nineteenth judicial district, specially presiding, dissenting. — Not without diffidence do I note my dissent.
I do so only because after reconsideration of the adjudication I am not convinced that the law when applied to the admitted facts is or ought to be such as should sustain the exceptions.
The trust company and Mr. Vail were joint trustees of the fund provided by the will of Nathan P. Towne. Mrs. Vail, his daughter, is given the net income for life. At her death the trust estate goes to residuaries.
The obligations of the trustees were to the estate, are fixed, and may not be waived or changed by agreement or acquiescence. In matters of discretion cotrustees may not act separately. The trust fund is entitled to the discretion of both. This is the reasonable rule recognized in all of the authorities, and in the arguments for except-ants.
It is urged however that one trustee may ratify the separate action of the other with the same effect as if he had originally acted in the making of the investment; and that such ratification may be established by silence, or failure to object after notice, or by accepting part of the trustee’s commission.
' While it may be that under some circumstances this might be just, the undisputed facts in this case exclude such qualification. We are concerned not only with the *655culpable breach of duty by trustee Vail but the inattention of Mrs. Vail, who is entitled to the income for life. The whole Towne trust for protection of all of its beneficiaries ought to be administered in accordance with law.
The facts illustrate the value of the rule. All of the investments, except those the subject of dispute, were made upon the written authority of Mr. Vail. Both trustees joined in the exercise of the discretion. Only on the $20,000 invested by the trust company, without the knowledge or assistance of Mr. Vail, the other trustee, is a loss imminent.
It was incumbent upon both trustees to have adequate knowledge, and thereon exercise their joint judgment. If this wise and settled rule had been observed the losses occuring in the investments made by the trustees alone might have been avoided. In these inferior investments the trust company varied from the rule and its own practice. The others, which were made by both trustees jointly, show no loss.
What may have been the reasons for the omission is unimportant. The evidence is that a letter of August 7, 1924, notifying Mr. Vail that the trust company had made these investments was without details as to the security, was erroneous in an important statement regarding one security, and gave no intimation that the trust company had an interest in another as trustee in the mortgage.
If carelessly, or for reasons undesirable to disclose, the trust company disregarded the rule clearly expressed in Bohlen’s Estate, 75 Pa. 304, it took the risk, and the loss resulting should not be borne by the beneficiaries of the Towne estate.
The proposition that the failure of Mr. Vail to perform the duties incumbent on him can inflict the loss on Mrs. Vail, the life beneficiary, and on those ultimately entitled to the corpus, does not seem just.
His conduct indeed was not admirable. Yet if he failed to exercise the care, discretion and judgment due from *656him as one of the trustees and allowed the other trustee to make the investments without his aid, if he failed to use due diligence to ascertain the relevant facts after he had some partial notice of what the other trustee had done alone, and if without doing any service he accepted part of the commissions from the trust company, he was remiss in his duty and may be held to account. This may be conceded, but it misses the real point.
That both trustees have been delinquent should not cause the loss to be borne by the trust estate and its innocent present and final beneficiaries.
The contention of exceptants is contrary to the principles recognized in the Restatement of the Law ol Trusts. Section 194, page 516, states:
“If there are two or more trustees, the powers conferred upon them can properly be exercised only by all the trustees, unless it is otherwise provided by the terms of the trust.”
The comments on this section accord with the principles of the adjudication, and are inconsistent with the exceptions.
The trustee Vail was under a duty to the beneficiaries not to delegate to his cotrustee the sole management of any part of the trust estate. The trust company also was under a duty not to accept such delegation. Neither could ratify their unauthorized acts • to the disadvantage of the trust estate: see Restatement of the Law of Trusts, section 171, page 441, section 184, page 468.
The sophistry of the claim that what one trustee did or omitted after the other had made the improvident investment can ratify it, in such a way as to put the loss upon the cestui que trust, is clear. No one can ratify that which he has. no legal right to do originally. If Mr. Vail had agreed in writing that the $20,000 of tibe Towne trust should be invested in such securities as the trust company alone selected, and that he would ask no question nor interfere in any way with the sole discretion of the trust company, and that in consideration of his com*657placency he should receive half of the trustee’s compensation, both he and the company would have violated their legal duty. The loss on improvident investments so made should not be borne by the trust estate. Neither should such inequitable result follow as so-called ratification by any such conduct as is shown here.
The argument made on behalf of the intervening fiduciaries regards a phase only incidental to the adjudication.
Without previous knowledge or authority of its co-trustee, $5,000 was invested by the trust company in bonds secured by a mortgage for $250,000 in which the trust company was trustee, with the usual provisions for its compensation. The erroneous statement subsequently was made by the trust company to Mr. Vail that this mortgage was for $200,000. These facts, in connection with the other considerations mentioned, are persuasive for the application of the rule regarding the requirement that cotrustees must exercise the joint discretion and judgment contemplated by the founder of the trust.
Without regard to the other elements in this case, however, the principle that a trustee should have no interest in a security in which it invests the funds of the trust estate, and especially should not be in a position to obtain a benefit ahead of the cestui que trust, is a wholesome one and should not be discarded.
The intervener’s brief gives an interesting review of the developing trust company business. The capital needed for useful business enterprises, to an increasing extent, has been obtained largely by the sale of bonds, secured by mortgages to a trustee for all bondholders. These mortgages have contained progressively elaborate provisions limiting the liabilities and increasing the emoluments and protection of the corporate trustee. In one of the latest quoted by counsel the reasonable compensation for the services of the trustees and reimbursement for all payments and liabilities incurred are made a lien on all of the mortgaged property, prior to that of *658the bonds. It is quite conceivable that the enterprise, of which such corporate mortgage is a part, may be the result of the financial plans of the promoters, security salesmen and their lawyers, connected in various degrees with a trust company having in its control large amounts of trust funds for investment. A corporation with money for investments in its hands as a testamentary trustee accountable to the court may not be able under such circumstances to exercise such impartial and disinterested discretion and judgment as should be expected of a trustee.
To sustain these exceptions would tend to weaken the principle, in the present times as wise and necessary as ever, expressed by this court in Curran’s Estate, 17 D. & C. 435, 446: “A trustee is not permitted to deal with trust property so as to gain any advantage beyond its lawful compensation”.
This court further said: “It might be a wise practice for a trust company to refuse to purchase for its trust estates any bonds wherein it is acting as trustee under the deed securing the same.” The present case presents a condition in which that dictum should be adopted as the law.
With due deference to the opposite judgment of my learned brethren I would dismiss the exceptions.