Unconstitutional Perpetual Trusts

I've been meaning to talk for a while about Steven J. Horowitz and Rob Sitkoff's exciting new article on "unconstitutional perpetual trusts," which is forthcoming shortly in the Vanderbilt Law Review.  Cribbing now from their abstract:

Perpetual trusts are an established feature of today's estate planning firmament. Yet little-noticed provisions in the constitutions of nine states, including five states that purport to allow perpetual trusts by statute, proscribe "perpetuities." This article considers those provisions in light of the meaning of "perpetuity" as a legal term of art across history. The article considers the constitutionality of perpetual trust statutes in states that have a constitutional ban on perpetuities and whether courts in states with such a ban may give effect to a perpetual trust settled in another state. Because text, purpose, and history all suggest that the constitutional proscriptions of perpetuities were meant to proscribe entails, whether in form or in function, and because a perpetual trust is in purpose and in function an entail, we conclude that recognition of perpetual trusts is prohibited in states with a constitutional prohibition of perpetuities.

As I started to read this I realized it is yet another example of applied legal history -- it's a sophisticated reconstruction of state constitutional provisions, starting with North Carolina's Constitution of 1776, which prohbited monopolies and perpetuities.  It runs through the nineteenth century, where a number of states (including Tennessee and Texas, at page 20) seem to have copied North Carolina's language and prohibited monopolies and perpetuties.  Even further west California followed in 1849 with a prohibition on perpetuities "except for eleemosynary purposes."  Close followers of pre-Civil War legal history (particularly as it relates to trusts) may recall that this was five years after the Girard College case validated a charitable trust that was in some ways anti-Christian.  (Girard's will prohibited the teaching of Christianity at the school he established.)  Story wrestled down the suspicion of perpetuities in charitable trusts even though a generation earlier the Supreme Court had invalidated a charitable trust for a church in Trustees of Philadelphia Baptist Association v. Hart's Executors.  (I wrote some about this years ago in an essay review of Peter Karsten's Heart versus Head, at page 1191).  So California was following the trend here, to permit charitable organizations to exist in perpetuity.  Charitable purposes were being construed quite broadly at this point (even if some southern courts did not view emancipation of slaves as a charitable purpose).  Some similar anti-perpetuities language continued to appear in state constitutions into the early twentieth century (such as my beloved Oklahoma).

Horowitz and Sitkoff argue perpetual trusts are unconstitutional in the nine states that have these anti-perpetuity clauses in their state constitutions.  I must say that I agree.  I would add a little more even to their case.  That Americans of the founding generation feared the concentration of wealth that was represented by perpetuities.  Though Horowitz and Sitkoff do not cite John Adams' "Dissertation on the Feudal and Canon Law" they might in this paper, for I think it reflects the founding generation's fear of property law they loosely linked to feudalism.  As Americans we love our property -- and we reflected this love in our landscape art in the years before Civil War.  We were also afraid of property, however.  We were afraid of it in the hands of churches (hence I think the skepticism of a trust in Philadelphia Baptist Association in 1819).  I think this is also reflected in North Carolina opinions in the pre-Civil War era that restricted spendthrift trusts.  (One example of this is Justice Thomas Ruffin's opinion in Mebane v. Mebane, 4 Ired. Eq. 131 (1845).)

We are also afraid of property in the hands of individuals that was passed down through generations.  This is reflected in the anti-rent movement in New York from the late 1830s to the early 1850s.  You may recall that some of the feudal incidents that the "tenants" complained about were struck down as inconsistent with the value of political equality in Overbaugh v. Patrie, 8 Barb. 28 (NY Sup. Ct. 1852).  This is part of what I see as the anti-feudal strain in American property law.  The restriction on perpetuities in the North Carolina Constitution is another part of this.  (And long time readers of faculty lounge may recall my talking about the anti-feudal strain in American thought in The Great Gatsby!)

Anyway, there's a lot more to be said about why property was feared and how (or whether) that ought to shape our interpretation of constitutional provisions that reflect a fear of concentrations of property.  I think you're going to be hearing a lot more about Horowitz and Sitkoff's work as these questions work their way through state courts.

Also, Josh Tate's commentary on this paper, which will also appear in the Vanderbilt Law Review, is up on ssrn.  I hope to have a separate post devoted to his apt thoughts on the explanation of change (and difference) sometime soon.

And my colleague John Orth has a somewhat contrary view in an article entitled "Allowing Perpetuities in North Carolina."

I used Thomas Jefferson's Monticello because Jefferson had a lot to say about the retreat from feudalism.

Comments

[Bill Turnier]

Some avoid the perpetuities issue by selecting an excessively long term of years such as 360 years. That would take us back to 1664 if we look backwards. Now imagine how different our times are from those and try to project 360 years into the future. Lengthy measurable periods of time such as 360 years or 999 years as another state uses are almost as much of an encumbrance as is a perpetual period. The issue extends well beyond perpetuities.

[AGR]

LOL,Al. I was wondering about that photo...

[Ann Tweedy]

This sounds like a very interesting read. Thanks for posting about it.