TRUSTS DEFINED.—In Bouvier's Law Dictionary, trusts are defined as obligations imposed, either expressly or by implication of law, whereby the obligor is bound to deal with property, over which he has control, for the benefit of certain persons of whom he may himself be one, and any one of whom may enforce the obligation. A trust arises when property has been conveyed to one person and accepted by him for the benefit of another. The person who holds the property and the legal title is called the trustee, and the person for whom it is held is termed the beneficiary or "cestui que trust." Trusts are created for a great variety of purposes. It is very common to create them by a will, the testator appointing a trustee to manage a trust fund which he sets aside for the maintenance and support of a certain person or a certain institution. A new device for creating a trust for the carrying on of a business, seems to be growing in popularity. The practice apparently began in Massachusetts with the creation of a trust for the operation of an office building and similar undertakings. Under this arrangement, a trust estate may have transferable shares, exemption of shareholder's liability, and frequently enjoys peculiar advantages in taxation matters. These organizations are sometimes spoken of as common law corporations. They are so comparatively new that the closest care should be exercised in operating a business under this form of organization. We shall now consider the powers and duties of trustees and include with them executors and administrators.
TRUSTEES, EXECUTORS, AND ADMINISTRATORS.—Trustees, executors and administrators may be classed together because they are alike in that they hold legal title to property which is held by them for the benefit of other persons. They hold the legal title. A trustee is the owner of the property, and any one who seeks a transfer of the legal title of the property must get it from the trustee. Executors have exactly the same powers as administrators, aside from powers that may be expressly given in the will. The difference in name is simply because an executor is appointed by the will of the testator, whereas an administrator is appointed by the court to take charge of an estate for which no executor has been named in a testator's will, or where the executor may have died or refused to act, or, the most frequent case, where the deceased died intestate.
THEIR APPOINTMENT.—Were it not for statutes, a trustee or an executor would become such simply because somebody had made him a trustee or an executor without any appointment or assistance from the court. But in the appointment of executors or trustees, under wills, the court is by statute generally required to make an appointment to give validity to a nomination or appointment in the testator's will. Administrators, of course, from their very nature, have to be appointed by the court. A trust, however, may be created between living persons without any appointment by the court, and frequently is. A real estate trust may be created by simply conveying property to trustees on the trust that they manage it and pay the income to the beneficiaries, and a great variety of trusts are constantly created without an appointment from the court. Wherever any question on a trust arises, or wherever the appointment of a new trustee is necessary, however, the court has jurisdiction, and any person interested in the trust can bring the matter before the court. When a testator dies the person named as executor in the will petitions for appointment, and unless there is some reason why he should not be appointed he doubtless will be appointed. If there is no executor, then the persons, or beneficiaries, interested in the estate, usually agree on someone to administer the estate, and a petition is filed for his appointment. The person who is next of kin, and competent to act, is generally appointed in the absence of agreement. These officers remain in office and retain their powers until their work is completed, unless they are sooner removed, which they may be at any time for cause.
THEIR POWERS.—What powers do these persons have? Do they have power to sell? We must first always look at the terms of the trust. If we are dealing with a trustee under a will we look at the will to see what powers the testator gave him. If we are looking at a question of a trust under a deed, we look at the deed, and the right of an executor to sell real estate similarly depends on whether any such power has been given him in the will. Aside from express power given in the instrument, a trustee has no power to sell either real or personal property unless the power is expressly given or unless the nature of the trust is such as necessarily implies the power, and courts are very slow in construing the existence of such power by implication. An executor, on the other hand, since his duty is to reduce the personal property of an estate to cash, and distribute it, has, in most States, implied power to sell personal property. He has, however, no power to sell real estate unless the will expressly gives such power. The court may authorize him to sell real estate, and will authorize him, if it is necessary to pay debts or legacies, but only in such cases unless a power is expressly given. Trustees, executors and administrators have no power to pledge property unless expressly given in the instrument under which they act. They have power to make such contracts as are necessary to carry out their trust, but only these, and even when they make such contracts they are personally liable upon them, having, however, a right of reimbursement from the estate which they represent. If they entered into an unauthorized contract they would be liable upon it personally and have no right of reimbursement.
THEIR DUTIES.—Their first duty is the care and custody of the property in their charge. A trustee, whose duty is to hold property, is bound to keep it invested so as to bring in an income, whereas an executor has no right to invest funds of the estate, except under the direction of the court; if he does so he will take the chance of loss, and the beneficiary can not only hold him liable for loss but can also take the profit should the investment prove profitable. The executor's duty is to reduce the property to cash and distribute it to the proper parties. All these officers owe the same duty of fidelity to their beneficiary that an agent owes to his principal. There is the same duty to execute the trust personally and not delegate authority, except in regard to ministerial or mechanical acts. There is the same duty to account, and furthermore, the accounts of these officers, if they are appointed by the court, must be filed in court. The trustee to carry out his trust will ordinarily distribute the income to the persons entitled, but, of course, trusts are of great variety, and not infrequently the object of a trust is to accumulate the income. Whatever the terms of the trust are they must be carried out. The duties of the executor and administrator are to distribute the estate by paying creditors first and the surplus to legatees or the next of kin legally entitled. They are allowed a fixed period, in many States two years, to settle an estate.
One of the most essential duties of any fiduciary is to keep the property he holds as a fiduciary separate and distinct from his own. This means that a trustee or executor receiving current income must keep a separate bank account as trustee or executor, and of course he should not draw checks on that fund for personal debts.
CHAPTER XI
Carriers and Warehousemen
CARRIERS WHO ARE PUBLIC SERVICE COMPANIES.—Common Carriers—that is, railroads, express companies, and other persons or corporations who carry goods for hire and hold themselves out to the public as engaged in the business of carrying goods for anybody for hire—are engaged in a public service. A man who owns a tramp steamer and gets cargoes as he can, is not engaged in a public service—he is not a common carrier or public carrier; but a person who has a line of steamers, or even one steamer, regularly engaged in plying between different places and taking goods as offered for hire, is engaged in public service.