These questions have been discussed by the present writer, more fully than is possible here, in an article on "Sequel to Workmen's Compensation Acts." 78 It should be added that, up to date, the courts have not manifested an inclination to repudiate the modern common-law doctrine that fault is generally requisite to liability in tort. CAMBRIDGE, MASS. Jeremiah Smith. 78 27 HARV. L. REV. 235, 344. Special reference may be made to pages 250, 251, 363, first sentence on page 367, and last paragraph on page 368. "OF THE PROGRESS OF THE LAW, 1918-1919 TRUSTS1 F all the exploits of Equity the largest and the most important is the invention and development of the trust." So Professor Maitland was accustomed to tell his students; and so indeed it is. The law of trusts, being comparatively modern, has developed more systematically, more symmetrically than the older branches of the law. Its general principles are for the most part now well settled; and most of the numerous current decisions relating to trusts involve mere questions of fact, of construction of written instruments. But there have been a considerable number of recent cases involving important questions of principle. The law of trusts has not ceased to grow. And as long as the institution of private property and the power of testamentary disposition continue to exist, it is safe to predict that the trust, the most effective instrument in effecting the disposition of private property, will hold its place in Anglo-American law. And as long as men succeed in dishonestly acquiring or retaining property, the remedy of the imposition of a constructive trust will continue to be the most effective weapon of redress. THE NATURE OF A TRUST Although perhaps no perfect definition of a trust has been or can be framed, yet it is clear that certain elements are necessary to constitute a trust. There must be a trust res held by the trustee. The trust res may be an interest, legal or equitable, in property, real or personal, tangible or intangible. The obligee may 1 This is the sixth article in a series written by professors in the Harvard Law School in which it is intended to point out the most notable decisions, books, articles, and statutes, coming under the notice of the author, which affect or explain the law in the topic under discussion. The following articles have appeared: Joseph H. Beale, "The Conflict of Laws," 33 HARV. L. REV. 1; Austin W. Scott, "Civil Procedure," 33 HARV. L. REV. 236; Zechariah Chafee, Jr., "Bills and Notes," 33 HARV. L. REV. 255; Roscoe Pound, "Equity," 33 HARV. L. REV. 420; Joseph Warren, "Wills and Administration," 33 HARV. L. REV. 556. The series will be continued in the April number. - ED. be trustee of a chose in action. But the obligor cannot. And one cannot be trustee of a promise made by himself to himself; he cannot, for instance, be trustee of his own note. These principles seem so clear and so fundamental that it is astonishing that courts should occasionally lose sight of them. In Re Leigh's Estate 2 the defendant's testator made a note whereby he promised to pay to a church the sum of $8,000. The payee marked the note paid and gave it back to the defendant's testator, who thereupon signed and delivered to the payee an instrument wherein he acknowledged the receipt of $8,000 and declared himself trustee of this sum for the payee. The court was of the opinion that a valid trust was thereby created. The court said: "His [the testator's] note, when made and delivered to the church, was property in the hands of the latter, and its return to him as trustee was a sufficient designation and setting apart of such sum as a trust fund to be accounted for as provided in the declaration of trust; as much so in fact for all the purposes of the law as if, instead of the making and transfer of the note, [the testator] had first paid and delivered the sum of $8,000 in actual money to the church which thereupon returned it to him in trust for the purposes named.” 3 But what was the trust res? If this were a trust, then any gratuitous promise to pay a sum of money might well be held to create a trust, and the requirement of consideration in the formation of a contract would become a mere matter of form. If the abolition of the requirement of consideration in the formation of contracts is desirable, it should be accomplished directly and openly and not by confusing contracts with trusts. In Legniti v. Mechanics & Metals National Bank1 it appeared that the plaintiff, a private banker in New York, wishing to transfer funds by cable to a bank in Naples, gave a certified check to a firm of private bankers and brokers which carried on in New York an extensive foreign exchange business and which had money or credit with the Naples bank. The firm deposited the plaintiff's check in its general account with the defendant bank, and failed 2 173 N. W. (Iowa) 143 (1919). Ibid., 146. The court was probably right in holding the defendant liable, because it was possible to spell out consideration for the note, in which case the surrender of the note was a valid consideration for a promise to pay $8,000. There was a contract, but not a trust. ▲ 186 App. Div. 105, 173 N. Y. Supp. 814 (1919). the next day, without having cabled to the Naples bank. The court held that the firm received the check upon trust, and that the plaintiff could follow it into the account with the defendant bank. There is a strong dissenting opinion by Shearn, J., who contended that the transaction was a contract for the sale of credit, and that although the firm was liable for breach of contract, it was not trustee of the check or its proceeds. It would seem that the view of the dissenting justice is right; surely it was not intended that the firm should hold the check or its proceeds as a separate fund for the benefit of the plaintiff.5 CONSIDERATION As a result of Lord Eldon's decision in Ex parte Pye, it is well settled that a gratuitous declaration of trust is valid. In a few early cases when an intended gift failed for lack of delivery of the subject matter of the gift or of a deed," the courts tortured the transaction into a declaration of trust. It is now held, however, that an imperfect gift cannot be upheld as a declaration of trust.' If the donor intends to give away property, he cannot be held to have retained it on trust. A somewhat similar question may See 33 HARV. L. REV. 279 (1919); 19 COL. L. REV. 322 (1919). For another instance of the confusion between a debt and a trust, see Myers v. Washington Trust Co., 105 Atl. (R. I.) 565 (1919). In that case a savings bank transferred all its assets to the defendant trust company, which assumed its liabilities and undertook to pay its depositors. The plaintiff had deposited a sum of money with the savings bank which by mistake had paid the amount of the deposit to one who was not authorized by the plaintiff to receive payment. The court held that the trust company was not liable, because the money deposited by the plaintiff had never come into its possession and that "the defendant cannot be held liable as the trustee of a fund which never came into its possession." 18 Ves. 140 (1811); SCOTT, CASES ON TRUSTS, 143. It was formerly held in England that an oral gratuitous transfer of a chose in action represented by a mercantile or common-law specialty was invalid, although the specialty or a deed of gift was delivered. Edwards v. Jones, 1 Myl. & C. 226 (1836) (bond); Milroy v. Lord, 4 D., F. & J. 264 (1862) (stock certificate). But see Fortescue v. Barnett, 3 Myl. & K. 36 (1834) (insurance policy). The opposite view was taken in the United States. CAS. TRUSTS, 152-165. It is now held in England that in view of the provisions of the JUDICATURE ACT (1873), 36 & 37 Vict. c. 66, sec. 25, sub.-s. 6, a gratuitous oral transfer by delivery of a specialty chose in action is valid. Re Lee, [1918] 2 Ch. 320 (exchequer bond deposit book); Re Westerton [1919], 2 Ch. 104 (deposit receipt). • Morgan v. Malleson, L. R. 10 Eq. 475 (1870); Cas. Trusts, 147. • Richards ". Delbridge, L. R. 18 Eq. 11 (1874); CAS. TRUSTS, 148–151. arise when an obligee of a chose in action wishes to extinguish it. A gratuitous parol forgiveness of a chose in action is not valid. In the absence of consideration, there must be either a release under seal, or, if the chose in action is represented by a specialty, a surrender or cancellation of the specialty. There seems to be no good reason, however, why an obligee cannot orally and gratuitously declare himself trustee of the chose in action for the obligor. And if the obligee is trustee for the obligor, the obligor has an equitable defense to the chose in action, based on the prevention of circuity of action. Under the doctrine of Ex parte Pye it would seem that the intention to create a trust is all that is necessary. In Cardoza v. Leveroni 10 the holder of a note and mortgage orally and gratuitously forgave the mortgagor. The court held that the mortgagor was still liable. There was no intention to create a trust, and an invalid forgiveness of a debt cannot be twisted into a valid declaration of trust. Can a hope of inheriting property or receiving property under a will be made the subject matter of a trust? A contract to convey or to become trustee of property which may in the future be inherited or received under a will, is binding if made for a consideration or if under seal,11 and if not unfair, fraudulent, or against public policy.12 But such a mere expectancy or spes cannot be made the subject matter of a gift.13 Similarly, such an expectancy cannot be a trust res. It was so held in Re Lynde's Estate.14 THE STATUTE OF FRAUDS By the seventh section of the English Statute of Frauds a writing is required if a trust of land is created; by the ninth section a writing is required if the interest of the cestui que trust is transferred. There is no provision expressly making a writing necessary for the extinguishment of a trust. May the cestui que trust give 10 233 Mass. 310, 123 N. E. 672 (1919). 11 Cf. Sloan v. Breeden, 233 Mass. 418, 124 N. E. 31 (1919) (contract by next of kin of insured to assign interest in life insurance policy payable to legal representatives of insured). 12 CAS. TRUSTS, 179, note. 13 Re Ellenborough, [1903] 1 Ch. 697; Cas. Trusts, 175. 14 175 N. Y. Supp. (Surr. Ct.) 289 (1919). See S. C., 105 Misc. 30, 172 N. Y. Supp. 523 (1918). |