Opinion ID: 1246501
Heading Depth: 1
Heading Rank: 5

Heading: Investment in defendant's own bonds.

Text: Plaintiffs also contend that defendant was guilty of a violation of its duties as a trustee during this same period in that it invested the entire trust fund in its own coupon bonds, from which defendant made a profit, and in failing to dispose of that investment. It is well established, of course, that a trustee may not use trust property for his own purposes and that, for this reason, a bank cannot (with certain statutory exceptions) deposit trust funds in its own banking department or invest trust funds in its own securities because by doing so it is dealing as an individual with itself as a trustee. See 1 Restatement, supra, § 170, Comments l and m, and § 206, Comment j ; 2 Scott on Trusts (3d ed. 1967) 1356-362, § 170.18. On the contrary, a trustee is ordinarily under a duty to dispose of any such improper investment within a reasonable time. See 1 Restatement, supra, §§ 209 and 230. A trustee has no such duty, however, if by the terms of the trust instrument it is authorized to retain an investment in its own securities. See Annot., 47 A.L.R.2d 187, 193 (1956). In this case the provisions of the will expressly authorized defendant to hold in trust its own $50,000 coupon bond or any re-issue thereof. Thus, defendant was not required to dispose of such bonds and to reinvest the proceeds and was not chargeable with any resulting profit made by it. Again, although not necessary to a determination of this question, it is of interest to note that Mrs. Stephan, after consultation with counsel, expressly consented to the reissue of further coupon bonds upon the maturity of the original bond during the interim period from 1941 to 1953. [5]