It is quite certain that trusts, which have now such immense importance in the law and the disposition of property in England and in the United States, originated in fraud. The feudal law of tenures embarrassed owners of property in their disposal of it, and the statutes of mortmain obstructed the appropriation at the pleasure of the owner still more; and to evade these rules of law, trusts (or the granting of property in trust) were invented. As the common law took no cognizance of trusts, they came before a court of equity. And if we remember that the chancellor was in early times usually a priest, and that the statutes of mortmain, which trusts were invented to evade, restricted or prohibited the granting of property to religious communities, we can understand why the court of equity took them under its protection. It did this by summoning the trustee before it, and compelling him " to do what justice and equity required." Hence Sir Robert Atkins, in the reign of Charles II., said: "A trust had for its parents fraud and fear, and for its nurse a court of conscience." The way in which these laws were successfully evaded by trusts was this.
If property is given to A. B., with all the forms of law, and in the same manner as if it were to be absolutely his own, but in fact for the use and benefit of C. D., the common law knows no one but A. B.; all the title is in him, and the estate in him is protected against all forfeitures but those which attach to him. But C. D. has all the benefit and advantage of the property. Hence if C. D. were a traitor, who would have forfeited the estate had it been his in law, or a religious body which could not take the estate by law, A. B. still might hold it for the benefit of C. D. In this way fraud and fear were the parents of trusts. But as the law knew no estate or title but that of A. B., if he chose to be dishonest, and to refuse all benefit of the trust to C. D., there was no remedy at law, and the trust would have been defeated. Then the court of equity came in, and, by compelling A. B. to perform the trust he had undertaken, became the nurse of this child of fraud. Now, however, trusts are employed in a vast number of cases, most honestly and beneficially, wherever it is desired to give any person the benefit and use of property, but to keep from him all power of forfeiting or alienating it.
The greatest number of modern trusts are created either by will or by transfer inter vivos to protect the estates of women from the control or the creditors of their husbands, or to carry down property to a series of holders, in some other way than that which would be provided by the laws of inheritance or distribution. To all trusts there are therefore two parties. One of these holds the legal title to the estate, and he is called trustee; the other has the actual benefit of the trust, and is called, by a Norman French phrase, the cestuy que trust. As the trustee has all the title which a court of law can recognize, he is said to have the legal estate; and as the cestuy que trust has an interest which only a court of equity can recognize and protect, he is said to have an equitable estate. At present, when the courts of law and the rules of law are coming nearer to the courts and the rules of equity, the antagonism between these has passed away, and the distinction become much less important. There may be any number of trustees and any number of cestuy que trusts in any trust.
If the trustee holds the property for the benefit of the cestuy que trust without any particular restrictions, directions, or provisions, it is called a simple trust; and then the nature and operation of the trust are determined by legal or equitable construction. But if the purposes of the trust, and the manner in which and the means by which these purposes shall be accomplished, are specifically pointed out and defined, it is then a special trust, and these special directions must be accurately complied with. Hence a trust may be merely ministerial; and it is so called when the trustee has no other duty than to collect and pay over the proceeds of property. Or it may be a discretionary trust, and is so when the general purpose only is declared, and the manner in which this purpose shall be accomplished is left to the discretion of the trustee. So a trust may have a power annexed; as when a trustee of lands has the power of leasing, or even of selling and converting them into personal property. And indeed any lawful powers may be given to a trustee. There are also private trustees and public trustees. The former hold property for one or more individuals, who are distinctly pointed out, personally or by description.
Public trustees are those who hold property for the benefit of the whole public, or for a certain large part of it, as a county, town, or parish. They are regarded by the law as in many respects official persons, with official rights and responsibilities. - The subject matter of a trust may be any property of a valuable nature, and many things also which the common law does not recognize as disposable or assignable property; as choses in action and probabilities of every description, or mere authorities which may be or become valuable. Even if the property be in another state or country, so that the process of the court could not reach it, yet a court of equity will interfere in any case of trust, however distant or inaccessible the property may be, provided the principal defendants are actually served with process, and adequate relief may be given by a decree in personam. - As to the capacity of creating a trust, it may be said that any person who has the power of making a valid disposition of any property, by will or grant, has also the power of attaching to his disposition of the property such limitations or directions as shall create a trust. As a general rule, any person may be a trustee, even if he be incapacitated by law from transacting business on his own account.
Thus infants, idiots, lunatics, married women, or other persons non sui juris, may become trustees. The reason is, that the trust is created for the benefit of the cestuy que trust, and not of the trustee; and if the trustee cannot take the legal estate, there will be nothing to support the equitable estate, and the trust will fail. So, too, it is established doctrine that a trust once created shall never fail on account of the death of a trustee, or his refusal to accept the trust. All difficulties of this kind are avoided by the power of the proper court (usually the court of equity) to remove a trustee and supply his place, or fill the place of a trustee when vacant by his death or refusal. It is very common for a will or deed creating a trust to prescribe in what way and by what person or tribunal this power may be exercised; and provisions to this effect would doubtless be regarded when they did not contravene the general principles of the law, or the statutory provisions in behalf of trusts and trustees.
Any person in possession of property, real or personal, by legal title and of his own right, may, by a proper declaration of trust, convert himself into a trustee, and then his legal title will remain undisturbed, but subjected to the equitable interest. - Any person may become a cestuy que trust of property, to the extent of his legal capacity of holding the same. Nor is it necessary to the creation of a trust estate that the cestuy que trust should be named, or even that he should be in being when the trust is created.. Thus money may be bequeathed or given to a trustee for any children that a certain person may have living at his death, and to accumulate until the death of that person. The assent of the cestuy que trust, if he is capable of giving one, is, strictly speaking, necessary; but it will be presumed where the trust is beneficial to him. Unincorporated societies and institutions may take the benefit of a trust, as well as natural persons or corporations. - Trusts and uses (see Uses) were originally created and declared principally, if not exclusively, by parol; but this was because they were then intended to evade the law. Now, it is uncertain whether trusts of real estate can be created except in writing, and for some purposes by deed.
In most of the United States, the provisions of the English statute of frauds, requiring trusts to be in writing, have been reenacted. But in England courts of equity have given a very liberal construction to these provisions, and a similar construction might be expected here. Where a trust is created, if at all, by a writing, especially if that writing be a will, any direct fiduciary expressions, indicative of a purpose that the donee of the property is to take it, in whole or in part, for the benefit, use, advantage, or support of another, will be held sufficient to create a trust. But such words or directions must be imperative on the donee; if they, by fair construction, only give him a power or permission, or even express a desire which is not obligatory on him, they do not create a trust. If the trust is distinctly and positively created, although no cestuy que trust is designated, the courts will enforce the trust.
If the donee may at his own discretion or pleasure execute the alleged trust or not, it is not a trust; but it is a valid trust if he must execute the trust, although the manner of doing it is entirely at his discretion. So, too, there may be what are called "resulting" or "presumptive trusts," which are expressed nowhere, but are implied or presumed from the assumed intention of the parties, or arise from the nature of the transaction; and the statute of frauds expressly excepts these trusts from the requirement of writing. - A trustee is always at liberty to decline a trust, but he cannot take the property without the trust. The best and usually the only evidence of an acceptance of the trust is some action by the trustee under it. The same person may stand in different relations; thus he may be appointed executor and also trustee; and he may give separate bonds with different sureties, as executor and as trustee. In such cases it is sometimes difficult to say where the duty and responsibility of executor end and those of trustee begin.
The general rule is this: If the executor has specifically set apart a portion of the estate to the purpose of the trust, he will be considered as to that portion as having discharged his duty as executor and entered upon his duty as trustee. - An important doctrine of the law of trusts, familiar to English lawyers and frequently applied in English courts, is known by the name of the cy-pres doctrine. This phrase means literally " near to it;" and this doctrine is applied when a trust is certainly created, and it is impossible to execute it precisely as the donor prescribed, and then a court of equity, from its desire to sustain the trust, will direct an exercise of it as near as possible to the original intention of the donor. By far the most frequent occasion for its application arises from the change of circumstances in ancient trusts; as, for example, where there is an endowment for a school limited to pupils of a certain description, and there are not now any pupils of that description. But that necessity cannot exist so frequently or with so much force in the United States as in England. As an undefined judicial power, it is open to abuse, and can scarcely be said to be recognized in the United States. - Trustees are held, both in England and in this country, to a somewhat strict accountability.
A trustee is bound not only to guard against loss or damage to the trust property, but to see that it is made reasonably productive. If he suffers it to lie idle unreasonably, when safe investments can be made, he will be charged with interest, and in some cases, as when he is guilty of gross delinquency, or if he mingles the property with his own for his own benefit in trade or otherwise, he will be charged with compound interest. He may not himself buy property which he sells as trustee, nor sell his own property and buy it as trustee; and this rule is applied not only to all trustees, but to agents generally. - An important difference between private and public trustees should be mentioned. Private trustees are responsible on the contracts they make as trustees, unless they guard against this by express reservation; and merely calling themselves trustees, or even saying they act as trustees, is not, generally speaking, sufficient. Thus an executor, signing a common promissory note as executor, is still liable on it personally, although the estate be insolvent.
But public trustees, or persons acting in a known official capacity, are not personally liable on the contracts they make for the state or government, unless they make themselves so expressly or by a reasonable implication, or have in their hands funds for the purpose of the contracts. It is, of course, always in the power of one who deals with a public trustee or agent to ask of him his own personal liability; and it is always in the power of that trustee to give it or withhold it.