View Full Version : Trust Law in repoducible terms = Mathematics

Michael Joseph
03-12-11, 07:51 PM
ab initio (http://savingtosuitorsclub.net/showthread.php?24-The-first-constitutions&p=143&viewfull=1#post143)

A trust may be defined as a fiduciary relationship in which one person holds a property interest, subject to an equitable obligation to keep or use that interest for the benefit of another.

The significance of the phrase "fiduciary relationship" is explained in greater detail in subsequent sections of this treatise dealing with the duties of the trustee and with constructive trusts. It will become apparent that a fiduciary relation is one in which the law demands of one party an unusually high standard of ethical or moral conduct with reference to another.

The trustee, like the executor, the guardian, or the agent, and similar parties, owes the one whom he represents a duty to act solely in the interest of the beneficiary; he is not permitted to consider his own personal advantage. The ethics of ordinary business relations, where parties oppose each other at arm's length, do not apply to the trust. On account of the intimate nature of the relationship, the great control of the trustee over the property of his beneficiary, the origin of the trust institution in the court of equity, and for other reasons, the trustee is expected to show more than ordinary candor, consideration, and probity in his dealings with the beneficiary.

The basic elements of a viable trust are as follows:

The trust property or res is the interest in property, real or personal, tangible or intangible, which the trustee holds, subject to the rights of another.

It should first be noted that an interest in property is always an element of the trust. In certain relations persons only, or persons and any property, may be involved, for example, in agency, where A may be the agent of P for the performance of personal services, which have no connection with any property, or no connection with any particular property. But the trust presupposes described, ascertained or ascertainable property, a defined interest in which is to be owned or held by the trustee. What may be the trust property and how it may become such are matters to be dealt with later. The trust property is sometimes called the trust res, the corpus, the capital, the subject or the subject matter of the trust.

The settlor of a trust is the person who intentionally causes it to come into existence. He is often called the trustor, grantor, founder, donor, or creator of the trust. Where the trust is created by will the creator is the testator.

The trustee is the individual or entity (often an artificial person such as a corporation) which holds the trust property for the benefit of another.

It is sometimes said that the legal title to the trust property is always in the trustee. His title is usually legal, but it may be equitable if the settlor expresses the intent to give him such an interest and has the capacity to do so. Thus if the settlor has a fee simple estate in certain lands, and conveys his interest to A to hold in trust for B, A, the trustee, will be seised of the legal estate. However, if the settlor has merely contracted to buy land for which he has paid the purchase price, and the settlor transfers his interest in the land to A in trust for B, A, the trustee, will hold merely the equitable title of the contract vendee of the land under a specifically enforceable contract. It is because of this possibility of legal or equitable ownership that the definition given above merely states that the trustee is a titleholder, without regard to the court in which his title will be recognized. In the great majority of trusts the trustee has the legal title to the trust property.

The beneficiary or cestui que trust is the person for whose benefit the trust property is held by the trustee. In the case of private trusts he is an individual but the beneficiary can be an artificial legal entity such as a corporation. As shown later, the beneficiary of a charitable trust is the public, or a substantial class thereof, and not the institutions or individuals who obtain and administer benefits from the trust.

Thus there are three requirements to create a valid private trust. These are (1) an expression of intent that property be held, at least in part, for the benefit of one other than the settlor; (2) at least one beneficiary for whom the property is to be administered by the trustee; and (3) an interest in property which is in existence or is ascertainable and is to be held for the benefit of the beneficiary. The requirement of a trustee to administer the trust does not mean that a trust will not come into existence where no trustee is named. A trust does not fail at its inception or thereafter for lack of a trustee since the court will appoint a trustee to administer the trust property for the benefit of the beneficiary.

The trustee holds the trust property "for the benefit of" the beneficiary. These advantages usually come to the beneficiary through investments made by the trustee that cause the property to produce income, and in the distribution of income and principal of the trust. In rare cases the beneficiary may be allowed to enjoy the property directly. It does not matter how the benefits are to come to the beneficiary. The important trust concept is that he has a right to obtain them.

The duty of the trustee is enforceable by the beneficiary whether or not he was a party to the act of trust creation or any promise was made by the trustee to him. In this respect the law of trusts differs from the law of contracts where there have been some holdings that not all third party beneficiary contracts are enforceable.

The trustee's obligation is "equitable." Originally it was recognized only by the English court of chancery, which administered the rules and applied the principles of equity. Some who have defined the trust have made enforceability in a court of chancery or equity a part of their definition. But in the present state of the law it is preferable to define the trustee's obligation as equitable, and to omit any reference to the court in which it may be enforced. In England and most American states the separate court of chancery has been abolished, and both legal and equitable obligations are enforced by the same court. However, in a few states the separate court of equity has been maintained. The trustee's obligation is based on equitable principles, whether enforced by a court having both legal or probate and equitable jurisdiction, or by a court having solely equitable functions. In rare instances the trustee's obligation is treated as legal and enforced in a legal action.

Whether the right which the beneficiary has is a property right in the subject matter of the trust (a right in rem), or merely a personal right against the trustee (a right in personam), is a question much debated.

In most cases there are at least three parties connected with the trust, namely, a settlor, a separate legal entity acting as trustee, and one or more third persons who are the beneficiaries. But where the settlor declares himself a trustee, settlor and trustee are one and the same person and a trust may exist with only two parties. Since one cannot be under an obligation to himself, the same individual cannot be settlor, trustee and sole beneficiary, and the trust parties can never be less than two. However a sole trustee may be one of a number of beneficiaries, and one of several joint trustees may be the sole beneficiary.

The trust instrument is the document, whether a deed, agreement or will, in which the settlor or testator expresses an intent to have a trust and sets forth the trust terms, that is, the details as to beneficiaries and their rights and the duties and powers of the trustee. In some cases trusts are created without a writing and hence there is no trust instrument as such. In such a case the terms of the trust are determined by evidence of the settlor's intent, to the extent the evidence is not barred by reason of the Statute of Frauds or the parol evidence rule.

Trusts are classified with respect to the manner of their origin. Where based upon the expressed intent of the settlor they are called express trusts; when they come into existence because of presumed or inferred intent they are given the name of resulting trusts; and when they are created by court action in order to work out justice, without regard to the intent of the parties, they are denominated constructive trusts. The two latter classes of trusts, according to the orthodox view, were grouped together under the heading of implied trusts and this terminology is still used. But the logic of this classification has been subject to criticism. There has been disagreement as to the meaning of "implied" in this connection. The Restatement of Trusts abandoned the phrase "implied trust".

Michael Joseph
03-13-11, 06:48 PM
Other definitions of a trust include the following:

"A trust, in the words applied to the use, may be said to be 'A confidence reposed in some other, not issuing out of the land, but as a thing collateral, annexed in privity to the estate of the land and to the person touching the land, for which cestui que trust has no remedy but by subpoena in chancery."’

"A trust is an equitable obligation, binding a person (who is called a trustee) to deal with property over which he has control (which is called the trust property), for the benefit of persons (who are called the beneficiaries or cestui que trusts), of whom he may himself be one, and any one of whom may enforce the obligation."

"A trust is an obligation imposed, either expressly or by implication of law, whereby the obligor is bound to deal with property over which he has control for the benefit of certain persons, of whom he may himself be one and any one of whom may enforce the obligation."

"A trust, in its technical sense, is the right, enforceable solely in equity, to the beneficial enjoyment of property of which the legal title is in another."

"A trust may be defined as a property right held by one party for the use of another."

"And a trustee is one in whom some estate, interest, or power affecting property is vested for the benefit of another”

"Every one who voluntarily assumes a relation of personal confidence with another is deemed a trustee, not only as to the person who reposes such confidence, but also as to all persons of whose affairs he thus acquires information which was given to such person in the like confidence, or over whose affairs he, by such confidence, obtains any control."

Michael Joseph
03-13-11, 07:36 PM
"Trusts are either executed or executory. In the former, everything has been done by the trustee required to secure the property, or to render certain the interest of the beneficiaries, and all that remains for him to do is to preserve the property and execute the beneficial purposes. In executory trusts, something remains to be done by the trustee, either to secure the property, to ascertain the objects of the trust, or to distribute according to a specific mode, or some other act, to do which requires him to retain the legal estate."

ENFEOFF'ED, pp. Invested with the fee of any corporeal hereditament.

FEE, n. In English, is loan.

FEUD, n. [L. fides; Eng. loan.]

a fee; a right to lands or hereditaments held in trust, or on the terms of performing certain conditions; the right which a vassal or tenant has to the lands or other immovable thing of his lord, to use the same and take the profits thereof hereditarily, rendering to his superior such duties and services as belong to military tenure, &c., the property of the soil always remaining in the lord or superior.

HEREDIT'AMENT, n. [L. haeres, haeredium. See Heir.]
Any species of property that may be inherited; lands, tenements,any thing corporeal or incorporeal, real, personal or mixed, that may descend to an heir.

A corporeal hereditament is visible and tangible; an incorporeal hereditament is an ideal right, existing in contemplation of law, issuing out of substantial corporeal property.

TEN'EMENT, n. [Low L. tenementum, from teneo, to hold.]
1. In common acceptation, a house; a building for a habitation; or an apartment in a building, used by one family.
2. A house or lands depending on a manor; or a fee farm depending on a superior.

The thing held is a tenement, and the possessor of it a tenant.


In the middle ages in England conveyancers of land invented the "use" which is the ancestor of the modern trust. The owner of land enfeoffed another to the use of the feoffor or another. The transferee was called a "feoffee to uses" and the intended beneficiary of the use a "cestui que use." Later uses were created by bargain and sale and covenants to stand seized. The feoffee agreed to permit the beneficiary to take the profits and to convey as directed. The feoffee had seisin and promised to defend the possession if he was disseised. Uses became very popular in mediaeval England. Indeed, by the time of Henry V (1413-1422) they were the rule rather than the exception in landholding.

The words "use" and "trust" are employed as synonyms frequently by writers and judges. However, there is a distinction in their meanings. Prior to the Statute of Uses (1535) there existed in England a relationship known as a trust. Trusts were of two classes, active or special, and passive, simple, or general. In cases where a trustee held property for some temporary purpose and with active duties to perform, the trust was called active or special. Thus, if A conveyed land to B for ten years, to take the profits of the land and apply them to the use of C, B was an active or special trustee. These trusts were comparatively rare prior to the Statute of Uses. But if the legal title was transferred to one as a holder for the benefit of another, but with no positive duties of care or management, the trust was called general, simple or passive, or a use. Thus an enfeoffment of A and his heirs to the use of B and his heirs would create a use or general trust. Uses were far more common than special trusts prior to the Statutes of Uses. Indeed, by the time of Henry V (1413-1422) they were the rule rather than the exception in landholding.

It is now the generally accepted view that uses were modeled after the treuhand or salman developed under Germanic Law. "The feoffee to uses of the early English law corresponds point by point to the salman of the early German law, as described by Beseler fifty years ago. The salman, like the feoffee, was a person to whom land was transferred in order that he might make a conveyance according to his grantor's directions."

An earlier view was that the use was a development of the Roman "fidei-commissum." Under the Roman law it was not possible to give property by will to certain persons, for instance, persons who were not Roman citizens. It became customary among the Romans to devise property to one capable of taking it, with a request that he deliver it to a desired devisee who was incompetent to take directly. This was the creation of a fideicommissum. The obligation of the devisee to the desired beneficiary in this relationship was not at first legally enforceable, but later became so. This confidence was analogous in many ways to the English trust or use, but differed in that it arose by will only and was limited to one purpose.

It was said many years ago that the parents of the trust were fraud and fear and the court of conscience was its nurse. It appears that the reasons for the introduction of uses were in some instances dishonorable. The common law of England attached many burdens to the holding of the legal title to land. As the feudal system prevailed when uses arose, the lord of the land was entitled to a "relief," or money payment, when the land descended to an heir of full age; to the rights of "wardship" and "marriage" when the heir was a minor; and to "aids" upon the marriage of a daughter of the tenant, the knighting of his eldest son, or when the tenant was held to ransom. These burdens, and others of a similar nature, fell upon the holder of the legal title. By enfeoffing another of the legal title and reserving only the use, the feoffor escaped such exactions. In order to avoid the feudal burdens which would ensue upon the death of a single feoffee, several feoffees could be used as joint tenants and their number renewed from time to time.

So too, upon the commission of certain crimes the holders of the legal title suffered a forfeiture, which could be avoided by vesting the legal estate in another and retaining only the use. And the common law gave no remedy to a creditor against the interest of a cestui que use. Some dishonest persons escaped payment of their debts by a transfer of land to a feoffee to uses. The incidents of dower and curtesy attached only to the legal estate. A husband, desiring to prevent the attaching of a dower interest in a prospective wife, could accomplish the result by a conveyance to a feoffee to uses. And a corresponding fraud could be worked by a wife with respect to her husband's interests in her realty.
Not only was the interest of the cestui que use free from dangers and duties, but it could be held by a large and influential class which could not hold the legal estate in lands, namely, religious organizations. The mortmain acts forbade the alienation [transfer] of land to them, and thus prevented religious orders from acquiring directly the real property they needed, and which charitably minded persons often desired to give them. Furthermore, certain of the orders had taken the vows of poverty, and could not consistently hold property in their own names. By a conveyance of land to an individual, to be held for the use of a religious order or organization, however, it could have the benefit of the land, though not the seisin. In the opinion of some scholars, the religious bodies were the first to employ the use extensively.

The equitable estate or use also was more capable of administration and transfer than the legal estate. The latter could originally be conveyed only by feoffment with livery of seisin, fine, or recovery. Publicity was essential. The use, on the other hand, could be created and transferred secretly, and with little or no ceremony. This capacity for secret transfer encouraged fraud on later purchasers of the land and the employment of the use by the unscrupulous. Likewise the use was capable of being disposed of by will. The legal estate was not so disposable at that period. To be able to control land after death was no doubt a great incentive to the creation of uses.

Early English law was extremely rigid. Forms and technicalities were strictly observed. The courts of common law gave no remedy unless a writ fitted exactly to the case could be found. The introduction of new remedies through the law courts was a matter of great difficulty. They rarely recognized a new type of property interest. The interests of the cestui que use might not be protected by the courts of common law because no writ existed to fit the case. The ecclesiastical courts had no jurisdiction to enforce them. Therefore, for many years uses and trusts existed only as honorary obligations and had no standing in any court. If the feoffee to uses saw fit to deny that he held the property for another, and appropriated it to his own use, he might do so with impunity.

It is true that some obligations with respect to money and chattels were enforced by the common law courts in these times, but these were the so-called "common law trusts" and not uses. If money was delivered to A, to be paid to B, the common law action of account lay. And if a chattel was delivered to another for the use of a third, detinue could be brought by the beneficiary.

Michael Joseph
03-13-11, 07:36 PM
"The development of the court of chancery brought a change. About the time that uses were arising, it became the custom to petition the king or his council for relief in cases where the law courts gave no remedy. If no writ was available, or if the opponent was powerful enough to prevent justice, the aggrieved suitor besought the king or his council for a special and extralegal dispensation. The chancellor was a member of the council, and about the time of the reign of Edward I (1272-1307) it became usual to refer these petitions to the chancellor for consideration. The chancellor became the custodian of the king's conscience, and his court the court of conscience where equity and fairness, rather than technicality, were supposed to rule.

It was natural that beneficiaries of uses alleging loss due to a failure of the feoffees to uses to hold the property for their use should apply to the chancellor for relief. At some time early in the fifteenth century the justice of these petitions began to be recognized by the chancellor, and uses and trusts were enforced. The chancellors of those days were churchmen, and their consciences were naturally shocked by the unfairness of allowing a feoffee to uses to repudiate his obligation. Possibly the common law trust appealed to the chancellor as a quasi-precedent. The process by which the chancellor acted was known as a subpoena. It commanded the defendant to do or refrain from doing a certain act. The relief was personal and specific, not merely money damages. Hence it is often said that the cestui que use had a remedy only by subpoena. “

“By the beginning of the sixteenth century uses and trusts had come to involve serious inconveniences and frauds and incurred the emnity of the crown. As previously stated, some of the principal objects of their introduction were to relieve tenants of the burdens of feudal landholding, to enable religious orders to have the benefit of land, and to effect greater freedom in the conveyancing of real property. From time to time prior to the Statute of Uses statutes in aid of creditors, purchasers, and landowners defrauded by uses, and against the holding of lands to the use of religious houses, were enacted by parliament, but they were ineffective.

In 1535 Henry VIII secured from parliament the passage of the famous Statute of Uses. The preamble to the Statute gives a list of the evils which were alleged to exist and to constitute grounds for its enactment. Apart from the reasons named in the Statute itself, there was, according to some authorities, the desire on the part of Henry VIII to destroy the monasteries and confiscate their property, which he thought could best be accomplished by abolishing the method by which they held land, namely, the use.

The object of the Statute was to abolish uses, and this it proposed to do by wiping out the estate of the feoffee to uses, and giving to the cestui que use the legal estate. The Statute "executed the use," in the phrase of the day. Instead of leaving it to the feoffee to uses to transfer the legal title to the cestui que use when the latter required it, the Statute transferred such interest immediately on the creation of the use. By this "transmutation of the use into possession" it was thought that this troublesome class of property interests would cease to exist, and that all estates in lands would be subject to the same burdens and the same rules of tenure and conveyance. There would be no uses in land, because the law would change them to legal interests at inception.

The Statute of Uses was repealed in England by the reform property legislation of 1925.

To the common law judges, who had to deal with legal estates, fell the tasks of construing the Statute of Uses, and of determining when the Statute executed the use and gave to the cestui que use the legal estate. It was evident from the express words of the Statute that uses in personalty were not included. The Statute spoke only of real property. And since it referred only to instances in which the feoffee to uses was "seized," it was readily held that the Statute had no application to interests in real property other than freehold estates. Therefore a gift to A of a term for five years, to the use of B, was not affected by the Statute. The Statute was also held not to apply to active uses. Duties of administration required the legal title in the trustee. Thus if land was conveyed to a feoffee with a duty to collect the profits and pay them to another, the necessity of having the title and possession in the feoffee would prevent the Statute from executing the use.

Finally, the English courts of law held that the Statute did not affect a use upon a use. Thus if lands were conveyed to A, and his heirs, to the use of B and his heirs, to the use of C and his heirs, the Statute was held to transfer the use of B into possession and give him the legal estate but not to convert the use of C into possession and destroy B's legal estate. This construction has been thought by some to have been a mere quibble, which improperly caused a partial destruction of the Statute. But others have shown that the second use in the case of a use upon a use had been held void before the passage of the Statute of Uses on the ground that it was "repugnant" to the first use. About a hundred years after the passage of the Statute of Uses chancery recognized the second use in the case of the use upon a use and held it enforceable as a trust against the person in whom the court of law had vested the legal estate.

Thus a large number of uses were left unaffected by the Statute of Uses and were recognized and enforced by chancery. The name "trust," after the Statute of Uses, was applied to all the equitable interests so sustained. It had been used as a synonym for the use in prior decisions and in the Statute of Uses. These interests which survived the Statute of Uses and have been enforced as trusts constitute the basis of modern trust law"