85-9

San Francisco, California
August 6, 1985

Re: Request for Opinion — Trust Business
Dear Mr. ________:
This is in reply to your letter of July 9, 1985.
You have requested an opinion from this Department as to whether certain contemplated activities of a proposed corporation would be “exempt from the requirement for qualifying to do business as a trust company under the banking law.”
Your letter states that your clients propose to form a corporation. The proposed activities of the corporation were described by you as follows.

1. The corporation’s sole purpose would be to act as one of the trustees for one or more irrevocable family trusts. The corporation would not otherwise act in a fiduciary capacity.

2. Trustees of the trust would be entitled to trustees’ fees based on a percentage of the trust income.
3. The shareholders of the corporation would all be beneficiaries of the family trusts.
You state that it is your opinion that the proposed corporation, by engaging in the described activities, would not be conducting trust business. However, you do not state the reasons for reaching such a conclusion.
It is our opinion that the activities of the proposed corporation would constitute doing a ‘trust business” within the meaning of Financial Code Section 106 (“F.C. Section 106″). ”Trust business” is defined in F.C. Section 106 as “. . . the business of acting as executor, administrator, guardian or conservator of the estate, assignee, receiver, depositary or 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.” The proposed corporation would act as trustee for a purpose permitted by law. Business is defined generally as that which occupies the time, attention, and labor for purposes of livelihood or for profit. Childe v. Warne (1961) 194 Cal.App.2d 623, 632. In Bank of America v. State Board of Equalization (1962) 209 Cal.App2d 780, 796, which interprets the phrase “engaged in the business”, the court held that one transaction was sufficient to find a retailer to be “engaged in the business” for imposing a duty to collect state use tax. Moreover, the Legislature’s use of the term “trust business” does not appear to be confined to the commercial sense nor restricted to a continuing course of conduct by a commercial enterprise. Therefore, even one instance of acting as a trustee for profit may constitute engaging in trust business.
The facts set forth in your letter describe a corporation which will act as trustee for one or more trusts and which will receive compensation for its services. Because the corporation would act as trustee for profit, such activities would constitute the doing of a “trust business” within the meaning of F.C. Section 106
Further, it does not appear that the proposed activities would be exempt from the licensing requirements of the Financial Code, Division 1, Chapter 12 (“F.C. Sections 1500-1591”). F.C. Section 1590 provides for certain specified exemptions and states as follows:
“Nothing in this chapter shall make it unlawful for any person or corporation to engage in the business of receiving and holding money in escrow or of acting as trustee under deeds of trust given solely for the purpose of securing obligations for the repayment of money other than corporate bonds.”
The facts set forth in your letter do not demonstrate any basis for exemption pursuant to F.C. Section 1590.
Consequently, it is our opinion that a corporation which acts as trustee for one or more trusts and which receives a fee for doing so is subject to the licensing requirements of F.C. Sections 1500-1591 and is not exempt pursuant to F.C. Section 1590.
The above opinion is based upon the facts set forth in your letter and limited thereto.
If you have any further questions in regard to this matter, please do not hesitate to call us.
Very truly yours,
LOUIS CARTER
Superintendent of Banks
By
JOHN R. PASTO
Counsel

July 9, 1985

Attention: James F. Carrig, Esq.
Re: Request for No-Action Letter re Proposed “S” Corporation
as Trustee of Family Trusts
Gentlemen:
We are counsel to members of a family who are primarily remaindermen beneficiaries of irrevocable family trusts (the “trusts”) and who are desirous of forming an “S” Corporation to act as one of the trustees of the family trusts, and we hereby request an opinion that such corporation will be exempt from the requirement of qualifying to do business as a trust company under the Banking Law set forth in the California Financial Code. The trustees of the trusts are entitled to trustee fees based on a percentage of the trust income.
Only beneficiaries of the family trusts will be shareholders of the “S” Corporation, it will be formed for the sole purpose of acting as trustee of the subject family trusts, and it will not otherwise act in a fiduciary capacity.
It is our opinion that the proposed corporation will not be conducting “trust business” as defined in California Financial Code Section 106 and, therefore, does not have to qualify to do business as a trust company under the “Banking Law”.
On the basis of the foregoing, we respectfully request the issuance of a no-action letter or an opinion letter to the effect that the proposed “S” Corporation does not have to qualify to do business as a trust company under the California Financial Code. Should the Department not agree with our conclusion, we respectfully request an opportunity for a meeting to discuss this request. Your prompt attention to this matter would be appreciated.
Thank you for your courtesy and cooperation.
Cordially,