The opinion
Mr. Justice Hand, dissenting:
The testator did not give Coddington Billings, as trustee, in express terms, the power to invest said trust fund in real estate,—clearly not in unproductive.real estate,—and no such power is implied in the will, the language thereof creating the power being, “to manage, invest, alter the investments and re-invest the assets in said shares so given him in trust as he may deem best, and the net income of said trust estate during their joint lives, and the life of the survivor of them, apply to the use and benefit of said Coddington and Mary W.,” etc., showing the' trust estate was to produce an income if the intention of the testator was carried out, which intention is inconsistent with the view that the trust estate should be tied up during the entire lifetime of one of the life tenants in vacant and unproductive real estate. If, however, it be conceded the trustee had the right tO' invest the trust fund in unproductive real estate, he had no right to make such investment in the name of another for his own benefit, and the law is well settled that in case the trustee invests the trust fund in real estate, or otherwise, and takes the title in his own name or the name of another for his own benefit and in violation of his trust, a court of equity will follow the trust estate into all forms of investment which it may assume, (Breit v. Yeaton, 101 Ill. 242 ; Maher v. Aldrich, 205 id. 242 ;) and that the cestui que trust, where the trustee has violated his trust by investing the trust fund in his own name or in the name of another for his benefit, has the right to affirm the action of the trustee and reap the benefit of the investment, or to repudiate the action of the trustee and require him to account for the trust estate.
The above statement of the law does not seem to be denied, but it is contended that as the original purchase of the tax titles, etc., was made with the individual funds of Billings, and not with the trust funds, the cestui que trust can not elect to affirm the action of the trustee and be invested with the title to the land, but must be satisfied to recover the trust estate and with a lien upon the land for the amount invested in the land. If the trustee had converted other moneys of the estate to his own use and saw fit to re-pay those moneys to the estate by turning over to the trust estate his interest in said tax titles, etc., he being one of the life tenants and in part entitled to the income from the trust estate, as well as the trustee, and the remainder-men being willing he should thus re-pay the moneys which he had misappropriated, I know of no reason why a court of equity should refuse to permit him to thus satisfy his debt, and had he not voluntarily turned over his interest in the tax titles, etc., for the benefit of the trust estate, in equity I think, in view of the facts disclosed in this record, he would have been required so to do, as it has been frequently held a trustee may not buy in and hold an outstanding title for his own benefit which is hostile to the trust estate and thereby destroy ■the title of the trust estate; nor may he mingle the trust estate with his own property, and if he does thus mingle the property of the two estates, the cestui que trust may follow the trust property and claim it all, unless the property of the trustee can be satisfactorily separated from the balance of the fund. In Lewin on Trusts (vol. 1, p. *298,) it is said: “The trustee, wherever the trust property may be placed, must always be careful not to amalgamate it with his own, for if he do, the cestui que trust will be held entitled to every portion of the blended property which the trustee cannot prove to be his own.” In Perry on Trusts (vol. 1, sec. 447,) it is said: “The trustee must not mingle the trust fund with his own. If he does, the cestui qzie trust may follow the trust property and claim every part of the blended property which the trustee cannot identify as his own.” And in Halle v. National Park Bank of New York, 140 Ill. 413 , the court said (p. 421) : “Can a trustee mix trust funds with his own, rightfully? The decree in this case finds what the trustee did, and the law pronounces that conduct wrongful, because it imperatively forbids the mixing of the trust funds with his own, and says if he does so the cestui que trust may follow the trust fund and claim every part of the blended property unless the trustee can identify his own.”
Here the trustee caused to be conveyed to James O. Sheldon said tax titles, certificates and claims. He individually made a quit-claim deed to Sheldon of thé property, so that Sheldon might be completely invested with all the title he had in the property, either personally or as trustee, and enabled to convey such title to Mrs. Scammon. He then brought about a compromise with the owner of the fee and caused her to convey to Sheldon the fee title to the portion of the property, one-half of which is now in controversy, and in his report as trustee concealed the fact that said real estate was purchased with trust funds. By his acts the tax titles, certificates and claims purchased by him with his own funds and the funds of the trust estate, the value of which was uncertain and not easily ascertained, were amalgamated and merged into the fee title, and he could no longer separate 'the value of. the tax titles, etc., purchased with his own funds from those purchased with the funds of the estate. As a result of such mixing of the tax titles, certificates and claims of the trust estate with those owned by himself, I think all of said real estate, so soon as the fee was placed in Sheldon, became a part of the trust estate.
From the copies of certain statements in writing, accounts and letters written to Mary W. Billings found in letter-press books kept by Billings, as trustee, it appears that Billings had carried his personal interest in said tax titles, etc., into his trust account as an asset belonging to said trust estate. It is claimed, however, said statements, accounts and letters were incompetent evidence, and if competent were not sufficient to show a transfer of the personal interest of the trustee in said tax titles, etc., to the trust estate. The state- . ments and accounts kept by the trustee were-clearly admissible, and the letters from Billings, as trustee, to his wife, were made to her as one of the life tenants interested in the income of the estate and in the preservation of the remainder of the estate that it might produce an income, and were not in the nature of confidential communications between husband and wife, and therefore privileged communications. I think the evidence, when considered as admissions of the trustee,- competent, and sufficient to establish the fact that Billings had transferred his individual interest in said tax titles, certificates and claims to the trust account as an asset of the trust estate; but in the view I take of the case I do not regard that evidence of controlling force, and if it were disregarded the decree should still be affirmed on the ground that the Fern-wood property was purchased mainly- with the funds of the trust estate, and the individual interest of the trustee in the tax titles, etc., was so blended by him with the tax titles, certificates and claims purchased with the funds of the trust estate that they could not be separated, and he having taken the title to said property in the name of another for his use, the entire Fernwood property, by reason of those facts, became a part of the trust estate, and the enhancement of its value upon sale cannot be treated as income and be decreed to the life tenant.
The-rule here applied is not a harsh one as against the widow and' heirs of Billings, as they claim through Billings, who was one of the life tenants as well as trustee, and have no greater rights and stand in no better light before the court than would Billings were he defending against a bill to have said real estate declared a part of the principal of said trust estate. He wrongfully mingled the property of the trust estate with his own, caused the property, which was vacant and unproductive, received in exchange therefor, to be placed in the name of another for his individual use, failed to include the property in his account to the court as trustee, and should have been required, in such case, by a court of equity, to surrender the property so purchased and held for his benefit, to the trust estate, upon the application of the remainder-men, and the remainder-men are entitled to the same relief as against his widow and heirs that they would have been entitled to as against Billings, through whom they claim. If the question arose between a life tenant and a remainder-man who was not a trustee or the representative of such trustee, it would be equitable to allow the life tenant, who otherwise, without his fault, would be deprived of the income upon the trust estate, interest upon the original investment; but it is far from equitable to allow a life tenant who is trustee, or his representative, not only interest on the fund which the trustee had misapplied, but the entire increase in value of the real estate in which the fund had been invested, which in this case was much more than the amount invested in the real estate by the trustee.