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Home My WebLink About03-0928IN RE: PHELARO, INC. IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA CIVIL ACTION - LAW No.__03 -- APPLICATION OF PNC BANK, N.A., EXECUTOR OF THE ESTATE OF WILLIAM G. MAGARO, DECEASED, FOR APPOINTMENT OF CUSTODIAN(S) NOW COMES applicant, PNC Bank, N.A., Executor of the Estate of William G. Magaro, deceased (hereinafter "PNC"), by and through its attorneys, Keefer Wood Allen & Rahal, LLP, as a shareholder of Phelaro, Inc. (hereinafter "Phelaro"), to request this Honorable Court to appoint one or more persons as custodian(s) of and for Phelaro, pursuant to 15 Pa.C.S. § 1767(a), averring as follows: 1. Phelaro is a Pennsylvania business corporation, engaged in the restaurant business, with its registered address at 28 North Market Street, Mechanicsburg, Cumberland County, Pennsylvania. 2. PNC is the duly appointed Executor of the Estate of William G. Magaro, deceased (hereinafter "Estate"). PNC Bank has local offices at 4242 Carlisle Pike, Camp Hill, Pennsylvania. 3. According to the terms of the Will, PNC has the right to manage the business affairs of the Estate. 4. The Estate holds twenty-five percent (25%) of the issued and outstanding common stock of Phelaro. 5. Fifty percent (50%) of the issued and outstanding common stock of Phelaro is owned or controlled by Richard E. Phelan (hereinafter "Phelan"), the President of Phelaro. 6. The remaining issued and outstanding stock is owned by the Estate of David Magaro, deceased, and either Richard Magaro or Variety Investments. 7. Upon information and belief, Phelan's wife, Linda Phelan, serves as the Vice-President and Secretary/Treasurer of Phelaro. 8. Prior to the death of William G. Magaro (hereinafter "decedent") in 1990, the decedent and Phelan served as the only two (2) members of Phelaro's board of directors, and they commonly found themselves voting in opposition to each other on a variety of matters important to the proper operation of Phelaro. 9. Subsequent to the decedent's death, PNC has been excluded from all meaningful shareholder participation in Phelaro's affairs and cannot prevent harm to the corporation caused by Phelan's improper operation of Phelaro. to, the following: (a) Failing to call and conduct meetings of the shareholders, including meetings to elect successors to directors whose terms have expired or would have expired upon the qualification of their successors; Phelan's mismanagement includes, but is not limited -2- (b) Failing to call and conduct meetings of the board of directors, including meetings to appoint officers of Phelaro; (c) Permitting the unauthorized withdrawal of corporate funds; (d) Committing waste of Phelaro's assets; (e) Misapplying Phelaro's assets; (f) Permitting self-dealing by directors and officers of Phelaro and permitting directors and officers of Phelaro to act contrary to and in competition with interests of Phelaro in payment of exorbitant consulting fees to a company wholly owned by Phelan, Phelaro's president and a director; (g) Permitting Phelaro's officers and director to breach their fiduciary duties of loyalty and good faith; and (h) Excluding PNC from all meaningful shareholder participation in Phelaro's affairs and profits. 10. PNC believes and therefore avers that the deadlock in electing successor directors and the other illegal, oppressive or fraudulent acts of Phelan and/or others in control of Phelaro will continue to result in harm to Phelaro in the months and years ahead unless the Court intervenes to remove the deadlock and avert the illegal, oppressive or fraudulent acts of Phelan and/or others in control of Phelaro through the appointment of a custodian or custodians. 11. More specifically, PNC believes that Phelaro has been harmed or faces irreparable potential harm as follows: -3- (a) (b) (c) continued operation at a loss, viz., 2001 net loss of $15,507? continued inability to pay shareholder dividends; continued waste of Phelaro's assets and self-dealing by officers and directors in payment of exorbitant consulting fees to Spirit Merchant & Grocer, Inc.; (d) continued breaches of fiduciary duties of loyalty and good faith by directors and officers of Phelaro; and (e) continuance of a deadlock situation in the election of successor directors and appointment of officers. WHEREFORE, applicant PNC respectfully requests this Honorable Court to grant the following relief: (a) That the Court promptly schedule a hearing to receive evidence in further support of this Application; (b) That the Court appoint an impartial person or persons as custodian(s) of Phelaro as prescribed by 15 Pa.S.C. § 1767(a); (c) That the custodian or custodians so appointed be given all the rights, powers and title of a receiver appointed under Subchapter G of Chapter 19 of the Business Corporation Law of 1988, as amended, 15 Pa.C.S. § 1501, et seq., but the authority of that custodian or custodians shall be to continue the business The net loss for 2002 has not yet been revealed to PNC or its counsel by Phelan. -4- of the corporation and not to liquidate its affairs and distribute its assets except when the Court shall otherwise order. See, 15 Pa.C.S. §§ 1767(c) and 1981(a); (d) That the custodian or custodians so appointed shall be entitled to such compensation, to be paid by Phelaro, as shall be fixed by this Court; (e) That this Court award PNC the costs of this suit, including attorney's fees; and (f) That the Court award such other and further relief as the Court deems just and proper. Dated: February 27, 2003 Respectfully submitted, KEEFER WOOD ALLEN & RAHAL, LLP Charles W. Rubendall 1I I.D. # 23172 Elyse E. Rogers I.D. # 41274 John A. Feichtel I.D. # 77426 210 Walnut Street P.O. Box 11963 Harrisburg, PA 17108-1963 717-255-8010, 717-612-5801 and 717-255-8005 Attorneys for Applicant -5- VERIFICATION The undersigned David A. Brown hereby verifies and states that: He is Vice President of PNC Bank, N.A., applicant herein; 2. behalf; 3. He is authorized to make this verification on its The facts set forth in the foregoing application are true and correct to the best of his knowledge, information and belief; and 4. He is aware that false statements herein are made subject to the penalties of 18 Pa.C.S.A. § 4904, relating to unsworn falsification to authorities. David A. Brown Date: February 27 , 2003 IN RE: PHELARO, INC. IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA CIVIL ACTION - LAW No. 03-928 Civil Term ACCEPTANCE OF SERVICE -- FOR-- APPLICATION OF PNC BANK, N.A., EXECUTOR OF THE ESTATE OF WILLIAM G. MAGARO, DECEASED, FOR APPOINTMENT OF CUSTODIAN(S) Being authorized so to do, the undersigned attorney hereby accepts service on behalf of Richard and Linda Phelan, both of whom are shareholders, directors, and/or officers of the corporation referenced above, of a true and correct copy of PNC Bank's application for the appointment of custodian(s). Dated: March_.~, 2003 STEVENS & LEE Mark D. Bradshaw I.D. # 61975 P. O. Box 11670 Harrisburg, PA 17108 717-561-5258 FAST EDDIES BILLIARD PARLOR & SALOON, INC. IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA CIVIL ACTION - LAW No. 03-927 Civil Term PHELARO, INC. PHELARO OF DERRY TOWNSHIP, INC. IN THE COURT OF COMMON PLUS ~)'F CUMBERLAND COUNTY, PENN~V~ ' CIVIL ACTION - LAW t?; ~:- c · No. 03-928 Civil Term ':;~. -- · :',D IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA CIVIL ACTION - LAW No. 03-929 Civil Term MOTION FOR HEARING NOW COMES applicant, PNC Bank, N.A., Executor of the Estate of William G. Magaro, deceased (hereinafter "PNC"), to request this Honorable Court to schedule a consolidated heating in the three actions referenced above and to consider the applications recently filed with the Court, averting as follows: 1. In each of the three actions referenced above, PNC has filed a request for the appointment of a custodian by the Court, pursuant to 15 Pa.C.S. § 1767(a). 2. That statutory provision reads in pertinent part ".... upon application of any shareholder, the court may appoint one or more persons to be custodians of and for any business corporation .... " 3. There are no procedures set forth in that statute or in the Pennsylvania Rules of Civil Procedure for custodianship actions? 4. PNC's three applications are related, in that the same shareholders, officers and directors are involved in all three corporations, namely, PNC and Richard and Linda Phelan. 5. A related proceeding is already underway before this Court, specifically, an involuntary dissolution proceeding for Gingerbread Man of Shippensburg, Inc., in which the shareholders are PNC and Richard Phelan. 6. The Honorable J. Wesley Oler has convened three hearings in that dissolution proceeding, and two more hearings are scheduled to be held before Judge Oler on June 16 and June 18, 2003. WHEREFORE, PNC respectfully requests this Honorable Court to schedule a consolidated hearing to consider PNC's applications for the appointment of a custodian, pursuant This type of action is not a shareholder-derivative action addressed by Pa. R. Civ. P. 1506. -2- to 15 Pa.C.S. § 1767(a). Prothonotary this date. Three suggested orders, one in each case, are being forwarded to the Dated: April 15, 2003 Respectfully submitted, KEEFER WOOD ALLEN & R.AHAL, LLP Charles W. Rubendall II I.D. # 23172 Elyse E. Rogers I.D. # 41274 John A. Feichtel I.D. # 77426 210 Walnut Street P.O. Box 11963 Harrisburg, PA 17108-1963 717-255-8010, 717-612-5801 and 717-255-8005 Attorneys fbr applicant 3 CERTIFICATE OF SERVICE I, Charles W. Rubendall II, Esquire, one of the attorneys for applicant, hereby certify that I have served the foregoing paper upon counsel of record this date by depositing tree and correct copies of the same in the United States mail, first-class postage prepaid, addressed as follows: Mark D. Bradshaw, Esquire Stevens & Lee P. O. Box 11670 Harrisburg, PA 17108 Lowell R. Gates, Esquire Gates Halbruner & Hatch, P.C. Suite 100 1013 Mumma Road Lemoyne, PA 17043-1144 KEEFER WOOD ALLEN & RAHAL, LLP Charles W. Rubendall II Dated: April 15, 2003 IN RE ' PHELARO, INC.,' IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA CIVIL ACTION - LAW NO. 03-0928 CIVIL TERM ORDER OF COURT AND NOW, this 29t~ day of April, 2003, upon consideration of Applicant's application for the appointment of a custodian pursuant to 15 Pa. C.S. §1767(a), a hearing is scheduled for Thursday, July 24, 2003, at 9:30 a.m., in Courtroom No. 1, Cumberland County Courthouse, Carlisle, Pennsylvania. BY THE COURT, Charles W. Rubendall, II, Esq. Elyse E. Rogers, Esq. John A. Feichtel, Esq. 210 Walnut Street P.O. Box 11963 Harrisburg, PA 17108-1963 Attorneys for Applicant Mark D. Bradshaw, Esq. P.O. Box 11670 Harrisburg, PA 17108 Lowell R. Gates, Esq. Suite 100 1013 Mumma Road Lemoyne, PA 17043-1144 J.~ esley Ole~., J. :rc 1N RE: PHELARO, INC.,: IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA CIVIL ACTION - LAW NO. 03-0928 CIVIL TERM IN RE: APPLICATION FOR THE APPOINTMENT OF A CUSTODIAN PURSUANT TO 15 PA. C.S. §1767(a) ORDER OF COURT AND NOW, this 14th day of July, 2003, upon consideration of the attached letter from Mark D. Bradshaw, Esq., the hearing previously scheduled for July 24, 2003, is continued generally. COUNSEL ARE directed to contact the court if they desire a hearing in this matter or ifa settlement is reached. Charles W. Rubendall, II, Esq. Elyse E. Rogers, Esq. John A. Feichtel, Esq. 210 Walnut Street P.O. Box 11963 Harrisburg, PA 17108-1963 Attorneys for Applicant Mark D. Bradshaw, Esq. P.O. Box 11670 Harrisburg, PA 17108 Lowell R. Gates, Esq. Suite 100 1013 Mumma Road Lemoyne, PA 17043-1144 BY THE COURT, J~esley Ole(~., STEVENS & LEE A PROFESSIONAL CORPOP~kTION ?. O. Box 11670 Harrisburg, PA 17108-1670 (717) 561-5242 Fax (717) 561-5207 www.stevenslee.com Direct Dial: (717) 561-5258 Email: mdb~stevenslee.com Direct Fax: (610) 371-7362 July 11, 2003 Honorable J. Wesley Oler, Jr. Cumberland County Court of Common Pleas High and H~over Streets Carlisle, PA 17112 Re: Gingerbread Man Custodianship Applications Dear Judge Oler: This correspondence is intended to confkm my telephonic advice to your assistant, Ruth, that the Magaro Estate and Richard Phelan are engaged in global settlement negotiations which would obviate the need for further proceedings before the Court with regard to the several open actions between these parties. At opposing counsel, Chip Rubendall's suggestion, we request that the Court continue generally the custodianship hearings which had been scheduled for Thursday, July 24, 2003, unless and until the parties advise the Court that settlement negotiations have broken down and that the matter should be rescheduled. We are hopeful that this entire matter will soon be resolved without need for further Court involvement. Very truly yours, STEV~ENS.~ ~E MDB: alsm cc: Mr. Richard E. Phelan Charles W. Rubendall, II, Esquire '% · Cherry Hill · Harrisburg · Lancaster · Lehigh Valley · Reading · Scranton · Valley Forge · Wilkes-Barre · Pkiladelphia · Wilmington 07/I0/03/SL 1 356350vi/00000.000 IN RE: PHELAR0, INC. IN THE COURT OF COMMON PLEAS CUMBERLAND COUNTY, PENNSYLVANIA CIVIL ACTION - LAW No. 03-928 Civil Term PR/%ECIPE TO DISCONTINUE TO: Curt Long, Prothonotary Kindly mark the docket for the above-captioned action to reveal that it has been settled, discontinued and ended, with prejudice. Dated: December ~, 2003 Respectfully submitted, KEEFER WOOD ALLEN & RAHAL, LLP Charles W. Rubendall II Elyse E. Rogers John A. Feichtel 210 Walnut Street P. O. Box 11963 Harrisburg, PA 17108-1963 717-255-8010, 612-5801 and 255-8005 Attorneys for applicant CERTIFICATE OF SERVICE I, Charles W. Rubendall II, Esquire, one of the attorneys for applicant, hereby certify that I have served the foregoing paper upon counsel of record this date by depositing a true and correct copy of the same in the United States mail, first-class postage prepaid, addressed as follows: Mark D. Bradshaw, Esquire Stevens & Lee P. O. Box 11670 Harrisburg, PA 17108 KEEFER WOOD ALLEN & RAHAL, Ch 11 II LLP Dated: December 3~, 2003