his own property," and as such men usually employ agents to attend to ministerial duties, such as to collect their rents, so trustees have a right to employ such agents, and if they exercise ordinary care in the selection of such agents, they are not liable for the defalcation of such agents.

Most particularly is a trustee held to the personal execution of anything left to his discretion. When, for instance, the amounts to be paid for the education and maintenance of a minor have been left to the discretion of a trustee, he is expected to decide the amount himself and not to leave it to anyone else.

§ 413. Trustee May Make No Profit for Himself

A trustee in the United States is entitled to reasonable compensation for his services, but otherwise he is not allowed to make any profit from the trust property for himself, directly or indirectly. The beneficiaries may be women, children, or others not skilled in business affairs. To bar temptation, the rule is absolute and without exception, that a trustee may not use his position as trustee for his own profit. If in any way a trustee receives any gain from his connection with the trust, the courts will invariably make him account for it and give the cestui que trust the benefit of it. If a trustee uses trust funds in any business or speculation of his own, he may be required to turn over every cent of profit, and if any loss results he will be required to make it all good.

In such a case the court said:

When therefore he was elected president of the company by directors whose election he as trustee controlled and allowed them to vote him a large salary as such president, and also allowed them to authorize the payment to him of bills for the legal services which he rendered to the company, he subjected himself to the criticism of using the position that the ownership of the stock held by him in trust gave him to secure to himself this salary and legal employ

ment which resulted in personal advantage to himself. . . .
Under such circumstances, we think the surrogate was amply
justified in arriving at the conclusion that he did that the
interest of the trust required that the appellant should be
removed as trustee."

All persons who stand in a trust relation to others, as partners, guardians, directors of corporations, and agents, generally are subject to this general rule against using their positions for their private profit.

The measure of damages for a breach of trust is, at the option of the beneficiary, the amount actually lost by the breach, or the amount which the trustee has gained by the breach, and where several trustees are involved, each trustee is liable for the whole loss.*

§ 414. Trustees' Duty to Take Possession

It is the duty of trustees as soon as qualified to get possession of the trust property and take it into custody. Until the trustees take possession, no profits go to the beneficiaries, but the creator of the estate is entitled to them. Where the trust is created by will, the title of the trustee will relate back to the time of death unless the will provides that the trust estate shall begin later.

When the trust property consists of notes, bonds, and claims against other people, the obligors and those indebted should be notified. If this is not done, and one of the debtors without notice and in good faith pays the debt to the original creditor, he cannot be made to pay again. Any debts due the trust estate should be collected without delay. Any loss resulting from delay could be charged to the trustees who were responsible.

Where property is to be sold, trustees must use their dis

'Matter of Hirsch, 116 App. Div. (N. Y.) 367.

Proprietors v. Force's Executors, 72 N. J. Eq. 56.

cretion. If there is an expensive establishment that is not to be continued, it should be broken up with the least delay. The widow and family generally have a reasonable time allowed before they leave if it is to be closed up and sold. Because under English law this period was forty days, it was called the "widow's quarantine."

Stocks that are not to be retained are to be sold at the trustees' sound discretion. It is their duty to sell to the best advantage, and they are not required to hurry the sale. To sell within the year or even within the second year has been held to be proper and reasonable. Usually, stock should be sold within the year allowed for settling an estate.

Notes and personal obligations should not be allowed to remain outstanding unless protected by mortgages or other equally substantial securities.

If the trustee himself owes the estate, he must treat his debt as assets collected.

§ 415. Trust Property Must Be Kept Separate

The trust property, when it has been reduced to possession, must not be mingled with like property of the trustee or with like property of any third person. The effect of mingling trust property is as follows:

I. If any loss occurs, the trustee is responsible for any amount that is required to bring the trust fund up to its full amount.

2. The beneficiary may claim all of the mingled fund, and the trustee can claim only what he can identify.

3. If the fund or property is kept separate and with the same degree of care that an ordinarily prudent business man would use in handling his own funds, the trustee is not responsible for any loss that occurs.

§ 416. The Conversion of Trust Property

The creator of the trust should set out: (1) whether the trustee is to hold the particular property intact during the period of the trust, or (2) whether the trustee is positively to sell certain trust property and reinvest it, or (3) whether the trustee is to use his discretion as to any conversion or change.

Where the instructions are positive either way, the trustee's duties are simple and certain. Where it is left to the trustee's discretion, it is the duty of the trustee to do the best he can as a prudent man of business.

Directions are sometimes given that real estate is to be sold and the proceeds invested in personalty in order that it shall ultimately be distributed as personalty. In such case it is sold as soon as it can be advantageously disposed of. is one of the certain cases mentioned in (2) above.

The cases upon the subject in the English and American courts are very numerous. But the general rule is recognized in all of them, that where it unequivocally appears from the will that the intention of the testator was to convert real estate into personal estate, the law will consider the conversion as actually made at the death of the testator, and treat the estate as personal for all purposes to which the intention of the testator clearly extends."

This

In many wills, positive directions are not given and the trustees or the court must infer from the construction of the instrument what courses will most nearly conform to the purpose of the testator.

A court of equity may order a trust property converted from personal to real property, or vice versa, where it can be shown that it is for the interest of the beneficiary, and where the will does not in terms forbid such change.

Hammond v. Putnam, 110 Mass. 232.
Perry on Trusts. § 449.

Where property is to be held for the benefit of one or more in succession and is of such a nature that it grows less valuable, or where the course of use and the lapse of time will make the final estate of diminished value, a court would imply an intention that the original property should be sold to the best advantage and the proceeds invested in what are ranked as "safe investments" in the particular state. (Funds must not be invested outside of the state.) By doing this the beneficiaries have an equal return each year, and whoever takes the remainder or final estate receives it undiminished.

§ 417. The Law as to Making Investments of Trust Funds There are certain general rules applicable to investments of trust funds made by trustees:

1. Any specific directions in the will or other instrument creating the trust, as to the investments to be made or retained, must be followed exactly as to time, manner, and kind of investment.

2. If there are no directions, the rules of court or any state laws or statutes on the subject would govern so far as they go, and where these do not exist or do not apply, the trustees are expected to use good faith and sound discretion.

An investment by a trustee should be first of all a permanent, safe investment, and the question of income comes second. In no case should the investment be speculative.

The usual rules of investment for trustees prescribe: (1) government or state securities, and (2) bonds and mortgages on unencumbered real estate.

In some states the statutes extend these limits.

Investments may not be made beyond the jurisdiction of the court having charge of the trust. If such investment is made, the trustee is responsible for any loss.

Trustees are never justified in loaning money on personal security unless the trust instrument expressly authorizes such