October 21, 2019

October 21, 2019

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Is A Trust Always A Person?

Yesterday's post discussed Justice Grimes' opinion that while a trust must always act through a trustee, a trust is a "person" that may associate in a partnership under the California Uniform Partnership Act of 1994 (Cal. Corp. Code § 26200 et seq.).  Han v. Hallberg, 2019 Cal. App. LEXIS 475. In reaching this conclusion, Justice Grimes leaned heavily on the definition of "person" in the UPA:

"'Person' means an individual, corporation, business trust, estate, trust, partnership, limited partnership, limited liability partnership, limited liability company, association, joint venture, government, governmental subdivision, agency, or instrumentality, or any other legal or commercial entity."

Cal. Corp. Code § 16101(13).  

The reference in the statute to "other legal or commercial entity" might be construed to imply that a trust is a person only if it is in fact a legal or commercial entity.  However, Justice Grimes rejected this implication on the grounds that the statutory list of persons includes estates as well as business trusts.  

It remains to be seen whether the Supreme Court will side with Han or the Fourth District Court of Appeal's earlier, seemingly contrary, holding in Presta v. Tepper, 179 Cal. App. 4th 909 (2009).  It also remains to be seen whether Han will be extended to the General Corporation Law which does not define "person".   Section 18 of the Corporations Code (which is not part of the General Corporation Law but governs the GCL) defines "person" as including a corporation as well as a natural person.  Section 18 makes no mention of trusts.  Depending on whether you interpret "includes" in Section 18 as restrictive or illustrative, a trust either is not or is a person under the GCL.

For a discussion of the ambiguous meaning of "includes", see this post by Ken Adams.

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Keith Paul Bishop, Corporate Transactions Lawyer, finance securities attorney, Allen Matkins Law Firm
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Keith Paul Bishop is a partner in Allen Matkins' Corporate and Securities practice group, and works out of the Orange County office. He represents clients in a wide range of corporate transactions, including public and private securities offerings of debt and equity, mergers and acquisitions, proxy contests and tender offers, corporate governance matters and federal and state securities laws (including the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Act), investment adviser, financial services regulation, and California administrative law. He regularly advises clients...

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