An express trust is one that comes into being when a person having the power to create a trust expresses an intent to have a trust arise and take steps to create a trust.
“To constitute an express trust, various combinations of elements have been said to be essential, the most common one being: Sufficient words to create it; a definite subject, and a certain and ascertained object. It would seem, however, that the elements of an express trust, as distinguished from the acts or words necessary to create it, are the same as those of all trusts, and consist of a trust res or subject matter, and the holding of the legal title of that property by one person for the benefit of another, while the matters requisite to create such a trust as a sufficient declaration of trust, evidencing an intention to create a trust and setting out the trust property, terms, and parties with reasonable certainty, and a transfer of the legal title by the owner of the property to a trustee to be held for the benefit of another, or a retention of title by the owner under circumstances which clearly and unequivocally disclose an intent to hold for the use of another.” Sieling v. Sieling, 151 Md. 536, 549-550 (1926) (quoting, “39 Cyc. 34”). (Emphasis added.)”
Whether an express trust has been created is a factual determination. In In Re Shank, 240 B.R. 216 (Bkrtcy. D. Md. 1999) (Judge Derby), debtors under a Chapter 11 plan sought to characterize a reorganization plan which formed an asset pool for the benefit of certain secured creditors as a “trust” so that the tax liability generated from the sale of those assets would be netted against the assets in the pool rather than pass through to the debtors. Under a bankruptcy reorganization, the debtors retained legal title to the asset pool assets subject, however, to various claims running in favor of creditors. The debtors made two alternative arguments; (i) that the creation of the asset pool coupled with the extensive powers over that pool granted to a creditor representative created a trust with the creditor representative as trustee; or (ii) that the debtor in possession retained ownership of the property but that the property was being held for the benefit of the creditors. As to the first contention, Judge Derby found that extensive powers held by someone over property without the holding of legal title does not make that person a trustee:
“Debtors argue that the creditors’ Representative’s wide ranging power over the Asset Pool assets requires that court to find that a trust was created with the Creditors’ Representative as its trustee. This is a fallacious argument, akin to arguing that because all dogs have four legs, all four-legged entities must be dogs. The fact that the Creditors’ Representative had extensive obligations under the Plan is also consistent with the proposition that the Creditor’s Representative was the collection agent of the unsecured claim holders, charged with the task of collecting the debt that the Plan created. As stated above, the existence of a trustee is derivative from the finding that there has been a proper declaration of trust. See Sieling, 135 A. at 380. While the Creditors’ Representative may have had some of the characteristics of a trustee, he certainly lacked the most prominent: that of holding legal title to the property. (Shank at 223.)”
Judge Derby also dismissed the debtors’ alternative argument: that the debtor was a trustee for the creditor by holding that the debtors’ “duties under the plan were perfunctory and colorless – akin to the contractual obligations incident to a contract to convey residential rental property … A contract to convey property is not a trust. See Restatement (2nd) of Trust § 13.” (Shank at 223.) Implicit in In Re Shank is the issue that a separation of the equitable from the legal estate must exist in order for a trust to exist.
