Wednesday, October 11, 2017
Court of Appeal: Trustee Properly Ousted for Not Running Ranch Like Business
Affirms Trial Judge Who Said Son Couldn’t Run Nudist Facility Like His Parents Did Because He Had a Fiduciary Duty to His Brother, a Co-Beneficiary of the Trust, to Make a Profit
By a MetNews Staff Writer
The Fourth District Court of Appeal has upheld the expulsion of the trustee for the trust that owns a nudist ranch in San Bernardino County, declaring that the evidence shows he has been failing to run the enterprise as a business.
The opinion by Justice Douglas P. Miller of Div. Two, filed Friday and not certified for publication, affirms a decision by San Bernardino Superior Court Judge John P. Vander Feer in removing Robert C. Kilborn as successor trustee of the Ralph C. Kilborn Trust, and appointing a private trustee. Robert Kilborn and his brother, Ronald Kilborn, are beneficiaries of their late father’s 2003 trust.
The father died in 2004 and their mother died in 2008.
The primary asset of the trust is Olive Dell Ranch, Inc., which owns Olive Dell Ranch in Colton. The ranch is a nudist resort.
Ronald Kilborn sought the removal of his brother as trustee, complaining of having been evicted from the ranch, subjected to a restraining order precluding his entry onto the property, being given no information as to the management of the business, and receiving no share of the income from it.
Robert Kilborn—who runs the ranch along with his wife, Rebecca Kilborn—responded that there is no income, so his brother can’t expect to receive a share.
It is the fact of the lack of income that caused the appeals court to uphold the trial court’s action.
Vander Feer found the trustee to be in violation of Probate Code §16047(a), which provides:
“A trustee shall invest and manage trust assets as a prudent investor would, by considering the purposes, terms, distribution requirements, and other circumstances of the trust. In satisfying this standard, the trustee shall exercise reasonable care, skill, and caution.”
The judge said that running the business “like mom and dad did when they were living is fine if Robert had a one hundred percent interest, but he does not.” He added that “generating profits should be the ‘invisible hand’ that guides decisions, not what mom and dad used to do.”
There was no abuse of discretion in removing the trustee, Miller said.
He pointed to expert testimony that the resort’s restaurant was losing money and child support payments were being made with restaurant funds.
Horses Given Away
“Robert had given away horses that belonged to the Ranch and had no idea how much they were worth. Robert testified that in the nine years he was running the Ranch, there was little or no profit. Rebecca was the bookkeeper despite having no formal training and never graduating high school. She also testified the restaurant at the Ranch was not ‘trying to make a profit.’
“Based on the foregoing, the evidence established that the Ranch was not run like a business and was not intended to make a profit. Robert and Rebecca did not use due care in operating the Ranch as they did not seek to run the restaurant for a profit and did not attempt to sell assets at the Ranch for profit. Robert and Rebecca did not operate the Ranch like a prudent investor.”
Powers Not Restricted
Robert Kilborn asserted that the trial court was foreclosed from relying on §16047 because it was not invoked in his brother’s petition. Miller responded:
“Here, the trial court had the authority to consider how Robert breached the trust. We have found no authority, and defendant has failed to provide any, that the court was limited to allegations in Ronald’s Petition. Moreover, how Rebecca and Robert ran the Ranch was clearly before the court and evidence was presented to address the issue.”
The case is Estate of Kilborn, E062925.
Alexandra S. Ward of San Bernardino’s Ward & Ward, along with Brian J. Simpson of Redlands, represented Robert Kilborn. Jack B. Osborn and John W. Short of the Redlands form of Brown White & Osborn acted for Ronald Kilborn.
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