body shall be elected or appointed at the same time and in the same manner, and shall serve for the same terms as members of such board of education or other body have been heretofore elected, selected, or appointed. We think the general purpose of this statute from which these citations have been made, was to create in every city the then existing board of education as a corporation with all the powers of the act of 1903. All boards of education of all cities of the state were brought under the act of 1903, and their proeeedings and powers were solely such as that act conferred, after the date of its approval. Sections 38 and 39 provided for a definite method of selection of board of education in cities adopting either of those sections, and if neither of said sections shall be adopted, then all cities are, as to the powers of boards of education, under a general statute which is uniform as to all.

It was suggested on the argument that if the school act of 1903 should be held to confer powers of condemnation upon all city boards, whether they were appointed under sections 38 or 39 of the act or not, that it was an unconstitutional statute, because special. We are unable to take this view. Neither section 38 nor 39 is operative in any city of this state, unless they shall be adopted by vote of the people after being submitted in accordance with the provisions of the act. These two sections are open to all cities, and any city may adopt either the one or the other of them, but no city is required to adopt either of them. This act merely takes the machinery existing in cities for the government of their educational system, and leaves such machinery as it is, but provides a uniform method for the management and control of all the cities of the state by the board or body as created or organized in such cities at the time of its approval. We think the board of education of the city of Hoboken, as constituted at the time of the adoption of the act of 1903 and at the time of the making of the order brought up in this case, was a legal body, and that the act of 1903 gave it power of condemnation, and that the order of the justice of the Supreme Court appointing the commissioners should therefore be affirmed.

TRUST. A trust declaration and assignment, by which C. transferred all his property to a trustee, provided that the trustee should pay the interest on outstanding notes, bonds, mortgages, etc., given or indorsed by C., and from time to time reduce and cancel the same, and hold and retain without action, and without collecting interest thereon, all notes and securities given by C., or by his son, daughter, and son-in-law, until the death of C., and then to cancel them. Held, that a mortgage by the son-in-law, a bond of the daughter, and notes

of the son, indorsed by C., were to be canceled at his death, and the trustee should be credited with the sum expended in the payment of the same.

2. SAME.

Under this trust declaration and assignment, where a note was not made before the making of the declaration of trust, and was not a renewal of any note or notes existing at the time of the execution of the trust, the trustee was not warranted in paying it from the estate.

3. SAME-MANAGEMENT OF TRUST PROPERTYSALE EXPENDITURES-IN GENERAL-COM

MISSIONS.

Where real estate was transferred to a trustee to hold or convey the same as he thought best, items paid real estate agents and others as commissions on sales of real estate, which were shown to be reasonable commissions for the services rendered, were properly charged against the trust estate.

4. SAME-ATTORNEYS' FEES.

Where a party transferred all his property to a trustee, it was proper for the trustee to pay for the services of the lawyers engaged in making the transfers and the declaration of trust and in giving advice concerning the proper way to accomplish the object of the settlor. [Ed. Note. For cases in point, see Cent. Dig. vol. 47, Trusts, § 334.]

5. SAME-RIGHT OF CESTUI QUE TRUST AS AGAINST TRUSTEE PERSONAL LIABILITY OF TRUSTEE.

A settlor at the time of making a declaration of trust owned and transferred to a trustee shares of stock in an insurance company. The execution of a scheme whereby the trustee attempted to obtain a majority of the stock of the insurance company was prevented by the court, and the stock of the insurance company depreciated in value so that the stock of the trust estate sold after the defeat of the scheme brought much less than that sold before. Held, that it could not be said that the trustee should have known that the necessary result of the proposed scheme would be to depress the price of the stock of the insurance company; and he should not be surcharged with the difference between the selling price of the stock before the defeat of the scheme and the lower price at which it subsequently sold. 6. SAME.

Where a person transferred all his property to a trustee to hold as a trust fund, it was a general trust, and if the trustee held stock which came to him from the settlor, and which were not securities he was authorized by law to hold, he should be surcharged 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. 7. SAME-INVESTMENTS-IN GENERAL.

Where a declaration of trust declared that the trustee hold the property transferred in trust for the following uses and purposes, "to hold or convey the same as in his judgment may be deemed advisable, and to collect the principal of securities and reinvest the same from time to time," the trustee was to exercise his discretion only in doing authorized things, and could not hold securities transferred to him which he was not by law authorized to hold. 8. SAME COMPENSATION OF TRUSTEE-COMMISSIONS.

Where a trustee's conduct was not willfully wrong, and he has not confused accounts, or unwarrantably used trust moneys, and has large resources, so that the making of unauthorized investments could not prejudice the interest of the cestui que trust, the fact that he was subject to surcharge in certain respects is insufficient to defeat his right to commissions.

[Ed. Note.-For cases in point, see Cent. Dig. vol. 47, Trusts, § 466.]

Edward B. Denny.

The bill in this case is filed by Anna D. Babbitt. She obtained loans from certain nonresidents, and made certain assignments of her interest in the estate of her father to secure the same. The bill in this case was framed not only to secure an accounting from the Fidelity Trust Company, the trustee, but also sought to litigate certain questions between the complainant and those to whom she had executed the assignments. These latter, being then represented by nonresident executors, filed a plea to the bill, and the issue raised was disposed of by this court adversely to the complainant. The report will be found in 63 Atl. 18 (Garrison, V. C., 1906). The suit thereupon

Suit by Anna D. Babbitt against the Fidelity Trust Company and others. Conclusions by court.

See 63 Atl. 18.

On the 19th day of July, 1898, Charles G. Campbell, by appropriate instruments, transferred all of his property of every description to the Fidelity Trust Company of Newark, as trustee. The latter, on that date, executed a declaration of trust with respect to the said property. In said instrument it "declares that it holds the property, real and personal, this day conveyed to it by Charles G. Campbell in trust for the following uses and purposes: (1) To hold and possess or dispose of and convey the same by proper in. struments of conveyance, as in its judgment may be deemed advisable, and to collect the principal of securities and reinvest the same from time to time. (2) To collect the income from the personal property, and the rents, issues and profits from the real property." By other provisions it undertakes to attend to the taxes and repairs upon the real estate, to the payment of interest on outstanding notes and other obligations, and to their reduction and cancellation, and to pay the proper expenses arising in the execution of the trust. The net income is to be paid monthly, in certain stated amounts, to the settlor, his sisters, his son, Charles B. Campbell, his daughter, Anna D. Graham (since intermarried with Babbitt), and the father of a deceased daughter's children. Upon the death of Charles G. Campbell, certain sums are to be paid to his sisters, and the balance is to be divided among his heirs at law according to the intestate laws of this state; the personal property according to the statute of distributions, and the real property according to the statute of descent. There are other provisions which will be stated as occasion requires it.

Charles G. Campbell died on the 29th day of May, 1905, and left, him surviving, his daughter, the complainant; Charles B. Campbell, a son; and Robert C. Denny, Walter B. Denny, and Julia Denny, children of Jennie B. Denny, deceased, who was the daughter of Charles G. Campbell and the wife of

tee and cestui que trust. All of the other beneficiaries under the declaration of trust, or their assignees, are parties to this suit. The trustee, in addition to filing an answer and account, also filed a cross-bill, praying, among other things, for a construction of certain portions of the declaration of trust, and for directions concerning its duty under certain provisions thereof. The complainant filed exceptions to numerous items of the trustee's account. Issues were properly joined and are to be herein disposed of.

Henry H. Fryling and Chandler Riker, for complainant. S. W. Beldon, for defendant Fidelity Trust Company. Edw. D. Duffield and J. J. Burke, for defendant Chas. B. Campbell. G. R. Dutton, for defendant Florence Joel.

GARRISON, V. C. (after stating the facts). The property which Charles G. Campbell had, and which on the 19th day of July, 1898, he turned over to the Fidelity Trust Company as trustee, was of varied character and of large value. It consisted of real estate, mortgages, bonds, stocks of companies, furniture, pictures, bric-a-brac, money in bank, and other characters of personal property such as an active business man of large means would possess. The face value exceeded the actual value by many thousands of dollars, because among the property turned over were interests in real estate which could not be realized upon, and in some instances the real estate could not be located; and, also, among the property, were bonds and stocks of various companies, which latter were defunct, or, if in existence, the stock of which had no value. The realized value exceeded $400,000, with some items still undisposed of in the trustee's hands. The account of the trustee is a very long one, and shows total receipts, principal and interest, of over $700,000; among the numerous items of disbursement being advancements made to the various parties to this suit on account of their distributive shares. A number of the questions raised under the exceptions were disposed of at the hearing by consents or arrangements between the parties, and only need to be stated without

discussion. Others of the exceptions may be grouped, and so much of the trust deed as requires construction for the purpose of determining the rights of the parties need not be discussed separately, but will be dealt with in connection with the subject-matter which it concerns.

1. The first exception concerns a series of promissory notes, all excepting two of which were made by Charles B. Campbell, the son of Charles G. Campbell (or by firms of which Charles B. Campbell was a member) and indorsed by Charles G. Campbell; the money going to Charles B. Campbell. After the making of the deed of trust, these notes were renewed, and such renewed notes were paid by the trustee. The two notes not coming within the above statement are one made by Denny Bros. and indorsed by Charles G. Campbell, and one made by Campbell & Osborne and indorsed by Charles G. Campbell, and paid to the Merchants' National Bank. The point of the exception is that, under the declaration of trust, the trustee, if it paid such notes, must hold them and charge the amount thereof against the distributive share of the maker of the note. This, of course, depends upon the proper construction of the declaration of trust. This instrument has two claims which concern this matter of obligations of Charles G. Campbell existing at its date, the fourth and the tenth clauses. The fourth clause is as follows: "(4) To pay the interest on outstanding notes, bonds, mortgages, etc., given or indorsed by the said Charles G. Campbell, and to provide from time to time for the reduction and cancellation of the same, as may be deemed advisable, provided it be done, so far as possible, without interfering with the execution and performance of the trusts hereinafter set forth." The tenth clause is as follows: "(10) To hold and retain, without action and without collecting interest thereon, all notes and securities given to Charles G. Campbell by Charles B. Campbell, Anna D. Graham and Edward B. Denny, and now held by assignment by Fidelity Trust Company until the death of the said Charles G. Campbell, and then to cancel and deliver them without charge to the said Charles B. Campbell, Anna D. Graham and Edward B. Denny, their respective heirs, executors and administrators."

At the time of the making of the declaration of trust, there was held by the settlor and delivered to the trustee a mortgage of E. B. Denny, the settlor's son-in-law, for $2,100, and notes of his for $8,710. At the same time there was held by the settlor and delivered to the trustee company a bond of Anna D. Graham, the complainant, for $20,976.51. Under the provision of the tenth clause, these two obligations were canceled at the time of the death of Charles G. Campbell, and the amounts thereof thus became gifts by the settlor to each of the persons named. There were no notes or other securities of Charles B. Campbell held by the set

tlor and transferred to the trustee; but there were between $16,000 and $17,000 worth of notes of Charles B. Campbell, indorsed by Charles G. Campbell, outstanding in the hands of those who had discounted them.

It is evident that it was with these notes in mind that the fourth clause was inserted. The exceptant contends that the proper meaning to be ascribed to this fourth clause is that the trustee is to reduce the notes, if it deems advisable, and if, by reduction, they are finally paid off, the trustee is to hold the paid-off note, and charge it, after the death of Charles G. Campbell, against the distributive share of the maker of the note. I do not think that this is the correct construction of this clause, or that it was the meaning of the settlor. I think it clear that this settlor, who was disposing of all of his property, and had clearly in mind that which he wished to do with it, desired to treat his son Charles, his daughter Anna, and his deceased daughter's husband and her children with similar bounty. At the time of the making of the instrument he had advanced money to his son-in-law, and to his daughter, and had obligated himself upon the notes of his son. I think it entirely clear that by these two clauses he intended that, where he had actually made advances and held an obligation therefor, such obligation was to be retained by the trustee without action, and was, at the distribution of the estate, to be canceled and delivered to the obligor; and, similarly, he intended that the obligation which he had undertaken for his son by indorsing his notes should be met by the trustee from time to time, and, when met, the note should be canceled. I cannot conceive of any meaning to be given to the word "canceled," in the fourth clause, excepting the well-known one "to render null and void." This works out the scheme of equity which I think was in the mind of the settlor. I hold, therefore, that, when this estate is to be distributed, the trustee is to be credited with the payments of the notes of Charles B. Campbell, indorsed by Charles G. Campbell. This holding also applies to the notes of Mrs. Babbitt, the complainant, which were indorsed by her father and paid by the trustee; and also to the note of Denny Bros., which was the title under which Edward B. Denny traded. These notes were in existence at the time of the making of the declaration of trust, and were renewed and subsequently paid by the trustee, and therefore come within the language of the fourth clause. The only remaining note to be dealt with is that which was in the Merchants' National Bank. This note was made by Campbell & Osborne and indorsed by Charles G. Campbell. There is no evidence that this note was a renewal of any note or notes existing at the time of the making of the declaration of trust. I cannot find any warrant or authority for the trustee paying this note out of the estate. If it has paid the

same, it must either be surcharged with it, or must, as between the parties hereto, charge the same against the distributive share of Charles B. Campbell.

2. The next exception relates to items in the account of commissions on principal retained by the trustee. Undoubtedly the trustee can only retain such commissions on principal as are fixed by this court, and the matter of this exception will be dealt with in adjusting the matter of commissions.

3. The next exception relates to the investment in the gold notes of the Public Service Corporation. The amount involved is $99,750, and the point of the exceptant was that the investment was not one authorized by law. By consents made at the time of the final hearing this matter was satisfactorily adjusted; the trustee agreeing to charge itself with whatever the proper sum was in respect to this item.

4. The next exception relates to the payment on account of the distributive share of Charles B. Campbell in advance of payments of any of the other distributees, and merely requires adjustment of interest items.

5. The next exception relates mainly to items paid to real estate agents and others as commissions on the sales of real estate. These were shown to be proper commissions for the services rendered, and I think it entirely proper to charge them as the trustee has. Any effect which the rendering of these services by others should have upon the amount to be allowed to the trustee will be taken into account in fixing its compensation. The items in this exception which are not covered by the above statements are for lawyers' services, and only one item is questioned; the other one being conceded to be correct at the hearing. The questioned item has to do with services at the time of the making of the declaration of trust. I think it clear, since Charles G. Campbell was transferring everything he owned to the trustee, that it is a proper item for the trustee to pay for the services of the lawyers engaged in making the transfers and the declaration of trust, and in giving advice concerning the proper way to accomplish the object of the settlor. I therefore allow this item.

6. The matter of interest on net bank balances was adjusted at the trial, and was set off against the right of the trustee to charge interest on advances to the distributees.

7. The only remaining question under the exceptions relates to the conduct of the trustee concerning shares of stock of the Prudential Insurance Company. The par value of this stock is $50, and much confusion resulted at the trial because the custom is to sell two shares at one time and call the same "a full share"; that is, the custom is to deal with this stock as if the par were 100, and deliver two shares to make what is termed "one full share." To avoid confusion I have dealt with the stock as it actually was, namely, each share at a par of 50. At

This

the time of the making of the declaration of trust, the settlor owned and transferred to the trustee 167.27 shares of such stock. was disposed of by the trustee at the following rate per share of $50 each: February 23, 1899, 60 shares at $360; February 6, 1900, 13 shares at $350; August 20, 1901, 20 shares at $375; December 7, 1903, 30 shares at $200; December 23, 1903, 25 shares at $195; January 25, 1904, 19.27 shares at $200. It will be observed that the first three sales averaged about $360 a share, and that these took place prior to the year 1903. The sales made after that date do not average quite $200 per share. The proofs show that down to about November, 1902, the stock of the Prudential Insurance Company was readily salable at about the average figure shown above, namely, $360 per share, and that since that date the latter average has been about the obtained price, namely, $200 per share. At about the date in 1902 just mentioned, the Fidelity Trust Company and the Prudential Insurance Company endeavored to carry out a scheme by which each should own a majority of the stock of the other, and by this means the existing management in each company could perpetuate its control. In execution of this scheme, the Fidelity Company offered the stockholders of the Prudential Insurance Company $300 per share for onehalf of their holdings. It succeeded in purchasing two shares over one-half of the capital stock of the Prudential Insurance Company. This court (Robotham v. Prudential Insurance Company [Stevenson, V. C., 1903] 64 N. J. Eq. 673, 53 Atl. 842) prevented the execution of this scheme, and the Fidelity Trust Company parted with sufficient of the stock to reduce its holdings below a majority.

The exceptant charges that the trustee, the Fidelity Trust Company, should have known that the scheme it embarked in with respect to the Prudential stock would depress the price or value of that stock, and therefore it should be surcharged, on the stock held in this trust, with the difference between the selling price of the stock before it entered upon the execution of the scheme and the lower price at which the stock subsequently sold. Applying to the trustee the rule of care to which it was subject, I cannot say that I find that it should have known that the necessary result of the proposed scheme would be to depress the price of the stock of the Prudential Insurance Company. The scheme was undoubtedly conceived with the purpose of perpetuating the management of those then in the control of each of these companies: but, as appears by the facts stated in the cited case, each was solvent and possessed of large assets and of a great and valuable business, and the business of each was growing and not diminishing, and I do not think it fair to infer that a reasonable man should have believed that perpetuating the then management would lessen the value of the stock of either of the companies. Whatever

the result may have shown the fact to be, I do not believe that at the time the scheme was proposed and was attempted to be carried out there was any thought in the minds of the parties that it would decrease the value, in the market, of the stock of the companies concerned. The very fact that the parties engaged wished to retain control and invested large sums of money for that purpose shows that they thought that each institution was a valuable one and would so continue. I do not, therefore, concur in the point made by the exceptant that, under the rule concerning the care with which a trustee is chargeable under such circumstances, this trustee is to be surcharged in this respect.

I do find, however, that the trustee is to be surcharged with the difference between the fair market value of this stock down to 1903, and the price at which it was sold in 1903 and 1904, for the reason about to be given. The trust in this case was of a unique character. It was a transfer by a living person of all of his property of every kind and description, including even his household goods and his money in bank. It was, in the broadest sense of the word, a general trust. Under such circumstances, I think it the duty of the trustee, so soon as it could do so in the exercise of reasonable diligence and good judgment, to convert the securities which came to it from the settlor into cash and invest the same in securities authorized by law. It is admitted by all of the counsel in the case that there is no statute law involved, excepting to the extent that the statute points out the investments in which trustees are authorized to place trust moneys; and it is conceded that the stock of the Prudential Insurance Company is not one of those so authorized. The general principle deducible from the cases and textbooks is well stated in the seventeenth volume of American & English Encyclopedia of Law, p. 454, as follows: "While a fiduciary may, as a rule, in the exercise of his discretion, retain such investments as are proper for the fiduciaries to hold, all others he must call in, and invest the proceeds in an authorized manner." Perry on Trusts, $$ 460, 461, 465; Ashhurst v. Potter (Ct. of Errors, 1878) 29 N. J. Eq. 625.

The trustee in the case at bar seeks to escape the responsibility involved in the application of this principle. In the brief of counsel for the trustee, its position is thus stated: "The rule contended for has undoubted existence, but is not of universal application. It is applicable to trusteeships where the subject of the trust has come to the trustee as a general estate, or an aliquot portion of an estate, but is not applicable where it comes as certain and specific property, unless there be a direction to convert." It therefore insists: First, that this was a trust of a specific thing, and that it was entitled to hold that thing, chargeable only with the exercise of

reasonable discretion; second, that by the declaration of trust it was given discretion with respect to investments, and therefore is not chargeable for anything excepting negligence. As I have before said, I do not concur at all in the view that this is a trust of a specific thing, or that this is a case to which the authorities relating to duties of trustees under trusts of specific things can be applied. It is true, of course, that a specific thing, or rather a great number of specific things, were by this settlor turned over to this trustee; but the real transaction was a turning over by the settlor of everything that he possessed to the trustee for it to handle and manage under its obligation as trustee, subject to the responsibilities thereof. I shall not stop to cite or analyze the various cases in which the subject-matter of the trust was held to be specific, but will content myself with saying that in each case, as I have read them, it was clear that the settlor intended that the identical thing transferred should be held by the trustee. There is not the slightest evidence in this case of the settlor's intention that this trustee should hold any specific thing, and it is quite clear, I think, from the circumstances, that there could have been no such intention. Among other property transferred to the trustee were household furniture, pictures, bric-abrac, and money in banks. Certainly it was not intended that these several species of property were to be held in specie by the trustee. Similarly, there is nothing to show that any of the transferred property was to be so held. The intention clearly shown was to hand over all of the property owned by the settlor to the trustee for the latter to deal with as trustee, and under such circumstances the law is clear that the trustee can only escape responsibility by converting the unauthorized securities thus transferred to it into authorized securities so soon as it conveniently and reasonably may do so.

In the case in hand, it is clearly shown that it could have sold the Prudential stock during the years 1898, 1899, 1900, 1901, and 1902 at at least $360 per share. The income from this stock was very small, being 10 per cent. upon $50 par, and therefore about 12 per cent. on the market value of the stock. There was therefore no reason, properly viewed by the trustee, to induce it to hold an unauthorized security, paying so little, at a time when the market for its sale was open, and a large price could have been obtained for it, and that price could have been invested in authorized securities to yield a rate of interest at least three times greater than that received from the then investment. With respect to the argument that by the terms of the declaration of trust the trustee was so vested with discretion that it is not chargeable for maintaining unauthorized investments, it is necessary, to refer to the language of the instrument. The material part thereof is that in which the trustee de