Monday, June 4, 2012
C.A. Overturns Ruling in Battle Over San Diego Banking Fortune
Panel Says Judge Erred in Applying Statute Enacted After Testator Died
By KENNETH OFGANG, Staff Writer
The eldest son of a wealthy San Diego banker is entitled to part of his grandfather’s estate, contrary to the wishes of his father, the Fourth District Court of Appeal has ruled.
Div. One said Thursday that Thomas W. Sefton Jr. is entitled to a “substantial” share of the estate left by his grandfather, Joseph W. Sefton Jr. The Sefton family controlled San Diego Savings Bank, later San Diego Trust & Savings Bank, from its founding by Joseph W. Sefton Sr. and one employee in 1899 until its sale to First Interstate Bank in 1993.
Thomas Sefton Jr. told the court the family’s interests should now be worth at least hundreds of millions of dollars.
The appeals court reversed a ruling by San Diego Superior Court Judge Julia C. Kelety, who said that Thomas W. Sefton Sr. had an exclusive power of appointment under his father’s will, and thus could disinherit any of his children. The appellate panel held that the statute Kelety relied on, Probate Code Sec. 652, should not apply because it was not in effect when the will was written or when the testator died.
‘Then Living Issue’
Joseph W. Sefton Jr. became vice president of the bank following his father’s death in 1908, and became president in 1935. He executed a will in 1955, providing for a trust that would provide lifetime income to his son Thomas Sefton Sr., with three-fourths of the remainder going to his son’s “then living issue as my said son shall by his Last Will and Testament appoint” following the beneficiary’s death.
The will recited that the testator had three grandchildren—Thomas Sefton Jr., Laurie M. Sefton and Harley K. Sefton.
Laurie and Harley Sefton were Thomas Sefton Jr.’s children from his marriage to Donna Knox, whose father was mayor of San Diego when the couple wed in 1951. Thomas Sefton Jr. was the child of an earlier marriage.
Joseph Sefton died in 1966, by which time his son had taken the helm of the bank. Thomas Sefton Sr. became well known for his varied interests, which included philanthropy and his collections of mining artifacts, model trains—he donated thousands of pieces to the California State Railroad Museum in Sacramento—and Laurel and Hardy memorabilia, which was donated to Loyola Marymount University.
Sefton conducted an extensive correspondence with Laurel in the years before the actor’s death and visited with him at least once, according to an online archive of Laurel correspondence.
Sefton died in 2006, and his will provided that two-thirds of the remainder of his father’s trust be distributed to Harley Sefton, one-third to Laurie Sefton, and none to Thomas Sefton Jr.
Estate of Sloan
The omitted Sefton petitioned the San Diego Superior Court to award him a share of the trust estate and impose a constructive trust. He contended that he was entitled to an interest under Estate of Sloan (1935) 7 Cal.App.2d 319, recognizing a common-law presumption that the use of “then living issue” language reflected intent to grant a non-exclusive power of appointment, meaning that each child was entitled to a “substantial” share of the estate in the absence of further specificity.
His brother and sister responded that Sec. 652, enacted in 1970 as part of the California Powers of Appointment Act, had reversed the presumption and that their father was, in the absence of language to the contrary, free to determine which of his children would inherit the three-fourths share referred to in their grandfather’s will.
Justice Gilbert Nares, writing for the Court of Appeal, sided with the petitioner, said that retroactive application of Sec. 652 in this case would be contrary to statute and possibly unconstitutional.
The trial judge, Nares said, had misconstrued Sec. 601, which says:
“If the law existing at the time of the creation of a power of appointment and the law existing at the time of the release or exercise of the power of appointment or at the time of the assertion of a right given by this part differ, the law existing at the time of the release, exercise, or assertion of a right controls. Nothing in this section makes invalid a power of appointment created before July 1, 1970, that was valid under the law in existence at the time it was created.”
The second sentence, the jurist reasoned, is controlling under the facts of the case.
He cited the legislative history, which he said reflected an intent to reverse the Sloan presumption prospectively, while recognizing that the rule had been relied on by individuals and their attorneys in planning their estates before the California Powers of Appointment Act became law.
The rule of Sloan, he noted, had been described as “California’s present position” in an article that was part of the Law Revision Commission’s report recommending changes. This make it clear, Nares said, “that until the CPAA was enacted, the rule enunciated in Estate of Sloan was the law in California, and we must presume, therefore, that Grandfather (and his attorney) intended that the power of appointment in his will be nonexclusive.”
Nares, however, rejected the petitioner’s claim that he is entitled to an equal division with his siblings. Instead, the trial judge must determine what constitutes a “substantial” share on remand, he said.
The case is Sefton v. Sefton, 12 S.O.S. 2704.
Copyright 2012, Metropolitan News Company