Trust
an arrangement by which property is handed to or vested in a person, in the trust or confidence that he will use and dispose of it for the benefit of another. In England, land was in early times frequently conveyed to persons in whom the owner had confidence that they might hold it to the use of other persons indicated by him.
The use was turned into a legal estate by statute in 1535, but the equitable powers of the Chancery remained, and were freely used to enforce any trust, whether relating to land or to personal property.
Trusts of land must be declared in writing, but this rule does not apply to trusts raised by implication or construction of law. Thus, if A purchases land with the money of B, he holds it as trustee for B, although there may be no written agreement between them. The person who holds property in trust is a trustee; the person for whose benefit he holds is called cestui que trust (he that has the benefit of the trust). In declaring a trust no special formula is necessary, but the intention of the party making it must be clear. Thus, in wills, a testator sometimes uses words which do not amount to an express trust, but speaks of his "wish and desire" or his "confidence," that the executor or trustee shall do certain things. These are called in the law precatory trusts; they are enforced if no uncertainty exists as to the purposes or mode of carrying out the the trust. A trustee's is not a compulsory office, but gratuitous; but if he once accept he is not at liberty afterward to renounce, unless the trust deed contain a provision enabling him to do so, or the court for good reasons discharge him.
A trustee cannot delegate the office to a TRUST third person, but continues personally bound to do his duty. Where there are several trustees appointed, the office is considered joint, so that if if one dies, the survivors continue to exercise the office.
As a rule, all must join in doing any act; but if the trust is of a public nature a trustee is liable only for his own acts or defaults, and this is so even though, for form's sake, he join his co-trustees in signing a receipt, if he can show that he never received the money in point of fact. When money lies in the hands of one trustee the others ought not to be satisfied with his mere statement that the money has been invested by him, but should see that it is actually done. Another rule is that a trustee is not allowed to make a gain of his office, and so jealous trust, but he must in general bear the loss of any mistake as to the law; but if there is any peculiar difficulty in carrying out the trust, he is entitled to take the opinion of, or even to throw the chief management on the courts, as the only safe protection. When trustees move them and appoint others. ment, or misconduct, the court will res move them and appoint others. are Trusts, broadly speaking, and as a term of of common acceptance, any comcommodity, ranging from a verbal agreement among them, to centralized ownership and management, tending toward a ship and management, tending toward a monopoly in an industry. Within this general field there are many types and degrees of combination. First of these is an understanding between manufacturis an English court of this rule that trus-ers of one commodity whereby each agrees tees have sometimes been restrained by the court from shooting over the trust estate. A trustee is personally liable if he trade with the trust funds, or buy shares in a joint stock bank; for, even though the trust deed authorize this to be done, he will be liable to pay the debts of the trading concern, though far exceeding the amount of the trust funds.
So, if a trustee is a solicitor, and does legal business for the estate, he will not be allowed to charge for his care and trouble, but at most will be allowed only the cost out of pocket. It is seldom that a trustee can get any benefit to himself que trust died without heirs land held in trust belonged to the trustee, but the rule has been altered by statute, and the duty of a trustee to keep the trust funds safe and if they consist of moneys, then he ought to invest them in government bonds, and not let the money lie unproductive. He is not entitled to lend money on personal security, or in the shares of any private company; but he money on personal security, or in the forbidden by the deed or will. If there is no power to invest in mortgages, the trustee must invest in State, city, or government bonds, or in some security authorized by the orders of the Supreme Court. As a rule, trustees must pay interest whether they invest the funds or not (if they have had time to invest) to terest whether they invest the funds or count for all the profits they make with the trust funds whether rightly or count for all the profits they make with misconducted himself as to the trust funds he will be charged five per cent. interest. A trustee is entitled to be indemnified for all the reasonable expenses or outlays attending the execution of the to restrict its business to a limited ter ritory, the agreement apportioning to territory, in proportion to the trade done.
Another form is an agreement whereby output of his manufacturing plants to a certain amount, which is usually in proportion to the amount of capital invested. A third form, or degree, of this type of "gentlemen's agreement," and most pernicious of all, is that by which all members of the ring agree to fix a standard price, by which all must abide, any change of price being made by a conference of representatives of all concerned. Such a pact, naturally, is only possible when practically all the manufacturers in the country of the coming so few that they may be modity in question adhere to it, the outsiders being crushed by a temporary lowering of prices, entailing a loss which only the members of the trust are strong enough to sustain. It was this type of trust that was exposed by the Lockwood Investigation Committee in the building. trades in New York, during the latter part of 1920, and the early months of 1921.
Higher types of trusts include two main forms: federated unions and The federated unions may again be di vided into two types-trusts proper and holding combinations. The centralized union is a type by itself, and includes financial single ownership and management, under union and the purchase or sale of a trust proper the heads of the various firms meet, a trust deed is drawn up, similar to a corporate charter, which prosimilar to a corporate charter, which pro- TRUST members be exchanged for trust certificates and, second, that the trustees manage the several corporations in the manner they deem most conducive to the best interests of the holders of the trust certificates. Such a combination constitutes a permanent financial union.
The first trust created in the United States was the Standard Oil Company, through the remarkable genius of S. C.
T. Dodd. Within the next ten years, trusts were also organized in the cotton, sugar, and whisky industries. As these and other similar combinations appeared, however, restrictive legislation was passed in the various States, with the exception of New Jersey, whose laws remained so accommodating that most combinations established their headquarters in that State.
The stockholding method was that which was most in practice during the earlier period of trust formation in this country. As an illustration, the American Sugar Company, known as the sugar trust, was formed by the corporation acquiring a majority interest in its rivals, in 1894. During the following ten years this method was widely practiced among the railroads. In 1900 a new and advanced step was taken, when James J.
Hill organized the Northern Securities Company, which acquired possession of the Great Northern railroad companies and the Northern Pacific. Later suit was brought by the State of Minnesota to have this merger dissolved, the Supreme Court finally passing a decision that this form of trust was illegal.
The rapid growth of these various forms and types of corporations in the United States was recognized as a constantly growing menace to the social interests, which could not be met by the legislation of the individual States. The vast capital available to certain combinations made it possible to crush small competitors by economic oppression, without redress before the courts of the country. On the other hand, the creation of a monopoly made it possible for them to levy what amounted to heavy taxes on the consuming public in the form of arbitrary profits, unlimited by competition. By the pooling arrangements, already described, competing firms were transformed into partners in one gigantic concern that could restrain trade and control the market.
In 1890, when ten States had already enacted anti-trust legislation, without much effect, the popular demand became so strong that Congress was compelled to take action. On July 2 of that year the famous Sherman Anti-Trust Law was passed, which for the first time gave TRUST the Federal Government power to take legal action against combinations in any part of the country.
Though drawn up with care and debated at length, the new law could only declare those combinations illegal which were in "restraint of trade." Tremendous efforts were therefore made to amend the provisions of the law so as to render their application impotent. The best legal talent available was employed to have incorporated the phrase which would define a trust as enjoying a complete monopoly of the market for its particular commodity. The law was also attacked on the ground that it curtailed the fundamental right of free contract.
The act having been passed, these same interpretations were put forth through test cases. Several of the lower Federal courts decided in favor of the corporate interests, but after a tedious series of litigations the Supreme Court finally decided that a complete monopoly need not necessarily be proven, and that the liberty to make contracts applied only to legal contracts. But in spite of the fact that several notable convictions were obtained under the Sherman law, in such cases as the Standard Oil Company and the Tobacco trust, both of which were ordered to dissolve into their former component parts, it soon became evident that this piece of Federal legislation was ineffectual. By means of gentlemen's agreements, dummy directors and interlocking directorates, the trusts continued, to operate.
To remedy this condition and make the law really effective, supplementary legislation was passed by October 15, 1914, known as the passed by Congress, on Clayton October Anti-Trust Act. By some of its provisions a manufacturer was forbidden to sell goods to a merchant on the understanding that he should not be free to buy from others as well. Another provision forbids a corporation from selling to different dealers at different prices.
With certain exceptions holding companies and interlocking directorates were forbidden. The most valuable feature of the law was the establishment of the Federal Trade Commission, which has the power to determine what constitutes unfair methods and acts "in restraint of trade." It also has the power to make special investigations, order hearings and to enforce its decisions through the Circuit Court of Appeals. It has been of real value in exposing to the public the methods of vicious combinations through the publicity attending its investigations, even though the facts made public do not come within the provisions of the law.
The report of its investigation of the TRUXTON TSARSKOE SELO packing industry during 1918 and 1919 ate "La Vengeance," and for this created such intense public sentiment against the meat trust that the latter was compelled to offer an effective compromise with the Federal authorities, though there was substantial reason to doubt whether a case could have been made out against it.
Two important decisions were rendered in 1920 by the Supreme Court in connection with the prosecution of trusts. In both cases the decision was made by a vote of four to three, two members of the Court not taking part in the deliberations. That against the Reading Company was a complete victory for the Government, compelling the coal interests to be separated from the railroad interests of the corporation. The case against the packing companies was also an undoubted victory, though won by other than court proceedings. According to the compromise the trust agreed to sell all its holdings not connected with the actual meat and packing trade and furthermore agreed never to engage in distribution.