Robert Tepper and Ronald Presta invested in real estate together through
several partnerships. They entered into two of these partnership agreements as
trustees of their respective trusts. The agreements contained provisions
requiring the partnership to purchase the partnership interest of any deceased
Tepper died. In her capacity as successor trustee of Tepper’s two trusts, his
widow refused to sell the two partnership interests. She argued that it was the
trusts, rather than the individual, who had been the partners, and there had
been no death of a trust partner, so she could not be compelled to sell the
trusts’ interests in the partnerships.
The Court of Appeal confirmed the trial court’s holding that an express trust
of the type created by Tepper is not a person, but merely a fiduciary
relationship with respect to property. Tepper’s trust was formed under the
Probate Code, presumably for estate planning purposes, and the court contrasted
this type of trust with the examples of a trust company formed under the
Financial Code, and a real estate investment trust formed under the Corporations
The court found that the type of trust created by Tepper is not an entity
like a corporation that is capable of entering into a business relationship such
as a partnership, or that is capable of suing or being sued, and that it was
Tepper the individual, rather than his respective trusts, who was the partner
under the agreements.
The court clarified that it did not suggest that the trusts were invalid or
that Tepper should lose whatever probate avoidance or tax advantage applied. The
court also recognized that certain trusts, as distinguished from the trustee,
can qualify as the type of entity capable of forming a partnership under
California partnership law.
The court only held that “when a trustee of an ordinary express trust enters
into a partnership relationship in his capacity as trustee, it is he, and not
‘the trust’ which is the party to that agreement.” The court therefore ruled
that the provision in the partnership agreements was triggered by Tepper’s
death, and required the partnerships to purchase the partnership interests of
the deceased partner.
This case reinforces the rule that an ordinary express trust, such as an
inter vivos revocable trust used for estate planning, is not an entity separate
from its trustee.
L. Hellmuth is the principal author of this release.