Carnes, Charles N.

English

University of Kentucky

Kentucky Law JournalVolume 42 | Issue 1 Article 71953Unincorporated Associations as Beneficiaries ofPrivate TrustsCharles N. CarnesUniversity of KentuckyFollow this and additional works at: https://uknowledge.uky.edu/kljPart of the Business Organizations Law CommonsRight click to open a feedback form in a new tab to let us know how this document benefitsyou.This Note is brought to you for free and open access by the Law Journals at UKnowledge. It has been accepted for inclusion in Kentucky Law Journal byan authorized editor of UKnowledge. For more information, please contact UKnowledge@lsv.uky.edu.Recommended CitationCarnes, Charles N. (1953) "Unincorporated Associations as Beneficiaries of Private Trusts," Kentucky Law Journal: Vol. 42 : Iss. 1 ,Article 7.Available at: https://uknowledge.uky.edu/klj/vol42/iss1/7NoTEs AND COMNmNTSa reasonable man at the time2l and it is immaterial that the parties insettling the controversy reach a different result than the law wouldhave reached or that the merits ultimately prove to be on the otherside.22It is submitted that the Kentucky court is in line with the majorityand better view and that it follows the rule of the Restatement of Con-tracts in requiring both the subjective requisite of a bona fide claimand the objective requisite that it must be reasonably doubtful. It hasbeen said that it is the duty of courts to encourage rather than dis-courage parties in resorting to a compromise as a mode of adjustingconflicting claims and the nature or extent of the rights of each partyshould not be closely scrutinized.23 So far as it can be done legally andproperly, the courts should support such agreements having as theirobject an amicable settlement of doubtful rights. Litigation is alwaysburdensome and the courts should look favorably upon settlement outof court.JOHN W. MURPHY, JR.UNINCORPORATED ASSOCIATIONS AS BENEFICIARIES OFPRIVATE TRUSTSIt is generally recognized that an unincorporated association canbe the beneficiary of a private trust,' although the courts have usedseveral theories to reach this conclusion. Courts are faced with twoproblems in upholding a private trust made in favor of an unin-corporated association. First, since the trust is a private one and musthave a definite beneficiary, who holds the equitable title? Secondly,does such a trust contravene the rule against private indestructibleAdequacy of the consideration given is not inquired into so long as thereis something of detriment to one party or benefit to the other, however slight,Nuckols v. Nuckols, 293 Ky. 603, 169 S.W. 2d 828 (1943); Dexter v. Duncan,205 Ky. 344, 265 S.W. 832 (1924); Barr v. Gilmour, 204 Ky. 582, 265 S.W. 6(1924); even though the amount is greatly disproportionate to what a partywould be legally bound to pay. Bates v. Todd's Heirs, 14 Ky. 177 (1823)."Murphy v. Henry, 311 Ky. 799, 225 S.W. 2d 662 (1949); Forsythe v.Rexroat, 234 Ky. 173, 27 S.W. 2d 695 (1930); Berry v. Berry, 183 Ky. 481, 209S.W. 855 (1919); Gray v. U. S. Savings and Loan Co., 116 Ky. 967, 77 S.W.200 (1903); Mills Heirs v. Lee, 22 Ky. (6 Mon.) 91, 97 (1827).Moore v. Sutton, 311 Ky. 174, 223 S.W. 2d 737 (1949); Childs v. Hamilton,308 Ky. 203, 214 S.W. 2d 106 (1948); Nuckols v. Nuckols, 293 Ky. 603, 169 S.W.2d 828 (1943); Provident Life and Accident Ins. Co., of Chattanooga, Tenn., v.Ramsey, 256 Ky. 126, 75 S.W. 2d 781 (1934).'P-H Wi.LLs, ESTATES AND TRUSTS SEV. see. 3663 (1950).KENTUCKY LAW JOURJNALtrusts? The primary purpose of this note is to discuss the first question;the second will be treated only collaterally.Historically courts would not enforce a private trust created foran unincorporated association because it was thought that such as-sociations were incapable of taking the equitable title, and it was con-ceived that the trust failed for want of a definite beneficiary.2 Latersuch trusts were upheld on the theory that the title vested in the mem-bers of the association.3 Another theory was that the association itselftook as beneficiary, giving recognition to the association as a separateentity capable of holding the equitable title independently of its in-dividual members.4 Other courts have simply upheld such trusts with-out explanation as to theory.5The whole problem historically was complicated by the lack oflegal capacity in such organizations. For centuries the position of unin-corporated associations before the law was rather awkward becausethey could not hold property except in the names of the individualmembers,6 nor could they sue or be sued except in the names of themembers.7 The typical early associations were the partnership and'Kain v. Gibonney, 101 U. S. 862 (1879); Mayfield v. Safe Deposit & TrustCo. of Baltimore, 150 Md. 157, 182 A. 594 (1926); Lane v. Eaton, 69 Minn. 141,71 N.W. 1081 (1904); German Land Association v. Konstantine Scholler, 10 Minn.260 (1865); Miller v. Rosenberger, 144 Mo. 292, 46 S.W. 167 (1898); Murrayv. Miller, 178 N. Y. 316, 70 N.E. 870 (1904); Stewart v. Green, Ir. R. 5 Eq. 470,481 (1870).'The third thing to be rspected is, the cestui que use; for to every good use,as there must be a person seise to use, so there must be a person to whose use heis seised, and he must be capable also .... And if a feoffment be made to I. S. andhis heirs, to the use of the parishioners of Dale; this use is void, for they are in-capable by this name: and it shall be to the use of the feoffer, [by resulting use]"SnEPPAR;'S ToucHSToNE OF CO,\mON AssumANcEs 509 (7th ed. 1821).'San Juan Gold Co. v. San Juan Ridge Mut. Water Ass'n., 34 Cal. App. 159,93 P. 2d 582 (1989); Hart v. Seymour, 147 II. 598, 35 N.E. 246 (1893) (Massa-chusetts business trust); Comstock v. Dewey, 323 Mass. 583, 83 N.E. 2d 257(1949); Howe v. Morse, 174 Mass. 491, 55 N.E. 213 (1899) (Massachusettsbusiness trust); Turner v. Ontonagan River Imp. Co., 77 Mich. 610, 43 N.W.1062 (1889) (business association); Venus Lodge No. 62, F. & A.M. v. AcmeBenevolent Ass'n., Inc., 231 N.C. 552, 58 S.E. 2d 109 (1950); Clark v. Brown,(Tex. Civ. App.) 108 S.W. 421, 433 (1908). In some of these cases it is notclear whether it was the members of the association at the time of the trust'screation who took the title, or whether the members from time to time took. Thelatter interpretation is probably what the courts intended.'Ruddick v. Albertson, 154 Cal. 640, 98 P. 1045 (1908); Wilbur v. PortlandTrust Co., 121 Conn. 535, 186 At. 499 (1936). In Amish v. Gelhaus, 71 Iowa170, 32 N.W. 318 (1887) the court seemed to regard a congregation as an entity.'Weaver v. First National Bank, 216 Ark. 199, 224, S.W. 2d 813 (1949);Appeal of Cox, 126 Me. 256, 137 A. 771 (1927) (trust upheld by implication);Normandy Consol. School Dist. of St. Louis Count, v. Harral, 315 Mo. 602, 286S.W. 86, 92 (1926); Appeal of Woolford, 126 Pa. 47, 17 A. 524 (1889).'See CANE, HANDBOOK ON THE LAW OF PARTNERSHIs AND OTHER UNIN-CORPORATED ASSOCIATIONS 529-530 (1952), and WRIGHTiNcTON, THE LAW OFUNINCORPORATED ASsOCIATIONS Am BusuNss TRusTs 336-337 (1923).'See CRANE, op. cit. supra note 6, at 538-539, for cases see 539 notes 28 and29; W IGHTINGTON, op. cit. supra note 6, at 425-427.NoTEs AND COA-vENTSthe religious society. The former flourished, its economic advantagesoutweighing its legal disadvantages, and a separate body of partner-ship law developed which is similar in many respects to the law ofnon-profit associations but which is markedly different in other re-spects." Religious societies also flourished, and since they could usuallybe classified as charities they were able to enjoy the benefits of prop-erty through the device of charitable trusts which required no definitebeneficiary. But in recent modem times, however, other types of as-sociations have taken on increased importance socially and economic-ally, such as labor unions, college fraternities, and fraternal organiza-tions, but there has not been a corresponding development of theirlegal status.As these newer types of associations increased in activity, size andwealth it became desirable to develop direct legal methods of pro-tecting their rights and property. By statute business associations wereallowed to take title to land9 and to sue and be sued in their ownnames.10 Under such statutes it would not seem difficult to uphold atrust made in favor of such an association as an entity. But thesestatutes do not apply to other types of associations.Related to the problem of finding an appropriate theory on whichto uphold a trust in favor of an unincorporated association is thequestion of whether such a trust needs a beneficiary at all, or to putit another way: how should such a trust be classified? A beneficiary isnecessary to the existence of a private trust because there must besomeone to enforce it against the trustee," whereas a charitable trustis enforceable at the suit of the attorney general.12 In this sense a8 Much of partnership law stems from the Law Merchant which, of course,does not hold true for the non-business types of associations. CRANE, op. cit. supranote 6, at 5-7. An association will not be terminated upon the death, withdrawalor bankruptcy of a member or a group of members as in the case of a partnership.Miller v. International Union of United Brewers, Flour, Cereal, and SoftdrinkWorkers of America, 187 Va. 889, 48 S.E. 2d 252 (1948). A member of an as-sociation has no authority to bind the others. Chastain v. Baxter, 139 Kan. 381,31 P. 2d 21 (1934).OK.A. STATS. see. 361 e (1941) (farm co-ops); W. VA. CODE sec. 4671(1)(business associations). In states which have adopted see. 8(3) of the UniformPartnership Act real property can be held in the partnership name. See Unif. LawsAnn. 7-57 (1949) n. 4."See Am. Jur. 486, 487; and cases cited at 486, notes 20, 1 and 2.U See I Scorr, THE LAw OF TRusTs 615 and 621-625. A notable exceptionto this rule is found in the case of so-called "honorary" trusts set up for the benefitof animals, or for the saying of masses, or the maintaining of graves or memorials.Such trusts have no beneficiary which can enforce the trust, nor are they charitable,but they are upheld nonetheless. Angus v. Noble, 73 Conn. 56, 46 Ad. 278 (1900)(keeping a grave clean); Coleman v. O'Leary's Ex'r., 114 Ky. 388, 70 S.W. 10681902) (masses); In re Dean, 41 Ch. D. 552 (1899) (animals)."People ex rel. Courtney, State's Attorney, 327 Ill. App. 231, 63 N.E. 2d 794(1945). And see III Sco-r, THE LA-,w OF Thusrs 2052-2053 (1939).KENTucKY LAw JouRNALcharitable trust does not need a beneficiary. But any private trustmust depend on a beneficiary for its enforceability, and the criticalproblem is: can an unincorporated association meet this requirement?If there is some "person" who can enforce the trust there would be nodifficulty in adjudging the trust valid. In the private trust the personor persons who can enforce the trust-the beneficiaries-are said tohave the equitable title. In a trust for an association we shall see thatthis requirement of enforceability-this requirement of a beneficiary-is satisfied and the courts are fully justified in upholding them.Probably the best modem explanation of the problems involved in-upholding private trusts in favor of unincorporated associations isgiven by Scott. He sees no difficulty in vesting the equitable title inthe association or its members as beneficiaries since in either case thetrust is enforceable against the trustee. 13 He indicates the only realdifficulty arises where a trust for the association as such is to continuebeyond the period of the "rule against perpetuities."14 He is of theopinion if the trust were to last the life of the association it wouldexceed the period and be invalid.' 5 To avoid such invalidity he wouldrequire that the trust by its terms be capable of being consumed orterminated within the period of the rule. He would not require thatsuch a disposal be made within the period, but only that it be pos-sible.16 This is the English rule,' and has been incorporated into theRestatement of Trusts.'8 Bogert does not mention the perpetuitiesproblem in his treatment of such trusts, but he does point out thevarious theories which have been used to support them, and he ap-proves the modern trend of upholding them.'9Let us assume a trust "To T for the benefit of X Brotherhood (Fra-ternity Chapter, Lodge, etc.)," and assume that it has provisions forits exhaustion or termination within the period of the rule. A courtlooking for a resting place for the equitable title of such a trust hasseveral choices. It may determine that the title vests in the individualmembers of the Brotherhood as it is constituted at the time of thecreation of the trust.20 This solution meets the enforceability require-ment since those members can enforce it, and it constitutes no problemunder the rule against perpetual private trusts since the durationnecessarily will be measured by lives in being. However, the solution'I ScoTT, THE LAW OF TRUSTS 598-599 (1939).:"ibid. at 599." Ibid. at 599-601." Ibid. at 604, see n. 24.'In Re Drummond, 2 Ch. 90 (1914).RESTATFNmT, TRUSTS sec. 119 (1935)."I BOGERT, THE LAw OF TRUSTS AND TRUSTEES 488-492 (1935).'o See cases cited supra note 3.NoTEs AND CovnamN'rsis inconsistent with the intention of the settlor since it was probablyhis intention that the trust be capable of existing so long as the associa-tion exists in its present general form with its present general objects21(subject, of course, to the Brotherhood's power of termination). If hehad intended for it to cease upon the death of the last old member hecould easily have indicated that intention in more explicit terms. Mostlaymen seem to consider an association as a distinct entity existingapart from the individual membership in much the same manner thatthey consider the distinctness of a corporation. 22 With this thought inmind when he created the trust, he probably intended that it last thelife of the Brotherhood.On the other band, a court may determine that the equitable titlevests in the members of the Brotherhood as they exist from time totime.23 This solution will satisfy the settlor's intention since the trustcould exist as long as there is a membership in the association, thoughit does not satisfy it in quite the manner that he had in mind, and itwill satisfy the requirement for definite beneficiaries. But, there is anair of artificiality about this rationalization. The "beneficiaries" do notreally have much to call their own. The interest they possess is de-pendent upon their continued membership in the association; theylose this "interest" without compensation when they cease being mem-bers.24 The interest is of no economic value to them since there is nomarket for it, and it would probably not be transferrable at all sinceit is so intimately bound up with membership.25 A member has verylittle individual control over his beneficial interest except in conjunc-tion with other members; the members can exert no control overassociate property except in their associate capacity.2 6 They standtoward the Brotherhood as sort of trustees of the beneficial interest forit. Their position is much the same as the attorney general in acharitable trust. The critical issue arises when it is effectively voted toterminate the trust and sell the corpus-to whom will the proceeds bedistributed? Since the individual members are termed the "bene-ficiaries" of the trust they could convincingly argue that they should"See Bancroft v. Cook, 264 Mass. 343, 162 N.E. 691 (1928) where a collegefraternity was held ineligible under a trust since it had altered its form and objects.S ee Stewart v. Green, Ir. R. 5 Eq. 570 at 481 (1870), and see Laski,Personality of Associations, 29 HAnv. L. RE.v. 404, 404-405 (1916), and CnANE,op. cit. supra note 6 at 12." See cases supra note 3.- Liggett v. Koivunen, 227 Minn. 114, 34 N.W. 2d 345 (1948); Harris et al.ex rel. Carpenters' Union No. 2573 of Marshfield, Ore., Lumber and SawmillWorkers v. Backman, 160 Ore. 620, 86 P. 2d 456 (1939)."Though in the case of a business association it might be transferrable c.f.Howe v. Morse, 174 Mass. 491, 55 N.E. 213 at 214 (1899).'See cases cited supra note 24.KENTucxy LAw JouRNAIpersonally receive the proceeds . 7 But, this was not the settlor's in-tention; we have shown that he had the association in mind when hecreated the trust and not the individual members. It would be hisintention that if and when the trust was properly terminated the pro-ceeds should go to the association and to no one else.It would seem that to recognize an unincorporated association as aseparate entity capable of holding equitable title would be the mostsimple and direct solution of our problem.2 8 The settlor's intentionswould be satisfied since the beneficial interest is in the associationwhere he intended it to be and the trust will exist as long as he in-tended. It will be subject to the will of the association in exactly themanner which he had in mind, i.e., the association can control thetrust according to its customary procedures without any objections byindividual members of infringment of their "personal rights." The titlevests once and for all in the association and is not even ambulatory.The rule against perpetual trusts is not violated because the unin-corporated association, as in the case of corporations, should be per-mitted to be the beneficiary of a private trust despite the fact that itmight exist in perpetuity.29 We assume, of course, that the trust couldnot of its terms be one of perpetual indestructibility. A trust set upfor the benefit of an unincorporated association should conform to thenormal rules governing private trusts so far as destructibility is con-cemed.30 The mere fact that the trust has a potential existence of in-finity should not vitiate it.In conclusion it would seem that to recognize the ability of anunincorporated association to be its own beneficiary is the most de-sirable solution of the problems presented by such private trusts. Itsquares with the intention of the parties involved and it is the easiestto legally justify and administer. Unquestionably it represents themodem attitude toward unincorporated associations.Ciius N. CAramsCRIMINAL PROCEDURE-PROTECTION ACCORDED THEOFFICER WHO ARRESTS UNDER A DEFECTIVE WARRANTIn any examination of the effect of an arrest under a defective war-rant upon the rights of the arresting officer it is necessary to give someconsideration to the nature of the warranti Though there are numerous'As was done to no avail by the individual members in Crawford v. Gross,140 Pa. 297, 21 A. 356 (1891).See cases supra note 4.See I Sco-r, THE LAw OF TRUSTS 589 (1939).Ibid. at 392-393.

Unincorporated Associations as Beneficiaries of Private Trusts

https://uknowledge.uky.edu/cgi/viewcontent.cgi?article=3597&amp;context=klj

Unincorporated Associations as Beneficiaries of Private Trusts

Abstract

Similar works

Full text

Available Versions

University of Kentucky