Documents Say Malibu Land Empire Ran Out of Cash, but Lawyer Insists It’s Stable

The corporate descendant of one of California’s most enduring land empires has hit a financial snag and may be forced to mortgage some of its real estate to pay its debts.

In court documents obtained by The Times, officials of the Adamson Cos., one of Malibu’s largest landowners, disclosed that as of last month, the firm had run out of cash and was unable to pay the more than $1 million it owes.

The documents quote company officials as saying that, to raise cash, they were considering a mortgage of the Point Dume Club, a luxury mobile home park on 91 acres of oceanfront in Malibu that provides more than half the firm’s income.

However an attorney for the company insisted in an interview that its finances were healthy, and that company officials were no longer considering encumbering the valuable property.

“The company is financially stable; it’s well-managed and in good shape,” attorney Thomas K. Houston said.

Houston called the firm’s troubles “a relatively insignificant short-term cash problem” and said the company has persuaded several creditors to extend their loans and is negotiating with two banks for lines of credit.

The company’s troubles come at a time when it is trying to start work on a $65-million, 300-room luxury hotel overlooking the Pacific Ocean in Malibu. It still needs final approval from the California Coastal Commission before construction may begin.

Adamson recently announced it had joined with the Sazale Corp., a Japanese firm, in a bid to develop and manage the hotel. Court records show that Adamson intends to retain no more than a 15% share of the project.

A bitter legal battle between heirs of the late Merritt Adamson provides an unusual glimpse of the firm’s finances and of the family feud that has intensified in the four years since he died of cancer at age 56.

The land empire was founded in 1892 by Adamson’s grandfather, Frederick Hastings Rindge, and, at its peak in the early part of this century, included some 17,000 acres along the Malibu coast.

Four months before he died, Merritt Adamson signed a partnership agreement with his sisters, Sylvia Rindge Adamson Neville and Rhoda-May Adamson Dallas, that gave them future control of the company and left his widow, Sharon, with little say in its affairs.

The agreement replaced one drawn up 18 years earlier that had provided that, upon the death of any of the siblings, his or her heirs could take out a one-third share of the company’s assets at full market value.

Under the new arrangement, however, the sisters became sole general partners when their brother died, and Sharon Adamson was left with little say over her inheritance.

In a lawsuit against her former sisters-in-law, Sharon Adamson, along with her two adult children, contends that the agreement should be invalidated since, by signing it, her husband made a gift of the couple’s community property without her consent.

The lawsuit also seeks to remove Neville and Dallas as trustees of nearly one-third of the company’s shares that Sharon Adamson purports to own, but does not control, as a result of the agreement. It contends that Neville and Dallas are inept managers who have steered the company to the brink of ruin.

The sisters have filed a lawsuit seeking to have the agreement enforced. If they prevail, Sharon Adamson would be prevented from having a voice in the company’s affairs.

A trial has been set for October in Los Angeles.

Hillel Chodos, Sharon Adamson’s attorney, said that unless the court intervenes there is a “grave threat” that the company’s properties may be dissipated.

Neville and Dallas declined to be interviewed, as has Sharon Adamson.

Sharon Adamson, who receives a salary of at least $18,000 a month from the company as required by the agreement, recently appeared before the Coastal Commission in Long Beach to urge that a permit for the hotel not be approved.

In her lawsuit, Sharon Adamson contends that the 69-year-old Neville, the firm’s managing general partner, has entrusted the company to advisers with little experience in managing its real estate holdings.

Earlier this year, Neville hired Olaf Isachsen, a strategic planning consultant. He was recently given the title of chairman of the executive committee, at an annual salary of $400,000.

In pretrial questioning by lawyers for Sharon Adamson, Isachsen said his primary role was to advise Neville, and that he did not yet consider himself qualified to manage the company’s affairs.

Isachsen’s contract provides for severance pay of $400,000 should he be discharged for any reason.

She said that she made Isachsen the trustee of a trust that she had established for her own heirs, and that she assumed he would take over the management of the company if she and her 73-year-old sister were to die.