75-6
75-6
San Francisco, California
May 7, 1975
Re: Subdivision Trusts in Arizona
Dear _______:
This is in reply to your letter of April 4, 1975, to Mr. James Carrig of this Department. It is our understanding that you are requesting an opinion from this Department as to whether your corporation may act as trustee “of subdivision trusts” in Arizona but without finding that your corporation is engaged in a trust business as defined in section 106 of the Financial Code.
Further, it is our understanding that your company is a California corporation licensed by the Department of Insurance to transact business of title insurance. Moreover, we understand that your company is authorized to transact a title insurance business in the State of Arizona. Finally, it is our understanding that acting as trustee of “subdivision trusts” is exempt from the definition of trust business under Arizona law.
Based on the above facts, it is our opinion that acting as trustee of “subdivision trusts” (as that term is described in article in Volume 5 of the Arizona Law Review) does not constitute the doing of a “trust business” as that term is described in section 106 of the Financial Code. Our understanding of “subdivision trusts” indicates that a trustee of such a trust is closely analogous to a trustee under a deed of trust in this State. Acting as a trustee under a deed of trust does not constitute the doing of a “trust business”. (Section 1590 of the Financial Code).
Therefore, we will interpose no objection to your company’s undertaking to act as trustee in Arizona of these “subdivision trusts”.
The above opinion is based upon the facts set forth in your letter as well as a description of “subdivision trusts” found in article. This opinion is limited thereto, and any change in the above factors or a structuring of “subdivision trusts” would make this opinion inoperative.
If you have any further questions in regard to this matter, please do not hesitate to contact us.
Very truly yours,
JOHN H. SHERMAN
Chief Deputy Superintendent of Banks
By
JOHN F. STUART
Counsel
JFS/nd
April 4, 1975
James Carrig, Esq.
Legal Counsel
Department of Banking
State of California
235 Montgomery Street, Suite 750
San Francisco, CA. 94104
Re: Subdivision Trusts in Arizona
Dear Mr. Carrig:
Confirming our telephone conversation with you on April 2, we would like to have an expression from the Department as to whether or not this Company’s involvement as trustee in subdivision trusts in the State of Arizona would constitute such involvement as would amount to doing business as a trust company, thereby subjecting this Company, as to such business, to the requirements and provisions of Sections 12392 through 12395 of the California Insurance Code.
This Company is a California corporation, duly certificated by the California Department of Insurance to transact the business of title insurance. Its articles of incorporation do not authorize it to act as executor, administrator, guardian, assignee, receiver, depositary, agent or trustee, or to do a general trust business. This Company is also authorized to do a title insurance business in the State of Arizona. Through a wholly-owned subsidiary, ________, an Arizona corporation without insurance powers, this Company does act as trustee, only in the State of Arizona, of numerous trusts falling into the category known in Arizona as “subdivision trusts”. Attached is a copy of Carlock, The Subdivision Trust–A Useful Device In Real Estate Transactions, an article which appeared in Volume 5 of the Arizona Law Review in 1963. ________ article in my opinion is an accurate description of the concept of subdivision trusts in Arizona still being used today.
The State of Arizona had no statutory body of law regulating the business of trust companies in Arizona until January 1, 1972.
Effective that date it adopted a comprehensive body of statutory laws regulating such business. In doing so, however, it specifically exempted both insurance companies licensed to do business in Arizona and persons holding trusts of real estate for the primary purpose of subdivision, development or sale. Attached is a copy of Section 6-852 of Arizona Revised Statutes, the section creating those exemptions.
All subdivision trusts in which this Company engages in as trustee in Arizona are administered entirely in Arizona by this Company’s wholly-owned subsidiary. We have recently reached agreement in principle to sell all of the capital stock of that subsidiary to a nonrelated company. However, our plan is to retain a portion of the subdivision trust business now handled by that subsidiary. We are prepared if necessary to form a new wholly-owned subsidiary and transfer to the new entity the subdivision trust business to be retained. We would much prefer, however, to transfer the retained subdivision trust business to the parent California title insurance company. We would not do so if such a step would subject the parent California title insurance company to the requirements of Sections 12392 through 12395. If we did transfer the retained subdivision trust business to the California title insurance company parent, all administration of the subdivision trust business, including all accounts and bank deposits relating thereto, would be maintained and administered entirely within the State of Arizona.
We therefore request an expression from the Department as to whether or not we may transfer the retained subdivision trust business to this Company and achieve our objectives as outlined above.
Very truly yours,
Enclosure
CHAPTER 8.—TRUST COMPANIES
§ 6—852. Exemptions
For the purposes of this article, a person does not engage in the trust business by:
Rendering services as an attorney at law in the performance of his duties as such.
Acting as trustee under a deed of trust made only as security for the payment of money or for the performance of another act.
Acting as a trustee in bankruptcy or as a receiver.
Holding trusts of real estate for the primary purpose of subdivision, development or sale, or to facilitate any business transaction with respect to such real estate.
Engaging in the business of a debt, management company to the extent of the activities for which it is licensed under chapter 6.
Engaging in the business of an escrow agent to the extent of the activities for which it is licensed under chapter 7.
Acting as trustee of a business trust as defined in § 10-501.
Holding assets as trustee of trusts created for charitable purposes.
Receiving rents and proceeds of sale as a licensed real estate broker on behalf of a principal.
Engaging in securities transactions as a dealer or salesman registered under chapter 12, title 44.
Insurance companies licensed to do business in the State of Arizona and subject to regulation and control of the director of insurance are excluded from the provisions of this chapter. As amended Laws 1974, Ch. 47, § 1.