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to cause the right of enjoyment and the right of disposition to rest on two different heads, et cetera."

My conclusion therefore is that while it is impossible to classify the Anglo-American trust by civil law standards, the statutory trust created by adaptation of the common law institution to the civil law, presents in general the characteristics of a contract which creates between the parties mutual rights and obligations. These characteristics are more or less strong according to the purposes for which the trust is created.


In conformity with the ideas and concepts I have expressed, the definition formulated as the basis for the adaptation of the English trust to civil law was as follows:

A trust (fidei commissum) is an irrevocable mandate, whereby certain property is gransferred to a person named the trustee (fiduciario), in order that he may apply it as directed by the party who transfers the property, named the settlor (fidei comitente) for the benefit of a third party named the cestui que trust (fidei comisario).

This, of course, is the simplest and most general form of trust. As in the recent Louisiana Trust Estate Act, only the express private trust was contemplated. It was thought that in introducing the new institution it was prudent to present it as simple and clean-cut as possible, avoiding complicated classifications and concepts difficult to understand for lawyers and judges unfamiliar with the common law. Therefore, there was no attempt to define and regulate resulting and constructive trusts. On the other hand, this type of trust, in the eyes of civilian jurisprudence, covers situations for which other remedies are provided by the civil law in general, and by the Trust Act in particular.


According to the final Draft on the Restatement of Trusts prepared by the American Law Institute, resulting trusts arise in the following situations:

1. Where a private or charitable trust fails in whole or in part; 2. Where a private or charitable trust is fully performed without exhausting the trust estate;

3. Where property is purchased and the purchase price is paid by one person and at his direction the vendor transfers the property to another person.

Mexican statutes, the determine extinction

According to the Panama, Puerto Rico and situations described in numbers 1 and 2 would of the trust and in case of extinction the trust property in the possession of the grustee shall be returned by him to the settlor. With this obligation, which of course is enforceable by the courts, there is no legal possibility for the trustee to enrich himself unduly, or to enjoy a benefit that was not meant for him, and to "Revue de Droit International Prive, Darras-Lapradelle, Paris, 1907, p. 265.

which he is not entitled, which is apparently the main purpose of the resulting trust.

The situation described in condition number 3 is one that in my judgment could hardly occur in civil law practice, in view of our customs and procedure regarding the sale of property, especially of real estate.

Regarding charitable trusts, the civil law has an acceptable and convenient equivalent in the institutions we call Fundaciones (Endowments). However, in a jurisdiction having a trust law nothing would prevent giving charitable, benevolent or any other public institutions the structure of a trust, if so desired. In fact, the Mexican Trust Law of 1926 enumerated among the functions of fiduciary banks that of acting as trustees for charitable, scientific or cultural institutions of any sort. (Article 117, IV.)


A trust law based on the proposition and draft submitted by me in 1920 was passed by the National Assembly in January 1925, (Act No. 9). Three years later, on April 23, 1928, the Puerto Rican legislature adopted the Panama model and enacted a similar law for the constitution of trusts and it is with great pleasure that I state that it contains several improvements on the Panama Law. The Puerto Rico Law was published by the Department of Commerce, Division of Commercial Laws, in COMPARATIVE LAW SERIES for May 1928. In 1926 Mexico adopted a General Banking Law, which incorporated also the essential provisions of the Panama Law, but restricting to banks alone the capacity to function as trustee, so that trusts were treated exclusively as a banking business. This law was subsequently modified in 1932. Other Latin American nations, according to information in my possession, are studying the problem of adaptation of the trust. The provisions of the Panama law tend to make the institution of trusts as easy and broad as possible. Trusts may be constituted on any kind of property, for any purposes not congravening the law or the public morals. The law contains specific prohibitions against substitutions and entails practices which are considered harmful and are rejected by modern principles of political economy and social organization. Secret trusts are also prohibited. As to the method of creating the trust, it may be either testamentary or inter vivos and may be constituted verbally or in writing. If the trust affects real property a public deed and registration thereof in the Public Registry is required for its validity. Other provisions deal with the capacities, incapacities duties and rights of the trustee, the rights and actions of the beneficiary and finally the causes for which the trust may become extinct and the effects of such extinction. Coming back to the subject of a civil law definition of the new institution, I desire to emphasize that while the fidei comiso or trust is referred to as "an irrevocable mandate" in the Panama statute of 1925, the Mexican Banking Law of 1926 and the Puerto Rico Trust Act of 1928, it is not essential, in formulating a definition, to use or adhere to such concept. The trust may be referred to in any terms, provided they do not conflict with its nature, essence and purpose. It may be called "a contract", "a special contract", "an irrevocable act", or simply "an act." By substituting any of these terms for "irrevocable mandate", the substance of the definition would not change. The essential elements of the thing defined are

the transfer of a patrimony by the settlor and the charge by him imposed on the trustee to apply the property for the benefit of the cestui in such manner and under such conditions as the settlor shall direct. A definition of this type will combine the two essential elements of the trust, and will describe the three roles or parties entering into the trust transaction. Any language will be acceptable which conforms to the conception of the trust and is easily understood by persons accustomed to transact business according to civil law standards and terminology.

Such are my humble but very sincere views in the matter of adaptation of the trust to the civil law.

I have always thought that this is a topic of special interest for all the countries of our hemisphere because economic, industrial, commercial, banking and even social relations between North America and South America are day by day becoming closer. North American capital goes to the Southern countries. With that capital go individuals, families, companies, banks and institutions of different sorts, and with all these natural and artificial persons go their customs and their necessities. And just as languages and customs are enriched and perfected by appropriating the good things that are found in other countries, so legislations, which are not dead bodies or rigid frames or immutable forms, should adopt, assimilate and conform to their own characteristics, such institutions as have proven beneficial in other countries. I firmly believe that the present reform has begun to open its way in civil law countries and is likely to bring about incalculable advantages to the peoples of Latin juridical ancestry.




Monthly Labor Review, October 1938

University of Pennsylvania Law Review, November 1938 Credit Manual of Commercial Laws, Gift of Henry H. Heimann, Executive Manager, National Association of Credit Men. Reviews and Journals: Indiana Law Journal, October 1938; Cuba Economica y Financiera, October 1938; The Guaranty Survey, October 1938; American Import and Export Bulletin, November 1938; The Arbitration Journal, October 1938; Export Trade and Shipper, November 1938; Federal Bar Journal, November 1938; La Information, September 1938; French Decedent Estate Laws, by Rodrigue Bertol, Gift of the Author; American Bar Association Journal, November 1938; Boston University Law Review, November 1938; Kentucky Law Review, November 1938; Indiana Law Journal, October 1938; Conference Parlementaire Internationale du Commerce, Twenty-fourth year; Current History, December 1938; Commercial Law Journal, November 1938; The Spectator, Part I and II, November 1938; Revista del Colegio de Abogados de Buenos Aires, September-October 1938; South DakotaAnnual Report of the Commissioner of Insurance, 1938.





By James L. Brown, Division of Commercial Laws

On October 24, 1938, Judge Berthold Vorsanger in the New Jersey District Court, Third Judicial District, County of Bergen, rendered a decision declaring the New Jersey Fair Sales Act unconstitutional. This law, which is generally referred to as the Ellis Act, was adopted in June of this year by the New Jersey legislature over the veto of the Governor of that State.

The advertisement, offer for sale, or the actual sale of merchandise at less than cost by retail dealers is prohibited by the Act. In the case of wholesalers the merchandise may not be advertised, offered for sale, or sold at less than cost, plus 2 percent. The additional 2 percent is to cover the cost of delivery.

The law does not apply to sales at retail or wholesale where there is a bona fide clearance, or discontinuance of the stock of the goods sold, or where the goods are imperfect or damaged provided that there has been an appropriate advertising and marking of such goods. Where there is a final liquidation of a business, or where the goods are sold for charitable purposes, the seller is not bound by the law's provisions. The Act does not apply to the sale of merchandise at a price to meet the legal selling price of a competitor, nor the sale of goods under order of any court.

The following is the decision rendered by the Court in the case of the State of New Jersey v. Packard, Bamberger & Company, Inc., a New Jersey corporation:

VORSANGER, JUDGE: This is a case on motion to dismiss the complaint, based on information and belief, in an action wherein the State of New Jersey appears as plaintiff, and Packard, Bamberger & Co., Inc., a New Jersey corporation, as defendant.

The action is based upon Section 2 of the Laws of 1938, Chapter 394, known as the Fair Sales Act, providing:

"It is hereby declared that the advertisement, offer for sale, or sale of any merchandise at less than cost by retailers is prohibited."

The Act further states that any such suit may be instituted in a District Court in any City, or Judicial District in any County:

"*** upon filing of a complaint in writing, duly verified,

The defendant moves to strike the complaint on two grounds: "1. That the complaint does not set forth a valid cause of action because the complainant has failed to state the source of his information and the grounds for his belief and, further, that the complaint is not verified.

"2. That the said Act, known as the Fair Sales Act, is unconstitutional and should be so declared."

In the opinion of the Court, the defendant's second contention, that the Act is unconstitutional, is correct. It is unnecessary, therefore, to discuss the first ground.

I find that nowhere in the Constitution of New Jersey, nor in any statute, is there any provision denying or prohibiting

to any Court the right to rule upon the question of the constitutionality of an Act in a proper case. As to the right of the District Court to pass upon the constitutionality of a statute, I know of or find no such restriction. If the question of constitutionality is directly drawn into a question, and that question must be decided to determine the matter, "a proper case" is presented and the duty to pass upon the constitutionality cannot be avoided.

In Lent v. Tillson, 140 U. S., at page 329, it is said: "The Judge or Judges of that Court (referring to a County Court of a State) were obliged, by their oath of office, and in fidelity to the supreme law of the land, to refuse to give effect to any statute that was repugnant to that law; any thing in the statute or the Constitution of the State to the contrary notwithstanding."

In 2 American Jurisprudence, page 714, the following rule is stated:

"When it is clear that a statute transgresses the authority vested in the legislature by the Constitution, it is the duty of the Courts to declare the Act unconstitutional because they cannot shrink from it without violating their Oath of Office."

The legislative intention that District Courts should, in "proper cases", rule upon the constitutionality of statutes, is distinctly expressed in Revised Statutes (1937) 2:8-10, as to the Oath of District Court Judges:



"I, (A. B.) do solemnly promise and swear that I will administer justice without respect to persons, and faithfully and impartially perform all the duties incumbent upon me as Judge of District Court of the City of (or of the ... ... Judicial District of the County of ....................) according to the best of my ability and understanding, agreeably to the Constitution and the Laws of the State of New Jersey, so help me God; and I do sincerely profess and swear that I do and will bear true faith and allegiance to the Government established in this State, under the authority of the people, so help me God."

Under our system of government, it would appear that every American Court has the right to determine the constitutionality unless such right has been expressly limited or removed. All constitutional courts have such power which cannot be taken away by legislation. All other courts are vested with the power, unless it is expressly denied.

In the case of Pollock v. Farmer's Loan & Trust Company, 157 U. S. 429, Mr. Chief Justice Fuller, speaking for the United States Supreme Court, states, on page 554:

"Necessarily the power to declare a law unconstitutional is always exercised with reluctance, but the duty to do so in a proper case cannot be declined and must be discharged in accordance with a deliberate judgment of the tribunal in which the validity of the enactment is directly drawn in question."

The defendant admittedly advertised loss leaders to attract customers to its store to sell, in addition to the loss leaders, other merchandise priced at a normal profit ratio. There certainly is no pernicious fraud in that practice as long as the goods are advertised and sold at the prices stated. The fraud

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