• The courts of equity were a distinct legal system that developed out of the office of the king called the chancery.

  • The initial judge of equity was the chancellor.

  • The origins of equity—drawn mainly from Roman law, canon law, and judicial prudence—are still debated, but by the fifteenth century it was a firmly established jurisdiction and body of law that competed with the common law.

• The purpose of equity was to correct the common law in the way that Aristotle described the idea of epieikeia: “The law is always a general statement, yet there are cases which it is not possible to cover in a general statement.”

  • This purpose of correcting the common law in particular cases was sometimes expressed as seeking to realize the spirit as opposed to the plain letter of the law.

• The major critique of equity was that it was uncertain and therefore contrary to the requirement of law as the fair and precise regulation of private rights.

• The liberal view of law, as expressed by Immanuel Kant in his Philosophy of Right (1797), is that the law must be well defined and equally available to all.

• The courts of equity operated by commanding the defendant to engage in a particular action. The common law operated by granting a judgment, usually for an amount of money, called damages.

  • Courts of equity operated without juries. The chancellor or the judge in equity decided the case as does a civil law judge, by resort to principles, called “maxims,” often enunciated in general principles, with a diminished influence of precedent. Juries were essentially limited to cases that arose under the common law.

• Law and equity are unified today in what appears to be a single body of law, but in fact each remedy in the law continues to conform either to the principles of law or to the principles of equity.

• Equity functions by commanding a specific act, such as specific performance of a contract.

• The command was eventually (and still is) expressed in an injunction. This has resulted in overlapping remedies in many cases.

• Equity supplied relief for fraud and for the reformation of contracts after mistakes had been made in the drafting.

• The most significant legal creation of equity was the idea of equitable ownership of land. This implied that one form of title would be protected at law (legal title) and another form of title protected in equity (equitable title). This was a remarkable idea that first led to a surrogate for the non existing systems of wills for testamentary succession.

  • The idea began, it seems, with landowners’ granting the “use” of the land to another. Then the use could spring from one person to another. These uses were protected in equity as equitable estates. Thus a primitive mechanism was set for transferring property at death. The use would spring from one person to another at death, and this transfer would be protected in equity.

Trusts

• Once equitable ownership of land and chattels became institutionalized, the road was open for the significant invention of the trust.

• The trust is a three-party transaction.

  • The trust has become an indispensable instrument of American law, largely because it is so useful in avoiding probate.

• The person who sets up the trust is called the trustor or settlor. This person conveys legal ownership in the corpus of the trust (the res) to the trustee to hold and manage the assets for the sake of a third person, the beneficiary of the trust.

• When someone dies in a common law jurisdiction, the property does not transfer directly to the heirs. It goes into “probate,” which means that it comes under the jurisdiction of a special branch of the judiciary called the probate court.

• It comes under the control of either an executor (under a will) or an administrator (when there is no will), who works with the probate court to make sure that all taxes and debts are paid before the property passes to the beneficiaries designated under the will or under the law (when there is no will).

• The trust serves to circumvent the role of probate. If the testator establishes a trust, the property remains in the hands of the trustee to distribute according to the terms of the trust.

  • Typically, when the settlor dies, the trustee transfers the property to the beneficiaries. This avoids the cumbersome process of having the property tied up in probate.

• The notion of equitable ownership has undergone important evolution, largely due to the law of mortgages.

  • In a mortgage transaction, the mortgagor transfers legal title to a mortgagee, who holds the assets as security for a debt. The mortgagee is either a bank or a mortgage company. The mortgagor retains the beneficial use of the property and therefore is analogous to the beneficiary of a trust.

    • The difference between the trust and the mortgage is that the former establishes legal relations among three parties—the trustor, the trustee, and the beneficiary. The mortgage is a two-party transaction, with the trustor and beneficiary united in a single party.

Equitable Pleading and Maxims

• Regardless of whether a plaintiff seeks relief for an equitable cause of action or seeks only an equitable remedy for a breach of a legal duty, the plaintiff must bring the suit, even today, before a court competent to act in equity. In most cases, this is the court of general jurisdiction.

• Chancery courts still exist in a few states, especially Delaware, which is the home of many of the corporations in the United States and so the source of much U.S. corporate law. In most states and in all federal courts, the courts of general jurisdiction may act according to their equitable powers.

• Pleading in equity is now much less specialized than it once was, owing to the adoption of uniform rules of civil procedure. Still, certain pleading matters are special to equity, such as the obligation to plead jurisdiction in equity and the requirement that a plaintiff who seeks pre-trial relief of an equitable nature must also seek equitable relief in the end.

• Although precedent plays an important role in equity courts, equitable courts often base their decisions on maxims of equity that acquire their binding force from moral reasoning.