TRUSTS 1. people think of the word trust as synonymous with monopoly. When industrial mo nopolies were first widely discussed in the eighties, the two most important monopolies—the oil and sugar combinations—existed in the legal form of trusts. In each case the stockholders of several companies which bad previously competed, turned their stock over to trustees who exclianged them for certificates eirtitling the holders to whatever dividends the trustees col lected on the stock. Since the trustees had the title to the stock of the several companies transferred to their own names on the books of the several corpora tions, they had the right to vote and thus to control the companies. The arrangement was a:trust—that is, a device whereby one person known 0T:trustee bolds the legal title to property and manages it for the benefit of one or more persons known as bene ficiaries (or ccstuis que trustetzt, singular, cestui que trust). The word "trust" stuck to monopolies tho later these monopolies gave up the legal 1 organiza tion of the trust and resorted to holding companies arid other forms of organization.
In 1279, Edward I of England by the Statute of Mortmain, forbade the gift of land to the clergy, be cause in their bands land was no longer liable to feudal dues. Thereupon the device known as the "use" sprang up. The land was given to a natural person who held it to the use or for the benefit of the clergy. Out of this grew the trust relation.
Since those days the trust has served many useful purposes where it has been expedient to vest the legal title and control in one person or persons and the income in another.
2. Legal nature of recent writer has aptly and concisely explained the nature of a trust thus: By means of the trust it was possible to give nominal own ership to definite individuals (machinery being devised for replacing these individuals as they died or needed to be re moved), while substantial ownership was given to the group. Like the idea of corporateness, the idea of trusteeship con tains something fictional. If A, the nominal owner, holds property in trust for B C 1) as beneficial owners, the ownership of A as against B C D is a mere sham. As
against strangers, however, A's ownership is real enough in the law: A is not a mere agent for B C I); A is the legal owner.' In this form of ownership and management the title and entire control is placed in the trustees; the beneficiaries have a claim against the trustees per sonally but not :against the trust property. In this respect the relation is much like the corporation, for stockholders have an interest in the corporation but no direct interest in the corporate property. The beneficiary has no remedies, legal or equitable, directly against a stranger, but must act thru the trustee.
3. Liabilities of the ordinary trust, the trust estate is chargeable with all debts tho third parties make their claim against the trustee person ally, and be reimburses himself from the estate. In active trusts where the trustee has an active duty to carry on a business with the trust property, the agree ment creating the trust ordinarily sets forth the rights and liabilities of the parties. These agreements ordinarily contain clauses similar to the following: The Trustees shall have no power to bind the shareholders personally, and the subscribers and their assigns and all persons or corporations extending credit to, contracting with, or having any- claim against the Trustees shall look only to the funds and property of the trust for payment under such contract or claim, or for the payment of any debt, damage, judgment, or decree, or for any money that may otherwise become due or payable to them from the Trustee, so that neither the Trustees nor the shareholders, present or future, shall be personally liable therefor.
In every written order, contract, or obligation which the Trustees shall give or enter into, it shall be the duty of the Trustees to stipulate that neither the Trustees nor the share holders shall be held to any personal liability under or by reason of such order, contract or obligation.' The courts are not all agreed on the effect of such a. provision, but the federal courts have held that one who deals with a trust estate and knows the terms of the trust, impliedly assents to be bound by them.