The Grapes of Wrath : Bitter Battle Over Small Winery Divides One-time Friends, La Jolla Society
During that enchanted October evening in the grand ballroom of the U.S. Grant Hotel, no one could have sensed the impending split between two of the most popular couples to grace La Jolla society.
Wealthy, powerful John M. and Sally B. Thornton were hosting one of the elite private parties of the 1990 social season: a sumptuous dinner, followed by the San Francisco Ballet’s “Sleeping Beauty”--a presentation underwritten by the Thorntons--at the Civic Theatre.
This, to celebrate their 35th wedding anniversary with 280 of their dearest friends.
Even the most hardened socialites found the evening irresistible as they ate plate-sized ravioli stuffed with forest mushrooms, roasted veal chops, wild-rice pancakes, chocolate parfait.
For champagne, the Thorntons offered one label, the logical choice. Already 75% owners of the respected Culbertson Winery in Temecula, John Thornton asked dear friends John and Martha Culbertson for four of their most prized vintages.
Among them, the Culbertsons provided a rare 1986 sparkling wine, “Wedding Bouquet,” to complement the evening’s theme.
Life couldn’t get much better.
Yet, five months later, the Thorntons beckoned the Culbertsons to their La Jolla mansion for what the Fallbrook couple expected to be a pro forma meeting of the Culbertson Winery Corp. board of directors.
In short order, the Thorntons wielded their majority ownership in guillotine fashion: John Culbertson was summarily fired as president and director of the winery that bears his name; Martha was fired as vice president and director.
The Culbertsons reeled at the notion they could be kicked out of their own winery. But Thornton, reputed as a man who cans executives with the ease of someone cutting in for a dance, was ever firm.
“I am taking over,” John Thornton pronounced, Sally at his side.
With that, one of San Diego’s most curious social and business relationships, an odd-couple kind of pairing between the high-finance, highbrow Thorntons and the dream-struck, dirt-under-your-fingernails Culbertsons, turned from champagne to vinegar.
The Culbertsons filed suit, calling it a case of conniving manipulation, of a gluttonously rich investor weaseling his way into the family winery so he could ultimately wrest control of it, claiming the Culbertson name and prestige for himself.
The Thorntons countersued, saying it was a necessarily urgent and prudent move to salvage an investment. They no longer would stand by and watch winery funds--Thornton funds--ransacked by business partners for their personal use, they maintained.
And La Jolla’s social and philanthropic circle cringed in embarrassment, wary of taking sides as two of its favorite couples lunged for each other’s throats.
It has been a nasty, dirty, vindictive war, as grimy as the bitterest divorce.
Last month, a San Diego judge ordered both sides to resolve their differences through court-sponsored mediation service. Like a divorce judge hoping the warring spouses would somehow reconcile, Superior Court Judge Robert J. O’Neill ordered a “cooling off” period. The couples are uncharacteristically quiet now, wary of the judge’s wrath.
A financial matchmaker joined the two couples in 1986, when the Culbertsons--looking for investors to expand the family business--were introduced to the Thorntons, who were among San Diego’s most successful venture capitalists.
The couples previously had attended the same social and charity affairs. The affable Culbertsons were much in demand because of John’s champagne and Martha’s culinary skills, the more-proper Thorntons because of their social standing and checkbook. But until 1986, the local networking hadn’t linked them in business.
“John Culbertson asked me if I could help him find maybe 10 or 20 people who would make an investment in his company,” recalled Bill Otterson, a retired executive who, as director of the Connect program at UC San Diego, frequently married entrepreneurs to investors.
“A friend of mine wanted money, and here was a guy who’s got it,” Otterson recalled. “And John Thornton said, ‘Why don’t I do the whole thing?’ ”
It was Thornton’s preference, say those who know him, to dominate a business, rather than to serve as a rank-and-file investor.
At the time, the Culbertsons had already established themselves as vintners of premier sparkling wines that had won accolades and gold medals around the country and had been poured at presidential inaugurals and White House dinners. John Culbertson was, wine reviewers have noted, a consistent and accomplished artist when it came to blending Pinot Noirs, Chardonnays and Pinot Blancs.
His love affair with wine began as a hobby as he traveled the world.
Martha and John Culbertson are San Diego products who attended San Diego State University. Commissioned as a Navy officer specializing in bomb disposal, Culbertson parlayed his diving experience into a career as a commercial diver for the offshore oil industry.
Twenty-five years ago, while working in Australia, John Culbertson became smitten with its wines. When the couple moved to Singapore, they followed the readily available French wines and began self-schooling in the complex art of winemaking.
In 1972, the couple moved to Houston, which became headquarters for John Culbertson’s underwater contracting business, Martech International.
“It’s an interesting business,” he said once, “but winemaking is more interesting.”
In Houston, Culbertson made his first wine--a sweet, fruity blend, which he dismissed as junk and threw out. He began attending wine seminars.
The couple returned to San Diego County in 1976 to buy 27 acres in Fallbrook. Two years later, their Rancho Regalo Del Mar was completed: an elegant, Spanish-style, red-tiled adobe home nestled out of public view in an avocado grove.
John Culbertson, now 56, continued to commute to his corporate office in Houston, and Martha, 53, who had schooled under Julia Child and Jaques Pepin, opened her Fallbrook Grocery & Cafe, a small gourmet market and restaurant.
On weekends, John Culbertson pursued his sparkling wines in the costly and time-consuming methode champenoise tradition--and entered a homemade wine competition at the 1979 Del Mar Fair with a champagne that received raves.
By then obsessed with winemaking, Culbertson opened his own Fallbrook Winery in 1981, converting a couple of ranch buildings into offices and a production area, complete with storage vaults tucked into a hillside. He planted his own Chardonnay vineyards but bought most of his grapes from the San Luis Obispo area.
By 1983, Culbertson’s 1981 brut and natural champagnes were released, and blue ribbons soon adorned the winery walls. By 1986, the Culbertsons, flushed with the early success of the sparkling wines, looked to build a new winery in Southern California’s version of wine country, the rolling hills of Temecula, just inside Riverside County and only a few miles from their Fallbrook estate.
Enter the Thorntons.
A car salesman’s son, John Thornton, 59, grew up in Long Beach buying and selling used bicycles and motor scooters. A take-charge dynamo even as a young man, he was elected student body president at Pomona College, where he graduated first in his class. He was commissioned as a Navy officer and added a patina of prestige to his natural entrepreneurial skills with a master’s degree from Harvard Business School.
His wife Sally, 57, a local woman and a dominant figure in San Diego philanthropic and cultural circles since the early 1960s, earned a master’s degree in history from the University of San Diego and wrote two books--one on a pioneer architect, “Daring to Dream: the Life of Hazel Wood Waterman,” and another with a decidedly narrower focus: “Funerary Practices in San Diego, 1820-1900.”
By age 33, John Thornton was president of Wavetek, a San Diego manufacturer of test and measurement instruments. The company’s annual sales increased during the next 20 years from $400,000 to $80 million. Then, in 1985, Thornton resigned. He has since sold his 8% share of the company.
Today, the Thorntons are the largest individual shareholders in five high-tech companies. An acknowledged “control person,” John Thornton exercises his stake and influence to call shots and help direct corporate strategy.
The Thorntons own homes in Point Loma and La Jolla--the latter previously occupied by the Maytags of appliance fame; they drive to stockholder meetings in a Rolls-Royce Silver Cloud and are estimated to be worth more than $100 million.
“John can talk about art, about winemaking, about culture, about all kinds of things. At a party, he’d be in the middle, not dominant, but not holding back,” said business associate Mel Gafner. Sally Thornton was much the same.
For the Thorntons, cutting checks in five figures for charitable causes is routine; their bigger donations fall along the lines of $5 million for UC San Diego’s new general acute-care hospital and $1 million for the San Diego Museum of Art. They serve on boards of directors all around town.
The opportunity to invest in a winery fed nicely into the Thornton game plan. Here was a relatively high-risk start-up venture with great potential and a bouquet of romance.
For the Culbertsons, the Thorntons represented a clean package: a single investor who boasted of his “deep pockets.”
By April, 1987, the Thorntons had written four checks totaling $400,000 toward the winery business, which was still operating out of the Culbertson estate in Fallbrook. In exchange, the Thorntons received 400 shares of non-voting preferred stock, court documents show.
And as the husbands forged their working relationship, the couples became a foursome on the social circuit.
In August, 1987, for instance, John and Sally Thornton underwrote the La Jolla Playhouse production of “Hedda Gabler,” and the Culbertsons were among the 140 friends who enjoyed an outdoor pre-play brunch featuring New Orleans pain perdu and chicken-basil sausages.
Later that year, the Culbertsons said $1.4 million was needed to construct the new winery in Temecula--but not to worry because a bank loan had been arranged. Told later that the construction loan had been delayed, however, the Thorntons loaned nearly $2 million toward the project, according to court records.
By the end of 1987, the Thorntons might have begun wondering if the winery was evolving as their primary charity. The corporation reported a loss of $395,000--and the cost of building the winery complex escalated to $4.3 million.
To cover the expenses, the Culbertson Winery Corp. borrowed $4.3 million from Citibank, backed personally by the Thorntons.
In June, 1988, the new $10-million winery opened, complete with its Cafe Champagne gourmet restaurant.
Original plans called for a 40-unit bed-and-breakfast inn, including suites that would fetch $135 on weekends. But for now, the French chateau-style winery buildings feature a gift shop, a pay-per-glass champagne bar and champagne-making facilities that are open to public tours. Its large stone patio and surrounding grounds beckon wedding receptions or weekend jazz concerts under balmy evening skies. Vineyards give the front a wine-country look, although most of the Champagne grapes come from San Luis Obispo.
By the end of 1988, the Thorntons figured they had invested $3 million in the winery in addition to backing the Citibank loan, court records show. In exchange, their non-voting stock was converted to a 75% ownership of the winery’s common stock, and the Thorntons became majority owners. In that deal, the Culbertsons contend they retained 50% of proxy votes to elect directors, thereby assuring themselves a place on the board.
Despite good reviews for its wines, the Culbertson Winery Corp. had yet to turn the financial corner. It lost $1.7 million in 1988 and $2.2 million in 1989.
Were the Thorntons complaining of financial indigestion? John Culbertson, in legal documents, said no. Thornton, according to the Culbertson lawsuit, “was fully aware and acknowledged in his initial discussions with the Culbertsons that his investment in the winery business was to be a long-term investment and that wineries are almost never profitable in the first few years of operation or during a period of any significant expansion of production.”
In February, 1990, John Culbertson told John Thornton to brace himself for a $673,000 winery loss that year. In fact, court papers show, it totaled $3.1 million.
Three months later, at the annual “Celebrities Cook for the UCSD Cancer Center,” Sally Thornton and Martha Culbertson teamed up at a booth where they handed out wedges of layered corn crepes and crisp duck. It was a very popular booth.
By the end of the year, the Thorntons simply established a line of Thornton credit for the winery’s disposal.
But in February, 1991, according to John Thornton’s legal papers, he got the call from the winery’s controller.
“John,” the controller said, “I think we should meet. There are some things happening at the winery that I don’t think you’re aware of.”
Next: The controller makes startling accusations about how the Culbertsons have spent the Thornton investment. The partnership--and harmony within La Jolla’s social circles--dissolves.