September 8, 1992

Re: Appointment of Individual Trustee

Dear ________:

This responds to your letter to Stan Cardenas dated August 4, 1992 and follows my letter to ________, dated August 10, 1992, of which you have received a copy.

The letter of August 10th sets forth the reasoning leading to the conclusion that the Banking Law prohibits an individual from acting as trustee on behalf of your fund’s certificate holders. You have asked, in substance, whether an attorney, acting without compensation, would be subject to that prohibition. Our answer is in the affirmative.

It is difficult to conceive that a professional would or could act in the contemplated capacity without receiving some form of compensation. We do not believe, however that the transaction of business requires the element of compensation. Business is defined in Black’s Law Dictionary as “That which habitually busies or occupies or engages the time, attention, labor, and effort of persons as a principal serious concern or interest or for livelihood or profit.” (Emphasis added.) California Evidence Code Section 1270 provides that, “…’a business’ includes every kind of business, governmental activity, profession, occupation, calling, or operation of institutions, whether carried on for profit or not.”

Moreover, cases have held that a single appointment as trustee, where it is not merely incidental to another main purpose, is sufficient to constitute the transaction of business, due to the substantial and continuing nature of the duties and powers which devolve upon the appointee (See, e.g. In re Wellings’ Estate, 192 Cal. 506).

In view of the foregoing, it is concluded that the appointment of an attorney as trustee, with or without compensation, under the circumstances described in your letter and in the prior correspondence from ________ is not permissible under the Banking Law.

Very truly yours,

Superintendent of Banks



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