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HomeMy WebLinkAbout09-24-08IN RE: ESTATE OF LOY T. HEMPT IN THE COURT OF COMMON PLEAS CUMBERLAND COUNTY, PENNSYLVANIA ORPHAN'S COURT DIVISION r.., c-> ~~ NO. 21-77-231 ~ "~' ___ -~ _ ~~_ N -'-~ ~. . ANSWER AND NEW MATTER OF KALBACH OBJECTORS .1 _~, _,F ~ IN OPPOSITION TO APPLICATION FOR STAY AND - . . FOR TERMS AND CONDITIONS OF APPROPRIATE SECURITY, = y ~n c.~ AND NOW come the Kalbach Objectors, by and through their attorneys, Mette, Evans & Woodside, and hereby file the following Answer and New Matter to Gerald L. Hempt's Application for Stay and for Terms and Conditions of Appropriate Security: 1. Admitted in part; denied in part. It is admitted that Gerald L. Hempt ("Gerald Hempt"), Trustee of the Loy T. Hempt Residuary Trust ("the Trust") has filed a Notice of Appeal of the Court's Order entered in this matter on August 14, 2008. As for the remaining averments of paragraph 1, the copy of the Order attached to Gerald Hempt's Application, being in writing, speaks for itself. To the extent the averments of paragraph 1 are inconsistent with the written document, same are denied. 2. Denied. The Court's Order entered on April 16, 2008, attached as Exhibit B to Gerald Hempt's Application, being in writing, speaks for itself. To the extent the averments of paragraph 2 are inconsistent with the written document, same are denied. Also, the Order dated August 14, 2008 and attached as Exhibit A to Gerald Hempt's Application, being in writing, speaks for itself. To the extent the averments of paragraph 2 are inconsistent with the written document, same are denied. 3. Denied. The Court's Order entered on August 14, 2008 and attached as Exhibit A to Gerald Hempt's Application, being in writing, speaks for itself. To the extent the averments of paragraph 3 are inconsistent with the written document, same are denied. I. ANSWER TO APPLICATION FOR STAY 4. Denied in part; admitted in part. It is specifically denied that a stay of the Court's Order should be granted. The stay should not be granted because Gerald Hempt has not made a substantial case on the merits; rather, to the contrary, the evidence of record demonstrates that Gerald Hempt has breached his fiduciary duty to avoid a conflict of interest; that he has breached his fiduciary duty to act primarily for the benefit of the Trust beneficiaries; and that he has engaged in self-dealing. Despite Gerald Hempt's arguments to the contrary, a showing of bad faith is not necessary under the circumstances of this case. See paragraph 5 below, which is incorporated herein by reference. Therefore, Gerald Hempt has not made a substantial case that he should remain as Trustee. Also, the stay should not be granted because the Trust will not suffer irreparable injury without a stay. The Application states essentially that the irreparable injury to the Trust would be the fees that an objective, appointed successor trustee, such as Hershey Trust, would charge. In Pennsylvania Public Utility Commission v. Process Gas Consumers Groun, 502 Pa. 545, 467 A.2d 805 (1983), the Pennsylvania Supreme Court expressly adopted the standards set forth in Virginia Petroleum Jobbers Association v. Federal Power Commission, 259 F.2d 921 (D.C. Cir. 1958). See Darlington, et al., West's Pennsylvania Practice Series, Volume 20A, Pennsylvania Appellate Practice (hereinafter "West's Pennsylvania Appellate Practice"), 2006 Edition, § 1732:6 at 239. In Virginia Petroleum Jobbers, the Court noted that [m]ere injuries, however substantial, in terms of money ... necessarily expended in the absence of a stay are not enough" to demonstrate irreparable injury. Virginia 2 Petroleum Jobbers, 259 F.2d at 925. Moreover, in the instant case, the fees that would be paid to an objective, appointed successor trustee are inadequate justification for a stay of the Court's Order especially when viewed in light of the harm to the Kalbach Objectors if a stay is granted. It is therefore also specifically denied that the issuance of a stay will not substantially harm other interested persons; rather the issuance of a stay will harm the Kalbach Objectors. First, if Gerald Hempt is allowed to continue as Trustee he would remain in a position to take such actions with Trust funds as to negatively impact the Kalbach Objectors. For instance, Gerald Hempt could conceivably still distribute money from the Loy Hempt Trust to the Jean Hempt Estate. As previously explained in the course of this litigation, because of Jean Hempt's incompetence, upon her death her estate will be distributed to her intestate heirs, who are Gerald Hempt and his siblings and the Mark Objectors. The Kalbach Objectors are not intestate heirs of Jean Hempt. Whether the assets are eventually distributed from the Loy Hempt Trust or from the Jean Hempt Estate upon the death of Jean Hempt has a direct financial impact on the Kalbach Objectors. (It should be noted that Jean Hempt is elderly, having been born in 1927.) The Kalbach Objectors are 20% residual beneficiaries of the assets of the Loy Hempt Trust but are not intestate heirs of Jean. The practical effect of the relationship between the Loy Hempt Trust and the Jean Hempt Estate and the identity of the remaindermen and intestate heirs is that the Kalbach Objectors lose $.20 of each dollar that is transferred from the Loy Hempt Trust to the Jean Hempt Estate. If a stay of the Court's Order is granted, there will be no restraints on Gerald Hempt's ability to distribute Trust Funds and there will be no protection for the Kalbach Objectors. If this Court decides to grant the stay, which the Kalbach Objectors specifically deny the Court should do, the Kalbach Objectors submit that an Order granting such a stay should enumerate limitations on Gerald Hempt's powers as trustee to ensure that he does not violate his fiduciary duties to the 3 Kalbach Objectors. The setting of such limitations is permitted: "The trial court ..., on application of a party or on its own motion, may impose such terms and conditions incident to granting a supersedeas as it deems just under the circumstances." West's Pennsylvania Appellate Practice, § 1733:1 at 248. See also Franco v. Atlantic Richfield Co., 3 D&C 3d 239 (1977). "The trial court and the appellate court are vested with broad discretion regarding the terms and conditions, if any, that may be attached to an Order granting a supersedeas." West's Appellate Practice, § 1733:1 at 248. Byway of further answer, if Gerald Hempt is allowed to remain as Trustee, he likely will not reform the three separate Trusts into a single trust as the Court ordered. In fact, in his Application, Gerald Hempt does not even address the reformation of the Trust. Therefore and, by way of further answer, Gerald Hempt fails in his Application to justify why a stay should be granted with regard to that part of the Court's Order requiring that the three separate trusts that Gerald Hempt created be reformed into a single trust as originally set forth in the Will of Loy Hempt. The Kalbach Objectors hereby submit that by omitting this issue in his Application Gerald Hempt has waived the issue of the Reformation of the Trust. As a result, a stay should not be granted and the three separate trusts should be reformed into a single trust. With regard to this issue, the Kalbach Objectors hereby incorporate paragraphs 15-20 below where it is explained why the Kalbach Objectors will suffer injury if the Trust is allowed to remain as three separate trusts. This obvious reluctance on the part of Gerald Hempt to reform the trusts is yet another reason why Gerald Hempt should not be allowed to remain as Trustee. By way of further answer, it is admitted that the issuance of a stay will not adversely affect the public interest. This matter involves individuals. 4 By way of further answer, Pennsylvania Public Utility Commission v. Process Gas Consumers Group, 467 A.2d 805, 808-809 (Pa. 1983), being in writing, speaks for itself. To the extent the averments of paragraph 4 are inconsistent with the written document, same are denied. By way of further answer, paragraphs 5-21 of this Answer and New Matter are incorporated herein by reference as if set froth at length. 5. Denied. It is specifically denied that Gerald Hempt has made a substantial case on the merits. As this Court stated in its Opinion, the "instant case is controlled by the general rule, not the exception" cited by Gerald Hempt. Court's Opinion, p. 10. Under the general rule neither bad faith nor fraudulent intent on the part of the fiduciary need be proven when the conflict of interest is apparent from the circumstances. A trustee should be removed where it is apparent that his interests conflict with those of the trust or its beneficiaries. This Court found that the general rule applied to Gerald Hempt and that he should no longer act as trustee. Gerald Hempt has not made a substantial case on the merits as is explained below, quoting largely from this Court's Opinion in this matter: At the time this matter was adjudicated, the law applicable to the removal of a trustee was codified in Section 7121 of the Probate, Estates and Fiduciaries Code, 20 Pa. C.S.A. §7121. The relevant portion of that section provides that the grounds for removal or discharge of a trustee shall be the same as those relating to the removal of a personal representative. Section 3182(5) of the Code provides that the Court has the power to remove a personal representative "when, for any reason, the interests of the estate are likely to be jeopardized by his continuance in office." 20 Pa. C.S.A. §3182(5). Self dealing and conflict of interest are among those reasons. As the Superior Court has noted, "(s)ufficient reason for removal of a fiduciary has 5 been found when the fiduciary's personal interest is in conflict with the estate, such that the two interests cannot be served simultaneously." In re: Estate of Westin, 874 A.2d 139, 143 (Pa. Super. 2005), specifically citing Section 3182(5). In the instant case it is clear that Gerald Hempt's personal interests were (and continue to be) in conflict with those of the Trust and its beneficiaries. Under the terms of the Trust he has the "sole and absolute discretion" to disburse income and principal for the "care, support and welfare" of Jean Hempt. As one of Jean's heirs he stands to benefit personally from those distributions. Furthermore, every dollar distributed to Jean operates to the detriment of Robert Kalbach, one of the Kalbach Objectors who is not an heir to her estate. In addition, as an officer and substantial stockholder in Hempt Brothers, Valley Land Company and C.A. Hempt Estates, Inc., Gerald Hempt has demonstrated a desire to increase his stake therein and control thereof by using his access to the stock held by the Trust. It should be noted that while provision 10(e) of Loy Hempt's Will gives the Trustee broad powers, including the power to self deal, with regard to Hempt Brothers, Inc. stock, those powers do not extend to the Trust's stock in Valley Land Company or C.A. Hempt Estate, Inc. The general rule is that "when a conflict of interest is apparent from the circumstances, bad faith or fraudulent intent on the part of the fiduciary may not be proven." Westin Estate, supra 874 A.2d 139, 143. See also In re: Estate of Dobson, 490 Pa. 476, 417 A.2d 138 (1980). This rule "is not intended to be remedial of actual wrong, but preventive of the possibility of it." In re: Noonan's Estate, 361 Pa. 26, 32, 63 A.2d 80, 84 (1949). Gerald Hempt contends that even if he has a conflict of interest he should not be removed as Trustee absent an affirmative showing of bad faith. He points out that the original Trustees appointed by Loy Hempt would have had the identical conflicts. He cites cases which 6 hold that any conflict is waived "where the testator knowingly placed his Trustee ... in a position which he knew might conflict with the interests of the Trust or the beneficiaries thereof ..." In re: Steele's Estate, 377 Pa. 250, 258, 103 A.2d 409, 413 (1954). See also In re: Flagg's Estate, 365 Pa. 82, 73 A.2d 411 (1950) and In re: Pincus' Estate, 378 Pa. 102, 105 A.2d 82 (1954). However, those cases are exceptions to the general rule. They are also distinguishable from the case at bar. In each of the cases cited by Gerald Hempt, the conflict involved a fiduciary specifically named by the testator or settler. As the Pincus court noted: Thus, although there may have been a conflict of interest, such conflict was created by the decedent's will and such possible conflict was fully cognizable by the decedent when he wrote his will. Under these circumstances, the evidence of the conflict of interest would not ipso facto disqualify (the fiduciary) from acting as he did in connection with the stock transfers now questioned. In order to effect such disqualification, bad faith on the part of the fiduciary must be affirmatively shown. `Testamentary provisions must be given effect notwithstanding the existence of the self-dealing rule.' 378 Pa. at 110-111, 105 A.2d at 86 (citations and footnotes omitted). While the principle enunciated therein would apply to Max or Dorothy who were named in the Will it does not apply to Gerald Hempt who was court appointed. It should also be noted here that Gerald Hempt was appointed by the Court without any notice having been given to the parties in interest. It should also be further noted that Gerald Hempt never informed the Court of the conflict or of his strained relations with Robert Kalbach and his branch of the family. (Under those circumstances alone the appointment of Gerald Hempt as Trustee should be null and void.) Loy Hempt knew and trusted Max and Dorothy, the individuals he specifically appointed. While it is safe to say that he waived any conflict as to them, it is illogical to contend that he waived the conflict with regard to anyone else. Thus, the instant case is controlled by the general rule not the exception. Gerald Hempt should be removed as Trustee because it is apparent that his interests conflict with those 7 of the Trust or its beneficiaries. As this Court has stated in its Opinion, Gerald Hempt should no longer act as Trustee. By way of further answer, the Kalbach Objectors again point out that in his Application for Stay, Gerald Hempt has presented no reason why the three separate trusts he created, without notice to the parties in interest, should not be reformed into a single trust as set forth in the Court's Order and as provided for in the Will of Loy T. Hempt. The Kalbach Objectors hereby submit that Gerald Hempt has therefore waived this issue and the trusts should be reformed pursuant to the Court's Order. See also paragraphs 15-20 below which are incorporated herein by reference as if set forth at length. 6. Denied. It is specifically denied that the Trust will suffer irreparable injury without a stay. In this paragraph Gerald Hempt explains how he became Trustee. The Kalbach Objectors point out the irregularities of that appointment: In the summer of 1996, Max Hempt and his son Gerald Hempt filed a petition for "Appointment of Successor Trustee and Successor Guardian of Estate and of Person." The petition was not docketed to this estate file, nor was any notice of the petition given to Robert Kalbach or any of Dorothy's sons. Gerald Hempt's appointment on September 3, 1996 as co-trustee of the Trust created under Loy T. Hempt's Will is questionable at best and is yet further evidence of Gerald Hempt's self-dealing from the beginning of his involvement with the Trust. By way of further answer, it is specifically denied that it is apparent from the terms of Loy Hempt's Will that he preferred that the trustee be a family member. To the contrary, Loy T. Hempt's Will, being in writing, speaks for itself. To the extent the averments of paragraph 6 are inconsistent with the written document, same are denied. 8 With regard to the remaining averments of paragraph 6, it is specifically denied that the Trust will suffer irreparable injury because it will have to pay fees to an objective, appointed Trustee if the Court's Order is not stayed. As explained above in the answer to paragraph 4, in Pennsylvania Public Utility Commission v. Process Gas Consumers Group, 502 Pa. 545, 467 A.2d 805 (1983) the Pennsylvania Supreme Court expressly adopted the standards set forth in Virginia Petroleum Jobbers Association v. Federal Power Commission, 259 F.2d 921 (D.C. Cir. 1958). See West's Pennsylvania Appellate Practice, Section 1732:6 at 239. In Virginia Petroleum Jobbers, the Court noted that [m]ere injuries, however substantial, in terms of money ... necessarily expended in the absence of a stay are not enough" to demonstrate irreparable injury. Virginia Petroleum Jobbers, 259 F.2d at 925. This standard adopted by the Pennsylvania Supreme Court in Process Gas as set forth in Virginia Petroleum Jobbers was "refined" in Washington Metropolitan Area Transit Commission v. Holiday Tours, Inc., 559 F.2d 841 (D.C. Cir. 1977). See West's Pennsylvania Appellate Practice § 1732:6 at 239. The Holiday Tours court noted that the "`mere economic injuries which under Virginia Petroleum Jobbers are insufficient to warrant a stay' ... were the necessary expenditure of funds pending appeal." Holiday Tours, 559 F.2d at 843 n. 2. Therefore, the payment of fees to an objective, appointed successor trustee does not rise to the level of "irreparable injury" set forth in the Process Gas standard. The fees are inadequate justification for a stay of the Court's Order especially when viewed in light of the harm to the Kalbach Objectors if a stay is granted. By way of further answer, the Kalbach Objectors emphasize that, in his Application for Stay, Gerald Hempt has presented no reason why the three separate trusts he created, without notice to the parties of interest, should not be reformed into a single trust as set 9 forth in the Court's Order and as it was provided for in the Will of Loy T. Hempt. The Kalbach Objectors hereby submit that Gerald Hempt has therefore waived this issue and the trusts should be reformed pursuant to the Court's Order. See also paragraphs 15-20 below which are incorporated herein by reference as if set forth at length. 7. Denied. It is specifically denied that the issuance of a stay will not substantially harm other interested persons. To the contrary, Robert Kalbach is a remainder beneficiary and his interests may be harmed for the reasons set forth in paragraph 4 which are incorporated herein by reference as if set forth at length. If Gerald Hempt is allowed to continue as Trustee he would remain in a position to take such actions with trust funds as to negatively impact the Kalbach Objectors. If a stay of this Court's Order is granted, there will be no restraints on Gerald Hempt's ability to distribute trust funds and there will be no protection for the Kalbach Objectors. If this Court decides to grant the stay, which the Kalbach Objectors specifically deny the Court should do, the Kalbach Objectors submit that an Order granting such a stay should enumerate limitations on Gerald Hempt's powers as Trustee to ensure that he does not violate his fiduciary duties to the Kalbach Objectors. The trial court, on application of a party or on its own motion, may impose such terms and conditions incident to granting a supersedeas as it deems just under the circumstances. West's Pennsylvania Appellate Practice Section 1733:1 at 248. The trial court is vested with broad discretion regarding the terms and conditions that may be attached to an Order granting a supersedeas. Id. By way of further answer, if Gerald Hempt is allowed to remain as Trustee, he likely will not reform the three separate Trusts into a single Trust as the Court ordered. In fact, in his Application, Gerald Hempt does not even address the reformation of the Trust. Therefore, 10 and, by way of further answer, Gerald Hempt fails in his Application to justify why a stay should be granted with regard to that part of the Court's Order requiring that the three separate Trusts that Gerald Hempt created be reformed into a single Trust as originally set forth in the Will of Loy Hempt. The Kalbach Objectors hereby submit that Gerald Hempt has therefore waived this issue. As a result a stay should not be granted and the three separate Trusts should be reformed into a single Trust. This obvious reluctance on the part of Gerald Hemp to reform the Trust is yet another reason why Gerald Hempt should not be allowed to remain as Trustee. By way of further answer, the Kalbach Objectors will suffer irreparable injury if the three trusts are not reconstituted into one trust as the Court ordered. This is explained in paragraphs 15-20 below which are incorporated herein by reference as if set forth at length. With respect to the part of the Order regarding the surcharge to Gerald Hempt, the Kalbach Objectors do not oppose a supersedeas and/or stay as to Gerald Hempt paying the $241,786.09 surcharge if he files the appropriate security in the amount of 120% of the surcharge with the Court. However, the Kalbach Objectors specifically deny that this would be sufficient or appropriate security to stay the other parts of the Court's Order, namely Gerald Hempt's removal as trustee and the reformation of the three separate trusts into the original single trust provided for under the Will of Loy T. Hempt. The Kalbach Objectors request additional security. 8. Admitted. WHEREFORE, for the reasons set forth above, the Kalbach Objectors respectfully request that this Honorable Court deny Gerald Hempt's Application for Stay of the August 14, 2008 Order except for the application for a supersedeas of the order requiring payment of the surcharge, which supersedeas will take effect upon the filing with the Court of the appropriate 11 security of 120% of the surcharge. The Kalbach Objectors also request, in the alternative, that if a stay/supersedeas is granted as to other aspects of the Court's Order, that Gerald L. Hempt be ordered to post additional security and that any such order staying the August 14, 2008 Order contain conditions and limitations on the powers of Gerald Hempt as trustee so as to protect the Kalbach Objectors. II. ANSWER TO ALTERNATIVE APPLICATION FOR PARTIAL STAY 9. Paragraphs 1-8 above are incorporated herein by reference as if set forth at length. 10. Denied. The Kalbach Objectors submit that Gerald Hempt's Application for Stay of the August 14, 2008 Order should be denied except for the stay/supersedeas of the payment of the surcharge. The Kalbach Objectors will agree that, upon Gerald Hempt's filing with the Court the appropriate security of 120% of the surcharge, asupersedeas/stay will operate with regard to that part of the August 14, 2008 Order dealing with the payment of money, namely the surcharge against Gerald Hempt. However, the Kalbach Objectors specifically deny that the $290,143.30 that Gerald Hempt proposes to post as security would be adequate if this Court decides to grant the other aspects of Gerald Hempt's Application, which pertain to Gerald Hempt remaining as trustee and to the reformation of the Trust. This Court should not stay its Order that the three separate trusts be reformed into the single trust as set forth in the Will of Loy T. Hempt, because Gerald Hempt did not raise this issue in his Application for Stay and did not provide sufficient reasons why, pursuant to Process Gas, this part of the Order should be stayed. The part of the Order requiring the reformation of the trust should not be stayed for the reasons set forth in paragraphs 15-20 below. Said paragraphs 15-20 are hereby incorporated by reference as if fully set forth at length. However, if this Court nonetheless decides to stay this part of its Order, and/or if this Court stays that part of 12 its Order requiring the removal of Gerald Hempt as trustee, then the Court should require additional security and should place other conditions and limits on the powers of Gerald Hempt so as to protect the interests of the Kalbach Objectors. WHEREFORE, for the reasons set forth above, the Kalbach Objectors respectfully request that this Honorable Court deny Gerald Hempt's Application for Stay of the August 14, 2008 Order except for the application for a supersedeas of the Order requiring payment of the surcharge, which supersedeas will take effect upon the filing with the Court of the appropriate security of 120% of the surcharge. The Kalbach Objectors also request, in the alternative, that if a stay/supersedeas is granted as to other aspects of the Court's Order, that Gerald L. Hempt be ordered to post additional security and that any such order staying the August 14, 2008 Order contain conditions and limitations on the powers of Gerald Hempt so as to protect the Kalbach Objectors. III. ANSWER TO APPLICATION FOR TERMS AND CONDITIONS OF APPROPRIATE SECURITY 11. Paragraphs 1-10 above are incorporated herein by reference as if set forth at length. 12. Admitted. 13. Denied as stated. It is admitted that an appeal from an order involving solely the payment of money operates as a supersedeas upon the deposit with the lower court of appropriate security in the amount of 120% of the amount found due by the lower court and remaining unpaid. By way of further answer, Pennsylvania Rule of Appellate Practice 1731, being in writing, speaks for itself. To the extent the averments of paragraph 13 are inconsistent with the written Rule, said averments are deemed denied. Furthermore, it is specifically denied that the August 14, 2008 Order involves solely the payment of money. To the contrary, the Order also 13 removes Gerald Hempt as trustee; proposes Hershey Trust as Trustee; and orders the reformation of the three single trusts created by Gerald Hempt into the single trust as originally provided for in the Will of Loy T. Hempt. The Kalbach Objectors specifically deny that the $290,143.30 that Gerald Hempt proposes to post as security would be adequate if this Court decides to grant the other aspects of Gerald Hempt's Application which pertain to Gerald Hempt remaining as Trustee; to the reformation of the Trust; and the proposal of Hershey Trust as Trustee. 14. Denied as stated. It is specifically denied that the August 14, 2008 Order involves solely the payment of money. To the contrary, the Order also removes Gerald Hempt as Trustee; proposes Hershey Trust as Trustee; and orders the reformation of the three single Trusts created by Gerald Hempt into a single Trust as originally provided for in the Will of Loy T. Hempt. The Kalbach Objectors will agree that, upon Gerald Hempt's filing with the Court the appropriate security of 120% of the surcharge, a supersedeas/stay will operate with regard to that part of the August 14, 2008 Order dealing with the payment of money, namely the surcharge against Gerald Hempt. However, the Kalbach Objectors specifically deny that the $290,143.30 that Gerald Hempt proposes to post as security would be adequate if this Court decides to grant the other aspects of Gerald Hempt's Application which pertain to Gerald Hempt remaining as Trustee and to the reformation of the Trust. This Court should not stay its Order that the three separate Trusts be reformed into the single Trust as set forth in the Will of Loy T. Hempt because Gerald Hempt did not raise this issue in his Application for Stay and did not provide sufficient reasons why, pursuant to Process Gas, this part of the Order should be stayed. The part of the Order requiring the reformation of the trust should not be stayed for the reasons set forth in paragraphs 15-20 below. 14 Said paragraphs 15-20 are hereby incorporated by reference as if set forth at length. However, if this Court nonetheless decides to stay this part of its Order and/or if this Court stays that part of its Order requiring the removal of Gerald Hempt as Trustee, then the Court should require additional security and should place other conditions and limits on the powers of Gerald Hempt so as to protect the interests of the Kalbach Objectors. WHEREFORE, for the reasons set forth above, the Kalbach Objectors respectfully request that this Honorable Court deny Gerald Hempt's application for stay of the August 14, 2008 Order except for the application for a supersedeas of the Order requiring payment of the surcharge, which supersedeas will take effect upon the filing with the Court of the appropriate security of 120% of the surcharge. The Kalbach Objectors also request, in the alternative, that if a stay/supersedeas is granted as to other aspects of the Court's Order, that Gerald L. Hempt be ordered to post additional security and that any such order staying the August 14, 2008 Order contain conditions and limitations on the powers of Gerald Hempt so as to protect the Kalbach Objectors. NEW MATTER 15. Paragraphs 1 through 14 above are incorporated herein by reference as if set forth at length. 16. Upon Gerald Hempt's deposit with the Court of appropriate security in an amount that is 120% of the surcharge he has been ordered to pay, that part of the court's August 14, 2008 may be stayed pursuant to Pennsylvania Rule of Appellate Procedure 1731. 17. In his Application for Stay, Gerald Hempt does not address that part of the Court's August 14, 2008 Order which requires that the three separate trusts created by Gerald Hempt be reformed into a single trust as provided for in the Will of Loy T. Hempt. Gerald Hempt thereby fails in his Application to justify why a stay should be granted with regard to that 15 part of the Court's Order dealing with the reconstitution of the Trust. Gerald Hempt has essentially waived this issue. As a result, a stay should not be granted and the three separate trusts should be reformed immediately into a single trust. 18. The reconstitution of the three separate trusts into the single trust provided for in the Will of Loy T. Hempt is of the utmost urgency given the advanced age of the Trust's beneficiary, Jean Hempt. 19. The Loy Hempt Trust will end upon Jean Hempt's death. Jean was born in January 1927. She is 81 years old. Given her advanced age, she could die at any moment. If she would die during this pending appeal, in all likelihood Gerald Hempt, if allowed to remain as trustee, would attempt to distribute the Trust funds to the benefit of Max's children and to the detriment of the Kalbach and Mark Objectors. This would be an unjust consequence of Gerald Hempt's prior self-dealing and would, at the very least, result in additional litigation. 20. If the three separate trusts created by Gerald Hempt are retained during a stay or supersedeas of the August 14, 2008 Order, the Kalbach Objectors would be harmed for the reasons set forth in paragraph 4 above and because, upon Jean's death, the Kalbach Objectors would only be entitled to the considerably less valuable trust assets that Gerald Hempt assigned to the Kalbach Objectors when Gerald Hempt distributed the assets of the single trust provided for in Loy T. Hempt's Will into three separate trusts. Under this distribution by Gerald Hempt, the Trust in which its Kalbach Objectors have a remainder interest received no stock in Hempt Brothers, Inc., Valley Land Company, or C.A. Hempt Estate, Inc. This Court found that "there is no question that Gerald used the values which were most beneficial to the separate trust in which he and his siblings held a remainder interest." Court's Opinion, page 7. Given this finding, the part of the Court's Order requiring reformation of the three trusts into the single trust as created 16 in the Will of Loy T. Hempt should not be stayed, but rather should be put into effect immediately, particularly in light of Jean Hempt's advanced age and the possibility of a 1'/2 to 2 year appeal period. WHEREFORE, for the reasons set forth above, the Kalbach Objectors respectfully request that this Honorable Court deny Gerald Hempt's application for stay of the August 14, 2008 Order except for the application for a supersedeas of the Order requiring payment of the surcharge, which supersedeas will take effect upon the filing with the Court of the appropriate security of 120% of the surcharge. The Kalbach Objectors also request, in the alternative, that if a stay/supersedeas is granted as to other aspects of the Court's Order, that Gerald L. Hempt be ordered to post additional security and that any such order staying the August 14, 2008 Order contain conditions and limitations on the powers of Gerald Hempt so as to protect the Kalbach Objectors. Respectfully submitted, METTE, EVANS & WOODSIDE By: H ell C. e e, Esquire S . Ct. I.D. No. 7217 John F. Yaninek, Esquire Sup. Ct. I.D. No. 55741 3401 North Front Street P. O. Box 5950 Harrisburg, PA 17110-0950 (717) 232-5000 -Phone (717) 236-1816 -Fax Date: September 24, 2008 Attorneys for Kalbach Objectors 17 CERTIFICATE OF SERVICE I certify that I am this day serving a copy of the foregoing document upon the person(s) and in the manner indicated below, which service satisfies the requirements of the Pennsylvania Rules of Civil Procedure, by facsimile transmission and by depositing a copy of same in the United States Mail at Harrisburg, Pennsylvania, with first-class postage, prepaid, as follows: Joel R. Zullinger Esquire Donald B. Kaufinan, Esquire ZULLINGER & DAVIS McNEES, WALLACE & NURICK 14 North Main Street 100 Pine Street Suite 200 P.O. Box 1166 Chambersburg, PA 17201 Harrisburg, PA 17108-1166 Respectfully submitted, METTE, EVANS & WOODSIDE ~. gy. ~C.. ell C. M ,Esquire . Ct. I.D. .7217 John F. Yaninek, Esquire Sup. Ct. I.D. No. 55741 3401 North Front Street P. O. Box 5950 Harrisburg, PA 17110-0950 (717) 232-5000 -Phone (717) 236-1816 -Fax Dated: September 24, 2008 Attorneys for Kalbach Objectors 502344v1