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Sefton v. Sefton

California Court of Appeals, Fourth District, First Division

April 24, 2015

THOMAS W. SEFTON, JR., Plaintiff and Appellant,
v.
HARLEY K. SEFTON, as Trustee, etc., Defendant and Respondent WELLS FARGO BANK, N.A., as Successor Trustee, etc., Objector and Respondent.

APPEAL from a judgment of the Superior Court of San Diego County, No. P82080 Julia Craig Kelety, Judge.

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[Copyrighted Material Omitted]

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COUNSEL

Van Dyke & Associates, Richard S. Van Dyke and James A. Bush for Plaintiff and Appellant.

Beamer, Lauth, Steinley & Bond, Stephen A. Bond and Phillip A. Bond for Defendant and Respondent.

Henderson, Caverly, Pum & Charney, Kristen E. Caverly and Debra J. Vella for Objector and Respondent.

OPINION

NARES, J.

Plaintiff Thomas W. Sefton, Jr. (Thomas Jr.) appeals a judgment awarding him $565,350, plus interest, from the estate of his grandfather, Joseph W. Sefton, Jr. (Grandfather). The probate court, interpreting our prior opinion in this matter (Sefton v. Sefton (2012) 206 Cal.App.4th 875 [142 Cal.Rptr.3d 174] (Sefton I)), determined this sum to be the " 'substantial' share" of Grandfather's estate to which Thomas Jr. was entitled. (See id. at p. 895.) Thomas Jr. contends the probate court misinterpreted Sefton I and therefore improperly limited his award from Grandfather's estate.

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We conclude the probate court's interpretation of Sefton I, while reasonable, was in error. The " 'substantial' share" determined by the probate court is not the correct measure of Thomas Jr.'s award from Grandfather's estate under the facts of this case. We do not fault the probate court for this error. As we will explain, portions of Sefton I, and in particular the sentence directing the probate court on remand, are ambiguous in their meaning. In this opinion, we resolve the ambiguity and clarify the award to which Thomas Jr. is entitled.

FACTUAL BACKGROUND

The relevant facts are largely undisputed. The facts in this section are drawn from the parties' stipulated facts in the probate court and this court's prior opinion in Sefton I, supra, 206 Cal.App.4th at pages 880-881.

Grandfather died in 1966. In Grandfather's will executed September 7, 1955, Grandfather created a testamentary trust (the Trust) for the benefit of his son, Thomas W. Sefton (Father), during Father's life. Upon Father's death, the Trust terminated and its assets were to be distributed. As relevant here, Grandfather's will empowered Father to appoint the objects of this distribution, in part, as follows: "[T]hree quarters (3/4) [of the Trust estate] shall be distributed to [Father's] then living issue as [Father] shall by his Last Will and Testament appoint, and in default of appointment, to his then living issue on the principle of representation."

Father died in 2006. Father left a will that he had executed on August 26, 1994. At the time of Father's death, his then living issue were Thomas Jr. (the only child of Father's first marriage), Harley K. Sefton (Harley) (the son of Father's second marriage), Laurie Sefton (Laurie) (the daughter of Father's second marriage), Harley's three children, and Laurie's child. Father's will exercised his power of appointment by splitting the property subject to appointment into three shares, two of which he allocated to an irrevocable trust established for the benefit of Harley and his children (the Harley Family Trust), and the other one of which he allocated to an irrevocable trust established for the benefit of Laurie and her child (the Laurie Family Trust). Father's will did not appoint any of the property subject to appointment to Thomas Jr.[1]

Based on the directions in Father's will, the trustee of Grandfather's Trust distributed approximately $37.8 million in cash, securities, and related income to the Harley Family Trust and $18.8 million in cash, securities, and

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related income to the Laurie Family Trust. The trustee also distributed approximately $3.5 million in short-term and long-term investment loss carryovers to the Harley Family Trust and a $1.7 million capital loss carryover to the Laurie Family Trust. The trustee did not distribute anything to Thomas Jr.

Harley currently acts as the trustee of the Harley Family Trust. Wells Fargo Bank, N.A. (Wells Fargo) currently acts as the trustee of the Laurie Family Trust.

PROCEDURAL HISTORY

In 2010, Thomas Jr. filed a petition in probate court challenging the distribution of Grandfather's Trust estate. Based on the common law, Thomas Jr. alleged that the power conferred on Father by Grandfather's will was a nonexclusive power of appointment, i.e., the power to appoint to the permissible objects named in Grandfather's will but without the power to exclude any of the permissible objects from receiving a substantial distribution of the appointive property. Because Thomas Jr. was named as a permissible object of appointment in Grandfather's will (as one of Father's "then living issue"), Father could not exclude Thomas Jr. from at least a substantial distribution. Thomas Jr. alleged that "distribution of an amount comprising a substantial distribution of the Trust, to [Thomas Jr.] outright and free of trust would best comply with the non-exclusive power of appointment [Grandfather] conferred at the time of his death." (Original italics.) Thomas Jr. prayed for an order ascertaining the beneficiaries of the Trust as set forth in the petition and for any other proper relief.

Harley, as trustee of the Harley Family Trust, filed a response and objection to Thomas Jr.'s petition. Among other objections, Harley contended that Father's appointment power was governed by Probate Code section 652, [2] which states that a special power of appointment is exclusive unless the person creating the power (the "donor") specifies a minimum share or amount that must be appointed to each object. Because Grandfather's will did not specify such a minimum share, Harley argued, Father had the power to exclude Thomas Jr. from any distribution from Grandfather's Trust. Wells Fargo, as trustee of the Laurie Family Trust, filed a demurrer making the same argument, among others. The probate court sustained Wells Fargo's demurrer and entered a judgment dismissing the petition.

Thomas Jr. appealed. On appeal, the primary question was whether the appointment power Grandfather conferred on Father was exclusive or nonexclusive. In Sefton I, this court concluded that Father's power of appointment

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was nonexclusive, i.e., Father was required to make at least a substantial distribution of the Trust estate to each permissible object, including Thomas Jr. (Sefton ...


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