for the amount, and consequently might recover the same (6).

§ 41. Construction of rule requiring prompt return of checks. The rule requiring the prompt return of checks is interpreted according to the spirit of its language and purpose and in a quite recent case the court of New York, in construing a rule that "in no case shall they be retained after one o'clock," and in order to save a forfeiture, held that the delivery to a messenger with sufficient time ordinarily for him to reach the other bank before one o'clock was a compliance with the rule (7).

§ 42. Clearing house certificates. Clearing house certificates are quite exceptional and are resorted to only in the case of great financial stress. They come about by reason of an agreement between all of the banks, or a number of them, members of the clearing house, to protect the credit of each and all by permitting the issuance of certificates of the clearing house promising to pay the amounts named. The holder of a draft or check on a bank is not obliged to accept from the bank upon which it is drawn anything but money. Plainly, therefore, clearing house certificates rest for their efficiency on the public spirit of the community and the combined credit of the associated banks which constitute the clearing house and have agreed to the issuance of the certificates.

(6) Ger. Nat. Bank v. Farm. Dep. Bank, 118 Pa. St. Rep. 294. (7) Central Nat. Bank v. New Amsterdam Bank, Note 4, above.

CHAPTER V

TRUST COMPANIES.

§ 43. Legal and illegal trusts. No word in the legal vocabulary has a more varied meaning than the word trust. Trusts are said to be the especial favorites of the courts of equity and in truth pure trusts are the first offspring of equity. On the other hand trusts are said to be the enemy of commerce and the very embodiment of monopoly. But there are several varieties of trusts. These are no doubt all clearly explained in other parts of this work (see Vol. VII, Art. 3), but a word as to the general nature of trusts will enable us to approach this subject with a clearer understanding. Wherever one person holds the title and control of property of any class in which he himself claims no beneficial interest, general or special, but which, on the contrary, he holds for another, whether this is by express or implied contract, or because of a peculiar status or relation, the holder is called a trustee and the beneficial owner is called the cestui que trust or beneficiary. This is the legal trust.

The illegal trust is quite different, but it has the one feature in common with the lawful trust, that the trustee holds and controls the property, but by an arrangement called a combination, the object being always to control

trade and commerce, or, as it is said, to restrain trade by monopoly.

§ 44. The nature of a trust company. A trust company is so named because its principal business is to hold titles for others who are the beneficial owners in order to facilitate the management of affairs, all of which have a lawful object. It is, in other words, an incorporated trustee. Any natural person, compos mentis, may be a trustee and it has been held that a municipal corporation might be a trustee. The power then of the state to charter a corporation with power to accept and execute trusts cannot be doubted.

In truth the foregoing explains all there is to the general object of a trust company. The usual power of a trust company is to accept trusts of every kind and nature.

§ 45. Same: Its banking power. With respect to the banking features of a trust company there is greater difficulty, for outwardly most of our trust companies receive deposits of money, general, special, and specific, and pay out money on checks precisely as do the regular banks. Bearing in mind that, except as restrained by law, and subject to regulation by law, any one may do a banking business, and keeping in mind that the powers of a corporation are only such as are expressly or impliedly granted by its charter, it may be readily seen that whether a trust company has the right to do a general banking business depends upon its charter; for a corporation authorized to conduct a definite business, expressed in generic terms or specially defined, cannot go outside of that orbit. Such a transgression is called

ultra vires the corporate powers. See Vol. IX, Art. 2, Chap. IV, sections 2 and 4. It follows therefore that no general rule can be laid down that a trust company can or cannot conduct a banking business, because that depends on the charter; and under some charters it has been held that a company might conduct a savings bank (1).

As a matter of course a trust company doing a banking business is subject to the statutory regulations governing banking.

§ 46. Same: Acts ultra vires. Having in mind the limited space at our disposal in this work the following extracts from an illustrative case have been chosen because they explain the general principles applied in construing such charters, make clear the idea of ultra vires, and mention the banking features sufficiently for our purpose. This case constitutes a very salutary guide to officers of banks and trust companies and suggests to others the necessity for considering the powers of officers who perform acts on the part of their corporations. It also suggests and explains many of the important steps and devices used in organizing and managing corporations, and its careful perusal and study will guide one in many analogous situations.

In Gause v. Commonwealth Trust Co. (2), the questions arose under an agreement by the defendant trust company to underwrite and guarantee, as well as to act as de

(1) Bank Com. v. Security Trust Co., 75 N. H. 107. (2) 196 N. Y. 134.

pository for, the bonds of the United States Shipbuilding Company. The Court said:

"The defendant was organized March 29, 1902, pursuant to article 4 of the Banking Law of this state as it then existed. The statute as it existed at that time defines a trust company to mean a domestic corporation 'formed for the purpose of taking, accepting and executing such trusts as may be lawfully committed to it, and acting as trustee in the cases prescribed by law, and receiving deposits of moneys and other personal property, and issuing its obligations therefor (3), and of loaning money on real or personal securities.' The powers of a trust company are expressly defined by statute and so far as applicable to this decision they are:

"2. To receive deposits of trust moneys, securities and other personal property from any person or corporation, and to loan money on real or personal securities.

"9. To purchase, invest in, and sell stocks, bills of exchange, bonds and mortgages and other securities; and when moneys, or securities for moneys are borrowed or received on deposit, or for investment, the bonds or obligations of the company may be given therefor, but it shall have no right to issue bills to circulate as money.

(3) It is at this point that one would look for any limitation on the power conferred by the words-"receiving deposits." It is sometimes expressed as "receiving and holding trust deposits." Such an expression would indicate a limitation too narrow to authorize the doing of a banking business.