§ 373. A trustee is a person holding the legal title to property, under an express or implied agreement to apply it, and the income arising from it, to the use and for the benefit of another person, who is called a cestui que trust. Trusts are, therefore, equitable interests in property, based on confidence, over which courts of equity alone have full jurisdiction.1 A trust may be created either by specialty or parol, and may be express or implied, but the statute of frauds of 29 Charles II. ch. 3, § 7 (which is generally adopted in the United States), requires that it should be in writing. It is not necessary, however, that the declaration of trust should be made in any particular form, but it will be sufficient if it can be clearly extracted from any letters or writings of the party,2 and although it be expressed in the form of a request, or desire, or recommendation. If, however, a trust be so vague and indefinite, that its object and terms cannot clearly be ascertained, it will not be carried into effect.3 The statute also exempts trusts arising, transferred, or extinguished by operation of law, and does not extend to declarations of trusts of personalty.4
§ 374. A trustee is bound to perform all acts which are necessary for the proper execution of his trust. But by the English rule, as he is not allowed compensation for his services, he would stand in the position of a gratuitous bailee, and be responsible only for losses or improper execution of his trust, in cases of gross negligence.1 The rule denying him compensation does not, however, obtain generally in America,2 and it is the general practice in America to allow commissions to trustees in cases of open and admitted trusts, where the trustee has not forfeited them by gross misconduct.3 It would seem, that in all the States where a compensation is given, he would be a bailee for hire of labor and services, and bound to exercise ordinary diligence. And he engages that he has sufficient skill to execute the duties of his office properly. And, indeed, a trustee seems generally to be bound to take the same care of the trust fund as a prudent and discreet man would take of his own property, to manage it for the best interest of the cestui que trust, and to make no profit or advantage out of it for himself personally.1
1 2 Story, Eq. Jur. ch. 24, § 962; Cooper on Eq. PI. Introd. p. xxvii.; Sturt v. Mellish, 2 Atk. 610; Com. Dig. Chancery (2 H.).
2 2 Story on Eq. Jur. § 973; Crooke v. Brookeing, 2 Vern. 106; Inchiquin v. French, 1 Cox, 1; Smith v. Attersoll, 1 Russ. 266.
3 Stubbs v. Sargon, 2 Keen, 255; Ommanney v. Butcher, Turn. & Russ. 260, 270.
4 Nab v. Nab, 10 Mod. 404; Fordyce v. Willis, 3 Bro. C. C. 586; 2 Story, Eq. Jur. § 972. See Mass. Gen. Sts. ch. 100, § 19.
1 2 Story, Eq. Jur. § 1268; Story on Bailments, § 173, 174; Manning v. Manning, 1 Johns. Ch. 527, and cases therein cited; Chetham v. Lord Audley; 4 Ves. 72; Robinson v. Pett, 3 P. Wms. 251; Annesley's Case, Ambler, 78; Brocksopp v. Barnes, 5 Madd. 90; Jenkins v. Eldredge, 3 Story, 333.
2 Meacham v. Sternes, 9 Paige, 399; Barrell v. Joy, 16 Mass. 221; Jenkins v. Eldredge, 3 Story, 333; Denny v. Allen, 1 Pick. 147. But see Manning v. Manning, 1 Johns. Ch. 527, where the English rule is maintained by Chancellor Kent. Mr. Justice Story, in commenting upon the rule as indicated by Mr. Chancellor Kent in the case of Manning v. Manning, and by Lord Cottenham in Home v. Pringle, 8 CI. & Finn. 264-287, says: "I confess that I have not been able quite so clearly to see, or so strongly to approve, the policy of the rule. Trusts may be very properly considered as matters of honor and kindness, and of a conscientious desire to fulfil the wishes and objects of friends and relatives. But the duties and responsibilities of the office of a trustee are sufficiently onerous and perplexing in themselves; and mistakes, even of the most innocent nature, are sometimes visited with severe consequences. Nor can any one reasonably expect any trustee to devote his time or services to a very watchful care of the interests of others, when there is no remuneration for his services, and there must often be a positive loss to himself, in withdrawing from his own concerns some of his own valuable time. To say that no one is obliged to take upon himself the duty of a trustee, is to evade, and not to answer, the objection. The policy of the law ought to be such as to induce honorable men, without a sacrifice of their private interest, to accept the office; and to take away the temptation to abuse the trust, for mere selfish purposes, as the only indemnity for services of an important and anxious nature. The very circumstance, that trustees now often stipulate for a compensation before accepting the office, and that courts of equity now sanction such an allowance, is a distinct proof that the rule does not work well, and is felt to be inconvenient or unreasonable in practice. The rule to disallow compensation to trustees has not been generally adopted in America."
3 Jenkins v. Eldredge, 3 Story, 332, 333; Dixon v. Homer, 2 Met. 420; Clark v. Piatt, 30 Conn. 282 (1861). See Blake v. Pegram, 101 Mass. 592.
§ 375. In regard to the preservation of trust property, the rule is, that a trustee must keep it with the same care as if it were his own. And if the trust property be lost or destroyed, or be stolen, he will not be responsible, unless the loss occur through the want of ordinary care and diligence.2 He is even allowed in equity to establish any amount stolen from him by his own oath, where no other mode is practicable.3 So, also, if loss be incurred owing to the necessary or proper transmission of it through other hands; as if money be placed in the hands of a banker in good credit, to be remitted by a bill, drawn by a person in good credit, and the banker should become bankrupt, the trustee would not be responsible.4