§ 358. Courts of Equity

Gradually, many causes which the courts of common law would not hear were in this way brought to the attention of the chancellor and there gradually developed a widely extended system of jurisdiction, called, to distinguish it from the common law, "equity jurisdiction," and the courts in which it was administered were called from the chancellor, "courts of chancery or equity." Having two systems of legal relief in the same country was confusing and uneconomical but it came about in the course of time, and for more than two hundred years the courts in England were divided into two distinct systems, one termed "law" and the other termed "equity." The terms so used add to the layman's confusion because the decisions of the courts of chancery are as much the law of the land as the decisions of the courts of common law, and neither court has any monopoly of the quality of equity.

When a lawyer says that a case is an equitable case, he means that it will have to be tried in a court of equity, and when he talks of a law case he means that suit must be brought in a court of common law and not in a court of chancery.

Equity procedure was at first simple and informal, but human nature loves forms and settled customs, and chancery procedure soon became more formal and complex than even the common law, and a chancery suit became proverbially slow.1

Equity was brought to this country and, as in England, was used as a separate system to supplement the defects of the common law.

In some states the attempt has been made to combine law and equity and to have both legal and equitable cases tried before the same courts, but even where this is the case the legal profession has kept up the distinction between the two.

The reader who wishes to go further into this subject may read Story, Equity Jurisdiction, Vol. I, § 56, and notes.

In fact, it is not possible to understand our system of administering justice without a recognition of this difference between what is technically and arbitrarily called "law" and "equity."

§ 359. Equitable Titles

As has been said, the courts of common law refused to give any relief to the person who was to benefit by property placed in trust, if the trustee refused to do his duty. The courts of chancery did give relief, and all litigation concerning trusts and their administration is to this day a most important function of chancery jurisdiction. It is vitally necessary to any study of the law of trusts that at least as much as has here been given in regard to the distinction between "law" and "equity" and the difference between "legal titles" and "equitable titles" should be understood.2

§ 360. The Legal Title in the Trustee

An essential element in a trust is that the trustee has the legal title. If it is real estate, every feature of ownership, title on public records, actual possession, liability for taxes, right to sue for trespass, etc., is in the trustee. No one.else has power to sell, mortgage, or lease. Every element of legal possession is in the trustee. In event of the death of a sole trustee, his heirs would take the property if it was land, and his executors or administrators if it was personal property. Those who thus take the legal estate would take it charged with the trust. Heirs and executors cannot be compelled to act as trustees against their will, and if they decline, the court having jurisdiction will appoint new trustees to succeed the original trustees. If there are several trustees, the title will

pass to the survivors until no one is left.

See earlier chapters. See also Woodruff, Introduction to the Study of Law. PP. 46-52.

§ 361. The Equitable Title in the Beneficiary

As the legal title is in the trustee so is the beneficial interest entirely in the one for whose benefit the trust was created. Unless the instrument by which the trust is created provides otherwise, the beneficiary, if of age, can sell or dispose of his or her equitable estate in the property as freely as can the owner of a legal title. When it is desired to prevent anything of this kind, the deed or will may provide against it. Being an equitable title, any dispute concerning its terms or interference with the rights of the beneficiary will have to be settled in a court of equity instead of in a court of law.

§ 362. Creating a Trust

The purposes for which trusts are created are at this time diverse, and will be considered in detail later. Suffice it for the present to state that perhaps the most common and simplest illustration of the creation of a trust is afforded by the case of a man with wife and children, who makes his will and arranges it so that if he dies his property will be safe and the income be applied to the maintenance of those dependent on him. In such case it would be natural that he should select some capable business man or men, younger than himself, and leave the property to them, in trust, to handle it and care for it, and to pay over the income to his wife for herself and the children. This kind of transfer could be done by will or by deed or conveyance of some kind.

The effect would be to make his friend or friends trustees, and his wife and children would be beneficiaries. The legal estate would go to the trustees, and if it were necessary to prosecute trespassers or there were a suit about the title to any part of the estate, such a suit would be brought in a common law court. But if his friends died or became incompetent, his wife and children, having only an equitable interest, would go to a court of equity for relief. A court of equity would have

power to do whatever was necessary to be done. It could require the trustees to account, and show what they had done in managing the property, what income or profits had been collected, and what part had been paid over. If there had been carelessness or fault, the court could compel restitution. If the trustees were incompetent or dishonest, the court could remove them and appoint more reliable men. In short, a court of equity has power to do whatever should be done to make the trust effectual.

Whenever, by will or deed, the legal interest in real or personal property is placed in one person while the equitable or beneficial interest is in another, a trust has been created.3

It may be stated as a general proposition, that everyone competent to enter into a contract, or to make a will, or to deal with the legal title to property, may make such disposition of it as he pleases; and he may annex such conditions and limitations to the enjoyment of it as he sees fit; and he may vest it in trustees for the purpose of carrying out his intention. All persons, sui juris, have the same power to create trusts that they have to make a disposition of their property.*

§ 363. The Instrument That Creates a Trust

A trust may be created by will, by deed of trust, by declaration of trust, or if it concerned only personal property, theoretically a trust could be created orally. Practically, no trusts are created orally, but they always come into being by some written instrument.

According as trusts are created by will or by some other written instrument, they are classified as "testamentary trusts" or as "voluntary trusts." In neither case is there any prescribed form of words that is necessary to create a trust. It is usual and always advisable to use the words "in trust" to 3 Pollack and Maitland, History of the English Law, Vol. II, pp. 226, 227. Perry on Trusts, § 28.

introduce the purposes of the trust and the disposition of the property and income placed in the custody of the trustee.

A "testamentary trust" is so called because it is created by a last will and testament.

A "voluntary trust" is so called because it is in practically all cases created by a voluntary deed or instrument of transfer executed not under compulsion or to fulfil a contract obligation, but freely to secure some kindly or benevolent purpose.

For examples of the creation of testamentary trusts and voluntary trusts, see Form 7.

§ 364. Express Trusts

Nearly all trusts are express or direct trusts—that is, they are created by wills or other instruments that directly and explicitly describe the property that is to be the subject of the trust, the person or persons who are to be trustees, and the persons who are to be the beneficiaries, and set forth what the trustees are to do with the property and the disposition that is to be made of the income and, finally, of the fund or property itself. If the language of the will or other instrument is not clear and explicit, a trust might be implied or presumed which, to distinguish it from an express trust, would be called an "implied trust."

An express trust in land must of necessity be in writing to conform to the provisions of the Statute of Frauds. In most states in this country it is possible to create an express trust in personal property by parol. This subject is treated

more fully in Chapter XLIV.

§ 365. Implied Trusts

In some cases where the language will not create an express trust, the court will imply a trust from the intentions of the creator. It often happens in a will that a testator will leave

Matter of Carpenter, 131 N. Y. 86.