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Rudnick v. Rudnick

December 2, 2009

OSCAR RUDNICK, AS TRUSTEE, ETC., PLAINTIFF AND RESPONDENT,
v.
PHILIP RUDNICK ET AL., DEFENDANTS AND APPELLANTS.



APPEAL from an order of the Kern County Superior Court. Robert S. Tafoya, Judge. (Super. Ct. No. S-1500-PB-57626).

The opinion of the court was delivered by: Levy, Acting P.J.

CERTIFIED FOR PARTIAL PUBLICATION*fn1

OPINION

Appellants, Philip Rudnick, Robert Rudnick, and Milton Rudnick, are three of the beneficiaries of the Rudnick Estates Trust (RET) and hold a minority interest. Respondent, Oscar Rudnick, is the trustee of the RET. After the majority of the RET beneficiaries approved the sale of the RET's principal asset, the Onyx Ranch, respondent petitioned the probate court for instructions requesting approval of both the sale and the proposed distribution. Appellants opposed this petition.

The probate court concluded that appellants' opposition was primarily for the purpose of causing unnecessary delay in the sale and was in bad faith. The court then awarded approximately $226,000 in attorney fees and costs to respondent and ordered these fees charged against appellants' future trust distributions.

Appellants contend the probate court's order should be reversed because the court had neither equitable nor statutory authority to make this award. However, contrary to appellants' position, the probate court, as a court sitting in equity, had the authority to charge the awarded fees against appellants' trust interests. Accordingly, the order will be affirmed.

BACKGROUND*fn2

The RET was created in 1965 by the beneficiaries of 11 separate trusts. These trusts each owned an undivided interest in various real property and business entities and were managed as an integrated enterprise. The purpose of the RET was to liquidate the trusts' assets and distribute the proceeds to the beneficiaries. This was to be accomplished by December 31, 1974. Under the RET agreement, any sale or disposition of a particular trust asset, once negotiated by the trustee, had to be approved by a majority of the beneficial shares in order to become effective.

Despite the expiration of the trust term, this court held in 1999 that the RET would continue to exist for a reasonable time until either the assets were sold or a majority of the beneficiaries elected to terminate the trust. (Rudnick v. Rudnick (May 25, 1999, F027453) [nonpub. opn.].) Although many of the RET assets were liquidated before 2008, the RET's major asset, the 68,000 acre Onyx Ranch, remained unsold.

In January 2007, respondent began the process of selling the Onyx Ranch. Various offers from potential investors were received and presented to the RET beneficiaries at noticed meetings.

In November 2007, the beneficiaries were given drafts of an agreement for the sale of the Onyx Ranch to CIM Acquisition Group (CIM) for $48 million. Appellants made it known to all beneficiaries that they opposed this sale.

In January, 2008, appellants filed an application for an ex parte appointment of a temporary trustee and a petition to enjoin the sale of the Onyx Ranch to CIM and remove the trustee. The hearing on this application and petition was scheduled for February 26, 2008.

On February 11, 2008, the beneficiaries met to hear presentations from CIM, Padoma Wind Power (Padoma), and Mitchell Ashe, the RET's certified public accountant. All beneficiaries were provided with the final purchase and sales agreement from CIM and a lease proposal for the development of a wind energy project from Padoma. At the end of the meeting a vote was taken. The beneficiaries voted to accept the CIM offer, with 60 percent in favor and 40 percent opposed. Although some beneficiaries, including appellants, favored the wind energy project concept, the beneficiaries voted 100 percent against approving the proposed Padoma lease. On February 20, 2008, the beneficiaries voted by ballot to approve the CIM sale.

Despite the February 11, 2008, beneficiary vote, appellants did not withdraw their application for an ex parte appointment of a temporary trustee and petition to enjoin the Onyx Ranch sale until February 22, 2008.

On February 21, 2008, respondent filed a petition in the probate court to obtain instructions to consummate the Onyx Ranch sale to CIM as required by the purchase and sales agreement and to approve a distribution of proceeds in accordance with the Ashe accounting. The purchase and sales agreement provided that if it was not approved by the court on or before May 4, 2008, the agreement would terminate. The hearing on this ...


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