The opinion of the Court was delivered by
WillaRD, A. J.The bills seek to charge the representatives of F. Nance, testamentary guardian of the complainants, with certain *217trust funds held by bim in that character. The representatives of F. Nance seek to discharge his estate by showing certain investments of that fund, claimed to have been properly and judiciously made, which have been lost, as is alleged, by casualties, not implicating the guardian in fault.
The decree establishes certain of these alleged investments, holding them to have been judicious, and disallows others.
The first, second and third grounds of complainants’ appeal bring to notice the evidence tending to show that the guardian had kept the funds of his wards invested separately from his private funds, denying its sufficiency. The complainants appear to have fallen into the error of considering the Chancellor as having based his decision, as to the sustained investments, wholly upon the fact that, after the decease of the guardian, the securities in question were found in a parcel by themselves, enveloped, and marked on the envelope, “Notes belonging to me as guardian of L. E. and M. ~VV. Nance.” (Signed) F. Nance.” This position is advanced by the complainants’ third ground of appeal. The Chancellor,, in upholding these investments, based his conclusions, not exclusively upon the testimony indicated by the third ground of complainants’ appeal, but as well upon additional testimony, and he is not open to the charge of having laid undue or exclusive weight upon the evidence furnished by the envelope of the package of securities. The additional fact that some of the securities enclosed in that envelope were disallowed as investments, shows that his decision did not depend wholly on the mode in which such securities were kept. The evidence bearing on the question of investment is, in part, general, and applicable to all the securities found in the envelope, and, in part, drawn from the circumstances attending particular investments ; and, therefore, can properly be weighed only in its special application to investments respectively.
The first ground of complainants’ appeal involves, in addition to the foregoing, a question of law, namely: whether the funds, if invested at all, were put in a “ state of security.”
This proposition of law is more fully stated in the fourth ground of appeal, and is, in substance, that the guardian should have loaned the trust funds “only on mortgage of real estate unencumbered, and then only to the extent of two-thirds of the value thereof.” If this proposition is sound it will be decisive against all the investments claimed, for but one of them was upon real security, and, in that case, the land appears to have been previously encumbered, and the *218security lost in consequence thereof. This proposition may be viewed in either of two distinct lights: first, as affirming a general rule of law, limiting all investments by guardians and trustees, by way of loan to individuals, to mortgages of real estate of the character contended for; or, second, as affirming that, under the circumstances of this fund, such was the limit of a prudent exercise of the guardian’s discretion. The first proposition is one of law purely ; the second is a mixed question of law and fact. Is there, in this State, a rule of law requiring real security in all cases of individual loans made by trustees, independent of the circumstances that may ■ surround the trust estate ?
In England, it is settled that an investment on personal security alone, whether created by a promissory note or a bond, constitutes a breach of trust, for which the trustee will be personally liable, (Hill on Trustees, 378;) and if he finds the estate coming into his hands to consist wholly, or in part, of personal obligations, it is his duty to call them in and properly invest the fund. (Ib. 380.)
In this State, while the principles of equity from which the English rule was deduced are recognized and enforced, the rule itself has undergone modifications to suit the circumstances of the country. No case is found localizing the English rule on the subject of personal securities within this State, while it is 'at the game time true that, in no case brought to notice, has the judgment of the Court rested upon any proposition directly sanctioning such modes of investment. It is true, nevertheless, that a considerable weight of judicial, opinion, of both an affirmative and negative character, has been advanced in favor of such securities under suitable limitations. In Spear vs. Spear, (9 Rich. Eq., 184,) Chancellor Ward-law says: “We are of opinion that the guardian should change, as soon as practicable, the investment of the funds of his wards into public securities, or bonds secured by lien on real estate, or, at least, bonds of third persons, with proper securities.”
The bill to which this expression related was, in behalf of the wards, to charge the guardian with moneys loaned to himself, and employed in his mercantile business. This bill was dismissed as prematurely brought, the loan in question having been properly made previous to the guardianship by a former trustee, and time sufficient for changing the investment not having been allowed the guardian after his accession to the guardianship.
If this opinion did not enter into the judgment of the Court, still it is entitled to great weight. One prominent reason for this *219is, that it was evidently the deliberate sense of the members of the Court, and intended as a guide to the guardian as to his future conduct, which, if followed, would render a formal expression of the judgment of the Court on the question unnecessary. Another reason for attaching peculiar importance to this declaration arises from the fact that it is the duty of trustees, in selecting investments; to have regard to the considerations that influence the practice of the Courts in .the case of investments made under their immediate direction.' — Hill on Trustees, 378. In conforming to this rule the trustee would not be justified in overlooking the daily practice of the Court, or in disregarding expressions of opinion, and confining his attention exclusively to the settled judgments of the Court.
It will be observed that the Court, in Spear vs. Spear, do not give unqualified approbation to personal securities, nor place them strictly on a par with public and real securities. This is very clearly implied by the use of the expression “ at least,” and is less distinctly shadowed forth in the use of the expression “ proper securities,” instead of “ good and sufficient sureties,” the latter expression, good and sufficient, being significant of value alone, while the term “ proper ” carries with it an implication that some degree of technical sufficiency is requisite. What is the true import of the language of the Court will be considered after the general rules applicable to the subject have been noticed.
In Sweet vs. Sweet, Spear’s Eq., 309, the application wTas to remove a guardian for loaning his wards’ money to himself. An order was made dismissing the guardian, which was reversed on appeal. Chancellor Wardlaw, in Spear vs. Spear, doubtless takes the true view of the ease of Sweet vs. Siveet. He says “ the point decided in that case was, simply, that it was insufficient reason for the removal of a guardian from his office that he had employed in his own business the funds of his ward.”
He adds, “ The Court might have proceeded to direct a change of investment.” But the decision, in Sweet vs. Sweet, is far from absolving the guardian from liability for losses in the case of personal investments. The guardian, in his answer, had contended “ that he had as good a right to use the money as to lend it out at interest to others; in which last case he could only have realized the interest, and have been responsible for the funds.” — p. 319. Chancellor Johnson appears to have taken the same view, for he says: “I do not know, indeed, how the Court can control a guardian in the use he makes of a money fund. It is not usual, particularly in the *220country, to require a guardian to invest funds of inconsiderable amount in government or other public securities; nor is it always practicable to do it to ad vantage; and there is no alternative but to lend it on bond. In this form it is always under the control of the guardian, and, in the end, the whole responsibility devolves on him.”
The Chancellor appears to have regarded investments in personal securities as, at least, an irregularity, affording imperfect protection to trustees, and hardly less objectionable or insecure than direct loans from the guardian to himself. The most noticeable feature of this decision is, that it grounds the propriety of personal investments on the necessity at times arising from the situation of the particular fund, and not upon any general rule of law giving unqualified approval to that form of security. The criticism on this case, in Spear vs. Spear, did not touch the general foundation upon which the reasoning of the Chancellor rested, but its application to the case of a loan made by the guardian to himself.
In Mulligan vs. Wallace, 3 Rich. Eq., 111, the Commissioner in Equity was ordered to invest in personal securities. The question before the Court grew out of the manner in which the Commissioner proceeded to execute this order, and did not concern the propriety of investments in securities of that class. It is to be presumed that special- reasons, or, possibly, the consent of all parties, in interest, influenced the terms of the order, so far as it directed the taking of personal securities.
In view of these judicial declarations and action, we cannot hold that the rule of law condemning investments by trustees in personal securities has been fully adoj>ted in this State. In conceding that circumstances may exist justifying such investments, it does not follow that an unnecessary resort to personal securities will be justified. The'duty of trustees, in relation to investments, is defined by the objects prompting the creation of the trust, namely : to placo the fund in a state of security, and in a condition to yield increase. The resulting duty is to seek, with reasonable diligence and prudence, investments affording both security and increase. These principles are recognized in our own Courts in the following cases: In Spear vs. Spear, already cited, it is said that it is the duty of a trustee “to put the estate committed to him in a state of security.” In Taveau vs. Ball, (1 McC. Ch., 456,) the duty of executors to invest the funds in their hands was enforced, and their liability for failure to invest within a reasonable time recognized. The princi-*221pie of this decision would apply with still greater force to trustees and guardians; for, while the primary duty of the executor is that of administration, the duty of investing being only subsidiary to it, the primary duty of the trustee and guardian is secure investment. The more difficult question is as to the degree of security requisite. This is to be determined, in part, by settled rules of law, and, in part, through the discretion of the trustee. The Courts have gone no further in the direction of limiting the discretion of trustees than to indicate certain classes of investments as admissible, and to reject others as unsuitable. Within the limits of this imperfectly defined jurisdiction the trustee has been entrusted with a large discretion, and treated with great liberality while acting in good faith and chargeable with no culpable negligence or gross imprudence.. In Spear vs. Spear, and in Mulligan vs. Wallace, loans made by a trustee to himself were condemned. In Morton vs. Adams, (1 Strob. Eq., 72,) he was held not to be authorized to lay out the trust funds in the purchase of real estate. It is held in England that the employment of the trust fund in trade or any speculative undertaking, without an express authority, will be treated as a breach of trust — Hill on Trustees, 378. The same doctrine was applied by Chaucellor Kent, in Thompson vs. Brown, 4 Johns. Ch., 619. The effect of authorities of this class is to subject the trustee to liability if he invests' trust funds, without special authority, in either of these objectionable modes.
A class of cases was pressed upon our attention bn the argument as maintaining the doctrine that want of good faith and gross negligence were the only grounds on which trustees could be' charged, in the event of a loss of trust funds. The true bearing of these cases was misconceived.
Boggs vs. Adger, 4 Rich. Eq , 408, is a case strongly illustrative of the grounds on which this proposition of the defendants rests. In that case an attempt was made to charge the guardian with funds lost through investments in stock of the United States Bank. The general question, whether bank stocks, as a class, were suitable security for trust funds, does not appear to have been considered. The prudence of investing in that particular stock was the question brought to the notice of the Court. The question, therefore, was as to the liabilities of trustees for errors of judgment, in cases where they had a. right to the exercise of discretion. The rule laid down by Chancellor Wardlaw is, that a trustee is answerable for those losses only which are occasioned by such acts or omissions *222as a prudent man could not do or omit in his own affairs. This rule is referred to the authority of Taveau vs. Ball, 1 McC., Ch., 464; Bryan vs. Mulligan, 2 Hill’s Ch., 364; Glover vs. Glover, McM. Eq., 153, and O'Dell vs. Young, Ib., 155. An examination of these eases will show that the rule, as laid down, was intended to define the responsibility of trustees while acting within the limits of their discretion, and not to give support to the idea that that discretion was unlimited as to the character of investments, and their responsibility measured solely by the purity of their motives and the degree of care exercised in the control of the trust fundi In Taveau vs. Ball it was held that the executor was justified in selling the produce of a plantation on credit, in conformity to the usages of the country, and was not responsible for a loss arising from the creation of a bad debt, having used due care. The Court say : “When he (the executor) has honestly and faithfully endeavored to acquit himself of his charge, the Court is slow to visit a loss upon him ; having, however, always so much regard to the ces-tui que trust as to prevent negligence and abuse.” Rowth vs. Howell, 3 Ves., 565, and Powell vs. Evans, 5 Ves., 839, are given as the authoritative sanction of this language. The Court proceeds to draw from these -authorities a rule stated as follows: “ The executor should manage the funds committed to his care with the same care and diligence that a prudent and cautious man would bestow on his own concerns.” The case did not involve a question of investment, but the propriety of employing the ordinary commercial means of disposing of merchandise, the product of the testator’s estate. If anything is wanting to a correct understanding of the language quoted from this case, it will be found in the English authorities, from which it is substantially drawn.
In Powell vs. Evans, the executor was charged with failing to call in personal securities in which the testator had invested during his lifetime. The Master of the Rolls held that the executor was liable, both on the general ground of having left the funds of infants dependent upon the value of personal securities, and upon special instances of neglect disclosed by the facts of the case. It was, in this case, setting rigid limits to the discretion of trustees as to investments, that language was employed tending to show that the largest liberality, in the case of errors of judgment, is consistent with the interposition of impassable boundaries to the discretion -of' trustees. The Master of the Rolls says: “ The Court is bound to attend with great rigor, on the one hand, to protect persons not *223capable of supporting their own interests — which was the case of this plaintiff, having been an infant at the time — and, also, with great tenderness to executors, who are called upon to execute often onerous and difficult trusts, and are entitled to great indulgence, unless neglect is fully proved.” Again, he says: “ No man who ever sat in this Court has been more averse than I to charge executors 'who intended fairly to discharge their duty, and more cautious not to hold them liable on slight grounds, thereby deterring others from taking upon them such an office.” Such expressions cannot be rightly understood when separated from the spirit of justice that prompted the determination of the case. They display tenderness without weakness, the highest ornament of the judicial mind. In tracing these expressions into our own cases we’must not lose sight of the true elements of their legal and moral strength.
In Rowth vs. Howell it was held that the executor was justified in employing the customary means of safely keeping funds in hand ; and trust funds having been lost by the failure of the banker, with whom they were deposited, the executor was free from responsibility, not being chargeable with any special want of due care. This was treated as a question of prudence, and was a case appropriate for the application of the rule stated in Boggs vs. Adger, upon the authority of this case, and Powell vs. Evans. The lights furnished by these English cases' disclose the force of the language of Boggs vs. Adger.
Bryan vs. Mulligan, 2 Hill’s Ch., 364, involved the right of an executor to ship merchandise, for sale, to a foreign market. It was, therefore, similar to Taveau vs. Ball, and thé same general result was arrived at, namely: that the executor was authorized to conform to the ordinary commercial usages in disposing of merchandise. He was, properly, held not to be chargeable with the consequences of an error of judgment in the selection of the best market for the sale of the produce, which resulted in a loss to the fund.
In Glover vs. Glover a question of negligence in the collection of debts was presented, and the executor charged on the ground that he knew that the debtor was in failing circumstances and failed to act accordingly. In Odell vs. Young the liability of a guardian for the solvency of securities taken for a debt due to the ward was. considered. In both of the cases last cited the questions were treated as turning on negligence, and expressions similar to those quoted above from Powell vs. Evans are employed.
*224Thus it appears that the rule laid down in Boggs vs. Adger was drawn exclusively from cases involving questions either of error of judgment or of negligence, and had no reference to the more general question whether the rules of law precluded certain investments as altogether unsuited to the nature of the trusts to which the fund was devoted.
The next case to be noticed, in connection with the general proposition advanced by the defendants under consideration, is Hext vs. Porcher, (1 Strob. Eq., 170.) The question in this case, as well as in Cooper vs. Day, (1 Rich. Eq., 26,) intimately connected with it, was, whether the trustee was liable for failing to record a deed of trust lands. In the former case it was held that he had committed a justifiable mistake; while in the latter he was charged with culpable negligence. The expressions employed in Hext vs. Porcher, to illustrate the protection afforded to trustees acting within the limits of a fair discretion, remind us of the language of Powell vs. Evans, and are to be understood under the same limitations. The question, whether the discretion of trustees as to investments was limited, was not either directly or indirectly before the Court, and its language cannot, with fairness, be extended to cover the doctrine advanced by the defendants.
The result of the cases in our own Courts, properly understood in their relation to the general principles of law determining the duties and responsibilities of guardians and trustees in case of investments of trust funds, prevailing in England as well as in this State, may be stated as follows: The trustee will be held responsible for losses of trust funds through loans to private persons, unless securities are taken collateral to such loans. Such securities should primarily consist of mortgages of unencumbered real estate of a value sufficient to guaranty the debt against all. contingencies liable to occur, or capable of being foreseen. Bonds of individuals should not be taken in lieu of real, securities, unless unobjectionable investments cannot, in the exercise of reasonable diligence, be procured. When personal securities are taken in lieu of real, it will devolve upon the trustee to' make the necessity and propriety of such investments appear upon' an accounting with the cestuis que trust.
The foregoing observations do not apply to loans made on public securities, nor to cases where the investment is, in neither form nor substance, a loan.
The deductions are in harmony with the objects intended to be *225secured by the creation of trusts designed to create and apply an income. Trustees are not called upon to obtain, for the funds in their hands, a greater rate of increase than that which is afforded by the most secure investments of the country. If they seek to enhance the product of the fund by assuming speculative risks, they do it at their peril. If they take securities of an inferior class, while better can be obtained, without any profit therefor to the cestui que trust, -they clearly disregard the plainest* dictates of duty.
In applying the foregoing principles to the present case, it should be observed that the Chancellor has decreed that certain investments in personal securities are judicious, and, unless ground is found for reversing that conclusion, it must be regarded that, as to such investments, the circumstances surrounding the trust fund justified the taking of that class of securities. It remains, therefore, only to consider the special matters brought up by the appeals.
The proposition brought up by complainants’ sixth ground of appeal is, that the guardian should be charged for not keeping good certain securities originally good. The complainants have not laid a sufficient foundation in fact to charge the trustee with negligence in connection with the deterioration of the value of those securities, and no ground exists for reversing the conclusions of the Chancellor on this point.
The objection, in complainants’ seventh ground of appeal, to the sealed note of J. D. Nance and S. Johnstone, that Johnstone signed as principal, and not as surety, is not sustained by the testimony of Johnstone; the only reasonable inference from which establishes the opposite conclusion.
In regard to the East note, referred to in complainants’ eighth ground of appeal, the proposition is, that the identification of this note as part of the wards’ estate fails: first, because it was not reported as such by the guardian; second, because the solvency of the parties, at the time the note was given, was not sufficiently proven. The failure to report the security is not, in itself, conclusive ; it is only a circumstance to be weighed among others. The conclusions of the Chancellor are not open to objection for the reasons stated in this ground of appeal. There certainly was evidence from which the conclusion might be drawn that this note was taken as an investment, and also that it was well secured when taken.
The ninth ground of appeal relates to the Butler note for $10,000. The evidence sufficiently sustains the conclusions of the decree, *226that this note was, in point of fact, an investment of the trust fund. The objection that the mortgage taken to secure collaterally this note was “inoperative and unavailing as a security,” in consequence of the property having been previously incumbered, and that such security became lost through such previous incumbrance, would have been in point, had that mortgage constituted the only security for the loan; but the fact is, that personal securities were given, as in the t>ther investments considered, and the mortgage appears to have been added thereto, for what it might prove to be worth. The charge of negligence against the trustee, in reference to this investment, is not sufficiently made out.
Having disposed of the important legal question involved in the complainants’ appeal, and having examined the special objections to the decree, based on the allowance of certain investments, the matter of the first five grounds of the complainants’ appeal is substantially disposed of, with the exception of the proposition advanced by the fifth ground. This proposition is not very distinctly presented, but amounts to a claim that investments made by the trustee for the joint account of the two wards, without distinguishing their several interests in the same, are for this reason to be disallowed. We know of no principle from which such a conclusion can be deduced. If the estate has sustained a loss for any such reason, and that loss can be traced to culpable negligence on the part of the trustee, such a state of facts should be presented directly ; it cannot be made out argumentatively in absence of such a statement.
Defendants’ first ground of appeal involves the proposition that investments made without sureties are good. This proposition, we have seen, is unsound.
Defendants’ second ground of ajipeal affirms the fact that the proofs established the fact that the guardian received certain stock of the Greenville and Columbia Railroad Company from the estate of complainants’ father, on a division of his stock in said company. “It was agreed, in this case, that the complainants should receive the stock as that much of their estate.” We do not find evidence that would warrant us in holding that the Chancellor was .bound, from the facts before him, to arrive at such a conclusion. We see no ground of disturbing his findings in this part of defendants’ appeal.
Defendants’ third ground of appeal rests on the proposition that the guardian may become a surety on a loan of trust funds. The *227same reasons which, as we have seen, prevent him from lending to himself, precludes him from lending on his own collateral obligation. By whatever means the note became placed in the amount of the trust funds, whether by original investment or as an appropriation made by the guardian out of the other trust funds held by him, or from his personal estate, the transaction is equally open to the objection on which the Chancellor based this part of his decree.
The appeals will be dismissed.
Moses, C. J., concurred.