Copyright © October 31, 2014
Note. This author published this article and then an online booklet which critiqued and exposed the false Ecclesiastical Law Center (“ELC”) teachings by Ben Townsend concerning the ordinary trust which have been available to the public for many years online and some in printed form. In the booklet, the author also explained the problems with the ELC method of church organization, something the author discovered as he studied in preparation to write the booklet. After the first eight chapters of the booklet were published, Townsend, leader of the ELC, admitted in an article that he did not know much about trusts and that the ordinary trust is not a legal entity (see chapters 9, 10, and 13 below). Then, in another article, Townsend admits that the ordinary trust is not a legal entity, but states that the law can be changed. Links to the booklet:
- Contents and Preface
- Chapter 1: Analysis of the title and first two paragraphs of Chapter 18 of “Approved by Man” by Wright/Townsend (ELC leaders)
- Chapter 2: Analysis of the first section of chapter 18 “The Propagation of the Declaration”
- Chapter 3: Analysis of the second section of Chapter 18, “Why such a strong stand against the DOT?
- Chapter 4: Analysis of the third section of Chapter 18, “Biblical Law Center Bulletins”
- Chapter 5: Analysis of the fourth section of Chapter 18, “More Exclusivity Statements”
- Chapter 6: Analysis of fifth section of Chapter 18, “We Can’t Give it to Other Churches!”
- Chapter 7: Analysis of the sixth section of Chatper 18, “Has it ever been tested in court?”
- Chapter 8: Analysis of the last section of Chapter 18, “The Questions will keep coming”
- Chapter 9: Ben Townsend Explains Chapter 18 of Approved by Man: He admits that he did not know what he was talking about
- Chapter 10: Reply to Ben Townsend’s Article, “Give and Take”
- Chapter 11: Answer to Ben Townsend’s Article, “It Really Isn’t Personal: “It’s Financial!”
- Chapter 12: Answer to Ben Townsend’s Article, “God is our Benefactor; He is NOT a Beneficiary”
- Chapter 13: Analysis of Ben Townsend’s Article, “A Law, Made by Man, Will be Changed”
Contrary to the teaching of the ELC the ordinary trust is not a legal entity as are some other kinds of trusts such as business trusts and charitable trusts. Each of these types of trusts are very distinct. This article will compare the ordinary trust to the business trust. The article is not at all exhaustive since to totally cover the subject would require a book of some length. Suffice it to say that the ELC grabs concepts from the law of various types of trusts (but not from the law of ordinary trusts) and also from business organizations such as corporations and creates a hodgepodge trust law totally divorced from reality in supporting its contentions that the ordinary trust is a legal entity. What does the law of ordinary trusts say? This article will answer that question and distinguish the ordinary trust from the business trust. A similar study can be made of the ordinary trust as compared to other types of trusts such as the charitable trust.
As to the ordinary trust:
- “The fundamental nature of a trust is the division of title, with the trustee being the holder of legal title and the beneficiary that of equitable title. By definition, the creation of a trust must involve a conveyance of property.
- “A ‘trust’ exists where the legal title to property is held by one or more persons, under an equitable obligation to convey, apply, or deal with such property for the benefit of other persons. A trust has been defined as a fiduciary relationship with respect to property, subjecting the person by whom the title to the property is held to equitable duties to deal with the property for the benefit of another person, which arises as a result of a manifestation of an intention to create it. The Restatement definition is similar, providing that a trust, when not qualified by the word ‘resulting’ or ‘constructive,’ is a fiduciary relationship with respect to property, arising from a manifestation of intention to create that relationship and subjecting the person who holds title to the property to duties to deal with it for the benefit of charity or for one or more persons, at least one of whom is not the sole trustee.
- “Caution: A trust consists not only of property, but also of the trust instrument, the trust’s beneficiaries and trustees, and the trust administrator [if any].” (76 AM. JUR. 2D Trusts 1. (2007).)
A trust has been defined as a fiduciary relationship5 with respect to property, subjecting the person by whom the title to the property is held to equitable duties to deal with the property for the benefit of another person, which arises as a result of a manifestation of an intention to create it. The type of trust I recommend consists of the trust estate, a trustee, and a beneficiary (the Lord Jesus Christ). The parties to the trust agreement which I recommend are:
- “the ‘settlor’ or ‘trustor’ who is the church who creates the trust. The trust is not the church and the church is not the trust.”
- “the ‘trustee’ is the person appointed, to execute a trust, and the one in whom an estate, interest, or power is vested, under an express or implied agreement to administer or exercise it for the benefit of another. In other words, a trustee is a person who holds legal title to property under an express or implied agreement to apply it, and the income arising from it, to the benefit of another.
- “the ‘beneficiary’ is the person for whose benefit property,’8 sometimes referred to as the ‘cestui que trust.’ A ‘beneficiary’ is one for whose benefit a trust directly and specifically provides.
See 76 American Jurisprudence (AM. JUR.) 2d, Trusts as a beginning point to study the ordinary trust.
The law states as follows concerning the ordinary trust:
“A trust is not a legal entity. A trust is not an entity distinct from its trustees and capable of legal action on its own behalf, but merely a fiduciary relationship with respect to property. A trust is not a legal ‘person’ which can own property or enter into contracts, rather, a trust is a relationship having certain characteristics.” (See the picture taken from 76 American Jurisprudence 2d (AM. JUR. 2d), Trusts § 3 (2007)).
The ELC teaches that the trust is a legal entity. They are partially correct in that some types of trusts are legal entities. However, the ELC does not quote from the law concerning ordinary trusts as to the legal entity status of the ordinary trust (see above). They do this to establish their incorrect position that the trust utilized the Biblical Law Center and the ordinary Bible trust used by this ministry are legal entities. They quote from the law concerning, for example, business trusts. See pages 175-177 of Approved by Man: A Case for Biblical Reasonableness by Wright/Townsend, for an example of where they quote from the law of business trusts and apply it to the ordinary trust. In American Jurisprudence, the law of business trusts is covered in volume 13 whereas the law concerning ordinary trusts is covered in volume 76. Notice that 63 volumes separate these two types of trust; this corresponds with the difference between the two. The two are very distinct.
The law makes very clear that business trusts are distinct from ordinary trusts and are legal entities:
- “One of the distinctive devices by means of which individuals may combine their resources to operate a business for profit is the so-called business trust or “Massachusetts trust,” which may be comprehensively defined as an unincorporated business organization created by an instrument by which property is to be held and managed by trustees for the benefit and profit of such persons as may be or may become the holders of transferable certificates evidencing the beneficial interests in the trust estate.1 Such an organization has also been frequently termed a ‘common-law trust.’”2 (13 AM. JUR. 2D, Business Trusts, § 1 (2007)
- “The business trust is created by the voluntary act of the parties and is based on a contract; it is intended for the purpose of carrying on some kind of business or commercial activity for profit.1 Stated more simply, a business trust is a business organization in a trust form. 2” (13 AM. JUR. 2D, Business Trusts, § 2 (2007).
- “Business trusts differ from ordinary trusts in that the primary purpose of the Massachusetts or business trust is to conduct a business for profit while the object of the traditional trust is to hold and conserve particular property, and its powers are incidental to this purpose.1 Earmarks of a business trust not usually found in an ordinary trust include the following characteristics: beneficial shares,2 centralized management, continuity of life, transferability of interests, limited personal liability,3 a profit motivation, and the ability of the shareholders to remove the trustees with or without cause.4” (13 AM. JUR. 2D, Business Trusts, § 6 (2007).
- “It generally is held, so far as pure legal principle is concerned and apart from any declaration to the contrary in a statute or constitution, that a Massachusetts or business trust is not a corporation.1 However, while a business trust is not a corporation, it has some of the attributes of a corporation2 and is similar in its practical effect.3 Some courts have expressly held that a given business trust falls within the legal definition of a corporation.4 Business trusts are sometimes and for some purposes, by constitution or statute, placed in the same category as corporations or, by definition, classified as such.5 The fact that a business trust is regarded as a corporation for certain purposes, however, does not mean that the corporate analogy will be indiscriminately applied or that the organization will be treated as a corporation for all purposes.6” (13 AM. JUR. 2D, Business Trusts, § 7 (2007).
One can go to the following link for more information on the ordinary trust: Spurious rationale for incorporating: to hold property (this is the online version of Seciton VI, Chapter 7 of God Betrayed/Separation of Church and State: The Biblical Principles and the American Application (Available free in online form and PDF. Click here for order information should you desire a softback copy of this or other books by Jerald Finney.)