SOME ASPECTS F TRUSTS in the CONFLICT of LAWS of The

SOME ASPECTS F TRUSTS IN THE CONFLICT OF LAWS LESTER G. HOAR Saint John, X.B. Of the problems encountered today in the conflict of laws, those involving trusts seem less susceptible than most to the stating of definite and universal rules. This is understandable perhaps when one considers that the subject "conflict of laws" was -a comparatively late development in English and American law, and, in addition, that only in fairly recent years has there been a noteworthy growth in the use of the trust device. Even now there are extremely few helpful Canadian and English cases to be found dealing with these problems. Consequently eiten- sive reference will be made to decisions of courts in the United States, where the subject has been explored more widely. For convenience, it is usual to adopt the practice, which will be followed in this article, of separating testamentary trusts and those established inter vivos, which are known sometimes as "living . trusts" . At the outset it may be said also that problems relating to trusts with foreign elements resolve themselves for the most part into questions of validity and adniinistration 2 Frequently it is difficult to. draw the line between these two classes of questions and the courts do not always assist by making it clear whether the matter before them is being treated as one of validity or of adminsitration. There appears to be general agreement among American authorities that the creation aspects of a trust end, and the administrative aspects begin, after title to the trust property has passed to the trustee.3 Thus prob- blems of validity have arisen over the capacity of the creator of 'Moreover this article will be confined almost entirely to those of the New York courts, since the most cursory examination reveals that New York courts provide the forum in a very large proportion of the American cases. Professor Cavers of the Harvard Law School suggests that New York's peculiar rules as to trusts may account for that State's beingso prolific in pertinent decisions : Cavers, Trusts Inter Vivos and the Conflict of Laws (1930), 44 Harv. L. Rev. 161, at p. 175. 2 It is proposed to restrict this article to questions of validity and administration, and not to deal, except where incidentally necessary, with, such problems as have to do with the construction of the trust instrument, jurisdiction and taxation. 3 See Swabenland, The Conflict of Laws in Administration of Express Trusts of Personal Property (1936), 45 Yale L.J. 438 ; Note (1941), 89 U. of Pa. L. Rev. 360, at p. 361 . Professor Beale, however, is content to say that "Any question which arises after the trust has come into being is a question of the administration of. the trust" : Beale, Living Trusts of Movables in the Conflict of Laws (1932), 45 Harv. L. Rev. 969, at p. 972 . Cf . the view of an English writer, who feels that .it is important to sever questions respecting both creation and administration from those concerning the vesting of the trust property in the trustees : Croucher, .Trusts of Movables in- Private ;International Law (1940-41), 4 Mod., L. Rev. 111 . 1416 The Canadian Bar Review [Vol. XXVI the trust, formalities of execution and "essential validity", while questions of administration have included those relating to the duties and powers of the trustee, the .investments he may make, the persons to whom he must pay income and principal, the right of the beneficiary to alienate his interest and the rates of commission to which the trustee is entitled. In determining the law to govern, however, there is a tendency on the part of the courts to treat similarly all such questions of validity, and a like tendency is noticeable where problems of administration are concerned. The attitude of the courts in this regard may well be a healthy one in a field, such as this, where there are few settled rules. As it is, too little distinction is made often between the problem of creating a valid trust of movables and problems arising from other transactions where movables are involved. One can detect a willingness as a result to treat the trust transaction in the same manner as a problem of succession or of contract. That there is a limit to the usefulness of analogies drawn from these branches of the law is apparent when one reflects upon the purposes of employing the trust device.4 It is suggested that if the courts were to attempt a more specific treatment of problems respecting validity, particular- izing as to questions of capacity, formalities and "essential validity", there would be a likelihood of an even more extensive resort to the ready-made rules of other branches of the law. I. Validity of Testamentary Trusts Trusts of land, whether they be testamentary or inter vivos, present so small a problem in the conflict of laws that they barely need be mentioned here. The law of the situs appears to have been applied in determining the validity of such trusts no less generally than it has been in respect of all transactions where an interest in land is created or transferred.5 Nor indeed would there seem to be any substantial reason that this should not be so. In respect of personal property, however, the treatment of testamentary trusts does not follow that of trusts inter vivos.s 4 See Cavers, supra, footnote 1, at p. 188. c Thus in an early New York case the court, upon finding that the real property devised by a New York testator was situated in California, stated, "The tenure, mode of enjoyment, transfer and descent of real property is [sic] regulated by the lex loci rei sitae. Whether, therefore, the trust created by will as to the realty is valid, or whether it is void as in conflict with the laws or policy of the State of California, can only be determined by the courts of that State": Knox v. Jones (1872), 47 N.Y . 389, at p. 395 . See also Restatement, Conflict of Laws (1934), s. 241 ; Goodrich, Conflict of Laws (1938), s. 147; Schmitthoff, English Conflict of Laws (1945), p. 178. 6 The importance of distinguishing between testamentary and inter 1948] Some Aspects of Trustsyin the Conflict of Laws 1417 . As a general rule the validity of such a testamentary trust is I held to be governed by the law o£ the testator's domicile at the time o£ his death,? and this rule is applied even though the trustees or beneficiaries may. reside elsewhere, and although the property too maybe elsewhere.$ . There is some confusion among the American authorities as to whether the problem created by legal restrictions,. such as the rules against perpetuities and accumulations, is to be cat egorized as relating to validity or administration. The close connection with matters of administration is recognized, but a logical difficulty is sensed. Thus in Cross v. United States Trust Company of New York,-9 the court in permitting administration in New York of a trust created under a Rhode Island testatrix's will, which was valid under the domiciliary law but contravened the New York rule against perpetuities,l 9 remarked that "The will was valid or not at the moment of the death of the testatrix, and if it was valid then it is valid now" . Again, it has been said that, "where the trust is to be administered in a state other than the testator's domicil, and the validity of the trust depends, not upon the creation; but whether the trust can be validly carried out at the place of administration, there is some disagree- ment as to what law should govern the validity"." Whether or not there is a logical difficulty in the sense that the validity of the trust should be determined irrespective of any question as to its administration, the reasonable approach would appear to be to examine the nature of the, restriction affecting the trust. Clearly then, in the case of the rule against perpetuities for ex- ample, it will be seen that the object of .the prohibition is to prevent the holding, rather than the giving, of property for periods deemed contrary to a state's . public policy. Since the holding will occur in whatever place the trust is to be administered, it is difficult to see why a court of the place of admin- vivos trusts does not appear always, to have been recognized by the courts. Probably this may be explained in part by the comparative paucity of old judicial decisions upon conveyances in trust inter vivos, and the overlooldng - of the possible importance of a distinction when, at a later date, the early testamentary cases were cited as authority for a general rule applicable to all trusts of personalty. See Hutchison v. Ross (1933), 262 N.Y . 381, at p. 391. 7 Restatement, Conflict of Laws (1934), 8.295 . See also In re Aganoor's Trusts (1895), 64 L.J. Ch. 521 . 8 Goodrich, Conflict of Laws (1938), s. 155. 9 (1892), 131 N.Y. 330. 19 For the converse situation see Hope v. Brewer (1892), 136 N.Y. 126 . And see the earlier decisions in Despard v. Churchill (1873), 53.N .Y .192, and Chamberlain v. Chamberlain (1871), 43 N.Y. 424. Cf. Fordyc e v. Bridges (1948), 2 Ph. 497 ; 41 E. R. 1035 . 11 Note (1941), 89 U. of Pa. L. Rev. 360, at p. 368 (emphasis mine). 1418 The Canadian Bar Review [Vol. XXVI istration should not strike down a trust offending its public policy in such a manner.

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