At no time in the history of the development of trust companies in this country have there been such numerous and marked evidences of the increasing public appreciation for the services which well equipped trust companies render in protecting trust property and funds, as at the present. It is especially significant that it is now the practice among men of large estates to make proper provisions for their families and heirs by drawing up wills in which trust companies are appointed to act as trustee and executor. This proof of confidence in trust company administration is not confined to post-mortem appointments. There are frequent instances where business men, upon retiring from active work, transfer under deeds of trust, the care and administration of their property. This is particularly the case where such retired business men wish to provide definite incomes to children, to insure their welfare and at the same time, not encumber them with the responsibilities or uncertainties which attend the unrestrained use of incomes or inheritances.

A notable instance of the growing custom among men of wealth to utilize the services of trust companies is afforded by the recent appointment of The Northern Trust Company of Chicago, by Charles W. Pardridge, of that city, to hold in trust and distribute to his children the income on real estate property valued at $600,000. About two years ago Mr. Pardridge bestowed about one-half million dollars upon each of his four children and he conveyed these gifts in the form of trusts, appointing the trust company as trustee of the property or funds. This device has proven so successful that Mr. Pardridge recently conveyed valuable real estate to be held in trust for his children, in the same manner, appointing The Northern Trust Company to assume the responsibility of management, apportioning the income and executing the conditions of the trust deed. In making this conveyance Mr. Pardridge stated that he decided upon this method after much deliberation as the safest way to provide for his children and that it was the only way to make sure that

the form and terms of the gift would be observed.

"Suppose your father wanted to give you $100 a month for the rest of your life," said Mr. Pardridge in an interview published in a Chicago newspaper. "How would he do it? The only way in which he could be sure of having this monthly income properly transferred is to place that sum in trust. In other words, if any man wants to give his children money and make certain that they will get it, is to convey it under a deed of trust."

The wisdom and foresight of appointing a trust company to carry out the conditions of a trust of this kind is emphasized by the record of losses, of dissipation of funds and extravagance in cases where children have been given property or funds outright or where individuals have been appointed to handle the property and distribute the income. In the instance noted above the purpose which Mr. Pardridge has in mind is simply to make certain that the property or funds held in trust for his children are administered and disposed of strictly in accordance with his wishes. But there are cases where this method is employed to protect beneficiaries against temptations to become extravagant, against lack of experience or willful misappropriation. In the event of the death of the man who has conveyed property or funds in trust to his children there is the certainty that the trust company will continue to adhere to the conditions of such trust conveyance and will not be swayed as an individual is apt to be. Moreover, the trust company exercises a protective and advisory influence over such heirs and beneficiaries which no individual would be in position to offer. The trust company provides expert services in administering real estate property thus left in trust, enhances its value and is an effective intermediary in preventing improper liquidation of trust assets or waste and extravagance. The same careful attention is given to the trust property after the death of the man who creates the trust as prior to his demise. There are countless instances where

this does not hold true where confidential advisors, personal friends or individual trustees have charge of the estate and the execution of trust deeds.

In making his latest conveyance of real estate property in behalf of his children recently Mr. Pardridge added $50,000 to the income of his four children. The property, embraced in the trust, conveyed to The Northern Trust Company for the benefit of the Pardridge children, consists of the seventeen story Schiller building in Randolph street between Dearborn and Clark and the leasehold interest in the ground on which this valuable building stands. About a year ago Mr. Pardridge paid $450,000 for this property and since then it has increased 33 1-3 per cent. in value. The previous gift included the conveyance in trust of the Reliance building, the leasehold interest in the ground and the fee in the lot in State street at Calhoun place.

The many advantages of appointing trust companies to carry out the terms of trust conveyance of property or gifts of money to children are obvious. The son who carries on his father's business is not only assured of a definite income but he is certain that the property is wisely and economically managed and he is free from responsibility. Where propert or moneys are thus left in trust for married daughters there is assurance that the principal will be preserved in her name and that she will receive the income. Then there is the altogether too frequent instance where the son is inclined to run through his fortune or inheritance or becomes the victim of designing people. The trust company cannot regulate the disposition of his income but it will preserve the principal and restrict expenditures to the defined annual income. Furthermore, the trust company acts as mediator between beneficiaries, preserves harmonious relations and accords to each his or her right proportion. In fact, the advantages derived from employing trust companies as Mr. Pardridge employs The Northern Trust Company, are so indisputable and clear, that it is only a tter of a short time until such appointmer s become the rule and not the exception.

The bond department of the Mercantile Trust Company of St. Louis,. is offering $1,000.000 Hydraulic-Press Brick Company (St. Louis) first mortgage 5 per cent. gold bonds to yield about 5 per cent. The October list offered by the Mercantile Trust Company contains exceptional opportunities for safe investments.

Payment of Interest on Deposits and Monthly Charge for Small Accounts

The Clearing House Association of Washington, D. C., is considering the adoption of rules which will provide for the complete abolition of interest payments upon all checking accounts, whether large or small, and the application of a monthly charge of 50 cents on all accounts which average less than $100. It is also stated that the Baltimore Clearing House Association proposes to adopt similar rules.

The reasons given for the abolition of interest on all checking accounts is that the overhead charges, maintenance and other expenses render accounts unprofitable upon which interest is paid. The Washington bankers maintain that it costs more than 3 per cent. to pay for all expenses in handling checking accounts and that a rate of 2 per cent. interest makes such balances unprofitable. The question is one which has received considerable attention at various meetings of bankers. But it is doubted if such a rule will be practical in view of the very general policy of all classes of banking institutions to allow interest. Competition is very keen and the public has been taught to expect a return for its funds deposited in banks or trust companies.

In regard to the second rule requiring a monthly charge on small balances it may be stated that this policy is quite generally approved in banking circles. A large number of banks and trust companies have applied such a charge although there has been no concerted action under Clearing House auspices. If the Washington rules go into effect the banking interests will watch developments with close attention.

WARNING.

Advice has been received by TRUST COMPANIES Magazine from the Dominion Trust Company that recently a number of drafts have been received by that company signed H. Fortmann, H. M. Fortmann, H. H. Fortmann, H. N. Fortmann, etc., made on the Dominion Trust Company, Limited, and cashed by frust companies and banks in Philadelphia, New York and Montreal, for small amounts from $2.75 to $40. As there is no one of this name who has any account with the Dominion' Trust Company, Limited, it has been necessary to return such drafts.

The management of the Dominion Trust Company, Limited, offers this information in order to protect, banks and trust companies from being victimized.

Twenty-five years ago, there were in existence about a dozen trust companies in the United States all acting under special charters, four or five in New York, three or four in Philadelphia, two in New England and two or three elsewhere, and their total assets at that time were less than forty millions of dollars. Then it was that the State of Illinois passed a general law enabling corporations organized under the banking and general incorporation laws to accept and administer trusts, with the same privilege of making one deposit of securities with the State in place of giving separate bonds in each trust, which had theretofore been enjoyed only under the special charters of the Eastern trust companies. This law was an invention and was instantly recognized as a great boon. It was copied and adopted into the laws of nearly every State of the Union and the District of Columbia, and State banks with trust company powers became the order of the day.

The first license under the Illinois law was issued to a State bank (the Illinois Trust and Savings Bank) on August 2, 1887, with then a capital and surplus of $793,000 and deposits of $5.721,000. For two years it was alone in its field, achieving a success and great headway. Today its capital and surplus of $14,500,000, and its deposits of $98,000,000, testify to the value of the privilege conferred by the law.

Twenty-five years ago the National banks were the great financial forces of the country; today the State banks with trust company powers have the lead. Today the number of trust companies in this country is about 2,500 and their assets exceed five thousand millions, while to estimate the value of the assets they administer as trustees, guardians, executors, administrators and agents is impossible and staggers the imagination.

This phenomenal result in the application of a single idea, in the matter of a deposit with the State in place of separate

bonds or security as explained, was accompanied by the usual provisions for examinations by the State, frequent publication of statements and the absolute control of the trust companies in case of improper conduct, by the courts or banking department.

Experience has proved the complete success of these governmental powers. In Illinois not a single failure is recorded, the only misfortunes elsewhere are chiefly ascribable to defective governmental action, and the best possible proof of the value of publicity, and wise control by the authorities, as a cure for corporate ills, has been given. Public confidence, the foundation of all business, was thus created and made universal in this business, and the originator of this idea has the satisfaction as he looks about him, of knowing that "two blades of grass grow where only one grew before."

Bank and Trust Company Growth in

Los Angeles

Reports of condition issued by the banks and trust companies of Los Angeles are both inspiriting and typical of the remarkable advances which have been made in the business development of the city. The thirty-six banks and trust companies of Los Angeles report combined deposits of $168,340,000 as compared with $152,879,000 on January 1, 1912, or an increase of $15,461,000 in six months. Total resources are $199,673,272, an increase of $16,406,000 since th first of the year. The bank clearings also furnish evidence of prosperous conditions. The individual statements show marked gains in a number of instances. The Los Angeles Trust & Savings Bank reports aggregate deposits of $16,578,735 and surplus and profits of $1,101,000. The Security Trust & Savings Bank reports deposits of $43.643,000 and surplus and profits of $1,698,000.

EFFECT OF MERGER OF TRUST COMPANIES

The Columbia Trust Company and the Fidelity Trust Company of Louisville, Ky., recently merged under the name of the Fidelity & Columbia Trust Company. The Fidelity Trust Company was trustee of the Estate of George Gaulbert. That estate owned certain stock in the Louisville Traction Company and the Louisville Trust Company was transfer agent for that stock. The Fidelity Trust Company disposed of certain stock as trustee but the Louisville Trust Company refused to make the transfer on the ground that the Fidelity Trust Co. was no longer in existence but that the order for the transfer should be signed by the Fidelity & Columbia Trust Company.

At the time, although the consolidation had been perfected, the two companies had been carrying on their business independently pending the day when the Columbia Trust Building would be ready to receive the Fidelity Trust Company organization. lf it were necessary that each company transact the business under the name of the Fidelity & Columbia Trust Company, the result would be confusion and undoubtedly trouble.

Upon this state of facts, the Columbia Trust Co. sued out a writ of mandamus against the Louisville Trust Company and the Louisville Traction Company, requiring that the transfer be made.

Those who were interested in the case were expecting a decision which would throw some light upon the effect of merger of trust companies in relation to the separate business of each company but the case was dismissed and settled and the stock was transferred without further litigation.

It is usually provided by statute that in case of merger of two corporations the constituent companies surrender all of their

rights, privileges and franchises, as well as their property, to the new organization. Apparently the former corporate entities exist only in the new corporation.

It is a general rule of law that a trustee cannot delegate his authority to another person. What, then, is the effect of merger upon trust companies which have been acting as trustees? Is the charge such that they are violating their obligations as trustees? Probably not, for although the former corporate trustees are to exist separately as such, still the life of each company is continued in a new form. Each corporate personality, if one may speak of it as a personality, is still active in the new enterprise.

Naturally these questions do not arise when the trustee has power to appoint its successor and when the new corporation is constituted such successor.

The recent case of Alabama Coal & Iron Co. vs. Baltimore Trust Co. (197 Fed. Rep. 347), involves the question of the validity of bonds exchanged for preferred stock in accordance with the provisions of the New Jersey statute. The statute provides that the stockholders may vote to exchange banks bonds for preferred stock, provided certain dividends have been paid and whose floating debt does not exceed ten per cent. of the preferred stock outstanding.

In 1903 the Coal Company had outstanding $490,000, in first mortgage bonds and $2,500,000, in seven per cent. cumulative preferred stock Shortly prior to this time. the Unitedtes Steel Corporation had converted its seven per cent. preferred stock into five per cent. bonds. The Coal Company sought to follow the example of the Steel Corporation. Although its business was flourishing, it had need for ready money. Consequently, the directors devised the scheme of placing a second mortgage

upon the property to secure a bond issue of $3.500,000. Of these bonds $490,000 were to be used in taking up the outstanding first mortgage bonds; $2,500,000 were to be exchanged for the preferred stock and the remaining $510,000 were to be sold for cash.

The stockholders gave their consent to the plan, the mortgage was prepared but was not executed until more than a year later. The delay was caused by the stringency of the money market which resulted from the conditions in 1903. All the parties, including the defendant trust company, which at that time was a very large holder of the preferred stock, agreed that the exchange of stock for bonds at that time would do the Coal Company little good, as the market for bonds was exceedingly quiet. The plan was therefore postponed indefinitely.

Eight months later, business conditions had improved to such an extent that the directors thought it worth while to make another attempt. In the second attempt, they decided, however, to extinguish only onehalf of the preferred stock for bonds. Every stockholder, as a condition of being allowed to make the exchange, was required to subscribe at 90 per cent. for bonds which at par were equal to 20 per cent. of the par value of the stock he proposed to turn in. This scheme was adopted in 1904 and the directors accepted the offer of the trust company to furnish all the stock and to take all the bonds which were not taken by other stockholders. This plan was carried out under the sanction of the stockholders at a regular meeting. It was agreed that the $1,250,000 of stock which had already been exchanged should be cancelled as well as the like amount of the second mortgage bonds originally intended for exchange with the remaining half of the preferred stock. In the resolution of directors and stockholders, it was expressly stated that the exchange of stock for bon is already made had been effected under the authority of the action taken in 1903. Consequently the bonds were the bonds issued under the mortgage of 1903.

Years after the exchange of the preferred stock for bonds had been made, the Coal Company sought to borrow $330,000 cash from the defendant trust company. It then knew that the trust company held a very large amount of the second mortgage bonds. It never suggested that it had any claim in relation to these second mortgage bonds against the trust company. Had such claim been made, there is no doubt that the loan of $330.000 would not have been made; but

the loan was made by the trust company and the Coal Company pledged as collateral for the repayment thereof $1,250,000 of its third mortgage bonds.

In the present action, the Coal Company sought to have the second mortgage bonds, which had been issued under the action of 1903, declared illegal because the statute under which they were issued had not been strictly followed and because the issue was beyond the powers of the corporation. The principal irregularities claimed were the delay in acting under the authorization of 1903 and whether the incomes of the corporation The equaled the statutory requirement. Coal Company attempted to do this in spite of the fact that the deed of trust providing for the third mortgage expressly recognized the validity of the prior second mortgage bonds. The Coal Company did not pay the loan of $330,000 when it became due and the Trust Company attempted to sell the security pledged for the payment of that loan. The court decided that the Coal Company was estopped to deny the validity of the second mortgage bonds although there had been some irregularity in their issue and denied the right of the Coal Company to enjoin the Trust Company from selling its collateial to obtain payment for the debt.

EFFECT OF DEATH OF BONDHOLDER IN

SUIT TO FORECLOSE MORTGAGE

In the recent case of Middendorf vs. Baltimore Refrigerating & Heating Co. (84 Atl. Rep. 150) the question of the effect of death of a bondholder ho was one of the plaintiffs in an action to foreclose a mortgage is considered.

The action was brought by a committee in behalf of the bondholders and R. M. Spedden, one of the bondholders, against the corporation to foreclose a mortgage under which the Continental Trust Co. was trustee. The plaintiff sued for themselves as well as for all other bondholders who would come in and contribute to the expense of the suit. The action was brought November 12, 1910, and resulted in an order of the court directing a sale and appointing the Continental Trust Co. trustee to make the sale. On February 3, 1911, the Trust Company reported a sale of the property to the Central Securities Company which was ratified and confirmed. That company, having failed to comply with the terms of the sale, an order of resale was made March 23, 1911. Later the Central Securities Co. filed a petition, stating that if the sale was postponed, it could arrange to comply with the terms