ( 1 ) The Trustees in their collective capacity and so far as practicable and convenient, shall be designated by, and shall act under the name of the Davis Coggins Oil Co. and under that name, so far as practicable, shall conduct all business and execute all instruments in writing in performance of their trust. (2) The said Trustees shall always be three in number, unless their number shall be changed by an amendment of these articles of agreement adopted in the manner hereinafter prescribed and the said J C Davis shall hold office until their annual meeting of the shareholders, and the said B F Coggins shall hold office until the second annual meeting of the shareholders, and the said J Fred Smith shall hold office until the first annual meeting of the shareholders, except that all of said trustees, as well as any trustee hereafter elected, shall in all cases hold office until their successors have been elected and accepted this trust. Appendix. 429 The shareholders at each annual meeting or adjournment thereof, shall elect the required number of trustees to fill all vacancies occurring in the Board of Trustees, by resignation inability to act, failure to accept this trust, or expiration of term of office, and trustees so elected shall serve for a period of three years the Board of Trustees, however, shall fill all vacancies occuring ad interim and the trustees so selected shall hold office until the next annual meeting of the share- holders. (3) Shareholders in said company shall have no legal right to the trust property, either real or personal or any character held from time to time by the Trustees; and es- pecially shall they have no right to call for any partition of the trust property or dissolution of the trust, but the shares shall be personal property carrying the right of division of the profits, and, at the termination of said trust, resulting either from the expiration of the period fixed for its existence or from the dissolution of the company otherwise efifected, the division of the principal and profits. (4) The death, insolvency or bankruptcy of a shareholder, the transfer of his interest by sale, gift, devise, descent or otherwise during the continuance of said trust, shall not oper- ate as a dissolution of said Company or terminate the trust, nor shall it have any effect whatsoever upon the company, its operation or mode of business; nor shall it entitle his heirs, assigns, or representatives to an account or to take any action in the courts, in law or equity against the company, its mem- bers, trustees, officers, or its property, or business operations which shall remain intact and undisturbed thereby but they shall simply and only succeed to the rights of the original member of shareholders. (5) The Trustees shall have and exercise the exclusive 430 Trusts for Business Purposeis. management and control of all property at any time belonging to this trust, with all the rights and powers of absolute own- ers thereof, subject only to the purposes of this agreement, they may adopt constitution and By laws, not inconsistent with these articles of agreement, or the laws of this State or of the United States and adopt and use a common seal ; they shall have the power to vote in person or by proxy any stock belonging to the trust and to collect, receive and receipt for the dividends thereof ; to contract with any and all companies in which they may hold stock as trustees in respect to any matters or matters relating to the business of any such com- pany or companies ; to collect, receive, sue for, and receipt for, all sums of money at any time coming due to said trust; to employ counsel; to begin, prosecute and settle suits at law in equity or otherwise and to compromise or refer to arbitration in favor of or against the Trustees. (6) The Trustees shall by a vote of a majority of the Board have full power to do all things in their judgement necessary and prudent in the management and conduct of the business of the Trust, same being the manufacture and sale of the products of petroleum the production of oil, gas or other minerals, the transportation of the same or of any of the manufactured products thereof; and the engaging in the general merchandise of said articles, or the doing of either or any of said things, or anything properly incident thereto and further, in the conduct of the business to execute con- tracts in the name of the Davis Coggins Oil Co. or in names of the trustese, as may be necessary or convenient; to pur- chase, contract for, lease or otherwise acquire such property, make such repairs, extensions and additions as they may deem necessary or proper, to sell and convey any part of the prop- erty of the Trust; to borrow money on the credit of the Appendix. 431 Trust, and if in their judgmement necessary or advisable, issue mortgage debentures therefor, secured by a mortgage or deed of trust upon the property of the trust, executed upon such terms as they may deem proper : and generally to do all things they may deem necessary or advisable for the successful management of the business and afifairs of the trust. (7) At any meeting of the shareholders at which a ma- jority of the shares are present or represented they may, by a vote of the holders of a majority of the shares present advise the trustees as to the management of the business of the Company or upon any subject which may be pending but no advice or instructions so given shall in any way impair or defeat the powers herein conferred. (8) The Trustees, the survivor or survivors of them, their successors and their survivor or survivors, shall have no power to bind the shareholders personally, and in every written contract they shall enter into, reference shall be made to this declaration of trust, and the person firm or corporation so contracting with them, shall look only to the funds and prop- erty of the Company under said contract and for the pay- ment of any debt, damage, judgment or decree, or of any money that may become due and payable in any way by rea- son thereof ; and neither any trustees, nor the shareholders present or future, shall be personally liable therefor, or for any debt incurred, or engagement or contract made by the Board of Trustees or any officer agent or servant, acting under them on behalf of the company. The funds and property of the company shall stand pri- marily charged with the burden of paying any claim or money demand established or existing on account of the operations and business of the company whether founded on contract 432 Trusts for Business PuRrosEis. or tort to the end that the members, of the company may be protected from personal liability. (8) In all deeds and conveyances to said trustees, or any of them, or to their successors or any of them, it shall be set forth that such grant, conveyance or transfer is to him or them as Trustees of the Davis Coggins Oil Co. to be held subject to this Declaration of trust. (9) The company may sue or be sued in the Company's name as provided by law; or suit may be brought or defended in the names of the trustees. (10) Stated meetings of the trustees shall be held as they may from time to time, by vote or by law, prescribe, and other meetings shall be held from time to time upon the call of the president or three trustees. A majority of the board shall constitute a quorum, and the concurrence of all the trustees shall not be necessary to the validity of any action done by them, but the wish of the majority of the trustees present and voting at any meeting as evidenced by a resolu- tion of such majority shall be conclusive and the trustees may make adopt amend or repeal any such by laws, rules and regulations not inconsistent with the terms of this instrument or the laws of tliis state or of the United States, as they may deem necessary or desirable for the conduct of their business and for the government of themselves and their agents, serv- ants and representatives. (11) Trustees shall elect from among their number a president and vice president of the board, and shall also elect a secretary treasurer and they shall have authority to appoint such other officers agents and attorneys as they may from time to time deem necessary or expedient, and they shall have authority to accept resignations and to fill any vacancies, and shall likewise have authority to elect temporary officers to Appendix. 433 serve during the absence or disability of regular officers, and the duties of the offices so created shall be such as are pre- scribed in the by laws, rules, and regulations adopted by the trustees. (12) The Trustees shall not be liable for errors of judg- ment either in holding property originally conveyed to them or in acquiring and afterwards holding additional property, nor for any loss arising out of any investment, nor for any act, or omission to act, perform or omitted by them, in the execution of this trust in good faith, nor shall they or any or either of them, be liable for the acts or omission of such other, or of any officer, agent or servant appointed, by or acting for them, and they shall not be obliged to give any bond to secure the due performance of this trust by them. (13) The shares herein provided for may be divided into preferred and common shares. The preferred shares shall entitle the holder to such dividends, payable at such time, as the trustees may specify, and they may also provide that in case of liquidation the proceeds of the liquidation shall be first applied to the payment of registered holders of preferred shares, and any accrued and unpaid dividends thereon and that the balance remaining thereafter shall be divided among the registered holder of common shares. As evidence of the ownership of said shares, the trustees shall cause to be issued to each shareholder a negotiable certificate or certificates, which certificates shall be in such form as they may prescribe, but such certificate shall only evidence, the interest that the holder thereof has in the property belonging to this trust, to be held subject to the articles of this agreement, and such by laws rules and regulations as the trustees may hereafter adopt. (14) The fiscal years of this Trust shall end on the first Monday of January of each year. Annual meetings for the 434 Trusts for Busine;ss Purposes. election of the trustees and for the transaction of other busi- ness shall be held in the town of Wichita Falls, Texas, on the first Monday of January in each year beginning with the first Monday of January 191 8, of which meetings notice shall be given by the Secretary by mail, tO' each shareholder, at his registered address, at least ten days before such meeting. (15) Special meetings of the shareholders may be called at any time, after ten days, notice, given by order of the President or two trustees. At all meetings of the sharehold- ers, each holder of the common shares shall be entitled to one vote for each share held by him, and any shareholder may vote by proxy, but the holder of preferred stock shall not have the voting privilege. No special business shall be transacted at any meeting of the shareholders, unless notice of such business has been given in the call for the meeting. No business except to adjourn shall be transacted at any meeting of the shareholders unless the holders of a majority of all the common shares outstanding are present in person or by proxy. (16) This trust shall continue for the term of 21 years after the death of the last survivor of the said J C Davis, B F Coggins and J Fred Smith, at which time the then board of trustees shall proceed to wind up its afifairs, liquidate its assets, and distribute the same among the holders of preferred and common shares according to the priorities hereinbefore expressed; provided, however, that if prior to the expiration of said period, the holders of at least two thirds of the shares then outstanding, shall, at a meeting called for that purpose vote to terminate or renew this trust, then said trust shall either terminate or be renewed and continue in existence for such further period as may then be determined, not incon- I Appendix. 435 sistent with the laws of this State or of the United States. Provided further however, that upon request of the holders, of at least two thirds of the shares of the common stock out- standing by vote or resolution thereof at a meeting of the shareholders called for that purpose the trustees may, if it seems to them judicious so to do, convey the trust property to new or other trustees, subject to the terms of such request and in the manner stated therein being first duly indemnified for any outstanding obligations provided further, however, that nothing in this provision contained shall be construed as making it obligatory upon the trustees to comply with such request. For the purpose of winding up its affairs and liqui- dating the assets of the trust the then board of trustees shall continue in office until such duties have been duly performed. (17) This Agreement and Declaration of Trust may be amended or altered except as regards the liabilities of the trustees, with the consent of the holders of at least two thirds of the shares of the common stock outstanding, provided notice of the proposed amendment or alteration shall be given in the call for the meeting, and in case of such alteration or amendment, the same shall be attached to and made a part of this agreement. (18) This instrument as well as any amendment thereto shall be recorded in any county or counties in which the trus- tees shall undertake to do business, and the trustees shall sign and acknowledge the Constitution and By laws and all amend- ments thereto in the form prescribed by laws to entitle them to registration, and the same may be recorded in any County or counties in which the trustees undertake to do business, when- ever, they deem it necessary or advisable to do so. In Witness Whereof we the Subscribers and we the Trus- 436 Trusts for Business Purposes. tees hereto sign our names, this the 4th day of January 19 18. J C Davis J. C. Davis B F Coggins B. F. Coggins J Fred Smith J Fred Smith, Trustees. A C Parker W F Reynolds, Subscribers. The State of Texas County of Wichita Before me, the undersigned authority, on this day person- ally appeared J C Davis, J Fred Smith and A C Parker and W. F. Reynolds, known to me to be the persons whose names are subscribed to the foregoing instrument, and acknowledged to me that they executed the same for the purposes and con- sideration therein expressed, in the capacity therein stated. Given under my hand and seal of office this the 4th day of January 1918. (seal) Jas A Griffin, Notary Public Wichita County, Texas. The State oE Texas County of Wichita Before me, the undersigned authority, on this day person- ally appeared B F Coggins known to me to be the person whose name is subscribed to the foregoing instrument, and acknowl- edged to me that he executed the same for the purposes and consideration therein expressed, in the capacity therein stated. Given under my hand and seal of office this the 21st day of January 1918. (seal) Edna Doke, Notary Public, Wichita County, Texas. Appendix. 437 THE PEPPERELL MANUFACTURING CO. THIS AGREEMENT AND DECLARATION OF TRUST made this fifteenth day of March, A. D. 1915, at Biddeford, in the State of Maine, (Malley & Bowditch, 259 Fed. 809, 7 A. L. R. 608). WITNESSETH: Preamble;. That Whereas the stockholders and directors of PeppER- EEE Manufacturing Company, a Maine Corporation carry- ing on business at Biddeford, in the State of Maine, deem it for the advantage of the interests in said company and business to transfer the property and assets of said company to a trust organized in accordance with the provisions of this agreement, and have passed such votes and done such acts and things as are required to authorize such transfer; and Whereas by deed of even date herewith and to be recorded, and by other instruments of assignment and transfer said prop- erty and assets have been conveyed and transferred to James Longley, Charles P. Bowditch, Francis C. Welch, George Wigglesworth, Philip Dexter, Philip Y. De Normandie, and William Amory, as trustees hereunder, to which deeds and in- struments of assignment and conveyance reference is hereby made for a more particular description of said property and assets ; Decearation of Trust. Now Therefore we, the said James Longley, Charles P. Bowditch, Francis C. Welch, George Wigglesworth. Philip Dexter, Philip Y. De Normandie, and William Amory, do here- 438 Trusts for Business Purposes. by, for ourselves and our heirs, executors, administrators and assigns and our successors, as trustees hereunder, declare and agree that we will hold the said property as well as all other property which we may acquire as trustees hereunder together with all proceeds and earnings thereof upon and for the trusts, uses and purposes herein set out : Name. 1. The name of this trust shall be Pepperell Manufacturing Company and the trustees may be so designated, and in that name the trustees shall, so far as practicable, conduct the busi- ness of the trust and execute all instruments in writing. Any property conveyed to the trustees under the above designation or as trustees of said Company shall be held by them as joint tenants as trustees under this instrument. Capital. 2. The capital of this trust shall be seven million six hun- dred and sixty-eight thousand dollars ($7,668,000) divided for the purpose of issuing certificates into 76,680 shares of the par value of one hundred dollars ($100) each. Certificates. The holders of said shares sliall be entitled as evidence there- of to certificates executed and delivered by the trustees in sub- stantially the form following, namely: PEPPERELL MANUFACTURING COMPANY. (Issued under Agreement and Declaration of Trust dated March 15, 191 5.) Appe;ndix. 439 No. Shares. This is to certify that is the owner of shares of the par vakie of one hundred dollars ($ioo) each of the Pepperell Manu- facturing Company, subject to the provisions of an Agree- ment and Declaration of Trust dated March 15, 191 5, and on file with Saco and Biddeford Savings Institution in Saco, Maine, which is hereby referred to and made a part of this certificate. This certificate is transferable only subject to the pro- visions of said Agreement and Declaration of Trust and only by transfer upon the books of the Trustees upon sur- render of this certificate properly endorsed. This certifi- cate is not valid until countersigned by Boston Safe De- posit and Trust Company, Transfer Agent, which signs merely to indicate that the shares represented by this and all other outstanding certificates bearing its signature do not exceed the total shares herein authorized. In Witness Whereof the Trustees under said Agreement and Declaration of Trust have caused the name of said Trust to be signed hereto and its common seal to be hereto afifixed by their President, and attested by their Treasurer, this day of A. D. 19 PEPPERELL MANUFACTURING COMPANY, By President. Attest : Treasurer. Countersigned : BOSTON SAFE DEPOSIT AND TRUST COMPANY, Transfer Agent, By (Form of Transfer ) For value received the undersigned hereby sells,, as- signs and transfers to 440 Trusts for Busine:ss Purposes. shares in Pepperell Manufacturing Company mentioned in the within certificate. Dated: Witness: Loss, etc., of Certificates. In case of mutilation, destruction or loss of any certificate hereunder the trustees may issue a new certificate on such terms as they may think fit in suhstitution for the certificate so muti- lated, destroyed or lost. Duration of Trust. 3. This trust unless sooner terminated as herein provided shall continue for a term of twenty (20) years next after the death of the last sur\'ivor of the following named persons: William Appleton Coolidge and John Linzee Coolidge, children of T. Jefferson Coohdge, Junior, late of Manchester, Mass., deceased ; Robert Winthrop, Frederic Winthrop, Jr., and John Winthrop, children of Frederic Winthrop, of Hamilton, Mass. ; Barbara Welch and Francis Clarke Welch, Second, children of E. Sohier Welch, of Weston, Mass.; William Dexter, son of Philip Dexter, of Boston, Mass. ; Mary Stockton and Charles H. Stockton, children of Phihp Stockton, of Manchester, Mass.; Theresa De Normandie and Elsie De Normandie, children of Philip Y. De Normandie, of Milton, Mass. Purposes and Powers of Trustees. 4. The trustees shall employ and use the trust property and assets in the carrying on of the business of manufacturing tex- tile or other fabrics and the component parts thereof from cot- ton or other materials and buying, selling and dealing in and with the same. The trustees shall have, without other or fur- Appendix. 441 ther authorization, full and absolute power, control and author- ity over the trust property held by them at any time hereunder and over the business of the trust to the same extent as if the trustees were the sole owners of such property and business in their own right, subject only to the limitations herein expressly stated and to the superior control of the shareholders. With- out restricting the generality of the foregoing such powers shall include among others the following : (a) To carry on the business aforesaid; to own or operate under letters patent and trade marks ; to buy, own, sell, lease or develop real and personal property and water power ; to buy, own, sell, lease, erect or operate mills, dams, power plants and other structures; to produce power by steam, water, electricity or other agency and to utilize and sell the same but not thereby or otherwise to engage in any business as a public service company except so far as may be from time to time permitted by law ; to do any and all things necessary or proper to effect or which may be in- cidental to any or all of the foregoing, and either as inci- dental thereto, or otherwise, to purchase, own, vote upon and dispose of the stock of corporations or associations, including shares issued hereunder, bonds and other securi- ties and to collect dividends or interest thereon. (b) To establish and carry on the business above- mentioned or any similar businesses at any other place or places, whether in the State of A-Iaine or elsewhere and either directly or through any controlled corporation or association ; to construct and equip or to purchase or other- wise acquire, plants for such businesses with all proper ap- purtenances thereto and the same to sell, mortgage or othenvise dispose of ; and to contract generally with any controlled corporation or association. (c) To employ such agents as the trustees shall think proper in their discretion for the management of the trust property and assets and the management and carrying on of any business herein authorized and to act through such agents to the extent they deem wise. (d) To pay all taxes, assessments and any and all nec- essary and proper expenses in connection with the man- 442 Trusts for Business Purposes. agement of the trust property and assets, or the carrying on of the business of the Company, including the purchase of any forms of insurance the trustees may deem advisable. (e) To adopt and use a common seal. (/) To collect, sue for, receive and receipt for all sums of money at any time coming due to the Company; to employ counsel; to begin and prosecute or to defend any actions or suits at law, in equity or otherwise, and to com- promise or adjust any such actions or suits or any contro- versy or dispute or any claim, demand or thing relating to the Company's property or business, or to refer to arbitra- tion any of the foregoing. (g) To borrow money for any purpose herein author- ized; to give notes, or to enter into obligations or con- tracts of suretyship or guaranty, and to secure such notes or obligations by a mortgage or pledge of any personal property of the Company, but such notes or contracts of suretyship or guaranty shall not be valid unless counter- signed by at least one of the trustees, in addition to the duly authorized signature thereto on behalf of the Com- pany ; to loan money and to invest any funds of the Com- pany as they may deem wise. (h) To cause to be organized a corporation or corpo- rations under the laws of any jurisdiction, or any other trust or trusts, to take over the trust property or any part or parts thereof, and to sell, convey and transfer such trust property or such part or parts to such corporation or corporations, trust or trusts, in exchange for the shares or securities thereof, or otherwise. Exemption of Shareholders. The holders of the shares are hereby declared to be cestuis que trust and not partners, and nothing herein contained shall constitute the trustees or the shareholders or any of them part- ners with one another or with any person, firm, association or corporation, or shall render them or any of them personally liable for any debt, contract or obligation or liability entered into or incurred in respect of this trust or by the trustees or Appendix. 443 officers or any of them; and neither the trustees nor the offi- cers of this trust shall have any power to bind shareholders per- sonally by any contract, express or implied (either in the names of the trustees or in the name of the trust), or by any act, neglect or default, and in every contract which they make, of whatever nature, whether in the name of the trustees or in the name of the trust, reference shall be made to this Declaration of Trust, and any corporation, person or persons contracting with, extending credit to or having any claim against the trus- tees or the trust shall look only to the funds and property of the trust for the performance of such contract or for the pay- ment of any debt, mortgage, judgment or decree, or of any money that may become due or payable under the authority or by reason of the failure or neglect of any trustees or any officers of the trust, and neither the trustees nor any present or future shareholders shall ever be personally liable therefor. ExE;MP'rioN OF Purchasers, etc. 5. No purchaser or mortgagee of any property from the trustees nor any lender to them shall in any event be bound to see to or be affected by the application of such purchase money or money lent. The receipts of any two of the trustees, or the Treasurer of the Company, or either of them, for moneys or things paid or delivered for the trust shall be effectual dis- charges therefrom to the persons paying or delivering the same. Title to Trust Property and Interest op Shareholder. 6. The title to the trust property of every name and nature, and the right, power and authority to carry on and conduct the business of the trust shall be vested solely in the trustees. No shareholder shall be deemed to have any legal title to any of 444 Trusts for Business Purposes. the trust property or assets, but the interest of the shareholders shall be deemed to be equitable only and they shall have no right to call for any partition or division of any of the trust property or any profits, rights or interests therein during the continuance of the trust. The death of a shareholder during the continu- ance of the trust shall not operate to determine the trust nor sliall it entitle the legal representatives of such shareholder to an accounting or to take any action in the courts or otherwise against the trustees or the property held hereunder, but the legal representatives of such shareholder shall succeed to all his rights under this trust, and upon the surrender of the certificate or certificates of such shareholder the trustees may issue a new certificate or certificates for such sliares to the executor or ad- ministrator of such shareholder and so doing shall be without liability. Record of Shareholders Conclusive. 7. The name or names in which any of the shares issued or to be issued hereunder shall be recorded on the books of the trustees shall be deemed conclusive evidence of ownership and the trustees may pay any and all dividends upon such shares to such record holders. And said trustees shall not be under any obligation to take notice or to inquire as to the rights of any assignee or pledgee in the absence of any transfer of record to such assignee or pledgee ; and all payments made in accordance herewith shall be deemed duly made and the trustee discharged with respect thereto. Anv and all notices to which shareholders hereunder may be entitled, and any communications of or in respect to any matter or thing hereunder, shall be deemed duly served if mailed, postage prepaid, addressed to shareholders of record Appe;ndix. 445 at their last known residences or places of business as recorded on the books of the trustees. Trustees' Names, Term oe Oefice, etc. 8. The trustees shall always be seven (7) in number. The trustees herein named as such shall hold office until the next annual meeting of the sliareholders. The term of office of the trustees shall be one year and shall expire at the next annual meeting following their election, subject, however, to the pro- visions for holding over, as hereinafter set out. FiscAE Periods. The fiscal year of the trustees shall be divided into two periods, ending respectively June 30 and December 31 in each year. Annual Meetings oe Shareholders. All meetings of the shareholders of the trust shall be held at such place in the State of Maine as shall be from time to time designated by the trustees and specified in the notice of the meeting. The annual meetings of the shareholders of the trust shall be held on the third Thursday of October in each year, at which meeting, or at any adjournment thereof, the said shareholders shall elect seven (7) trustees to serve for the ensuing year. Special Meetings of Shareholders. Special meetings of the shareholders of the trust may be called by the President at any time and shall be called upon written request of the holders of five (5) per cent in amount of the outstanding shares, and at special meetings no business shall 446 Trusts for Business Purposes. be transacted except such as shall liave been specified in the notice therefor. In case by oversight or for any other reason the annual meet- ing hereinbefore provided for shall be omitted the acts herein provided to be done at such annual meeting may be done at a subsequent special meeting in lieu thereof duly called as in this section provided. Notice of Meetings. 9. Written notice of all meetings, whether annual or special, shall be given by the President or Secretary ten (10) days at least before such meeting. Notice of any meeting may be waived by any shareholder either before or after such meeting. Proxies and Voting. 10. At any meeting the shareholders may vote by proxy. Only shareholders of record shall be entitled to vote, and each share shall be entitled to one vote. If the holder of any share hereunder is a minor, or for other reason subject to guardian- ship or legal control, he may vote by guardian or by such other person as may be lawfully authorized thereto and such vote may be given in person or by proxy. Quorum. 11. At any meeting of the shareholders, the shares present shall constitute a quorum, and a majority may decide upon all matters coming before the meeting except as herein otherwise expressly provided. Trustees' Meetings, etc. 12. Regular meetings of the trustees shall be held at such Appendix, 447 times and places as said trustees may provide and special meet- ings shall be held at any time upon the call of the President or any four of the trustees. Notice of any meeting may be waived by any trustee either before or after such meeting. A majority of the trustees shall constitute a quorum and except as herein otherwise provided, any action taken relating either to matters of discretion or otherwise at any meeting duly held, at which a quorum is present, shall be effective as the act of all the trus- tees; provided, however, that in case of any action relating to the borrowing or loaning of money, the establishment of new plants by purchase or otherwise, or the establishment of any new branch of business, the concurrence of at least four trustees shall be required. Officers. 13. The trustees shall annually elect from among their num- ber a president; and they shall also annually elect a secretary and treasurer, either of whom may, but need not, be a trustee (which latter two offices may, but need not, be held by the same person) ; and they shall have authority in their discretion to appoint further vice-presidents, assistant secretaries, assist- ant treasurers and such other officers and agents as they may from time to time deem advisable and to confer upon all such officers and agents such duties and obligations as they may de- termine. They may also appoint from among their number an executive committee of three or more persons to whom they may delegate such of the powers herein conferred upon the trustees as they may deem expedient except as herein otherwise provided. They may accept resignations of any officer elected or appointed by them and may fill such vacancies for the un- expired term. They may likewise accept the resignations of 448 Trusts for Business Purposes. any of their own number and may fill any vacancies thus caused or otherwise existing in their number until the next annual meeting of the shareholders. Compensation. 14. The trustees shall fix the compensation, if any, of all officers and agents appointed by them and may also pay to them- selves such compensation for their own services as they may deem reasonable. By-IvAws, etc. 15. The trustees may make, adopt, amend or repeal such by-laws, rules and regulations not inconsistent with the terms of this instrument as they may deem necessary or desirable for the conduct of the business of the trust, and for the govern- ment of themselves and their officers, agents, servants and rep- resentatives. Strangers May Rely on Trustees' Resolution as to Powers. 16. So far as strangers to this trust are concerned, a reso- lution of the trustees authorizing a particular act to be done shall be conclusive evidence in favor of such strangers that such act is within the powers of the trustees. Liability of Trustees. 17. The trustees shall each be liable only for his own acts and not one for another, and where they act by agents or serv- ants they shall not be liable for the faults of such agents or servants provided they have used due care in the selection of Appendix. 449 them. No trustee at any time acting under this instrument shall be liable for errors of judgment either in holding prop- erty originally conveyed to them or in acquiring or afterwards holding additional property, or in selling or disposing of any of the trust property, or in the conduct of the business of the trust, nor for any loss arising out of the conduct of said busi- ness; nor for any loss or depreciation in value of any of the trust property, original or subsequently acquired, unless such loss or depreciation shall have been directly caused by his own gross negligence or dishonesty, nor for any loss arising out of any investment, nor for any act or omission to act in the execu- tion of this trust in the absence of bad faith. The trustees and each of them shall be entitled to indemnity from the trust prop- erty for any personal liability which may be incurred in the ad- ministration of said trust or in the conduct of its business, ex- cept such as may arise from wilful default. No bond or other security and no surety or sureties shall ever be required of any trustees acting hereunder, in their capacity as trustees. Any trustee may purcliase or acquire shares in this Trust in all respects as if he were not a trustee. Dividends. 1 8. The trustees may from time to time declare and pay dividends out of the net profits received by them, or out of any surplus, but the amount of such dividends and the times of declaration and payment thereof shall be wholly in the dis- cretion of the trustees, as shall also the determination of what constitutes such net profits or surplus. The trustees may also determine what constitutes depreciation and may set apart such depreciation and reserve funds as they ma}^ think proper. 450 Trusts for Business Purposes. Trust Property to Vest in Succeeding Trustees. 19. Upon resignation, decease, removal or vacancy for any cause in any ofifice of trustee hereunder, the title of the trust property and assets shall vest in the remaining trustees and upon the filling of any vacancy the said title shall vest in the ne^v trustees jointly with the old. Any outgoing trustee or the legal representatives of any trustee deceased shall, at the request of the remaining trustees, but at the expense of the trust, execute, acknowledge and deliver all such conveyances and instruments as may be necessary or desirable to vest the title of said trust property and assets in such remaining or succeeding trustees. The trustees for the time being, whether surviving, remain- ing or substituted, shall be vested with all powers, authorities, rights and discretions, and shall be subject to all duties, obliga- tions, limitations and restrictions given to or imposed upon the trustees hereunder. Acceptance of Trust by New Trustees. Upon the election of any trustee by the shareholders or by the remaining trustees, he shall execute an acceptance of this trust, which, together with a certificate of the Secretary or As- sistant Secretary or of the Clerk of the trustees as to such elec- tion, shall be forthwith filed with the depositaries then having custody of this instrument. Except in cases of resignation or removal, which may take effect at any time, any trustee hereunder shall hold office until the election and qualification of his successor. Additional Shares. 20. In addition to the shares at any time issued hereunder the trustees may from time to time, with the consent of a ma- Appe;ndix. 451 jority in interest of the shares then outstanding, at a meeting duly called and held, in the call for which specific notice shall have been given thereof, issue and dispose of additional shares, creating the whole or any part of said increased issue preferred shares, all upon such terms and in such manner and, if pre- ferred shares, with such preferences, as the shareholders at such meeting may determine. Amendment, Alteration or Termination oe Trust. 21. The shareholders may upon the vote of a majority in interest of the shares outstanding at any annual meeting, or at any special meeting called for the purpose, alter or amend this Agreement in any particular (except with respect to the lia- bility of shareholders set forth in the last paragraph of section 4 and except by extending the term of this Agreement) includ- ing, but without restricting the generality of the foregoing, any change in the number of trustees, or may terminate this trust. Any such amendment shall be deemed thereafter a part of this agreement, and a copy thereof certified by the President and Secretary of the Company shall forthwith be filed with the depositaries then having custod}'' of this instrument. Trustees to Wind Up Upon Termination or to Transfer AS Directed by Shareholders. In case of any such vote of termination, the shareholders may also by like majority in interest of the shares outstanding vote to transfer the property, assets and business of this trust to an- other trust or trusts, or to a corporation or corporations, or in such other manner as they shall deem wise, all upon such terms as they may by such vote determine ; and the trustees shall carry out such transfer in accordance with such vote and 452 Trusts for Business Purposes. so doing shall be without liability. In case of such vote of termination, in the absence of any vote of the shareholders to transfer said assets and business to any other trust or cor- poration, or otherwise, or in case of the expiration of this trust by limitation, the trustees shall forthwith proceed to wind up this trust and its affairs and business, and after paying or satis- fying all obligations and liabilities of the Company shall divide the property then remaining in their hands or its net proceeds ratably among the shareholders. In such winding up and for purpose of making distribution the trustees may in their dis- cretion from time to time sell the whole or any part of the trust property in such parcels as they may determine, at public auction or private sale, and upon such terms as they deem wise. The powers of the trustees shall in any of the foregoing cases of termination continue after such termination to the ex- tent and for such time as may be reasonably necessary to carr}' out any transfer directed by the shareholders as aforesaid, or to wind up this trust as aforesaid, but not exceeding the time permitted by law. 22. This instrument is executed in the State of Maine and with reference to the laws of said State; and it is the intent of all parties hereto that the construction and effect of this instru- ment and every part thereof shall be governed by, subject to and construed according to the laws of said State. 23. The trustees shall have power at any time to change the depositaries of this instrument. * In Witness Whereof the said trustees above-named have hereunto set their hands and seals the day and year first above v/ritten. JAMES LONGLEY [seal] CHARLES P. BOWDITCH [seal] FRANCIS C. WELCH [seal] Appendix. 453 GEORGE WIGGLESWORTH [seal] PHILIP DEXTER [seal] PHILIP Y. DE NORMANDIE [seal] WILLIAM AMORY [seal] Commonwealth oe Massachusetts Suffolk, ss: Boston, ]\Iarch 16, 1915. Then personally appeared the above-named James Longley, Charles P. Bowditch, Francis C. Welch, George Wigglesworth, Philip Dexter, Philip Y. De Normandie, and severally acknowl- edged the foregoing instrument by them executed to be their free act and deed, before me. JAMES P. ROBERTS, [Notarial Seal] Notary Public. State of Maine York, ss: Biddeford, Mar. 19, 1915. Then personally appeared the above-named William Amory and acknowledged the foregoing instrument by him executed to be his free act and deed, before me. THOMAS B. WALKER, [Notarial Seal] Notary Public. 454 Trusts for Business Purposes. THE MARTIN-COPELAND COMPANY. This company was held to be a trust and not a partnership by the Supreme Court of Rhode Island, July 6, 1916. Re- ported in 39 R. I. 193, 98 Atl. 273. The Trust Agreement is as follows: i "An agreement and declaration of trust made the eighth (8th) day of August, A. D. 1912, by and between Edgar W. Martin, of Barrington, in the county of Bristol, and Wil- liam A. Copeland and Lawrence C. Martin, both of Provi- dence, in the county of Providence, all in the state of Rhode Island, and George W. Bleecker, of Chicago, in the county of Cook, and state of Illinois, trustees of the Martin-Cope- land Company, for the purpose of enabling the holders of trust shares hereunder to distribute the advantages and risks of their investments over different securities and business enterprises in a way ordinarily possible to investors, and to that end to hold as a com.mon or joint investment for the common and equal benefit of the shareholders, ratably, ac- cording to their several holdings of shares, the personal prop- erty, transferred or conveyed to, vested in, or acquired by the trustees under this agreement, and to invest and reinvest such money and funds as may be paid to the trustees or be realized by them from the disposition of shares issued here- under, in such manner and in such business enterprises, securi- ties, and personal property as under the terms of this instru- ment shall be permissible, and in the judgment of the trustees exercised under the powers given them by this instrument shall tend to enhance the value of the shares issued hereunder as investments ; and the said trustees hereby declare that they will hold all property acquired by them at any time as trustees hereunder, with the proceeds thereof, in trust, to manage and Appendix. 455 dispose of the same, and to collect, receive, and distribute the income and profits .thereof, for the benefit of the holders from time to time of the certificates of shares or evidences of interest issued and outstanding hereunder, in the manner and subject to the provisions of this agreement. "Title and Location of Trust. "(i) The trustees of these presents may be collectively designated as 'Martin-Copeland Company,' and the title of trustee or trustees hereunder shall be 'Trustee of the Martin- Copeland Company,' or 'Trustees of the Martin-Copeland Company,' as the case may be, and their principal place of business shall be at Providence aforesaid. "(2) The trustees under this agreement are the said Ed- gar W. Aiartin, William A. Copeland, Lawrence C. Martin, and George W. Bleecker; but the term 'the trustees,' when- ever hereinafter used, shall mean the trustee or trustees here- under for the time being, whether original or substituted; and any property at any time conveyed, transferred, or as- signed to the trustee or trustees hereunder, or otherwise ac- quired by them, shall be held by them as trustees under this agreement. "(3) The term 'shareholder,' used in this agreement, shall mean holder of record of the share receipt or share certificate from the trustees hereunder. "Issue of Shares. "(4) The trustees under this agreement shall as such have power to issue preferred shares and common shares of the par value of one hundred ($100) dollars each. "The trustees may issue preferred shares in an amount which shall not exceed in aggregate two hundred thousand ($200,000) dollars par value, and sell the same at public or private sale, or exchange for other shares, securities, con- 456 Trusts for Business Purposes. tracts, services, or personal property upon such terms and for such prices and considerations as they may deem ex- pedient. "The trustees may issue common shares in an amount which shall not exceed in aggregate two hundred thousand ($200,000) Dollars par value, and sell the same at public or private sale or exchange for other shares, securities, contracts, services, or personal property upon such terms and for such prices and considerations as they may deem expedient. "Any trustee may acquire, hold, and dispose of shares in the trust in his individual name and on his personal account, or jointly with others, or as a member of a firm, without being disqualified to act as trustee, and while so owning and holding such shares on his personal account shall be entitled to the same rights and privileges as any other shareholder. "(5) The trustees shall issue preferred and common share certificates in such form as they shall deem best for each sum of one hundred ($100) dollars or for its equivalent paid to them under this agreement. No share certificate shall be issued for any fraction of a share. "Transfer of Shares. "(6) Every transfer of any share (otherwise than by operation of law) shall be in writing under the hand of the transferror, and upon delivery thereof, with the existing cer- tificate for such share, to the trustees, or their transfer agent, shall be recorded in the trust books, and a new certificate therefor shall be given to the transferee, which new certificate and the holder thereof shall thereupon become subject to this agreement. In case of a transfer of only a part of the shares mentioned in any certificate, a new certificate for the residue thereof shall be given to the transferror. Until the existing certificate shall be so delivered and transfer recorded, the Appendix. 457 transferror shall be deemed to be the holder of the share or shares comprised therein for all the purposes of the trust thereof, and the trustees shall not be affected by any notice of the transfer. "In case of the loss or destruction of a share certificate issued hereunder as aforesaid, another may be issued in its place by the trustee, under such conditions as they may deem expedient. "{7) Any person becoming entitled to any share in con- sequence of the death, bankruptcy, or insolvency of any share- holder, or in any other way than by a transfer in accordance with the preceding paragraph, shall be recorded in the trust books as the holder of the said share, and receive a new cer- tificate for the same, upon production of the proper evidence thereof and delivery of the existing certificate to the trustees, or their transfer agent, which new certificate and the holder thereof shall thereupon become subject to this agreement. Until such evidence shall be produced, and the existing cer- tificate shall be delivered to the trustees, they shall not be affected by any notice of the change in title. "Title of Shares. "(8) All shares shall give only the rights in this agree- ment and in certificate thereof specifically set forth, and a shareholder, or upon the death, bankruptcy, or insolvency of any shareholder, the person or persons succeeding to his interest as legal representatives, assignees, or otherwise, shall have no right to call for any accounting or division of prop- erty or profits. "General Powers and Duties of Trustees. "(9) The trustees under this agreement shall have the sole legal title to all property, in any part of the United States of America, or in any foreign country, at any time held. 458 Trusts for Business Purposes. acquired, or received by them as trustees under the terms of this agreement, or in which the shareholders under this agree- ment shall have any beneficial interest as such shareholders, and they shall have and exercise the exclusive management and control of the same, in any manner that they shall deem for the best interests of the shareholders, with all the rights and powers of absolute owners thereof. They may sell, ex- change, mortgage, pledge, or in any other way dispose of or deal with the property of the trust, or any part thereof, or in- terest therein, upon such terms as they see fit, and take in payment or exchange therefor cash, securities, property, or notes, and obligations of any kind or description ; may adopt and use a common seal ; may manufacture, buy, sell, and otherwise deal in precious stones, chains, jewelry, lenses, optical goods and kindred articles, machinery, materials, and articles of all kinds which shall be capable of being used for such purposes, and may purchase or otherwise acquire patents, patent rights and privileges, trade-marks and trade-names, and improved or secret processes, that are in any way related to any of the objects aforesaid, and grant licenses for the use of, or of selling or otherwise deahng in, any patent rights and privileges, trade-marks and trade-names, and improved or secret processes acquired by them, and for these purposes use any moneys and property in their hands ; and generally make all contracts and do all things which they may think desirable in the management, development, and maintenance of the trust properties, and shall deem for the best interests of the shareholders. They may sell, discount, or otherwise negotiate notes, commercial paper, and obligations of all kinds coming into their hands, and otherwise, either without security, or secured by the pledge or mortgage with power of sale of the assets of the trust, as they deem best, such sums from time Appendix. 459 to time as they require, and they shall have full power to execute all contracts, mortgages, and agreements or instru- ments in writing, and to do any other things which they shall think proper for executing any of the powers or trusts herein contained, subject only to the provisions and purposes of this agreement, and shall have full power to perform and fulfill all agreements and obligations and pay all liabilities properly assumed by them as such trustees. "(10) The trustees may make, adopt, amend, or repeal such by-laws, rules, and regulations not inconsistent with the terms of this agreement as they may deem necessary or de- sirable for the conduct of their business, and for the govern- ment of themselves and their agents, servants, and represen- tatives. "(11) The trustees shall have power to represent the shareholders in all suits or legal procedings in any court of law or equity, or before any other body or tribunal, to em- ploy counsel and commence suits or proceedings or defend the same, and to compromise or submit to arbitration all mat- ters of dispute in which the trust or trustees may be a party, whenever and in such manner as they in their judgment may deem proper. "(12) The trustees shall have power to invest and rein- vest all funds and moneys of the trust in their hands, in merchandise, in stocks and bonds, any other securities and personal property, and at any time to sell, transfer, and dis- pose of, without further authority or consent than herein contained, any property acquired by them, at their discretion, and upon such terms and for such prices and considerations as they deem wise, and reinvest the proceeds of such sales, upon such terms and conditions as they may deem expedient. "(13) The trustees shall have power to pay the expenses 460 Trusts for Business Purposes. of organization of this trust, including all legal expenses in connection with the preparation and carrying out of plan for the formation of the trust and the acquisition of property acquired hereunder; to indemnify themselves or any of them out of the property of the trust for all liabilities for which they or any of them may be personally liable in the carrying out of the trusts herein contained; to pay the necessary and proper expenses of the carrying on of the business of and management of the trust hereunder, and to employ such of- ficers, experts, counsel, managers, salesmen, agents, mechan- ics, workmen, clerks, bookkepers, accountants, or other per- sons as they think best, and fix their compensation and define their duties, and any trustee so employed may receive compensation therefor. "(14) The trustees shall have power to determine whether moneys or things shall, for the purpose of these presents, be considered as capital or income, and what constitutes gross income and what net income in any year, or part of a year, and to determine the mode in which any expenses or outgoings shall be borne as between capital and income. "Number, Absence, and Incapacity of Trustees, and Vacancies. "(15) The trustees shall not be more than four in num- ber. The trustees may designate one of their number to act as president and one to act as treasurer, and may change such designations, which officers shall have the authority and shall perform the duties usually incident to these offices in case of corporations so far as practicable, shall have authority to sign share certificates issued hereunder, and shall have such other authority and perform such other duties as may from time to time be determined by the trustees. "A majority of the trustees constitutes a quorum, and the concurrence of all the trustees shall not be necessary to the Appendix, 461 validity of any action done by them, but the wish of a ma- jority of the trustees present and voting at any meeting shall be conclusive. "Any vacancy in the number of trustees, caused otherwise than by the removal of any trustee or trustees by the com- mon shareholders, may be filled by the remaining trustee or trustees, by an instrument in writing, and in case of the re- moval of a trustee by the common shareholders, as provided in the following paragraph of this agreement, the vacancy shall be filled only by the common shareholders. "(16) The common shareholders may, by vote of the ma- jority of shares then outstanding, at a meeting duly called for that purpose, as provided in paragraph 21 hereof, remove any trustee and appoint a new trustee in his stead. "(17) The trustee or trustees for the time being shall have all the powers of the original trustees. "(18) In case of any vacancy in the office of trustees, or the incapacity or neglect or refusal to execute the duties re- posed in him of any trustee for any reason, or the absence from this country of any trustee for a period of thirty (30) days or more, the remaining or other trustee or trustees shall have and exercise the powers and be subject and holden to perform all the duties of all the trustees so long as such va- cancy or absence continues, or such incapacity, neglect, or re- fusal exists, and the certificate of any remaining trustee shall be conclusive evidence of such vacancy, absence, neglect, in- capacity, or refusal. "(19) Upon the resignation, decease, removal, or perma- nent incapacity of any trustee or trustees hereunder, or vacancy for any cause in the office of trustee, the title of such trustee or trustees shall vest in the other or remaining trus- tee or trustees without any conveyance whatsoever; and upon 462 Trusts e^or Business Purposes. the filling of any vacancy, or the appointment of any new or additional trustee or trustees hereunder by the common shareholders, or otherwise, as is hereinbefore provided, the title of the trust property shall at once vest in the then trustees for the time being without any conveyance whatsoever. "(20) The trustees may by vote or otherwise delegate to any one or more of the trustees any of their powers herein, and any trustee may by written power of attorney delegate his power to any other trustee or trustees herein. "Meetings of Shareholders. "(21) The trustees may call meetings of common share- holders at any time, and shall do so upon the written request, stating the purpose for which such meeting shall be called, of holders of twenty-five per cent of all the common shares outstanding, and in case of the incapacity, neglect, or refusal of the trustees to call such meeting within a reasonable time after the receipt of such request therefor, the meeting may be called by the common shareholders signing said request, who may do all things necessary therefor required in the fol- lowing paragraph, or otherwise. "(22) A written or printed notice of every meeting of common shareholders, stating the time and place of the meet- ing, and the purposes thereof, shall be given to each common shareholder by the trustees at least seven (7) days before a meeting, by leaving such notice with him or by mailing it, post paid, to the address last given by him to the trustees, or, in case he had given no address to the trustees, to> his last known place of business or abode. "(23) Notices of meetings, or calls for payments or sub- scriptions, or notices or calls for any other purpose, shall be deemed binding upon each shareholder, if made as provided in the preceding paragraph. Appendix, 463 "(24) Common shareholders may vote by proxy, and for the purpose of voting at meetings each common share shall be entitled to one vote. "(25) No business shall be transacted at any meeting of the common shareholders, unless notice of such business has been given in the call for the meeting, and no business, except to adjourn, either generally or to a time assigned, shall be transacted at any meeting of the common shareholders, unless the holders of forty (40) per cent, of all the shares outstand- ing are present in person or by proxy. "(26) A certificate signed by one or more of the trustees, or if the office be vacant, or the trustee or trustees for the time being be unable, neglect, or refuse to act, by the holders of twenty-five per cent, of all the common shares outstanding, shall be conclusive evidence of the regularity of any meeting, of any vote passed, or other proceedings at such meeting, and of all facts in relation to such meeting stated in such vote or certificate. "Compensation. "{^'Z'j^ The trustees shall fix the compensation, if any, of all officers and agents whom they may appoint, and are like- wise authorized to pay to themselves such compensation for their services as trustees as they may deem reasonable, and any trustee may be employed by the trustees to perform any special business, financial, or other service, and shall in such case be entitled to receive such additional compensation as the trustees may fix and determine. "Liability of Shareholders and Trustees. "(28) Shareholders hereunder shall not be liable for any assessment, and the trustees shall have no power to bind the shareholders personally. "(29) Every act done, power exercised, or obligation as- 464 Trusts for Business Purposes. sumed by the trustees, pursuant to the provisions of this agreement, or in carrying out the trusts herein contained, shall be held to be done, exercised, or assumed, as the case may be, by them as trustees, and not as individuals, and every per- son or corporation contracting with the trustees, as well as every beneficiary hereunder, shall look only to the fund and property of the trust for payment under such contract, or for the payment of any debt, mortgage, judgment, or decree, or the payment of any money that may otherwise become due or payable on. account of the trusts herein provided for, and any other obligation arising under this agreement in whole or in part ; and neither the trustees nor the shareholders, pres- ent or future, shall be personally liable therefor. "(30) No bond or surety or sureties shall be required of any trustee acting hereunder, and each trustee shall be liable only for his own acts, and then only for willful breach of trust. "Liability for Application of Money Paid to Trustees. "(31) No purchaser, mortgagee, lender, -lessee, or other person shall be bound to see to the application of any money paid by him to the trustees. "Dividends. "(32) The trustee may from time to time declare and pay to the preferred and common shareholders dividends out of the net earnings from time to time received by them, but the amount of such dividends and the payment of them shall be wholly in the discretion of the trustees, except that any dividend which may be declared on the preferred shares shall be at the rate of six per cent, per annum and no more, and the same shall be paid and set apart before any dividend shall be paid or set apart for the common shares. % Appendix. 4^5 "Reserve or Surplus Fund. "(33) The trustees shall have authority to reserve in each year such sum as they deem wise from the gross or net in- come actually collected, as a reserve or surplus fund, with power to use said fund by the trustees at any time for the maintenance of dividends, for the payment of the charges of the trustees, or to treat the same or any part thereof as surplus capital, and to change their determination as to said fund, or any part thereof, from time to time, as to them may seem prudent and expedient, absolutely at their own discre- tion, but always subject to the terms of this agreement. "Inspection of Books. "(34) The transfer books of the trust shall be open to the inspection of shareholders at all reasonable times. "Amendment of Agreement. "(35) This agreement and declaration may be amended or altered, except as regards the liability of the trustees and shareholders and the provisions relating to the preferred shares, with the consent of the trustees for the time being, provided any such proposed amendment or alteration shall be authorized and approved at a meeting of the common shareholders by at least two-thirds of all the common shares outstanding, and notice of the proposed amendment or altera- tion shall have been given in the call for the meeting, but no alteration or amendment shall affect any person not having notice thereof, nor shall any alteration or amendment, or other action, affect previously acquired rights of any third per- son other than shareholders hereunder. "Acknowledgment of Certificates. "(36) Any certificate or paper signed by the trustees, or any of them, or by the common shareholders hereunder, or a copy of the record of any of the proceedings of the trustees 466 Trusts for Business Purposes. or shareholders, which it may be deemed advisable to record in any registry of deeds, or elsewhere, may be acknowledged by any one of the parties signing in the manner at the time pre- scribed by law for the acknowledgment of deeds to be re- corded in such registry. "Termination of Trust. "(37) The trusts under this agreement may be terminated at any time by vote of two-thirds of the common shareholders hereunder at a meeting duly called for that purpose, as here- inbefore provided in paragraphs 21 and 26 of this agreement, "(38) Unless the trust under this agreement shall be sooner terminated, as hereinbefore provided, they shall con- tinue for twenty-one (21) years after the death of the last surviving original trustee hereto, and of Wesley C. Martin and E. Cornell Martin, sons of the aforesaid Edgar W. Mar- tin trustee hereof, and at the expiration of the time so lim- ited for such continuance of the said trusts they shall ter- minate. "(39) Upon the termination of the trusts under this agreement by the expiration of time, or for any other cause, the trustee shall sell the trust property at either public or pri- vate sale and liquidate its assets; the proceeds of the liquida- tion shall be first applied to the payment of the holders of preferred shares of the sum of one hundred dollars per share and any accrued and unpaid dividends thereon, and the bal- ance remaining thereafter shall be divided among the holders of common shares in proportion to their holdings. "Acceptance of Trustees. "(40) Edgar W. Martin, William A. Copeland, Lawrence C. Martin, and George W. Bleecker aforesaid, herein named as trustees, hereby signify their acceptance of the trusts herein set forth. Appe;ndix. 467 "In witness whereof the said trustees have hereunto set their hands and seals on the day and year first above writ- ten. "Witnesses : "Edgar W. Martin. (Seal.) "Russell W. Wright. "WiUiam A. Copeland. (Seal.) "Russell W. Wright. "Lawrence C. Martin. "Russell W. Wright. "George W. Bleecker." 468 Trusts for Business Purpose;s. TRUST OF MATHILDE PIETSCH, FOR HER BENEFIT. The court said, in the case of Pietsch v. Marshall & Ilsley Bank, Wisconsin— 160 N. W. 184: A trust instrument whereby the trustor gave her realty and personalty to trustees to manage for her benefit during her life, and then to distribute in accordance with the instrument, was not a testamentary disposition of her property; the effective parts of the instrument clearly and expressly con- stituting a valid trust, and all other phraseology being readily harmonized with that intent and object. Follow- ing is a copy of the trust instrument: "Whereas, Mathilde Pietsch, of sound mind and menior}^, is aged and is desirous of keeping her property intact until her death, and wishes to be reheved from the cares and responsi- bilities connected therev^ith, and also is desirous of making dis- posal thereof upon her death, for the purpose of carrying out her intentions, said Mathilde Pietsch hereby sells, assigns, sets over, grants, and conveys to her daughter Doretta Pietsch, and to her son Ferdinand Pietsch, and to the survivor of them all her property, real and personal, in trust nevertheless upon the express trusts following, and hereby revoking all former dis- posals of a testamentary character, or otherwise; and the said Doretta Pietsch and Ferdinand Pietsch hereby accept such property upon the trusts as herein expressed : "(i) Power and authority is hereby given to the trustees or to the survivor of them to gather in, collect, sue for all rents, insurance, mortgages, interest, and other property of every kind and nature of the said Mathilde Pietsch and convert all into money and to invest and reinvest same in securities as said trustees shall deem meet and proper. "(2) For and during her natural life said Mathilde Pietsch is to receive the use and income of said property the net in- Appendix. 469 come of which is to be paid over to said Mathilde Pietsch upon her request and at such times as she may desire. "(3) On the 1st day of January and July of each year trustees shall render an accounting of their stewardship to said Mathilde Pietsch. "(4) There is also assigned to said trustees upon the trusts herein expressed life insurance policy No. 73430, dated July 22, 1867, in the Connecticut Mutual I.ife Insurance Company of Hartford, Conn., for twenty-two hundred dollars ($2,200.00), subject to a note against it held by said company, and there is also assigned to said trustees all moneys which said Mathilde Pietsch may have in banks. "(5) Said Mathilde Pietsch has this day also delivered in escrow, to be held by Frederick M. Wilmanns until her death, and then to be delivered to her trustees, a deed of all her real estate (description of real estate omitted), subject to the law- ful incumbrance thereon, and in which said deed the trustees are the grantees, and which said real estate the trustees, after the death of said Mathilde Pietsch, are to sell and dispose of at such price, and upon such terms and conditions as they may deem just and proper, and distribute the proceeds according to the trust herein provided for. "(6) Out of the personal property or the proceeds thereof coming to the hands of said trustees, and all other personal property which said Mathilde Pietsch may have an interest in at the time of her death, said trustees are ordered and directed to pay as soon as may be convenient, after payment of said Mathilde Pietsch's just debts and funeral expenses, as follows: "(7) All the rest, residue, and remainder of my estate I order and direct my said trustees, or the survivor of them, to distribute same in equal shares among my six children, Doretta Pietsch, Ferdinand Pietsch, Mathilde J\Iayer, nee Pietsch, Lena 470 Trusts for Business Purposes. Plats, nee Pietsch, Albert Pietsch and Hugo Pietsch, or their heirs. For the purpose of converting my property into money and to make distribution as aforesaid, I authorize and empower my trustees to take whatever steps they may deem necessary to accomplish the purpose; it being distinctly understood that no distribution is to be made until after my death. Should any question arise in the execution of the trust, power and discre- tion is given to my trustees, and to the survivor of them to act as they think best, confident that my trustees will act for the best interest of all concerned. "In witness whereof the said jMathilde Pietsch has hereunto set her hand and seal this 31st day of July, 19 15, and the said Doretta Pietsch and Ferdinand Pietsch have also hereunto set their hands and seals on the same day, and accept the trusts as created and declared herein. "Mathilde Pietsch. (Seal.) "Doretta Pietsch. (vSeal.) "Ferdinand Pietsch. (Seal.)" The foregoing instrument was witnessed and also acknowl- edged by Mathilde Pietsch, Doretta Pietsch, and Ferdinand Pietsch before a notary. Appendix. 471 HARRY HAULMAN TRUST DEED AND WILL. In the case of Haulman v. Haulman, 164 la. 471; 145 N. W. 930, the will and trust agreement were construed. Fol- lowing is a copy of both instruments: These presents witness that I, Harry Haulman, a resident of Ankeny, in the county of Polk and state of Iowa, do by these presents create a trust of my entire property, and do place the same therein subject to the following conditions and limitations, to wit: On the 1st day of November, A. D. 1907, I will place in the hands of my two sons, H. E. Haulman and B. T. Haulman, the sum of twenty-five hundred dollars ($2,500.00), whom I do hereby create the trustees of said fund, and also of any and all other sums that may be added to said sum both before and after my decease. Said sum of twenty-five hundred dollars ($2,500.00) is hereby placed in trust with my said sons, H. E. Haulman and B. T. Haulman, for the use and benefit of my five children, to wit, H. E. Haulman, B. T. Haulman, Mrs. J. H. Harris, Mrs. W. H. Lewis, and Mrs. A. W. Wagner, each to share equally in the fund and benefits thereof as hereinafter provided. Said sum of $2,500.00 is to be invested in such securities as my said trustees shall both agree upon and deem wise and best by them, and they are to add to said fund all interest accumu- lations and profits accruing from said $2,500.00 so invested, and to keep said fund, its accumulations and profits, contintiously invested in such ways as they shall deem best. My said trustees shall pay to me 4 per cent, interest on said original sum of $2,500.00 on the ist day of November in each year beginning with November i, A. D. 1908. But, in case I do not need or desire my said trustees to pay me said interest. 472 Trusts for Business Purposes. then the same shall be kept intact in said trust fund. My said trustees shall not be required to pay interest on any accumula- tions or profits, but only on the original sum. of $2,500.00. With the written consent of all of my said children who may be living at any particular time, my said trustees may loan any portion of said trust fund to any one of my said children on such terms and securities as to my said trustees shall seem wise and best. In case, also, of real necessity, and upon the written con- sent of all of my said children who may be living at any par- ticular time, my said trustees may permit any one of my said children to draw from said trust fund any amount which my said trustees shall think to be best, up to the amount of such child's undivided share in said fund, but no more. In case of the death of one or more of my said children, his children or living issue of his body shall have and receive his parent's share of said fund, and the benefits thereof, the same as my said child so deceased would have received his share of said fund, and the benefits and profits thereof. In case any of my said children shall die leaving no children or living issue of his body, then, and in that event, the portion of said trust fund and its accumulations which would have gone to my said child shall remain in said trust fund, and shall be divided equally among my said other children, or their issue, the same as the balance of the fund shall be handled, and not otherwise. Upon my death, all of my property, both real and personal, and wherever situated, shall pass into the hands of my said trustees to be handled by them as said $2,500.00, and the whole of said property shall be kept intact by my said trustees in such form and condition as to them shall seem best for the full period of five years from the date of my decease, when, at that Appendix. 473 time, my said trustees shall make an equal distribution of said trust property, and of all of my property then remaining, to my said five children, or the living issue of their body, share and share alike. That is, each child shall receive a portion equal in all respects to tliat of any other of my said children. And • if any of my said children be then dead, and have issue of their body then living, such issue shall receive the portion of said trust fund and property which would have gone to their parent had he or she been living. In the case of the death of either or both of my said trus- tees, the remaining children of mine herein mentioned shall choose a successor to such deceased trustee who shall carry on and perform the trust herein created. It being my desire and intent that no person outside of my own children as herein men- tioned shall ever be a trustee of this trust. It being my desire, also, and intention that there shall at all times be two trustees of my said property. Should I, at any time, add to this trust amount in my life- time, my said trustees shall receive such amounts, and handle and care for such amounts, the same as is herein mentioned concerning said $2,500.00 and its accumulations and other property. It is my desire, and a condition that I require of my said trustees, that they keep a strict account of said trust fund, and of all additions thereto, and of all accumulations thereof, and that each year, in the month of November, they render a writ- ten statement to me, and to each of my said children, showing the actual condition of said fund, the amount thereof, and how invested, and the securities held by them. It is also my desire and intention that my said trustees shall serve without com- pensation other than that arising to all of my children equally. Witness my hand this 5th day of December, A. D. 1907. 474 Trusts for Business Purposes. At the same time that this instrument above set out was ex- ecuted, the said Harry Haulman made his will, as follows : I, Harry Haulman, being of lav/ful age and of sound mind and disposing memory do hereby make, publish and declare this to be my last will and testament, to wit : I do hereby will, be- queath and devise unto my five children, H. E. Haulman, B. T. Haulman, Mrs. J. H. Harris, Mrs. W. H. Lewis, and Mrs. A. W. Wagner, all of my property both real and personal that I now have, or may hereafter accumulate or acquire, share and share alike. I do hereby nominate and appoint my two sons, H. E. Haul- man and B. T. Haulman executors of this my last will and testament and request and direct that they keep and care for my property the same as I have this day directed them to do in an article of trust and that they follow out the provisions of said trust fully, and, at the end of five years from my decease that they make an equal distribution of my property to my said children. If any of my said children die without issue and in that event, his share shall be equally divided among the remain- ing children, except that if any of my children are deceased and have living issue, then and in that event, they shall receive the share which their parent would have received if living. I do hereby request that said trust be fully executed and that said trust instrument and this will be construed together and that my said property be handled and disposed of as in said trust instrument and in this will provided. Witness my hand this 5th day of December, A. D. 1907. App]<;ndix. 475 JOHN PLANKINTON; DECLARATION OF TRUST IN FORM OF WILL. The trustees were undecided as to what action should be taken in reference to certain clauses in the instrument. They went to the court for instruction. This case is re- ported in 152 Wis. 275; 140 N. W. 5, as Upham v. Planli- inton. Copy of the Trust Instrument is as follows: I, John Plankinton, of the City of Milwaukee, in the State of Wisconsin, do make, publish and declare this my last will and testament and I do hereby revoke and annul any and all other wills by me at any time heretofore made. I do hereby nominate and appoint my wife, Annie B. Plankinton and my son, William Plankinton, to be the execu- trix and executor of this my will, and in case of the death of either before my death, I wish the survivor to be such executrix or executor, and I wish that no bond or security of any kind be required of either of them for the faithful discharge of any duty as such executrix or executor or for the performance of any trust whatever under this will, mean- ing hereby to direct that such bond and security be waived. I direct that my just debts, if any there shall be, and necessary and proper funeral expenses and charges and ex- penses of administration be paid out of my estate. I give and bequeath to my niece, Julia Hickey, of Sharps- burg, in the State of Pennsylvania, the sum of five thousand dollars ($5,000). I give and bequeath to my sister, Ann J. Denham, the mother of said Julia Hickey, the sum of twenty five thousand dollars ($25000) and in case of the death of my said sister before my death I direct that the said sum of twenty five thousand dollars be paid to my said niece, Julia Hickey, in addition to the above mentioned sum of five thousand dollars, 4/6 Trusts for Business Purpose;s. making her bequest thirty thousand dollars which I hereby give. I hereby give, devise and bequeath to my wife, Annie B, Plankinton, to have, hold and enjoy for and during her life, my homestead being a part of block two hundred and fifty five (255) in Roger's Subdivision, now in the i6th Ward of the City of Milwaukee, bounded on the north by Grand Avenue, on the east by Fifteenth Street, on the south by a line twenty feet south of the barn now on the premises parallel with the north line of the block, and west by the east boundary of the land of my son, William Plankinton, and by said line pro- duced south to the south boundary aforesaid, including the dwelling house, barn and all other buildings and improvements upon the premises, and also all animals, articles and prop- erty of any kind, owned by me at the time of my death provided for use, or convenience or ornament, in or about our home, whether in the dwelling house or in the barn or any building on the premises or in the grounds outside of any building, to the end that at my death my wife shall take, have, hold and enjoy during her life our home with its ap- pointments and surroundings as the same shall be at the time of my death, and while I make this devise and bequest to my wife for her life subject to no charge or condition what- ever, I know that it will be a pleasure to her, as it will accord with my wishes, that while she lives and occupies our home- stead it shall continue to be the home of any of my family desiring or needing it. I make the following bequests to be paid in money with no unnecessary delay after my death, to-wit: ten thousand dol- lars ($10,000) to the Society, corporation or association which manages and controls the hospital in the City of Mil- waukee known as the Passavant Hospital, for the use and Appe;ndix. 477 benefit of that hospital; five thousand dollars ($5,000) to the Milwaukee Orphan Asylum, meaning the charity in the City of Milwaukee known as the Protestant Orphan Asylum; five thousand dollars ($5000) to Jeremiah Quinn of the City of Milwaukee and one thousand dollars to each of the follow- ing persons who are in my employ at and about my residence, to-wit : Charles Burmeister, Senior, Charles Burmeister, Junior, Adolph Riemer, Ellen Bogne, Sarah Bogne, Kate Delany, Kate Adamer and Elizabeth Dawson. All the rest, residue and remainder of my estate and of property of every kind and nature, which I shall own or in which I shall have any right, title, interest or claim at the time of my death, I hereby give, devise and bequeath unto the above named executrix and executor of this will, and to the survivor of them, in trust, for the uses and purposes here- inafter set forth for a term during the lives of my daughter, Elizabeth E. Plankinton and my son, William Plankinton, and twenty one years thereafter, if they shall both survive me, but in case either should not survive me, then for a term during the life of the one who survives me and of my wife, if she survives me, but in case my wife does not survive me and one only of my said children survives me, then for a term during the life of such surviving son or daughter and in case neither of my said children survives me and my wife survives me, then for a term during her life. It is my will that during the term of their trust, said trus- tees have the entire control, management and charge of the estate and property committed to them, both personal and real, collecting receiving and handling all moneys for the in- terest of the estate, continuing or changing any and all in- vestments which may have been made as they shall deem best, investing and reinvesting or otherwise using any and all 478 Trusts for Business Purposes. moneys that may come into their hands in such manner and upon such securities as they shall deem best, intending hereby to give to them full authority and discretion and not holding them to any prescribed rules governing the investment of trust funds. It is my will, that during the term of their trust, said trus- tees, out of the income derived from my estate in their hands care for, maintain and keep in good repair and condition all buildings and other property as shall be for the best interest of the estate, and that by repairing and replenishing when necessary they maintain and keep up the furniture and all articles and property of any kind whatsoever, in the hotel building in the city of ]\Iilwaukee, known as the "Plankinton House" which I shall have provided for use or convenience or adornment so that so long as the building shall remain used and kept as a hotel, it may be, in all respects, first class. It is my will that said trustees shall set apart each year one tenth of the whole net income of my estate and hold the same and all additions thereto as a fund to meet any extra- ordinary expenditures or any expenditure for which the in- come is not sufficient, which they shall deem best for the protection or benefit of the estate. The moneys constituting such fund they shall invest and keep invested as they shall be able, so that the fund may be always available for the pur- pose intended, such investments to be made in such manner and on such securities as the trustees shall deem best. The trustees are hereby authorized and the survivor of them is authorized to sell and convey any and all real estate hereby devised to them which shall be vacant and not occupied with buildings at the time of my death on such terms and for such prices as they shall deem best and to invest any or all moneys received from such sales, in the purchase of improved Appendix. 479 real estate or in erecting buildings on any vacant land held by them as part of my estate, as they shall deem best. In case of the damage or destruction by fire or other cas- ualty of any building held by the trustees for which they shall receive insurance moneys, it is my will that the trustees apply such moneys or so much as may be needed to the repair or rebuilding of such building with full authority to make any changes or improvements in so repairing a damaged building or in building again on the site of a destroyed building as the trustees shall deem advisable and if at any time they shall deem it best they are authorized to use the ten per cent re- served fund for such purpose in addition to insurance moneys received. I hereby direct that said trustees pay to my wife, Annie B. Plankinton out of the net income of my estate held by them, ten thousand dollars annually during her life it being my intention thereby that she have means provided for the payment of taxes, repairs, and other expenses upon the home- stead with full authority to use any excess at her pleasure. I hereby direct that said trustees after paying or provid- ing for the payment of all sums that shall be required each year for taxes, insurance, repairs, and every other purpose required for maintaining and for the charge and care of my estate in their hands, as herein intended, and after setting apart the ten per cent reserved fund each year, and after paying or providing for the payment of the sum of ten thousand dollars yearly to my wife during her life, shall divide the remainder of the net income equally between my wife, my son and my daughter, one third of such net in- come, each year, to each, during their lives and these pay- ments I wish to have made semi-annually. In case of the death of either of the three, leaving surviv- 480 Trusts for Business Purposes. ing no lawful issue, I direct that the share of such net in- come intended for such deceased one, be thereafter paid to the other two, so long as they shall live (not exceeding the term of the estate of said trustees) one half to each, and upon the death of either of the two, so surviving the third, leaving no lawful issue, I direct that the whole of such net income be paid to such last survivor during her or his life, not exceeding the term of the estate of said trustees. In case either dying shall leave issue surviving, then I direct said trustees to continue the payment of the share of such income hereby intended for such one deceased to the child or children of such deceased, share and share alike, if there shall be more than one child so long as they shall live and so long as the estate shall be held by the trustees, and in case of the death of any child having lawful issue surviving then to such issue during life, so long as the estate shall be held by said trustees, the issue in all cases taking by right of representation and not per capita. It is my will that the trust herein created shall cease, and the term for which such trustees hold shall end upon the death of the one who shall last survive of my wife, my son and my daughter, if such death of the last survivor shall occur before the expiration of the twenty one years herein- above stated for the life of the trust. All the rest, residue and remainder of my estate and of property of any kind that shall be and remain at the ter- mination of the trust and the end of the term for which it is to be held by said trustees, under the preceding provisions of this will, I hereby give, devise and bequeath to the surviving issue of my son and of my daughter if they shall leave issue surviving one half to the issue of my son and one half to the issue of my daughter such surviving issue taking in all cases Appendix. 481 according to the right of representation and not per capita. And in case either my son or daughter should die leaving no issue surviving him or her then the entire rest, residue and remainder aforesaid, I hereby give, devise and bequeath to the issue surviving of either my son or my daughter who has left issue surviving such issue in all cases where it is applicable, taking according to the right of representation and not per capita. AH real estate devised by this paragraph of my will is to be taken in fee and all personal property abso- lutely. In case there shall be no lawful issue surviving of either my son or my daughter at the termination of the trust herein and at the end of the term for which said trustees are to hold my said estate and property as above provided, and in case there has been no disposition of the property under any subsequent clause of this will, then upon such termination of the trust, I hereby give, devise and bequeath all the rest, resi- due and remainder of my estate and property held by said trustees unto the Passavant Hospital hereinbefore mentioned, meaning thereby to the society, association or corporation hav- ing the charge and control of the Hospital in Milwaukee known by that name, for the use and benefit of that hospital, all real estate devised hereby to be taken in fee and all per- sonal property absolutely with full power to the devisee to convert, dispose of or use at pleasure for the benefit of the hospital. The provisions contained in this will for my wife are in- tended to be in lieu of her dower and any other lawful interest in my estate as my widow, and if accepted are to be so taken. In case my son and daughter shall survive my wife and my daughter shall reach the age of fifty five years and at 482 Trusts for Business Purposes. that time there shall be no issue living of either my son or my daughter, it is my will that the trust herein created shall terminate and the term for which said trustees hold my estate end, although before the period herein first fixed for the termination of such trust, and in such case I hereby give, devise and bequeath all the rest, residue and remainder of my estate and of m}^ property of any kind then in the hands of said trustees, in equal shares or parts to my son William Plankinton and my daughter, Elizabeth E. Plankinton to be by them respectively held, the real estate in fee and the personal property absolutely. In case of the death of my daughter before she reaches the age of fifty five years, leaving no issue surviving her, then upon the death of my wife, if she survives my daughter, and if my wife does not survive my daughter then upon the death of my daughter, if my son William survives and has no issue living at that time, it is my will that the trust herein created shall thereupon cease and the term for which said trustees hold shall then end, although it be before the end of the twenty one years hereinabove named for the termination of the trust and all the rest, residue and remainder of my es- tate and property held by the trustees, in such case, I give, devise and bequeath to my son William Plankinton and to his heirs and assigns forever. In case of the death of my wife and of my son William before my daughter reaches the age of fifty five years then if there is no living issue of either my son or my daughter, it is my will that the trust herein created shall thereupon cease and that the term for which said trustees hold shall then end although it be before the end of the twenty one years herein- above named and provided for the termination of such trust and in that case, all the rest, residue and remainder of my Appe;ndix. 483 estate and property in the hands of said trustees, I hereby give, devise and bequeath unto my daughter Ehzabeth E. Plankinton and her heirs and assigns forever. In Testimony Whereof I have hereunto set my hand and seal and pubhshed and declared this instrument of 13 written pages to be my last will and testament in the presence of the witnesses named below this 15th day of February, A. D. 1889. John Plankinton (Seal) The above instrument of 13 written pages signed, sealed, published and declared by said John Plankinton as and for his last will and testament in presence of us, who in his pres- ence and in the presence of each other and at his request have hereto subscribed our names as witnesses. Jerome R. Brigham Milwaukee, Wis. E. E. Murphy Milwaukee, Wis. 484 Trusts for Busine:ss Purposes. PENNYROYAL DEVELOPMENT COMPANY. THIS AGREEMENT, made this 4th day of June. A. D. 1921, between William F. Ware, designated as the Subscriber, and Edmond J. Ware, Joseph K. Ryan, Russell Hogan and George E. Garth, and William F. Ware, together with their successors, herein designated as the Trustees, witnesseth : THAT WHEREx\S, the Subscriber and Lessee proposes to transfer, assign and deliver to the Trustees, under the designa- tion of the PENNYROYAL DEVELOPMENT COMPANY, certain leases which are more fully described in Schedule A hereto attached and identified by the signatures of the parties hereto, and filed with the Trustees; and the Trustees, for the purpose of defining the interest of the Subscriber and his as- signs in such property, have agreed to issue to the Subscriber, negotiable certificates representing Beneficial Interests, or shares, in and to the Trust Estate herein created, to the amount of Twelve Hundred and Fifty (1250) Common Beneficial In- terest or shares, each Interest to be of the expressed par value of One Hundred Dollars ($100.00), the same being fully paid and non-assessable, and are transferable on the books of the Trustees in accordance with the terms of this instrument. NOW,. THEREFORE, the Trustees, for and in considera- tion of the said leases, hereby transferred, assigned and deliv- ered to them by the Subscriber, described in Schedule A, have agreed and do hereby agree to issue to the Subscriber Beneficial Certificates to the amount of Twelve Hundred and Fifty (1250) Common Beneficial Interest or shares, and the Trustees hereby further declare that they will hold the remaining of the Tv/enty-five Hundred (2500) Common Beneficial Interest and said property, to be transferred to them as well as all other property which they may acquire as Trustees, together with the Appendix. 485 proceeds and profits thereof, in trust; to manage and dispose of the same for the benefit of the holders from time to time, of certificates issued hereunder, and in the manner and subject to the stipulations herein contained, to wit: FIRST : That whenever the term "Trustees" is used herein, it shall refer to and include the above Trustees, and also any successors in trust, appointed under the terms hereof. That whenever the term "Company" is used herein, it shall be deemed to refer to said PENNYROYAL DEVELOPMENT COMPANY, being the designation, so far as practicable, of the said Board of Trustees and their successors in trust, in their collective capacity, under the terms hereof. That wherever the term beneficiary is used herein it shall be deemed to mean the owner of a Beneficial Interest in and to the trust estate herein. That whenever the term "Certificate Holder" is used herein it shall be deemed to mean the owner of a certificate evidencing one or more Beneficial Interests, of the par value of One Hun- dred Dollars ($100.00) each, in and to the Trust Estate herein mentioned the legal title, ownership and control of which estate is vested in said Trustee ; and that whenever the term "Certifi- cate is used herein, it shall be deemed to mean an instrument in writing, or printed or partly written and printed, issued by said Trustees, evidencing the ownership of an equitable interest in said estate of one or more beneficial interests, as may therein be stated. (B) The Trustees, in their collective capacity, shall be designated, so far as practicable, as the PENNYROYAL DE- VELOPMENT COMPANY, and under that name shall, so far as practicable, conduct all business and execute all instru- ments in writing, in performance of their trust. SECOND : The Trustees do hereby acknowledge the re- ceipt by them of the property aforementioned, and it is express- 486 Trusts for Business Purposes. ly agreed that the said property, as well as any other which may hereafter be acquired by the Trtist'ees for the purpose herein mentioned under the terms hereof, shall be received by the Trustees, and shall be by them held, owned, controlled, man- aged, and applied to the uses and purposes herein mentioned, and to no other. (B) That the money, or property, together with the income and issues thereof received or acquired by the said Trustees under the terms hereof, shall constitute and be held, kept and used by them as a Trust Estate for the use and benefit of the Certificate Holders in the said estate, and that the said Trus- tees are authorized, empowered and directed to apply the said money or property or the proceeds, the increase or income thereof, constituting said Trust Estate, as follows, to wit: (C) To buy and sell leases; to buy and sell land; to de- velop and drill for oil and gas ; to buy and sell oil and gas ; to construct, buy, sell, own and operate pipe lines, tank lines, cars, ships, trucks, and any and all other appliances for the handling and selling of oil and gas. (D) To enter into, apply for, purchase or otherwise acquire any franchises, contracts or concessions for or in relation to the construction, execution, carrying out, equipment, improvement, administration, management or control of the aforementioned operations or of works and conveniences, and to undertake, ex- ecute, carry out, sublet, dispose of or otherwise do any and all things necessary to put into effect the purposes for which the said trust is organized. (E) To construct, manufacture, buy, sell, install, lease or otherwise dispose of and deal in and trade in works, machinery, appliances, instruments, vehicles, supplies, materials and ar- ticles of every nature and description used or capable of being used in the production, refining, manufacture, operation, dis- Appendix, 487 tribution, control or other appliances used in the production, refining and transporting of gas and oil. (F) To acquire the good will, rights and other oil and gas property, or other properties, whether owned by individuals, corporations, trusts or associations, or otherwise, and to under- take the whole or any part of the assets or liabilities of any person, firm, association, corporation or trust ; to pay for the same in cash, the Beneficial Interests of this Trust Estate, bonds or otherwise, as the Trustees deem fit; to hold or in any man- ner dispose of or conduct in any lawful manner, the whole or any part of the business or property so acquired, and to exer- cise all the powers necessary or convenient in and about the conduct and management of such business. (G) To enter into, make and perform contracts of every kind with any person, firm, association or corporation, persons, municipality, body politic, county, State, government, colony or dependency thereof and without limit as to amount, to draw, make, accept, endorse, discount, execute and issue promissory notes, drafts, bills of exchange, warrants, bonds, debentures, and other negotiable and transferable instruments and evidences of indebtedness whether secured by mortgage or otherwise, so far as may be permitted by the laws of the State of Kentucky or of the United States. (H) To do any or all of the things herein set forth to the same extent as natural persons might or could do, and in any part of the world, as principals, agents, contractors, trus- tees, or otherwise, and either alone or in company with others. To have offices, conduct its business and promote its objects within and without the State of Kentucky, in other States, the District of Columbia, the territories and colonies of the United States, and in foreign countries, without restriction as to place or amount. 488 Trusts for Business Purposes. In general, to carry on any other business in connection there- with, whether manufacturing, agricultural, mining or other- wise, not forbidden by the laws of the United States. THIRD : The Trustees hereunder shall be five in number, but at any annual meeting, or regular or special meeting of the Trustees, called for that purpose, the Board of Trustees may be increased to seven or nine members by the then Board of Trustees, and the Trust Estate shall rest in the additional Trus- tees, in connection with those already in office, the same as if they were original parties to this instrument ; and the Trustees herein mentioned shall hold their office until the annual meet- ing-, or until their successors have been elected and have ac- cepted their trust. (B) The Trustees, shall, at every annual meeting or ad- journment thereof, elect a full Board of Trustees to serve for the next ensuing year, said annual meeting to be on the first Tuesday in June, following the first ]\Ionday in June each year, commencing in 1922. FOURTH : The Trustees are authorized to employ all nec- essary or proper agents, sen^ants, brokers, attorneys, employees or counsel, to carry into effect the purpose of the trust herein contained, and to protect and preserve the same, and to provide and pay out of said trust estate the compensation, fees, commis- sions, or expenses incurred in the management thereof, and to vote salaries to themselves. To contract for and on behalf of said trust estate, and to bind the same and its property to the performance of such contracts ; to borrow money on behalf of such trust estate on such terms and conditions as said Trustees shall deem best, and to bind said estate and its assets to the payment of such indebtedness and to pledge and incumber any property of said estate, whether real, personal or m.ixed, for the security of the indebtedness so incurred, under such terms and Appendix. 489 conditions as to the Trustees may seem best, and to agree upon, approve and fix, execute and deliver in the name and on behalf of the said trust estate, any deed, pledge, mortgage, bond, note endorsement or guarantee, trust deed, or any other instrument which may be necessary or proper to carry out the terms of this instrument. But neither the said Trustees nor the said certificate holders nor any of them shall be in any manner per- sonally liable by virtue of any contract, note, bond, deed of trust, mortgage or other instrument executed under the terms of this paragraph, but the same shall fully bind the property of the said trust estate for the performance thereof. (B) The said Trustees are hereby authorized to do, or cause to be done in any lawful manner, all the things which are incidental, necessary or proper to carry fully into effect all of the purposes herein enumerated or powers hereby conferred, the general authority given being intended to control and make fully effective the power and authority of the Trustees under this instrument, notwithstanding the specific enumeration and description thereof herein. (C) It is expressly understood that all expense incurred by said Trustees in carrying out the terms hereof, as well as all liabilities incurred by them in the execution of said trust, whether arising from contract or tort, shall be considered as expenses of executing said trust, which shall first be paid out of the assets and properties thereof, and which shall be a first and prior lien against the said estate and property, superior to all others. (D) The said Trustees shall, in their own name, as Trus- tees of said estate, bring any suit or action which in their judg- ment shall be necessary or proper to protect said estate or to enforce any contract made for the benefit thereof, and to de- fend in their discretion any suit or action against said estate 490 Trusts for Business Purposes. or against the Trustees thereof. The said Trtistees are ex- pressly authorized to bring or defend such suit in their discre- tion or to compromise and settle any suit, claim or controversy in which the said estate is interested, as to them may seem best, and to discharge the same out of said estate and its assets ; and they are specially authorized to pay or transfer out of said estate and its assets, all sums of money or property necessary to discharge any judgment against them in their said capacity as Trustees, together with all court costs, or other costs, in- cluding counsel and attorney's fees and also to pay out of said estate or its assets, such sums of money, or transfer or appro- priate property thereof, for the purpose of settling, compromis- ing, or adjusting any such claim or controversy, together with any such costs and expenses connected therewith, and all of such expenditures shall be treated as expenses of executing this trust. (E) The Trustees shall have full power to invest and re- invest the trust estate, its profits, income, increase, surplus or avails, subject to the terms of this instrument. But the trus- tees shall not delegate to any agent or attorney in fact, the power to contract on behalf of said estate, or bind it to the payment of money, but when said trustees have agreed upon the terms and forms of any contract or contracts, or other instrument or instruments necessary or proper for the carrying out of the purposes herein mentioned, and the execu- tion of the trust hereby created, they may, by resolution or other written authority, designating and describing the form of such contract or contracts or instrument, authorize an agent or agents, attorney or attorneys in fact, to countersign and de- liver, in the name and on behalf of said Trustees, any such con- tract or instrument, but in no case shall such agents or attorneys be authorized to countersign or deliver any notes, bonds, bill of Appendix. 491 sale, mortgages, trust deeds, encumbrances, or pledges trans- ferring, binding, encumbering or alienating the property of said trust estate, whether real, personal or mixed. (F) The Trustees shall hold the legal title to all property at any time belonging to their trust and shall have and exercise the exclusive management and control of the same, and the right of the said Trustees to manage, control and administer the said trust estate shall be absolute and unconditional, free from the control or management of the certificate holders. (G) So far as strangers to this trust are concerned, a reso- lution of the Trustees authorizing a particular act to be done shall be conclusive evidence in favor of such strangers that such act is vv^ithin the powers of said Trustees, and no purchaser from the Trustees or one loaning money to the Trustees shall be bound to see to the application of the purchase money or loaned money or other consideration paid or delivered by or for said purchaser or loaner to or for said Trustees. FIFTH : Stated meetings of the Trustees shall be held at least once every three months, and other meetings shall be held from time to time, upon the call of any officer or Trustee. A majority of the Board of Trustees shall constitute a quorum., and the concurrence of all the Trustees shall not be necessary to the validity of any action done by them, but the wish of the majority of the Trustees present and voting at any meeting shall be conclusive, except as hereinafter provided; they may adopt and use a common seal ; they may make, adopt, amend or repeal such by-laws, rules, and regulations, not inconsistent with the terms of this instrument, as they may deem necessary for the conduct of their business or for the government of them- selves, their agents or representatives. SIXTH: The Trustees may elect officers, who shall have the authority and perform such duties as the Trustees may de- 492 Trusts for Business Purposes. termine. They may combine the duties of several officers in one person. Two of such officers, elected, at least, shall be from among their own members. The Trustees shall have authority to elect or appoint temporary- officers to serve during the ab- sence or disability of regular officers; to fix the compensation of any or all officers, agents or employees they may appoint, and are likewise authorized to pay themselves such compensation for their services as they may deem reasonable. (B) The Trustees shall cause to be kept by a Secretary elected by them, a record of all meetings of the beneficiaries and of the Trustees, which record shall be similar in character and of the effect as that kept in case of corporations, and so far as strangers to this trust are concerned, shall be conclusive against the Trustees of the facts and doings therein stated. (C) Any Trustee may acquire, own and dispose of bene- ficial interests in this trust to the same extent as if he v/ere not a Trustee hereof. (D) Any Trustee may be removed for just cause. The term "Just Cause" as used in this paragraph, shall mean any cause which is detrimental to the interest of the trust estate other than political, racial or religious. Any Trustee may file charges for just cause with the Board of Trustees against any member thereof, and the remaining members of said Board of Trustees shall constitute a commission with the exclusive power and au- thority to investigate and determine said charges. (E) In case of removal of any Trustee, a statement of the cause therefor shall be set forth in writing, which statement shall be in duplicate, and shall be signed by the members of the Commission. The copy of said statement shall be delivered personally to the Trustee so to be removed and the other copy of said statement shall be filed in the office of the Trustees with a notation thereon showing proof of service of a copy of said Appendix. 493 statement upon the said Trustee. Upon filing of a copy of said statement, in the office of the Trustees, the removal shall im- mediately become effective. (F) Whenever a Trustee who has been so removed, shall file with the Commission, within five days after his removal, a statement in writing alleging his removal was made for political, racial, religious causes, or for unjust cause, and that he believes that upon a hearing he will be able to establish such fact, it shall be the duty of the Commission to order a hearing. The time and place of such hearing shall be fixed by the Commis- sion and due notice thereof given to said Trustee. Upon such hearing, the Commission sliall determine and decide whether or not the removal ^vas made for political, racial, religious causes, or for unjust cause, and if the Commission finds in favor of the Trustee, then he shall be elected to ser\^e the balance of his term. (G) In case of death, resignation or removal of any Trus- tee, the remaining members of the Board of Trustees shall have the power and authority to elect Trustees to fill the unexpired term or vacancy thus created, and for that pur- pose, a majority of the remaining Trustees shall be sufficient to elect one or more Trustees as above stated, and such Trus- tees, as above elected, shall occupy the same relation to this Trust as if they were original parties to this instrument. In case of death, resignation or disqualification of the entire Board of Trustees, a new Board may be appointed for the unexpired term by a Court of Equity of competent jurisdiction. (H) Neither the said certificate holders or any of them, or their property shall be liable for any indebtedness or liability created by, growing out of, or arising from the execution of the said trust estate, whether arising from contract or tort of the said Trustees, their servants, agents or employees, in the 494 Trusts for Business Purposes. administration of said estate. The Trustees, personally, nor either of them, nor their private property, whether real, per- sonal or mixed, shall be in any manner, liable for any debt or liability incurred by said Trustees, or any of them, in the ad- ministration or management of the said estate, whether arising from contract or tort of the said Trustees or any of them, or their agents, servants, or employees; and neither said Trustees or either of them shall ever be held personally liable for any damage or injury to person or property caused by or arising from, incident to, or growing out of the execution of said trust; nor shall they be liable for the acts or omissions of each other. That the assets of the said trust estate only, shall be liable for any indebtedness, liability, wrong, injury or tort incurred, aris- ing out of or growing out of, the administration of the said trust estate by the said Trustees or any of them or for any act or negligence or default of their servants, agents, or employees in the administration of said estate. (I) The said Trustees shall use ordinary and reasonable diligence in the performance of this trust, but shall not be liable to the certificate holders or any of them, for any act, de- fault, failure or negligence in or connected with the execution of the said trust, provided, the same shall not amount to and constitute fraud, embezzlement or wilful breach of trust, and they shall not be obliged to give bond to secure the due per- formance of this trust by them. SEVENTH : That for the purpose of evidencing the re- spective and proportionate equitable interests of the said cer- tificate holders in and to the said trust estate, the said Trustees are hereby authorized and directed to execute and deliver to each such beneficiary hereunder, a certificate signed by the ofifi- cers designated for that purpose, which shall evidence and set forth how many interests of the par value of One Hundred Appendix. 495 Dollars ($100.00) each, the said beneficiary therein named is entitled to as a beneficiary of said trust estate. (B) The said trust estate shall be divided into Twenty-five Hundred (2500) Common Beneficial Interests, all of which In- terests shall be of the expressed par value of One Hundred Dol- lars ($100.00) each, and the certificates issued by the Trustees to said beneficiaries shall be substantially in the following form, to wit: PENNYROYAL DEVELOPMENT COMPANY Number Shares This certifies that is the holder of shares in the capital of the PENNYROYAL DEVELOPMENT COMPANY, fully paid and non-assess- able, subject to Declaration of Trust in favor of said organiza- tion, dated June 4th, 1921. and recorded in Todd County, Ken- tucky, and transferable only on the books of this organization, in person or by attorney, upon surrender of this certificate prop- erly endorsed. IN WITNESS WHEREOE, the said organization has caused this certificate to be signed by its duly authorized officers, and its seal to be hereunto affixed this day of , A. D. 1921. Secretary. President. Shares $100.00 each. (C) By a unanimous vote of all the Trustees at any an- nual meeting, or special meeting called for that purpose, the Trustees shall have the power, after the Twelve Hundred and Fifty (1250) Common Beneficial shares now remaining in the treasury have been sold and used for the interest and advance- ment of the Trust Estate herein created, to issue preferred bene- ficial interests of said Trust Estate, to such an amount from time to time as they shall deem expedient for the interest and advancement of the Trust Estate herein created, and such pre- 496 Trusts for Business Purposes. ferred beneficial interests may be sold for cash, exchanged for property, or distributed as dividends, at the option of the trus- tees. (D) In case of the loss or destruction of any certificate of beneficial interests issued hereunder, by the Trustees, the Trus- tees may, under such terms as they may deem expedient, issue new certificates in place of the ones lost or destroyed. (E) The Trustees may from time to time declare and pay such dividends as are earned by all outstanding beneficial in- terests, out of the net earnings from time to time received by them, as they may deem advisable; but the amount of such divi- dends and the payment of them, shall be wholly in the discre- tion of the Trustees, and the surplus profits or earnings shall not be maintained as separate fund, but shall be merged into the body of the trust property. (F) Beneficial interests hereunder shall be transferable only on the books of the Trustees upon surrender of certificates therefor and presentation of a written transfer thereof. The acceptance of a certificate of beneficial interests by the original holder or transferee shall make the person named in said trans- fer of certificate a party of this instrument as if such party had, in person, joined in the execution thereof. (G) The name in which a certificate of beneficial interests stands on the books of the Trustees, shall be considered by the Trustees conclusive evidence of ownership, and they shall not be required upon transferring such certificate, or paying divi- dends on such interests, or distributing assets upon the termina- tion of the trust, or at any other time, to inquire in any way in- to the relations between assignor and assigns, pledgor or pledgee, trustee and beneficiary, guardian and ward, or in any other similar relation, and shall have the right to conclusively presume without inquiry, tliat the holder of any such certificate Appe;ndix. 497 as shown by their books is the real and true and unconditional owner thereof. ' EIGHTH: Annual meetings for the election of Trustees and for the transaction of other business shall be on the first Tuesday in June, following the first Monday in June, each year, commencing in 1922, of which meeting the secretary or acting secretary, shall give notice by mail to each Trustee at his regis- tered address at least ten days before such meeting, but failure to give notice of such meeting shall not invalidate the proceed- ings of the meeting. (B) The Trustees may call the certificate holders together at the annual meeting of said Trustees, upon ten days' notice given as aforesaid, at which meeting the Trustees may submit an annual, or such other reports as they may deem advisable, to said certificate holders for their information, and the certificate holders, at such annual meeting, may nominate from among themselves, candidates for the office of Trustees, presenting such nominations to the Board of Trustees, but the election of such nominees, by the Trustees, shall be wholly optional with said Trustees. The fiscal year shall end each year on December 31st. NINTH : The death of a beneficiary or of a Trustee during the continuance of this trust shall not operate to terminate the trust, nor shall it entitle the legal representative of the de- ceased certificate holder to an accounting, or to take any action in the courts, or elsewhere, against the Trustees ; but the ex- ecutors, administrators or assigns of any deceased certificate holder shall succeed to the rights of said decedent under this trust, upon surrender for transfer, of the certificates for the interests held by him. (B) It is expressly agreed that the said trust shall not be terminated or the administration thereof in any wise interfered 498 Trusts for Business Purposes. with or suspended by the death of any such beneficiary, or his incapacity for any reason, or by his said interest or interests being by process of law subjected to the payment of debts, or in any way vested in any heir, assign, creditor, or purchaser, of the said beneficiary, or in any trustee, assignee or officer of any court, or by the same in any manner being divested out of the beneficiary and transferred or vested in any other person, ad- ministrator, executor, trustee, assignee, or personal representa- tive. But any such person who may, in any such manner ac- quire or become vested with the ownership of such certificate, shall thereupon succeed to and become entitled to all the rights and equities of the beneficiary therein named, and the benefi- cial interests in the said trust estate, upon surrendering the original certificate to the said Trustees with such proof of own- ership as may be reasonably required by them, and the issue in lieu thereof of a new certificate, and notwithstanding said change of ownership or interest in any such certificate, or death or insolvency of the original owner thereof, the said trust estate shall continue and remain in full force until terminated as herein provided. (C) The ownership of interests hereunder sliall not entitle the certificate holder to any title in or to the trust property whatsoever, or right to call for a partition or division of the same, or for an accounting, or for any voice or control what- soever of the trust property or of the management of said prop- erty or business connected therewith by the Trustees. TENTH : The Trustees hereunder shall, in entering into contracts and in the execution of notes, bonds, or other written instruments obligatory upon the said estate, set forth in ap- propriate terms that the said instruments are not entered into by them nor binding upon them individually, but only as Trus- tees of this estate, and that contracts or obligations are to be Appendix. 499 satisfied or performed out of the assets of said trust estate only. But the failure or neglect of such Trustee or Trustees to so declare in any instrument, contract or obligation entered into for the purpose of carrying out the objects of said trust, shall not be construed to render said Trustees or any of them, in- dividually liable thereon, but the same shall be obligations bind- ing upon and performable only out of the assets of said trust estate. (B) It is further expressly agreed that the said Trustees are fully authorized in their capacity as such and for and on behalf of said trust, to receive, collect, receipt and give full re- leases, acquittances and discharges for any sums of money v^hich may be payable to them as said Trustees for the benefit of said trust, or for any property or any other thing of value which they may be entitled to receive on behalf of said trust. ELEVENTH: This trust shall not continue in any event longer than for the term of twenty-one years after the death of the Subscriber, at which time the then Board of Trustees shall proceed to wind up its affairs, liquidate its assets, and distribute the same among the certificate holders of the beneficial interests according to the number of interests held by them. (B) For the purpose of winding up their affairs and liquid- ating the assets of the trust, the then Board of Trustees shall continue in office until such duties have been performed. IN WITNESS WHEREOF, the said Edmond J. Ware, Joseph K. Ryan, Russell Hogan, George E. Garth and William F. Ware, Trustees, hereinbefore mentioned, have set their hands and seals in token of their acceptance of the trust herein specified, for themselves and their successors; and the said William F. Ware, Subscriber, has hereunto set his hand and seal in token of his assent to and approval of said terms of roo Trusts for Business Purposes. trust tor himself and his assigns, the day and year first above written. Trustee ( Seal ) Trustee ( Seal ) Trustee ( Seal) '. . .Trustee (Seal) Trustee ( Seal ) Subscriber ( Seal) State oe Kentucky | • r SS County oe Todd 3 I, a Notary Public in and for said County aforesaid, do hereby certify that Edmond J. Ware, Joseph K. Ryan, Russell Hogan, George E. Garth and William F. Ware, personally known to be the same per- sons whose names are subscribed to the foregoing instrument, appeared before me this day in person, and acknowledged that they signed, sealed and delivered the said instrument as their free and voluntary act for the uses and purposes therein set forth. Given under my hand and official seal this day of June, A. D. 1921. Notary Public. SCHEDULE A. I, William F. Ware, Subscriber to the Declaration of Trust herein, hereby transfer, assign and deliver to the Trustees, for the purposes set forth in the Trust, all my right, title and interest which I now have in certain leases. The fol- lowing is a list of the names of the owners of the fee of the AP] PEINDIX. 501 said leases, number of acres leased, date of lease and date of expiration of leases : Name Acres Date Due Watts Bros., 640 I 1-3- I 9 1 1 -3-2 1 J. L. Lawson, 380 11-3-19 I 1-3-2 I Mrs. Eula Garth, 208 I 1-29-19 1 1 -29-2 1 F. B. Graham, 302 1 1-7- 1 9 I I -7-2 I WilHe Fox, 123 11-12-19 11-12-21 W. H. Ryals, 175 1-15-20 6-1 5-2 I D. M. Christian, 117 10-30-19 10-30-21 Y. G. Jones, 96 11-3-19 1 1 -3-2 1 Mrs. M. E. Jackson, 125 11-5-19 I 1-5-2 I H. L. Tutt, 191 11-12-19 11-12-21 Mrs. N. H. Carneal, 205 11-6-19 11-6-21 R. W. Jefferies, 125 11-5-19 1 1-5-2 1 C. R. Dickinson, 150 5-13-20 11-13-21 T. D. Smith, 495 11-12-19 11-12-21 Wright Bros., 247 11-7-19 I I -7-2 I D. H. Powell, 280 10-31-19 10-3 1-2 I E. H. Dickinson, 220 4-19-20 I 0-19-2 I Tom Duerson, 104 5-15-20 10-15-21 Mrs. Daisy Shelton, 75 5-15-20 1Q-15-21 F. Rives & J. C. Crews, 149 5-6-20 1Q-6-21 E. N. Wakefield, 93 4-30-20 9-30-21 J. W. Tyler & J. W. Roberts , 134 6-7-20 6-7-21 Jim Camp, 125 10-30-19 10-30-21 Ashton Waller, 400 11-1-19 11-1-21 H. R. Dickinson, 400 5-13-20 11-13-21 I. M. Jackson, 165 11-6-19 1 1-6-2 1 Mrs. Belle Stack, 285 11-7-19 1 1 -7-2 1 C. M. Waller, 270 5-13-20 11-13-21 Repo Arwin, 300 5-13-20 11-13-21 502 Trusts for Business Purposes. Nam]^ Acres Date Due Ed Butler, 225 5-13-20 11-13-21 J. A. Spicer, 188 11-13-19 11-13-21 O. D. Boxley, 521 5-3-20 11-13-21 W. T. Payne, 98 5-6-20 1 1-5-2 1 J. E. Byars, 150 5-^20 11-6-21 O. W. Wilson, 540 5-5-20 11-5-21 George Minims, 300 4-12-20 10-12-21 W. E. Jackson, 327 1-30-20 6-30-21 N. B. Hopson, 407 5-15-20 11-15-21 R. W. Harris, 144 11-10-19 ii-ic^22 J.C.Young, 105 11-13-19 11-13-21 W. G. Duerson, 335 5-8-20 11-8-21 B.A.Camp, 180 5-7-20 11-7-21 B.F.Mitchell, 150 5-3-20 11-3-21 Trustee (Seal) Trustee (Seal) Trustee (Seal) Trustee (Seal) Trustee (Seal) Subscriber ( Seal) 1 Appendix. 503 THE GREAT AMERICAN HOME SAVINGS INSTITU- TION. Adjudicated in State v. Lee, 233 S. W. 20, This agreement and declaration of trust for the formation and administration of an unincorporated association to be known and styled as the Great American Home Savings Institution made and executed this 27th day of October, 1920, by and between C. R. Bramblet, G. L. Faulhaber, F. C. Shryock, R. L. Gurney, Samuel Niccols, J. B. Murphy, H. H. Scheer, and such persons who may become additional trus- tees under the terms hereof, all of whom are hereinafter col- lectively designated as "trustees". Witnesseth, Whereas, the parties hereto, and those who may hereafter become associated with them, as herein pro- vided, desire to form a voluntary association for the purpose of availing themselves of the provisions of the laws of Mis- souri applicable thereto and particularly of the provisions of Section 3431a, R. S. Mo. 1909, as found in the Session Acts of 1919, at page 226, for the purpose of accumulating a fund to be used as herein provided under the terms of said section for the purchase or building of houses, the acquisition of farming lands, or other income property, or paying off mortgage, or other incumbrance, and desire also to provide a fund to be raised by the said trustees for the protection and security of persons contributing as investors or depositors to any fund or funds herein contemplated, and to furnish capital for the administration of all of the business and af- fairs of said institution, and to provide loans therefrom to the contributors to said funds, and to such ends to publish and declare the terms, conditions, regulations and stipulations on 504 Trusts for Business Purposes. which all and every such funds herein provided for may be accumulated, held, managed, invested, reinvested, loaned, ex- pended and distributed. Now, therefore, in consideration of the premises and the terms, stipulations, condition, regulations and provisions hereof, the parties hereto for themselves, their successors in trust and those who may hereafter become trustees, for the use, benefit and protection of all persons who may become the holders or owners of any of the certificates herein provided to be issued, agree and declare as follows : Name. I. The business shall be conducted under and known by the style and name of Great American Home Savings Institution and when the said name is signed by any officer or employee, duly authorized by the board of directors, it shall bind the assets or funds of this institution to the extent authorized under the terms hereof and all persons may sue said directors ofiicially or in the name of the Great American Home Savings Institution and any judgment obtained on any such claim shall be paid solely out of the assets of said institution, and all persons having claims against said institution on account of credit extended thereto, are hereby authorized to enforce pay- ment out of any funds belonging to said institution which have not been specifically set aside for the benefit of other classes of . persons or claimants. The directors shall have the right and authority by all proper proceedings and in all courts of competent jurisdiction, to sue for and recover all of the assets, and enforce any and all of the rights of the institution. Appendix. 505 Liability and Indemnity — Notice. 2. No trustee, director or officer of said institution shall be personally liable for any debts properly chargeable against said institution or any fund or funds thereof, If any such persons shall be compelled to pay out of his or their own proper funds any such claim, such person shall be entitled to indemnity from any funds or assets available for that purpose, with interest thereon from the date of payment at the rate of 6 per cent per annum until paid; provided, any such claim shall not be collectable from the loan and trust fund as hereinafter established, unless the funds so paid out have been expended for the benefit and protection of said fund. Objects, Purposes and Powers. 3. The objects and purposes of this association are de- clared to be, (a) to provide for the accumulation of a fund or funds to be used as herein provided for the purpose of en- abling contributors thereto, to purchase or build homes, ac- quire farming lands or other income property, and pay off mortgages, other incumbrances, or make improvements; (b) to provide for the issue of trust certificates on the partial payment or installment plan; (c) to provide for the issue of full-paid interest-bearing certificates; (d) to provide for the issue of trustees' certificates (e) to provide for and de- fine the rights and limitations of the various classes of cer- tificate owners; (f) to provide for and grant authority to a committee of the trustees as directors to administer the said trust and to fix the rate of interest liability to be assumed on account of any class of certificate issued hereunder, and limit said interest liability thereon, and on the loan and trust fund; 5o6 Trusts for Business Purposes. (g) to provide for and fix the purposes, uses and disposi- tion to be made of said loan and trust fund and the regula- tions for its loan or investment and the accumulations thereon; (h) to provide authority in the directors to make loans from said loan and trust fund to certificate owners contributing to such fund; (i) to provide for the distribu- tion of any surplus profits accruing from the management of the institution; (j) to provide authority in the directors to procure insurance on property in which the institution is in any way interested against loss by fire or from other casu- alty; (k) to provide authority in the directors to procure indemnity to said institution against loss on account of any property acquired under foreclosure; (1) to provide author- ity in the directors to make provision for all necessary ex- penses incurred in the operation or management of the trust herein created; (m) to provide authority in the directors to fix the compensation of trustees, directors, officers, agent and employees for services actually rendered to said institution in any capacity; (n) to provide authority in the trustees or directors to make, alter, repeal and enact by-laws, rules, regu- lations and resolutions for the government, management, con- trol and disposition of the assets of said institution, its assets, or funds, and its officers, agents, and employees, and therein fix and define any powers of the trustees or directors which may become necessary and proper to be fixed and defined in order to the full exercise of control over said institution, its assets, funds, officers, agents and employees; provided, that no such by-laws, rules, regulations or resolutions shall be valid if in conflict with the constitution or laws of the State of Missouri or the provisions thereof. Appendix, 507 Trust Certificates. 4. All persons who apply for and are granted participa- tion in the said loan and trust fund, shall become by the acceptance of their application therefor, bound by the several provisions of the certificate issued to them and the terms, stipulations, conditions, regulations and provisions hereof, as fully as though each person had actually accepted a certificate containing this agreement printed or written therein in full; Certificates issued to all persons applying for the benefits of said loan and trust fund and accepted under the rules of the institution, as contributors thereto, shall be substantially in the following form: Other Certificates — Changes. 5. All other certificates herein contemplated or authorized to be issued, under the terms of this instrument or any amend- ment thereof, shall be in the form prescribed by the board of directors and the approval of the Supervisor of Building and Loan Associations of the State of Missouri ; and on like ap- proval, they may alter the form of trust certificate hereinabove set forth. Books of Account and Records. 6. The board of directors shall cause a full and accurate set of books of account to be kept, in which shall be recorded all of the financial transactions of the institution. A full report of the financial condition shall be made by the presi- dent of the trust at all annual meetings of the trustees, and at special meetings thereof when included as an object in the call therefor. The secretary or other person designated by the board of directors shall keep accurate minutes of the 5o8 Trusts for Business Purposes. proceedings of all trustees' meetings, all board of directors' meetings and all proceedings of committees appointed by the board. The minutes of all proceedings of such committees shall be reported to the board for action thereon. Board of Directors — Officers Elected By. 7. The board of directors shall provide by proper by-laws for the election within two weeks after each annual meeting of the trustees of a president, one or more vice-presidents, a treasurer, a secretary and such other officers as it may deem necessary, and define their powers and duties. The compensation of all officers shall be fixed by the board of directors and of all agents and employes, by the board or such officers as they may designate. All directors and officers named may be removed by the board on notice and hearing as the by-laws provide ; and all other officers, agents and employes at the pleasure of the board or as the by-law^s may provide. 8. Trust certificates issued on the partial payment plan shall be in denominations of not less than $1,000.00 nor more than $10,000.00 on one application, but may be issued in the sum of $1,000,00 or any multiple of $100.00 in excess there- of, and providing for a monthly deposit of 65 cents per month per each $100.00 face value for eleven years, and pro- ■ vided, if certificate owner desires more than the maximum of $10,000.00, same may be issued in two or more certificates. Full-paid certificates may be issued in denominations of $50.00 or any multiple thereof for not less than six months, nor more than eleven years, with interest payable annually or semi-annually ; provided the interest to be paid thereon shall not be greater in amount in per annum percentage paid than Appendix. 509 interest earned on loans made, and said full-paid certificates shall not be issued in greater volume than is necessary to meet and fill immediate loan demands from certificate owners. Loan and Trust Fund and Other Funds. " 9. The board of directors shall provide, establish and at all times maintain unimpaired, a "loan and trust fund" and such other funds of a trust character as may be necessary to fulfill the obligations of said Great American Home Sav- ings Institution, under the terms of any class of certificate issued under the authority hereof and said "loan and trust fund" shall be sufficient in amount — when improved with in- terest at the rate of four (4%) per cent per annum com- pounded monthly — to equal the accrued value of the certi- ficates issued and in force at all times and sufificient to equal their face value at maturity date thereof, based on interest at the rate of 4% per annum as aforesaid, and said "loan and trust fund" shall be increased to the extent of the surplus earnings, from fines, transfer fees, cash-surrender and partial paid-up certificates. The said "loan and trust fund" shall be for the benefit of certificate owners contributing thereto, and may be used for any of the following purposes; in mak- ing loans to certificate owners in the order of their written application therefor, for the purpose of purchasing or build- ing a home, purchase of farm, or other improved income property, or making improvements thereon ; or paying ofif mortgage or other incumbrance and paying certificates their full face value at their maturity date — with their equitable share of surplus earnings not to exceed the maximum named in the certificate ; or for paying cash-surrender and partial paid-up certificates. 5IO Trusts for Busineiss Purposes. The first three monthly deposits made on said trust cer- tificates and 30 cents per each $1,000.00 face value thereof, of each subsequent monthly deposit made thereon, shall be- long to the general funds of the trust. After providing for all obligations to certificate owners of all classes as provided for by the terms of their respective certificates, including their equitable share of surplus earnings, all additional earnings, if any, shall belong to the general funds of the trust. Trustees' Annual and Special Meetings. 10. The trustees shall meet annually on the first Tuesday of November in each year during the continuance of this trust, beginning in the year of 1922, and at such place and times as they may determine or in default thereof, as the board of directors may designate. The trustees may hold special meetings for the exercise of any of their powers, on the call of the president, when directed by the board in writ- ing or requested by 25 per cent of the trustees owning trus- tees' certificates entitled to vote at trustees' meetings. The call for every special meeting shall state the time, place and object of the meeting and the authority causing such call to be issued. No business except such as is stated in the call therefor shall be transacted at any special meeting of the trustees, without the unanimous consent of the holders of all issued and outstanding trustees' certificates entitled to vote at such meeting, given in person or by proxy duly authorized in writing. Notice of all annual and special meetings of the trustees shall be mailed by the secretary to each trustee, postage pre- paid to his last known address, as appears by the books of Appendix. 511 the trust, at least twenty days before the time set for such meeting; and all of such trustees hereby constitute the United States Post Office as his agent to receive and deliver such notice. If for any reason, any annual meeting of the trustees shall not be held at the time designated in such notice, it shall be the duty of its president to call such annual meeting within sixty days thereafter, and such meeting when assembled shall possess all the powers of the meeting, had same been held at the time and place herein and in said notice designated. At all annual and special meetings of the trustees the owners of 25% in par value of the issued and outstanding trustee certificates shall be necessary to constitute a quorum for the transaction of business, but a smaller number may adjourn to a different time or place. All questions to be voted upon at any meeting of said trustees shall be determined by a majority vote of the total number of votes represented thereat in person or by proxy. Amount of Loan Made;. II. No loan shall be made on any property in excess of fifteen thousand dollars ($15,000.00) nor to exceed seventy- five per cent (75%) of the actual cash value thereof, as deter- mined by the Great American Home Savings Institution, or its duly appointed appraiser, due consideration being given to the income value thereof, provided if the loan and trust fund shall at any time become in amount larger than the de- mand for loans from certificate owners to borrow, the di- rectors are hereby vested with the power and authority to loan said funds on straight mortgage real estate loans ; but to none but certificate owners so long as there is adequate 512 Trusts for Business Purposes. demand from said certificate owners to borrow on security within the requirements hereof. Trustee Certificates. 12. In furtherance of the objects, purposes and powers herein enumerated and in order to raise funds to meet imme- diate loan demands from certificate owners as contributors to the loan and trust fund, the board of directors shall issue to the trustees signing this instrument and such persons who may desire under its rules to become trustees hereunder, when fully paid for at not less than their par value, trustees' cer- tificates in any aggregate amount, not to exceed, however, $100,000.00 in par value. Said certificate shall be issued only to bona fide trustees who become parties to this declaration of trust by duly signing this instrument or accepting a trus- tees' certificate and their assigns or legal representative. Said trustees' certificates shall be redeemable only at the expiration of this trust agreement or its termination from any cause; and in consideration of their character, furnishing a revolving fund to be loaned to persons entitled to participate in said loan and trust fund, the owners of said trustees' certificates shall have the exclusive right to vote on all questions to be determined hereunder, at the meetings of the trustees. The owmers of said trustees' certificates shall be entitled to one vote cast in person or by proxy in the form prescribed by the board of directors, per each unit of one hundred ($100.00) dollars of par value on each certificate owned; pro- vided, that in the election of directors the number of votes entitled to be cast may be multiplied by the number of di- rectors to be elected and apportioned among any number less than the whole or cast for one director as such trustee may Appendix. 513 desire ; and, provided, further, that no person shall be entitled to vote for director unless his certificate or certificates for the units sought to be voted shall have stood on the books of the institution, in the name of the person seeking to so vote in person or by proxy, for at least thirty days before the meet- ing at which he seeks to so vote is, or should have been, held under the terms hereof. Dividends may be declared out of the net earnings of the ' institution by an equal percentage on the par value of all issued and outstanding trustees' certificates ; provided, that the payment of said dividend shall in no way impair said loan and trust fund or deprive the holders of trust certificates or the holders of any other class of participation certificates of their equitable proportion or any surplus earnings. The in- terest required to be accumulated in order to meet the amount due on trust or other certificates shall be set aside before the owners of said trustees' certificates shall be entitled to dividends. The amount of trustees' certificates may be increased to any sum in excess of one hundred thousand ($100,000.00) dollars by a majority vote of any annual or special meeting of the trustees called, and held as herein provided, and shall be entitled to the right, priority and preferences as deter- mined by the resolution providing for such issue, not incon- sistent with the terms hereof. The proceeds received from subscriptions to any such trus- tees' certificates, not to exceed their par value per unit, shall be held liable to guarantee all liabilities to certificate owners of all other classes, and the maintenance of the loan and trust fund at all times unimpaired. 514 Trusts for Business Purposes. Liability of Trustees. 13. Trustee certificates shall be issued to each trustee evidencing their interests in such form as the directors may provide, and said certificate shall contain a clause that this certificate is full paid and non-assessable, and when the said certificate has been paid for in cash at its par value, the lia- bility of said trustee is hereby limited to the funds invested therein. Compensation — Trustees, Directors and Empeoyes. 14. The directors of the trustees shall determine and fix all compensation of trustees, officers, agents or other em- ployes, for services rendered in any and all capacities, whether in the form of salaries or commissions, and provide means for the payment thereof; provided said compensation shall HI no way be paid out of, or impair the loan and trust fund as herein created. Board of Directors. 15. A committee of their own number, to consist of not less than five or more than eleven, as determined by resolu- tion of each meeting if a change in number be desired, to be known as the board of directors, shall be elected by the trustees, at each annual meeting to hold the legal title to all of the assets of the trust for its use and benefit and for the use and benefit of all persons who may be entitled to a bene- ficial interest therein. The board of directors shall be vested with the right to exercise all of the powers herein enumerated, and particu- larly those stated in the third clause hereof headed "Objects — Purposes and Powers." I Appendix, 515 The board of directors shall be charged with the duty of taking all proper action, by all appropriate methods, in order to have the proper, fair and equitable administration of the affairs and business of the trust. It shall provide for regular and special meetings, and at all times be subject to the control of the trustees in annual or special meetings assembled, and shall comply with all by-laws and resolutions adopted thereby. The following persons shall constitute the first board of directors, as though duly elected at an annual meeting of the trustees, namely; C. R. Bramblet, G. h. Faulhaber, Samuel Niccolls, F. C. Shryock, J. B. Murphy. Their terms of office shall expire on the election by the trus- tees, at their first meeting, and the qualifications of their suc- cessors ; but in no event shall their terms last beyond the time set herein for the first annual meeting of the trustees. Vacancies in the membership of the board of directors from any cause may be filled from among the persons eligible, for the unexpired term, by the remaining directors or a major- ity thereof. Title to Real Estate and Other Property. 16. The directors may have, hold, own, manage, dispose of real, personal and mixed property in furtherance of any of the objects and powers of this trust, and if deemed ad- visable, may direct that a committee of directors or other competent trustees receive and hold the title to any such real estate, but such deed thereto shall recite that the title thereto is held by the grantees for the use and benefits of the Great American Home Savings Institution. Neither said institution nor any person as trustee for its use and benefit shall hold the title to any real estate for its use for a longer period than 5i6 Trusts for Business Purposes. twenty years from the date such use begins, and within such period any such real estate shall be sold. It is expressly de- clared that it is not the intention or purpose of this trust to invest its funds in real estate further than may be necessary for the use of the trustees or directors in conducting its busi- ness, or to protect the assets of this institution. DiRKCToRs — Notice; of Election — Effect. 17. Upon the election and qualifications of a new director or directors, by either the trustees or directors, it shall be the duty of the president and secretary to execute a certificate of the fact and acknowledge same so as to entitle same to be received of record. The qualification of a successor director shall have the ef- fect of transferring to such successor all of the rights and title of his predecessor. It shall be the duty of any retiring director to execute any instrument of writing necessary or proper to divest himself of all right or title, as such director, in any and all of the assets of the trust, so as to fully clear the title thereto and vest same in his successor or in the proper holder or holders thereof. Effect, 18. This instrument and any amendment thereof, and any certificate of a fact pertaining to the trust, or any of its assets or funds, when executed as herein required, acknowledged and recorded in the office of a recorder of deeds, shall impart notice to all persons of its contents, and all persons shall be entitled to rely on its provisions and of any amendments thereof, and any recital of fact contained therein. Appendix. 517 Te;rmination of Trust. 19. This agreement and declaration of trust shall continue until the owners of seventy-five (75%) per cent of the issued and outstanding units of trustee certificates shall, by resolu- tion adopted at any annual meeting or special meeting called and held as herein required, direct the directors to wind up the affairs of this trust at the expiration of such period of time thereafter as may be necessary to enable them or their successors in office to carry out and fulfill all of the contracts, certificates and other obligations then in force, or thereafter contracted ; provided that no contract shall be made, certificate issued or obligations assumed after the date of the adoption of such resolution which is not to be fully matured within a period of twenty-one years. At the termination of this trust as above provided, the directors then in office shall be- come trustees for the purpose of winding up the affairs of the institution, converting its assets into cash and distributing same in a fair and equitable manner. They shall first pay all proper costs and expenses of closing up the business, including their reasonable charges in that behalf ; second, they shall pay all general claims and distribute the balance of said trust fund pro rata and in proper proportions among the holder or hold- ers of said trustee certificates as they may appear entitled thereto under the terms of this agreement. AmEndmi;nt. 20. This agreement and declaration of trust may be amended at any annual or special meeting of the trustees, called and held as herein provided by the affirmative vote of a majority of the issued and outstanding trustees' certificates, cast as this instrument provides ; provided that no such amend- 5i8 Trusts for Business Purposes. merit shall deprive any depositor or other class of certificate holders of any of their rights. Change of Other Laws. 21. The trustees may on the affirmative vote of two-thirds of the issued and outstanding units entitled to vote hereunder, by resolution direct the board of directors to accept the bene- fits of any law or laws of the State of Missouri, which may authorize the accumulation of a fund or funds, the accumu- lation of which is now contemplated under the terms of said Section 3431a R. S. Mo., 1909, and to do all things neces- sary to bring the assets under the provisions of any such law ; provided that no such readjustment or change shall deprive any non-voting certificate holder of his or her rights here- under. Execution of Trust Agreement. 22. This agreement and declaration of trust shall become fully effective upon the signing hereof by the parties named as trustees hereunder. Persons accepted as trustees as herein provided for and to whom a trustee certificate is issued orig- inally or by transfer of record, shall be held, deemed and taken, to be parties to this agreement and declaration of trust as fully as if they had actually executed this instrument as a party hereto. The secretary shall certify the name of each such trustee certificate holder to the Supervisor of Building and Loan Associations of the State of Missouri if requested by said supervisor. This agreement and declaration of trust shall be executed by the present parties hereto in duplicate, one copy to be re- tained and copied of record by the secretary in the minutes Appendix. 519 of the directors, and the other copy to be filed with the Super- visor of Building and Loan Associations at Jefferson City, Missouri. This instrument is a re-execution of the agreement of Oc- tober 27th, 1920, for the purpose of making corrections and changes therein. In Witness Whereof the parties herein named have here- unto set their names to duphcate copies hereof as of the date herein first above written. C. R. Bramblet, G. L. Faulhaber, F. C. Shryock, By H. S. Bridgewater, Atty. in Fact; R. L. Gurney, Samuel Niccolls, J. B. Murphy, By H. S. Bridgewater, Atty. in Fact ; H. H. Scheer. 520 Trusts for Business Purposes. DENVER TOWNSITE COMPANY. This trust was adjudicated in the Idaho Supreme Court in the case of A. T. Spotswood et al., Respts., v. J. B. Morris, Admrx., etc., of Benjamin F. Morris, De- ceased, et al., Appts. 12 Idaho 360; 85 Pac. 1094; 6 L. R. A. (N. S.) 665. Trust Instrument is as follows: "This Instrument, made this i8th day of September, 1895, Witnesseth, that whereas, Benjamin F. Morris was the owner of the following lands in Idaho county, Idaho, to wit: (Here follows a description of said 2,720.80 acres) * * * And he agreed with the following persons, to wit : Henry Dernliam and William Kaufifman, of Moscow, Idaho, John P. \^ollmer and Robert Schleicher, of IvCwiston, Idaho, and Wallace Scott, of Mt. Idaho, Idaho, to join them in a syndicate to purchase said lands of him and resell the same and divide the profits thereof, in which syndicate each of said persons shotild take and pay for a one-eighth share and be the owner of and entitled to a like portion of the profits thereof, and said Benjamin F. Morris should take and pay for a three-eighths share, and be the owner of and entitled to a like portion of the profits thereof * * *. And whereas, said Benjamin F. Morris has by deed of even date herewith conveyed to Robert Schleicher in trust for this syndicate according to these articles of agreement said 2,720.80 acres, all except the 160 acres last above described, subject to a mortgage on which there is due of principal $9,000 besides interest, and to the payment by the syndicate, including Benjamin F. Morris, of $4,320.00 of the purchase money, with interest thereon from the ist day of May, 1895, at the rate of 10 per centum per annum until paid : Now, therefore, in order to facilitate the accomplishment of the purposes of said syndi- cate, we, the said parties, hereby organize ourselves into an Appe;ndix. 521 association, and agree as follows: (i) That the name of said association shall be the Denver Townsite Company, and the principal office of said association shall be at Lewiston, Idaho. (2) That the members of the association, and their executors, administrators, heirs and assigns, shall, in proportion to their interests therein, pay the obligations thereof, and share in the profits thereof. (3) That the title to said lands is to be subject to all the terms and provisions, powers and trusts, of these ar- ticles of agreement and the amendments and alterations thereof which may be made from time to time. (4) That this associa- tion shall not be dissolved, or any of the powers herein given, or which may be given, be revoked by any transfer at any time of the interest of any member thereof, or any part thereof, whether by act of the party, or by operation of law, or by the death of any member or members thereof, or their successor or successors, at any time. (5) That, in order to maintain and continue this association, no member or members, or successor or successors, thereof shall for five years from date hereof liave any right or partition of said lands or any of them, but shall have such right thereafter. These articles of agreement shall be binding upon the parties, their assigns whether by act of party or operation of law, and their heirs, devisees, executors, and administrators. (6) The interests of the members of this association in the property thereof shall be represented by eight certificates, which shall be and are hereby agreed to be personal property. The members have only a right to the avails or pro- ceeds of said property, the title thereto, both legal and equitable, remaining and being in said trustee, his successor or successors in trust. (Here follows a form of a shareholder's certificate.) * * * (8) The certificate of shares in, and interests of mem- bers of this association in, its property can only be transferred in the manner prescribed in the form of certificate last above 522 Trusts for Business Purposes. set forth, and not then unless all obligations of the assignor to the association are paid. No transfer shall be made for five days immediately before a meeting of the shareholders, or for five days immediately before the time when a dividend is pay- able. (9) That the annual meeting of the shareholders shall be held in Lewiston, Idaho, at the office of First National Bank of Lewiston, Idaho, on the second Tuesday of May each year, at 2 o'clock P. M. That no meeting of shareholders shall be competent to transact business unless a majority in interest of the shareholders shall be represented; but less than a majority may adjourn from day to day or until such time as may be deemed proper. That at such annual meeting a president, vice president, and secretary for the ensuing year shall be elected by ballot", to sen-e one year, until their successors are elected and qualified. Special meetings of the shareholders may be called by any three shareholders by notice in writing, by mail or otherwise, to meet at Lewiston, Idaho, at the office of the First National Bank of Lewiston, Idaho, at an hour to be desig- nated in the notice, such notice to be mailed or served not less than five days prior to date of meeting. When all shareholders assemble and so agree, either in person or by proxy appointed in writing, a special meeting may be held without any notice. That at all meetings of the shareholders each shareholder shall be entitled to cast one vote for each certificate held by him. He may vote in person or by proxy appointed in writing. The president or presiding officer may vote his own share or shares, but shall not have power, in addition as presiding officer, to decide a tie vote. The secretary shall keep a record of each meeting. (10) That a majority in interest of tlie shareholders of this association, at any meeting thereof, shall have as full and ample power and authority to do, or authorize to be done, any and every thing of every nature whatsoever, as an indi- Appe;ndix, 523 vidual owner of said lands in fee simple would have, provided only that they cannot issue, or authorize the issue of, any nego- tiable instruments, or borrow money, except to renew, or ex- tend, or take up, or pay off, a mortgage or vendor's lien on said lands or some part thereof. That the only other manner in which they can raise money (except from income or sale of property) is by levy of assessments as hereinafter provided, upon the shareholders. That nothing except the consent of all the shareholders shall authorize the creation of any personal liability against the shareholders, and all contracts entered into shall be limited to creating a liability against the property of the association. (11) The officers of tliis association shall con- sist of a president, vice president, and secretary, who shall be elected by the shareholders, and shall perform the duties usu- ally appertaining to their respective officers, except that the secretary shall perform, also, the duties usually appertaining to the office of treasurer. They shall hold office for one year and until their successors are elected and qualified. * * * No person shall hold any of those offices unless he be a share- holder, and a transfer of his share as provided in these articles of agreement shall operate as a resignation by him. * * ♦ (12) The secretary of this association is hereby required, au- thorized, and empowered to sell, contract for sale of, and con- vey, by such form of conveyance as he may deem best, all or any part of the lands, or lots, or blocks contained in the 2,720.80 acres above described, for such price or prices, and upon such terms, at public or private sale, as he may deem best, subject to the directions of the shareholders ; and no purchaser need see to the application of the purchase money, or to any such direc- tions of the shareholders, or to the qualifications of the secre- tary as such officer. He shall have these articles of agreement and said deed to him recorded in Idaho county. The secretary 524 Trusts for Business Purposes. shall also have power to sell all products which may be received from any of said lands when and for such prices and on such terms as he may deem best. He may, out of any money in his | hands as secretary or treasurer, pay the taxes on said lands, insurance premiums on any property of the association, or any property on which it may have an encumbrance, and interest on any encumbrance or encumbrances on said lands or any part thereof, also all necessary repairs at the wells, or of fences or other property on said lands, and all expenses incident to con- struction of fences, made necessary by any changes in roads. He may take any action he may deem most for the interest of the association in the matter of any actions or proceedings of the county commissioners concerning roads. The secretary shall incur no obligations which shall altogether exceed $500. without additional authority. He may deposit any money on hand in his name as treasurer of Denver Townsite Company in any national bank and check out the same. He may procure such record books and stationery and blanks, from time to time, as may be necessary. He shall keep an account and record of the affairs of the company, and render accounts and reports at the annual meetings, and record the same in the record book of such meetings, and, whenever requested by vote at any meeting, render accounts and pay over any money due the Denver Town- site Company." Appendix. 525 OAKALA FOOD ASSOCIATION. Published by permission of John Stelk, former Judge of Chicago, Illinois, who is the Author of the following Trust: The Parties to the Trust. 1. This Agreement and Declaration of Trust made this ist day of November, A. D. 1922, by and between Sumiy South Developing Company, Inc., a corporation organized and exist- ing under the laws of the State of Alabama, of Oak, Alabama, for itself and its assigns, and John Steek, Albert W. Keller, and Viola Stelk, for themselves and their successors, herein designated as Trustees, witnesseth, that: Intention. 2. Whereas, the Sunny South Developing Company, Inc. desires to create an express trust to be known as the Oakala Food Association for the purpose of conducting any or all of the business hereinafter more specifically set forth, and, Whereas, it is possessed of property which it desires shall be used in the conduct of such business ; and Whereas, it desires to transfer, and convey such property to the Trustees herein as a Trust Estate to be used by said Trus- tees, and their successors, in the conduct of said business ; and Whereas, the Trustees desire to accept such property and hold and manage and dispose of the same in accordance with the agreements and covenants herein contained, and for the uses and purposes herein set forth : Declaration of Trust, 3. Now, Therefore, in consideration of the premises and 526 Trusts ifor Business Purposes. the mutual covenants hereinafter contained, it is mutually agreed as follows : (a) The said Sunny South Developing Co. Inc. hereby con- veys, grants, bargains, sells, transfers, assigns and delivers to the Trustees the following described land situated in the County of Baldwin and State of Alabama, to-wit: The southeast quarter of Section Twenty (20), Township eight (8) North, Range four (4), East of St. Stephen's Principal Meridian, re- ceipt of which is hereby acknowledged by the Trustees. (b) It is agreed that the land hereby conveyed to the Trus- tees, and all cash, securities and other property hereafter ac- quired by them as such Trustees, together with the proceeds, incomes, profits, increases and surplus thereof shall be and be- come and constitute a Trust Estate, to be held, controlled, man- aged and disposed of by the Trustees under the designation of (3akala Food Association, for the benefit of the holders, from time to time, of beneficial interests in said Trust Estate, some- times hereinafter called "beneficiaries" and "beneficial inter- ests," in accordance with the agreements and covenrints herein contained and for the uses and purposes herein set forth. Express Trust Created. 4. It is hereby expressly declared that an express trust and not a tenancy in common, association or ^partnership is hereby created, and that neither the trustees nor the holders of benefi- cial interests shall ever be liable hereunder as partners, asso- ciates or otherwise. Plolders of Beneficial Interests shall have no right and no voice whatever, as such, in the management of the Trust Estate except as hereinafter provided. In Case Estate is Without Trustees. 5. If, at any time, for any reason, this Trust Estate shall Appendix. 5^7 be left without a trustee, then trustees may be appointed by any court of competent jurisdiction, upon application by one or more of the Holders of Beneficial Interests hereunder. The Holders of Beneficial Interests hereunder shall at no time have any voice in the selection of trustees hereunder, except through the medium of some court of competent jurisdiction, in the manner and under the circumstances aforesaid. Number of Trustees. 6. The trustees shall be three (3) in number and shall in all cases hold their ofBce until their successors have been elected and shall have qualified and accepted the trust ; provided, that the number of trustees may be increased or diminished at any time by the unanimous vote and decision of all of the said trus- tees; and the said trustees, by such unanimous vote and de- cision, shall have the right to designate in writing the trustee or trustees who shall retire upon any decrease in the number, and also to designate in writing the trustee or trustees who shall act as such upon any increase in the number thereof. Eeection of Trustees. 7. John Stelk, subject to the provisions hereof, sliall act as trustee for three years; Albert W. Keller for two years, and Viola Stelk for one year. When the one year trusteeship of Viola Stelk expires, the remaining trustees shall elect her suc- cessor for a period of three years. When the term of Albert W. Keller as trustee expires, the then remaining trustees shall elect his successor for a period of three years, and when the term of John Stelk expires, as trustee, the then remaining trus- tees shall elect his successor for a period of three years. There- after, and yearly, the successor to the retiring trustee shall be 528 Trusts for Business Purposes. elected by the remaining trustees. If there is any increase at any time in the number of trustees, the terms of such trustee or trustees shall be so made that there shall be a yearly retiring and a yearly election of a trustee or trustees by the remaining trustees ; but this provision shall not be construed to mean that a trustee may not be elected to succeed herself or himself. Vacancies of Trustees. 8. In case of the death, removal, resignation, unwillingness, or inability to act of one or more of the trustees, and a vacancy or vacancies shall thereby be caused, the remaining trustees shall elect a new trustee or trustees to fill such vacancy or vacancies. Upon the election and qualifications of a Trustee under the provisions of this instrument, the certificate of such election and qualification shall be signed by all the trustees and acknowl- edged by them in the manner and form that instruments of con- veyances are required to be acknowledged by the laws of the State of Alabama, and shall be deposited with the Depository appointed by the trustees. Upon the election of any trustee, such person shall qualify by executing an acceptance of this Trust, which shall within ten days after such election, be de- posited with the Depository of the Trustees. If the acceptance is not so deposited, the office shall be considered vacant and a new election shall be made. As soon as any trustee elected to fill a vacancy shall have qualified, the trust estate and the title thereto shall rest in the new trustee and the old trustees with- out any further act or conveyance. Until such vacancy is filled, the remaining trustee or trustees shall have all the title and shall act and have all powers of all the trustees hereunder. ^'\Tlere there are five or more trustees in office, each trustee shall be subject to removal at any time, with or without cause, by Appendix. 529 the unanimous vote of all the remaining Trustees at a meeting of the Trustees duly held of which all the Trustees had at least three days prior notice. The Business oe the Association. 9. The Trustees shall have the power, under the designa- tion of Oakala Food Association, to use the Trust Estate for the following purposes : A. To engage in and carry on the business of : building and operating a canning and dehydration plant ; an ice making, elec- tric light, heat and water plant; cold storage and other ware- houses, a potato curing house, pickeling vats and other facilities for the proper handling of meats, turtles, crabs, fish, oysters, shrimps, poultry, milk, eggs, butter, cheese and all sorts of fruits and vegetables; acquiring, establishing and operating wholesale and retail stores, clubs or places where such products can be sold; purchasing, selling, trading and dealing in trees, plants, seeds, fertilizers, sprays, farm and orchard machinery, tools and equipment live stock, feed, poultry and bees ; teaching farmers and orchardists how to prepare, plant and cultivate their orchards, and farms, how to care for the live stock and poultry thereon, and how to harvest and dispose of the income and increase thereof ; guaranteeing from time to time, a net minimum price for the farm and orchard products as will as- sure the farmer a fair profit over and above all legitimate ex- penses, provided, the crop is planted, cultivated and harvested according to instructions from, and under the directions of the trustees, under a contract with the trustees for a fixed number of years, and, provided further, that the trustees are under such contract, permitted to market the products and are al- lowed a certain percentage of the amount that may be obtained 530 Trusts J'or Busine;ss Purposes. by them over and above such guaranteed price in the nature of a premium; inaugurating a system of fast water, truck and rail transportation facilities between Oak and Mobile, Alabama, and between Oak and Pensacola, Florida, and between Oak and other points and obtain an extension of the Bay Minette, Foley and Fort Morgan Railroad from Foley to Oak, Alabama, or its vicinity ; manufacturing bags, boxes, crateS; hampers, bas- kets and other containers for the shipment of all products, an-l finding markets for such products and buying, selling and trad- ing therein ; establishing and conducting a state or national bank and a telephone system. B. To engage in and carry on any other necessary and in- cidental business in connection with the foregoing which is cal- culated directly or indirectly to increase or enhance the value of the Trust Estate. C. To buy, sell, acquire, own, mortgage, encumber, lease, manage, exchange, dispose of, and deal in the good-will, fran- chise, property, stocks, securities, beneficial interests, and shares of corporations, trusts and associations engaged in whole or in part in any business similar to any business above mentioned. D. To buy, sell, license, acquire, own, mortgage, encumber, lease, manage, exchange, dispose of, and deal in franchises, con- tracts, concessions, leases, real estate, patents, patent rights, trade names, trade marks, copyrights, and any and all property of whatsoever nature, real, personal, or mixed, tangible or in- tangible, in any way believed by the Trustees to be valuable, necessary or incidental in connection with the carrying on of any business above mentioned. E. To do all and every act and thing necessary or incidental in connection with the carrying on of any business above mentioned. Appendix. 531 Powers of Trustees. 10. In connection with the carrying on of any business above mentioned: (a) The Trustees shall hold the legal title to the Trust Es- tate, and have the absolute control, management and disposition of the same and the absolute control and management of any and all business engaged in, to the same extent as natural per- sons might or could do, in any state and in any part of the world, as principals, agents, contractors, employers, employees, trustees, partners or otherwise. (b) The Trustees shall have power to enter into, make, execute, and perform contracts, agreements, leases, obligations, and undertakings of every kind and nature with any person, persons, firm, organization, private or public corporation, quasi- public corporation and other body or individual. (c) The Trustees shall have power to draw, make, accept, endorse, execute, pay, buy, sell and discount promissory notes, drafts, bills of exchange, bonds, warrants, debentures, and any and all other negotiable or non-negotiable evidences of indebted- ness of whatsoever nature. Additional Powers of Trustees. 11. The Trustees shall have full power to invest and re- invest, mortgage, sell, pledge and incumber the Trust Estate and its profits, income, increase, surplus and avails ; to bring, defend or compromise any action or suit at law or in equity, to pay, settle, compromise, satisfy and collect judgments and de- crees of whatsoever nature, and to engage and employ counsel for any and all such purposes. 532 Trusts for Business Purpose;s. Delegation of Powers of Trustees. 12. Any Trustee may, by written proxy or power of at- torney, delegate his power as such for a period not to exceed thirty days at any one time, to any other Trustee, including the right to vote at all meetings of the Trustees, but not including the right to vote on a motion to remove a Trustee, or to make, amend, adopt or repeal any by-law. Meeting of Trustees. 13. The Trustees shall meet at such times and places as they may fix from time to time by by-law or resolution. A record shall be made and kept of the business transactions at each meeting. The minutes of any meeting of the Trustees shall, as to any fact which they purport to state, be prima facie true, upon all questions of title depending in whole or in part there- upon or effecting the rights of third persons. Quorum of Trustees. 14. Any three trustees present in person or by proxy and not less than three shall constitute a quorum. At a meeting of the Trustees, the concurrence of all of the Trustees present or represented at the meeting shall not (except as otherwise herein provided) be necessary to the validity of any action taken by them; but the decision expressed by the vote of a majority of the Trustees shall be conclusive and binding. Special Meetings. 15. Special meetings of the Trustees, in addition to those provided for in the by-laws shall be held from time to time upon a call of the Trustees, or a majority of them. Appendix. 533 By-laws and Rules. 16. The Trustees may, at any meeting at which all of the Trustees are present, make, adopt, amend or repeal such by- laws and rules not inconsistent with the terms of this instru- ment as they may deem necessary or desirable for the conduct of their business or for the government of themselves, their officers, agents and servants. Agents and Employes. 17. The Trustees shall have the power to employ such help, including attorneys and solicitors, as they may from time to time deem necessary or expedient. The Trustees shall agree with said help as to the amount of compensation to be paid; and they may likewise pay to themselves such compensation for their own services as trustees or officers as they may deem reasonable and fair. Ofeicers and Servants. 18. The Trustees shall annually elect from their number a President, and in their discretion, a Vice-President. They shall also annually elect a Secretary and a Treasurer. The office of Secretary and Treasurer may be held by one and the same person, and any person or persons elected to such office or offices need not be a Trustee. The Trustees shall have authority to elect temporary officers to serve during the absence of or disability of* regular officers and have full authority to appoint and remove officers, agents, managers, employees, clerks and counsel, with or without cause. Duties of Officers. 19. The President shall preside at all meetings of the Trus- 534 Trusts for Business Purposes. tees, and shall perform such other duties as the by-laws or the Trustees may prescribe and require. The Vice-President shall perform the duties of the President in his absence; and shall perform such other duties as the by-laws or the Trustees shall prescribe or require. The Secretary shall attend all meetings of the Trustees, keep minutes of such meetings, keep such rec- ords and books and render such services as may be prescribed by the by-laws or imposed upon him or her from time to time by the IVustees. The certificate of the Secretary of the correct- ness of any copy or of any record in the Secretary's office shall be prima facie evidence. The Treasurer shall perform the duties usually incident to such position, and such as may be prescribed by the by-laws or required from time to time by the Trustees. The Trustees shall constitute as their depository the Treas- urer of the Trustees, who, as such, shall be tendered a copy of any instrument hereinafter designated. Duties oe Depository. 20. Such Depository shall have the custody of one of the originals of the Declaration of Trust and of any and all instru- ments altering or adding to the same, or containing the resigna- tion of one or more Trustees, or showing the election of one or more persons to be Trustees to fill vacancies, or otherwise af- fecting this Declaration of Trust or the duties, powers or lia- bilities of the Trustees. Such Depository shall give good and sufficient bonds for the safekeeping and return of all moneys, papers or property entrusted to his or her care either as de- pository or as treasurer. Such depository shall be bound to deliver, on demand, to any new depository selected by the Trustees all such documents and records. Appendix. 535 Evidknce of Acts of Trustees. 21. For purposes of convenience, the trustees may select one or more of their number to act for and in behalf of all of the Trustees respecting any given matter as respecting any given class of matters. All action of the Trustees, or other exercise by them of powers hereby conferred, except, the exe- cution of written instruments signed by all of the Trustees then acting, shall be by officer, agent, manager, attorney or other representative acting under the authority of a resolution or by-law passed or adopted at a meeting of the Trustees duly called and held, or by a Trustee or Trustees acting under such authority; and any action of the Trustee, or other exercise by them, of the powers hereby conferred, thru an officer, agent, manager, attorney or other representative thereunto thus au- thorized, or by a Trustee or Trustees thereunto thus duly au- thorized, shall, except as otherwise provided herein, be valid and binding upon the Trust Estate at law and in equity. Statements by Trustees or Officers. 22. So far as strangers to this trust are concerned, a state- ment in writing by the Trustees, or by any number of said trus- tees, authorized by all of the trustees- to act in that behalf, di- recting a particular act to be done, shall be conclusive evidence in favor of such strangers that such act is within the power of the trustees and no purchaser or purchasers from the trustees, and no person dealing with the trustees, shall be obliged to see to the application of any purchase money, or of any other con- sideration paid, or delivered by or for said purchaser to or for said trustees. Copies of all documents and records in the custody of Depository, duly certified, and certificates as to who are Trustees or the Cestui Que Trusts, or the like, duly S3^ Trusts for Business Purposes. signed by the president, and attested by the Secretary or Treas- urer shall be conclusive evidence as against the Trust Estate upon the matters certified to, and shall have all the effects of the original. Contracts of Trustees. 23. In every contract, or order, or obligation which the trus- tees shall give or enter into, they shall stipulate and such stipu- lation shall be binding, that the trustees do not sign said docu- ment as individuals but as trustees, and shall not be held per- sonally liable thereunder, and the party or parties dealing with such trustees shall be obliged to look to the trust estate for the satisfaction of any such contract, order or obligation. The Trustees shall adopt a common seal, on which shall be impressed the following: "Oakala Food Association, Oak. Alabama, Trustees Seal," and use or cause the same to be used, in attesta- tion of such instruments as to them may seem proper. Said Trustees shall sign all documents of every kind as follows : "Oakala Food Association, by Trustees. Said Trustees hereby sign as trustees, and not as individuals." No Liability for Errors. 24. The Trustees shall not be liable for errors of judgment either in holding or disposing of property originally conveyed to them, or in afterwards acquiring and holding or disposing of additional property, or for any losses arising out of any invest- ments; nor shall they be liable for any act or for any failure to act, in any given matter in the execution of this trust in Appendix. 537 good faith; nor shall they be liable for the acts and omissions of each other, or of any servant or employee and they shall not be required to give bond to secure the performance of this trust by them. Each trustee, however, shall be liable for his or her own wilful and corrupt breach of trust or misconduct. Indemnity to Trustee. 25. Each Trustee shall be indemnified by, and receive re- imbursement from the Trust Estate against any and all personal liability, claims, damages, or loss incurred or sufifered by him or her in the administration of the Trust Estate, or any part or parts thereof, or in doing an act on account of his or her being a Trustee, except such liability, claim, damages, or loss as may result from his or her personal and wilful default. Different Classes of Beneficial Interests. 26. There shall be issued two thousand (2000) preferred beneficial interests, to be known as Class "A", of the par value of Ten ($10.00) Dollars each; three thousand (3000) common beneficial interests, to be known as Class "B", of the par value of Ten ($10.00) Dollars each; and two thousand (2000) pre- ferred beneficial interests, to be known as Class "C", of the par value of Ten ($10.00) Dollars each. With each beneficial in- terest of Class "A", there shall be given as a bonus and without any cost or charge whatsoever, one Class "B" beneficial interest. Dividends on Beneficial Interests. 27. Out of the profits, the holders of the preferred benefi- cial interests, known as Class "A" certificates, shall be entitled to receive a dividend of seven per cent (7%) per annum on 538 Trusts for Business Purposes. each preferred Class "A" beneficial interest before any divi- dends shall be paid on Class "B" and Class "C" beneficial in- terests. The preference on Class "A" certificates sliall be cumulative, dividends shall be payable quarterly. The holders of the common beneficial interests, known as Class "B" certifi- cates, shall be entitled to receive, after the payment of the divi- dend on the beneficial interests, known as Class "A", a dividend of not to exceed seven per cent (7%) per annum, on each common Class "B" beneficial interest, before any dividends shall be paid on the Class "C" beneficial interests. Additionai, Earnings. 28. If, after the payment of dividends as hereinabove pro- vided, on the beneficial interests, known as Classes "A" and "B" a surplus or net profit remains, the trustees may, in their discretion declare a further dividend, payable at such time or times as they may deem advisable, which said dividend shall be distributed among holders of beneficial interests in such pro- portions as the trustees may determine. Special Dividends. 29. The holders of preferred beneficial interests, repre- sented by certificates of Class "C" shall be at all times entitled to a discount or reduction on the retail price on the purchases of goods, wares, and merchandise, or any products which may be oflfered for sale by the trustees, such discount or reduction shall be fixed from time to time by the trustees, but in no event shall such discount or reduction of said retail price be less than 5% nor more than 20% of the aggregate amount of such pur- chases, said discount or reduction to be payable or allowable at Appendix. 539 such times and in such manner as may be determined by the trustees. Certificates May be Called in for Payment. 30. The preferred beneficial interests, known as Class "A" and Class "C" shall be callable and may be retired at any time after five years from the date of issue, at the rate of $10.00 per beneficial interest, together with any accumulations of divi- dends which may have accrued thereon. Certificates Class "A". 31. As evidence of the ownership of the Class "A" pre- ferred beneficial interests hereunder, the trustees shall cause to be issued to each Class "A" preferred beneficial holder a trans- ferable negotiable certificate, which shall be substantially in the following form. "Number OAKALA FOOD ASSOCIATION Beneficial General Offices: Oak, Baldwin Co., Ala. Interests Par value An Express Trust $10.00 Class "A" This certifies that is the holder of Class "A" preferred Beneficial Interests in Oakala Food Association, of the par value of Ten ($10.00) Dollars, fully paid and non-assessable, subject to the Declaration of Trust, creating said Association, dated Novem- ber 1st, and recorded in the office of the Judge of the Probate Court in and for Baldwin County, Alabama, at Bay ]N,Iinette, the County Seat, and transferrable only on the books of the Trus- tees, in person or by attorney, upon surrender of this certificate properly endorsed. In Witness Whereof, the Trustees have issued this Cer- tificate on this day of A. D. 192 .. . Trustees." 540 Trusts for Busine;ss Purposes. Certificate Class "B". 32. As evidence of the ownership of Class "B" common beneficial interests hereunder, the Trustees shall cause to be issued to each beneficial holder of Class "B" certificates a trans- ferable negotiable certificate, which shall be substantially in the form provided for as to Class "A" excepting to cliange the words "preferred" to "common" and the letter "A" to "B". Certificate Class "C". ;^^. As evidence of the ownership of Class "C" preferred beneficial interests hereunder, the trustees shall cause to be is- sued to each Class "C" preferred beneficial holder a transfer- able negotiable certificate, which shall be substantially in the form provided for as to Class "A" excepting for the change of the letter "A" to "C". Reverse Side of Certificates. 34. On the reverse side of said Certificates shall appear the following : "For Value Received. .. .hereby sell, assign and transfer unto Beneficial Interests described in the within Certificate and do hereby irrevocably constitute and appoint Attorney to transfer the same on the books of the within named Trust with full power of substitu- tion in the premises. Dated 19 In presence of In addition thereto there shall be endorsed on reverse side of Appendix. 541 said certificates a synopsis of paragraphs 2.'], 28, 29, 30, 40, 50 to 55, substantially, as follows: "Note. Paragraphs 27, 28, 29 of the Declaration of Trust provide that Class "A" Certificates shall receive at least 7% cumulative dividend per year payable quarterly. Class "B" shall receive 7%, such a dividend as the trus- tees may from time to time designate. Class "C" shall receive discounts of 5% to 20% on purchases from the Trust Estate and in addition shall share in the excess profits in such an amount and at such times as the trustees may from time to time determine after dividends have been paid on Class "A" and Class/'B". Paragraph 30 provides tliat certificates of Classes "A" and "C" may be called in and retired at any time after five years from the date of their issue at par value with ac- cumulated dividends. Paragraph 40 provides that at no time and under no cir- cumstances and in no form whatever can a certificate hold- er be made liable for anything connected with the Trust Estate. Paragraphs 50 to 55 provide for an annual meeting of the certificate holders and the election of an Advisory Board to watch and protect their interests " Additional Certificates. 35. In addition to the Beneficial Interests hereinabove pro- vided for and described, the said Trustees may, as frequently as they desire, issue other and additional certificates for com- mon or preferred beneficial interests at such time or times, to such an extent and in such quantities, as they may deem nec- essary and proper, to any person or persons who may have paid to them as such trustees, or, who shall pay to them as such trustees, the sum of not less than $10.00 or any multiple there- of, for any beneficial interest in the trust estate hereby created. Substitute Certificates. 36. In consideration of the land which has been transferred 542 Trusts for Business Purposes. to the Trustees by the Sunny South Developing Company, Inc. there shall be issued to it looo Class "A" and looo Class "B" beneficial interests, representing the fair cash market value of said land. In consideration of the services rendered in and about the formation of this Trust by John Stelk and Albert W. Keller, two of the Trustees, there shall be issued to the said John Stelk Three Hundred Class "B" Beneficial Certificates, and to Albert W. Keller Two Hundred Class "B" Beneficial Certificates, which is to be in full payment and satisfaction of tlie services rendered by them until the signing and execution of this Instrument, leaving looo Class "A" Beneficial Interests 1500 Class "B" Beneficial Interests and 2000 Class "C" Bene- ficial Interests, to be dealt with and disposed of by the trustees for the benefit of the Estate, as provided herein. Certificates representing Class "A" beneficial interests and Class "C" bene- ficial interests now or hereafter issued, shall be sold by the trustees for not less than $10.00 per beneficial interest, on such terms of payment as they may decide, provided however, that the trustees may allow a sum of not to exceed $2.50 per bene- ficial interest for commission, expenses or services in and about such sale. The trustees may fix such terms as to them may seem expedient for the acquisition of such additional beneficiary- certificate holders. The Trustees may from time to time, in their discretion, invite and receive subscriptions for beneficial interests, in this estate, either in cash or in property in their discretion, for the purpose of increasing the capital investment of the trust estate, subject always to the terms and provisions of this instrument, and accept or reject the same. Salk on Installment Plan. 38. In case any person agrees to subscribe for beneficial in- terests in this trust and to pay his or her subscription therefor Appendix. 543 in installments, the trustees shall have full power and discretion to collect such payments upon such terms and conditions as they may see fit to impose, and to receive the same either in property at its fair cash market value, or in cash, as they may elect. If any person having subscribed for a beneficial interest or for beneficial interests hereunder upon the installment plan shall neglect to pay any installment at any time specified, the trustees may, if they see fit, cancel the subscription of such per- son and declare the amount of his or her payment, if any, for- feited to the Trust Estate. Who CoNsiDERElD Beneificiary. 39. The person in whose name a certificate stands recorded upon the books of this Trust shall be conclusively considered by the Trustees to be the beneficiary and entitled to such rights and benefits as are evidenced thereby, and the Trustees shall not be affected by any notice to the contrary, either actual or constructive; and it shall not be the duty of the Trustees upon transferring such certificate or paying dividends thereon or dis- tributing assets upon liquidation of the Trust Estate, or at any time, to inquire in any way, into the relations of assignor and assignee, pledgor or pledgee. Trustee and Cestui Que Trust, guardian and ward, or into any other similar relations with re- spect to said certificate or any right or interest therein. The Trustees shall be under no liability or responsibility of any kind or character for making or causing to be made upon the books of the Trust, the transfer of any certificate out of the name of the prior registered holder of the certificate, in pursuant to an assignment thereof, by such prior registered holder or upon or in pursuance to other authority, in writing, signed by such prior registered holder. Those who may hereafter become benefi- 544 Trusts for Business Purposes. claries under this trust shall have the same rights as the original beneficiaries hereunder, and shall in like manner be bound by the terms and conditions of this agreement and declaration of trust. No Liability as to Beneficiaries. 40. No assessment or personal liability or obligation shall under any circumstances or in any event be made or imposed upon the beneficiaries as such, or any of them, without the con- sent, in writing, of each and every such beneficiary, and the endorsement or notation of such consent and of the extent and terms thereof, upon each outstanding beneficiary certificate. Neither the Trustees nor any of them, nor any of the officers, manager or employees of them, shall have any right, power or authority under any circumstances or in any event to act as agent of the beneficiaries or any of them, or to create or incur any liability or obligation for them or on their account. The Holders of Beneficial Interests, nor any of them, shall be deemed in any way whatever liable or responsible as partners, or in any manner liable otherwise than in this instrument spe- cifically provided. Disability of Beneficiary. 41. The Executor, administrator, or assigns of any deceased certificate holder shall succeed to the rights of such decedent under this trust, and, upon the surrender of the certificate or certificates for the interests owned by said deceased certificate holder, a new certificate or certificates may be issued in lieu thereof. Rights of Beneficiary. 42. The ownership of beneficial interests hereunder shall Appendix. 545 not entitle the holder to any title whatsoever in the trust prop- erty, and the owner of any beneficial interest herein hereby ex- pressly waives and releases any and all claims to demand or enforce the return of the money invested in this trust, or any equivalent thereof, or the increase thereof, either at law or in equity, directly or indirectly, or to call for a partition or division of the trust property or any part thereof, nor shall the owner of any beneficial interests make any attack upon the trustees herein or upon the Trust Estate in any court, unless such owner is supported and joined in such attack by the owners of at least a majority of the then outstanding beneficial interests and every owner of beneficial interests herein, now existing or who may hereafter become such, expressly covenants and agrees with the trustees herein and all owners of beneficial interests that in no case shall any court be called upon to dissolve the trust created hereby, but that the court shall only be appealed to for the pur- pose of correcting the evil, by compelling the trustees to carry out the trust created hereby, and on their refusal, to remove them and appoint others in their places. Profits — Dividends. 43. All profits arising from the operation of the trust estate shall be and become a part of the trust estate as fast as accumu- lated and shall be dealt with as the trustees may see fit. The trustees may, from time to time, declare and pay dividends out of the earnings as received by them, but the amount of such dividends and the payment thereof shall be wholly in the dis- cretion of the trustees; provided, that the preferred certificates, as herein provided for, shall have such prior and preferred rights as are herein mentioned. 546 Trusts for Business Purposes. Liability for Debts. 44. The beneficiaries and their assigns and all persons and corporations by whom credit is extended, or with whom con- tracts are made, or who may have claims against the trustees, shall look only to the funds and property of the trust for the payment under such contract or claim, or for the payment of any debt, damage, judgment, decree, or of any money that may otherwise become due or payable to them from the trustees, as such; so that neither the trustees nor the certificate holders hereunder, present or future, shall be personally liable therefor. General Offices. 45. The general offices of the trust estate shall be located at Oak, Baldwin County, Alabama, or at such other place or places as the trustees may, from time to time designate. Fiscal Year. 46. The fiscal year of the trustees shall begin and end as the trustees may determine, provided, that unless otherwise de- termined by the trustees, the fiscal year shall be the calendar year. No Dissolution of Trust. 47. This Trust shall not be dissolved or its business affected by the death, insolvency, or incapacity of one or more of the beneficiaries, nor shall death, insolvency, or incapacity entitle the legal representatives or heirs or assigns, voluntary or involuntary, of such deceased, insolvent or incapacitate" 1 beneficiary, to any accounting or to any action at law or equity, or otherwise against the Trustees, or against the Trust Estate, or any part thereof; but such legal representa- Appendix. 547 tives, heirs, assigns, of such beneficiaries shall succeed to the rights of the deceased, insolvent or incapacitated beneficiary, subject to the terms of this Declaration of Trust, and shall suc- ceed to nothing more. Termination of Trust. 48. If, at any time, the trustees deem it best so to do, they may terminate this trust and wind up the business thereof ; and in any event, this trust shall terminate twenty-one years after the death of the last trustee named herein. Distribution of Assets. 49. In the event of the termination of the trust Estate and of the distribution of the assets thereof, the holders of the common beneficial inerests, known as Class "B" certificates, shall divide the residue of the trust estate, after full payment to the holders of Class "A" and Class "C" certificates. All of the debts and expenses of the estate shall be paid before any- thing shall be distributed to the holders of any of the beneficial interests. Holders of Beneficial Interests Annual Meeting. 50. Holders of beneficial interests may hold an annual meeting at such time and place as they, from time to time, may by resolution determine. The first annual meeting of such holders shall be held at the Bienville Hotel, Mobile, Alabama, on the 2nd Tuesday in February, 1923, at 10:00 o'clock A. M. The meeting may be adjourned to another place and a later time by the vote of a majority of the holders present, counting in- dividuals, and not interests. 548 Trusts i'or Business Purposes. Election o-e an Advisory Board. 51. At the meeting on the Second Tuesday of February, 1923, or at any adjourned meeting thereof, the holders of Bene- ficial Interests may elect an Advisory Board, consisting of as many individuals as they may desire, whose duty shall be to watch over and protect the interests of the holders of beneficial interests in the Trust herein created. The term of office and the duties of the members of said Advisory Board shall be fixed and determined by said holders of beneficial interests. Said Advisory Board, nor any of its members, shall under any circumstances, have any vote or voice in the meetings of the Trustees, nor any right to dictate to said Trustees, or, in any manner whatever interfere with them in the exercise of their rights and the discharge of their duties, under the trust by this instrument created. The Trustees appointed herein and their successors, shall at no time or place be under the jurisdic- tion, direction or control in whole or in part of said Advisory Board, or any of its members. How Advisory Board Elected. 52. At every annual meeting of the holders of Beneficial Interests each such Holder sliall be entitled to cast one vote for each beneficial interest held in his name; which vote may be cast by him either in person or by proxy. All proxies shall be in writing, and shall be filed and recorded as the Holders of Beneficial Interests may direct. In voting for the members of the Advisory Board, each Holder of a Beneficial Interest shall have the right to vote, in person or by proxy, for the number of such beneficial interests held or owned by him, for as many persons as there are mem- bers of the Advisory Board to be elected, or to cumulate said Appendix, 549 interests and give one candidate as many votes as the number of members multiplied by the number of his interests shall equal, or to distribute them on the same principal among as many candidates as he shall think fit. A quorum for the transaction of business at any meeting of Holders of Beneficial Interests shall consist of a number ot members representing a majority of the beneficial interests is- sued and outstanding ; but the members present at any meeting, though less than a quorum, may adjourn the meeting to a future time. Meeting of Advisory Board. 53. The holders of Beneficial Interests may provide that the Advisory Board shall meet at such times and places as may be designated by the Holders of Beneficial Interests ; that it may make and unmake by-laws and rules for its own guidance ; elect a set of officers ; keep minutes of its meetings and make reports to the holders of Beneficial Interests, and lay such other duties upon said board, not in conflict with this instrument, as they may deem proper. Object of Advisory Board. 54. The object of said Advisory Board shall only be to keep in touch with the Trustees appointed under this instru- ment, and their successors, and their meetings. Learn from all possible sources whether everything is being done by the trustees that should be done in order to faithfully carry out the terms of the Trust hereby created. To call the attention of the Trustees to any and all mismanagement or misconduct on the part of any of the Trustees, their officers or servants ; report to the holders of Beneficial Interests from time to time just how 550 Trusts for Business Purposes. the Trust hereby created stands and is proceeding, and Avhether the Trustees are discharging their duty. Said Advisory Board shall, however, be very careful to first ascertain all the facts and weigh them carefully before making any attack upon the Trustees or their management of the Trust Estate. Different Units May Be Established. 55. In case the holders of Beneficial Interests become nu- merous and scattered as to place of residence, they may, at any of their annual meetings determine to divide themselves into units and elect one or more representatives from each unit to the Advisory Board. The details of such an arrangement is left entirely to the holders of Beneficial Interests. Rules of Construction. 56. In the construction of this Declaration of Trust, the following rules shall be observed unless such construction will be inconsistent with its manifest intent or repugnant to its con- text, that is to say: First — All general provisions, terms, phrases and expressions shall be liberally construed in order that the true intent and meaning of the trust hereby created may be fully carried out. Second — Words in the present tense include the future. Third — Words importing the singular number may extend and be applied to several persons or things, and words import- ing the plural number may include the singular. Fourth — Words importing the masculine gender may be ap- plied to females. Fifth — The word "person" or "persons" as well as all words referring to or importing persons, may extend and be applied to bodies, politic and corporate, as well as individuals. Appendix. 551 Declaration Subject to Inspection. 57. A true copy of this agreement and Declaration of Trust shall be constantly on file at the office of the Trustees and shall be open to the inspection of the beneficiaries hereunder at all reasonable times. Conclusion. 58. In Witness Whereof, the Trustees hereinbefore men- tioned, have hereunto set their hands and seals for themselves' and their successors, in token of their acceptance of the agree- ments, conditions, and trust hereinbefore mentioned, and the Sunny South Developing Co. Inc. has caused this instrument to be signed by its President and attested by its Secretary and its Corporate Seal, pursuant to full and complete authority granted by its Board of Directors, for itself and its assigns in token of its acceptance, assent to, and approval of such agree- ments, conditions and trusts, on the day and year first above written. SUNNY SOUTH DEVELOPING CO. Inc. By: President. Attest : Secretary. (SEAL) (SEAL) (SEAL) Trustees. 552 Trusts for Business Purposes. State oe Alabama, | ^^ Baldwin County, \ I^ a Notary Public, in and for said State and County, do hereby certify that John Stelk, the President of the Sunny South Developing Company, Inc. and Albert W. Keller, the Secretary of said company, whose names are signed to the foregoing conveyance as president and secretary of said company acknowledged before me, on this day, that being informed of the contents of said conveyance they as such officers and with full authority executed the same volun- tarily on the day and date the same bears for and as the act of said company. Given under my hand and notarial seal this of A. D. 1922. State oe Alabama, X ^^ Notary Public. County of Baldwin, J I, a Notary Public in and for and residing in the County and State aforesaid, do hereby certify that John Stelk, Albert W. Keller and Viola Stelk, who are personally known to me to be the same persons whose names are subscribed to the foregoing instrument, appeared before me this day in person as trustees and acknowledged as such trustees, that being informed of the contents of said instru- ment, they executed the same voluntarily on the day the sarne bears date. I further certify that my commission is still in full force and effect. Given under my liand and notarial seal this day of A. D. 1922. Notary Public. Appendix. 553 REAL ESTATE TRUSTS. Homan Real Estate Trust Deed, Boston Real Estate Trust Agreement and Warren Chambers Agreement and Decla- ration of Trust were adjudicated in the case of Priestley V. Burrill, 230 Mass. 452; 120 N. E. 100. Copy of the Trust Agreements are as follows: HoMANs ReaIv Estate Trust Deed. Know all men by these presents that we, Robert Romans and Reginald Foster, both of Boston, in the county of Suf- folk and commonwealth of Massachusetts, being about to take title to a certain parcel of land with the buildings thereon, numbered 50 Essex street, situated in said Boston, and bounded southeasterly on Chauncey street, southwesterly on Essex street, northwesterly on Harrison Avenue, and northerly, northwesterly again and northeasterly on land now or late of F, M. Frost et al., containing 5,186 square feet more or less and being all the land recently owned by the trustees under the will of John Romans late of said Boston who died in 1868, hereby declare that we will, and our heirs, successors, administrators and executors shall hold said parcel of land and any and all property, real and personal, which may be conveyed or transferred to us as trustees here- under, upon the trusts hereinafter set forth for the benefit of the owners of the shares hereinafter described. 1. The term "trustees" hereinafter used shall mean not only those above mentioned, but whoever may be trustee or trustees for the time being. The term "shareholder" herein- after used shall mean holder of record of a certificate of shares hereunder. 2. The trustees shall issue certificates of shares of the aggregate amount of two hundred and forty thousand dol- 554 Trusts for Business Purposes. lars divided into shares of the par value of one hundred dol- lars each, and shall deliver said certificates to the person by whom the parcel of land above described is conveyed to them delivering to each of said persons shares bearing the same proportion to the total amount of the shares to be is- sued as above stated as his or her undivided interest in said parcel bears to the total value of the same. The trustees shall also have the power to issue certificates for additional shares hereunder if they are authorized so to do by vote of a majority of the shareholders as provided in clause lo, but not otherwise. 3. The trustees shall have entire control and management of the trust property. They may mortgage or lease the same, or any part thereof, from time to time on such terms and for such times as they think best : Provided that they shall not mortgage said property or any part thereof for more than twenty thousand dollars unless authorized so to do by vote of a majority of the shareholders as provided in clause 10. They may also sell said property or any part thereof at any time and from time to time on such terms as they think best. They may borrow money for temporary exigencies or for adding to, repairing, rebuilding or furnishing any building on land held by them for erecting new buildings on such land in such manner and on such terms as they think best, and may give their notes as trustees therefor. No purchaser, mort- gagee, lessee or lender shall be responsible for the application of money paid or loaned to the trustees. The trustees may exchange land and purchase additional land for the purpose of straightening or altering boundary lines, and may grant, release and acquire easements. They may from time to time hire suitable offices for the transaction of the business of the trust fund and may incur such other expenses and employ Appendix. 555 such clerks and other servants, transfer agents, lawyers and brokers as they may think best, and they may execute, ac- knowledge and record any and all instruments necessary or convenient for the purposes of the trust. They or either of them may act as counsel when it is proper to employ counsel and receive reasonable compensation therefor. They may make all such contracts and do all such things as they think best for the maintenance and management of the trust prop- erty and of the trust and may pay all expenses out of any assets of the trust. 4. The compensation of the trustees for their services as such shall amount to five per cent, of the gross income of the trust property, and in case of a sale of said property or any part thereof, one per cent, of the price for which the same is sold. 5. The trustees shall be responsible only for a willful breach of trust, and any trustee only for his own acts; and no trustee shall be required to give a bond. Any trustee may resign his office by a written instrument recorded with Suffolk deeds. 6. The number of trustees hereunder shall be kept at two, and each new trustee shall have the same powers as if orig- inally named herein. In case said Reginald Foster ceases to be a trustee hereunder before the termination of the trust his successor shall be appointed by the Old Colony Trust Com- pany, a corporation organized under the laws of said com- monwealth and having a usual place of business in said Boston, by a writing recorded with said deeds, if said corpora- tion is at the time the guardian of any child of the late Caro- line Homans Priestley, wife of Neville Priestley, who is then a shareholder hereunder, but not otherwise. 7. When any trustee is absent from the commonwealth 556 Trusts i^or Business Purposes. aforesaid, or unable to perform his duties, the remaining trustee shall have the power to act : Provided that in no case shall one trustee so acting do any act affecting the title of the trust property or incur any debt or liability exceeding in the aggregate five thousand dollars during any such period of absence or disability ; and the certificate of any trustee as to such absence or disability shall be conclusive. 8. The trustees shall annually or oftener in their discretion divide the net income from the trust property among the shareholders : Provided, however, that the trustees may set aside before paying any dividend whatever sum they see fit as a sinking or contingent fund, to be applied to repaying loans made by the trustees, whether unsecured or secured by mortgage on the trust property or otherwise ; to making repairs to and alterations in said property; and to meeting extraordinary expenses. They may invest and reinvest said fund and any money they may have on hand at any time in any securities they see fit. Their decision as to what con- stitutes net income shall be conclusive on all parties. 9. The trustees may call meetings of shareholders at any time, and shall do so upon the written request of any share- holder. Notices of meetings shall be given at least five days beforehand by mail and every such notice shall state the pur- pose of the meeting called. Such notices shall be binding upon each shareholder if mailed postage prepaid to the ad- dress last given by him to the trustees, or in default thereof to his last known place of business or abode : Provided that notice to any shareholder who is a minor may be given to his guardian instead of to him. Notices shall be deemed to be given at the time that they are mailed as above stated. 10. Shareholders may vote at meetings in person or by proxy and in case any shareholder is a minor, a proxy exe- Appendix. 557 cuted by his guardian will be suflBcient. The holders of a majority of the entire number of shares outstanding may, by vote at any meeting called for the purpose, authorize the trustees to issue shares hereunder in addition to those provided for by clause 2 and fix the price at which the same shall be issued, and may authorize the trustees to mortgage the trust property or any part thereof for any amount exceeding twenty thousand dollars for such times and on such terms as they see fit. The statements of one or more of the trustees con- tained in certificates relating to meetings of the shareholders, or other matters connected with the trust, and recorded with Suffolk Deeds, shall be conclusive upon all parties as to the facts therein stated. 11. The trustees shall not have any power or authority to enter into any contract that shall bind or affect the share- holders personally, or call upon them for any payment whatso- ever other than the amounts of the respective subscriptions; but the trustees shall be entitled to indemnity against any and all liabilities which they may incur, or to which they may be subject, out of the trust property, and may make any contract hereby authorized in such manner that the same and any lia- bility thereunder shall be enforceable against the trust prop- erty, and all persons or corporations extending credit to, con- tracting with, or having any claims against the trustees shall look only to the property of the trust for the payment of any such contract or claim, or for the payment of any debt, dam- age, judgment or decree, or of any money that may otherwise become due or payable to or from the trustees, so that neither any trustee nor shareholder, present or future, shall be per- sonally liable therefor. 12. . Shares hereunder shall be personal property and shall be transferable only on the books of the trustees upon sur- 558 Trusts for Business Purposes. render of the certificate therefor. Transferees shall, upon issue of new certificates to them, become shareholders here- under, and entitled to all the rights and subject to all the lia- bilities of the original subscribers hereto. 13. This trust, if not sooner terminated by sale of the property by the trustees, shall continue for twenty years after the death of the last surviving original trustee and of Kath- arine A. Homans, John Homans, Marian J. Homans, Helen Homans and William P. Homans, children of John Homans, late of said Boston, who died in 1903. 14. Upon the expiration of the said limit of twenty years the trustees shall sell any and all property then subject hereto. When all the trust property is sold either as provided in this clause or as hereinabove provided, the proceeds thereof after the payment of all the debts and expenses of the trust, the expenses of the sale, and the commissions of the trustees shall be divided among the shareholders in proportion to the number of shares owned by them of record. In case any portion of the trust property is sold or taken by eminent domain and any other property still remains subject to the trust, the trustees may either divide the proceeds of the sale or the damages obtained on account of the taking, after deduct- ing the debts, expenses and commissions above mentioned or the expenses of obtaining such damages, among the share- holders in the proportions above stated, or may hold the same and apply them in such manner as they may see fit to the pur- poses of the trust. In witness whereof we hereunto set our hands and seals this first day of November, 1905. Robert Homans, (Seal.") Reginald Foster. (Seal.) Appendix. 559 BOSTON REAL ESTATE TRUST AGREEMENT. The Boston Real Estate Trust Agreement and Declaration of Trust, Made This First Day of May, A. D. 1886; Copyright 1886 by Wm. Minot (for the Trustees). We, the subscribers, hereby agree to and with each othei, and in consideration of our mutual agreements as follows: 1. We agree to pay at any time within two years from the date hereof to the trustees hereunder, the amounts set against our names respectively, in such instalments and at such times as said trustees may require, but they shall not require any payment until the total amount subscribed amounts to two million dollars. In case any subscriber neglects to pay any instalment of his subscription within twenty days after the date of call, the amount of his subscription then unpaid shall be canceled at the option of said trustees. 2. John Quincy Adams of Quincy, Robert Codman, Abbott Lawrence, Samuel Wells, and William Minot, Jr., of Boston, all of the commonwealth of Massachusetts, shall be and are hereby made trustees hereunder. 3. Notices delivered personally or mailed, with prepay- ment of postage, five days beforehand, to any subscriber hereto or any shareholder at tlie residence given on his sub- scription or stated in his certificate, or to the address given by him from time to time to said trustees shall be deemed binding. 4. Said trustees shall use all money paid to them as such, except as hereinafter provided, for the purchase and improve- ment of real estate in the commonwealth of Massachusetts, and all real estate so purchased shall be conveyed to them in joint tenancy as trustees hereunder. 5. Said trustees shall have as such as absolute control 560 Trusts for Business Purposes. over and disposal of all real estate held by them at any time under this trust as if they were the owners thereof includ- ing the power to sell for cash or credit, at public or private sale, to mortgage with or without power of sale, to lease or hire for improvement or otherwise for a term beyond the possible termination of this trust or for any less term, to let, to exchange, to release and to partition. But said trustees shall not mortgage any real estate held by them for more than thirty per cent, of the value of the property so mort- gaged, as determined by the last preceding assessment made for the purpose of taxation. This provision shall not how- ever affect the title of any mortgage and no purchaser or mortgagee shall be liable for the application of money paid or lent. In granting leases or making contracts for buildings or alterations or repairs of buildings the signatures of a ma- jority of said trustees shall be sufficient. In all leases and mortgages it shall be stipulated that the shareholders shall not be personally liable thereon. 6. Said trustees may set aside not more than ten per cent, of the annual income, for a contingent fund, or sinking fund, or both. They shall divide the net income of the prop- erty held by them under this trust among the shareholders annually or oftener at their discretion and their decision as to what constitutes net income from time to time shall be final. Said contingent or sinking fund and any money wait- ing investment may be put at interest or invested and rein- vested in interest bearing securities by said trustees at their discretion. 7. Said trustees may from time to time hire suitable of- fices for the transaction of the business of the trust, appoint such officers and agents, including an agent for procuring subscriptions to this agreement, as they may think best, fix their Appendix. 561 compensation and define their duties. The compensation of said trustees shall not at any time exceed five per cent, of the income of the property held by them under this trust. 8. Said trustees shall issue certificates in such form as they shall deem best, for each sum of one thousand dollars or for multiples thereof paid to them under this agreement, but no certificate shall be issued for any less sum than one thousand dollars, which shall be deemed a share. 9. Shares may be transferred on the books of said trustees by the person named in the certificate thereof, his attorney or legal representative, upon the surrender of the certificate, and a new certificate shall be issued to the transferee, who shall thereupon become subject to the terms of this agreement, but no share shall be sold until the holder thereof shall have first in writing offered it for sale to said trustees, who shall as such trustees have the option for ten days after the receipt of such offer of buying the same at the last preceding ap- praisal made by them. They shall make such appraisal annu- ally or oftener as they may deem best. Shares so purchased by said trustees may be held as part of said contingent or sinking fund, or sold by them at their discretion. Devises by will, distribution of the estates of persons dying intestate and distribution of trust funds among those entitled thereto upon the termination of trusts shall not be deemed sales for the purpose hereof. 10. Said trustees may from time to time at their discretion invite and receive further subscriptions for the purpose of increasing the capital of the trust giving preference upon such terms and conditions as they shall deem best to existing share- holders. All subscriptions shall be subject to the terms of this agreement. 562 Trusts for Business Purpose;s. 11. No assessment shall ever be made upon the share- holders. 12. The books of said trustees shall always be open to the inspection of shareholders. 13. Any trustee under this agreement may resign his trust by a written instrument signed by him and acknowledged in the manner prescribed for the acknowledgment of deeds, and such instrument shall be recorded in the registry of deeds for the county of Suffolk in said commonwealth. Any va- cancy occurring from any cause at any time in the number of said trustees shall be filled by the remaining trustees by an instrument in writing acknowledged and recorded as afore- said, and such new trustee shall have the same power as if originally named herein. When any trustee is absent from the commonwealth or incapable by reason of disease, the other trustees shall have all the powers hereunder, and any trustee may by power of attorney delegate his powers for a period not exceeding six months at any one time to any other trustee or trustees hereunder, provided that in no case shall less than three trustees actually exercise the powers hereunder. The term "said trustees" used in this agreement shall be deemed to mean those who are or may be trustees for the time being. No trustee shall be required to give a bond. 14. This trust shall continue for twenty years after the death of the last survivor of the following named persons: (Naming 20 persons.) Provided that upon the request of three fourths in value of the shareholders, signed and acknowledged in the manner prescribed for the acknowledgment of deeds, and recorded in said Suffolk registry of deeds, said trustees shall terminate the trust or convey the trust property to new or other trus- tees, or to a corporation, according to the terms of such re- Appendix. 563 quest, and in the manner stated therein, being first duly indemnified for any outstanding obligation, and said trustees upon filing in said registry of deeds a certificate that they have complied with such request shall be under no further liability. In case this trust expires by the above limitation without action relative thereto by the shareholders, said trustees shall sell all property then held by them as such and divide the proceeds among the shareholders. 15. Said trustees shall be responsible only for a willful breach of trust, and each shall be responsible only for his own acts. 16. Meetings of the shareholders may be called by any two of the trustees and shall be called upon the written request of five or more shareholders. The shareholders may for their own government pass by-laws and elect necessary officers, and may instruct the trustees herein on any manner not inconsistent with the powers herein or hereafter given said trustees, or with the acquired rights of third parties. The vote or agree- ment in writing of three- fourths in value of the shareholders shall be binding upon all and upon the trustees and this agree- ment may be altered or added to accordingly, but the rights of third persons shall not be aff"ected, nor shall any third per- son be deemed to have notice thereof, until a certificate setting forth such vote or agreement, signed by a majority of the trustees and duly acknowledged, shall be recorded in the registry of deeds for the county of Sufifolk and such certifi- cate shall be conclusive as to the validity of the vote certified and all facts therein stated. A like certificate so recorded shall also be conclusive as to all facts affecting title. In witness whereof, we have hereunto set our hands and stated the amount of our respective subscriptions on the day and year above written. 564 Trusts for Business Purposes. (Signed by the trustees and by subscribers for shares to the aggregate amount of $2,000,000.) WARREN CHAMBERS AGREEMENT AND DECLARA- TION OF TRUST. An agreement and declaration of trust made by the sub- scribers, this twenty-sixth day of June A. D. 1895, for the purpose of purchasing certain real estate on Boylston street in the city of Boston and being the lots on which are now the buildings numbered 413, 415 and 421 on said street and erecting thereon a suitable building for the occupation of doc- tors, dentists, oculists and others. I. The trustees under this agreement are authorized as such trustees to purchase said premises and any existing leases thereof and to proceed to the erection of a new building thereon as soon as practicable and may as such trustees make all necessary contracts and agreements for such purchase and for such new building, including any agreement they may think advisable for straightening or altering boundaries, and may if they deem expedient, for the adjustment of boundaries acquire additional adjoining estate or release portions of the trust estate. They may at any time procure the discharge or release of any mortgages, now existing on the whole or any part of said premises on such terms as they deem expedient, and they may at any time mortgage the whole or any part of said premises and the buildings they may erect thereon, for an amount not exceeding in all two hundred and fifty thousand (250,000) dollars, upon such terms and for such time as they may think best and may make leases of the property or any part thereof held by them on such terms as they think best. After the new building is completed, the trustees shall incur no debt or liability except such as may Appendix. 565 be incidental to the management of the property held by them and then only for an amount not exceeding in the aggregate at any one time ten thousand (10,000) dollars. The trustees shall have no power to bind the shareholders personally and in every written contract they shall enter into reference shall be made to this declaration of trust and the person or corporation contracting with the trustees shall look to the funds and property of the trust for the payment under such contract, or for the payment of any debt, mortgage, judgment or decree or of any money that may otherwise be- come due, or payable by reason of the failure on the part of said trustees to perform such contract in whole. or in part, and neither the trustees nor the shareholders present or future in this company shall be personally liable therefor. 2. The title of the trustees shall be "Trustees of the War- ren Chambers" and any property conveyed to them under that description shall be held by them in trust under this agree- ment. 3. The trustees shall, if so instructed by the shareholders as hereinafter provided, take such action as they may deem best for the purpose of obtaining a charter for a corporation for the purposes aforesaid. 4. The trustees shall give receipts for installments on sub- scriptions when paid and when so much of the subscriptions shall have been paid as to the trustees seem necessary, they shall issue certificates of shares in exchange for such re- ceipts. Such receipts and certificates shall be transferable only on the books of the trustees upon surrender thereof, all installments due having first been paid, and the acceptance of a receipt or certificate shall make the person named therein a party to this agreement. The term "shareholder" used in 566 Trusts for Business Purposes. this agreement shall mean holder of record of a receipt or a certificate for one or more shares. 5. In addition to their reasonable and proper expenses incurred in the management of the trust, the trustees shall be paid at the rate of three thousand (3,000) dollars per annum, from August i, 1895, until the new building is com- pleted and thereafter at the rate of fifteen hundred (1,500) dollars per annum to be divided among them as they may agree. 6. Said trustees may appoint such officers and agents as they may think best, fix their compensation and define their duties. 7. When any trustee is absent from the commonwealth or incapable for any reason of acting as said trustee, the other trustees shall have all the powers hereunder provided that in no case shall less than two trustees actually exercise the powers hereunder. 8. All taxes and assessments during construction, together with interest at the rate of four per cent, per annum, shall be added to the cost of the building, which interest shall be paid semiannually to the subscribers from the date of their respective payments of subscriptions until the substantial com- pletion of said building. After the completion of said building, the trustees shall make such dividends among the shareholders as they may deem expedient. The cost of said building shall also include the sum of ten thousand (10,000) dollars to be paid to John B. Thomas and Edwin Read for their services and expenses in promoting this enterprise and pro- curing subscriptions to this agreement. 9. The trustees shall call meetings of the shareholders annually on the second Thursday in February, and shall re- port their receipts and expenses for the year ending on the Appendix, 567 thirty-first of December preceding. They may call special meetings of the shareholders at any time and shall do so upon the written request of the holders of one-tenth of the shares. 10. Notices of meetings, of calls for payments of subscrip- tions, or for any other purpose, shall be deemed binding upon each subscriber and shareholder if mailed prepaid to the last address given by him to the trustees, or in default thereof to his last known place of business or abode. Notices of meet- ings shall be given five days beforehand and may be given by advertisement for two successive days in two daily papers published in said Boston or by mail at the option of the trus- tees. In notices of special meetings the purpose therefor shall be stated. 11. Shareholders may vote by proxy, being entitled to one vote for each share. At any annual meeting or special meet- ing called for that purpose, the holders of a majority of the entire number of shares may fill any vacancy existing in the number of trustees, may remove any or all of the trustees and elect others in their place, may authorize a sale or addi- tional mortgage of the real estate, or any part thereof, held by the trustees, may authorize or instruct the trustees to pur- chase and build upon additional real estate and issue addi- tional shares for that purpose anl may alter or amend this declaration of trust or substitute a new one in place hereof. For all other purposes at such meetings five shareholders representing one fifth of all the shares shall constitute a quorum. No such alterations or amendments of or substitu- tion for this agreement or removal or appointment of trustees shall afifect any person not having actual notice thereof un- til recorded in registry of deeds, for Sufifolk county, nor shall any such alteration or amendment or other action afifect rights, previously acquired, of any third person. A certificate signed 568 Trusts for Business Purposes. by the chairman of such meeting shall, if countersigned by at least one of the trustees, be conclusive evidence of the regularity of the meeting and of the vote having been passed by the requisite majority and of all facts stated in such vote or certificate material to title. 12. Any vacancy in the number of trustees may be filled by the remaining trustees, until the next annual meeting of the shareholders or special meeting called for the purpose of filling such vacancy. The acting trustees from time to time shall have all the powers of original trustees. Upon resig- nation, decease, removal or vacancy for any cause, the title of the outgoing trustees shall vest in the remaining trustees and upon the filling of any vacancy as aforesaid the title of the whole trust property shall vest in the new board jointly. 13. No sale or mortgage for any amount exceeding two hundred and fifty thousand (250,000) dollars of the real estate hereinbefore described or any part thereof shall be made by the trustees unless authorized by vote of the share- holders as provided above, except that the trustees may trans- fer all the property held by them to a corporation chartered, as provided in section 3 of this instrument or sell all such property at the expiration of the trust in default of action relative thereto by the shareholders. 14. This trust shall not continue in any event longer than twenty years after the death of the last surviving subscriber hereto. 15. No bond shall ever be required of any trustee hereun- der and each trustee shall be liable only for his own acts and then only for willful breach of trust. 16. Any paper signed by the trustees or any of them or by the shareholders, or a copy of the record of any of their proceedings certified by any one of the trustees, which it may Appendix, 569 be deemed desirable to record in the registry of deeds for the county of Suffolk may be acknowledged by any one of the trustees in the manner prescribed for the acknowledgment of deeds in Massachusetts. 17. The whole number of shares of this trust shall be thirty-five hundred (3,500) which shall represent all the prop- erty of said trust, subject to such mortgages as may be made by the trustees under the powers hereinbefore set forth. 18. We, the subscribers agree to take the number of shares set against our names respectively and to pay to the trustees therefor such amount, not exceeding one hundred (100) dol- lars for each share, as the trustees shall call for, in such installments and at such times as the trustees may require and in case any subscriber neglects to pay any installment required by the trustees, in twenty days after notice, the amount of his subscription then unpaid may be canceled at the option of the trustees who may accept another subscriber in his place. 19. The first trustees under this agreement shall be Francis Peabody, Jr., Alfred Bowditch, both of Boston, and Emor H. Harding, of Milton, all in the commonwealth of Massa- chusetts, who signify their acceptance of the trusts by sub- scribing their names hereto. Francis Peabody, Jr. (Seal.) Alfred Bowditch. (Seal.) Emor H. Harding. (Seal.) (Signatures of subscribers for an aggregate of 3,500 shares.) 570 Trusts for Business Purposes. AMERICAN MANUFACTURING COMPANY. A decision in reference to this trust is reported in tlie chapter on Validity — Rights Distinguished from Law, Kinross v. Cooper. In this connection see also chapters — Rule Against Perpetuities and Difference Between Trust and Partnership. Tpiis Agreement and Declaration of Trust, made this 30th day of October, A. D. 1918, by and between John W. Kinross, Geo. A. Caldwell, John A. Hoblit, S. W. Gasaway, Wm. Seefeldt, Wm. G. Peters and Wm. J. Peck, together with their assigns, herein designated as "Subscribers", and John W. Kinross, Geo. A. Caldwell, John A. Hoblit, S. W. Gasaway together with their successors, herein designated as "trustees", WITNESSETH : Whereas, it is desired by the subscribers hereto and their assigns, and such others as may become shareholders here- under, to engage in the business hereinafter set forth, and to contribute therefor property or otherwise, for their interest therein as set forth by the number of shares set opposite the name of each subscriber respectively; and Whereas, it is desired by the subscribers that the said persons named as trustees herein shall act as trustees under the terms and conditions set forth herein for the purpose of carrying on the business, and withholding all property which may come into their hands as Trustees aforesaid; and Whereas, the said persons herein named as trustees are willing to account to the said subscribers as hereinafter set forth and upon the following terms and conditions : Now, Therefore, the Trustees hereby declare that they will hold the property and funds to be transferred to them, as well as other property which they may acquire as trus- Appendix. 57^ tees, together with the proceeds thereof, in trust, that they will engage such property and funds in the Manufacture and Sale of Tractors, Agricultural Implements and Other Devices, and in the transaction of other business incidental thereto ; a. To acquire in any manner whatsoever, and to hold, own, lease, rent, maintain, improve, work, develop, and generally to deal in and with real, personal, and mixed property, and all interest or rights therein or incident thereto, without limi- tation as to amount or situation ; b. To acquire by purchase or otherwise, and to hold, own, mortgage, hypothecate, pledge, exchange, sell, and generally to deal in stocks, shares, bonds, notes and other securities of every nature whatsoever ; c. To lease, rent, maintain, and improve, develop, sell, pledge, exchange, mortgage, hypothecate, or otherwise dispose of any property of any kind ; d. To engage in the business of a manufacturer and seller of Tractors, Agricultural Implements, and other devices, to buy, sell and manufacture the same, and generally deal in all products, machinery, raw material, partly finished and fin- ished material, appliances, devices, and methods used by them in connection with their business, and to engage in a business or industry whatsoever, whether specified herein or not ; e. To acquire in any manner whatsoever, and to hold, own, sell, assign, convey, lease, rent, or otherwise deal in real estate and personal property, and any and all things re- lating to or useful in connection with the business of the trust ; f. To apply for, obtain, register, purchase, lease, or to otherwise acquire, and to own, hold, use, operate, introduce, and to sell, assign, or otherwise dispose of, any trade-marks, 572 Trusts for Business Purposes. trade-names, patents, inventions, improvements or processes used in connection with or secured by or under letters patent of the United States or elsewhere, or otherwise, and use, exercise, develop, grant license in respect to, or otherwise turn to account, any such trade-marks, trade-names, patents, licenses, process and the like, of any such property or rights ; g. To advertise and otherwise exploit their goods and methods, to manage, control or dispose of the same in any part of the world for the benefit and profit, from time to time, of the certificates of shares issued hereunder, according to the priorities expressed in said certificates, and in the man- ner and subject to the stipulations herein contained; to wit: Article I. 1. The trustees in their collective capacity, shall be desig- nated, so far as possible and practicable, as the American Manufacturing Company, and under that name shall, so far as practicable, conduct all business and execute all in- struments in writing in performance of their trust, 2. The trustees shall be four in number and shall be cer- tificate holders. Their number may be increased or diminished at any annual meeting of the shareholders, or at any special meeting called for that purpose. 3. Of the trustees herein mentioned by name, John W. Kinross and John A. Hoblit shall hold office until the third annual meeting of the shareholders ; Geo. A. Caldwell shall hold office until the second annual meeting of the sharehold- ers ; Wm. J. Peck shall hold office until the first annual meet- ing of the shareholders; except that said trustees, as well as other trustees hereinafter elected, shall in all cases hold office until their successors have been elected and accepted this trust. Appendix. 573 4. The shareholders shall at each annual meeting, or ad- journment thereof, elect one or more trustees, as the case may be, to serve for the term of three years next ensuing. a. In case of death, resignation or inability to act of any of the trustees, the remaining trustees shall accept any resig- nation and fill the vacancy for the unexpired term. 5. As soon as any trustee elected by the shareholders, or by the remaining trustees to fill a vacancy, shall have accepted this trust, the trust estate shall vest in the new trustee, or trustees, without any further act or conveyance. Article; II. I. The trustees shall hold the legal title to all property at any time included in the trust estate, and said property shall be held by the Trustees as joint tenants, and not as tenants in common, in trust for all the certificate holders in proportion to their respective interests as represented by the certificates of shares. a. The trustees shall have the absolute, control, manage- ment and disposition of all of the trust estate, and shall like- wise have the absolute control and conduct of all its business, and shall without further authority from the shareholders possess every power which they deem necessary or proper to execute the purposes of the trust. b. They shall assume all contracts for and obligations and liabilities in connection with, or growing out of the purchase of the property assigned to them by the subscribers, and to the extent and value of such property, but not personally and shall agree to hold the subscribers and any persons asso- ciated with them, harmless and indemnified from and against loss, cost, expense or liability upon by reason of, or in con- nection with any such contract, obligation or liability. 574 Trusts i^or Business Purposes. c. They may adopt and use a common seal; they shall have power to vote in person or by proxy upon all shares of stock, bonds, mortgages, debentures, deeds or other written evidence of property rights belonging to the trust, and may collect, receive and receipt for all dividends thereon; d. They may contract with companies, corporations or in- dividuals in respect to any matters relating to the operation of the business ; e. They may collect, sue for, receive and receipt for all sums of money at any time coming to said trust; f. They may employ counsel to begin, prosecute, defend or settle suits at law. in equity or otherwise, and to compro- mise or refer to arbitration any claim in favor of or against any trust; g. They shall have power to improve and develop all prop- erty which may become a part of the trust estate, by the erection of building, or otherwise, as they shall deem proper, and to repair or rebuild any buildings ; or let, exchange or lease the whole or any part or parts of the trust estate, h. They may issue bonds, debentures, deeds, mortgages or other obligations from time to time for the purpose of the trust, and to secure the same by mortgage, deed or trust or otherwise ; i. They may make loans and advances of money upon open account or promissory notes, or other evidence of in- debtedness, secured or unsecured ; j. ]\Iay borrow money in such amounts, for such times and upon such terms, and upon such occasions as may be con- sidered to the best interest of the trust estate; 1. They may also by a majority vote at a meeting called for that purpose, but not otherwise, exchange, upon such terms as they may agree, the stock or securities held by them Appendix, 575 in any corporation or company, for the stock or securities of any other corporation or company, by consoHdation or other- wise ; m. May loan money to any corporation, company or indi- vidual or may own, buy, sell or hold the capital stock or bonds of any corporation or company, and may subscribe for or acquire the capital stock of any corporationoor company doing a like business. n. The trustees may sell, mortgage, pledge, encumber or dispose of any shares of stock, securities or other property from time to time held by them, upon such terms and for such purposes as they may approve; o. They may borrow money for the purpose incidental to the proper management and conduct of the trust, and may pledge the property of said trust in such manner as they may deem best to secure said loans, but said borrowings shall not exceed in the aggregate $50,000.00 and they shall incur no debt or liability except such as may be incidental to the proper management of the property held by them and to the proper carrying out of their trust. p. The trustees may make a general assignment of the assets of the trust for the benefit of the creditors of the said trust, when in the opinion of the Trustees occasion may de- mand, and such assignment shall be binding upon the certificate holders hereunder. 2. So far as strangers to this trust are concerned, a reso- lution of the trustees authorizing a particular act to be done, shall be conclusive evidence in favor of such strangers that such act is within the powers of the trustees, and no pur- chaser from the trustees shall be bound to see the application of the purchase money, or other consideration paid or deliv- ered by or for said purchaser to or for said trustees. 576 Trusts for Business Purposes. Article III. 1. The trustees may hold meetings in such places and at such times as they may determine, and stated meetings shall be held from time to time upon the call of the President or a majority of the trustees. a. A majority of the Board constitutes a quorum, and the concurrence of all the trustees shall not be necessary to the validity of any action done by them, but the wish of the majority present and by voting shall be conclusive evidence, except as herein specifically provided. 2. The trustees may make, adopt, amend or repeal such by-laws, rules and regulations, not inconsistent with the terms in this instrument, as they may deem necessary or desirable for the conduct of their business, or for the government of themselves, their servants, agents or representatives. Article IV. I. The trustees shall annually elect from among their num- ber a President and Secretary of the Board, and may also annually elect or appoint either from among their number or from among the shareholders, a Vice-President and Treas- urer ; a. They shall have authority to appoint such other of- ficers, agents, attorneys or employees, as they may from time to time deem necessary or expedient for the conduct of their business ; b. They shall have authority to accept resignations, and to fill any vacancies in the offices of President, Vice-President, Secretary and Treasurer for the unexpired term, and shall likewise have authority to elect temporary officers to serve during the absence or disability of regular officers. Appendix. 577 2. The president shall preside at all meetings of the trustees, shall sign all certificates and any instrument which he may be required to execute in the name of the company, and perform such other duties, and hold office for such period as may be determined by the trustees, or provided for in the by-laws. a. The Vice-President, or Vice-Presidents, shall perform the duties of the President in event of his death, absence or incapacity, and perform and render such other services as may be prescribed or required by the trustees. b. The Secretary shall countersign all said certificates, and shall attend all meetings of the certificate holders and of the trustees and keep the minutes of such meetings; he shall keep such records and books and render such services as may be prescribed, or be imposed upon him from time to time by the trustees. c. The trustees may in their discretion, entrust the pos- session, care or custody of any moneys or other property of the trust estate, to the Treasurer or other officer, agent or employees, and the trustees shall not be personally liable or responsible for the fault of any officer, agent or employee. d. The Treasurer shall perform all duties usually incident to such position, and such as may be prescribed, or recjuired from time to time by the trustees. 3. The trustees shall fix the compensation of any or all officers and agents whom they may appoint, and are likewise authorized to pay to themselves such compensation for their services as they shall deem reasonable. 4. The trustees shall not be liable for errors of judgment, either in holding property originally conveyed to them, or in acquiring and afterward holding additional property, nor for any loss arising out of any investment, nor for any act or 578 Trusts for Business Purposes. omission to act, perform or omitted by them in the execution of this trust in good faith, nor shall they be Hable for the acts and omissions of each other, or of any officer, agent, servant or person appointed by them or acting for them, and they shall not be obliged to give bond to secure the perform- ance of this trust by them. Article V. 1. The trustees shall issue certificates in the trust estate for the par value of One Hundred Dollars, to the persons contributing the trust estate in proportion to their contribu- tions respectively ; such certificates in the aggregate not to exceed Three Hundred Thousand Dollars ($300,000.00) said issue to be made in the discretion of the trustees for cash or such other property. 2. As evidence of the ownership of such shares, the trus- tees shall cause to be issued for each shareholder a negotiable certificate, which shall be in form of: NUMBER DECLARATION OF TRUST. SHARE AMERICAN MANUFACTURING COMPANY Capitalization $300,000.00 Par Value $100.00 This Certifies That is the holder of Shares of the Capital of the American Manu- facturing Company, fully paid and non-assessable, sub- ject to Declaration of Trust in favor of said Organization dated the day of October A. D. 1918, and re- corded in the office of the Recorder of Deeds of County, Illinois, and transferable only on such books of the organization in person or by attorney upon surrender of this Certificate properly endorsed. In Witness Whereof, the said Organization has caused this Certificate to be signed by its duly authorized officers and its seal to be hereto affixed this day of A. D. 19 Secretary. President. Appendix. 579 (Endorsement on Back of Certificate) For Value Received... hereby sell, assign and transfer unto Shares of the Capital repre- sented by the within Certificate, and do hereby irrevocably constitute and appoint Attorney to transfer the said shares on the books of the within named organ- ization, with full power to substitute in the Premises. Dated 19. . . . Presence of Article VI. 1. The trustees may issue and sell at public or private sale, and upon such terms and conditions, and for such prices as they may deem expedient, the shares hereunder. a. The Trustees may also, from time to time, with the consent of the majority of the shareholder, issue such addi- tional shares (in addition to the original capital hereinbefore provided) of such par value and in such numbers as they may deem necessary to provide added means to carry on the business of the trust, and they may sell such added shares at private or public sale, upon such terms and conditions and at such prices as they may deem expedient. 2. In case of loss or destruction of any certificate of shares issued by the trustees, the trustees may, under such condi- tions as they may deem expedient, issue new certificates in place of those lost or destroyed. 3. The trustees may from time to time declare and pay dividends out of net earnings from time to- time received by them, but the amount of such dividends and payment of them shall be wholly in the discretion of the trustees. Article VII. I. The fiscal year of the trustees shall end on the 31st 580 Trusts for Business Purposes. day of December in each year. Annual meetings for the elec- tion of trustees, and for the transaction of other business shall be held in county, Illinois, on the first Mon- day of January, in each year, beginning with year 1919, of which meeting notice shall be given by the Secretary by mail, to each shareholder, at his or her registered address, at least ten days before such meeting, 2. Special meetings of the shareholders shall be held any time upon seven days notice given as above stated, when ordered by the President or a majority of the trustees. At all meetings of the shareholders, each holder of shares shall be entitled to one vote for each share held by him, and any shareholder may vote by proxy. 3. No business except to adjourn shall be transacted at any meetings of the shareholders, unless a majority of all the shares outstanding are present in person or proxy. 4. All questions before the meeting at which a quorum is present shall be determined by a majority vote of the shares entitled to vote thereat. Article VIII. 1. The death of a shareholder or a trustee during the continuance of this trust shall not operate to determine the trust, nor shall it entitle the representative of the deceased shareholder to an accounting, or to take action in the Courts or elsewhere, against the trustees, but the executors, adminis- trators or assigns of any deceased shareholder shall succeed to the rights of said decedent under this trust, upon surrender of the certificate for the shares owned by him. 2. The ownership of shares hereunder shall not entitle the shareholder to any title in or to the trust property what- Appendix. 581 soever, or the right to call for a partition or division of the same, or for an accounting. Article IX. 1. The trustees shall have no power to bind a shareholder personally, and the subscribers and their assigns and all per- sons and corporations extended credit to, contracted with or having any claim against the trustees, shall look only to the funds of and the property of the trust for payment under such contract or claim, or for the payment of any debt, damage, judgment, or any money that may otherwise become due or payable to them from the trustees, so that neither the trustees nor the shareholders, present or future, shall be personally liable therefor. 2. In every written contract, order or obligation which the trustees shall give or enter into, it shall be the duty of the trustees to stipulate that neither the trustees nor the shareholders shall be personally liable by reason of such order, contract or obligation. 3. The accounts and books of the trustees or any of them, shall be open to inspection of the shareholders at all reason- able times. Article X. I. This trust shall continue for the term of twenty-five years, at which time the then Board of Trustees shall pro- ceed to wind up its affairs, liquidate its assets, and distribute the same among the holders of the shares according to their respective interests as represented by the certificates; Pro- vided, However, that if prior to the expiration of this period, the holders of at least two-thirds of the shares then outstand- 582 Trusts for Business Purposes. ing shall, at a meeting called for that purpose vote to ter- minate or continue the trust, then said trust shall either terminate or continue for such further period as may then be determined. 2. For the purpose of winding up their affairs and liqui- dating the assets of the trust, the then Board of Trustees shall continue in office until such duties have been fully per- formed. Article XL I. This agreement and Declaration of Trust may be al- tered or amended, except as regards the liability of the Trus- tees, at any annual or special meeting of the shareholders, with the consent of at least-two-thirds of the shares then outstanding, provided notice of the proposed amendment or alteration shall have been given in the call for the meeting; and in event of such amendment or alteration, the same shall be attached to and made a part of the Agreement and a copy thereof shall be filed with the Recorder of Deeds of Peoria, Illinois. In Witness Whereof, the said John W. Kinross, Geo. A. Caldwell, John A. Hoblit, Samuel W. Gasaway, Trustees hereunder, have hereunto set their hands and seals in token of their acceptance of the trust herein declared, for them- selves and their successors: John W Kinross Seal. Geo A Caldwell Seal. John A Hoblit Seal. Samuel W Gasaway Seal. And the said John W. Kinross, Geo. A. Caldwell, John A. Hoblit, Samuel W. Gasaway, Wm. J. Peck, William Seefeldt, and Wm. G. Peters, have hereunto set their hands and seals in Appendix. 583 token of their assent to and approval of the terms of trust, for themselves and their assigns, the day and year first above mentioned and written. John W Kinross Seal. Geo. A. Caldwell Seal. John A Hoblit Seal. Samuel W. Gasaway Seal. Wm J Peck Seal. Wm. Seefeldt Seal. Wm. G. Peters Seal. AAIERICAN MANUFACTURING COMPANY Declaration of Trust. ****** Trustees. John W. Kinross For three years John A. Hoblit For three years G€0. A. Caldwell For two years Samuel W. Gasaway For one year ****** Officers. John W. Kinross, President George A. Caldwell, Vice-President Samuel W. Gasaway, Secretary John W. Kinross, Treasurer ****** State of Illinois | County of j ^^• Before me, the undersigned authority, personally came and appeared John W. Kinross, Geo. A. Caldwell, John A. Hoblit, Samuel W. Gasaway, William Seefeldt, Wm. G. Peters, and Wm. J. Peck, who signed the foregoing instrument before me and acknowledged that they had signed the same as their 584 Trusts for Business Purposes. voluntar}^ act and deed and for the purpose therein set forth. In Witness Whereof, I have hereunto set my hand and seal of office this 30th day of October, A. D. 1918. John H Cramer Notary Public. John H. Cramer Notarial Seal Peoria County, 111. Appendix. 585 GENERAL FORM OF TRUST AGREEMENT. This Agreement and Declaration of Trust (hereinafter designated "Declaration of Trust"), made and entered into in the City of Chicago, State of Illinois, between , ' ) (here insert names of Trustees), together with their successors (hereinafter designated "Trustees"), and , , , , (here insert names of subscribers). WITNESSETH, That: Whereas, the said Subscribers propose to convey, assign, transfer and deliver, or cause to be conveyed, assigned, trans- ferred and delivered to the Trustees certain lands and other property, the particulars whereof are specified in Schedules I. II, III, IV, V and VI, hereof respectively; and Whereas, it is the purpose and intention that the Trust here- by created and designated as (here insert name of the Trust) shall manage, conduct and operate the said lands and property, and to conduct and carry on any business or en- terprise in connection therewith, or incidental thereto which the Trustees may deem desirable for the best interest of the said lands and property ; and Whereas, the Trustees, for the purpose of defining the bene- ficial interests of the Subscribers, and their respective assigns in the said lands and property, have agreed to issue to such Subscribers, or to their respective nominees negotiable certifi- cates for 25,000 shares of beneficial interest in the said Trust, in the following proportions, to wit : 586 Trusts for Busini;ss Purposes. Number of Shares of Beneficial Names of Beneficiaries Interest 10,000 5,000 5,000 • 2,500 2,500 Now, Therefore, the Trustees hereby declare that they will hold the said lands and property to be acquired by them as aforesaid, as well as all other property which they may acquire as such Trustees, together with the proceeds and avails thereof (all of such property being hereinafter sometimes referred to as the "Trust Estate"), in Trust, to hold, manage and dispose of the same, and to collect, receive and distribute the net income thereof, for the benefit of the cestuis que trustent, from time to time, whose beneficial interests are represented by certificates for shares of beneficial interest issued hereunder, and in the manner and subject to the stipulations herein contained, to wit: Article I. Section i. In so far as may be practicable and convenient, the Trustees shall manage the Trust Estate, execute all instru- ments of writing and do and perform all other things relating to this Trust under the name of And every duly authorized instrument executed in such name shall have the same efifect as if executed in the name of the Trustees. Section 2 , , , , , all of the said City of Chicago, shall be, and shall constitute the original Trustees hereunder. In case of the death, resignation or inability at any time to Appendix. 587 act of any of said Trustees or of any successor to any of them appointed under the provisions hereof, the vacancy thus cre- ated shall be filled by the remaining Trustees. As soon as the Trustee or Trustees so selected shall have accepted the terms of this Trust by an instrument of writing, the Trust Estate shall, without any further act or conveyance, forthwith vest in the new Trustee or Trustees jointly with the Trustee or Trus- tees remaining in office, with all the rights, title, interest, priv- ileges, powers, duties and estate which the former Trustees pos- sessed during their incumbency to the same extent as if such newly selected Trustee or Trustees had been original Trustees under this Trust. Section 3. Any Trustee may resign his trust by a written instrument acknowledged in the manner prescribed for the ac- knowledgment of deeds and by sending by registered mail, the said instrument thus acknowledged, to the remaining trustees. Article II. Section i. The Trustees are authorized and empowered: (a) To manage, improve, protect, develop and maintain any of the lands and real estate belonging to this Trust or which may hereafter be held by the Trustees under this Trust, improved or unimproved and wheresoever situate, including town sites, town lots, farm, timber and grazing lands, fruit orchards, fruit and stock farms and all rights, easements and interests in such lands and real estate ; in connection therewith to carry on and conduct agricultural operations of all kinds and to breed and raise cattle and live stock, and to sell or otherwise dispose of the products of such operations, including lumber, lumber products and logs ; to sell, convey, transfer and convert the said properties for such price or consideration and upon 588 Trusts for Business Purposes. such terms, trusts and conditions as the Trustees may deter- mine, and to grant leases of the whole or any part or parts of such lands or real estate for any term of years, beyond the possible termination of this Trust or for any less term, in pos- session or reversion or at will and with or without option to purchase, and to make allowances to, and make arrangements with, tenants and others, and to accept surrenders of leases and tenancies; to subdivide, resubdivide, partition, repartition or vacate subdivisions of, the said Trust properties, to exchange the same or any part or parts thereof for other properties, real or personal, to dedicate public ways and places, to grant ease- ments of any kind ; and to deal with the lands and real estate at any time belonging to this Trust, and every part thereof in all other ways and for such consideration as it would be lawful for any person owning the same to deal with the same, whether similar to or different from the ways above specified at any time or times hereafter. (b) To conduct mining operations of all kinds as to prop- erty at any time belonging to this Trust and which may be suit- able for those purposes, and in connection therewith to smelt, mill, reduce, prepare for the market, refine and otherwise treat minerals, ores and metals of all kinds, including fuel products, and to sell or otherwise dispose of for the benefit of this Trust the products and by-products resulting from such operations. (c) To search and drill for, refine, pipe, store, transport, sell, manufacture and distribute gas, petroleum and other oils and any and all of their products and by-products as to property at any time belonging to this Trust, and which may be suitable for those purposes, and in connection therewith to construct, build, operate and maintain oil wells, gas wells, refineries, build- ings, works, workshops, laboratories, machinery, power plants, sawmills, stores and warehouses ; and to the extent the Trustees Appendix. 5^9 may deem proper in respect to mining oil and gas operations, to acquire and deal in leases. (d) To exercise any and all rights incident to the ownership or possession of securities and obligations of all kinds, of any corporation, trust, association, partnership or individual that at any time shall be subject to the trusts of these presents; and to transfer into the name of any person any shares of stock, or shares of interest or securities in, or of, any corporation, trust or association that at any time shall be subject to the trusts of these presents and to allow any such shares or securi- ties to stand in the name of such person so long as the Trustees shall think proper for the purpose of qualifying such person as a director or officer of such corporation, trust or association, or otherwise, for the purpose of maintaining the organization of such corporation, trust or association. (e) To collect and sue for, and to receive and to receipt for, all sums due to the Trustees ; to represent the cestuis que trust- ent in all suits or legal proceedings in any court of law or equity, or before any body or tribunal ; to commence such suits or proceedings, or to defend the same, and to employ counsel ; to compound, compromise, abandon or adjust by arbitration or otherwise, any actions, suits, proceedings, disputes, claims, de- mands and things relating to this Trust, and to give time, with or without security, for the payment, or delivery, of any debts or property claimed in favor of this Trust and to pay or satisfy any debts or claims, upon any evidence that the Trustees may deem sufficient. (f) To buy, acquire, own, hold or lease such real and per- sonal property as the Trustees may think proper, suitable or convenient for any of their undertalcings hereunder and to pledge, lease, incumber and to exchange, sell and otherwise dis- pose of such property whenever they deem it expedient for 590 Trusts for Business Purposes. them so to do on such terms as they may deem best and to take in exchange therefor, cash or stocks, securities, obligations or property of any kind. (g) To invest, from time to time, any moneys under the control of the Trustees by them deemed to be available for the purpose, in any securities or property which the Trustees may select or approve, in the same manner and to the same extent as if they were not Trustees but were making such investments as natural persons, and without any limitation in respect of the character of the securities or property invested in, and to sell or otherwise dispose of any such investment, and reinvest the proceeds thereof, or any part thereof, with continuing pow- ers to invest and reinvest during the existence of this Trust. (h) To pay any and all taxes, assessments, charges or liens of any kind imposed upon or against the Trust Estate or any part thereof out of any funds available for such purpose. (i) To pay the expenses, legal or otherwise, of the organi- zation of this Trust and the acquisition by them of the land and property acquired hereunder ; to carry, at the expense of this Trust, wliatever insurance they may deem adequate for their protection, and for the benefit of this Trust and the Trust Estate, and to pay all the necessary and proper expenses of the carrying on of the business, and the management of this Trust, and the property constituting the Trust Estate. (m) To borrow, raise or secure the payment of money for the purpose of this Tnist by mortgage, pledge, cliarge, or other incumbrance of the whole or any part of the Trust Estate, and to give proper securities or evidences for the moneys so raised, which may mature at a time or times beyond the possible termination of this Trust or at any earlier time or times ; to enter into any and all contracts, guaranties, obligations and other instruments, which in the opinion of the Trus- Appendix, 59^ tees may be necessary or expedient to promote, protect and conserve the Trust Estate, including the making of guaranties to secure the performance of contracts and obligations of other parties ; and to charge the Trust Estate with any and all obliga- tions of indebtedness incurred by the Trustees in the exercise by them of any or all of the foregoing powers conferred upon them, provided, however, the Trustees shall have no power or authoritv whatsoever to borrow money on the credit or on behalf of the cestuis que trustent personally, or to make any contract binding the cestuis que trustent personally for repay- ment of any money raised by mortgage, pledge, cliarge or other incumbrance in pursuance of the provisions hereof, or to make any contract or incur any liability whatsoever on behalf of the cestuis que trustent binding them personally. (n) To pay themselves as Trustees hereunder, such com- pensation for their services as they may deem reasonable, and to employ and discharge such experts, counsel, representatives, agents, and employees of any kind as the Trustees may deem proper, define their tenure, fix their compensation and define their duties. (o) Generally, to do all and singular, such things as may be necessary or advantageous in the execution of the foregoing powers, or any of them, and not inconsistent therewith, anvl to manage, control and conduct this Trust as fully as if the Trustees were the absolute owners of the Trust Estate. The naming of any specific authority and pov/ers herein shall not be construed as limiting the general powers conferred upon the Trustees. Section 2. The Trustees shall have the entire title (legal and equitable) to, and the absolute and exclusive management and control of, all property at any time belonging to this Trust, 592 Trusts for Business Purposes. and they shall have the absolute management and disposition thereof. Section 3. Stated meetings of the Trustees shall be held at least once a month from time to time upon the call of any two of the Trustees. Two Trustees present in person shall consti- tute a quorum, and the affirmative vote of two Trustees sliall be necessary to the validity of any action taken by the Trustees. Section 4. Any Trustee, by written power of attorney, may delegate his powers as such, for a period not exceeding twelve months at any one time, to any other Trustee or Trustees, pro- vided that in no case shall less than two Trustees, each acting in person, exercise the powers hereunder. Section 5. The death or resignation of any of the Trustees, shall not operate to annul or terminate this Trust or to revoke any existing agency created pursuant to the terms of this in- strument. Article III. Section i. Each Trustee shall be indemnified by, and re- ceive reimbursement from the Trust Estate for his expenses and disbursements, including counsel fees, and also in respect of all losses and liabilities by him incurred or suffered in ad- ministering the Trust Estate or any part thereof, except such as may arise from his personal or willful default. And for the payment of such expenses, disbursements, losses and liabilities the Trustees shall have a lien on the Trust Estate prior to any rights or interest of the cestuis que trustent thereto or therein. Section 2. The receipt of the Trustees or any of them, or any of the agents, representatives or employees thereunto au- thorized, for moneys or property paid or delivered to them, or any of them, shall be an effectual discharge therefrom to the persons paying or delivering the same, and no person taking Appe;ndix. 593 such receipt shall be bound to see to the application of such moneys or property. And no purcliaser or person dealing with the Trustees shall be bound to see that the terms of this trust are complied with or to ascertain or inquire as to the existence or occurrence of any event or purpose in or for which a sale, mortgage, pledge or charge is herein authorized or directed or otherwise as to the purpose or regularity of any of the acts of the Trustees, or any of them purporting to be done in pursu- ance of any of the provisions or powers herein contained, or as to the regularity of the discharge, resignation or appointment of any Trustee. And no purchaser or person dealing with any Trustee purporting to act under any delegation of authority from any other Trustee shall be concerned to ascertain or in- quire whether an occasion exists in which he is authorized so to act or in which such delegation is permitted or whether such delegated authority is still subsisting. Section 3. Every note, bond, contract, instrument, certifi- cate, share or undertaking and every other act or thing whatso- ever executed or done by the Trustees, or any of them in con- nection with this Trust, shall be conclusively taken to have been executed or done only in their or his capacity of Trustees or Trustee under this Declaration of Trust, and such Trustees or Trustee shall not be personally liable thereon. Every note, bond, contract, instrument, certificate, share or undertaking made or issued by the Trustees shall recite that the same is executed or made by them, not individually, but as Trustees under this Declaration of Trust and may contain any further recital which they or he may deem appropriate. And every written obligation, contract or undertaking made or issued by the Trustees, shall provide expressly, in substance or effect, as follows : "This obligation (contract or undertaking, as the case 594 Trusts for Business Purposes. may be) is made (or issued) by the undersigned, not in- dividually, but as Trustees under a certain Agreement and Declaration of Trust, and hereby made a part hereof, and is enforcible only against, and is payable only out of, the trust property held thereunder, any and all personal lia- bility of the Trustees and cestuis que trustent thereimder being and having been expressly waived by the holder hereof." Section 4. The Trustees shall not be liable for errors of judgment in exercising any of their powers or discretions un- der this Declaration of Trust, nor for any loss arising out of any investment, nor for failure to sue for or to collect any moneys or property belonging to this Trust, nor for any act or any omission to act, performed or omitted by them, in the exe- cution of their powers or discretion, in good faith, and each shall be answerable and accountable only for his own several acts, receipts, neglects and defaults severally and respectively, and not for those of any other, or of any agent employed by them, or of any bank, trust company, broker or auctioneer or other person, with whom, or into whose hands, any trust moneys, property or securities may be deposited or come. ARTICI.E IV. Any Trustee may acquire, own, hold and dispose of shares of interest in this Trust to the same extent as if he were not a Trustee, without being disqualified to act as Trustee, and while owning and holding such shares on his personal account, as a cestui que trust, shall be entitled to the same rights, privileges and interests as any cestui que trust, and shall be chargeable witli no liability because he is both a Trustee and a cestui que trust hereunder. Any trustee, notwithstanding the fiduciary position which he holds, may deal with the Trustees in relation to the Trust Estate as freely as if he were not a Trustee here- under. Appendix. 595 Article V. Section i. No recourse shall at any time be had, under, or upon any note, bond, contract, instrument, certificate, under- taking, obligation, covenant, or agreement issued or executed by the Trustees under or pursuant to the terms of this Declaration of Trust or in managing the Trust Estate or by any agent, rep- resentative or employee of the Trustees, or by reason of any- thing done, or omitted to be done by them or any of them, against the Trustees individually or against any agent, repre- sentative or employee, or any cestui que trust, or the holder of any other security issued by the Trustees, either directly or in- directly, by legal or equitable proceeding, or by virtue of any suit or otherwise, except only to compel the proper application or distribution of the Trust Estate, it being expressly under- stood and agreed that (a) this Declaration of Trust and all ob- ligations and instruments executed thereunder, are executed pursuant thereto by the Trustees; that (b) any acts done or omitted to be done by them are solely the obligations, instru- ments, acts and omissions of, or in respect of, the Trust Es- tate, and that (c) all the obligations, instruments, liabilities, covenants and agreements, acts and omissions of the Trustee or Trustees shall be enforced against and be satisfied out of the Trust Estate only, or such part thereof as shall under the terms and provisions of this Declaration of Trust be liable for or chargeable therewith. And all personal and individual lia- bility of the Trustees, or any of them, except as above stated, and of all their agents, representatives and employees, and of the cestuis que trustent are hereby expressly waived and nega- tived. The Trustees and their agents are not authorized to con- tract any debt, or do anything which will charge the cestuis que trustent, or bind any or all of them personally. 596 Trusts for Business Purposes. Section 2. No corporation, trust, association or body politic shall be affected by notice that any of its shares of stock or bonds or other securities are subject to this Trust, or be bound to see to the execution of this Trust or to ascertain or inquire whether any transfer of any such shares, bonds or se- curities by the Trustees is authorized by this Trust, notwith- standing such authority may be disputed by some other person. Article VI. Section i. During the continuance of this Trust the bene- ficial interests therein and thereunder shall be evidenced solely by certificates for shares of beneficial interest, for which pro- vision is hereinafter made. Section 2. The beneficial interest in this Trust shall be di- vided into 60,000 beneficial interest shares, 25,000 of which shall be issued forthwith to the following persons named, or to their respective nominee or nominees, in the following propor- tions, to wit: Num.be r of Sliares of Beneficial Name of Beneficiaries. Interest. 10,000 5.000 5,000 2,500 2,500 The remainder of said beneficial interest shares may be is- sued from time to time by the Trustees in such amounts as they mav from time to time determine in exchange for additional property conveyed or transferred to them under the trusts here- of or for moneys advanced to or for them for the purposes hereof. Appendix. 597 Section 3. As evidence of the ownership of interest shares, the Trustees sliall cause to be. issued to each cestui que trust a certificate or certificates, which shall be in substantially the following form, to wit: CERTIFICATE OF BENEFICIAL INTEREST IN TRUST. No Beneficial Interest Shares. (Not Subject to Assessment.) This certifies that is the holder of beneficial interest shares in a certain Trust Estate known and designated as The , created under the terms of an Agreement and Declaration of Trust, dated 1922 (a duplicate original of which is on file with the Commercial Trust and Savings Bank, of Chicago, Illinois), which is hereby referred to and made a part of this certificate. All of the provisions of said Agreement and Declaration of Trust are hereby made a part hereof in all respects with the same force and efifect and to all intents and purposes as if the same were herein set forth at length, and said interest shares are issued, received and held subject to all such provisions to which the holder by the acceptance hereof consents and agrees. And except only as in said Agreement and Declaration of Trust provided, this certificate confers no rights, privileges or interests. The owner hereof appearing as such upon the books of the Trustees is entitled to participate in all net income and each distribution of money or other property of the Trust Estate made to the owners of certificates for beneficial interest shares under the terms of said Agreement and Declaration of Trust, in the proportion which the total number of such shares evidenced by this certificate bears to the total number of such shares out- 598 Trusts for Business Purposes. standing at the date of such distribution. In the event of liquidation of the Trust Estate, such distribution shall be made in the same manner. This certificate is made by the undersigned, not individually, but as Trustees under said Agreement and Declaration of Trust, and any and all personal liability of the Trustees and the cestuis que trustent under said Agreement and Declaration of Trust is, by the acceptance and as a consideration for the issue and execution hereof, expressly waived and negatived. The interests represented by this certificate are transferable by the holder in person or by attorney upon the books of said Trustees and not otherwise, and only upon the surrender of this certificate properly endorsed. In Witness Whereof, the Trustees have hereunto signed their names this day of 191 .. . As Trustees under an Agreement and Dec- laration of Trust, dated 1922, creating The Trust, and not in- dividually. On the back of each such certificate shall be endorsed a form of transfer of the beneficial interest shares represented thereby, substantially as follows, to wit: For value received, I hereby sell, assign, transfer and de- liver to the beneficial interest shares represented by the within certificate of interest of Trust, and I hereby request that said transfer be recorded on the books of said Trustees. Appe^ndix, 599 Witness my hand this day of. 191. .. In presence of Section 4. The Trustees may, from time to time distribute to the cestuis que trustent, such income, proceeds or other parts of the Trust Estate as they may determine. All distributions of income, proceeds or other parts of the Trust Estate, and the amount and conditions of payment there- of, among the cestuis que trustent (except in case of the termi- nation of this Trust) shall rest in the absolute discretion of the Trustees, whose decision with respect thereto shall be final, but in each such distribution the owner (appearing as such on the books of the Trustees) of beneficial interest share or shares hereunder shall be entitled to participate in the proportion which the total number of such shares owned by him bears to the total number of shares then outstanding hereunder. The Trustees may retain, undistributed, such sums as they may deem wise to create a sinking reserve, surplus or contingent fund. Section 5. In case of the loss or destruction of any certifi- cate of beneficial interest the Trustees may, under such condi- tions as they may deem proper, issue a new certificate in place of the one so lost or destroyed. Section 6. Shares of beneficial interest hereunder shall be personal property giving only the rights in this instrument, and in the certificates therefor, specifically set forth. The ownership of certificates for beneficial interest shares hereunder shall not entitle the cestuis que trustent to any title in or to the trust property whatsoever, or right to call for, de- mand or secure any partition or division of the same, or for an accounting during the continuance of this Trust and no widow 6oo Trusts for Business Purposes. or widower, heir at law, or devisee, of any shareholder shall have any right of dower or right of homestead or right of in- heritance or any other real property right (as distinguished from personal property right) in any of the real estate which is at any time a part of the Trust Estate. The registered holders of certificates for the time being, anc' no one else, shall be the cestuis que trustent of the Trust Estate It is expressly declared that a Trust and not a partnership is created by this instrument, and that the holders of certificates of interest are cestuis que trustent and hold no other relation to the Trustees than that of cestuis que trustent, with only such rights as are conferred upon them as such cestuis que trustent. Section 7. The death, insolvency, or incapacity of any cestui que trust during the continuance of this Trust, shall not oper- ate to determine this Trust, nor shall it entitle the legal repre- sentatives, heirs or assigns, voluntary or involuntary, of such deceased, insolvent or incapacitated cestui que trust, to an ac- counting or to take any action, at law or in equity, or otherwise, in the courts or elsewhere, against the Trustees ; but such legal representatives, heirs or assigns shall succeed only to the rights of such deceased, insolvent or incapacitated cestui que trust, subject to this Declaration of Trust, and any amendments there- to, and shall succeed to nothing more. Section 8. The Trustees shall liave no power to call upon the cestuis que trustent for the payment of any sum of money or assessment whatever other than such sums as they may at any time personally agree to pay by way of subscription to shares of beneficial interests, or otherwise. Section 9. All transfers of shares of beneficial interest (otherwise than by operation of law) shall be in writing under the hand of the transferror, and upon surrender thereof, with the existing certificate for such shares, to the Trustees, shall be Appendix. 6oi recorded in the books of the Trustees, and a new certificate therefor shall be issued to the transferee, which new certificate and the rights, interests and privileges of the holder thereof in respect to such new certificate, shall thereupon become subject to this Declaration of Trust. In case of a transfer of only a part of the shares mentioned in any certificate, a new certificate for the residue thereof shall be issued to the transferror. Until the existing certificate shall be so surrendered and transfer re- corded, the transferror shall be deemed to be the holder of the share or shares represented thereby for all the purposes of this Trust. Article VII. This Trust shall continue from the date hereof and until the expiration of a term of twenty-one (21) years after the death of the last survivor of the persons whose names are signed hereto, at which time it shall cease. The Trustees then in office shall wind up its affairs, liquidate its assets and distribute the same, or sell the assets and dis- tribute the proceeds thereof, among the cestuis que trustent ac- cording to their respective interests; provided, however, that if prior to the expiration of the said period, two of the Trustees shall vote to terminate this Trust at an earlier date, then in such event, this Trust sliall terminate on the date so fixed. For the purpose of winding up their afifairs and liquidating this Tnist, the then Trustees shall continue in office until such duties have been fully performed. Article VIII. A duplicate original of this Declaration of Trust shall be deposited with the said Commercial Trust and Savings Bank. In the event of the dissolution of the said bank, or the expira- 6o2 Trusts for Business Purposes. tion of its charter, the Trustees shall have the power to desig- nate the successor depository. The depository shall deliver to such successor, all documents in its possession relating to the Trust Estate. This Declaration of Trust shall be recorded in such public recording offices as by the Trustees may be deemed necessary or desirable from time to time. Article IX. This Declaration of Trust may at any time or times be amended or altered by the Trustees, in any particular wliatso- ever, but not so as to extend the duration of the trust or to affect the validity or effect of anything previously done by the Trustees, and except in regard to exemption from personal lia- bility of the Trustees, their agents, representatives and em- ployees or the cestuis que trustent, and in regard to the acquired rights of third persons. In the event any alteration or amend- ment is made by the Trustees, the same shall be attached to and made a part of this Declaration of Trust, and a copy thereof with the certificate of the Trustees, or a majority of them, as to its adoption shall be filed with the said Commercial Trust and Savings Bank. And such certificate shall be evidence of the adoption of such amendment or alteration for all purposes, and shall be conclusive in favor of purchasers and other persons subsequently dealing with the Trustees. Article X. In the construction of these presents, words in the singular number include the plural number and vice versa and words denoting males include females, and words denoting persons, include firms, associations, trusts and corporations, and the word Trustees shall extend to and include the Trustees for the Appendix. 603 ti'me being of these presents, unless a contrary intention is to be inferred from the subject matter or context. This instrument is executed in five counterparts each of which shall be deemed an original. In Witness Whereof the said , , , and , have hereun- to set their respective hands and seals in token of their respec- tive acceptance of the Trust hereinbefore mentioned, for them- selves and for their successors ; and the said , , and , Subscribers, have hereunto likewise set their respective hands and seals in token of their respective assents to, and approvals of, the terms of the said Trust, for themselves, and for their assigns, the day and year first above written. (seal) (seal) (seal) (seal) (seal) Trustees. (seal) (seal) (seal) (seal) Subscribers. State of Illinois, ^ County of Cook, j I^ , a Notary Public in and for the County and State aforesaid do hereby certify that , , , and , Trustees, per- sonally known to me to be the same persons whose names are subscribed to the foregoing instrument as such Trustees, ap- peared before me this day in person and severally acknowledged 6o4 Trusts for Business Purposes. that they signed, sealed, and delivered the said instrument as their free and voluntary act and deed, as Trustees as aforesaid, for the uses and purposes therein set forth. In Witness Whereof I have hereunto set my hand and Notarial seal this day of A. D. 191 .. . My commission expires Notary Public. State of Illinois, I g County of Cook, S I, , a Notary Public in and for the County and State aforesaid do hereby certify that , , and , Subscribers, personally known to me to be the same persons whose names are subscribed to the foregoing instrument as such Subscribers, appeared before me this day in person and severally acknowledged that they signed, sealed, and delivered the said instrument as their free and voluntary act and deed, for the uses and purposes therein set forth. In Witness Whereof, I have hereunto set my hand and Notarial Seal this day of A. D. 19 . . . My commission expires Notary Public. SCHEDULE I. • ■ Lands in Cass County^ Indiana. All of Section one containing 640 acres. All of Section two containing 640 acres; the north half of northwest quarter ow Section three, containing 160 acres; the West half of southeast quarter and the northeast quarter of Section four, containing 240 acres ; the northeast quarter, the north half of southeast quarter and the southeast quarter of southeast quarter of Section ten, containing 290 acres ; all of Section eleven, containing 640 acres ; all of Section twelve, contain- ing 640 acres; all of Section thirteen, containing 622 acres; Appendix. 605 all of Section fourteen, containing 640 acres; the east half, the southeast quarter of the northwest quarter and the south- west quarter of Section fifteen, containing 520 acres; the south half of southeast quarter and the southwest quarter of southwest quarter of Section sixteen, containing 120 acres; the west half of northwest quarter, the west half of south- west quarter and the northeast quarter of southwest quarter of section seventeen, containing 200 acres; the east half of northeast quarter and the east half of southeast quarter of Section nineteen, containing 160 acres ; the southwest quarter of northwest quarter and the southwest quarter of Section twenty, containing 200 acres. SCHEDULE II. Lands in Lake County, Indiana. The northeast quarter, the Northwest quarter, the soutli- west quarter and west half of southeast quarter of Section thirteen, containing 559.65 acres, more or less; all of Section fourteen containing 638.88 acres, more or less ; all of Section fifteen, containing 640.15 acres, more or less; the west half of southeast quarter and Lots three and two of Section sixteen, containing 233.02 acres, more or less; all of Fractional Sec- tion twenty, containing 394.81 acres, more or less; all of Sec- tion twenty-one, containing 639.91 acres, more or less; all of Section twenty-two, containing 640.32 acres, more or less ; all of Section twenty-three, containing 640.32 acres, more or less; the west half of northeast quarter, and the west half and the southeast quarter of Section twenty-four, containing 561.40 acres, more or less; all of Section twenty-five, con- taining 637.84 acres, more or less ; all of Section twenty-six, 6o6 Trusts for Business Purposes. containing 641.43 acres, more or less; all of Section twenty- seven, containing 644.71 acres, more or less. SCHEDULE III. Lands in BerriEn County, Michigan. East half of southwest quarter, east half of west half of southwest quarter of Section thirty-four. Township thirty- seven South, Range eighteen East, northwest quarter, north- west quarter of northeast quarter, north half of northeast quarter of southwest quarter of Section two, and northeast quarter of Section three. Township thirty-eight South, Range eighteen East. Southeast quarter of the southeast quarter of Section Three, Township thirty-eight South, Range eighteen East. Also west half of the southwest quarter of Section two and west half of the southeast quarter of Section three, all in Township thirty-eight South, Range eighteen East. Also Lots one, two, three and four of subdivision of that part of Lot two lying south of North Creek, being fractional south- east quarter of the southeast quarter of Section thirty-three. Township thirty-seven South, Range eighteen East. Also west three-quarters of the north half of Government Lot number two of Section thirty-three, Township thirty- seven South, Range eighteen East, less three acres off the north end of the west half of the north half of said Govern- ment Lot nunmber two, North Creek being the south boundary of the above described premises, together with all riparian rights and water privileges. Appendix, 607 SCHEDULE IV. Lands in Benton County, Michigan. The northeast quarter of northeast quarter, south half of northwest quarter of northeast quarter, southwest quarter of northeast quarter, southwest quarter of southeast quarter of northeast quarter, and all of government Lot one, except a strip 463.6 feet wide off the north end of said Lot one, all in Section seven. Township thirty-seven South, Range eighteen East, together with all riparian rights and water privileges thereunto belonging or in anywise appertaining, containing 121.93 acres, more or less; A strip of land 210.4 feet wide, off the south side of the north half of the northwest quarter of the northeast quarter of Section seven. Township thirty-seven South, Range eighteen East, said strip of land being 1,326 feet in length, containing 6.4 acres, more or less ; Lot number three, of Block number two, of the registered plat of Slay ton's subdivision, in Sections seven and eight, Township thirty-seven South, Range eighteen East, as the same is registered in the office of the clerk of the Circuit Court in and for Benton County at Benton Harbor, lying, being and situate in Section seven, Township thirty-seven South, Range eighteen East, containing 4.62 acres, more or less; Lot A of Block 2 of Slayton's subdivision (being the north- west quarter of the southeast quarter of the northeast quarter) of section seven. Township thirty-seven South, Range eighteen East, containing 10 acres more or less. Lot number eight on the plat of Harbor View, as said plat appears of record in plat book No. i, on page 177 of the public records of Benton County, Michigan. Said land being 6o8 Trusts for Business Purposes. situated in Section eighteen, Township thirty-seven South, Range eighteen East, containing ij^ acres, more or less. SCHEDULE V. Lands in St. Joseph County, Michigan. An undivided two-ninths (2/9) interest in the following described lands in St. Joseph County, Michigan : All of Sections one, two, three, four, five, six, seven and eight, the west half of the northwest quarter, and the west half of the southwest quarter of Section nine; the east half, and the east half of the northwest quarter of Section ten; all of Section eleven; the west half of Section twelve; the north half of Section fourteen ; the east half of the northeast quarter of Section fifteen; all of Sections seventeen, eighteen, nineteen and twenty; the west half of the northeast quarter, the northwest quarter and the north half of the southwest quarter of Section twenty-one; the south half of the north- east quarter, and the southeast quarter of Section twenty-two; the southwest quarter of the northeast quarter, the south half of the northwest quarter, the west half of the southeast quar- ter, the southeast quarter of the southeast quarter, and the southwest quarter of Section twenty -three ; the south half of the northeast quarter, the southeast quarter of the northwest quarter, and the southeast quarter of Section twenty- four; the northeast quarter, the southwest quarter of the northwest quarter, the east half of the southeast quarter, and the west half of the southwest quarter, of Section twenty-five; all of Section twenty-six; the east half, the east half of the north- west quarter, the southwest quarter of the northwest quarter, and the southwest quarter of Section twenty-seven ; the south- east quarter of the northeast quarter, and the south half of Appendix. 609 Section twenty-eight ; the southeast quarter of Section twenty- nine; the north half of the northeast quarter, the southwest quarter of the northeast quarter, south o degrees ii minutes east 1,058.6 feet to a brass cap monument; thence north o degrees 22 minutes east 1,058.7 feet to the point of beginning, containing 0.124 acres) ; together with all and singular the tenements, hereditaments and appurtenances hereunto belong- ing or in anywise appertaining, including all our estate, right, title, and interest therein and thereto both at law and in equity. SCHEDULE VI. Certain property and assets of The Wabash Company, Inc., a corporation of the State of Indiana, including book ac- counts and notes receivable of other corporations and individ- uals, said notes aggregating in amount the sum of Two Hun- dred Sixty-two Thousand and Fifty Dollars ($262,050) ; a certain oil, gas and mineral lease, dated August ist, 1919, from Joseph K. Ryan on 40 acres of land, being the northeast quarter of the southwest quarter of Section nineteen, Town- ship twenty-one North, Range fourteen West, Carroll County, Indiana; a certain oil, gas and mineral lease, dated August 1st, 1919, from Harry Uhl on 100 acres of land, being the west 100 acres of unleased land in Section sixteen. Township twenty-one North,' Range fourteen West, Grant County, Indi- ana; a certain oil, gas and mineral lease, dated May 10, 1920, from Roy Harmon and others on 80 acres of land, being the east half of the southwest quarter of Section two, Township twenty-one North, Range fifteen West, Grant County, Indi- ana; a certain oil, gas and mineral lease, dated July 2, 1920, from Walter Bourque on 240 acres of land, being the north- west quarter of Section twelve, and the east half of the 6io Trusts for Business Purposes. northeast quarter of Section eleven, Township sixteen North, Range ten West, Howard County, Indiana, mineral rights in, and royalty interest on oil produced from, the following de- scribed property: (That certain farm situated in Howard County, Indiana, known as the Landis place, and more particularly described as follows : All of Section twelve, the north half of Section thirteen, Township thirteen. Range eleven, lying east of old bed of the Wabash River ; the west half of northwest quarter, south- west quarter, west half of southeast quarter and southeast quarter of southeast quarter of Section seven, the north half of Section eighteen; the northwest quarter, west half of Sec- tion eighteen ; the northwest quarter, west half of northeast quarter, northeast quarter, northwest quarter of southeast quarter and Lots one, two and four of Section seventeen; Lot two of Section sixteen ; Lots six and seven. Section nine, and Lots six and seven. Section eight. Township thirteen. Range ten, less, however, the right of way of the Logansport and Wabash Valley Road.) subject to all of the liabilities of said The Wabash Company, Inc., as of the ist day of Sep- tember, 1918; and a certain oil, gas and mineral lease, dated May I, 1920, from Thomas J. McGrath and others on 40 acres of land, being the west half of the west half of the northeast quarter of Section twenty-six. Township twenty-one North, Range fifteen West, Logansport, Indiana, subject to the liabilities of said The Wabash Company, Inc., with respect to said lease as of the lOth day of September, 1920. Appendix. 6ii DOMESTIC PRODUCTS COMPANY. General Offices: Chicago, Illinois. This Agreement, made this 22nd day of June, A. D. 1922, between James A. Coopman, William T. GrablE and Ethel S. GrablE, designated as the subscribers, and JamEs A. Coop- man, William T. Grable and Ethel S. Grable, together with their successors, herein designated as the trustees, WIT- NESSETH, that, Whereas, the subscribers are now engaged in a general sales business, and they propose to exchange, deed, transfer, assign and deliver to the trustees herein, under the designation of the Domestic Products Company, all contracts, orders, the good will of the established business, and all other kind of assets now belonging to the subscribers in their present established sales organization. And it is likewise proposed that for and in consideration of the property aforesaid that the beneficial interests in the present property, and all future property acquired by the trustees, and in the business conducted by them, shall be evidenced and repre- sented herein by thirty (30) common beneficial interests or shares, of the par value of One Hundred ($100.00) Dollars each, said beneficial interest or shares being fully paid and non- assessable. Now, Therefore, the subscribers, by these presents, do hereby exchange, deed, transfer, assign and deliver to the trustees hereunder, all of the present business, orders, and good will now conducted by the subscribers under the business name of Domestic Products Company, to the trustees herein. And the subscribers hereby direct and instruct the trustees 6i2 Trusts for Business Purposi;s. herein to issue ten (lo) common beneficial interests or shares to each of the trustees herein. And now the trustees hereby declare that they will hold said property so transferred and such as may be transferred to them, as well as all other property which may be acquired, together with the proceeds thereof in trust, to manage and dispose of the same for the benefit of the beneficiaries hereunder, and their successors and assigns. And the trustees further declare that they will accept the trust and will execute it in the manner hereinabove directed, and subject to the stipulations herein contained, to wit: First : That whenever the term "Trustees" is used herein, it shall refer to and include the above Trustees, and also any successors in trust, appointed under the terms hereof. That whenever the term "Company" is used herein, it shall be deemed to refer to said Dome;stic Products Company, being the des- ignation, so far as practicable, of the said Board of Trustees and their successors in trust, in their collective capacity, under the terms hereof. That whenever the term "Beneficiary" is used herein, it shall be deemed to mean the owner of beneficial interests in and to the trust estate herein, and that whenever the term "Certificate Holder" is used herein, it shall be deemed to mean the owner of a certificate evidencing one or more benefi- cial interests, of the par value of One Hundred ($100.00) Dollars each, in and to the Trust Estate herein mentioned, the legal title, ownership and control of which estate is vested in said trustees ; and that whenever the term "Certificate" is used herein, it shall be deemed to mean an instrument in writing, or printed or partly written and printed, issued by said Trustees, evidencing the ownership of an equitable interest in said estate of one or more beneficial interests, as may therein be stated. (B) The trustees, in their collective capacity, shall be des- Appendix. 613 ignated, as far as practicable, as the Domestic Products Com- pany, and under that name shall, so far as practicable, conduct all business and execute all instruments in writing, in perform- ance of their trust. Second : The Trustees do hereby acknowledge the receipt by them of the property aforementioned, and it is expressly agreed that the said property, as well as any other which may hereafter be acquired by the Trustees for the purpose herein mentioned under the terms hereof, shall be received by the Trustees, and shall be by them held, owned, controlled, man- agd, and applied to the uses and purposes herein mentioned. (B) In addition to the present established business, the trustees shall have the right to act as agents for manufacturers, either on salary or a commission basis, in the sales of products of different manufacturers, and they shall have the right to do any and all things necessary to accomplish the purpose herein set forth, the same as natural persons might or could do, and in any part of the world, as principals, agent, contractors, trus- tees or otherwise, and either alone or in company with others. (C) That money or property, together with the income and issues thereof received or acquired by the said trustees under the terms hereof, shall constitute and be held, kept and used by them as a Trust Estate, for the use and benefit of the benefi- ciaries in the said estate, and that the said trustees are author- ized, empowered and directed to apply the said money or prop- erty or the proceeds, the increase or income thereof, constituting said Trust Estate, as their discretion dictates, to the best inter- est of the beneficiaries hereunder. Third : The trustees hereunder shall be three in number, and the said trustees herein mentioned shall hold their office until the annual meeting, or until their successors have been elected and have accepted their trust. 6i4 Trusts for Business Purpose;s. (B) The trustees shall, at every annual meeting or adjourn- ment thereof, elect a full Board of Trustees to serve for the next ensuing year, said annual meeting to be on the first Tues- day in July, following the first Monday in July, each year, com- mencing in 1922. Fourth : The trustees are authorized to employ all neces- sary or proper agents, servants, brokers, attorneys, employees or counsel, to carry into effect the purpose of the trust herein contained, and to protect and preserve the same, and to provide and pay out of said Trust Estate, the compensation, fees, com- missions, or expenses incurred in the management thereof, and to vote salaries to themselves. To contract for and on behalf of said trust estate, and to bind the same and its property to the performance of such contracts; to borrow money on be- half of such trust estate on such terms and conditions as said trustees shall deem best, and to bind said estate and its assets to the payment of such indebtedness and to pledge and incum- ber any property of said estate, whether real, personal or mixed, for the security of the indebtedness so incurred, under such terms and conditions as to the trustees may seem best, and to agree upon, approve and fix, execute and deliver in the name and on behalf of the said trust estate, any deed, pledge, mort- gage, bond, note endorsement or guarantee, trust deed, or any other instrument which may be necessary or proper to carry out the terms of this instrument. But neither the said trustees nor the said certificate holders or beneficiaries nor any of them shall be in any manner personally liable by virtue of any contract, note, bond, deed of trust, mortgage or other instrument exe- cuted under the terms of this paragraph, but the same shall fully bind the property of the said trust estate for the perform- ance thereof. (B) It is expressly understood that all expenses incurred Appi:ndix, 615 by said trustee in carr}dng out the terms hereof, as well as all liabilities incurred by them in the execution of said trust, whether arising from contract or tort, shall be considered as expenses of executing said trust, which shall first be paid out of the assets and properties thereof, and which shall be a first and prior lien against the said estate and property, superior to all others. (C) The said trustees shall, in their own name, as trustees of said estate, bring any suit or action which in their judgment shall be necessary or proper to protect said estate or to enforce any contract made for the benefit thereof, and to defend in their discretion any suit or action against said estate or against the trustees thereof. The said trustees are expressly authorized to bring or defend such suit in their discretion or to compro- mise and settle any suit, claim or controversy in which the said estate is interested, as to them may seem best, and to dis- charge the same out of said estate and its assets ; and they are specially authorized to pay or transfer out of .said estate and its assets, all sums of money or property necessary to discharge any judgment against them in their said capacity as trustees, together with all court costs, or other costs, including counsel and attorney's fees and also to pay out of said estate or its as- sets, such sums of money, or transfer or appropriate property thereof, for the purpose of settling, compromising, or adjust- ing any such claim or controver.sy, together with any such costs and expenses connected therewith, and all of such expenditures shall be treated as expenses of executing this trust. (D) The trustees shall have full power to invest and re- invest the trust estate, its profits, income, increase, surplus or avails, subject to the terms of this instrument. But the trustees shall not delegate to any agent or attorney in fact, the power to contract on behalf of said estate, or bind it to the payment of 6i6 Trusts for Business Purposes. money, but when said trustees have agreed upon the terms and forms of any contract or contracts, or other instrument or in- struments necessary or proper for the carrying out of the pur- poses herein mentioned, and the execution of the trust hereby created, they may, by resolution or other written authority, designating and describing the form of such contract or con- tracts or instrument, authorize an agent or agents, attorney or attorneys in fact, to countersign and deliver, in the name and on behalf of said trustees, any such contract or instrument, but in no case shall such agents or attorneys be authorized to counter- sign or deliver any notes, bonds, bill of sale, mortgages, trust deeds, encumbrances, or pledges transferring, binding, encum- bering or alienating the property of said trust estate, whether real, personal or mixed. (E) The trustees shall hold the legal title to all property at any time belonging to their trust and shall have and exercise the exclusive management and control of the same, and the right of the said trustees to manage, control and administer the said trust estate shall be absolute and unconditional, free from the control or management of the beneficiaries. (F) So far as strangers to this trust are concerned, a reso- lution of the trustees authorizing a particular act to be done shall be conclusive evidence in favor of such strangers that such act is within the powers of said trustees, and no purchaser from the trustees or one loaning money to the trustees shall be bound to see to the application of the purchase money or loaned money or other consideration paid or delivered by or for said purchaser or loaner to or for said trustees. Fifth : Stated meetings of the trustees shall be held at least once every three months, and other meetings shall be held from time to time, upon the call of any officer or trustee. A majority of the Board of Trustees shall constitute a quorum, Appe;ndix. 617 and the concurrence of all the trustees shall not be necessary to the validity of any action done by them, but the wish of the majority of the trustees present and voting at any meeting shall be conclusive. It shall be necessary for a majority of the trus- tees to concur in all v^^ritings and transactions of every kind or character, as the only means of executing this trust and vali- dating its acts. A majority of the trustees may amend this trust, but vested rights sliall not be impaired ; they may adopt an'i use a common seal ; they may make, adopt, amend or repeal such by-laws, rules, and regulations, not inconsistent with the terms of this instrument, as they may deem necessary for the conduct of their business or for the government of themselves, their agents or representatives. Sixth : The trustees may elect officers, who shall have the authority and perform such duties as the trustees may deter- mine. They may combine the duties of several officers in one person. Two of such officers, elected, at least, shall be from among their own members. The trustees shall have authority to elect or appoint temporary officers to serve during the ab- sence or disability of regular officers ; to fix the compensation of any or all officers, agents or employees they may appoint, and are likewise authorized to pay themselves such compensation for their services as they may deem reasonable. (B) The trustees shall cause to be kept by a Secretary elected by them, a record of all meetings of the beneficiaries and of the trustees, which record shall be similar in character and of the effect as that kept in case of corporations, and so far as strangers to this trust are concerned, shall be conclusive against the trustees of the facts and doings therein stated. (C) Any trustee may acquire, own and dispose of benefi- cial interests in this trust, to the same extent as if he were not 6i8 Trusts for Business Purposes. a trustee hereof, and any trustee may be removed for just and proper cause. (D) In case of death, resignation or removal of any trus- tee, the remaining members of the Board of Trustees shall have the power and authority to elect trustees to fill the unexpired term or vacancy thus created, and for that purpose, a majority of the remaining trustees shall be sufficient to elect one or more trustees as above stated, and such trustees, as above elected, shall occupy the same relation to this trust as if they were orig- inal parties to this instrument. In case of death, resignation or disqualification of the entire Board of Trustees, a new Board may be appointed for the unexpired term by a Court of Equity of competent jurisdiction. (E) Neither the said certificate holders, nor the owners of beneficial interests, or any of them, or their property shall be liable for any indebtedness or liability created by, growing out of, or arising from the execution of the said trust estate, whether arising from contract or tort of the said trustees, their servants, agents or employees, in the administration of said es- state. The trustees, personally, nor either of them, nor their private property, whether real, personal or mixed, shall be in any manner, liable for any debt or liability incurred by said trustees, or any of them, in the administration or management of the said estate, whether arising from contract or tort of the said trustees or any of them, or their agents, servants, or em- ployees ; and neither said trustees or either of them shall ever be held personally liable for any damage or injury to person or property caused by or arising from, incident to, or growing out of the execution of said trust ; nor shall they be liable for the acts or omissions of each other. That the assets of the said trust estate only, shall be liable for any indebtedness, liability, wrong, injury or tort incurred, arising out of or growing out Appb^ndix. 619 of, the administration of the said trust estate by the said trustees or any of them or for any act or neghgence or default of their servants, agents, or employees in the administration of said estate. (F) The said trustees shall use ordinary and reasonable diligence in the performance of this trust, but shall not be liable to the beneficiaries or any of them, for any act, default, failure or negligence in or connected with the execution of the said trust, provided, the same shall not amount to and constitute fraud, embezzlement or wilful breach of trust, and they shall not be obliged to give bond to secure the due performance of this trust by them. Seventh : For the sole purpose of designating the interests of the present and future beneficiaries hereunder, and their legal representatives and assigns, the beneficial interests herein shall be divided into thirty (30) common beneficial interests or shares, of the par value of One Hundred ($100.00) Dollars each, and the said trustees may execute and deliver to each such beneficiary hereunder, a certificate signed by the officers desig- nated for that purpose, which shall evidence and set forth how many interests or shares of the par value of One Hundred ($100.00) Dollars each, the said beneficiary is entitled to here- under ; and the certificates issued by the trustees to said bene- ficiaries shall be substantially in the following form, to wit : Certificate. Number Shares Domestic Products Company. Capitalization 30 Shares. General Offices : Chicago, Illinois. This certifies that is the holder of sliares in the capital of Domestic Products Company, fully paid and non-assessable, subject to Declaration of Trust in 620 Trusts for Business Purposes. favor of said organization, dated June 22nd, 1922, and recorded in Cook County, Illinois, and transferable only on the books of this organization, in person or by attorney, upon surrender of this certificate properly endorsed. In Witness Whereof, the said organization has caused this certificate to be signed by its duly authorized officers, and its seal to be hereunto affixed this day of A. D. 19... President. Secretary. Shares $100.00 each. (B) By a unanimous vote of all the trustees at any annual meeting, or special meeting called for that purpose, the trustees shall have the power to issue preferred beneficial interests of said trust state, to such an amount from time to time as they shall deem expedient for the interest and advancement of the trust estate herein created, and such preferred beneficial inter- ests may be sold for cash, exchanged for property, or distribu- ted as dividends, at the option of the trustees. (C) In case of the loss or destruction of any certificate of beneficial interests issued hereunder, the trustees may, under such terms as they may deem expedient, issue new certificates in place of the ones lost or destroyed. (D) The trustees may from time to time declare and pay such dividends as are earned by all outstanding beneficial inter- ests, out of the net earnings from time to time received by them, as they may deem advisable; but the amount of such dividends and the payment of them, shall be wholly in the discretion of the trustees, and the surplus profits or earnings shall not be maintained as separate fund, but shall be merged into the body of the trust property. (E) The trustees shall keep a record book of the benefi- Appe:ndix. 621 ciaries, and the number of beneficial interests owned by each of them, and beneficial interests hereunder sliall be transferable only on the books of the trustees, and this may be done by bill of sale, or upon surrender of certificates therefor and presenta- tion of a written transfer thereof. The acceptance of a certifi- cate of beneficial interests by the original holder or transferee, shall make the person named in said transfer a party of this instrument, as if such party had, in person, joined in the execu- tion thereof. (F) The name in which a beneficial interest stands on the books of the trustees, shall be considered by the trustees con- clusive evidence of ownership, and they shall not be required upon transferring such beneficial interests or paying dividend-i on such interests, or distributing assets upon the termination of the trust, or at any other time, to inquire in any way into the relations between assignor and assigns, pledgor or pledgee, trustee and beneficiary, guardian and ward, or in any other similar relation, and shall have the right to conclusively pre- sume without inquiry, that the beneficiary, as shown by their books, is the real and true and unconditional owner thereof. Eighth : Annual meetings for the election of trustees and for the transaction of other business shall be on the first Tues- day in July, following the first Monday in July, each year, com- mencing in 1922, of which meeting the secretary or acting sec- retary shall give notice by mail to each trustee at his registered address, at least ten days before such meeting, but failure to give notice of such meeting shall not invalidate the proceedings of the meeting. (B) The trustees may call the beneficiaries together at the annual meeting of said trustees, upon ten days' notice given as aforesaid, at which meeting the trustees may submit an annual, or such other reports as they may deem advisable, to said bene- 622 Trusts for Business Purposes. ficiaries for their information, and the beneficiaries, at such annual meeting, may nominate from among themselves, candi- dates for the office of trustees, presenting such nominations to the Board of Trustees, but the election of such nominees, by the trustees, shall be wholly optional with said trustees. The fiscal year shall end each year on December 31st. Ninth : The death of a beneficiary or of a trustee during the continuance of this trust, shall not operate to terminate the trust, nor shall it entitle the legal representative of the de- ceased certificate holder to an accounting, or to take any action in the courts, or elsewhere, against the trustees ; but the execu- tors, administrators or assigns of any deceased certificate holder shall succeed to the rights of said decedent under this trust, upon surrender for transfer, of the certificates for the interests held by him. (B) It is expressly agreed that the said trust shall not be terminated or the administration thereof in any wise interfered with or suspended by the death of any such beneficiary, or his incapacity for any reason, or by his said interest or interests being by process of law subjected to the payment of debts, or in any way vested in any heir, assign, creditor, or purchaser, of the said beneficiary, or in any trustee, assignee or officer of any court, or by the same in any manner being divested out of the beneficiary and transferred or vested in any other person, administrator, executor, trustee, assignee, or personal repre- sentative. But any such person who may, in any such manner acquire or become vested with the ownership of such certificate, shall thereupon succeed to and become entitled to all the rights and equities of the beneficiary therein named, and the beneficial interests in the said trust estate, upon surrendering the original certificate to the said trustee with such proof of ownership as may be reasonable required by them, and the issue in lieu Appendix. 623 thereof of a new certificate, and notv\nthstanding said change of ownership or interest in any such certificate, or death or in- soh'ency of the original owner thereof, the said trust estate shall continue and remain in full force until terminated as herein pro- vided. Tenth : The trustees hereunder shall, in entering into con- tracts and in the execution of notes, bonds, or other written instruments obligatory upon the said estate, set forth in appro- priate terms that the said instruments are not entered into by them nor binding upon them individually, but only as trustees of this estate, and that contracts or obligations are to be satis- fied or performed out of the assets of said trust estate only. But the failure or neglect of such trustee or trustees to so de- clare in any instrument, contract or obligation entered into for the purpose of carrying out the objects of said trust, shall not be construed to render said trustees or any of them, individu- ally liable thereon, but the same sliall be obligations binding upon and performable only out of the assets of said trust estate. (B) It is further expressly agreed that the said Trustees are fully authorized in their capacity as such and for and on behalf of said trust, to receive, collect, receipt and give full re- leases, acquittances and discharges for any sums of money which may be payable to them as said trustees, for the benefit of said trust, or for any property or any other thing of value which they may be entitled to receive on behalf of said trust. Eleventh : This trust shall not continue in any event longer than for the term of twenty-one years after the death of the trustees named herein, at which time the then Board of Trustees shall proceed to wind up its afifairs, liquidate its as- sets, and distribute the same among the certificate holders of the beneficial interests, according to the number of interests held by them. f 624 Trusts for Business Purposes, (B) For the purpose of winding up their affairs and liqui- dating the assets of the trust, the then Board of Trustees shall continue in office until such duties have been performed. In Witness Whereof, the said James A. Coopman, William T. GrablE and Ethel S. GrablE, Trustees, herein- before mentioned, have set their hands and seals in token* of their acceptance of the trust herein specified, for themselves and their successors; and the said James A. Coopman. William T. GrablE and Ethel S. GrablE, Subscribers, have hereunto set their hands and seals, in token of their assent to and approval of said terms of trust for themselves and their assigns, the day and year first above written. Subscribers. Trustee (Seal) Trustee ( Seal) Trustee ( SEal ) State oe Illinois, '^ County of Cook, \ ^^• I, , a Notary Public in and for said County aforesaid, do hereby certify that William T. GrablE, Ethel S. GrablE, and James A. Coopman, personally known to me to be the same persons whose names are subscribed to the fore- going instrument, appeared before me this day in person, and acknowledged that they signed, sealed and delivered the said instrument, as their free and voluntary act, for the uses and purposes therein set forth. Given under my hand and official seal this 14th day of July, A. D. 1922. Notary Fublic. Appendix. 625 CHICAGO RAILWAY TRUST. Chicago City and Connecting Railways Collateral Trust was adjudicated in the case of Venner v. Chicago City Ry. Co., 258 111. 523; 101 N. E. 949. A copy of the Trust Agree- ment is as follows: Trust Agreement as Amended November 7, 1910, and June 12, 1911. Dated January i, 19 10. Trust Agreement, made and entered into at Chicago, Illi- nois, dated the first day of January, in the year one thousand nine hundred and ten, between Cobe & McKinnon, a co-partnership composed of Ira M. Cobf; and John W. McKinnon, of the city of Chicago, state of Illinois, hereinafter called the "Vendors," parties of the first part, and Elbert H. Gary, of the city of New York, state of New York, and Albert J. Earling, and Samuel M. Felton, of the city of Chicago, state of Illinois, hereinafter called "Trustees," jointly, parties of the second part : Whereas, the Vendors are the owners or holders, possess- ing the right to sell and assign, and to transfer and deliver, certain mortgage bonds and shares of capital stock of cor- porations owning or operating electric railways in the city of Chicago and vicinity, hereinafter more particularly speci- fied ; and Whereas, the Vendors propose to sell and assign, and to transfer and deliver the said bonds and stock to the Trustees upon the trusts set forth in this trust agreement in consid- eration of the acceptance of such trusts by the Trustees, and of the issue and delivery by the Trustees to the Vendors of 626 Trusts for Business Purposes. certain five per cent, bonds and of certificates of certain pre- ferred participation shares and of certain common participa- tion shares, all as hereinafter more particularly described; and Whereas, the trust hereby created is to be entitled and des- ignated "Chicago City and Connecting Railways Collateral Trust :" Now, therefore this indenture witnesseth that in considera- tion of the premises and of the mutual covenants and agree- ments herein contained and the expected performance thereof, and of the sum of one dollar by them duly received from the Trustees, and for the purpose of creating such Chicago City and Connecting Railway Collateral Trust; The Vendors have sold, assigned, transferred and set over, and by these presents do sell, assign, transfer and set over, unto The trustees, parties of the second part hereto, the survi- vors and survivor of them and their successors, as joint ten- ants and not as tenants in common : I. All and singular the following shares of stock of the several corporations, and of the aggregate par value, specified respectively the certificates of which several shares of stock are herewith delivered to the Trustees to wit : Shares. 169,719 Chicago City Railway Company (an Illi- nois corporation) $16,971,900 50,000 Calumet and South Chicago Railway Company (an Illinois corporation) 5,000,000 8,000 Southern Street Railway Company (an Illinois corporation) 800,000 10,000 Hammond, Whiting and East Chicago Appendix. 627 Railway Company (an Indiana corpo- ration) 1,000,000 720 Chicago and Western Railway Com- pany (an Illinois corporation) 72,000 $23,843,900 II. Also, all and singular the following mortgage bonds of the several corporations, and of the aggregate par values, specified respectively, which bonds herewith are delivered to the Trustees, to wit: Par Value Calumet and South Chicago Railway Company (Consolidated Mortgage) $5,000,000 Hammond, Whiting and East Chicago Railway Company (First Mortgage) 1,000,000 Southern Street Railway Company (First Mort- gage) 1,600,000 Chicago and Western Railway Company (First Mortgage) 74,000 $7,674,000 And it is understood and agreed that in case the Vendors shall not deliver to the Trustees the full amount of the bonds in the foregoing clause II scheduled as being transferred to the Trustees, the Vendors shall have the right to deliver in lieu of any such bonds and to cover any such shortage, cash for each such bond equal to the par value thereof ; which case from time to time thereafter shall be repaid to the Vendors in corresponding amounts upon their delivery to the Trustees of the bonds in lieu of which such cash deposit shall have been made. Pending the engraving of the certificates of any stock or I 628 Trusts for Business Purposes. of any bonds constituting any part of the above described securities, or any securities at any time exchanged or substi- tuted therefor or any part thereof, the Vendors may deHver to the Trustees, printed certificates or printed bonds, substan- tially in the form proposed for the permanent certificates of stock or bonds. Without unnecessary delay, the Vendors will cause to be prepared engraved certificates of stock and bonds to be exchanged for said printed certificates of stock and bonds : To have and to hold, unto the Trustees, the survivors and survivor of them, and their successors, as joint tenants and not as tenants in common, all and singular, the said shares of capital stock and the said bonds, and any and all shares of stock, bonds or other property for which the said shares of stock or said bonds, or any of them, at any time may be ex- changed, or which at any time may be received by the Trus- tees as the holders of such shares of capital stock or such bonds, and also any and all moneys or other personal prop- erty resulting therefrom which pursuant to the provisions hereof shall come into the hands of the Trustees as part of the trust estate — all of which personal property hereinafter sometimes is termed the "trust fund" — with all the rights and powers of stockholders or bondholders or owners of such stock or bonds or personal property, and, as hereinafter pro- vided, with full power of sale or other disposition of all or any part thereof, for and during the lives of the following named eight persons — to wit, James B. Forgan, John J. Mitch- ell, E. K. Boisot, Harrison B. Riley, John A. Spoor, Edward Morris, Samuel Insull and Ira M. Cobe — and the life of the last survivor of said persons, and for and during the period of twenty years next ensuing after the death of such sur- vivor unless such sooner shall be determined. Appendix. 629 But in trust, nevertheless, to hold and dispose of the said trust fund, and to collect and receive the proceeds and in- come thereof and to apply and use the said trust fund, proceeds and income, as in this trust agreement provided, first, for the payment of the principal and interest from time to time of the said five per cent bonds, and thereafter for the benefit of the two several classes of holders of participation shares, viz. (i) the holders from time to time of the pre- ferred participation shares, and (2) the holders from time to time of the common participation shares — according to the interests and rights and the limitations thereof, severally and respectively, of each of such two classes, collectively, relatively to the others, but without preference, priority or distinction of any holder of any class over any other holder of the same class, but in every case according to the covenants and pro- visions, and subject to the conditions and limitations in this trust agreement contained and expressed, that is to say : Article One. Section i. The Trustees, in their collective capacity may be designated as the "Chicago City and Connecting Railways Collateral Trust," and in that name any business of the trust may be conducted, and any instruments of writing connected with the trust or its performance may be executed by the Trustees "as Trustees under the Trust Agreement dated Janu- ary I, 1910, creating the Chicago City and Connecting Rail- ways Collateral Trust, and not individually." Section 2. The Committee from time to time constituted under the provisions of this trust agreement or such of their number as may be empowered to act in behalf of the Commit- tee, hereinafter called the "Committee," shall possess and 630 Trusts for Business Purposes. may exercise the powers and authorities of the Committee hereinafter set forth; and any and all such acts or proceedings in respect of the trust fund or the respective interests therein, from time to time done or taken by the Committee, shall bind accordingly the holder at the time being of each and every participation share, and the heirs, executors, administrators, successors and assigns of such holder, as fully as if each such holder had expressly authorized and assented to each such act or proceeding in the premises. Section 3. The trustees shall have power to perform any act and to execute and deliver any instrument in writing in the premises which they may be instructed to perform or to execute and deliver by the Committee, acting in exercise of the police powers and authority upon it conferred as herein- after expressed. Section 4. The beneficial interest in the trust fund and in the proceeds of the trust fund, and in the income and net income of the trust fund (the several terms, "proceeds of the trust fund," "income of the trust fund," and "net income of the trust fund," being hereinafter in this article defined) shall be, and during the continuance of this trust shall remain (subject to the prior obligation of the outstanding five per cent bonds to be secured by the collateral trust indenture, dated January 3, 1910, mentioned hereinafter), in the holders of the outstanding preferred participation shares and in the holders of the outstanding common participation shares, sev- erally and respectively, according to the relative interests, preferences and rights, and the limitations thereof, set forth and provided in this trust agreement, or expressed or referred to, respectively, in the certificates of such preferred participa- tion shares, or in the certificates of such common participation shares. Appendix. 631 Section 5. For the purpose of payment of the principal of the interest of the five per cent bonds secured by the collat- eral trust indenture, dated January 3, 1910, the "proceeds of the trust fund" and "income of the trust fund" shall be deemed to be and shall be the amounts from time to time as- certained as provided in the collateral trust indenture securing said bonds. Section 6. For the purpose of making payments upon the participation shares, "the net income of the trust fund" for each fiscal year ending December 31, shall be deemed to be the sum which shall have been ascertained by deducting from the gross income however derived for such fisal year received from said trust fund, by the Trustees the following prior charges — all of which shall be paid, or provision for the pay- ment thereof shall be made, before any payments on the par- ticipation shares — to wit: (i) All expenses and losses in- curred in connection v*^ith the conduct or administration of the trust in such fiscal year, including, as part of such ex- penses, the compensation of the Trustees, their agents and employees, the compensation and re-imbursement for expenses of the trustee and the sinking fund trustee under the col- lateral trust indenture, dated January 3, 1910, the compen- sation of the Committee, and their agents and employees, gen- eral expenses, and all other expenses and losses, including the indemnification of the Trustees and the Committee against any Hability by them incurred in the discharge of their duties under the several trusts herein expressed; (2) all the sums paid or reserved for taxes and assessments, ordinary and ex- traordinary, for such fiscal year upon the property consti- tuting the trust fund, or the interest therein of the trustee under the collateral trust indenture, dated January 3, 1910, or the interest therein of the holders of any of the bonds 632 Trusts for Business Purposes. issued under such collateral trust indenture; (3) all sums paid or reserved for interest for such fiscal year on bonds which shall have been issued and shall be outstanding under the said collateral trust indenture, dated January 3, 1910; (4) all sums paid or reserved on account of the installments for such fiscal year of the sinking fund payment provided for in said collateral trust indenture dated January 3, 1910; (5) in- terest on all bills payable and other indebtedness payable out of the trust fund — all of such foregoing payments and ex- penses being chargeable upon and being payable out of the principal of the trust fund to the extent that the income thereof shall be insufficient to defray the same — and (6) an annual sum not exceeding $100,000 to be fixed pursuant to the provisions of Section 2 or Article Four of this trust agree- ment. Such "net income," determined as aforesaid, from time to time shall be ascertained and be declared by the Committee, and for all the purposes of this indenture, and of every cer- tificate issued thereunder, the amount thereof as so ascertained and declared, shall be deemed and be taken to be "the net income of the trust fund" of the Chicago City and Connect- ing Railways Collateral Trust, and the Trustees shall be au- thorized to rely thereupon, and shall not be bound to verify the same or to make any examination with reference thereto. Article Two. Section i. Forthwith upon the execution and delivery of this trust agreemenrt, the Trustees will enter into a collateral trust indenture, with First Trust and Savings Bank, of the city of Chicago, state of Illinois, substantially in the form of the instrument in writing hereto annexed, marked "Schedule", Appendix. 633 and, as part of the same transaction, will assign, transfer and deliver to, and pledge with, said First Trust and Savings Bank all and singular the stocks and bonds scheduled in the paragraphs numbered I and II of the assigning clause of this trust agreement, or the cash thereunder substituted for any of said bonds, to have and to hold the same unto the said First Trust and Savings Bank, its successor and successors and assigns, forever, but in trust to secure and to provide for the payment of certain bonds (herein sometimes termed five per cent bonds), payable January i, 1927, and bearing interest at the rate of five per cent per annum, and being in the form and of the tenor and effect set forth in said collateral trust indenture, for an aggregate principal sum not exceeding $22,000,000, at any one time outstanding, which bonds are to be signed by or on behalf of the Trustees under this trust agree- ment, and are to be authenticated by the trustee under said collateral trust indenture, and are to be issued and delivered, received and transferred, subject to the covenants, conditions and provisions set forth and contained in said collateral trust indenture and in this indenture. All of the provisions of said proposed collateral trust indenture, hereby are made a part of this trust agreement so far as concerns the rights of the holders of said bonds as in this trust agreement declared and so far as concerns the rights, interests, privileges and immu- nities of such bondholders and of the trustee under said col- lateral trust indenture. Section 2. Upon the execution of said collateral trust in- denture dated January 3, 19 10, the Trustees hereunder shall sign, or shall cause to be signed in their behalf, five per cent bonds, in the form authorized to be issued under said col- lateral trust indenture, for the aggregate principal sum of $22,000,000, and shall deliver the same to the trustee under 634 Trusts for Business Purposes. said collateral trust indenture for certification by it. As pro- vided in said collateral trust indenture, the trustee there- under shall be authorized to redeliver any and all such bonds, when so certified, to or upon the order of the Trustees, and in no event shall it be bound further to see to the application of any such bonds or their proceeds. Such bonds for the aggregate principal sum of $21,440,000 upon such certifi- cation, from time to time shall be deliverable upon the order of the Vendors. The remaining $556,000 of bonds shall be de- livered to the Trustees, or upon their order, and shall be sold by the Trustees at and for the price of ninety per cent of the par value, plus accrued interest to the date of sale, and from time tc> time the proceeds thereof shall be used and applied as shall be directed by the Committee. Section 3. The said bonds as herein and in said collateral trust indenture provided, as to both principal and interest, shall be payable only cut of the principal or proceeds and the in- come of the property from time to time held by the trustees under said collateral trust indenture, and no personal liability on the part of the Trustees, or of any person interested, bene- ficially or otherwise, in the trust fund, shall arise out of or be enforcible because of the making, issuing or transfer of said bonds, or any thereof. Section 4. The holders from time to time of the said five per cent bonds and the interest obligations appertaining thereto to the extent of the principal and interest thereby represented shall have the right, as provided in said collateral trust in- denture, through the trustee thereunder or otherwise, to en- force the performance of the covenants contained in said bonds or in the collateral trust indenture securing the same out of and against the said trust fund but not otherwise and the interests therein of any of the beneficiaries hereinafter desig- Appendix. 635 nated, but not against the Trustees or any beneficiary, indi- vidually. Article Three. Section i. Subject to the prior obligations of the five per cent bonds as in Article Two of this trust agreement ex- pressed, and subject to the right of the Trustees to apply, or the right of the Committee to direct the application by the Trustees of, any part or all of the income or proceeds of the trust fund, or any part of the trust fund consisting of cash, to or for the uses or purposes expressed in Section 2, of Article Four of this trust agreement, and subject also to the prior payment of the several charges above mentioned in Sec- tion 6 of Article One, the sole beneficial interest in the trust fund and in the net income and proceeds thereof, shall be and during the continuance of this trust shall remain in the owners from time to time of transferable shares of beneficial interest. In the first instance, the ownership of all of such shares of beneficial interest, shall be in the Vendors, and the cer- tificates of such shares, to be issued by the Trustees as here- inafter provided, shall be in the name of and shall be de- livered to, the Vendors or their nominees. Section 2. Such shares of beneficial interest (hereinafter called "participation shares") shall be two classes, to wit, pre- ferred participation shares and common participation shares. The number of the preferred participation shares shall be two hundred and fifty thousand. The number of the common participation shares shall be one hundred and fifty thousand, and also such additional num- ber as from time to time may be authorized as in Section 4 of this article provided. 636 Trusts for Business Purposes. For convenience, the income payments on such participation shares are herein termed "dividends." The relative rights and interests, and the limitations thereof, of the holders of the preferred participation shares and of the holders of the common participation shares, shall be as follows : The holders of the preferred participation shares shall be entitled to receive, out of the net income (as the term "net income" is defined in this trust agreement) applicable to such purpose, theretofore received by and then under the control of the Trustees, from the bonds, stocks and other securities from time to time constituting the trust fund subject to this trust agreement, dividends at the rate of $4.50 per annum on each such share, payable in semi-annual installments on the first day of January and the first day of July in each year. Such dividends shall be cumulative, and the moneys therefor shall be paid or shall be set apart for payment before any dividend on the common participation shares shall be paid or set apart; so that if in any year dividends amounting to $4.50 shall not have been paid upon any preferred participation shares, the deficiency shall be paid before any dividend shall be paid upon or be set apart for the common participation shares. Whenever in any year after all such cumulative dividends in respect of the preferred participation shares for all previ- ous years shall have been paid, and the semi-annual instal- ments for the current year shall have been paid or set apart for payment, any such applicable net income shall remain in the possession and under the control of the Trustees, such remaining applicable net income to such amount or amounts as the Committee may direct or approve, but not in any such year exceeding $600,000, shall be distributed and be paid, as App]5;ndix. 637 a non-cumulative dividend ratably among and to the holders of the common participation shares. Whenever in any year, after the sum of $600,000 shall have been so divided among, and shall have been paid or the amount thereof shall have been set apart for payment, ratably on the common participation shares, any of such applicable net income shall remain in the possession and under the con- trol of the trustees, such remaining applicable net income to such amount or amounts as the Committee shall direct or approve but not in any such year exceeding $1,000,000, shall be distributed and paid, as a non-cumulative additional divi- dend to and among the holders of the participation shares ; both preferred and common, in the following proportions, to wit: Five-eighths of any such residuary sum ratably among and to the holders of the preferred participation shares, and three-eighths thereof ratably among and to the holders of the common participation shares. In every year in which such last mentioned non-cumulative dividend therein of $1,000,000 shall have been paid as afore- said, or the amount thereof set aside for payment as afore- said, the holders of the common participation shares shall be entitled ratably to receive out of any and all further applicable net income remaining in such year, such amount or amounts as from time to time the Committee may direct or approve. Upon any distribution by the undersigned Trustees of the stocks, bonds or other securities constituting the trust fund, or the proceeds thereof, in accordance with the terms of this trust agreement, before any amount shall be paid to the hold- ers of the common participation shares, the holders of the preferred participation shares shall be entitled to receive in respect of every such share the sum of $100 and also the ainount of any accrued and unpaid, and the accrued propor- 638 Trusts for Business Purposes. tion of the currently accruing, semi-annual installment of the $4.50 cumulative dividend, and after such amounts shall have been paid to the holders of the preferred participation shares and not otherwise, the remainder of such trust fund, or the net proceeds thereof (after the payment of all charges thereon or in respect thereof) shall be distributed and be paid to the holders of the common participation shares ratably according to their respective interests. The registered holders of the preferred participation shares shall have the same ratable right (if any) as the holders of the common participation shares to subscribe for and to take additional common participation shares in case of any future increases in the number thereof and if the opportunity to sub- scribe therefor shall be offered to the holders of participation shares. Section 3. The Trustees shall issue certificates of such pre- ferred participation shares and such common participation shares which certificates, respectively, shall be in substan- tially the following form (the blanks therein being appropri- ately filled), to wit: (Form of Preferred Participation Certificate.) No shares. Chicago City and Connecting Railways Collateral Trust. Trustee's Certificate of Preferred Participation. The undersigned, as Trustees under a trust agreement dated January i, 1910, creating the trust called Chicago City and Connecting Railways Collateral Trust, do hereby certify that is the owner of preferred partici- pation shares of the beneficial interest specifically described in said trust agreement. The holders of the preferred participation shares shall be entitled to receive, out of the net income (as the term "net Appendix. 639 income" is defined in said trust agreement) applicable to such purpose, theretofore received by and then under the control of the undersigned Trustees from the bonds, stocks and other securities from time to time constituting the trust fund sub- ject to said trust agreement, dividends at the rate of $4-50 per annum on each such share, payable in semiannual install- ments on the first day of January and the first day of July in each year. Such dividends shall be cumulative, and the moneys therefor shall be paid or shall be set apart for pay- ment before any dividend on the common participation shares shall be paid or shall be set apart for payment before any divi- dend on the common participation shares shall be paid or be set apart; so that if in any year preferential dividends amount- ing to $4.50 shall not have been paid upon any preferred participation shares, the deficiency shall be paid before any dividend shall be paid upon or set apart for the common participation shares; and as stated in said trust agreement, the holders of such preferred participatiqn shares shall be entitled also to preference upon any distribution of the trust fund or the proceeds thereof. Under the provisions of said trust agreement, the holders of certificates of participation shares registered as in said trust agreement required, will be entitled to exercise certain voting powers, limited relatively as between the preferred participation shares and the common participation shares, as well as in other respects; and they shall possess also certain other dividend rights, all as specified in the said trust agree- ment. All the provisions of said trust agreement are hereby made a part hereof, in all respects and with like efi'ect as though the same were herein set forth at length; and except only as in said trust agreement mentioned and provided, this certifi- 640 Trusts for Business Purposes. cate confers no rights, powers, privileges or interest. The participation shares represented by this certificate are transferable only upon the books of the Trustees, in person or by attorney, upon surrender of this certificate. This cer- tificate shall not become or be valid until countersigned by the Registrar of Transfers. In testimony whereof, the Trustees have signed this cer- tificate by their agent duly authorized this day of As Trustees under the Trust Agreement Dated January i, 19 10 Creating the Chicago City and Connecting Railways Collateral Trust, and Not Individually. By , Their Agent duly authorized. (Form of Common Participation Certificate.) No Shares. Chicago City and Connecting Railways Collateral Trust. Trustees' Certificate of Common Participation. The undersigned, as Trustees under a trust agreement dated January i, 19 10, creating the trust called Giicago City and Connecting Railways Collateral Trust, do hereby certify that is the owner of common participa- tion shares of the beneficial interest specifically described in said trust agreement. The rights of the holders of common participation shares are subject to the prior rights of the holders of the preferred par- ticipation shares, as set forth in said trust agreement. The number of the common participation shares may be in- Appe:ndix. 641 creased in the manner, and subject to the provisions, set forth in the said trust agreement. Under the provisions of said trust agreement, the holders of certificates of participation shares registered as in said trust agreement required, will be entitled to exercise certain voting powers, limited relatively as between the two classes as well as in other respects, all as specified in the said trust agreement. All the provisions of said trust agreement are hereby made a part hereof, in all respects and with like effect as though the same were herein set forth at length ; and except only as in said trust agreement mentioned and provided, this certificate confers no rights, powers, privileges or interest. The participation shares represented by this certificate are transferable only upon the books of the Trustees, in person or by attorney, upon surrender of this certificate. This certificate shall not become or be valid until countersigned by the Regis- trar of Transfers. In testimony whereof, the Trustees have signed this certifi- cate by their agent duly authorized this day of As Trustees under the Trust Agreement Dated January i, 19 10, Creating the Chicago City and Connecting Railways Collat- eral Trust, and not individually. By.. ., Their Agent duly authorized. Each of such certificates, in the appropriate blanks therefor, respectively, shall recite the name of the holder, and the num- ber of participation shares represented by such certificate. No certificate shall be issued to represent less than one whole participation share of either class. 642 Trusts for Business Purposes. Such certificates may be signed by the Trustees, or in their behalf by their agent authorized as provided in section 2 of Article Five of this trust agreement. From time to time, the committee may direct tliat such certificates shall bear also the counter signature of the secretary of the Committee. The persons or corporations who from time to time shall be Trustees or Trustee under this trust agreement, either in their or its own name as such Trustees or Trustee, or in the names of the said parties of the first part may cause to be signed, and may issue any and all certificates of participation shares which theretofore shall not have been signed by or in behalf of the parties of the first part. On the back of each such certificate shall be endorsed a form of transfer of the particijmtion shares represented thereby, sub- stantially as follows : For value received, hereby sell, assign and transfer participation shares represented by the within Certificate to , subject to the terms and conditions of the trust agreement within referred to, and to all rules concerning such transfer which have been, or from time to time, or at any time, may be established by the within named Trustees; to which trust agreement and rules, the transferee and every holder hereof does assent by the acceptance of this transfer; and do appoint attorney to transfer said certificate on the books of said Trustees accordingly, with full power of substitution in the premises. Dated this day of 19 . . . (Seal) In the presence of , Witness. Section 4. From time to time, and at any time during the continuance of the trust, the registered holders of a majority Appendix, 643 of the total number of common participation shares, either by a writing signed by them and duly acknowledged or proved in the manner provided by law in respect of the execution of deeds of real property to be recorded in 'the state of Illinois, or by vote at a meeting of the holders of participation shares held as in this trust agreement provided, may authorize the Trustees to increase the number of the common participation shares in the amount specified in such writing or in such vote, and ac- cordingly to issue certificates thereof in substantially the same form as the certificates of the common participation shares then outstanding. Such writing or such vote also may specify the terms and the consideration on and for which the Trustees mav sell or otherwise may dispose of such additional shares, and in the absence of any such specification the Trustees may sell or otherwise may dispose of such additional shares on such terms and for such consideration as may be stated and fixed by the Committee, and without offering to the holders of participation shares the opportunity of subscribing for such additional shares. Any and all action taken by the Trustees pursuant to the pro- visions of this section shall bind the holders of each and every of the participation shares, as though all of them had expressly assented thereto. Section 5. The Trustees shall keep, or shall cause to be kept in the city of Chicago, state of Illinois, or in the city of New York, state of New York, or in each of said cities, transfer books in which shall be registered the names of the several hold- ers of the participation certificates, together with the post-office address of each as given by him for such purpose. Such par- ticipation certificates shall be transferable only on such books of the Trustees, to be kept by them or under their direction in the city of Chicago, state of Illinois, or in the city of New York, state of New York, upon due execution of a transfer 644 Trusts for Business Purposes. substantially in the form endorsed on the back of such certifi- cates, and on surrender thereof, by the registered holder in person or by attorney duly authorized, and in accordance and upon compliance with such rules and requirements as from time to time or at any time the Trustees may establish or pro- mulgate. Until so transferred, the Trustees and all other per- sons may treat the registered holders as the owners of said participation certificates for all purposes whatsoever, and none of them shall be affected by any notice to the contrary. The said transfer books may be directed to be closed by the Trustees and accordingly the same shall be closed at and during any period prior to the date of any dividend or distribution upon the participation shares, or prior to the date of any meet- ing of the holders of the participation shares. The Trustees shall close the transfer books also at any time and for such period as the Committee shall request. Section 6. All certificates before issue, shall be registered by a trust company of the city of Chicago from time to time designated in writing, by the Trustees, as the register of trans- fers, and such registration shall be noted on the certificates. The Trustees may appoint also a trust company in the city of New York as the registrar of transfers and such registration shall be noted on the certificates. No such participation certifi- cates, unless so registered by the registrar of transfers in Chi- cago, or the registrar of transfers in New York, shall be of any validity or shall be entitled to share in the benefits of this trust agreement. The Trustees from tim.e to time, may appoint one or more transfer agents in Chicago, and one or more transfer agents in the city of New York. The registrar of transfers in Chicago may act also as transfer agent in New York. The registrar of AppiiNDix. 64s transfers in New York may act also as transfer agent in Chicago. The Trustees, by an instrument in writing, signed by them, from time to time and at any time may appoint another trust company in Chicago or in New York to act as registrar of transfers in Chicago, or New York, respectively, in place of the registrar of transfers theretofore appointed, and may ap- point successors to the transfer agent, or agents, in Giicago, or New York, theretofore appointed. Section 7. Pending the preparation of the engraved certifi- cates to be issued under this trust agreement, the Trustees may issue and deliver printed certificates substantially in the form of the definitive certificates hereinbefore recited, and each of said printed certificates shall be marked "Temporary." Such temporary certificates shall be registered by the regis- trar or transferred in the same manner as herein provided in re- spect of the engraved certificates. Such temporary certificates duly issued and registered here- under from time to time, shall be exchangeable, at the ofiice or agency of the Trustees in the City of Chicago, without expense to the holder, for engraved certificates. Such temporary cer- tificates, until engraved certificates are prepared for delivery, shall be transferable in the same manner as the certificates. Without unnecessary delay the Trustees will cause to be pre- pared such engraved certificates, to be exchanged for such tem- porary certificates, upon surrender thereof to the Trustees. Section 8. In case any certificate shall become mutilated, or shall be lost or destroyed, the Trustees, on evidence satisfactory to them that it has been mutilated, lost or destroyed and on such terms if any as to indemnity and otherwise as the Trustees shall deem proper, may issue a new certificate in the name of the registered holder of such former certificate. 646 Trusts for Business Purposes. Section 9. Every transfer (otherwise than by operation of law) of any certificate and the said participation shares repre- sented thereby shall be in writing (substantially in the form hereinbefore recited) under the hand of the registered holder, and upon delivery of such writing together with the existing cer- tificate to the Trustees or their transfer agent, such transfer shall be recorded on the transfer books, and a new certificate for such shares so transferred shall be given to the transferrer, and in case of a transfer of a part only of the shares represented by the certificate, a new certificate for the untransferred shares shall be given to the transferrer. Until the transfer shall be so delivered and recorded, the registered holder of a certificate shall be deemed to be the holder of the participation shares thereby represented for all the purposes of the trusts hereof and neither the Trustees nor the Committee shall be affected by any notice of any unrecorded transfer. Section 10. Whenever in consequence of the death, bank- ruptcy or insolvency of the holder of any certificate, or in any way other than by a transfer in accordance with the preceding Section 9, any person shall become entitled to any certificate, and shall produce proper evidence of his title and shall surren- der such certificate to the Trustees or their transfer agent, he shall be registered in the transfer books as the holder of the shares represented by such surrendered certificate and shall re- ceive a new certificate for the same. Section 11. Certificates and the interests thereby repre- sented shall be personal property and the certificates shall en- title the holders thereof only to the rights and interests in the trust fund as set forth in this trust agreement. Section 12. Two or more persons holding any certificate shall be joint tenants of the entire interests represented thereby and no entry shall be made in any certificate or in the transfer Appendix. 647 books that any person is entitled to any future limited or con- tingent interest in any certificate. But subject to the provisions hereinafer contained, any person registered as the holder of any certificate may be described therein as a trustee of any kind, and words may be added to the description to identify the trust. Section 13. The Trustees shall not, nor shall the Committee or any transfer agent or other agent of the Trustees or the Committee, or the holder of any certificate, be bound to take notice of any trust whether express, implied or constructive, or of any charge or equity concerning any certificate or the inter- est in the trust fund of the holder of any certificate. Except as noted in the certificate or in the transfer book, neither shall they be bound to ascertain or inquire as to the authorit)'- for any sale or transfer of any such certificate or interest by any registered certificate holder or his personal representatives, or to recognize any person as having any interest therein except the persons registered as such certificate holders. The receipt or voucher of the person in whose name any certificate is regis- tered, or if such certificate be registered in the names of more than one person, the receipt or voucher of any one of such persons, shall be a sufficient discharge for all dividends and other money payable in respect of such certificate and from all responsibility in respect of the application thereof. Section 14. Unless express notice to the contrary shall have been received by the Trustees, they may deem and may treat any person who shall present a participation certificate, together with a transfer thereof signed by the registered holder of such certificate, as the bona fide owner of such certificate, and ac- cordingly on demand they may transfer the shares thereby represented. 648 Trusts for Business Purposes. Article Four. Section i. Subject to the paramount rights of the First Trust and Savings Bank or its successor, as trustee under the collateral trust indenture securing the five per cent bonds, and of the holders of such bonds under the provisions of said in- denture as creditors, the Trustees shall receive all interest, divi- dends or income of the trust fund; and, first, after the ascer- tainment and determination of "the income of the trust fund" as provided in the collateral trust indenture securing the five per cent bonds, from time to time shall apply such income to the payment of the interest on said bonds, as and when the same shall become due and payable, and to the payment of the annual sinking fund installment as and when required to be paid by said collateral trust indenture; and, next, after the ascertain- ment and determination of the amount of "the net income of the trust fund" as provided in Section 6 of Article One of this trust agreement, and after the making of the several payments, provisions and reser\^ations specified in said Section 6 of Article One, from time to time shall apply such "net income of the trust fund" to the payment of the sums distributable to the holders of the participation shares according to the relative rights and limitation of rights of the two classes of such shares, as herein specified. Section 2. So far as lawfully may be done, in any year, after payment of the interest due on the five per cent bonds, and the sinking fund installment for the then current year, the Trus- tees may, and upon the request of the Committee, the Trustees shall, set apart out of the "net income of the trust fund," as and for a "surplus fund," such sums if any, not to exceed $100,000 in any one fiscal year, as the Committee ■ may direct. Such "surplus fund," shall be applied and be used by the Appendix. 649 Trustees, from time to time upon the direction or approval of the Committee, in such way and for such purposes (v/hich may- include the payment of the cumulative semi-annual dividends of $2.25 per share on the preferred participation shares), as the Committee shall deem advisable. Out of the proceeds of any or all of the $556,000 of five per cent bonds hereinabove authorized to be sold by the Trustees, the Trustees shall pay all expenses connected with the organiza- tion of this trust, including the preparation of all writings or instruments incident thereto, the preparing, engraving, issuance and certification of the five per cent bonds and the certificates of preferred shares and common shares herein provided for, and they may add the balance remaining to the aforesaid "surplus fund." From time to time upon the request of the Committee the Trustees shall pay to the Committee or its order, out of any funds in the hands of the Trustees available for tliat purpose, such sums or amounts as the Committee shall in writing re- quest for use by the Committee in payment and discharge of expenses, obligations and liabilities incurred by or on behalf of the Committee in the administration of this trust. Anything in this trust agreement to the contrary notwith- standing all income of the trust fund shall be distributed in accordance with the provisions of this indenture on or before January i, 1931. Section 3. In the event that any bond constituting part of the trust fund shall be paid or be redeemed, or in the event that the property of any of the corporations, whose capital stock, or any part thereof, at any time shall constitute any part of the trust fund, shall be sold, and the proceeds thereof dis- tributed to the holders of the capital stock of such corporation, and as a result thereof any moneys shall come into the hands 650 Trusts for Business Purposes, of the Trustees, or in the event that any of the capital or the principal represented by any of the trust fund securities or any part thereof shall be distributed or be paid over to the Trustees — then, in any such event, any amount or amounts so received or distributed or paid over shall be applied by the Trus- tees, first to the prepayment or redemption of the five per cent gold bonds, or otherwise, in accordance with the provisions of the collateral trust indenture, securing such bonds; and (sub- ject to the reservations above stated in section 6 of Article One of this trust agreement) ; second, ratably to and among the holders of preferred participation shares then outstanding until the sum of $100 shall have been paid v.-ith respect to each of the said preferred shares, together with any accrued and unpaid semi-annual cumulative dividends of $2.25 per share and the proportionate amount then accrued of such dividend then cur- rently accruing ; and third, ratably to and among the holders of common participation shares. Section 4. Whenever the full amount payable upon any preferred participation shares as specified in the preceding section 3 of this article shall have been paid, or the amount thereof shall have been set aside for payment when and as called for by the holders of such shares, then and thereupon all interest of the then present or any future holders of such shares, or of any certificate thereof, in the trust fund, or in any income realized therefrom, forthwith shall cease and determine, and the certificate representing every such share shall be surrendered to the Trustees, and shall be cancelled and not reissued. Section 5. In case any sums amounting to less than $100 on account of principal or capital shall have been paid upon any preferred participation share, or shall have been set aside for payment thereon upon the order of the holder thereof (no such payment, however, to be made except upon production of the Appendix. 651 certificate, in order that the amount of any such payment may be stamped thereon), the amount to which the holder of such certificate thereafter shall be entitled, with respect to each of said shares represented by such certificate, either on account of dividends or principal, shall be reduced in the proportion that the aggregate amount of all such payments on account of cap- ital or principal shall bear to $100. Section 6. Nothing in this trust agreement or in any partici- pation certificate issued hereunder, either expressed therein or to be implied therefrom, is intended or shall be construed to give to any person or corporation other than the parties hereto, the trustee under the collateral trust indenture securing the five per cent bonds, the holders of such bonds, and the holders of participation certificates issued under this trust agreement and registered as herein provided, any legal or equitable right, rem- edy or claim under or in respect of this trust agreement, or any covenant, condition or provision herein contained, or any right, title, or interest in or to any property herein described or subject to the provisions hereof ; all the covenants, provisions and conditions of this trust agreement and of said participation certificates being intended to be, and being, for the sole and exclusive benefit of the parties to this trust agreement and the several other persons in this section mentioned. Section 7. Subject to the provisions of the indenture secur- ing the five per cent bonds, the Trustees shall have the right to vote upon any and all shares of stock constituting any part of the trust fund, at any and all meetings, regular or special, of the corporation or corporations issuing such stocks ; and, sub- ject to the terms and provisions of this trust agreement, the Trustees may take any action or may give or execute any con- sent or may take any step which the owners of such stock would be entitled or authorized to take, give or execute, with 652 Trusts for Business Purposes. the same force and effect as though at the time the Trustees were the absolute owners of such stock; and from time to time the Trustees may give proxies to any person or persons to vote such stock ; but in voting upon any of such stock the Trustees shall follow the directions or instructions, if any, that may be given to the Trustees by the committee, and shall cause their proxies also to follow such directions or instructions. In voting or in causing to be voted any such stock, the Trus- tees (and Committee when giving any such written directions or instructions to the Trustees), from time to time will exer- cise their best judgment to elect suitable directors of the cor- poration issuing such stock, to the end that the affairs of such corporation shall be properly managed. In voting and in act- ing on any other matters which shall come before the Trustees as stockholders, or at stockholders' meetings, the Trustees (and the Committee when giving any such written directions or in- structions to the Trustees), likewise will exercise their best judgment. Nevertheless, the Trustees assume no personal re- sponsibility, and shall be under no personal obligation in respect of such management or in respect of any action by them taken or taken in pursuance of their consent thereto as such stock- holders or in pursuance of their votes cast. Section 8. Any income of the trust over and above the in- come derived from the stocks, bonds, or other securities held by the trustee under the collateral trust indenture securing the five per cent bonds, shall be applied and be used by the Trus- tees, in such manner as the Committee shall request, not in dis- regard of any express provision of this agreement. Section 9. In case the Trustees shall acquire any interest in real estate, as proceeds or income of the deposited securities, they shall hold the same, subject to the terms of this trust agree- ment, for sale or other conversion into personal property; and, Appendix. 653 at all times, all such real estate sliall be considered and be treated as personal property for the purposes of this trust. Section 10. Any of the Trustees may purchase, acquire and own any of the five per cent bonds or any of the participation shares free from accountability with respect thereto, and may deal therein in all respects the same as any other person, either with any holder of such bonds or with any holder of such par- ticipation shares, or with any other person. Section 11. At any time prior to the happening of the event hereinbefore fixed for the termination of this trust, upon the written request of a majority of the members of the Committee and of the trustee under the collateral trust indenture securing the five per cent bonds, or of such majority and of the trustee under any instrument securing any bonds issued to pay of? said five per cent bonds as hereinafter provided, the Trustees shall terminate this trust, and shall sell and dispose of the trust fund, upon such terms as shall be approved by the Com- mittee and such trustee; provided, always, however, that, in event of any such termination of this trust, the trust fund never shall be so sold or disposed of except on such terms as after payment of all prior costs, charges and expenses, will produce cash sufficient to pay at par the principal and interest of all said five per cent bonds at the time outstanding, or of all of the then outstanding bonds issued for the purpose of pay- ing oflf said five per cent bonds as hereinafter provided. In the event of any such sale or disposition of the trust fund, the net proceeds shall be applied by the Trustees, first, to the prepay- ment at par of the then outstanding five per cent bonds, or of any then outstanding bonds issued to pay off said bonds, in accordance with the indenture securing the bonds, so paid ; and (subject to the reservations above specified in section 6 of Article One of this trust agreement), second, ratably to and 654 Trusts for Business Purposes. among the holders of preferred participation shares, then out- standing, until (including any previous payments) the sum of $100 shall have been paid with respect to each of the said shares, together with accrued and unpaid semi-annual cumula- tive dividends of $2.25 per share and the proportionate amount then accrued of such dividend then currently accruing; and third, ratably to and among the holders of the common partici- pation shares. In case said trust fund shall be so sold and disposed of partly for cash (sufficient in amount to pay the principal and interest of said bonds as hereinbefore provided), and partly for securities or other property, the Committee ( i ) shall place a valuation upon such securities or property, and in case such valuation shall be approved in writing by every Trus- tee, such securities and other property shall be distributed in kind to the holders of the participation shares as hereinbefore provided ; but otherwise such securities and other property shall be sold at public auction and the proceeds thereof shall be distributed to the holders of said participation shares as afore- said. Any valuation so made by the Committee with the ap- proval of the Trustees and any sale so made by the Trustees shall be conclusive upon all persons interested in the trust fund. At any such sale at public auction, any Trustee, or any member of the Committee, without further accountability (except for the purchase price) may bid for and purchase any property so sold. If, pursuant to the provisions of the ordinance of the city of Chicago in respect of the Chicago City Railway Company, passed February 11, 1907 the city of Chicago or its authorized licensee shall purchase the property of the Chicago City Rail- way Company, the Trustees shall terminate this trust, and thereupon shall sell and dispose of the residue of the trust fund upon such terms as shall be approved by the Committee. In Appe;ndix. 655 event of such termination of this trust, the net proceeds of the trust fund shall be applied, first (a) in case of such purchase under the terms of said ordinance by the city of Chicago, to the prepayment at par and interest of the then outstanding five per cent bonds, or (b) in case of such purchase under the terms of said ordinance by the authorized licensee of the city of Chicago, to the prepayment of said five per cent bonds, then outstanding at par and a premium of five per cent, together with interest, all in accordance with the indenture securing the bonds so paid; and, in either case (subject to the reservations above specified in section 6 of Article One of this trust agree- ment), second, ratably to and among the holders of preferred participation shares, then outstanding, until (including any pre- vious payments) the sum of $100 shall have been paid with respect to each of the said shares, together with accrued and unpaid semiannual cumulative dividends of $2.25 per share and the proportionate amount then accrued of such dividends then currently accruing ; and third, ratably to and among the holders of the common participation shares. Section 12. W^ith the written consent or approval of a ma- jority of the members of the Committee, and on such terms and conditions as the Committee shall approve, the Trustees shall have power to mortgage or to pledge all or any part of the trust fund for the purpose of borrowing money (repayable from the trust fund and not otherwise) to pay the principal and interest of any of said five per cent bonds at their maturity by lapse of time or otherwise; provided, however, that no money shall be borrowed otherwise than in conformity with the conditions and limitations expressed in subdivision (k) of section 16 of this article. Section 13. With the direction or approval of the Com- mittee (and the indenture securing the five per cent bonds 656 Trusts for Business Purposes. shall so provide), the Trustees, may withdraw any of the trust fund securities from the Hen of the indenture securing the said bonds, by paying to the trustees under such indenture in cash, for each share of the capital stock of the Chicago City Railway Company, the sum of $200 per share, and for each of the other trust fund securities so withdrawn, the par value thereof, and for the purpose of withdrawing any of such securities, the Trustees may use any funds in their hands ; but the Trustees shall not in this manner withdraw any one class or kind of such securities to an amount exceeding ten per cent of such class or kind of securities subject to this trust agreement, except that as herein provided, bonds may be con- verted into stock and canceled. The Trustees, as directed or authorized by the Committee, shall hold or shall sell and dis- pose of such securities, so withdrawn. At any time after so withdrawing any of such trust fund securities, the Trustees may reassign and deliver the same to the trustee under the said collateral trust indenture securing the five per cent bonds, and thereupon they shall be entitled to demand and to receive the money paid to the said trustee at the time of the withdrawal of such securities so reassigned and delivered. Section 14. In the event that the Trustees shall not deliver to the trustee under the indenture securing the five per cent bonds, the full amount of the securities in the assigning clause of this trust agreement scheduled as being transferred to the Trustees, the Trustees shall have the right to deposit with the said trustee, in lieu of any such securities, and to cover any such shortage, cash for each share of the capital stock of the Chicago City Railway Company at the rate of $200 a share and for any of the other securities the par value thereof; which cash from time to time thereafter may be withdrawn Appendix.- 657 by them in corresponding amounts upon delivering to the trustee under such indenture the securities in heu of which such cash deposit shall have been made. Section 15. With the consent or approval of the Com- mittee, and of the holders of a majority of all the participa- tion shares, including a majority of the preferred participa- tion shares, the Trustees shall have power to sell, or to exchange for shares of stock or other securities or for part cash and part securities and other property, any of the trust fund securities; subject, however, to the lien of the indenture securing the five per cent bonds, or any other bonds issued for the purpose of paying off said bonds. Said sale, ex- change, or other disposition of said securities, or of any part thereof, however, shall be subject to the lien of said indenture, and otherwise may be upon such terms and conditions as shall be approved by the Committee and the holders of the specified proportion of the participation shares, respectively. Section 16. Subject to any rights of the trustee of the said collateral trust indenture dated January 3, 1910, as specified therein, and subject to the terms of the written approval or consent of the Committee in any case where under the terms of this trust agreement such approval or consent is authorized or required, the Trustees shall have power: (a) To deposit any moneys derived from the trust fund, with any trust company, or in any bank ; (b) To loan any moneys under control of the Trustees available for such purpose, on such terms, and with or with- out security, and to such persons or companies as the Com- mittee shall approve; (c) To buy, or to join with any person or persons in buy- ing, any property that shall be sold under the provisons of any mortgage or security in which property or any part 658 Trusts for Business Purposes. thereof the Trustees shall have an interest, because of some right under this trust agreement, and to allow the title to any property so bought to be taken in the name or names of such person or persons, and to be held by such person or persons as the Committee shall approve; (d) To transfer to any person or persons any share or shares, in any company or association, the securities of which or any part thereof, shall constitute part of the trust fund, as hereinbefore provided, and to allow any such share or shares to stand in the name or names of such person or per- sons, as the Committee shall approve, in order to qualify such person or persons as a director or directors, or as an officer or officers of such company, or otherwise, or for the purpose of maintaining the organization of such company; (e) To collect and to sue for, and to receive and to receipt for, all sums of money due the Trustees; to compound, com- promise, and to abandon or to adjust by arbitration, or other- wise, any actions, suits, proceedings, disputes, claims, demands and things relating to said trust fund; and to transfer to and deposit with any trust company or other persons, any shares or securities forming part of the trust fund, for the purpose of any arrangement for enforcing or protecting the rights and interests of the trustees or of the holders of the bonds or participation shares hereinbefore provided for ; and to give time, with or without security, for the payment or delivery of any debts or property claimed by the Trustees, or belong- ing to said trust fund; and to pay or satisfy any claims against the trustees or the said trust property ; (f) To invest at any time, and from time to time, any sum or sums which the Trustees may hold, available for investment, in any securities or property which the Com- mittee may approve and with like approval to sell or other- Appendix. 659 wise to dispose of any such investments and reinvest the pro- ceeds thereof, or any part thereof and so to continue to invest and to reinvest during the period of this trust ; (g) To permit to be sold or leased to, or merged or con- solidated with each other, any corporations or companies any of whose shares, bonds or securities constitute part of the trust fund; (h) To vote in person or by proxy upon all shares or other securities whatsoever, belonging to this trust ; (i) To vote upon any of the shares, constituting any part of the deposited securities, in favor of any lawful consolida- tion, merger, or reorganization or the properties, franchises or shares of any of the companies whose shares or part thereof shall constitute part of said trust fund, with the properties, franchises and shares of any other company, upon such terms and conditions as shall be approved by both the Committee and the trustee under the indenture securing the five per cent bonds or of any bonds issued to pay ofif said bonds; and with like approval and authority, as to terms and conditions, to vote any of said shares to authorize a lease or operating agree- ment between the companies or any of them, whose shares or part thereof shall constitute any part of the trust fund, and any other company with which such lease or operating agreement may lawfully be made; (j) To pay any and all taxes or liens of whatsoever nature or kind, imposed upon or against the said trust fund, or any part thereof, out of any proper funds available for such pur- pose ; and (k) To borrow money, when and in such amount or amounts and upon such terms and for such purposes as the Committee may approve, and as such Trustees, to execute and to deliver, but subject to the provisions of sections 9 66o Trusts for Business Purposes. and 10 of Article Five, such notes, bonds or other evidences of indebtedness, payable only out of the trust fund, in stich form and containing such terms and conditions, as the Com- mittee may approve; and as security therefor, on such terms and conditions as the Committee may approve, to mortgage or pledge, any property or securities held by said Trustees under this trust agreement. Every obligation made or issued by the Trustees shall pro- vide expressly in substance or effect as follows : "This obligation is issued by the undersigned not individu- ally, but as Trustees, under a certain Trust Agreement, dated January i, 1910, hereby made part hereof, and is payable only from the trust fund therein mentioned, any and all personal hability of the Trustees, Committee, bondholders and cer- tificate holders thereunder being and having been expressly waived by the holder hereof." The five per cent bonds and the appurtenant coupons, sub- stantially in the form recited in the said collateral trust in- denture dated January 3, 1910, are hereby expressly author- ized. (1) To enter into such contracts of guaranty as shall be approved by the Committee, the obligations arising thereun- der to be payable only out of the trust fund held by the Trustees. Said contracts shall be restricted, however, to the guaranty of dividends, rentals, bonds and other obligations, payable by companies, the stock of which, or not less than a majority of the stock of which, shall be owned by the Trus- tees, and to the guaranty of obligations secured by stock or bonds of companies whose stock, or not less than a majority of whose stock, shall be owned by the Trustees. Every such contract or obligation shall provide expressly or in substance as follows : Appendix. 66i "This obligation is issued by the undersigned, not individu- ally, but as Trustees under a certain Trust Agreement dated January i, 1910, as amended on the 7th day of November, 1910, hereby made part hereof, and is payable only from and out of the trust fund therein mentioned, but subject to the prior rights of the First Trust and Savings Bank, of Chicago, Illinois, as trustees under the indenture dated January 3, 1910, and of the present and future holders of the bonds issued thereunder, any and all personal liability hereunder of the Trustees, Committee, bondholders and certificate hold- ers under said Trust Agreement or indenture being and hav- ing been expressly waived by the holders hereof. A copy of said Trust Agreement and said indenture is on file with the First Trust and Savings Bank of Chicago." No debt, obligation or liability of any kind shall be created, or incurred by any one other than the Trustees or otherwise than in the manner in this trust agreement provided. No member of the Committee and no certificate holder shall be authorized to impose any debt or obligation or lia- bility of any kind upon the trust fund, or upon the Trustees or any of them, or upon the Committee or any member thereof, or upon any certificate holder or holders, or upon the holder or holders of any bond or obligation made or incurred by the Trustees. Anything in this trust agreement to the contrary notwith- standing, no distribution of the principal of the trust fund, or of any part thereof, or of the proceeds thereof, shall be made to or among the certificate holders or any of them, until any and all outstanding debts, obligations or liabilities of the Trustees, payable out of the trust fund or any part thereof, shall have been paid or discharged or satisfied, or provision satisfactory to the Trustees shall have been made 662 Trusts for Business Purposes. for the payment or discharge or satisfaction thereof. Each and every obHgation and each and every certificate of participation shares issued by the Trustees under this trust agreement after the 7th day of November, 1910, shall after the names of the Trustees at the foot thereof, contain the following recital : "As Trustees under the trust agreement dated January i, 1910, creating the Chicago City and Connecting Railways Collateral Trust (as amended November 7, 1910), and not individually." Provided, however, that any and all of the five per cent bonds of the Trustees issued or issuable under the Indenture dated January 3, 19 10, shall be executed by the Trustees in the form recited in said indenture. (This paragraph (i) of section 16 of Article Four hereof added bv amendment made November 7, 1910). (m) To enter into such contract or contracts, as shall be approved by the Committee, for purchasing or acquiring, or procuring the right to purchase or acquire, securities, or any part thereof, issued or to be issued in accordance with any present or future plan providing for thfe merger or consolida- tion of the elevated railroads of the city of Chicago, and contemplating a merger or consolidation of such consolidated elevated railroads with the surface street railways of the city of Chicago, the obligations arising thereunder to be payable only out of the trust fund held by the trustees. Every such contract shall provide expressly or in substance, as follows : "This obligation is issued by the undersigned, not individu- ally, but as Trustees under a certain Trust Agreement, dated January i, 1910, as amended November 7, 1910, and as amended June 12, 191 1, hereby made part hereof, and is pay- able only from and out of the trust fund therein mentioned, Appendix. 663 but subject to the prior rights of the First Trust and Savings Bank of Chicago, IlHnois, as trustee under the indenture dated January 3, 19 10, and of the present and future holders of bonds issued thereunder, any and all personal liability hereunder of the Trustees, Committee, Bondholders and Cer- tificate Holders under said Trust Agreement or indenture being and having been expressly waived by the holder hereof. A copy of said Trust Agreement and said indenture is on file with the First Trust and Savings Bank of Chicago." Each and every obligation and each and every certificate of participation shares issued by the Trustees under this Trust Agreement after the 12th day of June, 191 1, shall, after the names of the Trustees at the foot thereof, contain the fol- lowing recital: "As Trustees under the Trust Agreement dated January i, 1910, creating the Chicago City and Connecting Railways Col- lateral Trust (as amended November 7, 1910, and as amended June 12, 1911), and not individually." Provided, however, that any and all of the five per cent bonds of the Trustees issued or issuable under the indenture dated January 3, 1910, shall be executed by the Trustees in the form recited in said indenture. (This paragraph (m) of section 16 of Article Four hereof added by amendment made June 12, 191 1.) Sec. 17. Subject to the provisions of the collateral trust indenture, and as far as lawful at any time and from time to time, with the written consent of the Committee, the Trustees may, and upon the written request of the Committee, they shall convert or cause to be converted into shares of the capi- tal stock of the corporations issuing the same, all of the bonds of any of the several issues of bonds transferable in paragraph II of the assigning clause of the trust agreement. 664 Trusts for Busini^ss Purposes. Such bonds severally and respectively shall be converted into shares of capital stock as herein provided only (a) if the shares issued upon such conversion shall be of an aggregate par value equal to the aggregate principal sum of the bonds converted; (b) if all of the bonds of each such issue shall be converted as an entirety; (c) if the corporation converting such bonds shall have no other outstanding bonds of any issue (or, in case of the Calumet & South Chicago Railway Company, no outstanding bonds of any issue other than bonds of the issue underlying the consolidated mortgage bonds of such company scheduled in said paragraph II of the assigning clause of this trust agreement) ; (d) if all of the stock (ex- cepting directors' qualifying shares) of such corporation mak- ing such conversion, then shall be held by the trustees under the indenture securing the five per cent bonds; and (e) if the capital stock of the corporation making such conversion, equal at par to the aggregate principal sum of the bonds there- into converted, shall be deposited with the said trustee, sub- ject to no lien prior or superior to the lien of said indenture securing the five per cent bonds. In every case, the capital stock of the corporation issued upon any such conversion, shall be issued as fully paid and non-assessable. Such capital stock may be either common stock or preferred stock, or part common stock and part pre- ferred stock; but in any case, all of the capital stock (other than directors' qualifying shares) of such corporation, whether theretofore issued or then issued, shall be held by the trustee under said indenture securing the five per cent bonds. Any and all such stock issued in conversion of bonds ipso facto shall become and shall be subject to this trust agree- ment and to all the terms and provisions thereof, and forth- with, upon the issue thereof, shall constitute part of the trust Appendix. 665 fund, and shall be delivered to the trustee under the indenture securing the five per cent bonds, as part of the securities pledged thereunder, free from any prior lien. Article Five. Section i. The Trustees shall receive out of the trust fund or the income thereof, for their services such remuneration as from time to time shall be fixed by the Committee, and reimbursement for their reasonable expenses and disburse- ments, and prior indemnity against all losses and liabilities by them incurred in the discharge of their duties hereunder. Sec. 2. Except as otherwise herein provided, the action of a majority of the Trustees taken from time to time at a meet- ing, or by writing with or without a meeting, shall constitute the action of the Trustees and have the same effect as though assented to by all. When any Trustee, being a natural per- son, shall be absent from the United States, and shall have been so absent for more than seven (7) days, or, in the judg- ment of the Committee shall be unable to act or incapable of acting as such Trustee, the other Trustees or Trustee, for the time being, may exercise all the powers and authority given to the Trustees. Any Trustee so absent or contemplat- ing such an absence may, by power of attorney or otherwise, empower any other Trustee or Trustees to act on his behalf, during his absence, and to exercise any power, discretionary or otherwise, and to use his name in the execution or sign- ing of documents as such Trustee, for the purposes of said trust. Sec. 3. Any trustee may retire and may be discharged from these trusts by presenting his resignation in writing at a meeting of the Committee or of certificate holders, or by 666 Trusts for Business Purposes. delivering the same to any member of the Committee, but such resignation shall be effectual and complete only upon the expiration of three (3) calendar months thereafter, or upon the previous acceptance of such resignation by the Com- mittee, or the appointment of a new Trustee or Trustees in his place, and meanwhile, he shall continue as such Trustee. Sec. 4. At any time and from time to time, tlie Commit- tee shall have power to increase or to reduce the number of Trustees under this trust agreement (but in the case of nat- ural persons, not to a number of less than two) ; and without assigning any reason therefor to remove or discharge any Trustee from such trust. Whenever any Trustee shall die, or shall be or shall desire to be, discharged from said trust, or shall resign, the Committee shall have power to appoint in his place, a new Trustee; and the Committee may appoint any incorporated company having a capital and surplus of not less than $1,000,000, and qualified to act in the premises, as the sole Trustee under this trust agreement ; but no such incorporated company shall be a Trustee jointly with one or more natural persons, or with any other such incorporated company. Sec. 5. Upon the appointment of any new Trustee or Trus- tees, such instruments shall be executed as shall be necessary or convenient for vesting the trust fund in the new Trustee, or for providing evidence of such vesting. Sec. 6. The receipt of the Trustees, or of any of them, for moneys or property paid or delivered to them or him, shall be an effectual discharge therefor to the persons paying or delivering the same, and no person receiving any such re- ceipt shall be bound to see to the application of such moneys or property. Sec. 7. The Trustees shall cause to be kept in books pro- Appendix. 667 vided for the purpose, minutes of all resolutions and proceed- ings of the Trustees, and of the names of the members pres- ent at each meeting of the Trustees specifying whether they were present in person or by proxy. Such minutes shall be evidence of the matters therein stated and shall be conclusive evidence in favor of all persons acting thereon in good faith of all matters and things therein stated. Sec. 8. The Trustees shall not be liable for errors of judg- ment, either in holding property originally conveyed to them, or in acquiring and afterwards holding any other shares of stock, bonds, notes, securities or other property, nor for any loss arising out of any investment, nor for failure to sue for or to collect the same, nor for any act or any omission to act (not in disregard or violation of any express provision of this agreement) performed or omitted by them, in the execution of these trusts in good faith, and each Trustee shall be answerable and accountable only for his own several acts, receipts, neglects and defaults, severally and respectively, and not for those of any other or of any agent properly employed by them, or of any bank, trust company, broker or auctioneer, or other person, with whom or into whose hands any trust moneys or securities may be deposited or come. Neither shall any Trustee be liable or accountable for any defect in title, invalidity or other defect, to, of or in the shares of stocks, bonds, notes, obligations or other properties or securities ac- quired for the trust, or for any loss unless it shall happen through his own several wilful default ; and severally and respectively, the Trustees shall be entitled as above statec' in section 6 of Article One and in the said collateral trust indenture securing the five per cent bonds, to prior indemnity out of the trust fund against any liability by them incurred in the execution of the trusts hereof. No Trustee of these 668 Trusts for Business Purposes. presents, however, appointed, shall be obliged to give any bond or surety or other security in respect of the trusts hereof. Sec. 9. Every note, bond, contract, instrument, promise, undertaking, and every other act or thing whatsoever, exe- cuted or performed by the Trustees or any of them, shall be executed or performed by them or him only in the capacity as Trustees or Trustee under this indenture. The Trustees are not authorized to impose, nor shall they, at any time, by any act or thing done by them, impose or seek to impose any personal liability or obligation upon the Committee or any member thereof, or upon any holder of any participation share or of any certificate thereof or of any five per cent bond or of any other security issued by the Trustees under this trust agreement. Sec. 10. No recourse ever shall be had, under or upon any note, bond, promise, contract, instrument, undertaking, obligation, covenant or agreement executed or performed by the Trustees as Trustees under this indenture, or by reason of the creation of any indebtedness by the Trustees, as Trus- tees under this indenture, for any purpose authorized by this indenture, against the Trustees individually or against the holder of any of the participation shares or the certificates thereof, or any other securities issued by the Trustees here- under, or against any member of the Committee, either di- rectly or indirectly by legal or equitable proceeding, or by virtue of any statute or otherwise; it being expressly under- stood and agreed that this indenture, and all obligations created hereunder by said Trustees, are solely the obligations of the trust estate, and that all such obligations, liabilities, covenants and agreements of said Trustees, as Trustees under this trust agreement, shall be enforced against, and be satis- fied out of, the trust fund only, or such part thereof as shall, Appendix. 669 under the terms and provisions of this indenture, be liable therefor ; all personal liability of the Trustees, and of the holders of any certificates by them issued, and of the Com- mittee and its members and of all beneficiaries under this agreement, being hereby expressly waived. Sec. II. From time to time, the Trustees may execute, and may file with the trustee, under the collateral trust indenture securing the five per cent bonds (or with the trustee under any instrument securing any bonds issued to pay off such five per cent bonds), a writing appointing any person or persons, or any copartnership or corporation, the agent or agents of the Trustees, in the name, place and stead of the Trustees, to sign any bond or coupon authorized to be issued under this trust agreement, or to sign any order or authority to deliver any such bond when certified pursuant to the pro- visions of the instrument whereunder such bond is issuable, or to sign any certificate of any participation share or share authorized to be issued under this trust agreement, or to sign and endorse any checks or drafts which the Trustees them- selves might sign. From time to time, the Trustees may revoke any such ap- pointment previously made, and may appoint a substitute or substitutes with like power and authority; but no such revo- cation shall operate to annul, or in anywise to afifect, any act or proceeding done or taken by any agent or agents previous to such revocation of authority and service of notice in writ- ing thereof upon the trustee under said collateral trust inden- ture or other instrument aforesaid, or shall operate to annul, or in anywise to afifect, any act or proceeding done or taken pursuant to the order of any agent or agents theretofore ap- pointed as provided in this section, of the revocation of whose 670 Trusts for Business Purposes. authority notice in writing shall not have been given as above stated. Until otherwise ordered by the Trustees, any bond or coupon or any certificate of any participation share may be signed in behalf of the Trustees by Sam R. Jenkins, of the city of Qiicago, state of Illinois, hereby appointed the agent of the Trustees for that purpose; and, until otherwise ordered by the Trustees, without any further act or appointment here- under, may exercise such powers of such Agent. The death of the Trustees, or any of them, or of any suc- cessor to them, shall not operate to revoke any agency created pursuant to the provisions of this section. Article Six. Section i. Xo holder of any bond, participation share or certificate, or of any security or obligation issued under and in accordance with the provisions of this indenture, shall be entitled to terminate this trust, or any trust organized and maintained under tliis indenture, or to require any distribu- tion or disposition of any of the securities held in trust here- under, other than in accordance with the terms and provisions of this indenture. Sec. 2. The death of any Trustee, or of any holder of any of said participation shares or certificates, or of any other securities issued by the Trustees, or of any member of the Committee, at any time during the continuance of this trust, shall not in any way operate to terminate this trust, and shall not entitle the legal representatives of such deceased Trustee, or of such deceased member of said Committee, or of such deceased holder of any of said participation shares or cer- tificates or other securities, to terminate this trust, or to require Appendix. 671 any accounting or sale or distribution of any of the securities or property held hereunder. Article Seven. Section i. James B. Forgan, John J. Mitchell E. K. Boisot, Harrison B. Riley, John A. Spoor, Edward Morris, Samuel Insull and Ira M. Cobe hereby are appointed to act as the original members of the Committee vested with the powers and discretions in this indenture specified. Sec. 2. The Committee, as from time to time constituted shall consist of not less than five (5) nor more than nine (9) members. It shall not be necessary that any member of the Committee shall be a holder of any of the participation certifi- cates or securities issued hereunder. The certificate holders from time to tim.e may increase or may reduce the number of the Committee within the limits above mentioned. Sec. 3. The Committee shall be elected at the first and at every subsequent annual meeting, or if not so elected at an annual meeting, they may be elected at any special meeting which shall be held prior to the next following annual meeting of the certificate holders, and shall continue in office until the next annual meeting, and until their successors shall have been chosen and shall have taken their places upon the Committee. Any member of the Committee shall be ehgible for re-election. Sec. 4. Any vacancy in the membership of the Committee, may be filled by the remaining members of the Committee; but any member so appointed shall continue in office only so long as the member in whose place he is appointed v.'ould have con- tinued in office, and the remaining members of the Committee may act notwithstanding any vacancy in their number. Sec. 5. Any member of the Committee may resign by pre- 6/2 Trusts for Business Purposes. senting his resignation in writing at a meeting of the Com- mittee. Sec. 6. The remuneration of the Committee shall be fixed from time to time by the certificate holders then entitled to vote, at any meeting thereof, and the amount thereof shall be divided among the members of the Committee in such manner as shall be determined by agreement among the members of the Com- mittee, and in the absence of such agreement shall be divided among them equally. Until the remuneration is so fixed, each member of the Committee shall receive ten dollars for every meeting of the Committee that he shall attend, and except as herein provided no further remuneration. Sec. 7. If a member of the Committee shall be called upon to travel or to perform other extra services, the Committee may determine his special remuneration, and shall provide for payment of such remuneration and his expenses in respect of such services. Sec. 8. The Committee may act by a writing as hereinafter provided in section 17 of this article, or they may meet together for the transaction of business, and from time to time they may adopt such rules and regulations, and may alter or amend the same, as they shall deem advisable for the regulation and transaction of their business. They may prescribe the times and places of regular meetings of the Committee, which may be held without any further notice thereof ; but except in pur- suance of a special resolution passed at a previous meeting of the Committee or by agreement of all the members of the Com- mittee no meeting shall be held at any place other than the city of Chicago. Sec. 9. The quorum necessary for the transaction of busi- ness at a meeting of the Committee, shall be a majority of the then existing members of the Committee, present personally or Appendix. 673 by proxy, of which members at least two shall be present in person. Such quorum shall have full power to exercise all or any of the powers, authorities and discretions for the time be- ing vested in the Committee. Sec. 10. The Chairman, or a majority of the existing Com- mittee, at any time may call a special meeting of the Committee by giving one day's notice of such meeting. In computing such time Sundays and legal holidays shall be excluded. A notice thereof sent through the post-office, postage prepaid, in a sealed wrapper, addressed to any member of the Committee at his last known post-ofifice address, and posted in the city of Chicago, shall be deemed sufficient notice to such member, whether the same shall be received by him or not. If any member of the Committee shall be out of the United States it shall not be necessary to give him any notice of such meeting. The mem- bers of the Committee may in writing or by attendance waive the notice required for a special meeting. Sec. II. Any member of the Committee from time to time in writing may appoint another member as his proxy to vote at any meeting of the Committee, or to perform any other act or duty as a mernber of the Committee hereunder. Sec. 12. Questions arising at any meeting of the Committee shall be decided by a majority of the votes of the members of the Committee present personally or by proxy, and in case of an equality of votes the chairman of the meeting shall have an additional and deciding vote. Any resolution so adopted shall be the resolution of the Committee. Sec. 13. The members of the Committee from time to time shall elect from their number a chairman, and they may elect also such other officers as the Committee shall deem advisable, which officers may or may not be elected from among the Com- mittee. All of such officers unless removed as herein provided, 6/4 Trusts for Busine;ss Purposes. shall continue in office until the close of the next annual meet- ing of the certificate holders and until their successors shall have accepted their places. The Committee from time to time shall prescribe the respective powers and duties of such officers and shall fix the compensation, if any, of every officer and agent whom they shall have elected or appointed. Sec. 14. The Committee at any time may permit any officer to resign his office, or by a resolution of the Committee may remove him from his office without assigning any reason there- for and may elect another person in his place, and likewise shall have authority to elect temporary officers to ser\^e during the absence or disability of regular officers. Sec. 15. The action of the Committee in respect of any matter shall be evidenced by a resolution passed by them at a meeting except as herein otherwise provided. Sec. 16. A certificate signed by the chairman or the secre- tary of any meeting of the Committee at which any resolution is passed certifying that the signer was such chairman or such secretary, of such meeting, shall be conclusive evidence in favor of the Trustees, and all other persons, acting in good faith in reliance thereon, of the contents of such resolution and of all matters in such certificate contained relating to such meeting and the regularity thereof, and of the passage of such resolu- tion; and no person shall be obliged to make inquiry as to any of the said matters, or as to the election or appointment of any person acting as a member of the Committee at such meeting, or be afifected by actual or implied notice of any irregularity whatsoever therein. Sec. 17. A resolution in writing signed by not less than two-thirds of the members of the Committee, in person or by proxy as above authorized, shall be as valid for all purposes as a resolution passed at a meeting of the Committee. Appendix. 675 Sec. 18. The Committee shall cause to be kept in books provided for the purpose, minutes of all resolutions and pro- ceedings of the Committee, and of the names of the members- present at each meeting of the Committee, specifying whether they were present in person or by proxy, and minutes of all resolutions and proceedings of all meetings of the certificate holders. Such minutes, if purporting to be signed by the chair- man or secretary of such meeting or of the next succeeding meeting, shall be evidence of the matters therein stated and of the regularity of the meeting, and that proper notice of the meeting was given if any was required, and a certificate signed by the chairman or secretary of such meeting or by persons certifying that they acted as such, shall be conclusive evidence in favor of the Trustees and all persons acting thereon in good faith of all matters and things therein stated. Sec. 19. Subject to the provisions of this trust agreement, and the provisions of the collateral trust indenture securing five per cent bonds, the Committee shall manage and control the trusts created hereunder; ascertain and determine "the income of the trust fund" as provided in the collateral trust indenture securing the five per cent bonds; ascertain and determine "the net income of the trust fund" as provided in section 6 of Article One of this trust agreement; prepare and state an ac- count of the income and expenditures of this trust for the annual meeting of the holders of participation shares as pro- vided in Article Eight of this trust agreement ; fix and deter- mine the amount, and direct the use, application or investment of the surplus fund of the trust as provided in Section 2 of Article Four of this trust agreement ; determine the use and application of income arising as mentioned in section 8 of Article Four hereof; apportion and direct the payment on the participation shares as dividends thereon of any moneys or 676 Trusts for Business Purposes. property applicable to such purpose ; pay and discharge any and all expenses, obligations and liabilities incurred by or in behalf of the Trustees or the Committee in the administration of this trust ; and consider and pass upon all questions and propositions where the consent, authority or approval of the Committee is required ; and generally they shall possess and may exercise all such other powers as reasonably shall be required for the proper administration of the trusts created by this indenture : but the Committee shall not have power in disregard of any express provision of this trust agreement to incur liabilities or to create or to issue obligations. Sec. 20. Any of the Committee may purchase, acquire and own any of the five per cent, bonds or any of the participation shares, free from accountability with respect thereto and may deal therein in all respects the same as any other person with any holder of five per cent bonds, or with any holders of any participation certificate, or with any Trustee or with any other member of the Committee or any other person. Sec. 21. The Committee shall not be liable for errors of judgment in exercising any of their powers or discretions under this trust agreement, nor for any loss arising out of any invest- ment, nor for failure to sue for or to collect any moneys or property belonging to the trust, nor for any act or any omis- sion to act, performed or omitted by them, in the execution of their powers or discretions in good faith, and each shall 1)e answerable and accountable only for his own several acts, re- ceipts, neglects and defaults, severally and respectively, and not for those of any other or any agent properly employed by them, or of any bank, trust company, broker or auctioneer, or other person, with whom or into whose hands any trust moneys or securities may be deposited or come; nor shall any member of the Committee be liable or accountable for any defect in title. Appendix. 677 invalidity or other defect to, of or in the shares, bonds, notes, obligations or other properties or securities acquired for the trust, nor for any loss unless it shall happen through his own several wilful default ; and, severally and respectively, the Com- mittee shall be entitled as stated above in section 6 of Article One, and in the said collateral trust indenture securing the five per cent, bonds, to reimbursement for their reasonable expenses and disbursements, and to prior indemnity out of the trust fund against any liability by them incurred in the execution of the trusts hereof. No member of the Committee, however ap- pointed, shall be obliged to give any bond or surety or other security hereunder. Article Eight. Sec. I. An annual meeting of the certificate holders shall be held, at twelve o'clock noon, on the Tuesday following the first Monday in February (or if such day be a legal holiday then on the next following Tuesday, not a holiday) , in each year, at the principal office of the Trustees in the city of Chicago. At each annual meeting, the Trustees shall lay before the certificate holders an account, as prepared and stated by the Committee, of the income and expenditures of their trust for the financial year last preceding such meeting, and also may submit to the certificate holders a report upon any other matter. The Committee also may submit to the certificate holders, any question, resolution or proposition, upon which the Committee shall desire the action of the certificate holders. Sec. 2. At each annual meeting, the certificate holders shall elect the persons who shall act as the Committee for the ensuing year, and shall talce such action as they iruiy consider appro- priate in reference to any and all other matters brought before the meeting. 678 Trusts for Busine;ss Purposes. Sec. 3. The Committee whenever they deem it advisable may, and upon the written request of the holders of certificates representing not less than twenty-five per cent. (25%) of all of the participation shares at the time outstanding, and then en- titled to vote, shall call a special meeting of the certificate holders to be held in the city of Chicago. Every such request of cer- tificate holders shall express the purpose of the meeting, and shall be delivered to the Committee, or to one of its members. In case for a period exceeding seven (7) days after such re- quest shall have been so delivered, the Committee refuse or neglect to call such special meeting to be held within twenty-one (21) days after the delivery of such request, such special meet- ing may be called by the certificate holders signing such request or by any three (3) of them. Sec. 4. The Chairman of the Committee shall be entitled to preside at every meeting of the certificate holders; but if he is not present at the commencement of the meeting, or, being present, shall not be willing to preside, the certificate holders present shall choose any certificate holder to preside as chair- man of such meeting. Sec. 5. At a special meeting of the certificate holders no business shall be transacted other than such as shall have been specified in the notice of the meeting. Sec. 6. Written or printed notices of the annual meeting and of special meetings, specifying the time and place thereof, and in the case of a special meeting the purposes thereof, shall be given by the secretary of the Committee, or by some other person designated by the Committee, to each of the certificate holders, seven (7) days at least before such meeting. In event of the Committee refusing or failing to give notice of any special meeting requested to be called by the certificate holders in the manner hereinbefore provided, then the written or Appendix. 679 printed notice of such meeting may be sent out by the persons calling the same as provided by section 3, of this Article Eight. The certificate holders may waive in writing the notice required for any meeting. Nevertheless, a failure to give notice, or any irregularity in any notice of the annual meeting to be held as provided in section i of this article, or in the mailing thereof, shall not affect the validity of any such annual meeting, or any regular adjournment thereof, or of any proceedings thereat. Every notice to the certificate holders required or provided for in these presents may be given to them personally, or by sending it to them through the post-office, postage prepaid, in a sealed wrapper addressed to each of them respectively at his address specified in the transfer books, and posted in the city of Chicago or in the city of New York; and in the case of such mailing shall be deemed to have been given at the time when it is so posted. In respect of any sliare held jointly by several persons, notice so given to whichever of them is first named in the transfer books, shall be sufficient notice to all of them. Any notice so sent to the registered address of any certificate holder shall be deemed to have been duly sent in respect of every share represented by such certificate whether held by him solely, or or jointly with others, notwithstanding he be then deceased, and whether the Trustees or the Committee or any person sending such notice have knowledge or not of his death, until some other person or persons shall be registered as holders. The certificate of the person or persons giving such notice shall be sufficient evidence thereof, and shall protect all persons acting in good faith in reliance on such certificate. Sec. 7. The holders of certificates representing not less than one-fourth of all of the shares of the class of participation cer- tificates, entitled to vote at any meeting, whether represented 68o Trusts for Business Purposes. in person or by proxy, slmll constitute a quorum for the transac- tion of business. Sec. 8. At all meetings of certificate holders, except as next hereinafter provided, every such holder, in person or by proxy appointed in writing, shall be entitled to cast one vote for each participation share registered in his name upon any question upon which such share shall be entitled to a vote. For the purpose specified in section 15 of Article Four, or for any of the purposes specified in section 14 of this Article Eight, a vote may be cast for every such preferred participation share and for every such common participation share ; but upon all other questions the voting right in respect of the preferred participation shares and of the common participation shares shall be mutually exclusive, that is to say : So long as every semi-annual instalment of the cumulative dividends of $4.50 per annum, herein provided for, shall have been paid upon every preferred participation share within ninety days after the time fixed for any such payment, the hold- ers of common participation shares shall have the right to vote in respect thereof, and such right sliall be exclusive, and the holders of preferred participation shares shall not have the right to vote in respect thereof. In case of any failure to pay any such semi-annual instalment of cumulative dividends upon the preferred participation shares within the period of ninety days after the same shall be pay- able, then, during such default and the further continuance thereof the holders of the preferred participation shares shall have the right to vote in respect thereof and such right shall be exclusive and during such continuing default the holders of the common participation shares shall not have the right to vote in respect of any such common participation shares. As soon and as often as the payment of any such instalment Appendix. 68i so in default shall have been made, and until the recurrence of such a continuing default, such right of the holders of the pre- ferred participation shares to vote in respect thereof shall cease, and the exclusive right of the holders of the common participa- tion shares to vote in respect thereof, shall revive, subject to the subsequent loss thereof as above provided upon the happening and during the continuance of any such subsequent default. Nothing in this section contained either shall extend or shall limit the voting right of the common participation shares for the purpose specified in section 15 of this Article Eight. Sec. 9. When any certificate shall be held jointly by several persons, any one of them may vote at any meeting in person or by proxy in respect of such certificate, but if more than one of them shall be present at such meeting in person or by proxy no vote shall be received in respect of such share unless the persons so present shall join in or shall assent to such vote. Sec. 10. If the holder of any certificate be a minor, or a person of unsound mind, or subject to guardianship or to the legal control of any other person as regards the charge or management of such certificate, he may vote by his guardian, committee, or such other person appointed to or having such control, and such vote may be given in person or by proxy. Sec. II. For the purpose of ascertaining and defining the certificate holders entitled to vote at any meeting, the transfer books may be closed at the end of such day as the Committee shall specify, but not more than twenty-one days before the day of such meeting, and shall remain closed until the close of the meeting, and no person shall be entitled to vote at such meeting, whose name is not entered upon the transfer books prior to such closing thereof. Sec. 12. If at the time appointed for a meeting a quorum be not present, the meeting shall be dissolved, if it be a meeting 682 Trusts for Business Purposes, called at the request of certificate holders or hy certificate hold- ers after such request as hereinbefore provided ; but if it be a meeting otherwise called or convened in accordance with any provision of this trust agreement, the certificate holders present in person or by proxy shall constitute a quorum for the purpose of adjourning the meeting to a later date, but shall not consti- tute a quorum for the transaction of any other business. Sec. 13. Except as otherwise herein provided, a majority of the votes given at any meeting shall be necessary and shall be sufficient to constitute the action of such meeting; and in case of an equality in number of votes, the chairman of the meeting shall have an additional and deciding vote. Any action taken by the holders of certificates representing a majority, in amount, of all of the participation shares, both pre- ferred and common, including a majority of the preferred par- ticipation shares, shall bind all the holders of participation shares in respect of all such shares and of the interest in the trust fund, provided that nothing shall affect the prior lien of any bond, or the prior and superior rights of the holders of pre- ferred participation shares, and provided, further, that no vote given or action taken by the certificate holders shall authorize or shall be effectual to authorize the creation of any liability or the issue of any obligations except by the Trustees, and subject to all the limitations and provisions of this trust agreement against the incurring of liabilities payable otherwise than out of the trust fund and against the issuing of obligations except as above prescribed in subdivision (k) of section 16 of Article Four of this trust agreement. Sec. 14. By a resolution passed by the votes of the holders of the certificates representing a majority of the total number of participation shares both preferred and common, including a majority of the preferred participation shares, then outstanding Appendix. 683 such certificate holders (i) may remove any Trustee or Trus- tees under this trust agreement, and (2) may direct the Trus- tees to sell or otherwise to dispose of the securities constituting the trust fund, on such terms as will produce cash sufficient at least to pay all costs, charges and expenses, and also to pay the principal and the interest of all of said five per cent bonds then outstanding, together with a premium of five per cent, of such principal, or to pay the principal and the interest of any bonds issued to pay for the said five per cent, bonds, and any premium that may be required upon any such payment ; and in the event of any such sale or disposition of the trust fund, may direct the Trustees to terminate the trust, and to distribute the proceeds in accordance with the provisions of this trust agreement. Sec. 15. Unless and until there shall be a subsisting default in the payment of any instalment of the semi-annual cumulative dividend of $2.25 per share upon any of the preferred participa- tion shares, the holders of the common participation shares, by resolution adopted by the vote of two-thirds of the number of such common participation shares then outstanding, given at an annual or at a special meeting of holders of participation shares, may alter the terms and provisions of this trust agreement ; but no alteration shall ])e made in any way affecting rights of the holders of the said five per cent, bonds, or of any bonds issued to retire the same, or the security of any such bonds, or in any way affecting the rights and priorities of the preferred partici- pation shares ; nor shall any alteration ever be made, which shall authorize the Trustee or the Committee to represent or bind any certificate holder except in respect of his beneficial interest in the trust fund, or whereby any personal liability or obligation shall be imposed upon any Trustee, or any member of the Com- mittee or any certificate holder under this indenture. No altera- tion shall be complete or effectual, until a certificate signed by 684 Trusts for Business Purposes. the chairman and secretary of the meeting at which the resolu- tion is passed and setting out such resolution and the manner in which it was passed, shall have been delivered to the Trustees. Article Nine. Section i. When this trust agreement shall have been signed and delivered by the parties of the first part and by any two of the parties of the second part, it shall become effective for all purposes with the same force as though on the day of the date hereof it had been signed and delivered by all of the parties hereto. Sec. 2. In the construction of the provisions of this inden- ture, words in the singular number include the plural number, and words denoting males include females, and words denoting persons include firms and corporations, and the words corpora- tions and companies include any corporation, association or trust, unless a contrary intention is to be inferred from the subject-matter or context. This trust agreement has been executed in four counter parts, each of which shall be and shall be taken to be an original and all collectively but one instrument. Appendix, 685 THE CO-OPERATORS OF AMERICA. A COMMON LAW TRUST. Reported in In Re Parker et al., 275 Fed. 868. Articles oe Trust made this 17th day of February, A. D. 192 1, by and between W. S. Ceark, GustavE Kopp and Louis I. Block, of Chicago, Illinois, settlors, as successors in trust to George A. Abbott, Carl Wisner and Viggo E. Bird, Trus- tees, who have resigned their trust, hereinafter called Party of the First Part, and Harrison M. Parker, and John Coe of Chicago, Illinois, and Viggo E. Bird of New London, Con- necticut, Grantees, hereinafter called the Party of the Second Part, WITNESSETH, That 1. Whereas, Harrison M. Parker, John Coe and N. A. Hawkenson, heretofore have been acting under the designa- tion of the Co-Operative Society oe America, under and by virtue of a common law trust which was evidenced by a certain Indenture and Declaration of Trust, bearing date the 20th day of February, A. D. 1919; and recorded in the Recorder's office of Cook County, Illinois, as Document #6554582, and attached hereto and marked Exhibit A. and 2. Whereas, the party of the second part so acting as a common law trust, in and by said Indenture and Declara- tion of Trust had the power to acquire, hold and dispose of property, real personal and mixed, of every kind whatsoever, and to prosecute and conduct all manner of mercantile, finan- cial and industrial business and all manner of dealing and trading in the said property, and to convert the same into cash and distribute the same, in payment of the beneficial interests at par, all of which by said Indenture and Declaration of Trust, Exhibit A, reference being had hereto, will fully and at large appear, and 686 Trusts for Business Purposes. 3. Whereas, the party of the second part, under and by virtue of said Indenture and Declaration of Trust acquired certain real estate in the State of Michigan, which real estate is fully described in Exhibit B hereto annexed and made a part hereof, and 4. Whereas, under said Indenture and Declaration of Trust the party of the second part became and were entitled to certain other real estate located in the State of Michigan and which real estate is fully described in Exhibit C hereto attached and made a part hereof, and 5. Whereas, the party of the second part, under and by virtue of said Indenture and Declaration of Trust acquired and became entitled to certain other real estate situated in the State of Illinois and the controlling interest in the Peoples Life Insurance Company, Randolph Building Corporation, Rico Milk Products Company, and the Amboy Manufacturing Company, which are described in Exhibit D hereto annexed and made a part hereof and 6. Whereas, the party of the second part acquired and became the owners of 10,000 shares of the capital stock of no par value of the Rochdale Wholesale Company, a Corpo- ration, and which corporation the party of the second part used and employed as an agency for conducting the whole- sale and retail grocery business, and which corporation in the prosecution of said grocery business installed certain ware- houses and retail grocery stores and provided certain fixtures in each of said stores, and which warehouses and stores are described in Schedule E hereto annexed and made a part hereof, and 7. Whereas, the party of the second part acting under said Indenture and Declaration of Trust divided the said trust estate into 400,000 'equal shares of beneficial interests, Appendix. 687 and sold and disposed of the same, or the greater part thereof, at the par value of $25.00 per share, and 8. Whereas, the party of the second part in the exercise of their power to borrow money and mortgage said assets in security therefor and in furtherance of the trust plan to se- cure such expansion of the trust business as would justify Nation-wide Co-operation throughout the several States as rapidly as the conservative management of the trust would permit, duly issued 2,000,000 debenture interests of a par value of $50.00 per share, and at the same time authorized the execution and delivery of a trust deed to secure the pay- ment of the same, and in pursuance thereof the party of the second part executed and delivered same to George A. Abbott, Carl Wisner and Viggo E. ' Bird, trustees named in the said deed of trust, which is attached hereto and marked Exhibit F. hereinafter referred to, and 9. Whereas, the grantees, in and by said trust deed, Ex- hibit F, were empowered and authorized to appoint their successors in trust and have heretofore, in pursuance of their said power and authority appointed W. S. Clark, Gustav Kopp and Louis I. Beock, of Chicago, Illinois, as trustees, herein called the parties of the first part, and 10. Whereas, by said trust deed Exhibit F, the party of the first part became vested with the title as trustees to all the said property and assets, real, personal and mixed, and all future acquisitions, increment and increase thereof, and all the business and good will of said trust estate for the benefit of the owners of beneficial interests therein and for the holders of beneficial debenture interests thereof, all which matters and things by reference to said Exhibit F will fully and at large appear, and 11. Whereas, by paragraph 23 of the said Trust Deed, 688 Trusts for Business Purposes. Exhibit F, it is provided that if for any cause whether com- petitive, economic, poHtical, legal or official, the grantors thereof being the party of the second part herein should be attacked or molested in their management or right to carry out and perform their said Articles of Trust and for such or for any other reason the grantees thereof, should feel them- selves insecure or unsafe in and about their trust as provided by said trust deed. Exhibit F, then and in the event thereof, the grantors thereof should ipso facto be and stand divested of their title, estate and possession in that behalf and by means thereof the grantees, should ipso facto be invested with said title, estate and possession ; and thereupon said estate and possession should be delivered to the grantees and their successors in trust, being the party of the first part hereof, to be by them administered, managed and conducted as a going concern in furtherance of the intent and objects of said Exhibits A and F all which matters by reference thereto will fully and at large appear, and 12. Whereas, the grantors thereof have been attacked and molested in their right to perform their said trust, as aforesaid, wherefor and for said other reasons and causes the party of the first part hereof, under and by virtue of the said deed of trust, thereupon elected to and have exercised their option, right and power, vested in them under and by virtue of said last mentioned deed of trust. Exhibit F, and in pursuance thereof have heretofore and do hereby declare that they have taken possession of all and singular the property of said trust, real, personal and mixed of every kind and nature, whatsoever, and of all of the business and good will of the said trust, to manage and dispose of the same for the best interest of the holders of said beneficial interests and of the said beneficial debenture interests, and now are man- Appendix. 689 aging the same as a going concern for the purposes aforesaid, and the party of the second part by good and sufficient as- signment and conveyance, for further assurance, have here- tofore rehnquished and conveyed to the party of the first part all their right, title and interest in and to said property in that behalf, in fee simple, and 13. Whereas, the party of the first part, in and by said trust deed. Exhibit F, in the event that they should take the possession and management aforesaid, are given the power by amendment or by their declaration of a new trust to re- organize said trust and the business and aft'airs thereof, to change and merge said debenture interests into beneficial in- terests, and by irrevocable power to appoint trustees therefor to take the absolute title in fee simple of said real estate and to said assets and to carry out and perform the trust hereby declared for the protection and benefit of the cestui que trust aforesaid, in the ultimate net profits and final distribution of the proceeds of the corpus thereof, and 14. Whereas, by diverse acquisitions and increment and further property, real, personal and mixed, the assets, busi- ness of the stores, warehouses, office buildings, insurance company, subsidiary companies and good will of the trust estate have attained a value sufficient to justify expansion to the proportions of interstate co-operation and the business of the trust is in a safe and prosperous condition for the protection of the cestuis que trust, whereby they are receiving the benefits of discounts, dividends, interest and profits with- out any unreasonable deductions for salaries, overhead charges, nor of the usual division of approximately one-half of the profits to corporate promoters ; wherefor the party of the first part do not deem it for the best interest of the trust estate, nor of the cestuis que trust to foreclose their said trust 690 Trusts for Business Purposes. deed, Exhibit F, for the purpose of sale and distribution of said assets, and 15. Whereas, there are at this time interested in said trust estate upwards of 75,000 people, owners of beneficial interests and debentures, who are dependent upon the pro- duction and distribution of food stuffs by and through up- w^ards of 100 grocery stores and warehouses and upon the outlet of production of diverse farms and factories and which producers and consumers are financially interested in said trust estate and look to the diverse forms of business thereof for the profits and distribution thereof to their several interests in said trust upwards of aggregating 400,000 beneficial inter- ests and a substantial part of two million beneficial debenture interests and the people are rapidly availing themselves of the advantage of co-operation heretofore extended to them in the manner hereof, as a welcome means of escape from the uncon- scionable profiteering of rapacious tradesmen, and 16. Whereas, the party of the first part, in and by said trust deed. Exhibit F, upon taking possession of said trust estate for the causes aforesaid are vested with power, in reorganization of said trust and the increase of the assets thereof, to divide and increase the corpus of the trust estate and by dividing the same into aliquot parts, increase the num- ber of beneficial interests thereof in proportion to the increase of said assets, and to merge said beneficial debenture interests into any increase in beneficial interests, and 17. Whereas, the economical and successful administra- tion of said trust estate in its diverse ramnifications of various kinds of business, mercantile, financial and industrial, of pro- duction, transportation and distribution, co-operating for mu- tual success, requires the systematic training of talent in the several lines thereof and therewith the creation of a reason- I I Appendix. 691 ably permanent tenure of employment to such expert talent, so as to minimize the attendant cost and loss of labor turn- over, which only the absolute and permanent control of a common law trust with succession by means of transferable shares will permit in a dependable degree, and 18. Whereas, by means of the prevalent form of busi- ness organization throughout the country and the country- wide associations of manufacturers, wholesale, retailers, bank- ers and transportation companies, the business of the country has ceased to be conducted by the laws of economics but has become a system of organized plunder perpetrated upon the producer and the consumer, and 19. Whereas, by the prevalent methods of transportation, storage, distribution and marketing of the products of farms and of factories handling such products, the distributors and dealers in such commodities systematically resort to every species of fraudulent degrading, forestalling, engrossing and monopolizing the supply and the means whereby the supply of such products should flow freely to the consumer at prices fixed by the law of supply and demand and thereby in repress- ing and destroying the supply and in fraudulent and oppres- sive practices in and about the making of returns as to clas- sifications, grading and prices to the producer for his products based on the cost of production, the dealer fixes a fictitiously low price to the producer and by means of the repression and destruction of the supply the associated dealers fix a fictitiously high price, to the consumer, and 20. Whereas, by the common-law and the law of eco- nomics, the interest of the producer and the consumer, in the flow of commodities, is the primary desideratum and the art of competitive trading by tradesmen as an occupation for profit is secondary thereto and becomes parasitic by the pre- 692 Trusts for Business Purposes. vailing associations of traders whereby by common consent and conspiracy prices are artfully manipulated to the detri- ment of the producers and consumers, and 21. Whereas, the professional traders and financiers of the country apply their activity on the theory that the public is legitimate prey for commjercial and financial exploitation, and that the manipulation of the resources of the nation, pubHc and private, are fit subjects for private plunder, and so have become a by-word and reproach to all modern eco- nomic methods and 22. Whereas, the public authorities do not enact adequate laws prohibiting fraudulent degrading, forestalling, engrossing or monopolizing of the supply, or facilitating the means of transportation and distribution and dO' not enforce such laws as are enacted to that end and make no effort to punish the destroyers of crops and commodities in the field or in transit, and thereby the "flow of commodities" has become merely a "stream of profit'' to the trader in which the law of supply and demand is a negligible factor, and 23. Whereas, the producer, whether of farm commodities or other products of labor, though he cannot fix the price of his products, is required to pay for his supplies and machinery such prices to dealers and manufacturers as are fixed artfully and fictitiously by so-called "economists" or "statisticians" who are commonly employed to make such prices as the public re- gardless of supply are supposed to be "able" and can be made to pay, and thereby the law of supply and demand has become a system of fictitious practices by tradesmen to the detriment of the producer and the consumer, and 24. Whereas, by the business methods herein mentioned, commercialism as ordinarily practiced has become a national vice and is the source of the most imminent public danger, the at- Appendix, 693 tempted curbing of which by so-called anti-trust legislation has been attended by administrative sham battles in the face of which the highest court of the land has declared that it cannot base its decisions upon the principles of economic law, and the increment of property values of the country by the exploita- tion practiced upon the producers and the consumers has gravi- tated to the hands of an unduly restricted number of persons, and 25. Whe;re;as, by the common law the producers and con- sumers of the country primarily have the unquestionable right, until they deprive themselves thereof by prohibitive amendment of state constitutions or unwittingly fail to adopt constitutional amendments to curb state legislatures from enacting legislation prohibiting co-operation in the production and distribution of the commodities of life, at fair prices according to the law of supply and demand, whereby the people will derive the benefits and profits, free from the exploitations of fraudulent and vicious commercialism, and thereby effectuate the principle that government is instituted among men to protect the weak against the aggressions of the strong and cunning and 26. Whereas, it is the fundamental merit of the co-opera- tive plan hereinafter set forth, whereby the trust, as an organi- zation, retains no profit whatsoever for itself, but that all the profits go to the cestui que trust ; that such advantages go to the people as a whole and are therefore an economic factor which operates to the universal betterment of the community; that such merit broadly distinguishes the co-operative trust plan from close business organizations which are designed primarily to build up and accumulate private fortunes for the promoters and organizers of business enterprise; that in the co-operative trust plan are wholly absent the motives, temptations, means and effects in the disposal of beneficial interests to the general 694 Trusts for Business Purposes. public, which have been instrumental in bringing stock selling operations of close business organizations under the scrutiny of the police power of the several states whereby, by means of so-called "Blue-sky Laws" it is attempted to prevent the issu- ance of securities which would operate to defraud the public and that, therefore, the issuance of beneficial interests of the co-operative trust hereof is not within the evil and hence not within the purview, prohibitions, requirements nor sanctions of such legislation. For the reasons stated, the departments, ad- ministering such legislation in the various states, will apprehend that the "Blue-sky Laws" of the several states are unscientific in conception, form and substance; concentrate the marketing of corporate securities in the hands of "Special Interests" com- monly allied with what is known as "Invisible Government;" fail to take into account the rule that commercial and industrial enterprise is almost invariably established by money gathered from the people and almost never by the capital of banks ; that banks or other "money interests" do not "assist" enterprise be- fore the potential values of enterprise are "established" but pursue them as a fat source of loot after they are "established ;" ignore the fact that success in dealing with a bank is measured by the ability of the enterprise to conceal the necessity for such "assistance;" fail to put the frauds of stock-jobbing and market manipulations of the "interests" on the same footing with "wild cat" securities ; base issues on reputation rather than character of securities ; put quotations of securities on the curb or ex- change on a par with the qualities of government or municipal bonds; take no account of quotations procured by fraudulent manipulations of securities listed on stock exchanges and boards of trade; provided no means of distinguishing between wild cat speculations and bona fide potential earning power ; depend for their administration on fancy, prejudice, discrimination and ca- Appendix. 695 price rather than fact and means and methods of sound judg- ment; and thereby subject securities to the bhght of public prejudices, regardless of merit, and discourage investments therein by the people, and 27. Whereas, there is not presently available any form of statutory incorporation by which the affairs of the trust estate could practically be administered so as to give the cestuis que trust all the profits and at the same time permit any reasonable permanence of the rights of the trustees and the talent employed in such an estate; in v^hich respect, also, the costs of statutory incorporation; the perennial exactions of visitorial administra- tion; the constitutional impediments to interstate migration; the great diversity and constantly changing and vexatious legis- lation of the several states and multitudinous and conflicting re- quirements as to reports ; and the increasing tendency to regard the status of statutory incorporation as a fruitful source of revenue instead of a means of defraying merely the costs of administration, renders any statutory incorporation cumbersome and vexatious and unduly expensive and prohibitive and in- imical to the best interests of such an estate and of the cestuis que trust thereof ; and wherefore the party of the first part deem it for the best interests of the estate and for the cestuis que trust to create and declare a trust estate of the said assets, business and good will subject to all encumbrances, debts, claims and demands whatsoever in that behalf as hereinafter provided, and 28. Whereas, the party of the second part under said In- denture and Declaration of Trust, Exhibit A, heretofore issued approximately 400,000 interests, the certificates of which in words and figures are substantially as follows, to-wit: 696 Trusts for Business Purposes. $25.00 $25.00 Beneficiary Certificate General Offices Chicago, Illinois. Number Beneficial Interests. THE CO-OPERATIVE SOCIETY OF AMERICA. A Common Law Trust. 400,000 Beneficial Interests $25.00 Each. This is to Certify That is the holder of Beneficial Interests in The Co-Opeeative Society of America. This Certificate is one of a series of certificates issued by the Trustees of the said Society, said Cer- tificates representing in all Four Hundred Thousand Beneficial In- terests of Twenty-Five Dollars each. The certificates and the Interests represented thereby are non-assessable and are described in and are subject to a Declaration of Trust in favor of said Society, dated the Twentieth day of February, 1919. The Certificates are transferable on the books of the Society by the holder or holders in person or by Attorney upon surrender and proper endorsement. The holder hereof shall be entitled to his or her proportionate share of the benefits arising from the operation of the Society by the Trustees named in said Declaration of Trust, or by their successors, payable as the said Trustees may from time to time elect. Dated this day of 19... The Co-Operative Society of America. I By. .and Trustees. 29. Whereas, the party of the second part under said trust deed, Exhibit F, heretofore issued 2,000,000 beneficial debenture interests, the certificates of which in form are in words and figures substantially as follows, to-wit : FORM OF DEBENTURE. $50.00 each $50.00 each General Offices Chicago, Illinois Number Beneficial Debenture Interests THE CO-OPERATIVE SOCIETY OF AMERICA. A Common Law Trust For National Co-Operation. This is to Certify, that Appendix. 697 is the holder of Beneficial Debenture Interests in The Co-Opeeative Society of America, of a par value of Fifty- Dollars ($50.00) each. This certificate is one of a series of certifi- cates issued by the Trustees of the said Society, said certificates representing in all two million benefits of a par value of fifty dollars each. The certificate and the interests represented hereby are non- assessable and are authorized by a Declaration of Trust in favor of said Society dated the Twentieth day of February, 1919, and are secured by a Trust Deed to George A. Abbott, Carl Wisner, and Viggo E. Bird, Trustees, and are subject to the terms thereof, are transferable on the books of the Society by the holder or holders to the extent of 20 shares only by one person in person or by at- torney upon surrender and proper endorsement. The holder hereof shall be entitled to his or her proportionate share of all the profits and benefits arising from the operation of the Society by the Trustees named in said Declaration of Trust, or by their successors, payable as the said Trustees may from time to time elect; and are payable as to principal at the maturity of said trust or convertible at the option of the holder as provided in the trust deed securing the same. Any purchases, sale or ownership of more than twenty shares is null and void to the extent of the excess. Dated This day of 19 . . . .and Trustees 30. Whereas, said beneficial interests of an expressed value of $25.00, by reason of their increase in value, are by said trust deed, Exhibit F, made convertible share for share into said beneficial debenture interests of a par value of $50.00 each, and 31. Whereas, a portion of said twenty-five dollar interests have been converted and exchanged and are in process of ex- change by the holders for said fifty dollar debentures and an- other portion of said debentures have issued and the remainder are in process of issue to other contributors to said trust estate, both of which forms of interests are hereby convertible into interests issued hereunder. 698 Trusts for Business Purposes. Title. 32. Now, Therefore, in consideration of the premises and of the acceptance hereof by the party of the second part, under and by virtue of the power granted in said deed of trust, Ex- hibit F, the party of the first part, W. C. Clark, Gustav Kopp and Louis I. Block as trustees, hereby declare and estabhsh a trust as at common law (not intended to be a partnership nor a joint stock company, nor any form of associatioin of the cer- tificate holders inter sese) and appoint thereto the party of the second part, as trustees, and grant, remise, release, convey, alien, confirm and quit claim, sell, assign, and deliver to them, Harrison M. Parker, Viggo E. Bird and John Coe, as trustees hereinafter referred to, all the said property, real, personal and mixed which was of the said trust estate as by the said Exhibits A, B, C, D, E and F, which are hereto annexed and made part hereof, the same to all intents as if said property therein de- scribed and referred to were here now fully described and set forth, reference being had thereto, will fully and at large ap- pear, and all the rights, tenements and hereditaments thereto appertaining and belonging, and all other and further additions, accumulations and accretions thereto at any future time to- gether with all the business, good will, assets, rights and credits which were of the said trust estate heretofore designated as The Co-Operative Society of America, To Have and to Hold the same to them and their successors and assigns in fee simple, and to stand seized of all the right, title and interest therein and possession thereof in law and equity, and to convert the same into personalty as rapidly as the trust business will per- mit in the discretion of the trustees and subject to all encum- brance, debts, claims and demands whatever, contracted in the business as heretofore conducted, for the uses and trust herein declared, to-wit: Appendix. 699 Aliquot Parts and Increases. 33. The trust estate of the corpus at present ascertained is divided into two miUion (2,000,000) interests of a par vahie of Fifty ($50.00) Dollars per intere.st, to be disposed of in the discretion of the trustees. The Trustees, in the course of the trust business herein estab- lished, are empowered to increase the corpus of the trust es- tate by accepting further contributions of property or cash and any such contributions of cash, whether or not the same may be immediately invested in the purchase of property, or whether used to purchase or invest in property of a permanent nature or in fluctuating property such as stocks-in-trade or whether used in the payment of incumbrances or other debts, shall be taken and held to be an increase in and addition to the corpus of the trust estate and be divided into aliquot parts or interests of a par value of Fifty ($50.00) Dollars each to the extent of such increase and addition to the trust estate, and to the amount thereof the Trustees, may immediately dispose of beneficial in- terests at par or at such price as the same may be by the Trus- tees deemed to be worth, having in view the accretion by profits and good will to the whole trust estate and by the method so provided the Trustees may increase the issuance and disposi- tion of beneficial interests to any amount to which the corpus of the trust estate may be increased up to and beyond said two million (2,000,000) interests to any extent and without limit whatsoever and without the necessity of any further authori- zation by amendment hereof. Scope. 34. The Trustees in the Co-operative management of the property and business of the trust may acquire, hold, manage, lend, donate, use, barter and exchange, pledge, mortgage, or sell, 700 Trusts for Business Purposes. deal or trade in any and all kinds of property, whatsoever, and in relation thereto may conduct any and all kinds of business whatsoever; may acquire, hold, conduct, or dispose of any and all kinds of mercantile, industrial, manufacturing, financial transporting, storage or refrigerating business whatsoever ; en- gage in any and all kinds of technical, professional, industrial, social, educational and publicity enterprise or business v/hatso- ever; acquire, hold, operate and dispose of mines or deposits of ore, coal, stone, ocher, megnesite, or any and all clays, earth products or mineral substance; oil and gas wells and pipe lines and refineries ; forests, saw-mills and lumber yards, fisheries and canneries ; smelters and rolling mills ; coke ovens and lime kilns; carbide works; factories for the manufacturing of clothing; boots and shoes, and building material; canneries of food stuffs of all kinds; car shops and railway rolling stock; shops for the building of automobiles, wagons and other ve- hicles; hangars and aeroplanes and seaplanes; all manner of building material and sources of material, and means of manu- facture thereof ; manufacturers of and dealing in farm machin- ery ; all manner of foundries, smithies and machine shops ; ship yards ; locomotive works, textile mills and factories ; carpenter shops ; paint shops ; plumber shops ; decorators and architectural business and all manner of building operations, contracting, constructions, engineerings, trades and business ; the production and dealing in dyestuffs; all manner of dealing in medicines, arts, sciences and crafts; have all manner of patents of inven- tions of or concerning machines, methods, process, substances and designs, trademarks and copyrights in and about any and all of the manufactures, business, trades, arts, commodities or means whatsoever herein mentioned; all manner of ways and means of transportation by land and water and aeroplanes ; all manner of electrical apparatus and machinery, telegraphy, tele- Appendix. 7^1 phone and wireless; transmission of electrical currents for all purposes; warehouses, docks, tugs, ships and steamers; rail- roads, rolling stock freight houses and passenger stations and street railways and interurban railways and franchises for the same ; grain elevators, stock yards ; creameries, cheese factories, condensories, drying, dehydrating and dessicating establish- ments; public markets; furniture and musical instrument fac- tories; printing plants; newspapers and periodicals and bind- eries; advertising; all manner of wholesale and retail stores of food stufifs, tobacco, cigars, sporting goods, jewelry, wearing apparel and adornment and housing material ; farming farms and farm crops ; dealing in and making of farm machinery and im- plements; producing, manufacturing and marketing the prod- ucts of farms, factories, mines, forests, streams, oil fields and shale, and all earth deposits and substances whatsoever ; and to acquire, hold, vote, in person or by proxy, deal in and dispose of all manner of corporate stock or securities, or buy and con- vert the beneficial interest of any companies or common law trusts, engaged in any and all kinds of business or manufacture, and the stocks of insurance companies, of all kinds of trust or guaranty companies, or banks and safety deposit companies, office buildings, hotels and restaurants, telegraph, telephone and aerial transportation lines and submarine transports ; to con- tract for, buy, barter, sell and convey in any transactions con- cerning any and all of said properties and business in like man- ner as an individual ; to have a common seal ; to have succession by transfer of shares ; to sue and be sued ; to sue for and re- cover upon all contracts, claims and debts ; to settle, compro- mise or submit to arbitration any disputes and controversies ; to borrow and lend money or securities; to receive money on de- posit and discount commercial paper where not prohibited by statute; pledge or mortgage their assets; pledge their credit; 702 Trusts for Business Purposes. guaranty and assure or underwrite the issues, obligations and credits of corporations, firms, individuals, estates or trusts; is- sue scrip, notes, bonds, mortgages or other evidence of debts and interests, indebtedness or obligations whatsoever; declare and pay dividends and participation benefits in cash or to pay the same in scrip or other dividend certificates out of the net profits or out of the proceeds of the trust in cash or by division in specie; to invest and re-invest the funds of the trust; to create and establish sinking, amortization, guaranty and assur- ance funds, whether the nucleus thereof be derived from the trust or from investors in the trust or from the trustees hereof or from any corporation, firm, trust or individual dealing with the trust or whether such nucleus be formed by trust funds out of profits or corpus or with securities of governments, munici- palities, corporations, firms or individuals or by the purchase as of the present worth of any given fund, policy or undertaking of whatsoever nature or kind maturing at a given future date. Proeits. 35. The cestuis que trust, ultimately shall be entitled to all the net profits of the trust enterprise which may remain over and above encumbrances, liens, charges, debts, claims, expenses, costs, wages and salaries in and about the management of the property and business of the trust estate. Plan. 36. The business and property of the trust estate sliall be conducted and managed so as to procure the greatest possible co-operation among and between the elements of production, transportation and distribution at the least possible expense of providing the free flow of commodities between the producers Appi:NDix. 703 and the consumers on the basis of supply and demand, and with- out profit to the trust as an intermediary trading organization over and above the cost of administration and to avoid and pre- vent the fraudulent engrossing of trade, product or means of distribution and of arbitrarily fixing of prices to producer and consumer. AlIvOTmSnts, Priorities and Conversions. 37. The trustees have and hereby do set aside and allot not exceeding 400,000 of the said beneficial debenture interests heretofore issued, the same to be used in substitution for such outstanding beneficial interests as have heretofore been issued, at the option of the holders thereof, share for share, without loss of priority to the extent of the value of said 10,000 shares of Rochdale Stock or substitutions therefor as herein elsewhere provided. 38. The trustees at their option, after the ensealing hereof, may continue the further disposition of said debenture inter- ests or in lieu thereof, so far as the number authorized may be undisposed of and in addition thereto for any increase of corpus thereafter, may issue a certificate in form which in words and figures shall be substantially as follows, to-wit : Form of Certificate. $50.00 Each Certificate No $50.00 Each General Offices Chicago, Illinois Numbers To Both Inclusive Beneficial Interests The Co-Operators of America known as The Co-OpEaiATiVE Society of America. A Common Law Trust For National Co-operation. This certifies that by reason of the organization of the co-opera- tive elements of production and distribution by the undersigned to overcome the prevailing evil practices of manufacturers, distributors 704 Trusts for Business Purposes. and traders tias contributed to and is the owner of Beneficial Interests of an expressed value of $50.00 each fully paid and non-assessable in the Trust Estate of the undersigned otherwise known as The Co-Opeeative Society of America, a Common Law Trust, created under Articles of Trust providing for the pro rata payment of all the participating distributive benefits and profits of the Trust Estate to the owners of the Beneficial Interests. The holder hereof is entitled to the benefit of collective buying and other co-operative advantages of production and marketing and other business by the affiliated enterprises of the trust operations, which may be realized by the undersigned trustees. Any sale, purchase or ownership by any one person of more than twenty interests is void as to the excess. Interests to the number of twenty only in any one individual are transferable by endorsement and delivery of certificates thereof and the transfer on the books of the Trustees in person or by Attorney in Fact, which transfer record is conclusive evidence of ownership. Dated this day of 19. . . ( Seal) ( Seal) ( Seal) Trustees. 39. The said beneficial debenture interests sold for cash and now outstanding shall have preference on all the property, real, personal and mixed wherever situated of the trust estate but in case it should appear at the dissolution and distribution of the trust estate that the proceeds of sale thereof shall not be suffi- cient to pay all beneficial interests and debentures, then out- standing, then said interests remaining uncontroverted into de- bentures and the debentures substituted therefor shall have pri- ority in so far as concerns the present value of said 10,000 shares of Rochdale Wholesale Company stock or stibstittitions therefor now in the trust estate to the extent of the said inter- ests converted and unconverted to the amottnt of $57.50 per interest. The priority so given shall inhere in any debentures which may be substituted for beneficial interests but the differ- Appendix. 7^5 ence in value in such exchange shall not be construed as a premium, bonus or right :— provided that the trustees may give such suitable right on such substitution as to them may seem proper, in which event said priority will be superseded, satisfied and displaced. 40. The holders of said 400,000 beneficial interests and the holders of said debentures whether received in exchange for said beneficial interests or paid for in cash may at the option of the holders be exchanged for the beneficial interests hereby pro- vided share for share with such rights as the trustees may deem fair and proper. 41. The said interests to the number of debentures remain- ing unallotted and undisposed of shall be transferable by en- dorsement and transfer in person or by proxy upon the books of the trustees. The disposition of said undisposed of interests and the substitutions of said 400,000 debentures for said out- standing beneficial interests shall be made by and under the supervision of the trustees or as herein otherwise provided. Any sale or sales or ownership of more than twenty debentures or interests to or for any one person, directly or indirectly is in- imical to the co-operative enterprise and shall be deemed and be null and void and the excess above twenty interests shall not be entitled to registry or transfer on the books of the trus- tees nor be entitled to recognition in the payment of dividends or distribution of profits or principal. Neither shall any sales of interests be made unless at least 80% of the proceeds be paid free of all charges or deductions to the Trustees, and upon receipt of contributions for said interests the Trustees shall ap- ply the same in units of $1000. In acquiring further shares of the capital stock of said Rochdale Wholesale Company or other subsidiary corporation or trust which may be used as an agency in accomplishing the co-operative enterprise of the trust estate 7o6 Trusts for Business Purposes. or other approved and secured income bearing or profit sharing stocks or bonds and real estate or preferably in the shares of said subsidiary trust agencies of the grantors' trust estate or other property, real, personal, or mixed, as additions to the corpus of the trust estate. 42. The said real estate situated in the State of Michigan is subject to certain contracts of sale heretofore entered into for amounts aggregating approximately $350,000.00 but the pro- ceeds of sale thereof, as promptly as the same shall be received shall be invested in other real estate or in income bearing or profit sliaring stocks; interests in common law trusts or bonds or stocks of various corporation agencies, which the Trustees use in the performance of their trust. 43. In case by existing contracts or otherwise, there shall be disposed of, any of the real estate or securities heretofore agreed to be sold, and any of the parties interested in such sales will deposit the reasonable market price thereof in escrow subject to this trust, whereby the trustees may receive and ap- ply the same in the purchase of other real estate or securities of equal or greater value for the trust estate then the Trustees shall release the said real estate, but the purchaser thereof shall not be required to see to the application of the purchase money paid by him. 44. The Trustees shall continue to permit the conversion of said beneficial interests and out of the contributions for the further disposition of beneficial interests invest a suitable part thereof in stock of said Rochdale Wholesale Company, its as- signee or other agency in that behalf, and thereby enable said company or its successor to establish the quota of stores and marketing facilities commensurate with a suitable proportion of interests at any time issued and the Trustees may otherwise carry out the intent of said Articles of Trust, Exhibit A, and Appendix. 707 trust deed, Exhibit F, which they may deem necessary, for the profit and security of all parties as their interests by previous subscriptions for interests on partial payments fully performed may appear, including the practice of allowing discounts on purchases made and interest on partial payments by holders of beneficial interests or debenture interest holder of this trust estate. Administrative Powers in General. 45. The party of the second part acting in their collective caimcity as Trustees and herein referred to as the Trustees and as the Board of Trustees, shall so far as practicable be desig- nated as The Co-operators of America in and about their form of advertisement of doing business and thereby for brevity and convenience may execute their contracts and business engage- ments so far as such form and style shall not be contrary to law; own property and conduct all kinds of business without limit of extent or value; shall have power and discretion to sell any of the property of the trust estate, real, personal and mixed, and convert the same into cash for the purposes of the business of the trust herein provided ; hold the legal title to all property at any time belonging to the trust and shall have and exercise the exclusive management and control of the same; and the right of the said Trustees to manage, control and administer the said trust estate shall be absolute and unconditional and free from the control or management of the certificate holders ; make and perform contracts of every kind with any person, firm, as- sociation, or corporation, persons, municipalities, bodies politic, county, or state, government, colony or dependency thereof, and without limit as to amount, to draw, make, accept, endorse, discount, execute and issue promissory notes, scrip, drafts, bills of exchange, warranted bonds, debentures, and other negotiable 7o8 Trusts for Business Purposes. and transferable instruments and evidences of indebtedness whether secured by mortgage or otherwise, so far as may be permitted by any custom or laws, state or federal ; have offices, conduct the business and promote the objects hereof, in any and all the States, and District of Columbia, the territories and col- onies of the United States, and in foreign coimtries, without restriction as to place, time or amount; adopt by-laws; hold official trustees' meetings; conduct the business of producing, collective buying and distributing of the trust estate in a co- operative manner and to the end that the producers and con- sumers who shall be holders of the beneficial interests of the trust estate shall receive all the net profits thereof ; meet all competition of producers and distributors in any branch of production, commercial or financial activity whatsoever, in any manner which may not be unlawful, to the end that commodi- ties shall flow freely from the producer to the consumer with- out undue or unreasonable trade restrictions or monopoly, but by the economic law of supply and demand; combine on the basis of co-operation by territorial, political or occupational subdivision, with any other common law trust which is con- ducted on the co-operative plan hereby presented ; eradicate any and all of the evils mentioned in the preambles hereof ; assist the nation in peace or war by the contribution of organization talent, men, money or material ; discountenance and oppose for- eign control of American Newspapers or other means of pub- licit}' or education; refrain from amalgamating co-operatively or otherwise with any society or combination for foreign propa- ganda having the design or effect to deceive our people; deal with foreigners in tangible articles of trade only and without regard to race or creed but at arms length; appoint trustees: increase the number of trustees hereof in multiples of three or thereafter reduce them by like proportion; resign their trust; Appendix. 7^9 appoint and nominate their successors in trust; which success- ors in any degree removed may in like manner appoint his suc- cessor; keep res^ular minutes of trustees' meetings and do any or all of the things herein set forth to the same extent as natural persons might or could do, and in any part of the world, as principals, agents, contractors, trustees, or otherwise, and either alone or in company with others. i Specific Powers. 46. All acts to be done by the Trustees, including the aliena- tion or encumbering of real estate may be performed by the said Trustees, namely, Harrison Parker, Viggo E. Bird and John Coe, or their successors in any degree removed, who are hereby made Trustees when duly nominated and confirmed as herein elsewhere provided. All parol contracts when in writ- ing or partly in writing may be signed by any two of said Trustees. Any verbal contract made in the ordinary course of the trust business by any one of said trustees shall be good and sufficient to bind the trust estate. 47. Any Trustee may acquire, own and dispose of benefi- cial interests in this trust to the same extent as if he were not a Trustee hereof ; they may also buy, own and dispose of such interests as trustees on behalf of the trust to any number and reissue the same. 48. The Trustees are authorized to employ all necessary or proper agents, servants, brokers, attorneys, employees or coun- sel, to carry into effect the purpose of the trust herein created, and to protect and preserve the same, and to provide and pay out of said Trust Estate the compensation, fees, commissions or expenses incurred in the management thereof. To contract for and on behalf of said trust estate, and to bind the same and 7IO Trusts i^or Busini;ss Purposes. its property to the performance of such contracts; to borrow money on behalf of such trust estate on such terms and con- ditions as said trustees shall deem best, and to bind said estate and its assets to the payment of such indebtedness and to pledge and incumber any property of said estate, whether real, personal or mixed, for the security of the indebtedness so incurred, un- der such terms and conditions as to the Trustees may seem best, and to agree upon, approve and fix, execute and deliver and perform in the name and on behalf of the said trust estate, any deed, pledge, mortgage, bond, note, endorsement or guarantee, trust deed, simple contract or any other instrument which may be necessary or proper to carry out the terms of this trust. But neither the said Trustees nor the said certificate holders nor any of them shall be in any mianner personally liable by virtue of any contract, note, scrip, bond, deed of trust, mortgage or other instrument, executed under the terms of this paragraph, but the same shall fully bind the property of the said trust es- tate for the performance thereof. The said Trustees are here- by authorized to do, or cause to be done in any lawful manner, all the things which are incidental, necessary or proper to carry fullv into effect all of the purposes herein enumerated or pow- ers hereby conferred ; the general authority given being in- tended to control and make fully effective the power and au- thority of the Trustees under this instrument, notwithstanding the specific enumeration and description thereof herein. 49. The Trustees shall, in their own names, as Trustees of said estate doing business as the Co-operators of America, bring any suit or action which in their judgment shall be neces- sary or proper to protect this estate or to enforce any contract made for the benefit hereof, and to defend in their discretion any suit or action against this estate or against the Trustees hereof, or against any employe or any holder of beneficial inter- Appe;ndix. 711 ests herein, civil or criminal, as may heretofore or may here- after be instituted. The said Trustees are expressly authorized to bring or defend such suit in their discretion or to compromise and settle any suit, claim or controversy in which tlie said es- tate is interested, as to them may seem best, and to- discharge the same out of said estate and its assets; and they are specially authorized to pay or transfer out of this estate and its assets, all sums of money or property necessary to discharge any judg- ment against them in their capacity as Trustees, together v^itli all court costs, or other costs, including counsel and attorneys' fees and also to pay out of this estate or its assets, such sums of money, or transfer or appropriate property thereof, for the purpose of settling, compromising, or adjusting any such claim or controversy, together with any such costs and expenses con- nected therewith, and all of such expenditures shall be treated as exiienses of executing this trust. 50. All expense incurred by these Trustees in carrying out the terms hereof, whether heretofore contracted or now exist- ing, as well as all liabilities incurred by them in the execution of this trust, whether arising from contract or tort, shall be considered as expenses of executing this trust, which shall first be paid out of the assets and properties hereof, and which shall be a first and prior lien against the said estate and property, su- perior to all others. Organizers. 51. The Trustees shall provide a corps of organizers whose duty it shall be to guide and aid the producers or consumers in the several localities of sufficient number to justify the trust in the installation of co-operative manufactories, retail stores, and other enterprises and to receive a sufficient amount per capita to cover the outlay in that behalf and to conduct the general 712 Trusts for Business Purposes. trust enterprise and to evidence such contributions by the issu- ance of certificates of beneficial interests in the trust estate; employ persons who shall contribute to the trust and take bene- ficial interests and who shall be trained and skilled in producing, buying or selling the products of persons who shall be minded to contribute to the trust estate and take beneficial interests therein and instruct such producers in the production, prepara- tion, manufacture, sorting, classifying, packing and shipping thereof so as to pass inspection at destination and prompt pay- ment therefor without loss to the producer ; train and appoint persons to install and manage neighborhood retail stores and in the several lines of trade, manufacture, art, profession, occupa- tion, invention or production; and in conducting of department stores and country general stores ; wholesale stores ; warehous- ing, cold storage and transportation; maintain a publicity de- partment for the education of the public in the benefits of co- operation; and to perform the duties in the said several Hues of business when the same shall be acquired by the trust; and in general to oversee the statistical, fiscal and financial affairs of the trust estate. Advisory Trustees. 52. The Trustees may appoint as advisory trustees such per- sons as may volunteer and as the trustees may deem fit for such position, without compensation except as they may be actively employed in' the business of the trust. The persons so ap- pointed shall be of pronounced favor toward the co-operative plan hereof and may severally acquaint themselves with the executive duties of some branch of the business into which the trust may be divided and classified or in the general executive management of the trust. Such advisory trustees may attend meetings of the trustees when invited thereto but shall not be Appendix. 713 entitled to a vote nor to any executive powers nor to partake in the title to the property of the trust estate. When in the opinion of the executive trutsees any such advisory trustees are com- petent they may be nominated and appointed as trustees and successors to the trustees as herein elsewhere provided for. DELKGATION. 53. The Trustees or their successors hereby are vested with power to appoint any individual or corporation as agent or as trustee to perform the trust hereby created, whether in delega- tion of the powers hereby created or required to be performed or in the exercise of the powers of such appointee. Whenever in this trust deed the trustees are referred to ex- pressly or by implication the meaning and intent thereof shall include any and all appointees, and be subject to the rights, benefits and obligations hereof. 'tj*^ Subsidiary Trusts. 54. The Trustees may classify the several lines of the Trust's business and organize the same severally so as to secure co-operation between them by character of business, trade or occupation, or by locality or territorially, as by experience may to them seem most desirable ; train or procure persons of expert talent in each of the several classifications or lines ; create, settle and declare a distinct, self-sustaining and co-operative subsidi- ary trust, of the general tenor hereof, of each of the several lines and classifications, the same to be divided into aliquot parts for the issue of Beneficial Interests thereof to be depos- ited with these trustees, subject to their right to sell the same to the holders of interests in this trust not exceeding twenty subsidiary interests to any one person, and providing that per- 714 Trusts for Business Purposes. sons dealing with such subsidiary trustee shall look only to the property of the subsidiary trust and saving this trust and the trustees and cestuis que trust harmless therefrom. 55. It is expressly declared that the trustees may acquire in whole or in part the capital stock of any corporation for the purpose of adding the enterprise co-operatively to the trust es- tate ; and in case a subsidiary trust shall be formed of such cor- porate enterprise the trustee may give the beneficial interests of such subsidiary trust in payment therefor. Provided however that in lieu of buying the capital stock of any corporation the trustees, in case any onerous conditions may otherwise and un- foreseen be attendant thereon, may buy all the property, real, personal and mixed and the stock-in-trade, business and good will of such corporation, subject to or free of the debts and liens thereon as may be agreed upon and in payment thereof may give the beneficial interests of any subsidiary trust into which the same may be organized. It is further expressly declared that after such purchase, for said purpose or any formation of a subsidiary trust the sub- sidiary trust interests shall not be sold unless as a condition precedent all the purchasers of such subsidiary trust interests shall be holders of beneficial interests of this trust estate; pro- vided that in the event of the formation of a subsidiary trust of corporate enterprise or purcliase of the assets thereof all the subsidiary trust interests may be given in purchase thereof or in conversion for corporate stock in such enterprise. 56. In case the trustees should decide to exercise their power to acquire or to declare a subsidiary trust of the property, real, personal or mixed, and the business and good will of any corporation then the holders of the corporate stock thereof who may be cestuis que trust herein shall consent or be taken to consent thereto and to convert their corporate stock into benefi- Appendix. 7i5 cial interests into which the subsidiary trust assets shall be divided as may be determined by the trustees at the time they shall create such subsidiary trust. Compe;nsation, 57. The Trustees, for performing their official duties which shall consist exclusively of attending trustees' meetings, as compensation and fees, shall be entitled to charge and deduct an amount not exceeding 4>4% of the net profits provided for the trustees under the Articles of Trust, Exhibits A and F, and in addition to such compensation they severally for any active service they severally may perform in the business of the trust shall be entitled to such reasonable compensation as, for such services as they may perform, is usual and customary for like service, in case they necessarily devote their time to the trust business. 58. The Trustees may adopt by-laws for the holding of stated meetings and other meetings of the Trustees to be held from time to time anywhere in the United States upon the call of the Secretary ; they may make, adopt, amend or repeal such by-laws, rules and regulations not inconsistent with the terms of this instrument, as they may deem necessary for the con- duct of their business or for the government of themselves, their agents or representatives ; to fix the compensation of any or all agents or employees they may appoint, and are likewise authorized to pay themselves such compensation for their active services as they may deem reasonable. 59. The Trustees may cause to be kept by a Secretary ap- pointed by them, a record of all meetings of the Trustees, which record shall be similar in character and of the same effect 7i6 Trusts for Business Purposes. as that kept in case of corporation directors, and so far as stran- gers to this trust are concerned, shall be conclusive against the Trustees of the Acts and Doings therein stated. Nominations, Qualifications, Duties, Removaes, Compensation. 60. Every Trustee or successor in trust shall at all times keep in the official minutes of the Trustees his nomination in writing signed by him, of some person, from among the ad- visory trustees, as his successor in trust. The successors in trust respectively of the present trustee in whatsoever degree removed, in addition to an earnest zeal, which shall be mani- fested by more than lip service, for the co-operative principles and plan hereof, shall concern, embody and perpetuate three general qualifications, severally, to-wit: The successor of Harrison M. Parker in whatever degree removed shall be experL in financiering, business organizing and executive qualities ; the successor of Viggo E. Bird in whatever degree removed shall be generally concerned with the occupationally organized pub- lic; and the successor of John Coe in whatever degree removed shall be generally representative of the enlightened and unorgan- ized public and having to do with educational matter. In case the trustees increase their number of executive trustees in mul- tiples of three as herein elsewhere authorized, such increase shall be attributive equally to said three general qualifications or to some specific subdivision thereof respectively, and their successors respectively, in whatever degree removed, shall have qualifications and concern and be nominated in like manner, as aforesaid ; The said trustee and successor, representative of said expert qualities and concern in financiering and business organization, Appendix. 717 shall be and continue the executive head of the trustees and any additional trustee allotted to such division of qualification shall have concern only with such subdivision thereof as the execu- tive trustee shall direct other than that of executive he^d of the trustees. The executive trustee shall at all times have the personal custody of all articles of trust and documents apper- taining thereto. Any active duties as to detail, which may be necessary in and about said general divisions and subdivisions other than attend- ance of trustees meetings and the functions of the executive trustee or other purely official functions may be performed by experts in the respective particulars for compensation as di- rected by the respective trustees ; or the trustees respectively or any of them may at their option devote their time thereto and be entitled to a reasonable compensation for such active service over and above the amount of 4/^% of profits for attending trustees' meetings and performing their purely official functions. Persons nominated as aforesaid, unless objected to in writing on the ground tliat they are not in favor of the co-operative business methods of the business carried on by the trustees and have not said qualifications shall be appointed and confirmed by the trustees when the trustee so making such nomination shall for any reason cease to be trustee. Appointments, resig- nations or other defections of trustees shall be evidenced by memorial in the trustees minutes which shall be sufficient as to real estate titled and other trust business. The successor in trust of the executive trustee, in any degree removed, shall be executive trustee subject to removal by the board of trustees for embezzlement, intentional fraud, gross in- competency, gross neglect, gross mismanagement or gross dis- loyalty, to the co-operative plan or business hereof, upon charges in writing duly filed with the Secretary of the Board of 7i8 Trusts for Business Purposes. Trustees and upon thirty days' notice to such executive trustee of the trial and due and lawful proof thereof before said Board of Trustees, sitting as a trial commission ; a complete record of the evidence and proceedings of which trial and conclusions of fact and decision of the commission shall be preser\'cd. No court proceedings shall be begun against such executive trustees before such trial shall have been had. Failure to Act. 6i. In the event of the death, resignation, refusal or in- ability of any or all of the trustees to act in and about the per- formance of this trust or by reason of any disability or disin- clination to act in this or any other jurisdiction the trustees or remaining trustees acting collectively, may accept any resigna- tion, appoint his or their successors whose nomination in writ- ing each trustee and successor in trust, in whatever degree re- moved, shall constantly have and maintain in the records of the trust) and fill any vacancy; in any which events any suc- cessor so nominated and appointed hereby is made successor in trust, who by virtue of such appointment shall be hereby deemed to be ipso facto vested with all the title, rights, duties, powers, obligations and emoluments in this behalf without any formal conveyance, and the trustees so displaced shall thereupon by virtue hereof ipso facto stand divested of the same without any formal conveyance. 62. Any such successor in trust shall be entitled to the immediate possession of the property and of the business, good will, franchises, interests, rights, accounts, commercial paper, and profits and of the records and books of account of the business and affairs and all records of the trust estate and of the management, control and operation of the same, Appendix. 719 and until the actual delivery thereof to the successor in trust any trustee failing so to act shall be held and taken to be ten- ant at will thereof for the successor in trust and shall deliver possession thereof on demand to the successor in trust and in case of refusal of the outgoing trustee to make such delivery, the successor in trust shall take possession by any lawful means, directly or indirectly ; in which respect a memorial in the trustees minutes thereof shall be conclusive evidence of the taking of possession and the rightfulness thereof. Immunitie;s. 63. The said Trustees shall use ordinary and reasonable diligence in the performance of this trust, but shall not be liable to the certificate holders or any of them for any act, default, failure or negligence in or connected with the execution of the said trust, provided the same shall not amount to and constitute fraud, embezzlement or wilful breach of trust, and they shall not be obliged to give bond to secure the due per- formance of this trust by them. 64. The Trustees, except to the extent of the property immediately held by them, nor in any manner whatsoever as to the several subsidiary trusts, shall not be held personally liable for any debts or claims against the trust estate or against such subsidiary trust; nor shall the subsidiary trus- tees be held personally liable for any claims or debts against the business of such subsidiary trust estate beyond the prop- erty immediately in the hands of such subsidiary trustee and all contracts of the trustees or subsidiary trustees respectively which bear the legend "TiiE Party Contracting Hereby Agrees to Look Solely to the Property of the Trustee AND TO Absolve the Trustee and Cestuis Que Trust From 720 Trusts for Business Purposes. Personal Liability" shall be sufficient notice to such con- tracting party of the limited liability hereby provided as of a trust at Common Law. 65. By the failure or neglect of such trustee or trustees to so declare in any instrument, contract or obligation entered into for the purpose of carrying out the objects of this trust, mentioned in any paragraph herein, shall not be construed to render said Trustees nor any of them individually liable thereon, but the same shall be obligations binding upon and perform- able only out of the assets of said trust estate. 66. The Trustees, nor the subsidiary trustees, shall not be liable for any losses of property or investment or transaction due to any act or omission by them in good faith; nor in any event or circumstance shall they be held liable for the acts or omissions of each other, nor for the acts or omissions of any servant, agent or attorney appointed or acting for them. 67. The holders of said debentures or beneficial interests shall not have any right by reason of error or mis judgment in the management of the trust short of embezzlement or actual and intentional fraud upon the beneficial interest or debenture holders to commence and prosecute any sort of action against the trustees or any of them or against the prop- erty or against other security holders before the dissolution of this trust, and then only in the event that the trustees, on written notice particularly specifying the alleged cause as aforesaid, arbitrarily refuse or negligently delay for the space of ninety days to take such action as may be directed in writ- ing by a majority of said holders, but the trustees shall not in any event be obliged to defend any action or to begin any suit or action on the demand or notice of the said holders of interests or debentures as aforesaid unless they f?rst tender Appendix. 7^1 to the trustees such reasonable indemnity for attorneys' and sohcitors' fees and other usual liabilities and expenses as the trustees in their reasonable discretion may require, for the protection of the trustees and the interests of beneficial inter- est or debenture holders. 68. In case any trustee, officer, agent or attorney or owner of beneficial interests, for any reason, shall be held to, or be under any personal liability, not due to his acts in bad faith, then such person shall be held harmless and indemnified out of the Trust Estate from and of all loss, cost, damage or ex- pense by reason of such liability, and such liability upon which said person is personally liable, as aforesaid, shall be deemed a direct claim against the assets of the trust and such person paying the same shall be and become subrogated to all of the rights of the holder of said claim against the assets of this trust, and shall be deemed a creditor thereof to the extent of such claim or liability, and if, at any time, the income from the Trust Estate shall be insufficient to pro- vide for such indemnity and to satisfy all liabilities of and claims upon it, then the trust Estate shall be applied to the payment of the claims against it, including the claims for which such persons are liable, pro rata. 69. The death of a holder of a certificate of beneficial in- terests or trustee during the continuance of this trust, shall not operate to terminate the trust, nor shall it entitle the rep- resentatives of the deceased holder to an accounting or to take action in the courts or elsewhere against the trustees; but the executors, administrators, or assigns of any deceased holder of beneficial interests or debenture, shall succeed to the rights of said decedent upon the surrender of the certifi- cate and the issue of a new certificate therefor. 70. This trust shall not be terminated or the administration 722 Trusts for Business Purposes. thereof in any wise interfered with or suspended by the death of any such beneficiary or his incapacity for any reason, or by his said interest or interests being by process of law sub- jected to the payment of debts, or in any way vested in any heir, assign, creditor, or purchaser, of the said beneficiary or in any trustee, assignee, or officer of any court, or by the same in any manner being divested out of the beneficiary and transferred or vested in any other person, administrator, ex- ecutor, trustee, assignee or personal representative. But any such person who may, in any such manner acquire or be- come vested with the ownership of such certificate, shall thereupon succeed to and become entitled to all the rights and equities of the beneficiary therein named, and to the beneficial interests in this trust estate, upon surrendering the original certificate to the said Trustees with such proof of ownership as may be reasonably required by them, and the issue in lieu thereof of a new certificate, and notwithstanding said change of ow^nership or interest in any such certificate, or death or insolvency of the original owner thereof, the said trust estate shall continue and remain in full force until terminated as herein provided. 71. The ownership of Certificates of beneficial interests issued at any time by the trustees hereunder, shall not entitle such owner to any title in the trust property whatever; nor to the right to call for a partition or division of the same, nor shall such ownership entitle the holder to an accounting nor for the declaration or payment of dividends unless in case of a specific showing of intentional fraud or embezzlement. 72. The trustees shall have no power to bind the holders of beneficial interests and such holders and their assigns and all persons or corporations extending credit to, contracting with, or having any claim against the trustees or the trust estate, Appendix. 723 or any subsidiary trust for the payment of any amount claimed as owing under such contract or claim or for the payment of any debt, damage, judgment, decree, or of any money that may otherwise become due or payable to them from the trustees or subsidiary trustees, so that neither the trustees or subsidiary trustees, nor the holders of beneficial interest, present or future, shall be personally liable therefor. y^- Neither the said certificate holders, nor any of them, nor their property shall be liable for any indebtedness or lia- bility created by, growing out of, or arising from the exe- cution of said trust estate, whether arising from contract or tort of the said trustees, their servants, agents or employees, in the administration of said estate. The trustees, personally, nor either of them, nor their private property, whether real, personal or mixed, shall be in any manner, liable for any debt or liability incurred by said trustees, or any of them in the administration or management of the said estate, whether arising from contract or tort of the said trustees or any of them or their agents, servants, or employees ; and neither said trustees nor any of them shall ever be held personally liable for any damage or injury to person or property caused by or arising from, incident to, or growing out of the exe- cutions of said trust; nor shall they be liable for the acts or omissions of each other. That the assets of the said trust estate only, shall be liable for any indebtedness, liability, wrong, injury, or tort incurred, arising or growing out of the administration of the said trust estate by the said trustees or any of them or for any act or negligence or default of their servants, agents, or employees in the administration of this estate. 74. The name in which a certificate or beneficial interest, or debenture interest, stand on the books of the trustees, shall 724 Trusts for Business Purposes. be considered by the trustees conclusive evidence of owner- ship, and they shall not be required upon transferring such certificate, or paying dividends on such interests, or distribut- ing assets upon the termination of the trust, or at any other time, to inquire in any way into the identity or relations be- tween assignor and assigns, pledgors or pledgees, trustees and beneficiary, guardian and ward, or in any other similar rela- tion, and shall have the right to conclusively presume without inquiry, that the holder of any such certificate as shown by their books is the real and true and unconditional owner thereof. 75. So far as strangers to this trust are concerned, a reso- lution of the Trustees authorizing a particular act to be done shall be conclusive evidence in favor of such strangers that such act is within the powers of said Trustees, and no pur- chaser from the Trustees or one loaning money to the trustees shall be bound to see to the application of the purchase money or loaned money or other consideration paid or delivered by or for said purchaser or lender to or for said Trustees. Reorganization. 76. If for any cause, whether competitive, economic, po- litical, legal or official the trustees or any of them, or any successor in trust, should be attacked or molested in the man- agement or right to carry out and perform this trust, then the title and the right of any such trustee so attacked to the possession of this trust estate shall ipso facto be divested and be vested in the successor of such trustee and if thereby or for any other cause the trustees should deem themselves in- secure and unsafe in their protection of the rights of the said cestui que trustent then the trustees at their election and Appendix. 7^5 option may surrender to their successors the possession of said property, business and assets of the trust estate without filing any bill in equity in this behalf, and such successors by means of the present corporate or by other agencies may manage and conduct the business and affairs of said trust as a going concern for the protection of this trust and in accord- ance with the spirit and intent hereof and for the equal or pro rata benefit of the holders of beneficial interests and debentures in parity or priority as such interests may appear; in which event the trustees so attacked or molested ipsi facto shall be divested of all right to retain such title and possession and shall surrender and deliver the same on demand to the succes- sor in trust; in any of which events the successors in trust hereby are vested with the power to reorganize this trust in any administrative respect whatsoever by amendment of these articles of trust in any manner or extent which in their judg- ment will be conducive to the best interests of the business, the holders of beneficial interests, and the beneficial debenture holders ; provided only that in whatever form of trust said reorganization may be efifected the substantive rights of the cestui que trustent to the ultimate benefits be duly conserved ; and to such purpose the trustees in any said events or for any other reason are further empowered to organize a corpora- tion or corporations with power to do said business on the co- operative plan of these Articles of Trust, if State or Federal Legislation shall authorize such incorporation by statutes which in the judgment of the trustees would not burden the business and management with cumbersome restrictions, impracticable conditions and expensive franchises taxations and visitorial exactions in favor of the political or governmental treasury, preventive or prohibitive of co-operative commercial enter- prise and membership benefits therein. 726 Trusts for Business Purposes. DiSSOEUTlON. Dividends and Distribution. ']']. The trustees from time to time, are authorized to de- clare and pay dividends or participating distributive benefits out of the income or proceeds from time to time decided by them from the Trust Estate, to the intent that this trust estate shall be nonaccumulative as to profits. 78. If, on the 20th day of February, A. D. 1940, the trus- tees should deem it for the best interests of the trust and cestui que trustent to dissolve the trust, they shall sell the then remaining corpus of the estate in such time and manner, in parcels or en masse or as a going concern, and upon such terms as to them may seem proper and right and distribute the proceeds as herein provided; but if in the judgment of the trustees such dissolution would be a needless sacrifice of the property and a destruction of good will they shall not be obliged to dissolve the trust at the time above mentioned if they shall deem it for the best interest of the business and of the cestuis que trust to continue the trust's business ; but on said date if then there should remain outstanding any beneficial interests under said Articles, Exhibit A, or de- benture interests under said trust deed, Exhibit F, of which the holders or any of them should require payment, the trus- tees at their option, without dissolving the trust, shall have the right to make payment thereof out of the trust estate ac- cording to their priorities to the extent of the value of the Beneficial interests issued under the articles of trust, Exhibit A, which shall not have been converted and to the extent of the debenture interests issued under the trust deed, Exhibit F, and remaining unconverted as determined by the usual and current value thereof, in the usual way by the trustees, and Appexdix. 727 which amounts shall be held and taken as and for the value and share in the proceeds of sale of the estate as upon dissolu- tion and liquidation and paid out of the corpus of the trust assets or the trustees may borrow money on the mortgage security of the trust assets to pay the same; and the interests so paid out may be reissued to such lender or to other per- sons who may contribute to the corpus of the trust assets. 79. The holders of the beneficial interests hereby created, shall, in addition to such dividends, as the trustees may, from time to time declare and pay, be entitled on the dissolution of the trust; to the proceeds of sale of the corpus of the trust estate in proportion with the par value of the said beneficial interests held by them at that time, and according to the pari- ties or priorities herein provided to the extent the priorities shall not be waived or displaced, which sum or sums the trus- tees, by their acceptance of this trust, hereby agree as trus- tees to pay on dissolution at that time. 80. Upon the dissolution of the trust, for the purpose of winding up the afifairs hereof, and liquidating the assets of the trust, the persons then constituting the Trustees shall proceed to wind up its aflfairs, liquidate its assets and dis- tribute the excess after payment of the debts, among the hold- ers of beneficial interests and debentures and for that purpose shall continue in office until such duties shall have been fully performed. In Witness Whereof, the parties have hereunto set their hands and seals in token of the creation, declaration and ac- ceptance of the trust hereby created, for themselves and their successors, assigns and appointees at the place and on the day and year first above written. (SEAL) (SEAL) 728 Trusts for Business Purposes. (SEAL) Trustees and Settlers. ( (SEAL) ACCEPTED ( (SEAL) ( (SEAL) Trustees. Appendix, 729 THE GUARANTY & ACCIDENT LLOYDS. This association was organized for the purpose of conduct- ing an insurance business in the State of Ohio. It was held that this was an association, exercising a franchise. The case is reported in 51 Ohio State 163, 37 N. B. 828, 24 L. R. A. 298. Following is copy of the instrument under which they sought to do an insurance business in Ohio: "The undersigned being desirous of entering into the busi- ness of individual guarantee and accident insurance : "ist — Do each individually agree to deposit with an ad- visory committee to be appointed by the undersigned as here- inafter provided, the sum of one thousand dollars. "2d — Such sum or sums so subscribed by each individual subscriber shall be held by the advisory committee for the individual account of each subscriber, together with all earn- ings thereon, as a fund to meet any loss which such subscriber may sustain upon any policy of insurance subscribed by him beyond the net amount of premiums earned and received on said policy. "3d — Such advisory committee shall consist of five of the subscribers to this agreement, or such further subscribers as may hereafter adopt and execute this agreement, and may be selected and appointed once in each year on the Wednesday succeeding the first Monday in January, at an annual meet- ing of the subscribers. An annual meeting shall be called by the advisory committee, by mailing or handing to each sub- scriber a notice for such meeting at least five days before the time fixed therefor. The advisory committee to act until the Wednesday succeeding the first Monday of January, 1891, shall be composed of (I.) (2.) (3.) (4.) (5-) 730 Trusts for Business Purposes. "Such advisory committee and every member of such com- mittee shall continue to act as such until a new member or a new committee shall be appointed. "All questions shall be determined by a majority of such committee, and three members thereof shall constitute a quorum. Each member attending a meeting shall be paid $5 in gold for each attendance. Such committee shall meet at least once in each month; and oftener if they deem it neces- sary. "4th — Such committee shall have the custody and manage- ment of the subscription fund above provided for, and the general charge and supervision of all the business to be done ; shall supervise and direct the attorneys in fact who may be appointed by the subscribers, exact and receive accounts from such attorneys in fact, examine, audit, and pass upon the same, receive from said attorneys in fact and receipt for any earnings applicable to the several accounts of either of the undersigned, and make such use, disposition, and invest- ment of the fund and earnings as they shall deem most ad- vantageous and secure. "5th — If any member of such committee shall cease to be an insurer under the terms of this agreement, he shall cease to be a member of such committee and the remaining mem- bers thereof shall select from among the other subscribers at the time being some person to fill the vacancy thus occasioned. Any vacancy in the committee shall be filled in the same man- ner. "6th — The business management of the insurance to be ef- fective for and on behalf of each of the individual subscrib- ers hereto shall be in charge of Aaron H. Rathbone, Frederick W. Satterlee, Cleveland D. Fisher, and John G. Dorrance, as attorneys in fact of each subscriber hereto; such business Appe;ndix. 731 shall be carried on at an office to be known as the office of the Guarantee and Accident Lloyds ; each subscriber shall execute and deliver to them a power of attorney, in form and effect to be approved by the advisory committee, and by Alessrs. Coudert Brothers, counselors at law, giving to said attorneys the necessary power for the purpose indicated. The powers thus conferred on said attorneys shall be subject to and shall be exercised under the direction, supervision, and control of the advisory committee above referred to, and all policies or other instruments binding the subscribers must be signed by at least two of said attorneys. The compensation of said attorneys jointly shall be a commission of ten per cent on the amount of the premiums received in each year ; in considera- tion of which the said attorneys agree to defray all charges of office rent, salaries, stationery, advertising and all other expenses incident to the proper care and prosecution of the business, except agent's and broker's commissions, losses, legal expenses, taxes and the pay of inspectors employed un- der the direction of the advisory committee. Such attorneys shall be entitled as further compensation for their services, to twenty-five per cent of the net profits of each year's busi- ness as found and determined by the advisory committee. Such profits may be determined and paid over quarterly. "7th — Such attorneys shall at all times, wdien so required, furnish to the advisory committee full statements of all in- surance, expenses and premiums, whether due or collected, and every member of the committee shall at all times have access to all the books and papers of the attorneys. The attorneys shall keep separate accounts for each of the sub- scribers to this agreement, and each subscriber shall at all times have access to his individual account. "8th — -The advisory committee shall cause to be made up 'J2,'2 Trusts for Business Purposes. on the 31st day of December in each year all the accounts of the several subscribers hereto. If there should be any balance to the credit of the several subscribers over and above the amount of each subscription, the advisory committee shall determine how much, if any thereof, it is advisable to pay to each subscriber; and no part thereof shall be paid to or with- drawn by any subscriber hereto, so long as he shall remain a party to this agreement, except upon the order or direction of the advisory committee. Each subscriber shall, however, be entitled to receive from such advisory committee at the end of each calendar year a certificate showing the amount to his credit at the end of such year. If account of any sub- scriber hereto shall show upon such annual statement that the amount to his credit is insufficient to cover the current liabilities against him, the advisory committee shall have the power and authority to call upon such subscriber for the payment of such an amount as will in the judgment of such committee be sufficient to meet the deficiency, and such amount when paid shall be credited to each individual subscriber in like manner with his original deposit and if not paid within three months from the date of such call such subscriber shall thereupon cease to be a party to this agreement except in re- gard to transactions already entered into on his behalf. "9th — In case any of the subscribers hereto should desire to withdraw from this agreement, and shall give thirty days' notice in writing of such desire to the advisory committee, and in case any of such subscribers shall become insolvent or embarrassed in business or in case of any other reason, it should be deemed advisable in the opinion of a majority of the advisory committee that any subscriber should withdraw from this agreement, the attorneys aforesaid shall upon writ- ten notification by the advisory committee, cease to act as Appendix. 733 the attorneys for such subscriber, except in regard to trans- actions already entered into on his behalf, and such subscriber shall thereupon cease to be a party to this agreement, except in regard to such previous transactions. In case of the with- drawal of any subscribers for either of the reasons above stipulated, and in case of the death of any subscriber, his account shall not be closed until three months after the ex- piration of all risks in which he may have been concerned as such subscriber, and all sums to his credit, either in the hands of the advisory committee, or of the attorneys, shall be irrevocably pledged to the payment of any losses for which he may be or become liable, and of any amount which may be due or unpaid by him growing out of the insurance business herein contemplated ; and neither such subscriber nor his as- signs or legal representatives shall have the right to withdraw any part of such sum to his credit, until all such losses or other debts are fully satisfied and discharged. At the ex- piration of all such risks and upon payment and satisfaction of such other indebtedness, the balance remaining to the credit of such subscriber shall be paid over to him or his legal representatives or assigns. "loth — In case, however, any subscriber who duly with- draws from this agreement, or the legal representatives of any deceased subscriber, should procure a new subscriber satisfactory to the advisory committee, then, upon such new subscriber assuming, in writing, all the liabilities and indebt- edness of the former subscriber under this agreement, or arising from any business contemplated therein, and duly executing this agreement, the former subscriber, or his legal representatives, shall be released and discharged from all re- sponsibility as a party hereto. "nth — At the annual meeting of the subscribers already 734 Trusts for Business Purposi;s. provided for, any and all questions arising under this agree- ment, or in reference to the business herein contemplated, may be called up and disposed of. Special meetings may be called by a majority of the advisory committee, or by any ten subscribers, in the manner provided for annual meetings. The subscriber may waive a five days' notice, and accept in writing a shorter notice. Matters brought before any meeting shall be determined by the vote of a majority of those represented at such meeting, either in person or by proxy. At any meet- ing, annual or special, a quorum shall consist of the represen- tatives of a majority of the subscribers. No change, however, can be made in the terms of this agreement, except by the vote of three- fourths of all the subscribers hereto at a meet- ing specially called for the purpose by notice stating the exact terms of the change proposed. "i2th — ^All claims for losses shall be disposed of by the attorneys under the supervision of the advisory committee, and shall be paid out of the funds in their hands, and when these are insufficient, then out of the funds in the hands of the advisory committee. Any suit brought upon any claim aris- ing out of the business contemplated by this agreement, and any questions arising as to any legal liability upon any such claims, shall be referred to Messrs. Coudert Brothers, as coun- sel, under the supervision of the advisory committee, and such committee, with the advice and concurrence of said coun- sel, shall have power to settle, compromise, or contest any such suit or claim as to them shall seem expedient, and are authorized, upon the advice and concurrence of said counsel, to stipulate for and on behalf of each several subscriber hereto, that such subscriber will abide by the event of any such suit, whether at the time of such stipulation such sub- scriber be or not a party to this agreement. Appendix. 735 "13th. — In the policies issued under the present arrange- ment, neither of the subscribers shall be made jointly liable with the others, nor with either of the others, but each sub- scriber shall only be made severally and separately liable to the amount authorized by him individually in the power of attorney, given by him to the attorneys above mentioned. Nor shall any joint liability be created on behalf of the sub- scribers hereto, in any matter arising out of the business to be carried on under this agreement, but only a several liability on behalf of each individual subscriber. No policy, however, shall be issued on behalf of any individual subscriber hereto, unless each of the individual subscribers insures for a like amount on said policy. "14th — All receipts or earnings of the business contemplated by this agreement shall be kept by the attorneys in fact in a separate bank account, in their name as such attorneys, and not in any way mingled with their own funds. They shall render accounts to the advisory committee at least once in each month, or oftener if required, and shall make returns and payments of balances to such advisory committee at least once in every three months, and oftener if required by the said committee. "15th — All funds in the hands of the advisory committee shall be kept separately, and a separate bank account shall be kept by the committee for all uninvested funds, which bank account shall be in the names of such committee. Each of the undersigned, in consideration of the premises and of the execution of this agreement by the others, does hereby severally agree for himself, individually, to and with the others, and with each of them, that he and his represen- tatives and assigns, will faithfully abide by and carry out his obligations and covenants hereunder. 736 Trusts for Business Purposes. "In testimony whereof, each of the subscribers has hereto set his hand and seal, on the day and year set opposite his name. "Each member of the association also executed a power of attorney in the form following, viz. : "Know all men by these presents, That I do hereby consti- tute Aaron H. Rathbone, Frederick W. Satterlee, Cleveland D. Fisher, and John D. Dorrance, my attorneys, in fact, for me and in my name, place and stead to insure individuals, firms, or corporations against all lawful risks injuries, losses, and liabilities, excepting marine losses, losses by fire and death from natural causes, upon such conditions as they may deem to my interest; for such purpose to make and issue all bind- ing contracts and policies of isurances ; to subscribe such policies in my name, with the amount insured by me thereon, which shall in no case exceed the sum of five hundred (500) dollars on any one risk, unless such excess shall have been provided for by re-insurance; to change or modify the terms of any policy so issued; to annul or cancel the same; in their discretion to re-insure any and all such risks so taken and in- sured in such manner as shall be deemed by them most ad- vantageous to my interests; provided always, that no such insurance or policy or re-insurance shall be made in my name or for my account unless a like insurance policy or re-insur- ance on the same risk be made at the same time and on the same terms, for and in the name of each and every other per- son for whom they shall at the time be acting as attorneys under power similar to this, severally and not jointly, for an equal amount, as provided in the articles of agreement en- tered into by me with various other persons on the day of , 189. ., of which agreement copy has been furnished to said attorneys. Appendix. 737 "This power is given, and the exercise of all faculties there- under is subject to the control and direction of the advisory committee acting under the provisions of the articles of agree- ment hereinabove referred to, and the said attorneys are in- structed and directed to turn over to such advisory committee all premiums, notes, moneys, or things of value belonging to me which shall come into their possession in the premises at least once in every three months, and as much oftener as they may be thereto required by said advisory committee. "To demand, collect, sue for, receive and receipt for all premiums which may at any time become due to me. "Also to receive notices and proofs of loss and interest, and all other notices and proofs under any policy issued by virtue hereof, and in all respects to manage and do in and about such insurance and all notices or claims thereunder, as they shall deem best for my interests. "Also to adjust and pay out of any moneys in their hands belonging to me any loss, claim, or demand that may arise from or under any policy issued in my name under this power. And in case of suit being brought against me on any such loss, claim, or demand, to appear for me and in my name to defend or compromise such suit. Also, with the advice and concurrence of the advisory committee, to stipulate in my name that I will abide by the event of any suit which may be brought against any other party to the articles of agreement already mentioned, upon any policy which shall have been likewise subscribed in my name by virtue hereof. "Also to do and perform for me and in my name every other act and thing, in relation to any poHcy made by virtue hereof, as fully as I could personally do. "Provided always, that my said attorneys shall in no case make any policy of insurance by virtue of these presents, by 738 Trusts for Business Purposes. which I shall be made to insure jointly with any other person or which shall in any w^ay make me liable for the acts of any other person or insurer, or which shall bind or affect me otherwise than by a several and individual liability to the amounts insured or subscribed by me individually or in my name. "In testimony whereof I have hereunto set my hand and seal in the city of New York, on the day of , 189. .. "Sealed and delivered in presence of The form of policy used by the association, and issued to those whom it insures, is as follows: Ceassification a. No $ Guarantee and Accident Lloyds. New York. Age Weekly Indemnity $ In Consideration of dollars paid, and of the warranties and agreements contained in the application for in- surance, which application is made a part of this contract, each of the subscribers hereto, as a separate underwriter, does for himself and not one for the other, hereby Insure (subject to the conditions hereon) of by occupation a from 12 o'clock noon of the day of 189. . , to 12 o'clock noon of the day of 189. ., and for such further period of time as may be covered by duly author- ized renewal receipts subject to the conditions and provisions expressed therein. Appendix. 739 Against Loss of Life, Eye or Eyes, Loss (Separation) of Limb or Limbs at or above the wrist or ankle, provided such loss occurs within ninety days of the happening of the accident causing the same, also against the loss of time while immedi- ately, continuously and wholly disabled and prevented from transacting any and ever}' kind of business pertaining to the occupation above stated, not to exceed sixty-five consecutive weeks (except when so disabled for life), provided the loss for which any claim is made is not caused or contributed to by any form of disease, but is caused exclusively by bodily injuries leaving external and visible marks of contusion or wounds upon the body, effected by external, violent, and accidental means during the continuance of this insurance, in the following sums, to-wit : 1. For loss of life as aforesaid $5,000.00 2. For loss of both hands as aforesaid. .. . 5,000.00 3. For loss of both feet as aforesaid 5,000.00 4. For loss of one hand and one foot as aforesaid 5,000.00 5. For loss of both eyes as aforesaid 5,000.00 6. For permanent total disability for life as aforesaid 3,000.00 7. For loss of the right foot as aforesaid. . 2,500.00 8. For loss of the left foot as aforesaid. , 2,500.00 9. For loss of the right hand as aforesaid. 2.500.00 10. For loss of the left hand as aforesaid. . 1,500.00 ir. For loss of one eye as aforesaid.... 650.00 12. For loss of time per week, as aforesaid (in lieu of all other benefits) 25.00 13. The loss in subdivision I is payable to if surviving, if not, to the legal representatives of the assured. Other loss to the assured. 14. The assured shall have the privilege of travelling in any of the civilized portions of the globe, by confining himself to the usual routes and the ordinary means of conveyance. 740 Trusts for Business Purposes. 15. The loss of one or both eyes, feet or hands, or failure duly to pay any premium, will immediately terminate this in- surance. 16. Each of the subscribers hereto shall be and is individu- ally liable for one-hundredth part of the amount insured here- under. 17. Affirmative proofs of loss and proof of insurable inter- est under subdivisions i, 2, 3, 4, 5, 7, 8, 9, 10 and 11, shall be furnished to the attorneys of the subscribers within four months of the happening of the accident causing the same, and under subdivisions 6 and 12 within one month after termination of total disability, and no proceeding in law or equity shall be brought to recover payment under this policy unless such suit or proceeding shall be com.menced within six months of the filing of such affirmative proofs and against only one of the underwriters at one time. A final decision in any suit so brought shall be decisive of such claim against each of the underwriters, and each underwriter hereto waives any limita- tion as to costs, and agrees to abide, by the event of any such suit, and authorizes the attorneys to pay the assured out of any funds in their hands the amount due under this policy. Each of the underwriters hereby authorizes the attorneys to receive and admit service of process for him in any suit brought as aforesaid. 18. If the assured shall be fatally or nonfatally injured, while temporarily or otherwise exposed to a hazard pertaining to an occupation or employment classed by the subscribers as more hazardous than that here given, the liability hereunder shall be only for such amount as is provided for the class in which such more hazardous occupation or exposure is rated, in the manual of the Guarantee and Accident Lloyds. 19. All losses under this policy are payable at the Home Appendix. 741 Office in New York, ninety days after receipt of proofs of loss satisfactory to the attorneys of the subscribers. Each of the present subscribers as a separate underwriter binds himself severally and not jointly with any other for the true performance of the premises for the amount expressed to be insured by him. In Witness Whereof the subscribers, as separate under- writers do severally subscribe their names at the City of New York, this day of , 189..." Here follow the names of the members : Signed "by Attorneys." Conditions. Not Waivable by Agents. "The conditions under which this policy is issued and ac- cepted by the assured are as follows : "This insurance shall not be held to extend to or cover dis- appearances, nor to any injuries received while engaged tempo- rarily or otherwise in any act or thing pertaining to blasting, wrecking or to the manufacture, transportation or handling of gunpowder, or any explosive substance or article in any way, shape or manner, except the use of firearms by sportsmen, nor while riding on a railroad train in any place or places except those provided for the transportation of passengers, or while vra,lking or being upon any bridge or road bed of any railway. "The assured suffering a loss for which a special sum is stated herein, shall not be entitled to any other indemnity, for the same injury, and the total amount of indemnity hereunder in any one year (twelve months) shall not exceed the sum named herein as death indemnity. "In the event of an accident or injury for which or from 742 Trusts for Business Purposes. which, directly or indirectly, any claim may be made under this policy, notice shall be given in writing signed by the assured, his attending physician, or beneficiary, mailed within ten days of the happening of such accident, and addressed to the Mana- ger of the Accident Department of The Guarantee and Accident Lloyds at New York, stating the full particulars as to when and where and how it occurred, and the occupation of the as- sured at the time, his policy number and his address. "A representative of the subscribers shall be allowed to ex- amine the person or body of the assured in reference to any injury or cause of death, when and as often as may be reason- ably required in their behalf. "The subscribers or their attorneys shall have a right to ter- minate this policy and insurance, by mailing to the assured at his address as furnished, a notice of such termination, and a check or draft on New York for all unearned premiums stand- ing on the books of the Lloyds to his credit. "This insurance shall not be held to extend to or cover in- juries received, whether fatal or nonfatal, that are caused wholly or in part,' directly or indirectly, by or in consequence of disease ; fighting, scuffling, lifting or over-exertion, unnecessary exposure to danger (voluntary or otherwise) ; war, riot, or in consequence of violating the law, by inhalation or otherwise (voluntary or involuntary) of any form of gas or gasses; in- juries intentionally inflicted; injuries received while under the influence of intoxicating drinks, or narcotics or in consequence thereof; sunstroke, freezing, suicide (felonious or otherwise, sane, or insane) ; contact with any poisonous substance. "In the event that a claim shall be made under this policy for loss of one hand or one foot, and the assured shall have more than one other policy of accident insurance covering such loss, the liability hereunder shall be only for such proportionate part Appendix. 743 of the amount of such loss of hand or foot named herein as one poHcy bears to the total number of policies held by the assured. "By the acceptance of this policy the assured absolutely agrees and consents that in any action, proceeding or investiga- tion in which this Lloyds is interested, any physician who has been or may be at any time consulted by him professionally, may testify under oath, before any court, tribunal or officer, concerning any ailment, disease, injury or affliction, bodily or mental, constitutional or otherwise, that he is or has been or may be suffering from. "Should the assured engage in an occupation more hazardous than that named herein, it shall operate immediately to reduce the indemnity named herein to that provided for such more hazardous occupation according to the manual of the Guaran- tee and Accident Lloyds then in use, with the same effect as if the policy had been canceled and a new one issued accordingly, the premiums however remaining the same. "Dividend Bond Notice. "This policy participates in the benefits of the dividend bond class, when the premiums are paid annually in advance. "Notice. "In case of injury notice must be given immediately to "W. D. Chase, "Guarantee and Accident Lloyds." TABLE OF CASES. A. Page Abbey v. Chase, 6 Cush. 54 214 Acme Cement P. Co. v. Am. C. P. Co. Tex. Civ App. 167 S. W. 183 161 Adams v. Adams, 86-89 U. S. Sup. Ct. 504 170 Adams Express Co. v. Schofield. Ill Ky. 833, 64 S. W. 903.. 115, 117 Adams v. Nelson, 1 Ohio S. & C. P. Dec. 216 74 Aiello V. Montecalfe, 21 R. I. 496 126 Ainsa v. Mercantile Trust Co., 174 Cal. 504, 163 Pac. 898. . .176, 195 Alger V. Thacher, 19 Pick. 54, 31 Am. Dec. 119 385 Allgeyer v. Louisiana, 165 U. S. 578, 41 L. Ed. 832, 17 Sup. Ct. Rep. 427 37 Alvord V. Smith, 5 Pick. (Mass. 22) 232 106,107,111 American Bonding Co. v. Richardson, 214 Fed. 897 174,194 American Bonding Co. v. State Ind., 40 App. 559, 82 N. E. 548. 221 American Colonization Soc. v. Lathrobe, 132 Md. 524, 104 Atl. 120 311 American Steel v. Wire Drawers, 90 Fed. 598, 20 R. C. L. 669 Sec. 9 154,355 Anderson v. Kemper, 116 Ky. 339, 76 S. W. 122 225 Anderson v. Phegley, 57 Ore. 172, 110 Pac. 975 170,180,185 Anderson v. Stockdale, 62 Tex. 54 150 Anderson v. Williams, 262 111. 308, 104 N. E. 659 23 Arnold v. Southern Pine Lumber Co., Tex. Civ App., 123 S. W. 1162 171, 191 Ashley v. Holman, 44 S. C. 145, 21 S. E. 624 198 Ashley v. Winkley, 209 Mass. 509, 95 N. E. 932 192 Association v. McAllister (Mass.) 26 N. E. 862 203 Austin V. Cahill, 99 Tex. 172, 88 S. W. 542 5,51,151 Austin V. Wilcoxson, 149 Cal. 24, 84 Pac. 417 2 Austin V. Young, 90 N. J. E. 47, 106 Atl. 395 5 Aycock V. R. R. Co., 89 N. C. 321 84 B. Babbitt v. Fidelity Trust Co., 72 N. .T. E. 745, 66 Atl. 1076 178, 182, 209 Backus V. Crane, 87 N. J. E. 229, 100 Atl. 900 204 Bacon v. Pomeroy, 104 Mass. 577 109 Bailie v. Carolina Interstate Bldg. & Loan Ass'n, 100 Ga. 20, 28 S. E. 274 82 Bailey Appeal of (Pa.) 5 Atl. 49 215 (745) 746 Tabl^ of Cases. Baker McGrew Co. v. Union S. & T. Co., 125 Ark. 146, 188 S. W. 802 251 Baltimore v. United R. Co., 108 Md. 71, f59 Atl. 436, 10 L. R. A. (N. S.) 1006 153 Bank of Augusta v. Earle, 38 U. S. 13, Pet. 595 10 L. Ed. 311.. 393 Bank of Watertown v. Watertown, 25 Wend. 686 326 Barbour v. Weld, 201 Mass. 513, 87 N. E. 909 225, 227 Barlow v. Lee Cong. Society, 8 Allen 460 214 Barnes v. Spencer, 79 Ore. 205, 153 Pac. 47 76 Barroll v. Foreman, 88 Md. 188, 40 Atl. 883 174,183 Bartlett v. Pickering, 113 Me. 96, 92 Atl. 1008 195 Bay Biscayne Co. v. Bails, 73 Fla. 1120, 75 So. 860. .. .5, 22, 82, 223 Beam v. Patterson Safe Deposit & Trust Co., 82 N. J. E. 518, 91 Atl. 734 195 Belding v. Archer, 131 N. Car. 287, 42 S. E. 800 226 Berry v. Dunham, 202 Mass. 133, 88 N. E. 904 74 Berry v. Stigall, 125 Mo. App. 264, 102 S. W. 585 223 Berthold v. Goldsmith, 24 How. 541, 16 L. Ed. 762 340 Bertholf v. O'Reilly, 74 N. Y. 509, 30 Am. Rep. 323 407 Bessette v. People, 193 111. 334, 62 N. E. 215 36 Bigelow V. Cady, 171 111. 229, 48 N. E. 974, 63 Am. St. 230.... 28 Biggs V. Miller (Tex. Civ. App.) 147 S. W. 632 157 Bingham v. Graham (Tex.) 220 S. W. 105 138,354 Birmingham Belt R. Co. v. Gerganous, 142 Ala. 238, 37 So. 929. 183 Bliss V. Bliss, 20 Idaho 467, 119 Pac. 451 305 Bobb V. Bobb, 89 Mo. 411, 4 S. W. 511 192 Bodwell V. Eastman, 106 Mass. 525 107 Boehmer v. Silverstone, 95 Ore. 154. 186 Pac. 26. . .170, 185, 194, 205 Bogard v. Planters' Bank & Trust Co. (Ky.) 112 S. W. 872 209 Bohll V. Hasselbroch, 64 N. J. E. 334, 51 Atl. 508 80 Bone V. Hayes, 154 Cal. 759, 99 Pac. 172 164,193 Boothe V. Cheek, 253 Mo. 119, 161 S. W. 791 166 Bourquin v. Bourquin, 120 Ga. 115, 47 S. E. 639 194 Boston & Albany Railroad v. Pearson, 128 Mass. 445 107 Boston Beer Co. v. Massachusetts, 97 U. S. 25. 24 L. Ed. 989.. 374 Bowes V. Cannon, 50 Colo. 262, 116 Pac. 336 2 Braceville Coal Co. v. People, 147 111. 66, 35 N. E. 62, 22 L. R. A. 340 3" Brackett v. Middlesex Banking Co., 89 Conn. 645, 95 Atl. 12... 179 Branch v. Bulklev, 109 Va. 784, 65 S. E. 652 311,313 Branch v. De Wolf, 28 R. I. 542, 68 Atl. 543 305 Brandon v. Carter, 119 Mo. 572, 24 S. W. 1035 6,308 Bried v. Minthrup, 203 Mo. App. 567, 219 S. W. 703 197,198 Brightman v. Bates, 175 Mass. 105 65 Briscoe v. Bank of Com. Ky., 36 U. S. 11, Pet. 257, 349, 9 L. Ed. 709, 745 395 Briston v. Barker, 14 Johns 205 387, 412 Brock V. Conkwright, 179 Ky. 555, 200 S. W. 962 171 Brown v. Brown, 247 111. 528, 93 N. E. 357 28 Brown v. Pacific M. Steam Co., 5 Blatch. 525 66 Brown v. Spohr, 87 App. Div. 522 Sup. Ct. 84 N. Y. S. 995.... 5 Bruant v. Richardson, 126 Ind. 145, 25 N. E. 807 135 Table of Cases. 747 Budd V. New York, 143 U. S. 523, 36 L. Ed. 250 388 Buist V. Williams, 88 S. C 252, 70 S. E. 817 302 Bullock V. Angleman. 82 N. J. E. 23, 87 Atl. 627 304 Bunn City v. City of Laredo (Tex.) 213 S. W. 320 173 Burch V. Gaston, 182 Ala. 467, 62 So. 508 303 Burke v. Burke, 259 111. 262, 102 N. E. 293 4,35,73,76 Burling v. Newlands, 112 Cal. 476, 44 Pac. 810 18 Burney v. Atkinson (Tenn. Ch.) 54 S. W. 998 223 Burt V. Lathrop, 52 Mich. 106, 17 N. W. 716 236,250 Butchers U. S. H. v. Crescent City, 111 U. S. 746, 28 L. Ed. 585. 408 Butler V. Badger, 128 Minn. 99, 150 N. W. 233 74 Buzard v. Bank, 67 Tex. 89, 2 S. W. 54 200 Byrne v. Jones, 159 Fed. 321, 90 C. C. A. 101 78,79. C. Cadell V. Palmer, 10 Bing. 140-2-4-51 Id. (1833) 1 Clark & F. 372 27 Cahlan v. Bank of Lassen County, 11 Cal. App. 533, 105 Pac. 765 "7 Caldwell v. Graham, 115 Md. 122, SO Atl. 839 206 California v. Central P. R. R., 127 U. S. 40, 32 L. Ed. 157.... 393 Cameron v. Cameron, 10 Smedes (Miss.) 394, 48 Am. Dec. 759. 11 Campbell v. Campbell, 8 Fed. 460 192 Campbell v. Noble, 145 Ala. 233, 41 So. 745 5 Campbell v. Virginia-Carolina Chemical Co., 68 S. C. 440, 47 S. E. 716 179 Canada v. Daniel, 175 Mo. App. 55, 157 S. W. 1032 165 Canadian v. Johnson (Tex. Civ. App.) 176 S. W. 835 150 Candelaria v. Miera, 18 N. M. 107, 134 Pac. 829 206 Carne v. Long, 2 De Gex, F. & J. 75 32 Carr v. Carr, 15 Cal. App. 480, 115 Pac. 261 7 Carleton v. Roberts, 1 Posey, Unrep. Cas. 587 155 Carr v. Leahy, 217 Mass. 438, 105 N. E. 445 197 Carrier v. Carrier, 226 N. Y. 114, 123 N. E. 135 183, 307 Carrier v. Price (1891) 3 Ch. 159 32 Carroll v. Woods, 132 Mo. App. 492, 111 S. W. 885 3 Catt V. Wm. Knabe & Co. Manuf'g Co., 93 Va. 736, 26 S. E. 246 82,217 Cavender v. Cavender, 114 U. S. R. 464 226,227 Central Trust Co. v. Gaffney, 157 App. Div. 501, 142 N. Y. S. 902 5, 208, 304 Central Trust Co. v. Johnson (Ky.) 74 S. W. 663 220 Chapin Petitioner, 148 Mass. 588, 20 N. E. 195, 2 L. R. A. 768, 26 R. C. L. 1377 92 Chaves v. Myer, 13 N. M. 368, 85 Pac. 233 81 Cheatham v. Rowland, 22 R. I. 245, 47 Atl. 365, 63 L. R. A. 227 «9 Chesnutt v. Gann, 76 Tex. 150, 13 S. W. 274 174 Citizens' Nat. Bank v. Jefferson, 88 Ky. 651, 11 S. W. 767 178 Citizens' Nat. Bank v. McKenna, 168 Mo. App. 254, 153 S. W. 521 3,75 City of Austin v. Cahill, 99 Tex. 172, 88 S. W. 542, 89 S. W. 552. 5 748 TabIvK of Cases. Clay V. Thomas, 178 Ky. 199, 198 S. W. 762 77,194 Clemens v. Heckscher, 185 Pa. 276, 40 Atl. 80 174 Clough V. Clough, 117 Mass. 83 13 Cochran v. Richmond & A. R. Co., 91 Va. 339, 21 S. E. 664.. 205, 223 Coleman v. Knights of Honor, 18 Mo. App. 189, 194 259 College V. McHugh, 39 Tex. 348 202 Colvin V. Martin, 68 App. Div. 633, 74 N. Y. S. 11 74 Comingor v. Louisville Trust Co., 128 Ky. 697, 108 S. W. 950.. 220 Commonwealth v. Adams Ex. Co., 123 Ky. 720, 97 S. >V. 386 114 Commonwealth v. Cary Imp. Co., 98 Mass. 19 337 Commonwealth v. Hamilton Mfg., 12 Allen 298 336, 337 Commonwealth v. Knowlton, 2 Mass. 529, 534 107 Commonwealth v. People Fire C. S. B., 5 Allen 428 337 Commonwealth v. Vrooman, 164 Pa. St. 306, 30 Atl. 217, 25 L. R. A. 250, 44 Am. St. Rep. 603 362,369 Cone V. Cone, 61 S. C. 512, 39 S. E. 748 309 Conley v. Daughters of the Republic, 156 S. W. 197 (Texas)... 5 Connally v. Lyons, 82 Tex. 664, IS S. W. 799, 21 Am. St. Rep. 935 36, 53, 198, 230 Connecticut v. Commonwealth, 133 Mass. 161 337 Corfield v. Corvell, 4 Wash. C. C. 380 403, 407 Costello V. Costello, 209 N. Y. 252, 103 N. E. 148 195,198 Cotting V. Berry, 50 Colo. 217, 114 Pac. 641 208 Cotton V. Rand (Ky.) 92 S. W. 266 185 Cotulle V. Mortgage (Tex. Civ. App.) 86 S. W. 339 162 Cowie V. Strohmeyer, 150 Wis. 401, 136 N. W. 956 23,198 Cox V. Cox, 95 Va. 173, 27 S. E. 834 137 Cox V. Hickman, 8 H. L. C. 268 246,284 Craft V. Craft 74 Fla. 262, 76 So. 772 79 Crawford v. El Paso Land Improvement Co. (Tex. Civ. App.) 201 S. W. 233 176, 183 Crawford v. Niles, 224 Mass. 474, 113 N. E. 408 305 Cristman v. Peck, 90 111. 150 127 Crocker v. Malley, 249 U. S. 223, 63 L. Ed. 573, 2 A. L. R. 1601, 39 Sup. Ct. 270 19, 47, 57, 343, 344 Crohn v. K. C. Home Tel. Co., 131 Mo. App. 313, 109 S. W. 1068 267 Cromwell v. Tate, 7 Leigh. (Va.) 301, 30 Am. Dec. 506 20 Cross v. Jackson, 5 Hill. 478 36 Crown V. Cohn, 88 Ore. 642, 172 Pac. 804 7,177,181 Crowther v. Thorley, 32 W. R. 330 237 Grundy v. Drye, 104 Ky. 825, 48 S. W. 155 167 Culver V. Lompoc Valley Savings Bank, 22 Cal. App. 379, 134 Pac. 355 308 Curtis V. Curtis, 185 App. Div. 391, 173 N. Y. S. 103 7 Curtis v. Leavltt, 15 N. Y. 9 411, 412 D. Dana v. Treasurer & R. General, 227 Mass. 562, 116 N. E. 941. . 98 Darrett v. Donnelly, 38 Mo. 492 258 Davis V. Hudgins (Tex.), 225 S. W. 73 19,46,57,352,353 Table of Cases. 749 Davis V. Lusk, 191 III. 620, 61 N. E. 483 228 Dayton v. Stewart, 99 Md. 643, 59 Atl. 281 6,22,74,75 Dearborn v. N. W. Sav. Bank, 42 Ohio St. 617, 51 Am. Rep. 851. 396 Dennett v. Dennett, 40 N. H. 498, 503, 43 N. H. 499, 501 28 Denvir v. Park, 169 Mo. App. 335, 152 S. W. 604 215,217,221 Dettmer v. Behrens, 106 la. 585, 76 N. W. 853, 68 Am. St. Rep. 32& 13 Dickson v. N. Y. Biscuit Co., 211 111. 468, 71 N. E. 1058 179,180 Digney v. Blanchard, 226 Mass. 335, 115 N. E. 424 207 Dillard v. Dillard, 97 Va. 434, 34 S. E. 60 178 Dillivan v. German Savings Bank (la.) 124 N. W. 350. .194, 205, 208 Dingman v. Boyle, 285 111. 144, 120 N. E. 487 172,173 Dodge V. Dodge, 109 Md. 164, 71 Atl. 519 308, 309 Dodge V. Lacey (Tex.) 216 S. W. 400 173 Dolph V. Cincinnati, B. & C. R. Co., 56 Ind. App. 137, 103 N. E. 13 182 Donnelly v. Alden, 229 Mass. 109, 118 N. E. 298 346 Doom V. Howard (Ky.) 64 S. W. 469 219 Dorman v. Balestier, 175 N. Y. S. 677 74, 171 Down V. Collins, 6 Hare. 418 109 Doyle V. Continental Ins. Co., 94 U. S. 535, 24 L. Ed. 148 380 Drovers' Deposit Nat. Bank v. Newgass, 161 App. Div. 769, 147 N. Y. S. 4 75 Dyer v. Sullivan, 18 Tex. 771 202 E. Easton v. Demuth, 179 Mo. App. 722, 162 S. W. 294 23 Easton v. Houston & T. C. Ry. Co., 40 Fed. 189 218 Edgerly v. Barker, 66 N. H. 434, 31 Atl. 900, 28 L. R. A. 328.. 25 Edgerton v. Preston, 15 111. App. 23 133 Elias v. Schweyer, 17 Misc. 707, 40 N. Y. S. 906 228 Eliot v. Freeman, 220 U. S. 178, 31 Sup. Ct. 360, 55 L. Ed. 424 43, 51, 111, 251, 321, 342 Ellicott V. Kuhl, 60 N. J. E. 333, 46 Atl. 945 81 English V. Mclntyre, 29 App. Div. 439, 51 N. Y. S. 697 166,346 Evans v. Evans, 200 Ala. 329, 76 So. 95 79, 80 Ex Parte Jonas, 186 Ala. 567, 64 So. 960 137 Ex Parte Tartar, 278 Mo. 356, 213 S. W. 94 96,207 P. Falardeau v. Boston A. S. Assn., 182 Mass. 405, 65 N. E. 797.. 90 Farmers' Loan & Trust Co. v. Chicago & A. Ry. Co.. 27 Fed. 146 39, 134, 135, 170 Faulds v. Yates, 57 111. 416 65 Feldman v. Preston, 194 Mich. 352, 160 N. W. 655 197 Fesmire— Appeal of, 134 Pa. 67, 19 Atl. 502 174 Fidelity & Deposit Co. of Maryland v. Rankin, 33 Okla. 7, 124 Pac. 71 79 Fisher v. Hampton Transp. Co., 136 Mich. 218, 98 N. W. 1012.. 4 Fisheries Co. v. McCoy (Tex. Civ. App.) 202 S. W. 343.-205,209,210 750 Tabi,e 0^ Cases. Flint V. Stone, 220 U. S. 107, 55 L. Ed. S89, 31 Sup. Ct. 342 322 Flovd V. Smith, 59 Fla. 485, 51 So. 537 5 Forbes v. Brigham, 232 Mass. 177, 122 N. E. 396 306 Forney v. Remey, 77 Iowa 549, 42 N. W. 439 11, 14 Forster v. Ftiller, 6 Mass. 58 213 Fox V. Fox. 250 111. 384, 95 N. E. 498 223 French v. French, 58 Ind. App. 621, 108 N. E. 786 78 French v. Hall, 198 Mass. 147, 84 N. E. 438 181 Fritz V. City Trust Co., 72 App. Div. 532, 76 N. Y. S. 625.. 173, 207 Frost V. Thompson, 219 Mass. 360, 106 N. E. 1009 36,92,101 Frost V. Walker, 60 Maine 468, 471 107 Fyler v. Fj'ler, 2 Railwy. Cas. 813 110 G. Galvin v. McConnell, 53 Tex. Civ. App. 486. 117 S. W. 211 358 Gardiner v. Cord, 145 Cal. 157, 78 Pac. 544 182 Garrard v. Hardey, 5 Man. & G. 471 106 Gartside v. Gartside, 113 Mo. 348, 20 S. W. 669 227 Garrish v. Institution, 128 Mass. 159, 35 Am. Rep. 365 13 Gifford V. Hart, 1 Sch. & Lef. 386 320 Gifford V. Livingston, 2 Denio 380 327 Gilbert v. Penfield, 124 Cal. 234, 56 Pac. 1107 177 Gillespie v. People, 188 111. 176, 80 Am. St. Rep. 176, 52 L. R. A. 283 37 Gisborn v. Charter Oak Ins. Co., 12 Sup. Ct. 277 4, 82 Givens v. Clem, 107 Va. 435, 59 S. E. 413 304 Glazier v. Everett, 224 Mass. 184, 112 N. E. 1009 172 Gleason v. McKay, 134 Mass. 419 38,106,107,233,251,331. Globe Woolen Co. v. Utica Gas & Elec. Co., 224 N. Y. 483, 121 N. E. 378 185 Colder v. Bressler, 105 111. 419 229 Goldman v. Page, 59 Miss. 404 154 Gomez v. Gomez, 81 Hun. 56G, 31 N. Y. S. 206 182 Gott v. Dinsmore. Ill Mass. 45 107 Gould V. Gould, 245 U. S. 151, 38 Sup. Ct. 53, 62 L. Ed. 211.... 50 Grafton v. Holt, 58 W. Va. 182, 52 S. E. 21, 6 Ann. Cas. 403.. 153 Great S. Fire P. Hotel Co. v. Jones, 177 U. S. 449, 20 Sup. Ct. 690, 44 L. Ed. 842 263 Green's Adm'rs v. Fidelity Trust Co., 134 Ky. 311, 120 S. W. 283 308 Green v. Pavey, 150 111. 513, 37 N. E. 842 28,55 Griffith V. Jewett, 9 Ohio Dec. (Reprint) 627 66 Grundy v. Drye, 104 Ky. 825. 48 S. W. 155, 49 S. W. 469 167 Guernsey v. Cook, 120 Mass. 501 67 Guilfoil V Arthur, 158 111. 600, 41 N. E. 1009 307 Gulick V. Bruere, 42 N. J. Eq. G29, 9 Atl. 719 228 H. Hafer v. N. Y. Lake E. & W. R. R. Co., 9 Ohio Dec. (Reprint) 470 67 Table of Cases. 75 i Hamilton v. Dooly, 15 Utah 280, 49 Pac. 769 77,78 Hammerstein Ex. v. Parsons, 38 Mo. App. 332 260 Hall V. Houston & T. C. R. Co., 52 Tex. Civ. App. 90, 114 S. W. gg]^ 166 Hammond" V." Grander, 128 Mass. 272 109 Hanna v. Clark, 204 Pa. 145, 53 Atl. 757 • 220 Hanscom v. Maiden & Melrose Gaslight Co., 234 Mass. 379, 125 N. E. 626 ••••• 217 Harden v. Ry. Co., 129 N. C. 354, 40 S. E. 184, 55 L. R. A. 784, 85 Am. St. Rep. 747 84 Hardwicke v. Wurmser (Mo. App.) 180 S. W. 455 78 Harper v. R. R. Co., 36 Fed. 102 136 Harris v. Amery, Law Rep. 1 C. P. 148 272 Harris v. Hicks, 13 Tex. Civ. App. 134, 34 S. W. 983 361 Harrison v. Heathorn, 6 Man. & G. 81 106 Hart V. Equitable Life Assur, Society, 172 App. Div. 659, 158 N. Y. S. 1063 164 Hart V. Seymoure (1893) 147 111. 598, 35 N. E. 246, 7 A. L. R. 613 24, 35, 103 Hartman v. Evans, 38 Va. 669, 18 S. E. 810 185 Harvey v. Schwettman (Mo. App.) 180 S. W. 413 220,226 Hatch V. Rearson, 204 U. S. 152, 27 Sup. a. 188, 51 L. Ed. 415, 9 Ann. Cas. 736 342 Hawley v. Northampton, 8 Mass. 3-38, 5 Am. Dec. 66 27 Haulman v. Haulman, 164 la. 471,145 N. W. 930.4, 8, 12, 14, 15, 18, 74 Hawkridge v. Treasurer & R. General, 223 Mass. 134, 111 N. E. 707 101 Havemeyer v. Havemeyer, 43 Sup. Ct. N. Y. 506 66 Hayden v. Hayden, 178 N. C. 259, 100 S. E. 515 175 Hayes v. Pratt, 13 Sup. Ct. 503 185 Havward v. Hapgood, 6 Gray 437 110 Heckscher v. Blanton, 111 Va. 648, 69 S. E. 1045, 66 S. E. 859.. 192 Heidelbach v. Campbell, 95 Wash. 661, 164 Pac. 247 80 Hemphill v. Ry. Co., 141 N. C. 487, 54 S. E. 420 84 Hewitt V. Phelps, 105 U. S. 400 203 Hey V. Dolphin, 92 Hun. 230 66 Higgins V. Lansingh, 154 111. 301, 40 N. E. 362 65 Hiil V. Hill (Okla.) 152 Pac. 1122 137,171 Hill V. Moors, 224 Mass. 163, 112 N. E. 641 305 Hitch V. Stonebraker's Estate, 125 Mo. 128, 28 S. W. 443 224 Hoadley v. County Commissioners, 105 Mass. 519. . .35, 107, 233, 338 Hobbs V. McLean, 117 U. S. 5C7 221,222 Hoboken Trust Co. v. Norton, 90 N. J. E. 314, 107 Atl. 67.. 220 Hodgson V. Baldwin, 65 111. 532 129 Holbrook v. Fvffe, 164 Ky. 435, 175 S. W. 977 302 Hollis V. Drew Seminary, 95 N. Y. 166 13 Holmes v. McDonald, 220 111. 169, 80 N. E. 714 206 Holsapple v. Schrontz, 65 Ind. App. 390, 117 N. E. 547 2,7 Hoosier Mining Co. v. Union Trust Co., 173 Ky. 505, 191 S. W. 305 172, 173 Howe V. Hodge, 152 111. 252, 38 N. E. 1083 28 Howe v. Morse, 174 Mass. 491, 55 N. E. 213 28, 32 752 Table o^ Cases. Howell V. Harris-Cortner & Co., 168 Ala. 383, 52 So. 935, Ann. Cas. 1912 B. 236 Note 147 Hoyt V. Bliss, 93 Conn. 344, 105 Atl. 699 178 Hull V. Chaffin, 54 Fed. 437 181 Hummel's Appeal (Pa.) 5 Atl. 669 223 Hunnewell v. Willow S. Can. Co., 53 Mo. App. 245 259 Hunt V. Chicago & Dummy Ry. Co., 20 HI. App. 282 44 Hussey v. Arnold, 185 Mass. 202, 70 N. E. 87 197,209,236,250 I. Illinois Watch Case Co. v. Pearson, 140 111. 423 127, 131 Imperial Mfg. Co. v. Schwartz, 105 111. App. 525 34,133 In Re Adams' Estate, 221 Pa. 77, 70 Atl. 436 174,195,207,208 In Re Agriculturist Cattle Co., L. R. 5 Ch. 725 109 In Re Arthur Ave. Assn., 3 Ch. D. 522 275, 284, 295 In Re Assn. Trust, 222 Fed. 1012 351 In Re Battin, 89 N. J. E. 144, 104 Atl. 434 219,224,308,309 In Re Borough of Kane, 177 Pa. 638, 35 Atl. 874 309 In Re Bosler's Estate, 161 Pa. 457, 29 Atl. 57 209, 219 In Re Cozzens* Estate, 15 N. Y. S. 771 206, 215 In Re Darlington's Estate, 245 Pa. 212, 91 Atl. 486 194 In Re Dutton, 4 Exch. Div. 54 32 In Re Faure Electric Ac. Co., 40 Ch. D. 141, 151, 152 237 In Re Fox's Estate, 264 Pa. 478, 107 Atl. 863 167 In Re Froelich's Estate, 50 Misc. Rep. 103, 100 N. Y. S. 436 175, 184, 186 In Re Gay's Estate, 138 Cal. 552, 71 Pac. 707 308 In Re Graham Estate, 218 Pa. 357, 67 Atl. 462 206 In Re Hanson's Estate, 159 Cal. 401, 114 Pac. 810 216, 219, 223 In Re Hart's Estate, 203 Pa. 480, 53 Atl. 364 194 In Re Hodges' Estate, 66 Vt. 70, 28 Atl. 663 79 In Re Hoyt, 103 Misc. Rep. 614, 170 N. Y. S. 846 171 In Re Hubbell Trust, 135 la. 637, 113 N. W. 512 182 In Re Jacobs, 98 N. Y. 98, 50 Am. Rep. 636 401,407 In Re Jones (1889) 2 Ch. 83 237 In Re Kellogg, 214 N. Y. 460, 108 N. E. 844 172 In Re Lane's Will (Del.) 97 Atl. 587 81, 175 In Re Mahin Estate, 161 la. 459, 143 N. W. 420 3 In Re Mallon's Estate, 110 App. Div. N. Y. 61, 97 N. Y. S. 23.. 207 In Re Mendel's Will, 164 Wis. 136, 159 N. W. 806 169 In Re Mexican & S. A. Co., 27 Beav. 474, 6 L. R. A. (N. S.) 665 35, 103 In Re Order of Sparta, 242 Fed. 235, 155 C. C. A. 75 351 In Re Parker, 275 Fed. 868 348 In Re Pittsburgh Wagon Wks. Estate, 204 Pa. 432, 54 Atl. 316 36, 93 In Re Price's Estate, 209 Pa. 210, 58 Atl. 280 225 In Re Podha.isky Est., 137 la. 742, 115 N. W. 590 12 In Re Reich's Estate, 230 Pa. 55, 79 Atl. 151 220 In Re Siddall, 29 Ch. D. 1 237 In Re Soulard's Estate, 141 Mo. 642, 43 S. W. 617 2 Table; of Casss. 753 In Re Spreckles' Estate, 162 Cal. 559, 123 Pac. 371 178 In Re Stafford's Estate, 258 Pa. 595, 102 Atl. 222 23 In Re Thomas, 14 Q. B. D. 379 237 In Re Van Riper's Estate, 90 N. J. Eq. 217, 107 Atl. 55 219 International Trust Co. v. Preston (Wyo.) 156 Pac. 1128.169, 204, 305 Internat. Y. W. C. A. v. Y. W. C. A., 194 111. 194, 62 N. E. 551. . 125 Irvine v. Dunham, 111 U. S. R. 327 224 J. Jackson v. Tel. Co., 139 N. C. 347, 51 S. E. 1015, 70 L. R. A. 738 88 Jarrett v. Johnson, 216 111. 212, 74 N. E. 756 217 Jencks v. Safe Deposit & Trust Co. of Baltimore, 120 Md. 62G, 87 Atl. 1031 180 Jessup V. Smith, 223 N. Y. 203, 119 N. E. 403 182,221,223 Johnson v. Crawley, 25 Ga. 316, 71 Am. Dec. 173 21 Johnson v. United States Rys. Co. (Mo.l 219 S. W. 39 77 Jones V. Haines, 79 N. J. E. 110, 80 Atl. 943 23 Jones V. Jones. 8 Misc. Rep. 660, 30 N. Y. S. 177 225 Jones V. Nicholas, 151 Iowa 362, 130 N. W. 125 11 Joseph V. Herzig, 135 App. Div. 141, 120 N. Y. S. 34 192 K. Kahn v. Tierney, 135 App. Div. 897, Sup. Ct. 120 N. Y. S. 663.. 5, 24 Kantzler v. Bensinger, 214 111. 589 65 Keating v. Keating, 182 la. 1056, 165 N. W. 74 179 Keely v. Black, 90 N. J. E. 439, 107 Atl. 825 209 Kellev V. Snow, 185 Mass. 288, 70 N. E. 89 5 Kennedy v. Hodges, 215 Mass. 112, 102 N. E. 432 101 Keplinger v. Keplinger, 185 Ind. 81, 113 N. E. 292 1 Kerrison v. Stewart, 93 U. S. 160, 23 L. Ed. 843 150,152 Keyes v. Carleton, 141 Mass. 45, 6 N. E. 524 75 Kilpatrick v. Robert, 278 Mo. 257, 212 S. W. 884 218, 219 Kimball v. Whitney, 233 Mass. 321, 123 N. E. G65 195 King V. Townshend, 141 N. Y. 358, 36 N. E. 513 36 King V. Webb, 14 East 406 102, 257 Kinney v. Treasurer & R. General, 207 Mass. 368, 93 N. E. 586, Ann. Cas. 1912 A 902, 35 L. R. A. (N. S.) 784 101 Kipp V. O'Melveny, 2 Cal. App. 142, 83 Pac. 264 177 Klugh V. Seminole Securities Co., 103 S. C. 120, 87 S. E. 644 18, 194, 204 Knipp V. Bagby, 126 Md. 461, 95 Atl. 60 197 Koehler v. Koehler (Ind.) 121 N. E. 450 3 Kreisel v. Distilling Co. of A., 61 N. J. Eq. 50 67 L. Labouchere v. Tupper, 11 Moore P. C. 198 108 Lane v. Brothers, 120 Ga. 355 126 Lane v. Ewing, 31 Mo. 75, 77 Am. Dec. 632 12 Laney v. Fickel, 83 Mo. App. 60 258 754 Table of Cases. Langer v. Fargo Mercantile Co. (N. D.) 174 N. W. 90 226 Las Vegas Ry. & Power Co. v. Trust Co. of St, Louis County, 17 N. M. 286, 126 Pac. 1009 222 Laughlin v. Page, 108 Me. 307, 80 Atl. 753 82 Laurel County Court v. Trustees of Laurel County Seminary, 93 Ky. 379, 20 S. W. 258 215,311 Lawrence v. Lawrence, 181 111. 248, 54 N. E. 918 229 Laws V. Christmas, 178 N. C. 359, 100 S. E. 587 2 Ledbetter v. Ledbetter, 88 Mo. Lo. Cit. 62, 31 Cyc. 150 258 Lee V. Albro, 91 Ore. 211, 178 Pac. 784 185 Levine v. Gerardo, 60 X. Y. Misc. 261, 112 N. Y. Sup. 192 228 L-ewis V. Curnutt, 130 Iowa 423, 106 N. W. 914 11 Lilly V. Tobbein, 103 Mo. 477, 15 S. W. 618, 23 Am. St. Rep. 887 264 Lindsley v. Dodd, 53 N. J. E. 69, 30 Atl. 896 192,313 Lippold V. Lippold, 112 la. 134, 83 N. V/. 809, 84 Am. St. Rep. 331 13 Locke V. Cope, 45 Okla. 69, 146 Pac. 416 175 Logan V. Ry. Co., 116 N. C. 940, 21 S. E. 959 84 Loring v. Hildreth, 170 Mass. 328, 49 N. E. 652 6 Loring v. Marsh, 70-73 U. S. Sup. Ct. 802 176 Loud V. Winchester, 52 Mich. 174, 17 N. W. 784 164 Lovato V. Catron, 26 N. M. 168, 148 Pac. 490 ^ 167 Love V. Blauw, 61 Kan. 496, 59 Pac. 1059, 48 L. R. A. 257, 78 Am. St. 334 11 Ludington v. Mercantile Nat. Bank, 102 App. Div. 251, 92 N. Y. S. 454 347 Lynn v. Lynn, 135 111. 18 8 M. Mabry v. Ry. Co., 139 N. C. 388, 52 S. E. 124 84 Maclaren v. State, 141 Wis. 577, 124 N. W. 667 369 Makin v. Savings Inst., 23 Me. 350, 41 Am. Dec. 389 236,250 Matter of Assn. Trusts, 222 Fed. 1012 351 Matter of Tilden's Ex'rs, 98 X. Y. 434 319 McCartin v. Administrator of Traphagen, 43 N. J. Eq. 323, 11 Atl. 156 209 McCaugn v. Young, 85 Miss. 277, 37 So. 839 196 McCloskey v. Bowden, 82 X. J. Eq. 410, 89 Atl. 528 222 McCord V. Xabours, 101 Tex. 494, 109 S. W. 913, 111 S. W. 144.. 163 McCormick v. McCormick's Adm'r (Ky.) 121 S. W. 450 80 McCoy V. McCoy, 30 Okla. 379, 121 Pac. 176 302 McDonald v. Flour Mills Co., 31 Fed. 577 135 McFerran v. Fidelity Trust Co., 140 Ky. 536, 131 S. W. 393.. 166 McGeorge v. Bigstone Gap Imp. Co., 88 Fed. 599 174 McKenna v. O'Connell, 84 Misc. Rep. 582, 147 N. Y. S. 922.... 307 McLean v. Fleming, 96 U. S. 245 126 JIcLean v. McLean, 88 N. C. 394 84 McRoberts v. Carneal (Ky.) 44 S. W. 442 205,312 McVay v. McVay, 43 N. J. Eq. 47. 10 Atl. 178 6 Mallev v. Bowditch, 259 Fed. 809, 7 A. L. R. 608, 170 C. C. A. 609 38, 111, 339 Table of Cases. 755 Mallory v. Russell, 71 la. 63, 6 Am. Rep. 776, 32 N. W. 102 35 Manderson v. Appeal, 113 Pa. 631, 6 Atl. S93 186 Mann v. Day, 199 Mich. 88, 165 N. W. C43 182, 193 Markel v. Peck, 168 Mo. App. 358, 151 S. W. 772 215 Marshall v. Marshall, 11 Colo. App. 505, 53 Pac. 617 183,313 Marks v. Sample, 111 Ala. 637, 20 So. 791 218 Marston v. Carter, 12 N. H. 159 28 Martin v. Dryden, 1 Oilman (111.) 187 154 Mason v. Pomeroy, 151 Mass. 164, 24 N. E. 202 203, 347 Massey v. Huntington, 118 111. 80, 7 N E. 269 6 Matter of Hawley, 100 N. Y. 206, 3 N. E. 68 319 May V. May, 17 Sup. Ct. 824 224, 307 Maydwell v. Maydwell, 135 Tenn. 1, 185 S. W. 712 224 Maynard v. Columbus, 150 Ky. 817, 150 S. W. 1019 182 Mayo V. Moritz, 151 Mass. 481, 24 N. E. 1083 53. 74, 168, 235, 249 Meldon v. Devlin, 31 App. Div. 146, 53 N. Y. S. 172 174 Melson v. Travis, 133 Ga. 710, 66 S. E. 936 204 Memphis Sav. Bank v. Houchens, 115 Fed. 96 303 Mercer v. Safe-Deposit & Trust Co., 91 Md. 102, 45 Atl. 865 74 Merchants Natl. Bank v. Wehrmann, 69 Ohio St. 160, 68 N. E. 1004 36 Metcalfe v. Union Trust Co., 87 App. Div. 144, 85 N. Y. S. 183. . . 21 Miller Trustee v. Smythe, 92 Ga. 154, 18 S. E. 46 88 Millett V. People, 117 111. 294, 5 West. Rep. 155 410 Mills V. Mills, 63 Fed. 511 78 Mitchell V. Whitlock, 121 N. C. 166, 28 S. E. 292 90 Mobile & O. Ry. Co. v. Nichols, 98 Ala. 92 66 Moore v. First Nat. Bank, 154 Mo. App. 516, 135 S. W. 1005 79 Morel v. Hoge. 130 Ga. 625 ; 67 Morrill v. American Reserve Bond Co., 151 Fed. 305 165 Morris v. Boyd, 110 Ark. 468, 162 S. W. 69 304-305 Morrison v. Kelly, 22 111. 622 73 Moulden v. Train, 199 Mo. App. 509, 20i S. W. 65 2, 3 Muhlke V. Tiedemann, 280 111. 534, 117 N. E. 708 216 Mullaney v. Schott, 135 111. 655, 26 N. E. 640, 25 A. S. R. 401 21 Munn V. Illinois, 94 U. S. 113, 24 L. Ed. 77 410 Murry v. Berkshire Ins. Co., 104 Mass. 586 336 Murry v. King, 153 Mo. App. 710, 135 S. W. 107 78, 166, 167 Myers v. Manhattan B., 20 Ohio 283 368 N. Nance v. Hemphill, 1 Ala. 551 ' 412 Nellis v. Rickard, 133 Cal. 617, 66 Pac. 32 167 Nev/ Orleans v. Whitney, 138 U. S. 595, 11 Sup. Ct. Rep. 428 136 New V. Nicoll, 73 N. Y. 127, 29 Am. Rep. Ill 203 Newton v. Bealer, 41 Iowa 334 13 Nichols V. Eaton, 91 U. S. R. 717 304 Nichols V. Emery, 109 Cal. 323, 41 Pac. 1089 4, 75 Nickerson v. Atchinson & T. & S. F., 17 Fed. 408 7 Nixon V. Nixon, 268 111. 524, 109 N. E. 294 171 Nolan V. Guggerty, 187 la. 980, 174 N. W. 706 3 756 Table of Cases. Norling v. Allee, 10 N. Y. S. 97 206 Northrip v. Burge, 225 Mo. 641, 164 S. W. 584 5, 308 Noyes v. Turnbull, 130 N. Y. 639, 29 N. E. 145 346 O. Oellien v. Gait, 150 Mo. App. 537, 131 S. W. 158 221 Offutt V. Divine's Ex'r. (Ky.) 53 S. W. 816 219 Ogden V. Allen, 225 Mass. 595, 114 N. E. 862 82 Ohio Miss. R. R. Co. v. State, 49 Ohio St. 668 66 Oliver v. Wash. Mills, 11 Allen 268 336 O'Malley v. Mears, 240 Pa. 373, 87 Atl. 862 312 Otjen V. Frohbach, 148 Wis. 301, 134 N. W. 832 6 Owen V. Delamere, L. R. 15 Eq. 134 108 Oxley V. Butler Co., 121 Mo. 614, 26 S. W. 367 228 P. Page V. Gillett, 26 Colo. App. 204, 141 Pac. 866 173 Pape V. Cap. B. of Topeka, 20 Kan. 440, 27 Am. Rep. 183 396 Parker v. Kelley, 166 Fed. 968 224, 225, 227 Patterson v. Hewitt, 25 Sup. Ct. 35 311 Patterson v. Northern Trust Co., 207 111. App. 361, 286 111. 564, 122 N. E. 55 168,221 Patrick v. Patrick, 135 Ky. 307, 122 S. W. 159 217 Peabody v. Treasurer & R. General, 215 Mass. 129, 102 N. E. 435 97, 101 Pembroke Academv v. Epsom School, 75 N. H. 408, 75 Atl. 100. . 2 Pennington v. Smith, 69 Fed. 188 80, 303 People, ex rel. Winchester v. Coleman, 133 N. Y. 279, 31 N. E. 96, 16 L. R. A. 183 324 People's Inv. Co. v. Crawford (Tex. Civ. App.) 45 S. W. 738 358 People V. Lieb, 85 111. 484 127 People V. Loewenthal, 93 111. 191 396 People V. Loew, 19 Misc. 248, 44 N. Y. S. 42 369 People V. Marx, 99 N. Y. 377, 2 N. E. 29 408 People V. Niagara, 4 Hill 20 326 People V. Rose, 219 111. 46, 76 N. E. 42 120 People V. Utica Ins. Co., 15 Johns. 358, 8 Am. Dec. 243 387 People V. Wemple, 117 N. Y. 77, 6 L. R. A. 303, 52 Hun. 434 326 Perry v. German & Blaebaum, 66 W. Va. 566, 60 S. E. 604 208 Pettis V. Atkins, 60 111. 454 129 Phillip Carey Co. v. Pingree, 223 Mass. 352, 111 N. E. 857 198 Phillips v. Blatchford (1884), 137 Mass. 510 104, 233 Phillips v. Sanger Lumber Co., 130 Cal. 431, 62 Pac. 749 168 Pilsen Brewing Co. v. Wallace, 291 111. 59, 125 N. E. 714, 8 A. L. R. 579 45 Pollock V. House & Hermann, 84 W. Va. 421, 100 S. E. 275 308 Poole V. Mueller (Tex. Civ. App.), 30 S. W. 951 147 Portland Bank v. Apthorp, 12 Mass. 252 337 Powell V. Pennsylvania, 127 U. S. 678, 32 L. Ed. 253, 8 Sup. Ct. Rep. 992 37,373 Table oi^ Cases. 757 Pray v. Hegeman, 98 N. Y. 351 315, 320 President & Trustees of Bowdoin College v. Merritt, 54 Fed. 55. . 165 President, etc. of Harvard College v. Attorney General, 228 Mass. 396. 117 N. E. 903 74 Preston v. Walsh, 10 Fed. 315 312 Priestley v. Burrill, 230 Mass. 452, 120 N. E. 100 97 Primeau v. Granfield, 184 Fed. 480 80 Prinz V. Lucas, 210 Pa. 620, 80 Atl. 309 92 Purdy V. Lynch, 145 N. Y. 462, 40 N. E. 232 216 Pyle V. Pyle, 137 App. Div. 568, 122 N. Y. S. 256 228, 308 R. Rackemann v. Tilton, 236 111. 49. 86 N. E. 168 23, 218 Rand & Farquhar, 226 Mass. 91, 115 N. E. 286 173, 215, 346, 347 Randolph v. Hinck, 288 111. 99, 123 N. E. 273 171 Ranzau v. Davis, 85 Ore. 26, 165 Pac. 1180 82 Reaves v. Coffman, 87 Ark. 60, 112 S. W. 194 80 Red Bud Realty Co. v. South. 96 Ark. 281, 131 S. W. 340. . . . 80, 193 Reeder v. Reeder, 184 la. 1, 168 N. W. 122 176 Reg V. Whitmarsh, 15 Q. B. 600 284, 293 Reich v. Cochran, 151 N. Y. 122, 45 N. E. 367, 37 L. R. A. 805, 56 Am. St. Rep. 607 315 Reichert v. Mo. & 111. Coal Co., 231 111. 238, 83 N. E. 160, 121 Am. St. Rep. 307 172-228 Reynolds v. Sumner (111.). 14 N. E. 661 312 Reynolds v. Thompson, 161 Ky. 772, 171 S. W. 379 4, 74 Rhode Island Hosp. v. Copeland, 39 R. I. 193, 98 Atl. 273 53, 242 Richards v. Wilson, 62 Ind. A. 4. 112 N. E. 780 2 Rice V. Merrill, 223 Mass. 279, 111 N. E. 860 75 Rice V. Rockefeller, 134 N. Y. 174, 31 N. E. 900, 17 L. R. A. 237, 30 Am. St. Rep. 658 Ill, 352 Righter v. Riley, 42 W. Va. 633, 26 S. E. 357 304 Ricker v. Am. Loan & T. Co., 140 Mass. 346, 5 N. E. 284 234, 323 Ringrose v. Gleadall, 17 Cal. App. 664, 121 Pac. 407 7 Riordan v. Schlicher, 146 Ala. 615, 41 So. 842 166 Ritchie v. People. 155 111. 98. 40 N. E. 454, 29 L. R. A. 79 38 Robbins v. Butler, 24 111. 387 129 Robey v. Smith Ind. Sup., 30 N. E. 1093 135 Robinson v. Robinson, 105 Me. 68, 72 Atl. 883 177 Rogert V. Decker, 131 N. Y. 490 828 Ross V. South Delaware Gas Co. (Delaware), 89 Atl. 593 166 Rothenberger v. Garrett, 224 Mo. 191, 123 S. W. 574 308 Rouse V. Rouse, 176 N. C. 171. 96 S. E. 986 310 Roush V. Griffith, 150 N. C. 820, 65 S. E. 168 310 Royal V. Royal, 30 Ore. 448, 47 Pac. 828 222 Rudolph V. Southern B. League, 23 Abbott's N. C. 199 126 Ruhstrat v. People, 185 111. 133, 57 N. E. 41, 49 L. R. A. 181 36 Russell V. Hartley, 83 Conn. 654, 78 Atl. 320 180 Rutherford v. Ott, 37 Cal. App. 47, 173 Pac. 490 217 758 Table of Cases. s. Sanford v. Howard. 29 Ala. 684 203 Sartor v. Newberry Land & Security Co., 104 S. C. 184, 88 S. E, 467 219 Sawyer v. Railroad, 142 N. C. 1, 54 S. E. 793, 115 Am. St. Rep. 716 88 Schumacher v. Dolan, 154 la. 207, 134 N. W. 624 4 Schuster v. Crawford (Tex. Civ. App.) 199 S. W. 327 156 ■Scoville V. Brock, SI Vt. 405, 70 Atl. 1014 207 Sharon v. Hill, 23 Fed. 353 135 Sedg\vick. J. v. Williams, 8 Mass. 162 212 Shaw V. Bridgers, 161 N. C. 246, 76 S. E. 827 179 Shaw V. R. R., 5 Gray (Mass.) 162 152 Shaw V. Shaw, .=-.1 Tex. Civ. App. 55, 112 S. W. 127 162 Shirk V. City of LaFayette, 52 Fed. 857 134 Shelton v. Harrison, 182 Mo. App. 404, 167 S. W. 634 76 Shepang v. Trust Cases, 60 Conn. 553 67 Sherman v. Williams, 84 Tex. 421, 19 S. W. 606, 31 Am. St. Rep. 66 153 Sbirkey v. Kirby, 110 Va. 455, 66 S. E. 40 303 Shoe & Leather N. Bank v. Dix, 123 Mass. 148, 25 Am. Rep. 49. . 210 Silver v. Investment, 183 Mo. 41, 81 S. W. 1098 268 Simmons Hdw. Co. v. Warbel, 1 S. D. 488, 47 N. W. 814, 36 A. S. R. 755, 11 L. R. A. 267 92 Simpson v. Alexander (Tex. Civ. App.), 188 S. W. 285 162 Sinking Fund Cases, 99 U. S. 700, 25 L. Ed. 496 388 Skeen v. Marriott, 22 Utah 73, 61 Pac. 296 6, 7, 18, 22, 74 Slaughter-House Cases, 83 U. S. 16, 21 L. Ed. 394. . . 46, 373, 385, 404 Slaughter v. Am. Bapt. P. Soc. (Tex. Civ. App.) 150 S. W. 224. . . 156 Slawson v. Loring, 5 Allen 340 214 Smallwood v. Lawson, 183 Ky. 189, 208 S. W. 808 193, 307 Smith V. Anderson, 15 Ch. D. 247, 273, 4, 7, 282 51, 53, 236, 269 Smith V. Robinson, 83 N. J. E. 384, 90 Atl. 1063 186, 193 Smith V. San Francisco & N. P. Ry. Co., 115 Cal. 584, 35 L. R. A. 309 65 Smith V. Smith (Ky.), 121 S. W. 1002 2 Smith V. Smith, 19 S. W. 595 165 Smith V. Swormstadt, 16 How. 288, 14 L. Ed. 942 153 Snodgrass v. Snodgrass, 176 Ala. 276, 58 So. 201 312 Snyder v. Wiley, 59 Tex. 449 202 Sommerset Ry. v. Pierce, 98 Me. 528, 57 Atl. 888 82, 221, 222 Southern Ry. Co. v. Glenn's Adra'r., 98 Va. 309, 36 S. E. 395 216 Speer v. Colbert. 26 Suo. Ct. 202 308 Spotswood V. Morris (1906), 12 Idaho 360, 6 L. R. A. (N. S.) 665, 85 Pac. 1094 251, 263 Spradling v. Spradling. 101 Ark. 451, 142 S. W. 848 302 St. Catherine's Cemetery v. Fidelity Trust Co., 152 Ky. 797, 154 S. W. 29 2.3 Stapylton v. Neeley, 44 Fla. 212, 32 So. 868 306 Starr v. Wiley, 89 N. J. E. 79, 103 Atl. 865 225 State v. Ausmus (Tenn. Ch.), 35 S. W. 1021 227 Tabls of Cases. 759 state V. Ackerman, 51 Ohio St. 163, 37 N. E. 828, 24 L. R. A. 298 35, 54 State V. Bixman, 162 Mo. 1, 62 S. W. 828 267 State V. Bockstruck, 136 Mo. 335, 38 S. W. 317 267 State V. Bruce, 17 Idaho 1, 102 Pac. 831 81 State V. Ellison, 216 S. W. 967 6, 75 State ex rel. v. Blake, 241 Mo. 100, loc. cit. 107, 144 S. W. 1096, Ann. Gas. 1913 C. 1283 267 State ex rel. v. McGrath, 92 Mo. 355, 5 S. W. 29, 5 C. J. 1343. . 31, 265 State ex rel. Pearson v. Louisiana & M. R. R. Co., 196 Mo. loc. cit. 536 262 State ex rel. v. Swanger, 190 Mo. 561, 89 S. W. 872, 2 L. R. A. (N. S.) 121, 4 Ann. Cas. 563 257 State ex rel. Goodsill v. Woodmansee, 1 N. D. 246, 11 L. R. A. 420, 46 N. W. 971 368, 411 State V. Lee, 233 S. W. 20 53, 251 State V. Mfg. Mutual Fire Assn., 50 Ohio St. 145, 33 N. E. 401, 24 L. R. A. 252 53 State V. Northrop, 93 Conn. 558, 106 Atl. 504 313 State V. Scougal, 3 S. D. 55, 51 N. W. 858, 15 L. R. A. 477, 44 Am. St. Rep. 756 46, 363, 383, 389 State V. Stebbins, 1 Stew. (Ala.) 312 396 State V. Stone, 118 Mo. 388, 24 S. W. 164, 25 L. R. A. 243, 40 Am. St. Rep. 388 260 State V. Williams, 8 Tex. 255 412 Stearns v. Fraleigh, 39 Fla. 603, 23 So. 18 180 Stein V. Safe Deposit & Trust Co. of Baltimore, 127 Md. 206, 96 Atl. 349 : 170, 172, 180 Steinbeck v. Bon Homme Mining Co., 152 Fed. 333 79 Stephens v. Stephens-Cas. t. Talb., 232 (1736) 27 Stephenson v. Morris, 128 Wis. 242, 107 N. W. 343 305 Stewart v. Brady, 300 111. 425, 133 N. E. 310 43 Stockwell V. Stockwell's Estate, 92 Vt. 489, 105 Atl. 30. . 191, 192, 193 Stone V. Mississippi, 101 U. S. 814, 25 L. Ed. 1079 381 Story V. Palmer, 46 N. J. Eq. 1, 18 Atl. 363 167, 304 StuU V. Harvey, 112 Va. 816, 72 S. E. 701 177 Sullivan & Co. v. Ramsey (Tex. Civ. App.), 155 S. W. 580 81 Sumner v. Crawford, 91 Tex. 130, 41 S. W. 994 162 Sumner v. Williams, 8 Mass. 162, 184 212 Supervisor of Niagara v. People, 7 Hill. 512 327 Supreme L. K. of P. v. Improved O. K. P., 113 Mich, 133, 71 N. W. 470, 38 L. R. A. 658 265 Swift V. Craighead, 75 N. J. Eq. 102, 75 Atl. 974 77 Swift V. Williams, 68 Md. 236, 11 Atl. 835 208 Sykes v. Beadon, 11 Ch. D. 170 270, 273, 275, 284, 295 T, Taber v. Bailey, 22 Cal. App. 617, 135 Pac. 975 2, 4, 310 Taft V. Smith, 186 Mass. 31, 70 N. E. 1031 194, 195 Taft V. Ward, 106 Mass. 518, 111 Mass. 518 107 Tappan v. Bailey, 4 Met. 529, 535 (45 Mass.) 107 760 Tabi,^ oif Cases. Taylor v. Biddall, 2 Mod. 289 (1677) 27 Taylor v. Blatchford, 13 Allen 372, 90 Am. Dec. 203 385 Taylor v. Davis, 110 U. S. 330, 4 Sup. Ct. 147, 28 L. Ed. 163. . 203, 214 Taylor v. Denny, 118 Md. 124, 84 Atl. 369 175, 223 Taylor v. Mayo, 110 U. S. 330, 4 Sup. Ct. 147, 28 L. Ed. 163 90 Teal V. Pleasant Grove Local Union, 200 Ala. 23, 75 So. 335 1, 2, 80, 184 Temple State Bank v. Mansfield, 215 S. W. 154 161 Templeton v. Bockler, 73 Ore. 494, 144 Pac. 405 1 Thacher v. Dinsmore, 5 Mass. 299 213 Thayer v. Daniels, 110 Mass. 345 110 Thayer v. Fairchild, 25 R. I. 509, 56 Atl. 773 306 Thellusson v. Woodford (1799), 4 Ves. Jr. 227, 337 27 Thomas v. Dakin, 22 Wend. 9 326 Thomas v. Lamb, 11 Cal. App. 717. 106 Pac. 254 35 Thomas v. Thomas, 97 Miss. 697, 53 So. 630 217 Thomas v. United, 192 U. S. 363, 24 Sup. Ct. 305, 48 L. Ed. 481. . . 342 Thome V. Allen (Ky.), 70 S. W. 410 167 Thorn v. DeBreteuil, 179 N. Y. 64, 71 N. E. 470 314 Thorp V. Lund, 227 Mass. 474, 116 N. E. 946 75, 305 Tibbetts v. Tomkinson, 208 N. Y. 486, 102 N. E. 562 305 Trani v. Gerard, 181 App. Div. 387, 168 N. Y. S. 808 204 Traynham v. Jackson, 15 Tex. 170, 65 A. D. 152 202 Tucker Mfg. Co. v. Fairbanks, 98 Mass. 101 213, 214 Turnbull v. Pomeroy, 140 Mass. 117, 6 N. E. 15 217 Turquend v. Kirby, L. R. 4 Eq. 123 ; 109 Turton v. Grant, 86 N. J. E. 191, 96 Atl. 993 221 Tyrrell v. Washburn, 6 Allen 466-475, (88 Mass.) 107 T. & P. Co. v. Hood, 59 Tex. Civ. App. 363, 125 S. W. 982 147 U. Ungrich v. Ungrich, 131 App. Div. 24, 115 N. Y. S. 413 168 United States Fidelity & Guaranty Co. v. Douglas' Trustee, 134 Ky. 374, 120 S. W. 328 215 United States v. Isham, 17 Wall. 496, 21 L. Ed. 728 50 U. S. Fidelity & Guaranty Co. v. Smith, 103 Ark. 145, 147 S. W. 54 3 United States v. Lacher, 134 U. S. 628, 10 Sup. Ct. 625, 33 L. Ed. 1080 119 United States v. Thurston County, Neb. 143 Fed. 287 80 Upham V. Plankinton, 152 Wis. 275, 140 N. W. 5 18, 22, 306 V. Van Aernan v. Bleistein, 102 N. Y. 470, 4 Cent. Reo. 635 331 Vanatta v. Carr, 299 111. 47, 82 N. E. 267 79 Veazie Bank v. Fenno, 75 U. S. 8, Wall. 533, 19 L. Ed. 482 395 Venner v. Chicago City Railway Company, 258 111. 523, 101 N. E. 949 35 5g 74 203 Vernoy v. Robinson, 133 (ila. 653, 66 S. E. 928 '....'....' 180 Von Schmidt v. Huntington, 1 Cal. 55 154 Vosburg v. Mallory, 155 Iowa 165, 135 N. W. 577 12 Tabl^ of Cases. 761 w. Wadsworth v. Duncan, 164 111. 360, 45 N. E. 132 129 Wadsworth, Rowland & Co. v. Arnold, 24 R. I. 32, 51 Atl. 1041. . 347 Walburn v. Ingilby, 1 Myl. & K. 61 106 Waldo V. Cummings, 45 111. 421 24 Ward V. Shire (Ky.), 65 S. W. 8 220 Warner & Roy v. Beers (N. Y.), 23 Wend. 103 257 Warren v. Pazolt, 203 Mass. 328. 89 N. E. 381 179, 195 Webb V. Allen, 15 Tex. Civ. App. 605, 40 S. W. 342 147 Weber v. Delia M. Mining Co., 14 Idaho 404 66 Weed V. Bergh, 141 Wis. 569, 124 N. W. 664, 25 L. R. A. (N. S.) 1217 362 Weeks v. Frankel, 197 N. Y. 304, 90 N. E. 969 171 Weihteuchter v. Miller, 276 Mo. 322, 208 S. W. 39 3, 262 Welch V. City of Boston, 221 Mass. 155, 109 N. E. 174 171 Wells V. Messenger, 249 111. 72, 94 N. E. 87 80 Wells Stone Mercantile Co. v. Grover, 7 N. D. 460, 75 N. W. 911, 41 L. R. A. 252 (1898) 248 Wertheimer v. Swartz S. Co. v. McDonald, 138 Mo. App. 328, (loc. cit.) 122 S. W. 5 258 West Texas Bank & Trust Co. v. Matlock, 212 S. W. 937 (Tex.) 82 Wheatcraft v. Wheatcraft, 55 Ind. App. 283, 102 N. E. 42 224, 225 Whitaker v. McDowell, 82 Conn. 195, 72 Atl. 938 180 White V. Hall, 113 Va. 427, 74 S. E. 212 181 White V. Sherman, 163 111. 589, 48 N. E. 128 169, 183, 198 White V. Thomas Inflatable Tire Co., 52 N. J. Eq. 178 67 Whitman v. Porter, 107 Mass. 522 233 Whitney v. Mayo, 15 111. 251 154 Whittemore v. Equitable Trust Co., 162 App. Div. 607, 147 N. Y. S. 1058 74 Whittingham v. Schoefield's Trustee (Ky.) 68 S. W. 116 217 Wiegand v. Woerner, 155 Mo. App. 227, 134 S. W. 596 222, 226 Wilder v. Hart (Ky.), 96 S. W. 1106 82, 219 Williams v. Boston, 208 Mass. 496, 94 N. E. 808 234 Williams v. Inhabitants of Milton, 215 Mass. 1, 102 N. E. 355 7, 50, 53, 100, 231 Williams v. Johnson, 208 Mass. 544, 94 N. E. 90 241 Williams v. Nichol. 47 Ark. 254, 1 S. W. 243 226 Williams v. U. S. Express Co., 195 Mo. App. 362, 191 S. W. 1087 262 Williamson v. Grider, 97 Ark. 588, 135 S. W. 361 227 Willis V. Clymer, 66 N. J. E. 284, 57 Atl. 803 175 Willis V. Murray, 4 Exch. 843 110 Wilmington Trust Co. v. Jacobs, 9 Del. Ch. 77, 77 Atl. 78 178 Wilson V. Carrico, 140 Ind. 533, 40 N. E. 50, 49 Am. St. Rep. 213 12 Wilson V. Kennedy, 63 W. Va. 1, 59 S. E. 736 302 Wilson V. Smoot, 186 Ky. 194. 216 S. W. 129 184, 193, 225 Winchester v. Coleman, 133 N. Y. 279, 31 N. E. 96, 16 L. R. A. 183 39 Winder v. Nock, 104 Va. 759, 52 S. E. 561 194 Winsor v. Griggs, 5 Cush. 210 213 Winsor v. Mills, 157 Mass. 362, 32 N. E. 352 32 Winters v. March, 139 Tenn. 496, 202 S. W. 73 24 Wisdom V. Wilson (Tex. Civ. App.) 127 S. W. 1128 183 762 Tabi^e; of Cases. Witherhead v. Allen, 4 Abb. App. Dec. 628 329 Woddrop V. Weed, 154 Pa. 307, 26 Atl. 375 82, 180 Wood V. Griffin, 46 N. H. 230 28 Wood V. Owen, 133 Ga. 751, 66 S. E. 951 2 Woodruff V. Woodruff, 44 N. J. Eq. 349, 16 Atl. 4, 1 L. R. A. 380. . 228 Wright V. Caney River Ry. Co., 151 N. C. 529, 66 S. E. 588, 19 Am. Case 384 82 Wright V. Franklin Bank, 59 Ohio 80, 51 N .E. 876 92 Wright V. Clark, 81 Miss. 527, 142 N. Y. S. 812 208 Wylie V. Bushnell, 277 111. 484, 115 N. E. 618 164, 194, 225 Y. Yates V. Yates, 255 111. 66, 99 N. E. 360 170 Yellowstone County v. First T. & S. Bank, 46 Mont. 439, 128 Pac. 596 79 INDEX. ACCEPTANCE OF TRUST Essential in vesting title, 6. ACCOUNT Duty of trustees to, 222. Equity may compel trustee to, 302. Trustee must render, 193. ACCOUNTING Beneficiaries entitled to, 33, 164. Bill for, 164. Equity may enforce, 302. ACCUMULATIONS Statute of, 317. Action to recover, 318. ACTION See "Parties." Barred by laches, 311, 312. Beneficiaries parties to, 149. Brought in time, 311. By beneficiary against trustee, 313, 317, 355. By cotrustee to remove, 307. By distributee, 312. By or against association, 154. By trustees, 151. For accumulations, 318. For removal of trustee, 227. ACTION Insolvency cause for, 151. On trustee's bond, 312. To declare trust invalid, 317. To recover taxes, 331, 335. Trustees sustained in, 315, ADVISORY BOARD Beneficiaries as, 548. Provision for, 548. (763) 764 Index. AGENT Compensation of, 245. Employed by trustees, 422. Partner is, 246. AGREEMENT See "Declaration of Tkust." Created a trust, 46, 49, 99, 354, 420, 426, 437, 4r.4 Created a partnership, 100. Elements of trust in, 414. Essentials of trust in, 414. Failed to create trust, 564, 570, 729. Must be made by parties, 304. Of Chicago Railway Trust, 625. Of Davis Coggins Oil Co., 426. Of Martin-Copeland Co., 454. Of Pepperell Mfg. Co., 437. Of Wachusett Realty Trust, 420. AMENDMETNTS By trustees, 18, 48. Provision for in trust, 424, 435, 451, 517. To Banking Act, 371. To trust, 18, 245. APPENDIX, 419. APPOINTMENT OF TRUSTEES See "Trustees." ATTORNEYS As trustee, 175. Provision in trust as to, 422. ATTORNEYS' FEES Chargeable to trust, 223. For services, 193. For trustee, 222. Paid out of complainants' share, 168. Trustees reimbursed for, 223. ASSOCIATIONS Action by or against, 154. Certificate holders associated, 234. Confused with trusts, 46. English construction of, 286. May have capital stock, 341. May have certificates, 341. Members, Partners, 260. Not trusts, 237, 295, 352. Index. 765 ASSOCIATIONS— Con/mwe(Z. Organized under a law, 322. Partnership relation, 249. Sued as entity, 264. Taxes on, 47, 321. Taxed under corporation act, 323. Unnecessary for all to join, 354. B BANKING Act of South Dakota, 388. A franchise, 391. Bank of England, 394. British Parliament Act, 397. By corporations, 369. Common law right, 366. Foreign coins, 395. Free to all under common law, 397. Issuing currency a franchise, 394. Issuing currency a privilege, 394, 395. Issuing notes not a right, 386. Laws repealed, 412. Legislation on. 362. Legislature control of, 391. Limited to corporations, 363. May be regulated, 410. National banking laws, 397. New York Act, 386. Not prohibited, 397. Persons may be excluded from, 391. Private and corporate, 367. Powers construed, 396. Power of Congress over, 395. Privileges of — what are, 341, 391. Privileges subject to police regulation, 391. Regulation of, 391. Regulation of currency, 894. Requisite to engage in. 369. Rights distinguished, 386. State constitution reference to, 396. What constitutes, 365. Unlawful for individuals, 365. BANKRUPTCY Act liberally construed, 394. Act silent as to trusts, 348. In relation to trusts, 348. In relation to trustees, 348. No one to discharge in trust, 348. Provision of. 350. Purpose of, 349. Receiver, 353. Spirit of Act, 348. 766 Index. BENEFICIARIES Action against trustee by, 313, 317, 355. Advisory Board provision for, 548. Application for a trustee, 309. Committee of, 416. Control actions of trustees, 97, 100. Death of, 104, 108. Entitled to accounting, 33, 164, 192. Entitled to profits, 164. Entitled to statements, 141, 142. Equitable interest in, 29. Functions of, 49. Income tax, 345. Interest personalty, 92, 98. Interest real estate, 96, 98. Laches, 311, 312. Lapse of time, 310. Liability, 167. Liability none as partners, 168, 200, 248. May ask for receiver, 143. May sue, 149. Necessary to trust, 5. Non-liability, 248. Not associated, 50, 238, 294, 352. Not entitled to partition, 32. Not in business, 239, 300. Not in control. 48, 201. Not partners, 235. Not prejudiced by delay, 313. Parties, 152. Petition, 145. Protect trust property, 165. Provision as to, 429. Reimbursement, 166. Removal of trustees, 157. Represented by trustees, 151. Rights of, 137, 138, 249. Right of assignment, 166. Right to petition court, 139. Right to pursue trust property, 80. Right to receive income, 50. Right to receiver, 353. Safeguarded. 257. Sale of interests, 334. Terminate trust, 245. Trustees as, 167, 352. Unnecessary for all to join, 354. Who may be, 137. Wrongs of, 139. Index. 767 BENEFICIAL INTERESTS Assignable, 166. At death of beneficiary, 108. Evidenced by certificates, 103, 324. Individual's property, 336. Personalty, 92, 98. Provision as to, 416, 433, 457. Purchase by trustee, 78. Real estate, 96, 98. Represent trust in aggregate, 323. Sale of, 45, 111, 334. Transferability, 95. BILL Asking instructions of court, 307. BLUE SKY LAW Construing, 43, 44. Of Illinois, 41. Sales under, 45, 111. Sales void, 45. BOOKS Opened by trustees, 360. Provision as to, 465, 507. Trustees must keep, 193. BREACH OF TRUST Beneficiaries may sue for, 151. Trustee's liability for, 346. Trustees may be removed for, 225. What constitutes, 227. BUBBLE ACT Not applicable to America, 107. BUILDING AND LOAN Conducted under a trust, 268. BUSINESS By trustees, 289. Definition of, 271. For gain, 275. Incident to trust, 298. May be regulated, 400. Must be free, 401. Prohibition of must be to all, 401. Pursuit of a right, 405. 768 Index. BUSINESS Regulation of, 380. What is doing, 273, 362, BY-LAWS A contract, 257, 260. Construed, 257. Organization may adopt, 257. Provision for in trust, 448. Void as to strangers, 260. C CAPITAL STOCK Associations may have, 341. Distinguished from capital, 340. Fixed in charter, 340. Tax on, 323. Trust has beneficial interests, 323. Trusts may have, 340, 341. CARE Trustees charged with, 194. CERTIFICATES American rule as to, 103. Assignable, 256, 257. Cash surrender value, 255. Copy of, 439, 495, 539, 597, 638, 696. Definition, 341. English rule, 103. Evidencing interest, 103, 104, 324. History of, 102. Issuing of-a right, 104. Legal, 106. Muniment of title, 342. New — issued, 334. Preferred, 638. Profits and losses follow, 109. Provision for, 512. Rights of holders, 253. Signed by trustee, 333. Stamp tax on, 344. Transferring is a right, 111, 324, 340. Transferring on books, 95, 111. Trust may or may not have, 339, 340, 341. Unissued — no stamp tax, 342. CITIZENS Discriminated against, 392. Fourteenth amendment, 373. In reference to banking, 391. Index. 769 CITIZENS— Continued. In reference to paternalism, 387, 388, May not exercise a franchise, 392. Privileges of, 398. Protected under police power, 374. Restricted in rights, 402. Rights of, 403. Rights distinguished from franchise, 392, 394. Rights guaranteed, 402. Rights supreme to state, 387, 398, 399. Right to engage in banking, 391. Right to engage in business, 407. COMMON LAW Banking free to all under, 397. Banking a right under, 366. In force in Illinois, 43. Insurance a right under, 384, 385. Liability, 328. Liability of corporations under, 329. Modified by statute, 376. Trust a misnomer, 39. COMMON LAW RIGHTS Cannot be legislated away, 387. Distinguished from law, 35. COMMISSIONS Allowed by court, 219. As compensation, 96, 220. Beneficiary estopped in reference to, 311. Brokers, 197. Trustees, 190, 218. COMMITTEE Trustees in relation to, 31. Provision in agreement, 416, 463, 548. COMPENSATION Awarded by court, 219. Commissions, 96, 220. Excessive, 218. Fixed by instrument, 216. Forfeiture of, 220. Of officers, 244. Of trustees, 48, 189. Paid from trust funds, 217. Provision for in agreement, 423. Reasonable, 217. 770 Index. COMPROMISE Equity no jurisdiction in, 305. CONSIDERATION In reference to executory agreement, 304. Not necessary in completed transaction, 4. Title passes without delivery, 5. CONSTRUING Agreement, 244. Banking, 386. Bankruptcy Act, 349. Constitutional provision, 405. Corporate Tax Act, 342. Corporation Act, 119. English statute, 286. General rule, 8. Income Tax Act, 345. Insurance Act, 372, 376. Partnership association, 117. Phrase, life and liberty, 405. Phrase, organized under law, 323, 327. Phrase, organized under law of U. S., 321, 322. Rule against perpetuities, 29. Stamp Tax Act, 341. Statutes, 119, 262, 267. Tax Act, 321. Trust in favor of beneficiaries, 7. Words, masculine and feminine, 117. Words, singular and plural, 117. Words unincorporated, 116, 350. CONVERSION By trustee, 198. CORPORATION Act not applicable to trusts, 250, 261. Artificial person, 328. Banks in relation to, 362. Banking limited to, 363. Capital stock, 340. Capital stock tax, 321, 323. Cannot usurp rights of individual, 385. Construing-act, 118. Creature of law, 113. Discrimination against individual, 392. Distinguished from partnership, 128. Distinguished from joint stock company, 128, 325. Existence derived from state, 378. Franchise distinguished from a right, 392. Franchise tax, 321. Index. 'J'J^ CORPORATION— Coniintied. Foreign corporation act, 114, 120, 130. Insurance Act construed, 372. Insurance limited to, 362, 371, 380. Liability no common law, 329. May create trusts, 48, 58. Organization tax, 321. Organized under a law, 322, 378. Perpetual succession, 323. Property taxed, 321. Restricted by law, 378. Shareholders may pool interests, 63. Special privileges conferred on, 401. Subject to state control, 378, Tax Act, 323. Tax Act construed, 342. Trustees may vote stock, 59. Trust does not imply, 71, 352. Trust is not, 352. Trust is not taxed as, 321. Unincorporated not embraced in corporated, 116. Unlawful acting as such, 56. With exclusive privileges, 383. COTRUSTEE Bill to remove, 307. Default of, 208. Tn fifPTi PT*fl \ 174 Trustee liable for acts of, 206, 215. COURT OF EQUITY Action by cotrustee to remove, 307. Acts in personam, 303. Cannot create a trust, 304. Disagreement of trustees, 304. Discretionary on removal of trustee, 307. Executory agreement, 304. Give no instruction on past acts, 306. Give no instruction on contingent events, 306. Instruct on present acts, 306, 314. Jurisdiction over trusts, 302, 303. May administer trust, 308. May appoint a trust company, 309. May appoint receiver, 158, 159. May appoint trustee, 171, 307, 308. May change trustee, 307. May extend trust, 306. May instruct trustees, 242, 304. May remove trustee, 307. Number of trustees discretionary with, 309. Protects trust property, 307. Trustees subject to, 258, 353. 'j'jT, Inde:x. CREDITORS /See "Third Parties." Equality of, 348. For additional work, 347. May sue in equity, 347. Of trust, 347. Of trustee, 347. Powers of, 247. Unsecured, 349. CURRENCY See "Issuing Currency." D DAMAGES Trust liable for, 82. DECLARATION OF TRUST See "Agreement." Beneficial interest, 416. By-Laws, provision for, 448. Certicates, provision for, 439. Committee, 416. Created by instrument, 46, 49, 99, 354, 420, 426, 437, 454, 553, 559. Dividends, provision for, 449. Duration of trust, 415. Equity cannot alter, 305. Form for, 585. Liability limited in, 417. Liability of trustees, provision in, 448. Meetings, 434. Property set out in schedule, 415. Property properly discribed in, 426. Provision as to oflQcers, 432. Provision as to termination, 434. Provision as to trustees, 428. Purpose of trust should be stated clearly, 415. Seal provision for, 415. Schedule provision for, 604. Trust property described, 414. Vests title in trustees, 358. DIRECTORS Distinguished from trustee, 288. Duties of, 152. Elected by trustees, 67. Shares to qualify, 70. DISABILITY OF TRUSTEE Will not defeat trust, 308. Index. 773 DISCRETION As to number of trustees,. 309. By court in removal of trustee, 307. Equity will not interfere in, 304, DISTRIBUTION Of trust property, 92. Time for, 92. DIVIDENDS Provision for in agreement, 449, 464. DURATION OF TRUST See "Peepetuities." Provision for in agreement, 424, 433, 440. DUTIES OF TRUSTEES In doubt to consult court, 305. Provision in agreement as to, 457. To account, 222. To carry on business, 188. To carry out trust, 185. To employ counsel, 186. To keep books, 193. To look after trust property, 204. To manage property, 184. To use prudence and care, 193. E EMINENT DOMAIN Carriages on public highway, 386. ENTITY Association as, 148. English rule, 270. Trust as, 46, 258, 352. EQUITABLE INTEREST Vests in shareholders, 30. EQUITY See "Court of Equity." ESSENTIALS In preparing trust agreement, 414. ESTOPPEL By record, 316. Doctrine of protects trustees, 314. General rule, 315. Previous judgment as, 318, 319. Res adjudicata, 315. 774 Index. ESTOPPEL — Continued. Safeguard of trustee, 313. Shareholders, 169, 311. EXECUTOR As trustee, 317. Carry on business, 318. EXHIBITS See "Appendix." Davis Coggins Oil Company, 426. Wachusett Realty Trust, 420. EXPENSES Attorneys fees, 222. Personal against trustee, 222. Of trust, 81. Of trustee, 221. EXPRESS COMPANY National, 323. Organized by contract, 324. Taxed, 324. Taxed on capital stock, 324. F FEES Attorneys, 82. FOREIGN CORPORATION ACT Trust not subject to, 114, 120, 130. FORMS See "Appendix." Certificates copies of, 439, 495, 539, 597, 638, 696. Trust copies of, 420, 426, 437. 454, 625. FRANCHISE Banking as, 391. Corporation as, 324, 331, 378. Defined, 392, 397, Derived from law or state, 393. Distinguished from a right, 392, 894. Erroneously conferred on corporation, 385. In relation to rights, 363. Is a grant, 392. Issuing currency is, 394, 395. May not usurp rights, 398. Tax, 321, 326. Trust is not, 821. Trust not subject to, 331. What is embraced in, 393. Index. 775 FRANCHISE TAX See "Taxes." Distinguished from stamp tax, 342. G GIFT Distinguished from a trust, 14. GOOD FAITH Of trustees, 304. Trustees charged with, 194. GRANTOR See "Teustob." I INCOME TAX Construed, 50. Provision of, 344. Trustees not subject to, 47. INCOMPETENCY Of trustees will not defeat trust, 308. INDEMNITY By contract, 386. Contract of common-law right, 385. Of trustees, 347. INDIVIDUAL Constitutional right of, 384. Discriminated against in favor of corporation, 392. Eminent Domain in reference to, 386. Insurance a common law right, 384, 385, 386. No right to issue bank note, 386. Not restricted in business, 378. Requires no franchise, 398, 413. Rights cannot be taken away, 399. Rights cannot be legislated away, 387. Rights cannot be conferred on corporations, 385. Rights distinguished from franchise, 392, 394. Rights of citizens, 403. Rights guaranteed, 402. Rights in reference to paternalism, 387. Rights supreme to state, 398, 413. Right to acquire property, 374. Right to contract, 37, 384. yjd Indsx. INDIVIDUAL— Con^inMCd. Right to create trusts, 64. Right to engage in banking, 391. Right to engage in business, 405, 407. Right to life and liberty, 36. Under different rule than corporations, 378. INJUNCTION ■ Trust name protected by, 125. INSOLVENCY Beneficiaries may sue, 151. INSURANCE A common law right, 384, 385, 386. Act is regulation, 382. Benefits of, 377. Corporations and individuals in reference to, 380, 385. Department in state, 379. Law construed, 372, 384. Law in each state, 379. Law of Pennsylvania, 363. Laws regulating, 378. Legislation as to, 362, 379. Limited to corporations, 371, 380, 382. Magnitude of business, 377. May be prohibited, 385. Police power in reference to, 376, 382. Reason for control of, 381, Requirements to engage in, 379, 384. INSTRUCTIONS Asked by trustees, 307, 314. Confined to present duty, 306. None as to contingent events, 306. None as to past acts, 306. Right of trustee to, 305. Trustees receive from court, 242, 304, 305. INTENTION Determined by acts, 241. Of Congress, 323, 350. Of legislature, 44. Of parties, 156. Of settlor, 14. To create trust, 7. INTERSTATE COMMERCE Constitution of U. S. in reference, 134. In general, 113. Right of trust to engage in, 133, 134. Index. in ISSUING CURRENCY /See "Banking." A franchise, 394. A privilege, 395. Power construed, 396. JOINT STOCK ASSOCIATION See "Associations." Characteristics of corporation, 129. Defined, 128. Distinguished from corporations, 128, 325. Entity, 262, 264. Not a corporation, 263. Organized under a law, 322. Partnership in reference to, 113. Taxes on, 321, 324. JOINT TENANTS Trustees as, 228. JURISDICTION Court over trust, 306, 308. Court over trust funds, 303. Equity none in compromise, 305. Equity over trustees, 303. Equity over trusts, 302. Restricted, 304. L LACHES Action barred by, 311, 312. A person guilty of, 310. Defense to, action, 311. Does not protect fraudulent, 310. In general, 310. Not an equitable bar, 313. Not imputed to beneficiary, 312. What constitutes, 310. LEASES By trustees, 306. Court may extend, 306. LEGISLATION As to banks, 362. Business and, 362. Cannot usurp rights of citizens, 364, 399. Extent of, 384. In reference to franchise and rights, 363. In violation of rights, 364, 399. 778 Index. 'LEGISL,AT10N— Continued. Limited by constitution, 384. May regulate business, 384, 392, On insurance, 379. Unconstitutional, 412. LIABILITY See "Liability of Trustees." Corporation, 328. Individual, 329. Limited, 52, 199, 210, 417. Limited to trust fund, 259. Non-liability, 214. Of trust, 81, 347. Shareholders, 167. Third parties, 346. LIABILITY OF TRUSTEES See "Liability." Agreement governs as to, 244. Extent of, 208. For acts of others, 205. For losses, 205. For misappropriation, 207. For mismanagement, 204. For negligence, 206, 311. For trust debts, 198, 311. For violating trust, 346. Limited, 52, 197, 199, 201, 210, 417 For secret profits, 209. Non-liability, 202, 214. Personal, 197, 204. Provision for in agreement, 448. LIMITATION ON TRUST As to taxes, 336. By instrument, 305. That business shall not be illegal, 35. M MARTIN-COPELAND COMPANY Trust agreement of, 454. MEETINGS Provision for annual and special, 510. Provision for in general, 434. Provision for notice of, 446. Provision for shareholders, 445, 462. MERGER Not contrary to law, 71. Index. 779 MISAPPROPRIATION Action for, 312. Of trust funds, 313. Trustee liable for, 121 MONOPOLY . . . Corporation with exclusive privileges is, 38<5. On insurance business, 386. On particular business, 386. Privileges to a class, 383. Should not extend to few, 388. N NAME See "Trade Name." Protected by injunction, 125, Statutory, 131, 133. Trust protected in, 120, 265. NATIONAL EXPRESS CO. Organized as a right, 325. Organized by contract, 324. Taxes on, 323. NEGLIGENCE In reference to laches, 310. Trustee liable for, 206. NEW YORK BANKING ACT Construing, 386. Issuing notes under, 386. NON-LIABILITY Of trustees, 202, 214. NOTICE As to third parties, 346. Constructive, 347. Facts sufficient, 346. In appointing a receiver, 159. Of meetings, 446. Recording, 19. When unnecessary, 160. OFFICERS Appointed by trustees, 244. Compensation of, 244. Elected by trustees, 148, 358. Provision as to, 432, 445. 780 Index. OHIO Banking Act, 396. P PARTIES See "Action." All not necessary, 155. Beneficiaries, 151, 152. Doctrine of representation, 154, 355. Doctrine of representation applies to trusts, 356. Instrument should be clear as to, 3. Misjoinder, 150. Necessary, 152, 157. Represented must have common interest, 356. Some may sue for all, 154, 355, 356. Trustee as, 314. Unnecessary for all beneficiaries to join, 354. PARTITION Beneficiaries not entitled to, 32. PARTNERSHIP Confused with trust, 46. Creation of, 100. Created under common law right, 338. Distinguished from corporation, 128. Liability not applicable to beneficiaries, 200. Liability provision, 417. Not a legal entity, 157. Not a trust, 230, 235, 352. Partner is agent, 246. Profit sharing, 245. Shareholders, 233, 234. Shareholders not liable as partners, 168. Taxation of, 234. Test of, 230, 232. PATERNALISM Assumes citizen is a child, 388. Definition, 387, PATENTS Deeded in trust, 332. Taxation of, 334. PENNSYLVANIA Insurance law, 363. PEPPERELL MANUFACTURING CO. Agreement a trust, 437. Indi;x. 781 PERPETUITY. Bee "Rule Against Pebpetuity. Duration of trust in reference to, 415, Provision as to in agreement, 414. Trust not violating, 33. Voluntary societies, 32. PERPETUAL SUCCESSION Corporations, 323. Trusts, 323. PERSONAL PROPERTY Beneficial interest, 92, 95, 98. Conveyed in trust, 4, 11. Provision in trust, 93. PETITION By beneficiary, 145. By trustee, 305, 306. Contents of, 306. Five years after death of trustee, 312. For receiver — unsustained, 361. POWERS OF TRUSTEES Derived from instrument, 176. Discretionary, 178. Express, 176. Implied, 176. Incidental, 181. Personal, 180. Provision as to, 457. Restricted, 182. To appoint officers, 244. To carry on business, 318. To declare dividends, 245. To invest trust funds, 358. To make leases, 306. POLICE POWERS Banking privileges under, 391. Cannot deprive individual of rights, 387. Corresponds to self preservation of individual, 375. Defined, 399. Does not extend to prohibition, 400. Enlarging its range, 376. In general, 373. Inherent in all governments, 374. In reference to insurance, 376. Is one of regulation, 374. Limitations, 375. May regulate but not prohibit, 392, 400. May restrict issuing notes, 387. 782 Index. POLICE POWERS— Continued. No adequate definition, 374. Over business; gambling; lotteries; Sunday laws, 381. Over insurance, 382. Paternalism, 388. Proper exercise of, 373. Protect lives, 374. Pi-otect health, 374. Protect property, 374. Provisions of, 386. Regulation of business, 380. Regulation of banking, 368, 391. Security act, 41-45. When violating fundamental law, 375. PRESUMPTION OF SETTLEMENT After twenty years, 312. PRIVATE INDIVIDUALS See "Individuals." PROFITS— SECRET Trustee liable for, 209. PROFIT SHARING Partnership, 245. PROFIT AND LOSSES Follow certificate, 109, From trust funds, 192. Insurance companies, 378. PROHIBITION As to banking, 397. Defined, 387. Distinguished from regulation, 380. Exclusive grant to a class, 387. Legislature in reference to, 392. Masquerading as regulation, 367. ^ Not regulation, 366. Of business, must be to all alike, 401. What is not, 382. PROPERTY All kinds may be transferred in trust, 4, 76. General rule, 13. In trust, 4, 76. Jurisdiction, 303. Necessary to create a trust, 5. Rule against perpetuity, 27. Taxed, as partnership, 234. Title must pass to trustees, 6. Indbx. 7^:^ PUBLIC POLICY In reference to trust, 53. No rule of, 64. R RATIFICATION General rule, 168. REAL ESTATE Beneficial interest, 96, 98. May be placed in trust, 4. REASONABLE TIME What is, 311. RECEIVER i.fi 1R0 orrj Appointment discretionary, 156, ibcs, 6b (. Appointment of, 146. Appointment without notice, 158. Beneficiaries may ask for, 143, 353. Cause for appointment of, 158. Evidence must be positive for appointment, 357. Evidence failing to sustain petition, 361. Prayer for, 355. Procedure, 353. Proper cases for, 353. Requirements of petition, 162. Rule as to notice, 160. Showing is necessary, 161. Takes charge of trust, 353. Trustee to succeed, 163. When may be appointed, 147. RECORDING Notice, 19. REGULATION By legislation, 392. Distinguished from prohibition, 380, Drugs, 381. Easy of enforcement, 380. Exclusive grant to a class, 387. Gambling, 381. Insurance act is, 382. Intoxicating drinks, 381. Is a power within a state, 383. Law in reference to, 376, 380. Medicine, 381. Must not be prohibition, 366. Not prohibition, 368. Of business, 380, 784 Index. REGULATION— Con/iwtted. Sunday laws, 381. "What is not, 387, REIMBURSEMENT Beneficiaries entitled to, 166. Of trustees, 221. REMOVAL OF TRUSTEES Action for, 227. Breach of trust, 225. By court, 224, 307. Cause for, 227, Conflicting interest, 227. Discretionary with court, 307. Jurisdiction, 224. Misuse of trust, 226. Must be cause, 307. Necessity for, 226. Neglect, 226. REPUDIATION Of trust, 310. RES ADJUDICATA Estoppel, 315. Previous judgment, 318. RESPONSIBLE All trustees are, 311. REVOCATION Of trust, 75. RIGHTS And franchises, 363. Banking free to all, 397. Bill of, 374, 375. Cannot be legislated away, 399. Common law as to banking, 366. Constitutional, 384. Constitution of South Dakota, 368. Conveyed in trust, 35, 42. Corporation usurping, 385. Creation of partnership in reference to, 338. Distinguished from franchise, 392, 394. Distinguished from law, 34. Gift of creator, 46. Guaranteed, 368, 402. Inalienable, 37, 38. Individual cannot be deprived of, 363, 385, 387. Insurance a common law right, 384, 385. Index. 785 RIGHTS— Continued. Invaded, 374. Issuing bank notes is not a right, 386. Law recognizes, 46. National Express Co. created under a, 325. Not a commodity, 338. Not taxable, 338. Of beneficiary to receiver, 353. Of citizens, 403. Of citizens to organize, 325. Of individuals, 35, 36, 45, 384. Of individual to contract, 384. Of individual to write insurance, 386. Of individual to engage in business, 405, 407. Of ownership in trustee, 358. Of the State, 380. Protected by law, 338. Subject to regulation, 374. Supreme over State, 398. Trust created as a right, 250, 251, 322, 331, 339. Violated by legislature, 364. When denied, 375. RULE AGAINST PERPETUITIES Applies to trusts, 28. Definition, 24. Object of, 24. Purpose of, 26. Violated, 57. S SCHEDULE Copy of, 500, 604. In trust agreement, 415. Trust property, 415. SEAL Definition and history, 20. Provision in trust, 415. SECURITY ACT Construing, 43, 44. Of Illinois, 41. Sales under, 45, 111. Sales under void, 45. SETTLEMENT Presumed after twenty years, 312. 786 Index. SHARES Additional provision for, 450. American rule, 103. English rule, 103. Individual property, 336. Legal, 106. On death of beneficiary, 104. Provision as to, 433, 457. Representing trust estate, 104. Sale of, 111. Transferable, 102. Transferring of is a right, 111. Trust may have, 341. SHAREHOLDERS See "Beneficiary," Associated, partnership, 249. Equitable interest in, 29. Estoppel, 169. Interest — 'personalty, 92. Liability of, 167. May be trustee, 227. May terminate trust, 245. New shareholders, 31. Not partners, 235. Not associated, 238, 294, 300. Partners, 233, 234, 241. Ratification by, 168. Reimbursement of, 166. Rights of, 249. Right to assignment, 166. ■ SOUTH DAKOTA Banking act, 388. Constitution of, 368. Declaration of rights, 368. STAMP TAX See "Taxes." Act construed, 342. Distinguished from franchise, 342. Federal act, 339. No difference between incorporated and unincorporated, 341. Only on issued certificates, 342. STATUTE Against accumulation, 317. Banking, 362. Banking act of New York, 387. Banking act of South Dakota, 389. Banking act of Wisconsin, 363. Bankruptcy Act, 349. Index. 787 STATUTE — Continued. Construing income tax act, 345. Construing insurance law, 376. Construing, 119, 262, 267, 292, 342. Construing Stamp Tax Act, 341. Corporation and association, 329. English, 286. Modern on insurance, 379. Modify common law, 376. On Insurance, 362. Pennsylvania Insurance Act, 363. Proper office of, 376. Tax act construed, 322. Trust derives no benefit from, 339. Trust not organized under, 339. Violates rights, 364. STATUTE OF FRAUDS Trust must be within, 3. STOCK CERTIFICATES See "Ceetificates." Definition, 340. Term not peculiar to corporations, 340. SUBSTITUTED TRUSTEE Accounts for settlement, 186. Commissions of, 191. In general, 174. May follow methods of predecessor, 188. SURVIVORSHIP Death of trustee, 228. T TAXES Act construed, 321. Act limited to corporations, 323. Advantage with trust, 321. Application to correct, 335. Assessed as partners, 231. Associations, 47, 321. Capital stock tax, 323. Commodities are taxable, 338. Construction of Income Tax Act, 345. Corporations — capital stock, 321. Corporations — organization tax, 321. Firm property is taxable, 338. Franchises, 326. Franchise and stamp tax distinguished, 342. Franchise tax on corporations, 321. Income, 47, 321, 344. 788 Inde;x. TAXES — Continued. Income tax construed, 50. Intention of Congress, 323. Is excise on franchise or privilege, 338. Joint stock company, 321. Must be reasonable, 339. Not on rights, 338. Not a license fee, 337. On machinery, 333. On patents, 334. On value of shares, 336. Partners jointly taxed, 232. Partnership property, 234. Stamp, 339. Stamp act construed, 344. Subject to limitations, 336. Trust not subject to franchise tax, 331. Trust not taxed as corporation, 321, 324, Trust property, 232. Trustees not liable for, 215. Trustees return on income tax, 344, TERMINATION OP TRUST See "Duration." Beneficiaries not entitled to, 33. By beneficiaries, 23, 245. By instrument, 21, 424, 433, 440, 446. By Trustee, 22. By trustor, 22. From other causes, 23. TESTATOR Property to children, 303. TESTAMENTARY Disposition of property, 10. Trustee, 309. THIRD PARTIES See "Creditobs." Becoming trustee, 346. Facts to put on notice, 346. Impressed with trust on notice, 346. In reference to trustee's violation, 346. On notice, 346. TIME LAPSE OF No bar between trustee and beneficiary, 310. TITLE Passes in praesenti, 15. Provisions — not in beneficiaries, 429. Index. 7^9 TITLE — Continued. Provision — in trustee, 429, 443. Separation of legal from beneficial interest, 14. TORTS Trust estate, 83. TRADE NAME See "Name." Fraud in use of — statutory, 127. Protected by injunction, 125. Trust protected in, 120, 264. TRUST Acceptance necessary, 6. Action to have declared invalid, 317. Advantage in taxes, 321. Agreement. (/See "Agreement.") Agreement created, 250. Amendment, 18. As an entity, 46, 258, 352. Bankruptcy, 348. Business not requiring franchise may use, 413. Capital of, 340. Common law, 39. Consideration, 4. Consolidation, 69. Construing, 6, 10, 12, 16. Created as a right, 250, 339. Created on invention, 332. Created for all purposes, 4. Created by agreement, 46, 420, 426, 437, 454, 503. Creature of contract, 413. Creditors, 347. Damages — liable for, 82. Definition, 1, 12, 137, 177. Derives no benefit from statute, 339. Difficult to determine from partnership, 354. Directed by equity, 304. Disability of trustee vf\\l not defeat, 308. Distinguished from gift, 14. Doctrine of representation applies, 356. Duration of, 415, 424, 433, 440. Elements of, 5. English rule, 269. Equity cannot create, 304. Equity jurisdiction of, 302. Exclusive management and control in trustees, 358. Exercising functions of corporation, 44. Exists as a right, 331. Expenses of, 81, 166. Fees, 81. 790 Index. TRUST — Continued. Formality not necessary in creating, 2. Foreign corporation act, 114. Foreign corporation act not applicable, 120. In business not restricted, 378. Incompetency of trustee will not defeat, 308. In form of will, 471, 475. In hands of receiver, 353. In reference to associations, 46. Intention of, 241. Intention to create, 7. Interstate commerce, 113, 133. Is a citizen, 39, 328. Laches run against, 310. Leases may extend beyond duration of, 306. Legal title in trustee, 171. Liability of, 81, 347. Liable for expenses, 198. Liable for secret profits, 209. Limitation, 35. Limited by instrument, 305. May be created by will, 12. May be extended, 306. May embrace rights, 35. May have capital stock, 341. May have certificates, 341. Must be written, 3. Name protected by injunction, 125. Natural person, 39, 328. Notice, 19. No capital stock tax, 321, 323. No franchise tax, 321, 331. No perpettual succession, 323. Not an association, 237, 287, 295, 352. Not a corporation, 71, 352. Not a joint stock company, 345. Not a partnership, 230, 235, 242, 258, 352. Not a partnership or association, 57. Not organized under law, 322. Not subject to corporation act, 250, 261. Not subject to corporation tax, 323. Not taxed as corporation, 321. Organized as a right, 42, 45, 73, 113. Private, 32. Property, 76. Protected by court, 307. Public policy, 53. Purpose of, 4. Recording, 19. Represented by beneficial interests, 323. Repudiated by trustees, 310. Index. 79^ TRUST — Continued. Revocation, 75. Rule against perpetuities, 24. Safeguards beneficiary, 257. Seal, 20. . x,. . Should be clear and concise as to parties and object. Special words not necessary to create, 2. Subject to court of equity, 353. Termination of, 21, 24. Test of, 230, 235. Torts, 83. Title to property must pass to trustees, 6. Title in trustee, 358. Trade name, 120, 264. Trustees act as unit, 172. Trustees may be removed, 307. Under different rule from corporation, 378. Upheld as such, 420. Validity, 18, 34. Well known institution of law, 352. When testamentary, 10. Who may create, 11. TRUST ESTATE See "Trust." Liable for acts of agents, 92. Liable for expenses, 198. TRUST FUND Bears expenses, 221. Compensation paid from, 217. Distribution of, 92. For exclusive use of beneficiary, 346. Invested by trustee, 358. Invested as directed, 185. Liable for trustees' acts, 89. Liability limited to, 259. Misapplication of, 151. Misappropriation of, 313. Pay into court, 303. Profit from, 192. Reached by petition, 306. TRUST INSTRUMENT See "Declaration of Trust." TRUST PROPERTY Bears expenses, 221. Beneficiary's right to protect, 165. Beneficiary's may follow, 165. Change in form, 80. Conversion of, 81. 792 Index. TRUST PROPERTY— Continued. Described in agreement, 426. Disposal of, 415. Distribution of, 92. Following, 47, 81. In agreement, 414. In general, 76. Mingling with other property, 79. Private debts of trustee, 82. Purchasing by trustee, 76. Represented by beneficial interests, 323. Sale to trustee, 77. Set out in schedule, 415. Taxation of, 232. TRUSTEES Acceptance of trust, 6. Acceptance provision as to, 466. Act by majority, 358, 428. Act as a unit, 172, 428. Acts may be ratified, 168. All are responsible, 311. Appoint officers, 244. Appointment of, 170, 224. 307. Appointed by court, 224, 308. As attorney, 175. Associated, 290. Attorney's fees, 222. Bankruptcy, 348. Beneficiaries may be, 167, 227. Beneficiaries and trustees not associated, 352. Beneficiaries may sue, 313, 317, 355. Care and caution, 194. Certificates assignable to, 256. Certificates provision for, 528. Collective capacity, 172, 358, 428. Commissions, 190, 218. Compensation, 48, 189, 216, 217, 218. Conflicting interest, 227. Conspiracy by, 166. Conversion, 198. Cotrustee, 174. Creditors, 347. Death of, 172, 228. Disability of, 308. Disagreement of, 304. Distinguished from directors, 288. Duties, 85, 184. Duty to beneficiaries, 142. Duty to ask advice of court, 305. Elect directors, 67. Exclusive management and control, 358. Index. 793 TRUSTEES— Continued. Executor, 317. Exemption, 201. Expense, 221, 222. Fiduciaries, 50. Filling vacancy among, 48. Functions of, 49. Good faith, 194, 304. Hold legal title, 171. Hold title to trust property, 358. Holders of corporate property, 48. Income tax, 47. Incompetency, 308. In control, 46, 97. Indemnity, 347. Instructed by court, 242, 305. Instructions, 314. Interfered with, 307. Joint tenants, 228. Lapse of time, 310. Liable for losses, 205. Liable for acts of others, 205. Liable for negligence, 206. Liable for misappropriation, 207. Liable for trust's debts, 198. Liability, 88, 89, 91, 197. Liability limited, 90, 198, 209. Majority of, 173. Masters, 248, 250. May elect oflBcers, 148. May invest trust funds, 358. May make leases, 306. May petition court, 305. Mismanagement, 204. Must render account, 164, 191, 193. Necessary to creation of trust, 5. Non-liability, 202, 214, 215. Not bound by acts of others, 226. Not joint stock company, 345. Not partners, 235. Number of, 309. Number of in agreement, 428. Owners of trust property, 137, 171. Powers conferred on, 73. Powers of, 176. Private debts, 92. Profit by, 164, 192. Protected by estoppel, 314. Prudence and care, 193. Purchasing beneficial interests, 78. Purchasing trust property, 76. Refusal to act, 246. 794 Index. TRUSTEES— Continued. Reimbursement of, 221. Removal of, 224, 226, 307. Removal discretionary, 307. Removable for cause, 225. Represent beneficiaries, 150. Repudiation of trust, 310. Resident trustee, 308. Resignation of, 180. Return on income tax, 344. Safeguarded by estoppel, 313. Salary, 190. Sale to themselves, 77. Settlement presumed, 312. Subject to committee, 62. Subject to court, 257. Substituted, 174. Sustained, 315. Testamentary, 309. Title passes to, 17, 137. To carry on business, 318. To use best judgment, 303. Trustor may act as, 75. Trust, amendment by, 18. Trust company, 309. Vacancy, 309. Vacancy — provision for, 528. Violating trust, 346. Voting stock in corporations, 59. Who may be, 175. TRUSTEES' DUTIES See "Duties of Trustees." TRUSTEES' LIABILITY See "Liability of Trustees." TRUSTOR As trustee, 75. Creates for own benefit, 74. Hostility of, 307. Intention of, 14, 74, 241. Limitation on, 75. May declare a trust, 73, 74. Must transfer property, 6, 11, 12. Necessary in creation of trust, 5. Reserve powers, 13. Who may be, 74. Inde;x. 795 UNINCORPORATED COMPANY Confused with trust, 46. Construing, 350. Does not include corporations, 116. Rights of, 118. VACANCIES OF TRUSTEES Provision for, 528. VALIDITY Of Trust, 34. W WILL Against statute of accumulations, 317. Creating trust, 471, 475. Executor of, 317. Judicial construction, 318. Trust may be created by, 12. Validity, test of, 318. WISCONSIN Banking Act, 363, 369. Banking Act violates rights, 364. WACHUSETT REALTY TRUST Agreement, 420. WORDS See "Construing." Construing, 117. Given normal meaning, 350. Life, liberty, construed, 406. UNIVERSITY OF CALIFORNIA LIBRARY Los Angeles This book is DUE on the last date stamped below. Die 2^ \9li Form L9-Series 4939 UC SOUTHERN REGIONAL LIBRARY FACILITY AA 000 713 464