This section is from the book "The Law Of Real Property and Other Interests In Land", by Herbert Thorn Dike Tiffany. Also available from Amazon: A Treatise on the Modern Law of Real Property and Other Interests in Land .
70a. That a provision defeating an estate for life upon its alienation is invalid appears to be decided in Streit v. Fay, 230 111. 319, 120 Am. St. Rep. 304, 82 N. E. 648; Diamond v. Rotan, 58 Tex. Civ. App. 263, 124 S. W. 196.
71. Roe d. Hunter v. Galliers, 2 Term Rep. 133; Gray, Restraints on Alienation, Sec. 46. See ante, Sec. 54(a).
72. Co. Litt. 223a; Gray, op. cit. Sec.Sec. 27, 102.
73. Hobbs v. Smith, 15 Ohio St. 419; Gray, op. cit. Sec. 278; 1 Tiffany, Landlord & Ten. Sec. 152j.
74. So in the case of a feo simple estate see Jones v. Tort Huron Engine & Thresher Co., 171 111. 502, 49 N. E. 700; Turner v. Hallowell Sav. Inst. 76 Me. 527 Blackstone Bank v. Davis, 21 Pick. (Mass.) 42, 32 Am. Dec. 241; Sparhawk v. Cloon, 125 Mass. 263; Butterfield v. Reed. 160 Mass. 361, 35 N. E. 1128; Kessner v. Phillips, 189 Mo. 515. 107 Am. St. Rep. 368, 3 Ann. Cas. 1005, 88 S. W. 66; Ricks v. Pope, 129 N. C. 52, 39 S. E. 638; Mclntyre v. Mclntyre, 123 Pa. St. 329, 10 Am. St. Rep. 529, 16 Atl. 783; Manierre v. Welling, in fee simple, or rendering it terminable, upon, the bankruptcy of the tenant, or on a sale under a judgment against him, is likewise invalid,75 while a provision termination, or rendering terminable, an estate for life or for years in such case has been regarded as valid.76 In thus applying similar rules in determining the validity of restraints on voluntary and involuntary alienation, the courts inferentially suggest that the same considerations necessarily apply in both cases. But a particular restriction upon involuntary alienation cannot, like a similar restriction upon voluntary alienation, be regarded as invalid by reason of the desirability of preventing the withdrawal of property from commerce, since immunity from forced sale does not have that effect. The invalidity, in so far as it exists, of a provision directly or indirectly restricting involuntary alienation in behalf of creditors must, it would seem, be based either upon the theory that public policy requires that one should not enjoy the benefits of ownership without being subject to the burdens usually incident thereto, or upon the theory that such a provision operates in contravention of the execution and bankruptcy statutes, which clearly recognize the liability of such property to be disposed of for the satisfaction of creditors. The former theory appears to be in effeel excluded by the decisions, hereafter referred to, recognizing the validity of "spendthrift trusts," since, so far as public policy is concerned, the same considerations would seem to apply in the case of legal and equitable interests. And consequently, in states where the right of the creator of a trust to exclude the cestui's creditors is recognized, the inability of the creator of a legal estate to exclude the donee's or grantee's creditors would seem to be based upon the theory that the bankruptcy and execution statutes cannot thus he nullified as regards particular property, by the language used in the creation of a legal estate therein.
32 R. I. 104, Ann. Cas. 1912C 1311, 78 Atl. 507; Van Osdell v. Champion, 89 Wis. 661, 27 L. R. A. 773, 46 Am. St. Rep. 864, 62 N. W. 539. So in the case of a life estate, see Streit v. Fay, 230 111. 319, 120 Am. St. Rep. 304, 82 N. E. 648; Thompson v. Murphy, 10 Ind. App. 464, 37 N. E. 1094; McCormick Harvesting-Mach. Co. v. Gates, 75 Iowa, 343, 39 N. W. 657; Wellington v. Janvrin, 60 N. H. 174; Bramhall v. Ferris, 14 N. Y. 41; Mattison v. Mattison, 53 Ore. 254, 133 Am. St. Rep. 829, 19 Ann. Cas. 218,
100 Pac. 4; Ehrisman v. Sener, 162 Pa. St. 577, 29 Atl. 719; Bridge v. Ward, 35 Wis. 687.
75. Potter v. Couch, 141 U. S. 296, 35 L. Ed. 721; Re Dugdale, 38 Ch. D. 176. See Wieting v. Bellinger, 50 Hun (N. Y.) 324, 3 N. Y. Supp. 361.
76. Bramhall v. Ferris, 14 N. Y. 41; Dommett v. Bedford, 6 Term. Rep. 684; Cooper v. Wyatt, 5 Madd. 482. Contra, Streit v. Fay, 230 111. 319, 120 Am. St. Rep. 304, 82 N. E. 648; Diamond v. Rotan, 58 Tex. Civ. App. 263, 124 S. W. 196.
(f) Equitable interests. The validity of a clause of cesser, or limitation over, upon the alienation, voluntary or involuntary, of an equitable estate, is to be determined by the same rules as apply in the case of such a provision in connection with a legal estate, that is, it is invalid in connection with an equitable estate in fee simple,77 but valid in connection with an equitable estate for life.78 In the case even of a life estate, however, a provision for cesser, or a limitation over, upon bankruptcy of the life tenant, has been regarded as invalid if it occurs in a settlement made by the life tenant himself, that is, one cannot create an equitable estate in his own favor to be divested upon his bankruptcy, this being regarded as in fraud of the bankrupt law.78 But the validity of a limitation over, divesting an equitable life estate created by the settlor in his own favor, upon voluntary alienation by him, has been recognized in English cases,79 though there appears to be authority to the contrary.80
77. Potter v. Couch. 141 U. S. 296, 35 L. Ed. 721; Re Machu, 21 Ch. D. 838; Re Dugdale, 38 Ch. D. 176.
78. Shee v. Hale, 13 Ves. 404; Stephens v. James, 4 Sim. 499; Fe Alwyn's Trusts, L. R. 16 Eq. 585; Nichols v. Eaton, 91 U. S. 716, 23 L. Ed. 254; Mehane v. Mebane, 4 Ired. Eq. (39 N. Car.)
131, 44 Am. Dec. 102; Bull v. Kentucky Nat. Bank, 90 Ky. 452, 12 L. R. A. 37, 14 S. W. 425; Tillinghast v. Bradford, 5 R. I. 205; Heath v. Bishop, 4 Rich. Eq. (S. C.) 46, 55 Am. Dec. 654. 78. Higinbothara v. Holme, 19 Ves. 88; Mackintosh v. Pogose. (1895) 1 Ch. 505; Lewin, Trusts (12th Ed.) 118.
The mere fact that a trust exists in land does not ordinarily affect the freedom of alienation. If A has an estate for life, with remainder to B and C in fee simple, the three persons named, if sui juris, can, by joining in a conveyance, transfer the absolute and complete ownership, and so if X holds the property in trust for A for life, and after A's death in trust for B and C and their heirs, the three persons last named can, if sui juris, in the ordinary case, call for the legal title, and then transfer the complete ownership. And even if the cestui or cestuis que trust have no right to call for a conveyance of the legal title,81 it does not seem that, so long as the trustee is able, by voluntarily joining with the cestuis in a conveyance, to vest the complete ownership in the grantee, that the existence of the trust can be regarded as involving a restraint on alienation. And it does not involve such a restraint if the trustee is expressly given a power to dispose of the land free from the trust. In the absence, however, of such a power, the trust would seem to operate as a restraint on alienation in so far as the intention of the creator of the trust may prevent the merger of the legal and equitable interests, into whose soever hands they may pass, as by a requirement that the trust shall continue for a certain period or until a certain event. The existence of the trust may also suspend the right of alienation if the interest of the cestui que trust is such that it cannot be transferred, owing either to a statutory prohibition of such transfer, or to the expression of an intention to this effect in the creation of the trust.