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perishing. But even if that is controverted, still on either supposition, when the innocent purchaser for value finds himself with the unencumbered legal title and, because of merger, with no separate equitable interest, in what sense has he an "equity"? Only in the sense that he is worthy of considerate treatment, i.e., has acquired merit in the eyes of the chancellor, because he has innocently parted with value for the particular property in question. That this equity is in no sense a property right is apparent when a bona fide purchaser for value is contrasted with a mala fide one. Each has the legal title, but the bona fide purchaser has a merit which enables him to retain that legal title while the mala fide purchaser, lacking such merit, must yield it up. The bona fide purchaser's kind of an equity is quite different from the cestui's equity, for it is virtue instead of property or quasi-property; it is defensive not affirmative-a shield and not a sword. The equities of the parties are "equal" when the defense offsets the attack, i.e., when the chancellor says to the complainant, "Your merit and your property or quasi-property rights as a cestui que trust are in my eyes precisely offset for defensive purposes by the merit of the defendant as a purchaser in innocently parting with value, and for that reason I cannot give you relief against him." As Vice-Chancellor Kindersley has so well said in Rice v. Rice:1

"For when we talk of two persons having equal or unequal equities, in what sense do we use the term 'equity'? For example, when we say that A has a better equity than B, what is meant by that? It means only that, according to those principles of right and justice which a Court of Equity recognizes and acts upon, it will prefer A to B, and will interfere to enforce the rights of A as against B. And therefore it is impossible (strictly speaking) that two persons should have equal equities, except in a case in which a Court of Equity would altogether refuse to lend its assistance to either party as against the other. If the Court will interfere to enforce the right of one against the other on any ground whatever, say on the ground of priority of time, how can it be said that the equities of the two are equal; i.e., in other words, how can it be said that the one has no better right to call for the interference of a court of equity than the other"?2 In discussing the rule that "where equities are equal, the legal title prevails," Lindley, L. J., said in Bailey v. Barnes, "Equality means


1 (1854) 2 Drewry, 73, 77, 2 Eq. R. 341, 23 L. J., Ch. 289, 61 Eng. Rep. R. 646. 2 Id., 77-78. "The equity is equal between persons who have been equally innocent and equally diligent." Per curiam in Maina v. Elliott (1875) 51 Cal. 8, 11.

8 [1894] 1 Ch. 25, 36, 63 L. J., Ch. 73, 7 R. 9, 69 L. T. 542.

the non-existence of any circumstance which affects the conduct of one of the rival claimants, and makes it less meritorious than that of the other."

But then it has been suggested that, because of supposed estoppel on the cestui que trust, the innocent purchaser for value has not merely an equity equal to that of the cestui que trust but one that is greater. That compels consideration of the question, how far does the nature of a trust permit the application to the cestui of estoppel doctrines? In other words, from the mere fact that there is a trust may we estop the cestui as against third persons who deal with the trustee? Does the bare fact of a trust plus wrong action by the trustee mean lack of merit on the part of the cestui? We assume, of course, a secret trust,-by which is meant here a trust which the purchaser for value did not know, and could not be expected to know, existed. The cestui of such a trust may be an infant or insane, or both, or a sane and in every way responsible adult. If an estoppel doctrine as such is to be applied properly, the infant and the lunatic must be made exceptions, yet as things now stand the bona fide purchaser for value who gets title from the trustee prevails over infant and lunatic cestuis que trust. That fact points rather clearly to the merit of the defendant, rather than the demerit of the complainant, as the important thing in the doctrine of purchase for value without notice. But even in the case of the sane adult cestui, is it fair to apply the estoppel doctrine without important reservations? If the sane adult cestui established the trust for himself and the offending trustee was one selected by him, or, by the terms of the trust, could have been displaced by him at any time through the appointment of another, estoppel might conceivably be deemed a sufficient ground for regarding such cestui as inferior in equity to the innocent purchaser, though in England, at least, it is not such a ground and in this country, in general, is not. But even so, since the vast majority of trusts are created for cestuis by others, that extreme case, practically negligible in extent in this country, it would seem, has merely the effect of making us certain of the impropriety of applying the estoppel test against a cestui who neither selects nor can control the trustee and who is, after all, the typical kind of cestui que trust. The secret passive trust created by the trustor for himself as cestui has long ceased to be the important kind of secret trust where either real property or personal property is concerned,

See Ewart on Estoppel, chapters XVIII, XIX, XX. For a recent presentation of the estoppel view see Henry W. Ballantine, Purchase for Value and Estoppel, 6 Minnesota Law Review, 87.

and, moreover, in many places passive trusts of real property are forbidden or are practically impossible, except in the form of constructive trusts, and also, where such trusts are allowed, of resulting trusts. The normal trustee is not a mandatory of the cestui and, unless the latter knows or refuses to know what reasonably he should ascertain about the trustee's prospective wrongdoing, the cestui should not be estopped to cling to whatever advantage of position he finds himself possessed of when the trustee's wrongdoing is uncovered.

Whether their origin be deemed good or bad, express trusts have been retained and developed as desirable property holding devices, and it may well be said that their effective operation and highest development require that the cestui be relieved of any estoppel blame when he does not know and has no reason to suspect that his trustee is doing, or is going to do, wrong. That is clearly what the English Court has had in mind in several cases now to be noted.

In Shropshire Union Railways and Canal Company v. The Queen, Lord Chancellor Cairns said that the argument in behalf of the respondent in that case appeared to him

"to go almost to this, that whenever you have an equitable owner who is the absolute owner, that is to say, entitled to the whole equitable interest, such a person ought not to have a trustee at all holding the indicia of legal ownership; or, if he chooses, for his own purpose, to have such a trustee, he must be in danger of suffering for every act of improper conduct by that trustee; and that, therefore, if the person entitled absolutely to the equitable interest in a share in a railway company, chooses for his own purpose to have that share standing in the name of a trustee for him, he will be bound not merely by a valid legal transfer of that share by the trustee, but by any equitable dealing or contract which the trustee may choose to enter into. My Lords, that is a very serious proposition. It goes not merely to shares, but it goes to land, and to every other species of property; and it goes to say that, whereas there is a large, well-known, recognised, and admitted system of trusts in this country, that system of trusts is to be cut down and moulded and reduced to this, that it is to be a system applicable only to infants, married women, or persons with limited interests; and that wherever the limited interest has ceased, and the equitable interest has become entire and complete without any limit, there the equitable owner is under some measure of obligation with regard to his duty of watching his trustee, an obligation which does not lie upon a limited owner. I find no authority for such a proposition, and I feel satisfied

5 Bogert on Trusts, p. 155.

• (1875) L. R. 7 H. L. 496, 507, 45 L. J., Q. B. 31, 32 L. T. 283.

that your Lordships will not be disposed to introduce, for the first time, that as a rule of law."

In Burgis v. Constantine,' Fletcher Moulton, L. J., said: "The defendant's counsel has endeavored to bring the case within certain equitable doctrines, the effect of which, on proper occasions, is that an equity subsequent in point of time will be put in a position of priority in point of law to an equity prior in point of time, and even, in certain special cases, to the legal title. But in the cases in which this has been done there has, I think, always been something in the nature of negligence on the part of the owner of the equity prior in point of time. Here, in my opinion, there is no room for the suggestion that the cestui que trusts were guilty of any negligence. A person is entitled to leave his property, whatever it may be, in the name of a trustee. A vast amount of property in this country must be in the names of trustees."

And Farwell, L. J., said:

"As has been pointed out by Lord Cairns in Shropshire Union Railways and Canal Co. v. The Queen, the mere fact that a person has transferred the legal ownership of stock or shares or other property, real or personal, to a trustee, and given him the title deeds, or the securities, or other indicia of title, does not justify any one in assuming that the person to whom such transfer is made is the beneficial owner. If the trustee does, in fact, deal with the property, and convey the legal ownership to a bona fide purchaser or mortgagee for value without notice, the cestui que trust has to bear the loss. If such a subsequent purchaser or mortgagee does not get the legal estate it is because he has not taken those precautions which the law allows him in order to protect himself from all risks; and he cannot set up the apparent ownership of the trustee as evidence of any misconduct or negligence on the part of the beneficial owner, because it is in accord with the usages of mankind that the legal estate in property should be conveyed to, and the indicia of title deposited with, trustees, and no other member of the community, therefore, is entitled to allege that such a course of action constitutes any invitation to him from which a duty towards him can be inferred."

In Cory v. Eyre,10 Turner, L. J., said:

"The very first principle of trusts is, that the cestui que trust places confidence in his trustee, and if it is to be held that a cestui que trust is to be postponed upon the mere ground that he did not inquire into the acts or conduct of his trustee, that principle would, as it seems to me, be in a great measure, if not wholly, destroyed."

7 [1908] 2 K. B. 484, 498, 77 L. J., K. B. 1045, 99 L. T. 490, 24 T. L. R. 682.

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In Hill v. Peters,11 Eve, J., said:

"There is nothing to prevent an individual, if he is so minded, from vesting any item of his property in another person as a trustee, and if he so does, the trustee is the proper custodian of the documents of title and other indicia of ownership. Moreover, the settlor is justified in adopting an attitude consistent with a belief on his part in the honesty of the individual whom he has appointed trustee. He is entitled to act on the footing that he has selected an honest man for the position, and not the less so because the person selected happens to be his own solicitor. Further, it is contrary to well-recognized practice to introduce into the transaction any notice of the existence of the trust by an indorsement on the title deeds or otherwise. If authority is needed for these several propositions, it is to be found in Cory v. Eyre,12 In re Richards, 13 Shropshire Union Railways and Canal Company v. Reg., Bradley v. Riches,15 and Carritt v. Real and Personal Advance Company,"16


Trustees quite often are court approved or court appointed, and, as to those, it is the chancellor, and not the cestui, who is responsible for the trustee and morally blameable, if there can be moral blame in such case, for the trustee's unexpected wrong doing. But even where the trustee is privately selected, without the court being apprised of the trust's existence, the trustee is in all probability only rarely subject to the domination of right of the cestui, and, except in such rare cases, and unless the cestui raises no protest against what he knows or has reason to believe the trustee contemplates doing, it would seem quite inconsistent with the essential nature of a trust to apply to the cestui the doctrine of estoppel in order to give him an inferior equity. As a matter of fact, under the commonly accepted doctrines, there is no need even to attempt to fasten on him such inferiority except where the purchaser acquires only an equity, and that is just the situation where it seems on principle undesirable to do so. Professor Huston has pointed out what is the fundamental problem, namely, to what extent shall a trust be brought within that principle of public policy which favors the free exchange of property? That is, how far is the trust to be embraced in the "effort to ensure security in commercial transactions and

11 [1918] 2 Ch. 273, 277, 87 L. J., Ch. 584, 62 S. J. 717.

12 (1863) 1 De G. J. & S. 149, 165.

18 (1890) 45 Ch. D. 589, 594-595, 59 L. J., Ch. 728, 63 L. T. 451. 14 (1875) L. R. 7 H. L. 496, 507-508.

15 (1878) 9 Ch. D. 189, 47 L. J., Ch. 811, 38 L. T. 810.

16 (1889) 42 Ch. D. 263, 269-270, 58 L. J., Ch. 688, 61 L. T. 163. Hill v. Peters, supra, n. 11, from which the above quotation is taken is of special interest because it cherishes trusts to the extent of holding as to the rule of Dearle v. Hall (1828) 3 Russ. 1, 48, 38 Eng. Rep. R. 475, much followed in

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