The so-called doctrine of tracing trust funds is a special application of the doctrine of con structive trusts. Not only will equity follow property acquired by fraud or breach of trust into the hands of any person who is not a pur chaser in good faith for value, but it may compel any such constructive trustee who has disposed of the property to account for its proceeds in his hands. even though the proceeds have in time been converted into other property. As neither resulting nor constructive trusts are created by intention of the interested parties, neither is within the Statute of Frauds requiring the trust to be evidenced by writing. The trustee is, strict ly speaking, the legal owner of the property, with all the rights and obligations of legal ownership, subject only to the right of the rested que trust to compel with the aid of a court of equity per formance of the trust. The trustee may sue and he sued with reference to the trust property with out joining the ecsfui que trust. Ile may convey it, giving a complete legal title, although he may act in violation of the trust. With reference to the cestui que trust, however, he must perform completely the terms of the trust, and he cannot delegate his authority. He must act in good faith and with due care in administering his trust, and for failure to do this he must account to his restui. When he has funds in hand he must keep them properly invested. In many States the investments which a trustee may make are regulated by statute or by settled practice.
Aside from his fees allowed by law or specifically granted by the terms of the trust, he cannot make any gain or profit from his position as trustee. in several of the United States, notably in New York, statutes have been passed defining and gen erally regulating trusts and attempting to some extent to limit the doctrine of trusts as devel oped by the English Court of Chancery. It may be said, however, that neither by legislation nor otherwise has there been any material modifica tion of the notion of a legal interest vested in one person and held by him for the benefit of another, the obligation to so bold the property being enforced by courts having equity powers. More changes have been made in the direction of substituting one trustee for another with facility in case of death or misconduct of a trustee, and in providing for the accounting of trustees and regulating their acts. Breach of trust or misap propriation of trust funds was not a crime at common law. It is now generally made a crime, being punishable as one of the statutory forms of embezzlement. In New York misappropriation of trust funds falls within the statutory defini tion of larceny and is punishable as such.
Consult the statutes of the various States; also the works on the law of trusts and trustees by Lewin (10th ed.. London. 1899) ; Romer ( Lon don, 1898) ; Robbins and Maw (3d ed., London, 1901) ; and also the authorities referred to under EquiTy. See CHANCERY; EQuurv; Feauo; FIDUCIARY.