Widow Loses Bid to Break Up Company

A state appellate court has rejected a bid by the widow of the late Merritt Adamson to break up the assets of the wealthy real estate development company he headed--one of Malibu’s largest landowners--and that is now controlled by his sisters.

The decision by the 3rd District Court of Appeal represents a further setback to Sharon Adamson in her effort to gain access to the one-third of the Adamson Cos. that she owns, but does not control, as the result of an agreement her husband signed with his sisters shortly before his death in 1986.

The company is controlled by Sylvia R.A. Neville and Rhoda-May Dallas. Court documents show that the firm has assets of between $80 million and $130 million.

An attorney for Neville and Dallas said the ruling “reaffirms our confidence in Sylvia and Rhoda-May’s position” and expressed the hope that it would persuade Sharon Adamson to abandon her challenge to the company’s management.

“In our view, there isn’t much left for her to do,” attorney Thomas K. Houston said.

A lawyer for Sharon Adamson, meanwhile, said that he has appealed the matter to the California Supreme Court.

The three-judge appeals court in Los Angeles unanimously upheld a ruling by Superior Court Judge Michael Berg that Sharon Adamson had not established the legal right to break up the company’s assets.

Under the terms of the partnership agreement between Merritt Adamson and his sisters, should the company be dissolved for any reason, Sharon Adamson and her two adult children receive a one-third distribution of assets.

Berg had ruled last November that as an assignee of Merritt Adamson’s limited partnership shares in the company, Sharon Adamson did not have legal standing to remove the one-third share of the company’s assets that she owns. As an assignee, she has no vote, no management role and is not entitled to information about how the company is operated.

Although Sharon Adamson could presumably prevail in any of several other elements of the complicated legal battle over the family real estate fortune, the ruling could remove the biggest threat to the sisters’ stewardship of the Malibu land empire.

The agreement Merritt Adamson signed with Neville and Dallas shortly before he died made them sole general partners of the firm. It 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.

Sharon Adamson and her two children, Grant Adamson and Leslie London, contend that the agreement should be invalidated since, by signing it, her husband made a gift of the couple’s community property. She contends that her husband, who died of cancer, was too ill to know what he was signing and did so without her consent.

However, after listening to 2 1/2 days of arguments in November, Berg limited his ruling to whether Sharon Adamson has the legal standing to seek dissolution of the firm, saying that the matter needed to be resolved before other aspects of the complicated legal dispute are brought to trial.

Among the items unresolved are Sharon Adamson’s claim that the sisters have mismanaged the firm, her contention that the agreement between her husband and his sisters constituted an unlawful gift of her community property, and her claim that her husband was too ill to know what he was signing and did so without her knowledge.

Any or all of these issues may be the subject of future litigation, if a trial in the matter is resumed, said Hillel Chodos, Sharon Adamson’s attorney.

“We’re obviously disappointed with” the appellate court ruling. “But as a practical matter, the magnitude” of the sisters’ mismanagement “is so great, if my client gets damages for mismanagement, I don’t think the sisters could pay it, and the company would have to be dissolved,” Chodos said.

Houston, the lawyer for Neville and Dallas, dismissed as “ridiculous” the idea that the sisters have mismanaged the firm.

“The court rulings in the case have thus far gone just as we expected, and we’re obviously pleased about that,” he said. “We’re looking forward to full vindication of these ridiculous mismanagement claims.”