Used most commonly in reference to an individual, banking house, bank, trust company, etc., acting as " trustee " of a mortgage. When a corporation desires to borrow money by the issuing of bonds there must be some party to act in the common interest of both the lender and the borrower. Trust companies are becoming the most common class of " trustees," and buyers of bonds, nowadays, prefer to have some such institution act as "trustee" of the mortgage securing an issue. The majority of trust companies investigate quite carefully all legal documents in relation to the bonds to be issued; that is, they often investigate the legality of the franchises; ascertain that the mortgage covers the property which it purports to mortgage, and is properly drawn; and that all other legal requirements are duly complied with. They then certify the regularity of the issue and each bond bears the trust company's certificate in some form, which indicates that the bond has been issued under its authority acting as " trustee."
Should a default in either interest or principal occur, or the promises of the corporation borrowing money not be fulfilled, then, under certain conditions, it is the " trustee's " duty to enforce these promises or take possession of the property and act for the benefit of the bondholders, in accordance with the terms of the trust deed.
One who has the legal custody of money or property (holds it in trust) for others is a "trustee."