of the legal title would have nothing, as the limitation of the fee to him would be void, and there would consequently be nothing that the cestui que trust could follow, a result which is contrary to well-settled principles in that branch of the law. How can the circumstance that the purchaser has notice of the trust, but takes discharged thereof because of the power, invalidate on the ground of remoteness a limitation which otherwise would be valid? The trustee's right to dispose of the title does not spring from the power but from his title as dominus. The only effect of the power is to shift the right of the cestui que trust. If, therefore, the trustee should in the conveyance limit interests violating the rule, as he undoubtedly might, the void limitations would not arise under the power. They would be void without the presence of the power." Are such limitations to be considered as being created by the donor of the trust? The donor parted with the entire legal title and completely exhausted the fee by his limitations. How, then, can any further limitations be said to be made by him? The trustee does not act as his attorney or under a common law power. He acts as dominus.10 An eminent judge, Sterling, L. J., in Goodier v. Edmunds, (1893), 3 Ch. 455 at 460, has said that the power offends the rule because it enables the donee of the power to vest in a purchaser an estate in fee simple after the expiration of the prescribed period. This remark assumes the question in dispute, which is, from what date does the period run, and the same remark may be applied to an ordinary conveyance. The vendor may vest an estate in fee simple in a purchaser at a period remote, calculating from the date of the last deed. It has never been suggested that there was any reason why the rule should apply to such a case. What is the difference at law between that and a sale by the trustee? The learned judge does not point out any distinction, and it is believed that there is none. 19 Mr. Gray, Rule Perp., 2 ed. (1906), $509a, says that there is no distinction, in so far as the application of the rule against perpetuities is concerned, between a power in a trustee, a power in trust, and power to sell given to a stranger, and in this position he is supported by the greatest modern English authorities. It is submitted, however, with due deference to this great weight of opinion, that there is a material distinction. A power in trust is a common law power. It is said to be in trust because the parties to be benefitted by the exercise are entitled to proceed in equity to compel its exercise. At common law, such a power operates as a warrant of attorney. It is, in the case of a power to sell, a direction to an agent to sell and distribute the proceeds. The interest in the proceeds, therefore, is limited by the donor of the power. In case, however, of a power in a trustee, it has been shown in the text that there is no room to argue that the limitations made by the trustee in disposing of the legal title can, in any sense of the word, be said to be limitatations created by the donor of the trust. Equitable Reasons Why the Period Runs From the Time of the Exercise of the Power of Sale 418. In equity, the power operates to shift the equitable estate of the cestui que trust from one property to another. It is, therefore, submitted that in equity there is no limitation of an estate or future interest, and there is no more reason for the rule to apply in equity than at law. The argument has been put in this form: that the power does not defeat or destroy estates but only effects a change of title, to which three answers have been offered, (1) that it is an equitable answer to a legal objection.2 To this it may be replied that there is no legal objection. The limitation at law is a transfer of the fee, and is totally outside the application of the rule. (2) The second answer suggested is, that the exercise of the power may cause an entire change in the nature of the property, as from real estate to personal property or vice versa, and may therefore alter the course of descent and the nature of the cestui que trust's interest, and to this it may be replied that it is no concern of the rule against perpetuities whether the nature of the property is changed or not. The fact that the settlor has authorized a change is a sufficient answer in the law of trusts. Why, therefore, is it not an answer to the rule against perpetuities? (3) The third answer suggested is that the power enables the trustee to create a new equitable estate in the property purchased with the proceeds of the sale. To this it may be replied that the estate, or right in rem. which the cestui que trust has in the new property purchased with the proceeds of the sale, is a right created by law, and not a right created by the donor of the trust, and is, therefore, not within the scope of the rule against perpetuities. That this is so will appear after a moment's reflection. If the trustee mixes the trust funds with his own at the remote period, or the fund becomes increased at the remote period, the cestui que trust can in each case assert his right, in the one case against all of the trustee's property, and, in the other case, to the increase of the fund. In neither case has the right been created by 1 Sugden on Powers, 8 ed. (1861), p. 848. 2 Hayes' Conv. 3 ed. (1838), pp. 469, 470. The learned author assumes that the power is void at law. In this assumption, it is submitted, lies the fallacy of his position. The power does not exist at law. the donor of the trust. A fresh res has been brought within the scope of the trust relation, and when that happens, the cestui que trust acquires a right in rem. as to that res by operation of law. Giving this argument its greatest force, it cannot apply to the conveyance of the old trust property made by the trustee, and yet it is to those very limitations that the objection of remoteness is commonly made. Mr. Gray's Views as to the Application of the Rule to Powers in a Trustee 3 419. Mr. Gray, however, objects to the reasoning advanced in the previous sections as unsound, and concludes that such powers are valid because the trusts to which they are attached must come to an end or be destroyed within the limits fixed by the rule against perpetuities; that they are unobjectionable because they are destructible, upon which it may be observed, (1) that a trust does not necessarily come to an end within the period fixed by the rule; (2) that the powers are indestructible during the continuance of the trust. Mr. Gray appears to draw no distinction between the powers of a trustee over the legal title and his powers over the equitable title. Author's Objection to the View of Mr. Gray Discussed in the Previous Section 420. A case may arise where the trust will not terminate within the period fixed by the rule against perpetuities. Thus, where there is a devise to A. in trust for B. for life, at his death in trust for the eldest grandchild of C., then living, for life, and after the grandchild's death, to X., a living person, and his heirs, with power in the trustee to sell at any time during the continuance of the trust. B. dies, living a grandchild of C. The life estate in this grandchild is good, and the trust must remain until his death." Mr. Gray" says that the power in such a case is void, because it may be exercised at a remote period. To say that the power is valid 3 Rule Perp., 2 ed. (1906), §488, et seq. 4 Rule Perp., 2 ed. (1906), §490, et seq. 5 Rule Perp., 2 ed. (1906), §482. 6 The estate in the grandchild is good because it vests within the period prescribed by the rule. §374, ante, and the fact that it extends into the remote period is immaterial, §345, ante. The ultimate limitation to X. and his heirs is vested and valid, and the trust must remain to support it. 7 Rule Perp., 2 ed. (1906), §500. because the trust must come to an end within the period fixed by the rule, and then, when faced with a case where the trust continues beyond the period, to say merely that the power is void, does not, it is submitted, meet the difficulties of the case. Application of Rule to Powers of Sale in Trustees for a Charity 8 421. Furthermore, if the period prescribed by the rule begins to run from the time of the creation of the trust, in considering the case of a power of sale in a trustee, this further point arises. In what respect, if any, is the case of a power of sale vested in the trustees of an indefinite trust for a charity an exception? An indefinite, or as it is sometimes called a perpetual, trust for a charity is valid. The power of a sale in the trustee is therefore indestructible by the cestui que trust. We have there another case to which Mr. Gray's reason 9 does not extend. If the court can authorize a disposition of the trust property free from the claim of the cestui que trust at any time in the future, no matter how remote, why should there be any objection to the trustee doing the same thing under an express power in the settlement? There is no necessity that the power should be valid in such a case of a charitable trust, as the trustees can sell under the order of the court at any time during the continuance of the trust or under the act of April 18, 1853.10 A reference to this instance of a power of sale is useful as illustrating a case where, if the rule against perpetuities applies, as it is commonly supposed, to a power of sale in a trustee, there must be an exception, whereas under the reasoning already submitted," the case is not an exception at all. The law in Pennsylvania will now be examined, and we shall first notice the few cases which have been found. Cresson v. Ferree 422. In Cresson v. Ferree1 there was a power of sale vested in trustees, unlimited as to time. A sale was made by the trustees under the power during the continuance of the trust, and the purchaser refused to take title. On a case stated, 8 See Chap. 26 on Charitable Gifts. 9 See $419, ante. 10 §2, P. L. 503. 11 See 8417, 418, ante. it was held that the title was good, and that the exercise of the power by the trustee was valid. Sharswood, J., in the Supreme Court, said, "We may concede that a general power over an estate, without limitation of time, unless after an estate tail, would violate the rule against the creation of perpetuities. In this case, however, the power of sale is clearly limited to a period during which the trusts created by the will subsist, or some of them, and that cannot exceed a life or lives in being at the death of the testator." In this the learned judge seems to recognize the principle that the power may be exercised so long as the trust is valid, although he inaccurately states the period for which the trust may subsist.3 Wilkinson v. Buist 4 423. In Wilkinson v. Buist there was a power of sale in the trustees unlimited as to time. The court in an opinion by Clark, J., said that the other provisions of the will indicated that it was to be exercised only during the lifetime of the widow, and then the learned judge made use, by way of dictum, of the following language:5 "A power of sale without limit would doubtless be bad under the rule against perpetuities, and a testator will not be presumed to have intended anything so absurd." Marshall's Estate 424. In Marshall's Estate, No. 1, a testator gave his estate in trust for the benefit of his On petition by the 2 This is clearly a misapprehension. Twenty-one years may be added to the life in being, see §340, ante, and the trust may extend considerably beyond even that period in order to provide for equitable life estates which vest in time, but continue to a remote period; see §§345, 420, ante. 3 See remarks of Ashman, J., in Githens's Est., 24 Pa. C. C. 248 at 250 (1900), where an executor had a power of sale unlimited as to time, which it was argued, was invalid, and the learned judge said that the power of sale could not outlive the purpose it was meant to subserve, and as the period fixed for final distribution was not remote, the power children. 8 would be exhausted within the period 4 124 Pa. 253 (1889). Dicta of Hare, P. J., in the court below, in Mifflin's App., 121 Pa. 205 at 215 (1888), and Stewart, P. J., in the court below in Johnston's Est., 185 Pa. 179 at 189 (1898), accord. 7 138 Pa. 260 (1890). 8 The same will was before the court in Marshall's Est., 147 Pa. 77 (1892), probably on an account of the proceeds of this sale, and it was held that the trust was terminable only in the discretion of the trustee. See this question discussed, $538, post. |