This section is from the book "American Commercial Law Series ", by Alfred W. Bays. Also available from Amazon: American commercial law series.
The law permits one person to hold legal title to property upon obligations to use it in declared ways for the benefit of another, that is, one may have the legal title, while another has a beneficial estate therein.81
In our law, it is possible to clothe one with legal title, upon declared uses or trusts for the benefit of another; the legal ownership is in one and an equitable ownership or claim in another. Thus we may have A granting the fee to B subject however to a provision that B shall use the land for C's benefit and to convey it to C after a certain period. We speak of obligations of this sort as uses and trusts. There are a variety of reasons why an estate might be granted in this way; to keep it intact for a period instead of being divided among several; to give the legal title into capable hands, the beneficiary being a spendthrift or inexperienced; to perpetuate certain purposes, etc. Uses and trusts may also arise by operation of the law.
The owner of the legal title is called the trustee, the person for whose benefit he holds it is called a beneficiary or a cestui que trust.
A use may be defined as a right to the benefits and profits of land the legal title to which (or in early days the seizin of which) was in another.81
81. See Historical discussion in Blackstone, Book II, p. 327 and following.
The term "use" was once of more importance than now, as we shall see. We now generally use the term "trust." A use was a right in one to the benefits of land of which another had the title.
The idea of a use was probably taken from the German law, and was originally applied in England to give the benefit and profits of land to a religious order forbidden by law to hold real property. Thus if A desired to convey to a church and the church was forbidden to hold real property, A would convey to B "to the use" of the church, setting out the uses. Courts of equity took jurisdiction of uses and enforced them. The law which forbade the ownership of lands by the church was called the "Statute of Mortmain," to prevent excessive holdings "in dead hand," and this statute was evaded by the adoption of the use and its recognition by courts of equity. Other purposes of the use were soon found, and it was created to unjustly evade the liabilities and burdens incident to ownership.
The statute of uses was a statute passed to prevent holding land upon use, by putting the legal title in the beneficiary. The courts decided that certain uses were not covered by the statute and these survived under the name of trusts.
Owing to the evils possible under the device of the use, Parliament in 1535, passed the "Statute of Uses." It provided that whenever a person should be seized to uses, the person having the use should by operation of law be deemed to have the seizin or legal title.
The courts in course of time decided that the statute did not execute:
(1) A use upon a use.
(2) Uses in personal property.
(3) Active uses.
To distinguish what uses it did not execute, the court called them "trusts."
First, as to a use upon a use. Here A conveys to B to the use of C to the use of D. The courts of law declared the title in C by virtue of the statute and the use to D void, as there could be no use upon a use; but courts of equity enforced the use to D as a trust. Thus C would hold to the use of or in trust for D, notwithstanding the statute. Thus by a few words the court permitted the evasion of the statute, and the very condition existed which the statute was enacted to prevent.
Second, uses in chattels. Uses in chattels were not covered by the statute. Such uses were known as trusts.
Third, active uses. An active use is one in which the feofee to uses has active duties to perform as where he must collect rents, or perform services of any sort. Other uses were known as passive or dry uses in which the feofee to use held the bare naked title with no duty to perform except when demanded or at a certain period to convey the fee to the beneficiary.
The statute of uses was availed of by the conveyancers to transfer the title without livery of seizin.
We have elsewhere noticed that in transfers of the fee there must be "livery of seizin" at common law. Under the Statute of Uses, a number of forms of conveyance were invented which did away with this necessity and also permitted the transfer of the fee in futuro. This was accomplished by creating such a use as the statute would execute. Thus A desiring to convey the fee to B covenanted to stand seised to B's use. The statute of uses thereupon operated to give B the seizin and B without more ado became vested with the seizin and the ownership. This was the "covenant to stand seized," but it afterwards fell into disuse in favor of the "lease and release" and the "bargain and sale." Thus conveyancers made use of the Statute of Uses in ways not contemplated by the enacters, and by its aid the fee could be granted without livery of seizin.
A trust may be defined as an obligation upon the legal owner of land to hold or use it for the benefit of another upon uses not executed by the statute of uses; or it may be used as synonymous with the term use.
From our discussion of a use, we understand already what we mean by the term trust which is the modern term and indicates a common situation.
Trusts may be tabulated as follows:
(1) Express trusts.
1. Active trusts.
2. Passive or dry trusts (either so in their creation or by performance).
(2) Implied trusts (or trusts that arise by operation of law.
1. Constructive trusts.
2. Resulting trusts.
An express trust is one created by the language of a deed, will or other instrument. If there are active duties to perform, as to manage the property, collect rents, etc., it is called an active trust. A passive trust is one in which the trustee has nothing to do except convey the legal title to the beneficiary. If so in its inception, and concerns real estate it is properly a use and not a trust, and the statute of uses immediately by operation of law executes the legal title in the beneficiary. Or it may become passive because all the duties thereunder have been performed, except the conveyance of the legal title. Implied trusts are such as arise by operation of law in order to give the real ownership to one who in equity ought to have it instead of the nominal holder of the title.