The Trust As An Instrument of Law Reform

The Yale Law Journal Company, Inc.
The Trust as an Instrument of Law Reform

Author(s): Austin W. Scott
Source: The Yale Law Journal, Vol. 31, No. 5 (Mar., 1922), pp. 457-468
Published by: The Yale Law Journal Company, Inc.
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LAW JOURNAL
Vol. XXXI MARCH, 1922 No. 5
THE TRUST AS AN INSTRUMENT OF LAW

REFORM
AUSTIN W. SCOTT
Professor of Law, Harvard University
Professor Maitland, in one of his most brilliant essays,' said:
"The idea of a trust is so familiar to us all that we never wonder at it.

And yet surely we ought to wonder. If we were asked what was the
greatest and most distinctive achievement performed by Englishmen
in the field of jurisprudence I cannot think that we could have any better
answer to give than this, namely, the development from century to
century of the trust idea."
Maitland's dictum at first blush may seem to be an exaggeration, but

when it is considered how much of the progress of the English law is
due to the doctrines of the law of uses and trusts, its truth would seem
to be clear. It was chiefly by means of uses and trusts that the feudal
system was undermined in England, that the law of conveyancing was
revolutionized, that the economic position of married women was ame-
liorated, that family settlements have been effected, whereby daughters
and younger sons of landed proprietors have been enabled modestly to
participate in the family wealth, that unincorporated associations have
found a measure of protection, that business enterprizes of many kinds
have been enabled to accomplish their purposes, that great sums of
money have been devoted to charitable enterprizes; and by employing
the analogy of a trust, by the invention of the so-called constructive
trust, the courts have been enabled to give relief against all sorts of
fraudulent schemes whereby scoundrels have sought to enrich them-
selves at the expense of other persons. Many of these reforms in the
English law would doubtless have been brought about by other means;
' The Unincorporated Body. 3 Maitland, Collected Papers (I9II) 27I, 272.
I7 [457]
458 YALE LAW JOURNAL
but the fact remains that it was the trust device which actually was
chiefly instrumental in bringing them to pass.
There are two sides to the picture. The trust has often served as a
means of evading the law. Lord Bacon said that "the special intent
unlawful and covinous was the original of uses, though after it
induced to the lawful intent general and permanent."2 The line
between evasion and reform is after all a difficult one to draw. The
evasion which in the long run proves successful is usually a reform.
Mr. Justice Holmes, with characteristic discrimination, has said :3
"We do not speak of evasion, because, when the law draws a line, a
case is on one side of it or the other, and if on the safe side is none the
worse legally that a party has availed himself to the full of what the
law permits. When an act is condemned as an evasion what is meant is
that it is on the wrong side of the line indicated by the policy if not
by the mere letter of the law."
A trust is a device for enabling one to enjoy various rights, powers,

and privileges in respect to property greater than those enjoyed by
owners of property, for enabling one to enjoy the benefits of owner-
ship without subjection to all the duties and liabilities resulting from
ownership. The question with which courts of equity have been com-
pelled to struggle is how far it is possible to go without crossing the
line which separates the legitimate use of the trust device from an illegal
evasion of the letter or the policy of the law.
There have been four more or less definite periods in the history of
the development of uses and trusts. For the use or trust, as Lord
Bacon said, "grew to strength and credit by degrees." It did not,
Minerva-like, spring full-grown into being. There were centuries of
gestation before it became a legal institution, and centuries of growth
before that institution took its place as the central figure in a "noble,
rational and uniform system" of equity.
I
The first period began with the first employment of uses4 and con-
tinued until the beginning of the i5th century. During this period uses
were not enforced by the courts; they were mere honorary obligations,
resting upon gentlemen's agreements. The cestui que use had no legal
rights, but on the other hand he was free from the burdens of owner-
2 Bacon, Reading on the Statute of Uses, 24. "A trust is altogether the same
that an use was before 27 Hen. 8, and they have the same parents, fraud and fear;
and the same nurse, a court of conscience." Per Atkyns, arguendo, in Attorney
General v. Sands (i669, Exch.) Hard. 488, 49I.
'Bullen v. Wisconsin (ii6) 240 U. S. 625, 36 Sup. Ct. 473.
'As to the origin of uses, see Ames, Lectures on Legal History (1913) 233; 2
Maitland, op. cit. 403; Holmes, Early English Equity (i885) I L. QUART. REV.
i62.
TRUST AS INSTRUMENT OF REFORM 459
ship. The courts were neutral; they did not help, but neither did they
hinder.
Yet even in this period Parliament had to interfere in order to prevent
the employment of uses to accomplish purposes which were too
obviously opposed to the prevalent conceptions of public policy. In
I376 conveyances for the use of the transferor made for the purpose
of defrauding his creditors, were condemned.5 In I377 a statute was
passed, characteristic of that turbulent time, providing that if a disseisor
convey to "lords or other great men" or to persons unknown, to the
use of the disseisor, in order to render it difficult if not impossible for
the disseisee to recover the land, the conveyance should be void and the
disseisee might sue the disseisor in possession, the "pernor of profits,"
and recover the land.6 In I39I the mortmain statutes, whereby land
conveyed to religious and other corporations was forfeited to the over-
lord, were extended to cover cases where land was conveyed to indivi-
duals to the use of such corporations.7 The cestui que use in these cases
had no enforceable interest in the property conveyed, but the danger
that the feoffee would carry out his moral obligation was so great, and
the result of his so doing was regarded as so subversive of public policy,
that Parliament felt impelled to interpose.
II
The second period began when, early in the I5th century, the Chan-
cellor first undertook to enforce uses,8 and continued until the enact-
ment of the Statute of Uses in I536. The common law was at this time
most inflexible and most complex. The common-law judges would
have stunted uses by forcing them into the categories of conditions or
covenants; and at the same time doubtless would have held many of
the purposes for which uses were commonly employed invalid as against
the policy of the law. Fortunately however during this highly critical
stage of their development uses were subject to the exclusive jurisdic-
tion of equity;9 and fortunately the Chancellors adopted them in a
liberal spirit.
The Chancellors treated uses for many purposes as equitable estates in
property, and not as mere choses in action, and applied to them by
analogy many of the legal rules governing estates in property. As
early as I465 it was held that when the cestui que use dies his interest
55o Edw. III, c. 6. See also (I379) 2 Rich. II, c. 3; (1487) 3 Hen. VII, c. 4;
(I570) Q3 Eliz. c. 5.
oi Rich. II, c. 9. See also (0402) 4 Hen. IV, c. 7; (433) ii Hen. VI, c. 3;
(1485) i Hen. VII, c. i.
715 Rich. II, c. 5.
8 The first recorded decree apparently was made in i446. Myrfyne v. Fallan, 2
Cal. Ch. XXI. Professor Ames thinks that it is probable that uses were first
enforced by the Chancellor some time in the reign of Henry V (1I43-I422).
Ames, op. cit. 237.
9(1464) Y. B. 4 Edw. IV, p. 8, pl. 9.
descends in accordance with the rules governing descent of the land

itself.10 Like land and unlike choses in action, uses were held to be
assignable.1' Estates in uses were recognized, estates in fee tail for
example.12 It was held that various classes of persons claiming under
the feoffee to uses took subject to the uses, namely a purchaser with
notice of the use,13 the executor or heir of the feoffee,14 and a transferee
who paid no value.15
Although the use was thus regarded for many purposes as an equit-
able estate, the principle that equity follows the law was not at this time
fully accepted or consistently applied. It was possible, therefore, by the
employment of uses to avoid the application of many of the rules of
law.
Equity refused to follow the technical legal rules governing the
creation of estates. These rules rested upon feudal conceptions which,
although they still flourished in the courts of law, were no longer
required by public policy. Although a use was regarded as an equitable
estate, yet the feudal doctrines governing seisin were not applied to
uses. In creating legal estates the doctrines as to seisin required that
there should be no overlapping of estates and no hiatus between estates;
but the Chancellors allowed shifting and springing uses and executory
devises. Moreover uses could be created without the formality of livery
of seisin or other formalities necessary for the creation of legal estates.
Uses were frequently employed in this period by tenants to defeat the
claims of their overlords. The feudal incidents of tenancy bore heavily
upon the tenant. The overlord was entitled to a relief and in some
cases to a heriot when the tenant died, and the land reverted to him by
escheat if the tenant died without natural heirs or was attainted of
felony. If the heir was an infant the overlord was entitled to act as
guardian and to take the rents and profits until the heir became of age,
and to sell the privilege of marrying the heir. He was entitled to aids
when his eldest son was knighted and when his eldest daughter was
married. These various burdensome incidents could be avoided in part
at least by conveying the land to feoffees to the use of the tenant."'
There was no tenure of equitable estates. The cestui que use owed
homage or fealty to no overlord. He held his estate of no one. The
feoffees, it is true, were subject to the feudal incidents, but it was possi-
ble by employing several feoffees as joint tenants to avoid most of them.
When it is remembered that during the Wars of the Roses most of the
10 (465) Y. B. 5 Edw. IV, p. 7, pI. i6; (1481) Y. B. 2I Edw. IV, p. 24, p1. I0.
" St. Germain, Doctor and Student (1523) Dial. II, c. 22.
2 Crompton, Courts, 6o.
13 (1465) Y. B. 5 Edw. IV, p. 7, p1. i6; (i47i) Y. B. II Edw. IV. p. 8; Fitzher-
bert, Abridgment (I492) tit. Subpoena, pI. I8.
4 Fitzherbert, op. cit. tit. Subpoena, p1. I4; (150I) Keil. 42, p1. 7.
1 (1522) Y. B. I4 Hen. VIII, p. 4, p1. 5.
" (I535) Y. B. 27 Hen. VIII, p. 8, p1. 22; Jenk. C. C. I90.
TRUST AS INSTRUMENT OF REFORM 46i
land in England was held to uses, it will be seen how great a blow was
given to the feudal system by the invention of uses. But although the
courts would not help the overlord, Parliament gave him some relief.
In 1487 a statute was passed providing that the lord should be entitled
to wardship or relief on the death intestate of the cestui que use of land
held by knights service ;17 and in I503 it was provided that on the death
intestate of the cestui que use of lands held in socage, the lord should
"have his relief, heriot, and all other duties."1
Similiarly the courts did not help the king in the event of treason
committed by a cestui que use. Men who were interested in politics had
been unable to take part in that pastime without the danger of losing
all their property. The favoring of the losing side was treason and the
penalty for treason included forfeiture to the king of the traitor's
property. During the Wars of the Roses the followers of the fortunes
of Lancaster and of York were accustomed to vest their property to
their own use in a peace-loving subject, usually a law clerk. This
device however was ultimately defeated by acts of Parliament,'9 which
provided that uses as well as legal interests should be forfeited to the
Crown upon attainder of treason.
During this period also uses were frequently employed for the purpose
of devising land. The policy of the feudal system forbade devises.
The defence of the realm rested on the assumption that a tenant's heir
was best fitted to take his place as tenant on his death. The natural
desire, however, to make testamentary dispositions, particularly with a
view to making provision for daughters and younger sons, was wide-
spread. Tenants would therefore make feoffments to the use of such
persons as they might designate by will. The feudal system was fast
losing its hold in England, and the courts were unwilling to hold that
such dispositions were against public policy. When the Statute of Uses
put an end to this practice by turning uses into legal titles, five years
had not elapsed before Parliament expressly authorized devises of
land.20
A contemporary statement of the reasons why most of the land in
England was held to uses before the end of this period, is given in that
very interesting treatise by Christopher St. Germain called Doctor and
Student, written in 15i8.21
174 Hen. VII, c. U7.

19 Hen. VII, c. I5.
19 (I534) 26 Hen. VIII, c. I3, sec. 5; (I540) 33 Hen. VIII, c. 20. By special
acts of Parliament from time to time the equitable interests of various individual
traitors had been declared forfeited to the Crown. See e. g., (1387) ii Rich. II,
c. 3.
Conversely by other acts the property of certain loyal cestuis que use was saved
to them although their feoffees had committed treason. See e. g. (1403) 5 Hen.
IV, c. I; (1405) 7 Hen. IV, c. 5.
0 (1540) 32 Hen. VIII, c. i. See also (0542) 34 & 35 Hen. VIII, c. 5.
t Dial. II, ch. 22.
"Doctor. I pray thee touch shortly some of the causes, why there
hath been so many persons put in estate of lands to the use of others
as there have been; for, as I hear say, few men be sole seised of their
own land.
"Student. There have been many causes thereof, of the which some
be put away by divers statutes, and some remain yet. Wherefore thou
shalt understand, that some put their land in feoffment secretly, to the
intent that they that have right to the land should not know against
whom to bring their action, and that is somewhat remedied by divers
statutes that give actions against pernors and takers of the profits. And
sometime such feoffments of trust have been made to have maintenance
and bearing of their feoffees, which peradventure were great lords or
rulers in the country: and therefore to put away such maintenance,
treble damages be given by statute against them that make such feoff-
ments for maintenance. And sometime they were made to the use of
mortmain, which might then be made without forfeiture, though it were
prohibited that the freehold might not be given in mortmain: but that
is put away by the statute of R. 2. And sometime they were made to
defraud the lords of wards, reliefs, heriots, and of the lands of their
villeins: but those points be put away by divers statutes made in the
time of King H. the 7th. Sometime they were made to avoid execu-
tions upon a statute-staple, statute-merchant, and recognisance: and
remedy is provided for that, that a man shall have execution of all such
lands as any person is seised of to the use of him that is so bound at the
time of execution sued, in the i9th year of H. 7. And yet remain
feoffments, fines, and recoveries in use for many other causes, in manner
as many as there did before the said estatute. And one cause why they
be yet thus used is, to put away tenancy by the courtesy and titles of
dower. Another cause is, for that the lands in use shall not be put in
execution upon a statute-staple, statute-merchant, nor recognisance, but
such as be in the hands of the recognisor at the time of the execution
sued. And sometime lands be put in use, that they should not be put in
execution upon a writ of extendi facias ad valentiam. And sometime
such uses be made that he to whose use, etc., may declare his will
thereon: and sometime for surety of divers covenants in indentures of
marriage and other bargains. And these two last articles be the chief
and principal cause why so much land is put in use."
III
The third period began with the enactment of the Statute of Uses22
in I536 and lasted for about a century. The purposes of that Statute
are expressed in its preamble. Uses had been employed to disinherit
heirs, to create estates without solemn formalities, to deprive lords of
their feudal claims, to deceive purchasers, to deprive widowers of
curtesy and widows of dower, to deprive the King of his claim to
property of persons attained of treason, to give to aliens interests in
land. To remedy these evils which followed from the separation of
the legal and equitable titles, the Statute provided that the cestui que use
should have the legal title.
One evil arising from the creation of uses the Statute did not cure,
namely, the secrecy attending the creation of uses. The cestui que use
22 27 Hen. VIII, c. io.
might be in open possession, enjoying the rents and profits of the land,
no man knowing who the legal owner might be.23 The Statute did not
require any new formalities, any notorious and open act, in the creation
of uses, although the creation of uses now resulted in the creation of
legal estates. A half-hearted attempt to cure the evils resulting from
the secrecy with which uses could be created was made the same year,
when Parliament passed the Statute of Enrolments24 which required
that a bargain and sale of a freehold estate should be by a writing sealed
and enrolled in a public office. This Statute however accomplished
little; for it had no applicability to a covenant to stand seised nor did it
apply to a bargain and sale of a leasehold interest. The only real effect
of the Statute of Enrolments was to require two steps in the creation
or transfer of freehold estates, a lease and a release.
When by virtue of the Statute of Uses the courts of common law
were driven to take cognizance of uses, they evolved a more definite
though more intricate philosophy of the law of uses. The use was
regarded as a concrete thing which had certain inherent properties essen-
tial to its nature. These properties were not adduced merely by analogy
to the technical rules of the common law, nor yet were they based alto-
gether upon any consciously accepted principles of public policy. "A
use in law hath no fellow," as Lord Coke observed. In some respects
uses are "ordered and guided by conscience"; but in some respects
they "ensue the nature of possessions." Hence the flexibility of the
new science of conveyancing; and hence also the arbitrary limits to that
flexibility. The science of the law of uses became more metaphysical
in character, as it came to be administered by the courts of law, at a time
when legal science was most metaphysical. If a use could be regarded
as a use by way of remainder, the courts doggedly insisted on so regard-
ing it, rather than as a shifting or springing use, although the conse-
quence was to defeat the intention of the settlor, by bringing it under
the technical rules of law as to remainders. Still when all is said and
done the law of conveyancing was revolutionized through the employ-
ment of uses. The bargain and sale and the covenant to stand seised
ultimately supplanted the feoffment. The system of conveyancing
employed to-day in England and in the American states is based either
directly upon the Statute of Uses, or upon statutes passed in the i9th
century which pruned some of its outworn formalities from the system
based upon the Statute of Uses. But whether the time is not now ripe
for the introduction of a simpler system such as is now proposed in
England is another question.25
"3 The evils resulting from the secrecy with which uses might be created were
recited in (1483) i Rich. III, c. i, which provided that a conveyance by or execu-
tion against the cestui que use should be valid not only against him but also against
the feoffee to uses.
3' (1536) 27 Hen. VIII, c. i6.
25 See Hudson, Current Land Law Reform in England (I92I) 34 HARv. L. RE
34'.
IV
The fourth period began with the revival in the 17th century of the
use as a passive trust. For a hundred years or so after the enactment
of the Statute of Uses it appears that trusts were seldom created.
Occasional active trusts there might be, but these were usually regarded
as mere choses in action; and there were occasional trusts of terms for
years and trusts of personal property; but the passive trust created by
means of raising a use on a use was not enforced for about a century
after the Statute of Uses. A use on a use had always been held even in
equity to be repugnant and void; even in equity "a use could not be
engendered of a use." Naturally therefore in Tyrrel's Case 26 the courts
of law held that such a use was not executed by the statutes; and when
equity reversed its former view, rejected the metaphysical idea of repug-
nancy, sought to carry out the intention of the parties, and held that such
a use is valid,27 it was too late for the law courts to overrule the decision
in Tyrrel's Case, for to do so would have a disastrous effect upon pur-
chasers who had relied upon that decision. This, as Professor Ames
discovered, is the explanation of the origin of the modern passive trust.28
When this passive trust arose in the I7th century the broad principle
was accepted, receiving its impetus mainly from Lord Nottingham,
Chancellor from i673 to i682, that equity should follow the law. As
a result of this doctrine the law of trusts was systematized, and it
became increasingly difficult to evade or improve the law by means of
the trust device. It became necessary for courts of equity to determine
how far the doctrines of the law expressed a real and living policy and
ought therefore to be followed in equity, and how far on the other hand
they were based upon some technical rule of law or upon some outworn
conception of public policy. The necessary resulting inquiry into the
fundamental principles of the law is one of the great contributions made
by the law of trusts to Anglo-American law.
The old philosophy of uses evolved by the Chancellors of the I5th
century and rendered more subtle and intricate by the courts of law in
the i6th century, gave way to a new philosophy of trusts based upon
clearer conceptions of public policy, of the nature and purposes of the
law. Of these modern trusts Lord Mansfield said :29
"In my apprehension, trusts were not on a true foundation, till Lord

Nottingham held the great seal. By steadily pursuing, from plain prin-
ciples, trusts in all their consequences, and by some assistance from the
Legislature, a noble, rational, and uniform system of law has been since
raised. Trusts are made to answer the exigencies of families and all
purposes, without producing one inconvenience, fraud, or private
mischief, which the statute Hen. 8 meant to avoid."
( I557, K. B.) 2 Dyer, I55a.

"7Sambach v. Dalston (I634, Ch.) Toth. i88.
' Lectures on Legal History (1913) 243. See Maitland, Equity and the Forms
of Action (0909) 42.
'Burgess v. Wheate (I759, Ch.) i Wm. Bi. I23, i6o.
What then is the part these trusts are to play in our mo

of law?
Family Settlements. Primarily of course trusts are emplo
purpose of making family settlements. That is, as always,
pal r6le. The trust is the most flexible instrument for the
private property by will or inter vivos. In this country th
settlement is not as common as in England, but testamenta
increasingly common, particularly in the older states.
The Widow's Dower. By means of trusts it has been possible' to
avoid widows' claims to dower. Before the Statute of Uses it was
settled that wives had no dower and husbands no curtesy in equitable
estates.30 When, however, it was seen that this was an unwarrantable
evasion of the policy of the law, the courts of equity faced about and
held that husbands should have curtesy in their wives' equitable estates.
Unfortunately for the wives, however, it was held by the courts impos-
sible to make a similar holding in the case of dower, not, as has been
suggested, because men and not women sat upon the woolsack, but
because purchasers who had acted on the faith of the earlier decisions
would have found that their titles were rendered imperfect by a depar-
ture from these decisions, or perhaps, as Maitland suggests, because
dower was beginning to be recognized as an intolerable nuisance,
restraining the alienation of land.31
Married Women's Separate Estate. In the i8th century equity took
a step which revolutionized the economic position of married women,
when, refusing to follow the analogy of the legal rule, it allowed a
wife to have an equitable separate estate. When a daughter of well-to-
do parents married, a marriage settlement would be drawn whereby
property would be conveyed to trustees so that she might be assured of
an income which she might enjoy independently of her husband. This
far-reaching reform, however, hardly touched the position of women of
the lower orders. If a prudent housekeeper or ambitious lady's maid
managed first to put by a considerable sum out of her wages and then
to secure a husband, and incautiously failed to employ a solicitor, the
husband became entitled to her savings. The ultimate reform whereby
the legal as well as the equitable estates of married women were freed
from the claims of their husbands has been brought about by statutes
passed in the i9th century. But the way was paved by the Chancellors
who recognized that the old idea of the unity of husband and wife was
becoming obsolete and that even a married woman may be entitled to
economic independence.
8 (i497) Y. B. I3 Hen. VII, p. 7, p1. 3.

' Dower in equitable interests in land is allowed by statute in England, but the
husband may deprive the wife of dower in legal as well as in equitable estates
by conveyance inter vivos or by will. (i833) 3 & 4 Will. IV, c. I05. In some
states in this country widows are entitled to dower in equitable estates.
Evading Creditors. To a certain extent trusts have been successfully

employed for the purpose of evading creditors. The device of trans-
ferring property upon trust for the transferor himself was clearly
doomed to failure. As we have seen, Parliament gave relief to creditors
even before uses were enforced by the courts. When a trust is created
by some one other than the debtor, the English courts have protected
the creditors by allowing them in equity to reach the debtor's beneficial
interest in the property. In this country in a considerable and growing
number of the states, however, it is possible effectively to provide that
the beneficial interest shall be free from the claims of creditors. Great
differences of opinion have been expressed on the question whether it is
in accordance with public policy to allow spendthrift trusts and thereby
to create a favored class of persons who can live in idleness and in
comfort or even in luxury without paying their debts. To some it may
appear to be a reform, but to the writer it seems to violate the sound
principles of personal responsibility upon which the doctrines of the
common law are based.
Charities. By the employment of trusts it has been possible to devote
huge sums of money to charitable purposes. At a time when corporate
charters could only be obtained by special act of Parliament, the chari-
table trust afforded an easy method of disposing of property for chari-
table objects. The courts in England have always been most liberal in
upholding charitable trusts. The Legislature however has sometimes
interfered. We have already seen how by the early mortmain acts
conveyances of land to corporations, or for their use, were forbidden as
in derogation of the rights of the overlord. In the reign of George II
Parliament went much farther and forbade devises of land for charitable
purposes. Now however these statutes are repealed and, although there
are still in England limitations upon the power of charitable corpora-
tions to hold land, the other restrictions have been removed.
In some of the American states there are to be found restrictions
upon the power to make gifts for charitable purposes. In New York
it was formerly held, and now in a few states it is still held, that gifts
cannot be made to trustees for charitable purposes, but only to charitable
corporations. In some states devises and bequests for charitable pur-
poses are forbidden if the will is executed within a certain time of the
death of the testator. In others a testator cannot devise or bequeath for
charitable purposes more than a certain part of his property.
Unincorporated Associations. Unincorporated associations cannot
hold the legal title to property; but property may be held in trust for
them. It is by means of trusts that unincorporated social clubs, fra-
ternal organizations, trade unions and the like, are able to maintain
themselves. To-day however it has become increasingly common for
such organizations to incorporate.
The Trust in Business. In modern times the trust device has been
extensively applied to business transactions. Most corporations find it
convenient if not essential in order to raise the necessary cap

prosecution of their undertakings to give a mortgage upon t
erty. As the amount required is usually more than any one individual
would or could advance, it is necessary to issue a number of bonds of
comparatively small denominations; and as it would manifestly be
impracticable to give mortgages to the several bondholders, the property
is conveyed to individual or more commonly corporate trustees by a
deed of trust, the trustees holding the property in trust for the bond-
holders and for the debtor corporation. Thus it has come about that
most of that huge aggregation of wealth devoted to transportation and
to industry is held by trustees.
In America toward the end of the i9th century a favorite method of
stifling competition between corporations engaged in the same line of
business and of securing a monopoly, was by the creation of a trust of
the shares of the competing companies. The trustees were enabled to
control the activities of all the companies for the benefit of the stock-
holders of all. The purpose sought to be accomplished, however, was
one which was regarded as against public policy. Such trusts therefore,
together with other devices for stifling competition, were held illegal,
and were finally outlawed by the federal statute known as the Sherman
Act and by similar statutes in the various states. As a result of this
misuse of the trust device the term "trust" became identified in the
public mind with monopolistic organization and fell into general disre-
pute.
More recently the trust device has come into wide use as a substitute
for incorporation. In Massachusetts corporations are forbidden to own
land except for the purpose of carrying on their business. In the case
of large office buildings or extensive schemes for land development, it
was found necessary to procure more capital than any individual was
willing to venture. Therefore the practice was adopted of vesting the
title to the land in trustees to manage it for the benefit of beneficiaries,
whose interests were represented by transferable certificates. Such
certificates are bought and sold like shares of stock. The beneficiaries
have most of the advantages of corporate stockholders without the
burdens attaching to incorporation and are subject to few of the burdens
attaching to individual ownership. In the last few years the scope of
these business trusts or Massachusetts trusts, as they are sometimes
called, has been widely extended. They have been used for the
purpose of carrying on businesses of all sorts, in order to avoid the
sometimes over-stringent laws as to corporations. These trusts are
beginning to be widely used in other states. In Texas many of the new
oil companies now being formed are trusts of this kind. In Oklahoma
a recent statute has expressly authorized the creation of the trust with
transferable shares for business purposes.
In other commercial transactions requiring a new method of conduct-
ing business, the trust affords a readily available instrument. In the
last few years as foreign trade has increased, the need of an adequate
machinery for conducting that trade has become accentuated. One
method which has come into common use in which the trust device is
employed is the following: An importer of goods procures from his
bank a letter of credit for the purpose of financing the importation.
The foreign seller consigns the goods to the bank and draws upon it or
upon its foreign correspondent for the price and attaches to the draft
the invoice and bill of lading. Upon the arrival of the goods the bank
indorses the bill of lading to the importing buyer, taking a trust receipt
under which the buyer is given the right to sell the goods, he agreeing
however that the goods or their proceeds shall be held in trust for the
bank to secure the payment of the amount due to the bank.32
The extreme adaptability of the trust is shown in the employment of it
in other business transactions. It has recently been used by several
railroads having a joint terminal. The Supreme Court of the United
States decided a short time ago that the Des Moines Union Railway
Company which holds the legal title to a railroad terminal in the city of
Des Moines holds the terminal property under a trust for the several
railroads using the terminal, and that purchasers of the stock of the
terminal company are bound by the trust.33
CONCLUSION
So it is abundantly clear that uses and trusts have played for over five
hundred years and are still playing a notable part in the progress of the
English law. And how typically English has been their development.
There is, it is true, a certain analogy between uses and trusts and the
usus or usufructus or fidei-commissum or bonorum possessio of the
Roman law. But it is only an analogy.34 Uses and trusts are in their
origin and in their growth the peculiar product of England. The
development of the trust idea has involved a great deal of muddling and
a great deal of common sense; little of sound logic, but much of
expediency. It is no wonder that Gierke said to Maitland that he could
not understand the English trust. No logician, no philosopher, could
have evolved it. It has developed as it has as a practical means of
accomplishing certain results which could not otherwise have been easily
attained.
32 See Vaughan v. Mass. Hide Corporation (19I3, D. D. Mass.) 209 Fed. 667.
Chicago, etc. Ry. v. Des Moines, etc. Ry. (I920) 254 U. S. i96, 4I Sup. Ct. 8i.
8 See 2 Maitland, Collected Papers (I9II) 403, 4i6.

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The Trust as an Instrument of Law Reform

THE TRUST AS AN INSTRUMENT OF LAW

Professor of Law, Harvard University

Professor Maitland, in one of his most brilliant essays,' said:

"The idea of a trust is so familiar to us all that we never wonder at it.

Maitland's dictum at first blush may seem to be an exaggeration, but

A trust is a device for enabling one to enjoy various rights, powers,

descends in accordance with the rules governing descent of the land

174 Hen. VII, c. U7.

22 27 Hen. VIII, c. io.

"In my apprehension, trusts were not on a true foundation, till Lord

( I557, K. B.) 2 Dyer, I55a.

What then is the part these trusts are to play in our mo

8 (i497) Y. B. I3 Hen. VII, p. 7, p1. 3.

Evading Creditors. To a certain extent trusts have been successfully

convenient if not essential in order to raise the necessary cap

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