We’ve been introduced to these before. Executory interests are interests that are recognized after the Statute of Uses as legal interests but they’re not remainders.
An executory interest is created in a transferee, just like remainders. It is also capable of becoming possessory, just like remainders. However, executory interests may have gaps, whereas remainders can’t. Also, an executory interest can divest a preceding estate and can follow a vested fee simple, but a remainder can’t.
So whenever you see a vested fee simple defeasible, the interest that follows it cannot be a remainder.
There are two types of executory interests: shifting and springing. But these types have no practical significance. We distinguish them for analytical purposes.
Shifting executory interests shift from one transferee to another. Here are some examples:
· To A for so long as the property is used for school purposes and then to B and her heirs.
· To A and her heirs, but if the property is not used for school purposes, to B and his heirs.
· To A and her heirs for so long as the property is used as a farm and then, one day after farming ceases, to B and her heirs.
In the third example, we have a gap of one day between when A’s estate ends and when B’s estate becomes possessory.
Springing executory interests spring from the grantor to the grantee. An example would be: “To A when she reaches her 25th birthday.” Let us assume that A is currently 19. Is this an executory interest? Who owns what? The owner would have a fee simple subject to an executory limitation, and A has a springing executory interest in fee simple absolute because there’s a gap before A gets the land.
When it’s being transferred from the grantor, then it’s springing, and when it’s being transferred from another grantee, then it’s shifting.
What happens if there is a gap in ownership? What happens to possession? Land is always owned by someone. During the gap, the owner gets a fee simple subject to executory limitation. The distinction between shifting and springing is a distinction between from whom the interest is coming.
Here’s an example from the book that is wrong (in the book).
“To A for life, then to B and her heirs, but if B does not survive A, then to O and his heirs”: B has a vested remainder subject to total divestment. O has a right of entry (not a reversion) because you can’t have a reversion following a vested fee simple. So what if B dies? Then O just has a reversion. B’s interest can never become possessory if B dies.
What if A and B are both alive? Then O has a right of entry. What about if A dies and B is still alive? Then B gets a fee simple absolute and O has nothing left.
The Statute of Uses
This thing comes along in 1536 and has the effect of validating future interests that had not previously been recognized as valid at law. This wasn’t actually the intended effect, but this is what happened.
“To T and his heirs for the use of A and his heirs for so long as A is unmarried at the time of her death and then to B and his heirs”: Before the Statute of Uses, you wouldn’t allow the future interest in B. At law, this wouldn’t have been enforced, but in equity, it would have been recognized.
The Statute of Uses is passed to increase taxes, among other reasons. “Raising a use” was a tax avoidance scheme because seisin didn’t pass at death at law.
What the Statute did was execute the trust. “Execute” means the same thing here as it does when you talk about “executed” contracts. What the Statute says is that what were previously equitable interests are now legal interests.
In the above example, before the Statute of Uses, A had an equitable fee simple determinable and B had nothing at law, but had an equitable interest. T had the fee simple absolute at law, but his duties would be enforced at equity. O had a possibility of reverter at law, but nothing in equity.
So law and equity were in conflict! The Statute of Uses brings them into harmony! We make all the interests legally enforceable. The mechanism was complicated because it “indulged in a fiction”: the “feoffee to uses”, or trustee, acquired a fee simple absolute, but it disappeared as soon as he got it. Thus, the trust was said to be executed.
So how do we still have trusts in light of the Statute of Uses? The Statute of Uses executed trusts! This Statute is part of our common law here! How can we still have trusts?
Trusts are valuable! The courts and people with money didn’t want to see them go. There are two possibilities that will result in the creation of a valid trust:
· To T for the use of T1 for the use of…somebody else. The first trust would execute, but the second trust would be valid. This is totally artificial, but it worked. One you execute once, you don’t execute again, so the second trust gets enforced in equity.
· You can establish an “active trust” but not a “dry” or “passive” trust.
How do we interpret “To A five days hence”? How can you have a fee simple absolute if it’s going to end in five days or when somebody graduates from law school or gets married or whatever? It seems inconsistent, and it is. We just grin and bear it. A fee simple absolute is an estate of potentially infinite duration except as modified by the Statute of Uses.