recognized no equity of redemption in the land upon nonfulfillment of the condition. Another scheme of conveyance was devised 2 whereby the borrower deeded the land absolutely to the lender, and, concurrently with it, the lender gave to the debtor a bond, which came to be known as a "bond of defeasance," agreeing that if a certain sum of money were paid by a certain day, the deed would become inoperative, or the lender would reconvey. The effect of this scheme upon the debtor would be the same as that of the deed on condition, so far as an equity of redemption is concerned.

It was no doubt due to the hardship that these types of mortgages worked upon the debtor that another scheme became very popular during this period-that is, the trust deed. By the trust deed, the land was "conveyed to the creditor, or to some third person, upon a trust, that it was to be availed of by holding it to the creditor's use, or by selling it, in case of failure to pay the sum secured, and paying the debt from the proceeds the remainder to be returned to the debtor." 3 This is the second type of trust, referred to above.

Summary. Thus all three,-mortgage, simple trust, and trust deed, or "mortgage trust”—are founded in the medieval use; and they have gradually become distinct from each other so that now we have:

1. The mortgage by deed of condition or by absolute deed accompanied by defeasance clause which has lost all connection with the ancient use and is not regarded as a trust at all.

1 Not only would the borrower lose his land but further than that a personal action would lie against him for the debt. Later the court of equity interpreted such deeds of condition as simply mortgages and granted equity of redemption to the debtor-in other words, permitted the creditor to have out of the land only the amount of the loan with interest, and the remainder to the debtor in case of default. But this right of the mortgagor to redeem in equity was not finally established until the time of James I, in Bacon v. Bacon, Toth. 133 (1640). Walsh, op. cit., p. 486.

2 "By the end of the sixteenth century," according to Jenks, op. cit., pp. 125-6.

3 "This form attained great popularity, and is now in use in a large number of our states, and it is used in all states for bond debts." Chaplin, H. W., op. cit., p. 12. Italics supplied.

2.-The simple trust, in a great variety of forms, where the corpus of the trust is in control of and under the direct supervision of the trustee.

3.-The trust deed, or "mortgage trust," which while being of the nature of a mortgage, retains the characteristics of a trust. It is to be distinguished from the trust of the type where the corpus is actually in control of the trustee.

CHAPTER XI

HISTORICAL CONDITIONS ANTECEDENT TO THE DEVELOPMENT OF CORPORATE FIDUCIARIES

IN THE UNITED STATES

The corporate fiduciary is an institution founded upon the existence of a complex economic order. The description of the functions and services of the corporate fiduciary, contained in Part I, must have impressed the reader with that fact. Before a large number of individuals have accumulated private fortunes of considerable size there could be no market for fiduciary services of sufficient magnitude to justify the formation of corporations to handle the personal trust and agency business. Before the investment problems of individuals began to assume the elusive complexity due to the existence of a heterogeneous variety of investment possibilities, the market for expert investment service could not exist in sufficient proportions to make profitable the existence of a corporate fiduciary. Until the principle of corporate existence had been applied extensively to railroad organization and industrial organization as well as to banking institutions, the variety of functions and services of the modern corporate fiduciary for corporations could not exist.

Furthermore, doubt existed whether a corporation could perform fiduciary services, and this doubt persisted until quite a late date.1

The history of the development of the corporate fiduciary, then, is coeval with the history of the growth of individual

1See supra, p. 6. The English doctrine was applied in this country in the case of Trustees of Phillips Academy v. King, Executor, 12 Mass. 546, decided in 1816, and this doctrine was approved and elaborated in later decisions. See Vidal v. Girard's Executors, 2 How. (U. S.) 127 (1844). Cf. Purifoy, F. M., "Growth and Development of the Scope and Power of Trust Companies from a Legal Viewpoint," Trust Companies, Vol. 1 (August, 1904), pp. 601–3.

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capital and the growth of the corporate organization of enterprise.

The Colonial Period. Throughout the colonial period the economic organization of society was primitive and simple. There were no great fortunes. A collection of Connecticut probate records furnishes instructive information on this point. The following table shows the number of estates of various sizes probated (a number taken at random from a large collection) in the several periods, 1635-50, 1650-63, 1663-77, 1677-87, and 1729-50:

* All estates reported in Manwaring are not recorded here, but a random selection was made in order to get a representative group.

From this random selection of estates probated during the various periods, the average estate of the period 1635-50 was 322 pounds, and that of the period 1729-50 was 1,118 pounds. The capital of individuals in other colonies was doubtless no greater, although there may have existed somewhat larger private fortunes in Massachusetts Bay and possibly in Pennsyl

1 Manwaring, Charles W., A Digest of the Early Connecticut Probate Records, in 3 volumes, passim.

vania and Delaware.1 A record of a random selection of New Jersey wills probated during the period 1751-60 shows the following: 2

NEW JERSEY PROBATE RECORDS-1751-60

There were no corporations of the modern type during the colonial period. The partnership and joint-stock company were the prevailing forms of business organization. But the members of the joint-stock companies tried to limit their liability so far as they legally could by contract and thus the beginnings of corporate limited liability are seen. "A jointstock concern was essentially an enlarged partnership, and sometimes originated from a simple partnership through sub

1 In 1749, the whole white population of the North American Colonies was estimated at 1,046,000. The number in each colony was estimated as follows:

Pitkin, Timothy, A Statistical View of the Commerce of the United States of America, 2d edition (1817), p. 12. The individual capital of colonists living in New York (then New Amsterdam) at that time was no greater. See Lanier, H. W., A Century of Banking in the U. S., pp. 83-4.

2 Documents Relating to Colonial History of New Jersey, 1st series, Vol. 32; Calendar of N. J. Wills, Administrations, etc., Vol. II, 1751-60, passim.