277 N.W. 899 | Minn. | 1938
"The trustee shall invest and reinvest all principal cash in the trust fund in first mortgages on improved real estate, in municipal or corporation bonds or in any other form of income bearing property, except real estate, but in selecting such investments, the trustee shall exercise its judgment and shall have first regard for the safety of the principal of the trust rather than for a high rate of income.
"The trustee shall be under no obligation to change the investments which come into its hands from my estate, on account of the character thereof, but only when it deems it advisable to do so because of changing conditions and after careful investigation and consideration."
The court below held that the trustee was not authorized by the terms of the trust to invest trust funds in corporate stocks and decreed that the words " 'first mortgages on improved real estate, in municipal or corporation bonds or in any other form of income bearing property, except real estate' as such words are used in * * * of the last will and testament of Robert Fremont Jones, deceased, be and they hereby are construed as excluding corporate stocks. * * *" The beneficiaries of the trust appeal.
That the trustee may invest trust funds in corporate stocks is predicated upon the grounds (1) that the will creating the trust in the instant case, and (2) the statutes governing corporate trustees, authorize such investment.
1. In construing the will the important thing is to ascertain the intention of the testator. All provisions should be harmonized and given meaning if possible. Authorization to invest in corporate bonds excludes other forms of corporate investment. The application of the rule of ejusdem generis would confine the expression "any other form of income bearing property" to property of the *190 same kind enumerated, namely, mortgages, bonds, etc. This would include governmental obligations and many other forms of property. But it is contended that the rule does not apply because of the exception of real estate and that this exception clearly indicates that authority is given to invest in all kinds of income bearing property except real estate. If this construction were adopted it would nullify the express directions as to investments in first mortgages and bonds. It would permit investment in second mortgages, the purchase of contracts for deed and other forms of investment impliedly prohibited by the powers given with respect to investment in bonds and first mortgages on improved real estate. This certainly could not have been the intention of the testator. It is more reasonable to believe that inasmuch as the power to invest in mortgages was confined to first mortgages on improved real estate and did not cover unimproved real estate, that the testator, in order to make sure that there would be no investments in real estate, added the exception. By giving the exception this construction, full meaning is given to the other provisions of the will. The court below was correct in holding that the will does not authorize the trustee to invest in corporate stocks.
2. Even though the will impliedly excludes corporate stocks, it is contended that the will contains no specific directions as to investments in corporate stocks, and, that being true, the trustee must look to the statute for directions. The contention is that under the statute the trustee has discretionary power to so invest.
The statute, 2 Mason Minn. St. 1927, § 7735, provides that a corporate trustee may invest in authorized securities if the terms of the trust contain no specific directions as to investment and that it shall invest according to the directions, if there be any. The question is one of statutory construction. Ordinarily, the word "may" is directory and "shall" is mandatory in meaning, but not always so. Henkel v. Pioneer Sav. Loan Co.
Provisions which are mandatory in form are often held to be directory, and those which are directory in form are often held to be mandatory because such words as "may," "shall," "must," and *192
"will" are often used without discrimination. All of them are elastic and frequently treated as interchangeable. 7 Fletcher, Cyc. Corp. (Perm. ed.) pp. 779-780, § 3647, notes 96 and 97; Gilfillan v. Hobart,
A trust company is a financial corporation. 2 Mason Minn. St. 1927, § 7635. In the statutes governing such corporations the words "may" and "shall" are used indiscriminately. Hence the use of the one word or the other is without significance. The statute defining the powers and duties of state banks (2 Mason Minn. St. 1927, § 7663) uses the word "may" throughout. It provides that a state bank may exercise certain powers and in the seventh subdivision reads in part: "It may invest its funds in authorized securities as defined by law," etc. The statute regulating the powers and duties of building and loan associations (2 Mason Minn. St. 1927, § 7762) also uses the word "may" throughout and provides that such associations "may make loans on real estate security," etc., and "may purchase" and "may acquire" property as defined in the section. The word "may" is used with respect to the powers and duties of state banks, trust companies, and building and loan associations, and the word "shall" is used with respect to savings banks and the investment of accumulations by trust companies. It can hardly be thought that the duty to observe the provisions of the statute is less obligatory upon state banks and building and loan associations than it is upon savings banks. Nor can the same language when used with respect to trust companies be held less imperative than when used with respect to state banks and building and loan associations. The use of the word "may" is not decisive. The meaning of the language may be sought by such aids as the subject matter of the statute, its objects, and history. Bender v. City of Fergus Falls,
3. The fact that §§ 7735 and 7714 are grants of corporate power is determinative not only of the powers and capacities granted to a corporate trustee, but also of those withheld and denied. In considering this aspect of the case, we lay aside entirely the fiduciary character of the powers granted. We consider only the question of power. Trust companies were authorized by L. 1883, c. 107, the provisions of which, with some amendments not here material, are found in our present law. The statute grants to trust companies specific powers, prescribes the mode of their exercise with particularity, and limits them to the granted powers. Provision is made for public supervision. They may be liquidated for violation of charter or conduct of the business in any unsafe or unauthorized manner. Section 9 of c. 107 in eight subdivisions enumerates the powers and specifies the mode of their exercise. In the original act, the headnote indicates that the section refers to corporate powers. In G. S. 1894, the section (2849) is entitled "Corporate Powers." The present statute, § 7735, is derived from the sixth subdivision of § 95 of the original act and is the power of investment. Section 7714, providing authorized securities, was adopted in the *194 revision of 1905 (R. L. 1905, § 3022) to supplant a section of the original law and a section of the act relating to savings banks.
The controlling principle is that a corporation has only the powers and capacities expressly granted to it by law, or incidental to its existence or necessary to the exercise of its express powers. 2 Dunnell, Minn. Dig. (2 ed. Supps. 1932, 1934) § 1998; Rochester Ins. Co. v. Martin,
A trust company has only the powers which the statute grants. St. Paul Tr. Co. v. Strong,
Chief Justice Marshall stated the rule in language which has been quoted many times in Head v. Providence Ins. Co. 2 Cranch, 127, 167,
"Without ascribing to this body, which in its corporate capacity, is the mere creature of the act to which it owes its existence, all the qualities and disabilities annexed by the common law to ancient institutions of this sort, it may correctly be said to be precisely *195 what the incorporating act has made it, to derive all its powers from that act, and to be capable of exerting its faculties only in the manner which that act authorizes."
A corporate trustee is required by statute to transact its business in conformity to the laws relating to trust companies. 2 Mason Minn. St. 1927, § 7441(4). The specific provisions in the statute for the exercise of the power of investment determine the duty of the trustee. The trustee is controlled by all the restrictions which the statute imposes. It can exercise the power only as the statute directs. We regard this question as settled by our decision in St. Paul Tr. Co. v. Strong,
If a corporation is authorized to invest in a particular manner, it must exercise the power of investment within the express terms of the authorization. St. Paul Tr. Co. v. Strong,supra; New York F. Ins. Co. v. Ely,
The enumeration of the powers which a corporation may exercise excludes all other powers. Powers not conferred are withheld and denied just as much as if the legislature used express negative language for that purpose. Rochester Ins. Co. v. Martin,
The contention that the trustee may follow the statute at its option and in its discretion invest in securities not enumerated in the statute is equivalent to saying that a corporation possessing restricted power of investment may invest in any manner not expressly prohibited by its charter. This contention was effectually answered in New York F. Ins. Co. v. Ely,
The principle that a corporation has only the powers granted to it, and that those powers must be exercised in the manner prescribed by the statutes conferring them, goes to the very power and capacity of the trustee to act at all. It is not a question of discretion, it is a question of power, and there can be no discretion where there is no power. To hold that a statute permitting a corporate trustee to invest only in authorized securities confers discretion such as is claimed here, it would be necessary to construe that a restricted power of investment is really an unlimited power of the same kind — that to restrict a power, by that very fact makes the power unrestricted. A corporate trustee, under the guise of exercising discretion as to the mode of investment, will not be permitted to take unto itself powers of investment withheld and impliedly denied and prohibited. Such a trustee must invest only in authorized securities as permitted by statute.
4. The construction that a corporate trustee is limited, in the absence of express directions, to investments authorized by statute, is confirmed by the reënactment of the original statutes in substance and the enactment of other provisions supporting such an inference, in R. L. 1905. Although c. 107 was amended several times, § 9, subd. sixth, was carried forward through G. S. 1894 (§ 2849-sixth), unchanged until 1905. In the revision, the old statute (G. S. 1894, § 2844) enumerating the authorized investments for corporate trustees, was dropped entirely. A new section (R. L. 1905, § 3022) was adopted, providing a list of authorized securities for all cases under the revised laws. This was taken from a section of the old law which listed the investments of savings banks (G. S. 1894, § 2562, as amended), and provisions were inserted therein directing that savings banks shall and that corporate trustees may invest in such authorized securities. The mandatory "shall" is carried over from the old statutes relating to savings banks and hence is without significance so far as concerns corporate trustees. A new section (§ 3040) was adopted for corporate trustees in which the substance of the original statute, L. 1883, c. 107, is reënacted in terms, with the exception that the first clause was rewritten to state that corporate trustees may invest trust funds in "authorized *198
securities" and the addition of a clause authorizing a corporate trustee "in its discretion" to retain investments coming into its hands as part of the trust estate. No change of substance was effected by the first clause except that authorized securities were adopted for corporate trustees instead of those specified under the old law. Chapter 107 was expressly repealed by R. L. 1905, but the section adopted in the revision, § 3040, was practically the same as § 9, subd. sixth, of c. 107. The new provisions are continuations of the old ones. In State v. Barnes,
The judicial construction of a statute becomes a part thereof as if it had been written into the statute originally. 6 Dunnell, Minn. Dig. (2 ed. Supp. 1937) § 8936b; Roos v. City of Mankato,
In the rewriting and reënactment of the statutes governing financial corporations, a trust company is defined as: "a corporaation under like [public] control, authorized, within prescribed limitations, to act as a safe deposit company, trustee or representative for or under any court, public or private corporation, or individual, and as surety or guarantor." R. L. 1905, § 2967. The "prescribed limitations" here referred to are the enumerated powers of a corporate trustee and the restrictions upon the particular mode or manner in which they may be exercised. It includes the prescribed limitations on the power of investment.
The insertion of a provision that a corporate trustee may "in its discretion" retain any investment coming into its possession in any fiduciary capacity clearly indicates that the duty of a corporate trustee is otherwise to invest in authorized securities according to statute. In that sense the word "may" in § 7735 is mandatory and not directory. The use of express words to indicate the discretionary and optional nature of the power of retention was made necessary by the mandatory meaning of the word "may" in the other provisions and is in itself statutory recognition of the mandatory duty of corporate trustees to invest only as authorized by the statute.
R. L. 1905, § 3040, is the present § 7735; § 3022 has been rearranged and rewritten as the present § 7714. We do not deem it necessary to discuss § 7738 further because it relates simply to the investment of accumulations and not to the primary duty of trustees to invest. It is sufficient to say that under that section it is the duty of a corporate trustee to invest accumulations in authorized securities.
5. The legislative history of this subject shows that it has been the policy of the statute to withhold from financial corporations the power to invest generally in corporate stocks. That power has never been given to trust companies. Only a restricted power to *200 invest in enumerated stocks has been granted to savings banks. G. S. 1878, vol. 2, c. 33, § 92; G. S. 1894, § 2562. L. 1903, c. 273, is the only instance in which any power to invest in corporate stocks has been given to trust companies. It authorized trust companies to invest in certain debenture stocks of a certain railroad. L. 1903, c. 273, is significant for at least two reasons. First, it is the only statute which authorizes corporate trustees to invest in any kind of stocks; and, secondly, its language is that it shall "be lawful" for any trust company to invest in such debenture railway stock. If corporate trustees had the power to invest in corporate stocks it would have been entirely unnecessary to enact that statute. The language and substance of the statute clearly indicate that the legislature acted upon the assumption that trust companies did not have the power to invest in corporate stock. It has been the policy to increase the restrictions upon the power to invest in corporate stock so that in 1905 the only power which savings banks had to invest in corporate stocks was that of the debenture railroad stocks referred to in L. 1903, c. 273. Even this power to invest in corporate stocks was entirely taken away by L. 1923, c. 421. Since 1923 no financial corporation has been authorized to invest in corporate stocks of any kind.
The legislature has always recognized the rule that trust companies have no power to invest except as specially authorized by statute. At least 17 laws, of which 15 have been subsequent to the revision of 1905, have been passed by the legislature dealing with the subject of authorized securities.7 Most of these acts had to do with the enlargement of the list of authorized securities. It is inconceivable that the legislature would have asserted its power 17 times if that were unnecessary. It is absurd to require savings banks and corporate trustees to purchase authorized securities which comply with all the meticulous requirements of § 7714, as amended, and at the same time hold that they may in their discretion *201 ignore the statute and select investments which the statute plainly excludes.
The limited powers of corporate trustees has been recognized by other legislation. On at least two other occasions laws were passed which recognized the limited power of trust companies. Two years after L. 1883, c. 107, was passed, L. 1885, c. 3, was passed authorizing trust companies to engage in the title insurance business. In conferring trust powers on state banks, permissive language, the word "may," was used, the same as in § 7735. 2 Mason Minn. St. 1927, § 7663, subds. 4 and 7; 3 Mason Minn. St. 1936 Supp. § 7661-1. With this legislative background, negativing the idea that trust companies have power to invest in corporate stocks, it cannot now be asserted with plausibility that trust companies have that power. Bemis Bro. Bag Co. v. Wallace,
The generally accepted opinion and practical construction is that the power of investment of a corporate trustee, where the trust does not contain specific directions, does not include the right to invest trust funds in corporate stocks. This construction is in accord with our decision in St. Paul Trust Co. v. Strong, supra, and has long been accepted and acquiesced in with practical unanimity by the legislative and executive branches of the state government, the bar, and the public.8 There is a strong presumption that that which has never been done cannot by law be done at all. 6 Dunnell, Minn. Dig. (2 ed. Supps. 1932, 1934, 1937) § 8952.
6. It is suggested that the court has the power to allow and ought to instruct the trustee to invest in corporate stocks. The *202
answer, of course, is that the statute makes its own instructions. When a corporate trustee is named, the statute by that act is made a part of the trust. Corporate trustees are limited in their investments to afford reasonable assurance that the trust will be safely administered. St. Paul Trust Co. v. Strong, supra; Pratt v. Short,
"In the creation of corporations of this quasi-public order and in keeping them thereafter within the limits of their charters, the state is parens patriae, acting in a spirit of benevolence for the welfare of its citizens. Shareholders and creditors have assumed a relation to the business in the belief that the assets will be protected by all the power of the government against use for other ends than those stated in the charter. Aside from the direct interest of the state in the preservation of agencies established for the common good, there is thus the duty of the parens patriae to keep faith with those who have put their trust in the parental power."
Good faith requires that the trust be executed according to its terms — according to the statute. A statute is a command of the law, intended to be obeyed, else it would never have been enacted. Kipp v. Dawson,
"* * * it is very clear that it [the court] will not make itself the active agent in behalf of the company in violating the law and enabling the company to do that which the law forbids."
In In re Muller's Will,
"Despite the broad jurisdiction over trusts now possessed by the Surrogate's Court, which is as comprehensive as that possessed by the former Chancellor, I know of no power in any court to disregard the command of the Legislature and to declare an investment to be lawful which the lawgivers have declared to be unlawful. Cruger v. Jones, 18 Barb. 467. If there are considerations which justify the change of the class of legal investments they should be addressed to the Legislature."
Courts will direct trustees to do what the law itself directs.
7. A national bank, when acting as a fiduciary, exercises the same powers as a corporate fiduciary organized under state law. The state law determines the extent of the powers of corporate fiduciaries whether organized under state or national law. National banks are authorized by 2 Mason Minn. St. 1927, §§ 7727, 7728, to exercise the same fiduciary powers as trust companies and other financial corporations, organized under state law, on a basis of absolute parity. A national bank, when acting as a fiduciary, must act in conformity to the laws of the state in which it is located. 7 Am. Jur., Banks, § 191, note 2; First Nat. Bank v. Fellows,
It has been suggested that national banks are authorized by the Federal Reserve Regulation,9 adopted pursuant to
The power of the board of governors of the Federal Reserve System to make regulations is, by the terms of
Our conclusion is that it is the duty of a corporate trustee, in the absence of directions in the trust instrument, to invest trust funds in authorized securities as directed by statute; that in this respect the statute is exclusive and mandatory; and that a corporate trustee does not have power to invest trust funds in corporate stocks in the absence of specific directions to do so in the instrument creating the trust. *206
We appreciate the able briefs of amici curiae filed at our request, which have been very helpful in the consideration of this case.
Affirmed.
MR. JUSTICE STONE, on account of illness, took no part in the consideration or decision of this case.
In 65 Trust Companies, p. 446 (Oct. 1937), Mr. Louis S. Headley, Vice-President of the First Trust Company of St. Paul, writes: "In Minnesota an authorized investment statute which has always been assumed to be mandatory, has been held by several lower courts to be merely permissive."
