Trustee is entitled to purchase trust assets at a properly conducted auction following notice to the beneficiaries.

Bernadine Moncur created a trust in 2002 for the benefit of her daughters with herself as initial trustee and two of her daughters, Miki and Dianne, as successor trustees. Bernadine died in 2007 and Miki and Dianne qualified as personal representatives under the will and became co-trustees of the trust. The trust assets included real property in Butte County.

The trustees arranged for a public auction of the property, and gave notice of the auction, including the date, terms and conditions of sale, to the other beneficiaries. The trustees also sent the other beneficiaries the auctioneer’s employment contract that included an addendum stating that family members were permitted to bid at the auction. The trustees used a surrogate bidder and purchased the property at the auction for $309,000.

The other daughters, Shirley and Janet, sued to remove the trustees, alleging breach of duty for purchasing the property at auction. The trial court rejected their claims on the grounds that: (1) Shirley and Janet had the capacity to contract and were aware of the details of the auction; (2) they were aware of Miki and Dianne’s intention to bid on the property and raised no protests; and (3) therefore the trustees had not breached their duty of loyalty.

On appeal, the court of appeals affirmed the trial court and rejected the claims on the grounds that: (1) the appellate court concluded that Miki and Dianne had overcome the statutory presumption of insufficient consideration and undue influence; (2) Shirley and Janet had sufficient knowledge of the transaction; (3) the record included testimony from the auctioneer and an auction bidder who “aggressively” bid against the trustees; and (4) there was no evidence in the record to support the claims that the trustees had intentionally delayed the auction to depress its price of the property.