Thompson, Ledgemont Closer to Benefiting From Leighton Estate

October 11, 2012

Thompson Township and Ledgemont Schools are one step closer to benefiting from the estate of the late Francis Spatz Leighton.

Last month, Chardon attorney Bill Hofstetter provided an update to school board members and township trustees during a special Sept. 28 meeting.

Hofstetter was appointed in January 2011 by the late Geauga County Probate Court Judge Charles “Chip” Henry to oversee a trust created to “hold, manage, sell, lease, transfer, mortgage or otherwise use and dispose of the … real property” for the equal benefit of the township and school district.

Leighton — daughter of Joseph Orstein, a Jewish farmer who immigrated to America from Poland during World War II — was a Thompson High School graduate who passed away in 2007 in Arlington, Va., at the age of 87.

In her will, she named the township and school district as beneficiaries of her estate, which involved cash and property in several states, including her family’s 124-acre farm on Phillips Road in Thompson.

She also owned property in Virginia, Texas and Washington, D.C., which she left to other beneficiaries.

During his presentation, Hofstetter said when the co-fiduciaries — Edward Sauer Jr. and Stephen Christenson — of Leighton’s estate filed their initial papers with the court in Virginia where her estate is being probated, they requested the court confirm everything in her residual estate go to her niece.

“So the default mode was the township of Thompson, the park district and the school are out in the woods, they get nothing from this whole thing,” Hofstetter said.

But as a result of some in depth legal work, trustees and the school were able to successfully challenge the co-fiduciaries’ position, with the end result being the establishment of a trust in Geauga County.

“So, for the significant amount of legal fees that were paid … the estate of Francis Spatz Leighton went from being, ‘Yes, she was a nice lady that we remember from coming to the valedictorian’s commencement or whatever in 1965,’ to, ‘Yeah, and we might get the better part of $800,000 or $900,000,’” Hofstetter said. “So, I think that’s an important context to bear in mind — not that Mrs. Spatz Leighton apparently wanted to do something, but the form it finally took … there was some pretty razzmatazz legal work that was done.”

Virginia Probate Action

The co-fiduciaries of Leighton’s estate — opened in 2007 — have filed a fifth partial account that shows total assets remaining of about $1,070,000.

After fees and other expenses, Hofstetter estimated there is about $800,000 of assets remaining in Virginia to be distributed.

The township’s and school district’s share of that residual would be approximately $309,000, or half of a 77.38 percent share divided equally with the University of Texas at El Paso.

Leighton’s niece is entitled to the remaining 22.62 percent of the residual estate.

There could an additional $300,000 due the beneficiaries from obligations — receivables — owed the estate, Hofstetter added.

“That would not be an unrealistic guesstimate,” he said.

There are three “big receivables,” totaling approximately $771,000, from other beneficiaries that resulted from the transfer of property, he explained.

Hofstetter said he could not understand how the co-fiduciaries could be five years into the probate of Leighton’s estate and have receivables in that amount.

“The good news is … these fiduciaries are bonded, so that if for any reason the money went bye-bye, there is a bonding agent who stands and delivers, and they chase down the fiduciaries,” he said.

Hofstetter also said there were “little ticket” items that eventually could result in the distribution of more cash to the beneficiaries.

“Bottom line … is everybody’s hoping there will be a sixth and final account … next year at this time if not sooner,” Hofstetter said, reiterating this was a “razzmatazz” estate slowed by protracted litigation and real property in multiple states.

“It’s not your garden variety seven months and bam, you’re done,” he said. “This was three years of litigation to find out what the deal is and then working in different states with different tax authorities, with different courts and so on.”

When a final account is filed, the beneficiaries should get their half of the 77.38 percent of the estate residual.

“A check comes,” Hofstetter said.

He also mentioned the co-fiduciaries have been asked to make another partial distribution of $75,000 to him as the Thompson/Ledgemont trustee.

Hofstetter said there were sufficient liquid funds in the estate to make the partial distribution, but the decision rests solely with the co-fiduciaries.

“The good news there is if $75,000 materializes, there’s already been a reserve established so that’s money I could distribute pronto,” he added.

However, any distribution beyond what the trust owes beneficiaries for unreimbursed fees must be used in accordance with the terms of the trust, Hofstetter said.

“The rest we get to have a happy meeting of, ‘Wow, how do you want to recommend that we spend the rest of this?’” he said, adding it would have to be consistent with the terms of the trust document.

Phillips Road Farm

Hofstetter also discussed a mechanism for the sale of the Phillips Road property that he has had “significant success” using in the past similar situations.

He said he considered several traditional options to sell the property, including listing it with a broker or calling an auctioneer.

But those methods would result in commissions or fees of up to 10 percent of the sale price, he added.

Hofstetter said the Lausins have expressed “sincere interest” in buying the property; however, he needs to ensure there is an element of competitiveness, so the beneficiaries are getting the true market value.

In addition, Hofstetter said he wants to make sure everyone in the community knows “there was an objective process that was one size fits all, fair to all concerned.”

The process he intends to follow meets all those objectives and would save “a ton of money,” if it works, he explained.

Hofstetter said he has ordered signs to be posted at the property that read, in part: “For Sale by Trustee 124 Acres, Complete or Surface Rights or Mineral Rights Only, Deadline for Offers Nov. 7, 2012.”

He also has advertised the sale in area newspapers, including the Geauga County Maple Leaf.

Prospective buyers will be provided an instruction sheet on how to make an offer, “a one size fits all” information sheet and three forms of purchase agreement — one covering the entire 124 acres, farmhouse, surface rights and mineral rights; another covering just the surface rights, which would be the house, fields and timber, but not the mineral rights; and the third covering mineral rights only.

Once the offers come in, Hofstetter said he would decide what “pieces, parts, what mechanism” would be the best for the situation.

The attorney said he hoped to have the property sold this spring, but the “shale play” has delayed and complicated the process as it continues to evolve.

“So, the idea of retaining the mineral rights (is) if someone is not willing to pay a meaningful amount of money or a fair amount for those mineral rights, then if we could get enough value out of the surface rights … without enough for the mineral rights, we could get the larger amount … for the benefit of the trust and the beneficiaries,” he said, adding then they can “watch and see what happens on this mineral rights/shale play and see where that takes us.”

Three old oil and gas leases that were tied to the property have been released, Hofstetter said.

“So, we’re on the verge of being able to market this with no cooties,” he added.

Thompson Township Trustee Frank Sirna confirmed that Hofstetter has the final say on the sale of the property.

“But I don’t live in a vacuum. So, if it doesn’t work significantly for a majority of you folks, I’ve got to find out why that is,” Hofstetter said. “I need to take what you think into account. And while I ultimately … have the authority to do this, I was not born yesterday.”

Hofstetter also shared with everyone several calls he had received for people interested in forming a Thompson property owners group similar to the Eastern Geauga Landowners group.

“Farther north (of the Leighton property), but not a lot farther north, there are 500, 600 or 700 acres of people that are trying to put (a group) together. If the happy day comes when someone wants to facilitate a drilling unit, that could be the case,” Hofstetter said of one such group, led by Mike Vary, whose family owns 40 acres on Moseley Road.

He added the Sidley family, which owns hundreds of acres in Thompson, might be part of Vary’s group.

“It could benefit the trust or whoever buys this property to explore this sort of activity further when the time comes,” Hofstetter said.

Finally, the attorney said he had been contacted by Brett Rodstrom, northeastern field director for the Western Reserve Land Conservancy.

“He said his organization, through cooperative efforts with private parties, such as the Lausins, may have an interest in making a bid or working with others to put together a bid,” he explained. “The mission of that group, I think, would be to harness the power of the farmland protection fund, which is grant-type money that’s available, to acquire the property, impose a restrictive covenant limiting the surface use to farmland, for which they would pay a property owner.”

Again, Hofstetter emphasized that while it might be a great idea, he told Rodstrom it was a “one size fits all” process with a Nov. 7 deadline.