IN THE SUPREME COURT OF THE STATE OF CALIFORNIA

Transcription

1 Supreme Court Case No. S d Civil No. B ROGER D. MOELLER, vs. Petitioner, IN THE SUPREME COURT OF THE STATE OF CALIFORNIA LOS ANGELES COUNTY SUPERIOR COURT, SANWA BANK, Respondents, Real Party in Interest. BRIEF ON THE MERITS OF REAL PARTY IN INTEREST SANWA BANK MITCHELL, SILBERBERG & KNUPP Hayward J. Kaiser (66365) OFFICE OF GENERAL COUNSEL SANW A BANK CALIFORNIA Allan B. Cutrow (50353) Richard B. Sheldon (150092) Stephen H. Weiss, General Counsel (60172) Jill Switzer, Senior Counsel (72878) West Olympic Boulevard Phyllis A. Siegel, Senior Counsel (90383) Los Angeles, California South Figueroa Street, W4-2 (310) Los Angeles, California (213) GREINES, MARTIN, STEIN & RICHLAND Kent L. Richland (51413) Carolyn Oill (130721) 9601 Wilshire Boulevard, Suite 544 Beverly Hills, California / Attorneys for Real Party in Interest SANW A BANK CALIFORNIA

2 TABLE OF CONTENTS QUESTIONS PRESENTED 1 INTRODUCTION 2 STATEMENT OF FACTS 4 LEGAL DISCUSSION 8 I. THE ATTORNEY -CLIENT PRIVILEGE PROTECTS CONFIDENTIAL COMMUNICATIONS BETWEEN SANWA, AS TRUSTEE, AND ITS COUNSEL. 8 A. The Attorney-Client Privilege, And The Rules Governing Its Application And Waiver, Are Governed Exclusively By Statute. 8 B. For Purposes Of Assertion Of The Attorney-Client Privilege As To Confidential Communications With Counsel When Acting As Trustee Of The Moeller Trust, Sanwa Bank Is The "Client" And "Holder Of The Privilege." 11 II. NEITHER M:OELLER' S "OFFICE OF TRUSTEE" THEORY; NOR THE COURT OF APPEAL'S "TRUST PROPERTY" THEORY, VITIATES SANWA'S EXCLUSIVE CONTROL OF THE PRIVILEGE OR OTHERWISE REQUIRES SANW A TO DISCLOSE THE PRIVILEGED INFORMATION; NOR IS THE PRIVILEGE AFFECTED BY THE PURPOSE OR CONTENT OF SANW A'S CONFIDENTIAL COMMUNICATIONS WITH ITS COUNSEL. 15 1

3 A. The "Office Of Trustee" Is Not And Cannot Be The "Client" Under Evidence Code Section B. Sanwa's Attorney-Client Privilege Cannot Be Vitiated By The Court Of Appeal's "Trust Property" Analysis. 19 c. Application Of The Privilege Is Not And Cannot Be Dependent On The Nature Of The Consultation Or Communications. 23 CONCLUSION 26 11

4 Cases TABLE OF AUTHORITIES Benge v. Superior Court (1982) 131 Cal.App.3d Dickerson v. Superior Court (1982) 135 Cal.App.3d 93 8, 14, 18, 21 Estate of Effron (1981) 117 Cal.App.3d Fletcher v. Superior Court (1996) 44 Cal.App.4th Goldberg v. Frye (1990) 217 Cal.App.3d , 14 Hobbs v. Buck (1981) 115 Cal.App.3d Huie v. DeShazo (Tex. 1996) 922 S.W.2d Koshman v. Superior Court (1980) 111 Cal.App.3d Lasky, Haas, Cobler & Munter v. Superior Court (1985) 172 Cal.App.3d Mitchell v. Superior Court (1984) 37 Cal.3d People v. Gionis (1995) 9 Ca1.4th , 18 People v. Harris (1989) 47 Ca1.3d

5 Pillsbury v. Karmgard (1994) 22 Cal.App.4th , 20 Roberts v. City of Palmdale (1993) 5 Cal.4th , 21, 23 Shannon v. Superior Court (1990) 217 Cal.App.3d , 20, 21 Strauss v. Superior Court (1950) 36 Cal.2d , 22 Valley Bank of Nevada v. Superior Court (1975) 15 Cal.3d Wells Fargo Bank, N.A. v. Superior Court (Oct. 7, 1996) 49 Cal.App.4th 1320 [96 Daily Journal D.A.R ] 13, 14, 16, 21' 23, 24 Statutes Business and Professions Code section 17913, subdivision (b)(4) 17 Business and Professions Code section Civil Code section , subdivision (c) 17 Code of Civil Procedure section Code of Civil Procedure section 1501, subdivision (c) 17 Corporations Code section 200.5, subdivision (a) 17 Corporations Code section 15611, subdivision (v) 17 Evidence Code section Evidence Code section 911 8, 21 Evidence Code section Evidence Code section lv

6 Evidence Code section 951 9, 11, 16 Evidence Code section Evidence Code section 953 9, 11, 18, 19 Evidence Code section 953, subdivision (a) 9, 11, 18 Evidence Code section 953, subdivision (b) 9, 18 Evidence Code section 953, subdivision (c) 9, 18 Evidence Code section 953, subdivision (d) 10, 18 Evidence Code section 954 1, 9, 21, 23 Evidence Code sections Probate Code section 82, subdivision (b)(6) 17 Probate Code section Probate Code section , 20 Probate Code section Probate Code section Probate Code section , 20 Probate Code section Other Authorities 18 Cal. Law Revision Com. Reports (1986) 20 Cal. Law Revision Com. com., Deerings Ann. Evid. Code, 911 (1986) 8 Reid, et al., Privilege and Confidentialit~ Issues When A Law~er Represents A Fiduciary (1996) 30 Real Prop., Prob. & Trust J v

7 QUESTIONS PRESENTED 1. Whether, notwithstanding the Legislature's express directive that the attorney-client privilege as codified in Evidence Code section 954 can only be limited by statutory exceptions, there is a common law exception to the attorney-client privilege for communications made by a trustee of a general trust in consultation with its legal counsel regarding matters of trust administration. 2. Whether the right of the beneficiaries and successor trustee of a general trust to inspect trust documents takes precedence over, and annuls, the attorney-client privilege held by the trustee as to documents reflecting communications with counsel regarding trust administration. 1

8 INTRODUCTION Does an individual or entity lose the protection of the attorneyclient privilege - which protects all clients - simply because it is acting as the trustee of a trust at the time of its confidential communications with its attorney? Is a confidential communication between attorney and client merely a piece of property that is transferred to successive trustees or beneficiaries? The Court of Appeal below, in ordering real party in interest Sanwa Bank to disclose to its opponent in the present litigation what are conceded to be attorney-client privileged documents, answered these questions in the affirmative. This brief explains why those answers cannot be correct. The most fundamental reason why the Court of Appeal's conclusion must be erroneous is that the attorney-client privilege, and all exceptions to it, are exclusively creatures of statute; indeed, this is one of the few areas in the law in which the Legislature has expressly provided that it is to be governed solely by statute. A careful reading of each of the pertinent provisions of the Evidence Code establishes beyond any doubt that, as to its confidential consultations with counsel in pursuit of its duties as trustee of the Moeller Trust, Sanwa Bank is the sole holder of the attorney-client privilege and, thus, has the exclusive right to assert or waive that privilege. As the brief also explains, none of the various theories that have been suggested vitiate the privilege. Roger Moeller, beneficiary and successor trustee of the Moeller Trust, argues that the "office of trustee" is the true holder of the privilege, and that, therefore, as successor trustee he has full control over the privilege. But this theory is incompatible with the provisions of the Evidence Code, which define a "client" as either a person, a business entity, or a public entity. The 2

9 "office of trustee" simply does not fit into any of those categories. Moeller's theory similarly cannot be squared with the Code's definition of "holder" of the privilege, which specifically provides for the circumstances in which a "successor" inherits the privilegecircumstances that do not include the succession of a trustee, or anything similar or analogous. A different approach was taken by the Court of Appeal, which attempted to avoid the privilege altogether by labelling all documents generated by a trustee and its counsel as "trust property" to which both beneficiaries and successive trustees must be given access. This approach doesn't work either. In the first place, a "right to inspect" documents does not by itself trump invocation of an evidentiary privilege. To the contrary, there is no need to invoke the privilege except in the face of an asserted "right to inspect" the subject information, and it is the privilege that supersedes any such right. In fact, as explained in more detail below, the authorities are uniform that in the absence of a statutory exception to the privilege - which plainly does not exist here - the privilege is paramount to any claimed right of access. A third theory more or less implicit in both Moeller's and the Court of Appeal's approaches is that the privilege can be applied selectively depending upon the content of a particular communication: The concept is that confidential attorney-client communications concerning a trustee's potential liability to beneficiaries would be privileged while confidential attorney-client communications about matters of general trust administration would be open to inspection by the beneficiaries and successor trustees. But while there may be jurisdictions in which such line-drawing is permissible, California is not one of them. California law is clear that application of the privilege 3

10 does not and cannot turn on the content of the communication without effectively destroying the privilege. Moreover, as we explain, no such line can be effectively drawn, and to recognize any substantial incursion into the sanctity of attorney-client communications would inevitably chill the freedom and openness that the privilege is intended to encourage. Lurking between the lines of all of these attempts to circumvent the privilege is a fundamentally flawed conception of the role played by a trustee in administering a general trust. Although the trustee owes fiduciary duties to the beneficiaries, the trustee is not simply an agent of the beneficiaries. Rather, the Probate Code makes it clear that the trustee's primary duty is to administer the trust in accordance with the provisions of the trust instrument. Thus, an individual or entity acting as trustee may sometimes - even frequently - be faced with decisions that are inconsistent with the desires or interests of one or more beneficiaries. As a result, in administering the trust, the trustee must have the opportunity to consult with counsel concerning legal problems with complete openness and candor, and with confidence that those attorneyclient communications will remain confidential. For these reasons, there can be no special exception to the attorney-client privilege that provides individuals or entities acting as trustees of general trusts any less protection than is provided to any other client of an attorney. STATEMENT OF FACTS The underlying action involves a dispute over Sanwa Bank's management as trustee of the Moeller Trust. Roger Moeller ("Moeller") is the successor trustee and a beneficiary of the trust. The matter before this Court arises out of Moeller's motion to compel production of documents in the face of Sanwa's claim of attorney-client privilege. 4

11 During Sanwa' s tenure as trustee, the primary asset of the trust was a 25 % interest in a parcel of real property leased to a plating company. (Exhibit 1 to Petition for Writ of Mandate ["PWM"], p. 2,, 4; Exhibit E to Exhibit 4 to PWM, p. 1.) When the property was found to be seriously contaminated with hazardous chemicals, the Environmental Protection Agency ("EPA") issued an order to clean up the property. (Exhibit B to Exhibit 1 to PWM.) Sanwa, as trustee, retained experts for the clean up. (Exhibit 1 to PWM, pp. 4-5.) Eventually, the clean-up costs depleted the liquid assets of the trust. Sanwa then advanced more than $600,000 of its own funds to litigate a claim against the former tenants, who were responsible for the pollution on the property, to pay clean-up costs; Sanwa obtained a $5 million judgment against the former tenants in that litigation. (Exhibit E to Exhibit 1 to PWM, 18th p. [March 4, 1994, memorandum to file from Jeffrey A. Philpott].) These advances were made under a provision in the trust agreement that also gave the trustee a first lien on the assets of the trust for repayment of the advance. (Exhibit 1 to PWM, pp. 6-7, 9.) On July 11, 1994, Sanwa filed a request to resign as trustee. (Exhibit 1 to PWM.) The court granted the request in August 1994, subject to Sanwa filing a final accounting with the court, which Sanwa did on February 1, (Exhibit 3 to PWM.) On March 10, 1995, Moeller filed objections to Sanwa's accounting, claiming that Sanwa refused to turn over relevant documents to him as successor trustee, made imprudent decisions regarding administration of the trust, and improperly spent funds and committed to obligations in excess of the value of the trust. (Exhibit 4 to PWM.) In the meantime, in response to Moeller's informal requests, Sanwa had already voluntarily delivered to Moeller 14 boxes of administrative files containing more than 400 documents which Moeller 5

12 copied and reviewed. (Exhibit E to Exhibit 4 to PWM, p. 3; Exhibit 7 to PWM, pp. 3-5.) Based on his review, Moeller told the other beneficiaries of the trust in a letter dated March 7, 1995, that he "ha[ d] been able to pinpoint specific decisions that were imprudent and to lay the groundwork for allegations of dereliction of fiduciary duties." (Exhibit E to Exhibit 4 to PWM, p. 3.) Notwithstanding these conclusions, on August 2, 1995, Moeller filed a motion to compel production of additional documents. Specifically, Moeller sought, among other things: "1. Any and all engagement letters and agreements for all legal firms including any subsequent modification engagement letters for any law firm that represented the George and Grace Moeller Trust during the period that Sanwa Bank acted as Successor Trustee. "2. Any and all letters, notes, memorandums [sic] and telephone notes between Sanwa Bank as Successor Trustee and any law firm hired by Sanwa Bank to do any legal work for the George and Grace Moeller Trust during the period that Sanwa Bank acted as Successor Trustee. "3. Any and all copies of invoices and billings for professional services from any law firm that performed services for the George and Grace Moeller Trust at the bequest of Sanwa Bank or [sic] Successor Trustee for the George and Grace Moeller Trust during the period that Sanwa Bank acted as Successor Trustee. " "8. Complete copies of any and all files, memorandums, [sic] notes and accountings and invoices which relate to services performed by Sanwa Bank as Successor Trustee for the George and Grace Moeller Trust during the period that Sanwa Bank acted as Successor Trustee." (Exhibit 6 to PWM, pp. 1-3.) 6

13 Sanwa refused to produce this material, asserting its attorneyclient privilege. (Exhibit 7 to PWM, pp ) Moeller argued that as successor trustee, he was now the holder of Sanwa's attorney-client privilege and, therefore, entitled to view even privileged documents. (Exhibit 8 to PWM.) The trial court denied the motion, concluding that Sanwa's privilege was not transferred to Moeller and the subject documents were in fact protected by the privilege. (PWM, p. 5.) Moeller sought extraordinary writ relief in the Court of Appeal and the court issued an alternative writ.l' On May 23, 1996, the Court of Appeal filed a published opinion granting a peremptory writ and holding that the subject documents were discoverable by Moeller and the other beneficiaries. (Appendix to Petition for Review [hereinafter, "Opinion"].) The court reasoned that the documents, including legal opinions of Sanwa's counsel, were the property of the trust and were, therefore, subject to review by any of the beneficiaries or successor trustees; consequently, the court concluded, the documents were not protected by the attorney-client privilege. Sanwa's petition for rehearing was denied on June 18, 1996, and this Court granted review on August 21, The trial court hearing on the motion was not reported and apparently no written order was issued. (PWM, p. 5.) However, while the writ petition was pending in the Court of Appeal, the appellate court ordered the superior court to issue a written order, and such an order was issued on February 23, That order provided that Sanwa Bank "held and properly asserted an attorney-client privilege and that said privilege neither inured nor transferred to Sanwa's successor, Roger D. Moeller." Thus, Moeller's motion for production of documents was denied. 7

14 A. LEGAL DISCUSSION THE A ITORNEY -CLIENT PRIVILEGE PROTECTS CONFIDENTIAL I. COMMUNICATIONS BETWEEN SANWA. AS TRUSTEE. AND ITS COUNSEL. The Attorney-Client Privilege. And The Rules Governing Its Application And Waiver. Are Governed Exclusively By Statute. In California, evidentiary privileges are exclusively creatures of statute. This rule is codified in Evidence Code section 911: "Except as otherwise provided by statute:... [n]o person has a privilege to refuse to disclose any matter or to refuse to produce any writing, object, or other thing." ( 911, emphasis added; see also, Cal. Law Revision Com. com., Deerings Ann. Evid. Code, 911 (1986) p. 72 ["This section codifies the existing law that privileges are not recognized in the absence of statute"; emphasis added].~' Furthermore, the courts are not free to elaborate upon the statutory scheme: They must apply the privileges that exist, and they may not create new privileges or judicial exceptions to existing privileges. (People v. Gionis (1995) 9 Cal.4th 1196, 1206; Valley Bank of Nevada v. Superior Court (1975) 15 Cal. 3d 652, 656; Dickerson v. Superior Court (1982) 135 Cal.App.3d 93, 99; Cal. Law Revision Com. com., Deerings Ann. Evid. Code, 911, 2/ All further statutory references are to the Evidence Code unless otherwise noted. 8

15 supra, p. 72 ["This is one of the few instances where the Evidence Code precludes the courts from elaborating upon the statutory scheme"].) The attorney-client privilege is set forth in Evidence Code section 954, which provides that a client may preclude disclosure of confidential communications between himself and his attorney. A "client" is defined by the Evidence Code as "a person who, directly or through an authorized representative, consults a lawyer for the purpose of retaining the lawyer or securing legal service or advice from him in his professional capacity." ( 951.) A "confidential communication" is defined as "information transmitted between a client and his or her lawyer in the course of that relationship and in confidence by a means which, so far as the client is aware, discloses the information to no third persons other than those who are present to further the interest of the client in the consultation... " ( 952.) Whenever a communication is claimed to have been made in confidence in the course of the attorneyclient relationship, the communication is presumed to be confidential and the party opposing application of the privilege has the burden of demonstrating the contrary. ( 917; Koshman v. Superior Court (1980) 111 Cal.App.3d 294, 297.) The right to assert the attorney-client privilege belongs to the "holder of the privilege." (People v. Gionis, supra, 9 Cal.4th at p ) Section 953 defines the "holder of the privilege." The client is normally the holder. ( 953, subd. (a).) However, if the client has a guardian or conservator, then the guardian or conservator is the holder of the privilege. ( 953, subd. (b).) If the client is deceased, the personal representative of the client becomes the holder. ( 953, subd. (c).) And if an institutional client (i.e., a corporation, partnership, or the like) is no longer in existence, its successor, assign or other representative 9

16 becomes the holder of the privilege. ( 953, subd. (d).) Only the holder of the privilege may waive it. (People v. Gionis, supra, 9 Cal.4th at p ) As is true of most privileges, application of the attorney-client privilege may sometimes result in the suppression of relevant, even "vital" evidence. But the Legislature has determined that the benefits derived from applying the privilege outweigh the risk of unjust decisions resulting from suppression of relevant evidence. (People v. Gionis, supra, 9 Cal.4th at p ) According! y, the courts are not free to ignore the privilege in order to "do justice" in a particular situation. If the privilege is properly asserted by its holder, and if the party seeking the information does not demonstrate that the communication was not confidential, then the privilege applies and the information must be suppressed. The public policy behind the privilege - that of encouraging "'full and frank communication between attorneys and their clients"' (Roberts v. City of Palmdale (1993) 5 Cal.4th 363, 380) -would be thwarted were the rule otherwise. As this Court recently explained: "Without the ability to make a full disclosure of the facts to the attorney, the client risks inadequate representation. Unless he makes known to the lawyer all the facts, the advice which follows will be useless, if not misleading." (People v. Gionis, supra, 9 Cal.4th at p. 1207, internal quotation marks omitted.) 10

17 I I B. For Purposes Of Assertion Of The Attorney-Client Privile~e As To Confidential Communications With Counsel When Actin~ As Trustee Of The Moeller Trust. Sanwa Bank Is The "Client" And "Holder Of The Privile~e." Roger Moeller seeks to compel Sanwa Bank to produce documents that were generated during Sanwa's tenure as trustee of the Moeller Trust. Sanwa has turned over more than 400 such documents, asserting the privilege only as to certain documents consisting of confidential communications between Sanwa and its attorneys. (Exhibit E to Exhibit 4 to PWM, p. 3; Exhibit 7 to PWM, pp. 3-5.) Applying the principles set forth above to the uncontradicted facts present here, it is clear that Sanwa is the client and the holder of the privilege within the meaning of the Evidence Code, and that Sanwa, therefore, cannot be compelled to disclose the privileged material. As noted above, the "client" in the "attorney-client" relationship is a "person" (including a legal person, such as a corporation) who consults a lawyer in his professional capacity. ( 951.) There is no dispute here that Sanwa Bank is a legal person within the meaning of the Code. Nor is there any dispute that Sanwa, in fact, consulted various attorneys in the attorneys' professional capacity to advise it regarding legal issues it faced in administering the trust. Thus, under the plain language of section 951, with respect to each of the attorneys Sanwa consulted, Sanwa is a "client" for purposes of the attorney-client privilege. Moreover, under section 953, as client, Sanwa is the holder of the privilege. ( 953, subd. (a).) Since Sanwa is both client and holder of the privilege, Sanwa alone has the right to waive - or not 11

18 waive - the privilege with respect to its confidential communications with its attorneys. As noted above, these provisions of the Evidence Code are designed to promote the public policy behind the attorney-client privilege - i.e., to encourage free and open communication between attorney and client in order to best serve the client's needs - and they serve that policy well in this context, where Sanwa, acting as trustee when consulting with counsel, was charged with the burdensome and sometimes delicate responsibility of administering a trust. The trustee's primary duty is "to administer the trust according to the trust instrument." (Prob. Code, ) The Probate Code sets out numerous other duties of a trustee: for example, a duty of loyalty to the beneficiaries (Prob. Code, 16002), a duty to make the trust property productive (Prob. Code, 16007), and a duty not to delegate its responsibilities (Prob. Code, 16012). But all of these duties take a back seat to the duty to comply with the trust instrument. (Prob. Code, ["the trustee has a duty to administer the trust according to the trust instrument and, except to the extent the trust instrument provides otherwise, according to this division"; emphasis added].) Unless the trustee can communicate openly with its attorney, there is a real risk that the legal advice the trustee receives with respect to the administration of the trust, according to the trust instrument, will be inadequate, improper and uninformed and the trust will not be administered according to the terms of the trust instrument. Thus, both the trustee and the beneficiaries benefit from the trustee's open communication with its attorneys. 'J.' 3./ Of course, there are circumstances in which some (or none) of the beneficiaries may benefit as a result of the trustee's confidential (continued... ) 12

19 Indeed, California courts have uniformly held that when a trustee consults an attorney, it is the trustee alone that is the client for purposes of the privilege. (Fletcher v. Superior Court (1996) 44 Cal.App.4th 773, [attorney for trustee represents only the trustee]; Lasky. Haas. Cobler & Munter v. Superior Court (1985) 172 Cal.App.3d 264, [trustee who consults counsel is the client]; Wells Fargo Bank. N.A. v. Superior Court (Oct. 7, 1996) 49 Cal.App.4th 1320, 96 Daily Journal D.A.R , [same]; cf. also Goldberg v. Frye (1990) 217 Cal.App.3d 1258, 1269 [attorney for executor of will is not attorney for legatees]; Shannon v. Superior Court (1990) 217 Cal.App.3d 986, [court-appointed receiver who consults attorney is the client]; Estate of Effron (1981) 117 Cal.App.3d 915, 929 [attorney for executor of will may not represent beneficiary of estate without express written waiver of any potential conflict of interest].) This rule is completely consistent with the role of the trustee, which is to serve the interests of the estate or the trust- "not to promote the objectives of one group of 3..1 ( continued) communication with its lawyer. For example, some legal decisions as to which a trustee might consult counsel could involve whether a distribution should be made to income beneficiaries that might deplete trust assets to the detriment of residuary beneficiaries, or vice versa. In other circumstances, where the trust instrument places some restriction on the manner in which trust assets can be used, all beneficiaries might object to the particular decision the trustee, in consultation with counsel, might make. In yet other circumstances, the consultation with counsel might be in the interest of the beneficiaries, as, for example, where the trustee seeks advice concerning taxes that might be owed by the trust. In each of these circumstances- no matter who may or may not ultimately benefit - the need for the trustee to have confidence that it can be utterly candid in its consultation with counsel is manifest. 13

20 [beneficiaries] over the interests of conflicting claimants." (Goldberg v. Frye, supra, 217 Cal.App.3d at p )~' The analysis in the recently decided Wells Fargo Bank. N.A. v. Superior Court, supra, 49 Cal.App.4th 1320, 96 Daily Journal D.A.R , is completely consistent with these principles. There, the Court of Appeal concluded that where a trustee of a general trust consults confidentially with counsel, it is the "client" for purposes of the attorney-client privilege. (96 Daily Journal D.A.R. at p ) The court further held that the privilege is not vitiated by the fact that a trustee owes fiduciary duties to the beneficiaries of the trust. (ld. at p ["there is no categorical exception [to the attorney-client privilege] for fiduciaries in general or trustees in particular"]; see also Dickerson v. Superior Court, supra, 135 Cal.App.3d at pp [courts cannot create judicial exceptions to the attorney-client privilege for corporate fiduciaries where no such exception exists in the statutes].) In sum, the Evidence Code provides that it is normally the client who is the holder of the attorney-client privilege, and the law is clear that the trustee of a general trust is the client when consulting with counsel on trust matters. Here, Sanwa Bank was the trustee of the Moeller Trust at the time of the communications at issue and, therefore, Sanwa Bank, as holder of the privilege, has exclusive control over its exercise. As we now explain, none of the theories that have been asserted as to why the privilege is vitiated can withstand scrutiny..41 Moreover, even if a different rule were desirable, it is not for the courts, but the Legislature, to create such a rule. (See Dickerson v. Superior Court, supra, 135 Cal.App.3d at pp ["although [a different rule] may be a desirable means of preventing abuse of the attorney-client privilege by corporate fiduciaries, this court cannot properly alter the legislative scheme by adopting such a nonstatutory exception "J.) 14

21 II. NEITHER MOELLER'S "OFFICE OF TRUSTEE" THEORY~ NOR THE COURT OF APPEAL'S "TRUST PROPERTY" THEORY~ VITIATES SANWA'S EXCLUSIVE CONTROL OF THE PRIVILEGE OR OTHERWISE REQUIRES SANW A TO DISCLOSE THE PRIVILEGED INFORMATION; NOR IS THE PRIVILEGE AFFECTED BY THE PURPOSE OR CONTENT OF SANWA'S CONFIDENTIAL COMMUNICATIONS WITH ITS COUNSEL. As demonstrated above, under established principles of law, Sanwa is the holder of the privilege as to confidential communications with counsel while it was acting as trustee of the Moeller Trust. Three theories have been suggested as a basis for Moeller obtaining discovery of the privileged communications. First, Moeller contends that as successor trustee, he is the holder of Sanwa's privilege and thus may waive it; he reaches this conclusion by arguing that the client is not the individual trustee (i.e., Sanwa), but the "office of trustee," regardless of who sits in that seat. Second, the Court of Appeal concluded that the attorney-client privilege "is not really what determines whether petitioner is entitled to review all of Sanwa's Trust-related documents"; instead, the Court asserted, the beneficiaries and successor trustees have a "common interest" in, and therefore an unqualified right to inspect, the trust property, including all the trustee's administrative files, regardless of whether they may otherwise be privileged. (Opinion, pp. 8-9.) 15

22 Finally, the opinion below, as well as the recently decided Wells Fargo Bank. N.A. v. Superior Court, supra, suggest- at least by negative implication - that at least some confidential communications between the trustee and its counsel may be discoverable by trust beneficiaries to the extent those communications concern "trust administration" as opposed to consultation regarding the trustee's own "potential liability." (96 Daily Journal D.A.R. at p ) As we now explain, none of these theories provides a basis for Moeller's discovery of the communications in question. A. The "Office Of Trustee" Is Not And Cannot Be The "Client" Under Evidence Code Section 951. Moeller contends that the "office of trustee" is the client when a trustee consults legal counsel about trust administration. However, section 951 defines a "client" as "a person who, directly or through an authorized representative, consults a lawyer for the purpose of retaining the lawyer or securing legal service or advice from him in his professional capacity." ( 951, emphasis added.) Thus, for Moeller's argument to succeed, the "office of the trustee" would have to be a "person" within the meaning of section 951. But it is clear that the law is to the contrary. "Person" is defined in the Evidence Code as "a natural person, firm, association, organization, partnership, business trust, corporation, limited liability company, or public entity." ( 175.) In other words, a client must be a natural person or a legal person (i.e., entity). No 16

23 "office" or "position" whatsoever is contained in the definition, much less "the office of trustee of a general trust."~' Moreover, if the office itself, as opposed to the person occupying the office, were the client, the policy behind the privilege would be defeated. The purpose of the privilege is to encourage the client to be open and honest with his attorney. If any person or entity succeeding to the "office of trustee" would be privy to any and all confidential communications between a predecessor trustee and his attorney, no such communication could truly be considered confidential and no trustee could communicate with complete candor. Indeed, the mere threat that a third party might someday be privy to the trustee's confidential communications with its attorney would effectively chill any such communications. Nor can Moeller's argument succeed if the trust is considered the "real" client and the "office of trustee" is considered the representative of the trust. In the first place, as noted above, the authorities are uniform that the trustee is the client. But more fundamentally, a trust is simply "'a fiduciary relationship with respect to property... "' (Hobbs v. Buck (1981) 115 Cal.App.3d 176, 180, emphasis added.) Just as nothing in section 175 suggests that an office can be a "person," so too nothing in the statute suggests that a "relationship" can be a 5_1 In contrast to a general trust, a business trust is a form of business entity, like a corporation or a partnership. (See Bus. & Prof. Code, 17913, subd. (b)(4); Code Civ. Proc., 1501, subd. (c); Corp. Code, 200.5, subd. (a) and 15611, subd. (v).) Where necessary, the Legislature distinguishes between a business trust and a general trust (see, e.g., Bus. & Prof. Code, 16205; Civ. Code, , subd. (c)), and the Probate Code expressly excludes "business trust" from the definition of a "trust." (Prob. Code, 82, subd. (b)(6).) 17

24 "person." Since a trust is not a legal person, it cannot be the client of an attorney..i The conclusion that a successor to the office of trustee cannot waive a predecessor trustee's attorney-client privilege is further supported by the relevant provisions of the Evidence Code. Under the Code, only the holder of the privilege can waive it. (Eeople v. Gionis, supra, 9 Cal.4th at p ) Section 953 sets out who may be the holder of the privilege. With respect to an entity, like Sanwa, which is not a natural person, section 953 provides that the holder of the privilege is: (1) the client ( 953, subd. (a)); or (2) "[a] successor, assign, trustee in dissolution, or any similar representative of a firm, association, organization, partnership, business trust, corporation, or public entity that is no longer in existence." ( 953, subd. (d).)1' Thus, an institutional client like Sanwa is the holder of the privilege unless and until it ceases to exist as an entity, in which event its successor, assign or other representative becomes the holder. (See, e.g., Dickerson v. Superior Court, supra, 135 Cal.App.3d at p. 98 ["the client holding the privilege, ADZ, Inc., was merged into Santa Clara Publishing, Inc. and has ceased to exist"; thus, although the client no longer existed, the new holder of the client's privilege was held to be Santa Clara Publishing].) fl/ It is significant in this regard that the common law of trusts, as codified in California (see Prob. Code, 15002), has long provided that an action cannot be maintained in the name of a trust; rather, it is the trustee who is the real party in interest for purposes of filing or defending against a lawsuit. (Pillsbury v. Karmgard (1994) 22 Cal.App.4th 743, 753; see also Code Civ. Proc., 369 [permitting the "trustee of an express trust" to sue "without joining as parties the persons for whose benefit the action is prosecuted"].) 11 When the client is a natural person, the holder is either the client, his guardian or conservator (if he has one), or his personal representative if he is deceased. ( 953, subds. (a), (b), (c).) 18

25 As a legal entity, Sanwa continues to exist in the same form it did when it administered the Moeller Trust and consulted counsel regarding such administration. Thus, subdivision (d) of section 953 does not apply and Sanwa (as "client") continues to be the holder of the privilege. That Moeller succeeded Sanwa in its role as trustee of a particular trust does not change that conclusion: Nothing in subdivision (d) suggests that the holder of the privilege changes if the client switches jobs - which is, in effect, all that happened when Moeller succeeded Sanwa as trustee. Accordingly, Moeller is not and cannot be the "successor" to Sanwa's privilege within the meaning of section 953, and Moeller, therefore, has no right to waive Sanwa's privilege. B. Sanwa's Attorney-Client Privilege Cannot Be Vitiated By The Court Of Appeal's "Trust Property" Analysis. The Court of Appeal rejected the attorney-client privilege as a basis for resolving this case. Instead, the Court applied a "trust property" analysis. Starting with the premise that the trustee and beneficiaries have a "common interest" in "trust property," the Court held that the beneficiaries' right to inspect trust documents necessarily precluded the trustee from asserting a privilege against disclosure of any of the trust documents. (Opinion, pp. 8-9.) This conclusion cannot withstand scrutiny for many reasons. First, the Court's "trust property" approach fails to appreciate some fundamental features of trust law that directly undermine its analysis. Although both the trustee and beneficiaries have a "common interest" in the sense that each has an interest in the trust property, those interests are not equal or identical. The trustee owns legal title to the 19

26 property, the beneficiaries only equitable title, and, therefore, the trustee has control of the property. (See Pillsbury v. Karmgard, supra, 22 Cal.App.4th at p. 753; Prob. Code, [trustee's duty "to take and keep control of and to preserve the trust property"] and [trustee's duty to make trust property productive].) Additionally, the beneficiaries' rights regarding trust property are completely subject to the wishes of the settlor: For example, the settlor can utterly eliminate the beneficiaries' right to an accounting through the trust instrument. (See 18 Cal. Law Revision Com. Reports (1986) p. 540 ["'The duty to account annually, like other duties, is subject to control in the trust instrument. Hence, if a settlor does not wish the beneficiaries to have the right to an annual account, the settlor may simply waive the duty in the trust instrument or qualify it as desired'"].) Thus, it is the settlor's wishes that are paramount, and it is the trustee's primary duty to comply with those wishes. (Prob. Code, ["the trustee has a duty to administer the trust according to the trust instrument and, except to the extent the trust instrument provides otherwise, according to this division"].) Second, since the enactment of the Evidence Code in 1965, California law has been clear that, except for a limited number of statutory exceptions, attorney-client communications are "not discoverable under any circumstances. " (Shannon v. Superior Court, supra, 217 Cal.App.3d at p. 995, emphasis in original.) Thus, it is universally recognized that the privilege must be preserved notwithstanding any contrary desire or "need" for the information by the court or the parties to the action. (Ibid.; Mitchell v. Superior Court (1984) 37 Cal.3d 591, 600.) Indeed, the privilege operates -and the need for it is always the greatest - when a third party (like the beneficiaries) asserts a right to the information. As explained in 20

27 Shannon v. Superior Court, supra, 217 Cal.App.3d at pp , "recognition of a 'necessity' exception to the privilege... would be tantamount to the first step in the ultimate abolition of the privilege." Consequently, while beneficiaries may have a right to inspect trust documents absent some countervailing provision in the trust instrument (see Strauss v. Superior Court (1950) 36 Cal.2d 396), that right must give way in the face of any privileges properly asserted. In holding that the privilege does not protect trust documents from discovery by the beneficiaries, the Court of Appeal in this case essentially held that the beneficiaries' right to access trust information outweighs the public policy favoring free and open communication between attorney and client. But this is something the Court was not authorized to do. The attorney-client privilege is "a cornerstone of our jurisprudence." (Wells Fargo Bank. N.A. v. Superior Court, supra, 96 Daily Journal D.A.R. at p ) The Legislature has determined there are no judicial exceptions to the privilege, and therefore, the only exceptions are those expressly provided for in the Evidence Code ( ) - none of which apply here. (Roberts v. City of Palmdale, supra, 5 Cal.4th at p. 373; Dickerson v. Superior Court, supra, 135 Cal.App.3d at p. 99 ["the area of privilege 'is one of the few instances where the Evidence Code precludes the courts from elaborating upon the statutory scheme"']; 911, 954.) In particular, "there is no categorical exception for fiduciaries in general or trustees in particular." (Wells Fargo Bank. N.A. v. Superior Court, supra, 96 Daily Journal D.A.R. at p ) The Court of Appeal's reliance on this Court's decision in Strauss v. Superior Court, supra, as authority for the proposition that the beneficiaries of a trust are entitled to inspect even privileged communications if they are part of the trust file is misplaced. In Strauss, 21

28 the only question before the Court was whether the beneficiaries had a right to examine trust documents. The trustee in that case had refused to produce information concerning offers on the open market and by the bondholders of the trust to purchase sinking fund bonds from the trust, after it had claimed that the offers on the open market were more lucrative. The trustee never raised the privilege in the face of the request for information and, therefore, this Court never had the opportunity to address the issue. In fact, Strauss was decided 15 years before the attorney-client privilege was codified by the Legislature. Strauss simply cannot stand for a proposition that the Court never addressed. (Eeople v. Harris (1989) 47 Cal.3d 1047, 1071.) Finally, the Court of Appeal's conclusion that all information contained in the trust files must be disclosed to the beneficiaries draws an artificial - and unworkable - line between oral and written communications. If only the information in the trust files is discoverable by the beneficiaries, then presumably the oral communications between Sanwa and its attorneys remain privileged and not subject to discovery. If this were the rule, then oral communications would be favored over written communications with counsel in order to preserve the attorneyclient privilege - a ludicrous, and even dangerous, proposition. In sum, Moeller's right to inspect trust documents cannot be resolved by application of a "trust property" analysis that simply ignores the attorney-client privilege. If the privilege applies - and, as we have demonstrated at some length above, it clearly does - then categorizing the material in question as "trust property" does not vitiate the privilege. 22

29 c. Application Of The Privilege Is Not And Cannot Be Dependent On The Nature Of The Consultation Or Communications. Although the Court of Appeal ostensibly refused to decide this case based on the attorney-client privilege, it did appear to agree with Moeller that there was at least a possibility that the specific purpose of Sanwa's consultation with counsel may affect its ability to assert the attorney-client privilege. In particular, the court noted that calling Sanwa the "client" "does not address the more specific issue argued by the parties, to wit, when an attorney represents the trustee of a trust, does he represent the trustee in the trustee's capacity/office of trustee, or does he represent the trustee in the trustee's personal capacity." (Opinion, p. 8.) The implication that a line may or should be drawn between legal advice sought by a trustee for the purpose of administering the trust and legal advice sought by a trustee trying to avoid liability to the beneficiaries is also present in the recently decided Wells Fargo Bank. N.A. v. Superior Court, supra, in which such a distinction was assumed. However, for the reasons we now explain, the distinction is illusory and unwarranted with respect to the question whether the confidential communications between the trustee and its attorneys are protected by the privilege. Nothing in the Code limits the privilege according to the content of the communications. As aptly stated in Benge v. Superior Court (1982) 131 Cal.App.3d 336, 347, "The privilege does not turn on the type of advice sought by the client or given by the attorney." By statute, the privilege applies to all confidential communications between attorney and client( 954), whether or not the communications are made in the context of litigation or for any other purpose (see Roberts v. City of 23

30 Palmdale, supra, 5 Cal.4th at p. 371 ["the privilege applies not only to communications made in anticipation of litigation, but also to legal advice when no litigation is threatened"]). Even the courts are strictly prohibited from examining the content of the subject material in order to determine if it is privileged. ( 915.) Since application of the privilege does not depend on the content of the communication, the validity of the trustee's privilege cannot depend upon the nature of the advice sought, i.e., whether the trustee seeks advice regarding trust administration or advice regarding protection against civil liability. The decision in Wells Fargo, supra, does not stand for a contrary position. As noted above, the Court of Appeal there held that the trustee may assert its attorney-client privilege against the beneficiaries of the trust. However, the Court purported to limit its holding to "confidential advice given regarding [the trustee's] potential liability from claims made by the beneficiaries." (96 Daily Journal D.A.R. at p ) But that was the only issue the court was asked to address, the trustee having expressly waived its privilege with respect to any other confidential advice by voluntarily producing trust administration documents, "including those which may come within the attorney-client privilege." (ld. at p ) Thus, the decision in Wells Fargo did not address the question of whether the trustee could successfully assert the privilege as to confidential communications with counsel solely regarding matters of trust administration.~~.81 Moreover, despite its limited holding, the Wells Fargo opinion supports Sanwa's position here in as much as it expressly rejected as "specious" the argument that application of the attorney-client privilege would turn on whether the communication was made in anticipation of litigation. (ld. at p ) 24

31 Finally, any rule making application of the privilege dependent upon some purported distinction between different types of legal advice sought or received by a trustee is simply unrealistic. Because of the fiduciary nature of his duties and because the trustee must act according to the terms of the trust instrument, any action taken by the trustee with respect to the trust, however benign it may seem at the time, could become subject to a lawsuit at a later date by a dissatisfied beneficiary. As the Supreme Court of Texas recently explained in holding that the attorney-client privilege could be invoked to prevent a trust beneficiary from discovering the content of communications between a trustee and attorney concerning administration of the trust: "A trustee must be able to consult freely with his or her attorney to obtain the best possible legal guidance. Without the privilege, trustees might be inclined to forsake legal advice, thus adversely affecting the trust, as disappointed beneficiaries could later pore over the attorney-client communications in second-guessing the trustee's actions. Alternatively, trustees might feel compelled to blindly follow counsel's advice, ignoring their own judgment and experience. See In re Prudence-Bonds Corp., 76 F.Supp. 643, 647 (E.D.N.Y. 1948) (concluding that, without the privilege, 'the experience in management and best judgment by [the trustee] is put aside... which, in the end may result in harm to the [beneficiaries]')." (Huie v. DeShazo (Tex. 1996) 922 S.W.2d 920, 924.) Legal commentators have concurred in this conclusion: "The trustee's and beneficiary's interests, however, are not necessarily mutual. Realistically, any difficult decision a trustee must make (one that will require legal advice) normally has the potential of being adverse to the interest of at least one beneficiary. Like an umpire who must call a runner either safe or out, the trustee must make 25

32 decisions that almost always could be considered adverse to some beneficiary's personal interest. Allocations between principal and income, investment decisions, and discretionary distributions can each favor one beneficiary over another. Therefore, though a trustee might obtain legal advice simply for the sake of being consistent with the trust instrument, normally a trustee seeks legal advice concerning a difficult question to avoid trouble with the beneficiaries." (Reid, et al., Privilege and Confidentiality Issues When A Lawyer Represents A Fiduciary (1996) 30 Real Prop., Prob. & Trust J. 541, 590.) In short, there is no way to tell what communications between a trustee and his attorney may eventually become important in protecting the trustee against a beneficiary's subsequent lawsuit. And if the trustee cannot know which communications will be privileged when they are made, then the trustee will act as though no communications will be privileged and will not be open and frank with counsel. In such circumstances, the purpose of the privilege is completely undermined, to the detriment not only of the trustee, but also potentially of the beneficiaries whose interests the trustee may be seeking to protect. For all of these reasons, Sanwa's right to protection of the attorney-client privilege cannot be based on the content of its communications with counsel. CONCLUSION The California Evidence Code, and the cases interpreting it, make it crystal clear that the attorney-client privilege provides absolute protection to confidential communications between attorney and client, at least in the absence of specific statutory exceptions not present here. An individual or entity acting as trustee of a general trust, whose 26