TRUSTS-CORPORATE TRUSTEE'S DUTY OF LOYALTY-MERGER OF THE TRUSTEE CORPORATION WITH A CORPORATION IN WHICH THE TRUST HELD SHARES

Securities delivered to the trustee under provisions of a will included stock in the corporate trustee and in a bank. Subsequently, the bank and the trust company affiliated, under an agreement whereby the bank acquired substantially all the stock of the trust company, to be held for the benefit of the shareholders of the bank. The holders of the trust stock and the old bank stock exchanged their shares for new stock in the bank. The trust authorized the trustee to retain stocks in the trust estate, to invest in securities other than of the character prescribed by law for trust investments, and to participate in the reorganization of corporations in which the testator held stock.

Trustees brought a bill in equity for instructions relative to the will. Held, the corporate trustee was precluded by the "undivided loyalty" rule from acquiring stock created by the affiliation in exchange for stock held by the testator in the trust company and in the bank. City Bank Farmers Trust Co. v. Taylor, CR.I. 1949) 69 A. (2d) 234.