78-11

78-11

November 15, 1978

Dear Mr. ________:

This is in response to your letter of November 8, 1978.

It has been the policy of the State Banking Department that a bank licensed to do a trust business in a state other than California may acquire and hold title as trustee to real property in California for the benefit of a California beneficiary of a non-California trust. The acquisition and ownership of one parcel of real estate by ________, a Georgia trust company acting as trustee for a trust established in Georgia, is an isolated transaction and does not constitute the transaction or conduct of a trust business in the state of California as defined by the provisions of the California Financial Code. Therefore, ________ need not obtain a license from the State Banking Department prior to making such purchase.

If you have any further question concerning this matter, please do not hesitate to contact me.

Very truly yours,

JACK L. TAUFER
Superintendent of Banks

By

MARGARET MARTINSEN
Counsel

MM:jo

November 8, 1978

Margaret Martinson, Esq.
California State Banking Department
235 Montgomery Street
Suite 750
San Francisco, California 94104

RE: REQUEST FOR STATE BANKING DEPARTMENT OPINION

Dear Ms. Martinson:

In speaking to our client today I have learned that there is some urgency for consummating the transaction set forth in the accompanying letter. If it is convenient and if your time permits, we would very much appreciate an early review of this matter.

Sincerely,

KAB:cm

Enc.

November 8, 1978

Margaret Martinson, Esq.
California State Banking Department
235 Montgomery Street
Suite 750
San Francisco. California 94104

RE: REQUEST FOR STATE BANKING DEPARTMENT OPINION

Dear Ms. Martinson:

We are writing to request an opinion from the State Banking Department with respect to the following matter:

________ is a Georgia bank that (a) is authorized to engage in the banking and trust business in the State of Georgia, (b) is not qualified to do business in the State of California pursuant to California Corporations Code §§2100 et seq., and (c) is not licensed to engage in the banking or trust business in this state pursuant to California Financial Code §§1750 et seq. ________ acts as a trustee for a trust established in the State of Georgia, which trust has a life beneficiary who resides in the State of California. It is proposed that ________, as trustee, purchase the life beneficiary’s house and hold such California real estate as a trust asset.

QUESTION.

The question is whether such purchase of one parcel of real estate in the State of California by a Georgia bank, acting as trustee for a trust established in Georgia, constitutes the transaction or conduct of a trust business in the State of California pursuant to the provisions of the California Financial Code, with the consequent requirement that the Georgia bank must first obtain a license from the State Banking Department prior to making such purchase.

DISCUSSION.

California Financial Code §106 defines trust business as: ” ‘Trust business’ means the business of acting as…trustee under the appointment of any court, or by authority of any law of this or any other state or of the United States, or as trustee for any purpose permitted by law.”

California Financial Code §1503 provides: “No foreign corporation, other than a national banking association which is authorized to conduct a trust business in this State, shall have or exercise the powers of a trust company nor directly or indirectly transact or conduct in this State a trust business as defined in Section 106 of this code…”

It appears that ________ is engaged in the trust business as defined in California Financial Code §106. However, the prohibitory language set forth in Financial Code §§1503 and 1750 et seq. focuses on the transaction or conduct of such trust business in the State of California. While the Financial Code does not define what constitutes transacting or conducting a trust business in this State, the California Corporations Code, which code is incorporated by reference by California Financial Code §101, does elucidate the meaning of transacting intrastate business in the State of California.

Similar to the Financial Code, the California Corporations Code requires that all foreign corporations doing business in the State of California must first so qualify. California Corporations Code §191 provides in part:

“(a) For the purposes of Chapter 21 (commencing with Section 2100) [the Section relating to foreign corporations], ‘transact intrastate business’ means entering into repeated and successive transactions of its business in this state, other than interstate or foreign commerce….

(c) Without excluding other activities which may not constitute transacting intrastate business, a foreign corporation shall not be considered to be transacting intrastate business within the meaning of sub-division (a) solely by reason of carrying on in this state any one or more of the following activities:

…(8) Conducting an isolated transaction completed within a period of 180 days and not in the course of a number of repeated transactions of like nature.”

With respect to the Corporations Code, it is our opinion that the purchase of a single parcel of real estate in this State is the conduct of an isolated transaction, not in the course of a number of repeated transactions of like nature, and therefore, pursuant to California Corporations Code §191(c) (8), does not constitute the conduct of intrastate business in California for the purpose of requiring qualification to do business here.

Since the California Corporations Code is incorporated by reference by California Financial Code §101 as applicable to the conduct of banking or trust business in this state, it would appear that this definition of the conduct of business within the State of California would be equally applicable to the provisions of the Financial Code.

Accordingly, it is submitted that the purchase of a parcel of California real estate by a Georgia bank, acting as trustee for a trust established in the State of Georgia, is an isolated transaction in the State of California, that such transaction should not require obtaining a license by the State Department of Banking, and that such transaction should not be considered the conduct or transaction of a trust business in this State.

Thank you for your review and opinion on this matter.

Very truly yours,

KAB:cm