HomeMy WebLinkAbout01-15-92 (2)
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IN RE:
ESTATE OF
ROBERT M. MUMMA,
Deceased
IN THE COURT OF COMMON PLEAS
CUMBERLAND COUNTY, PENNSYLVANIA
NO. 21-86-398
ORPHAN'S COURT DIVISION
ANSWER WITH NEW MATTER TO PETITION FOR
THE APPOINTMENT OF A TEMPORARY FIDUCIARY
AND NOW corne Barbara McK. Mumma and Lisa M. Mumma
(Respondents), Co-Executrices of the Estate of Robert M. Mumma,
Deceased (Estate), by their counsel, Goldberg, Katzman & Shipman,
P.C., who plead as follows to the Petition for the Appointment of
a Temporary Fiduciary upon which a Rule to Show Cause was issued by
this Court under date of December 26, 1991:
1. Denied as stated; Robert M. Mumma, II (RMMII), while a
named beneficiary under the will referred to, has since renounced
his interest under said Will, and is thus no longer an actual
beneficiary thereunder.
2. Denied as stated; it is admitted that the minor children
referred to have an interest in the Estate.
It is averred,
however, that the proper person to represent their interests before
the Court in this matter is Robert M. Frey, Esq., who was appointed
Guardian ad Litem for them by Order of this Court of December 29,
1988. It is further averred that the Petition to the York County
Court appointing RMMII and Gary M. Gilbert as Co-Guardians of the
Estates of the two minor daughters of Robert M. Mumma, II was
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issued on the basis of untrue statements made by RMMII that he had
no interest adverse to the financial interests of said minors,
whereas his Petition to this Court on June 2, 1989, asking for
permission to revoke his disclaimer, is clearly evidence of such
adverse interest. RMMII also failed to disclose to the York County
Court his serious conflicts of interest with the Estate in which he
alleges these minors have rights.
3 . Admi tted.
4. Admitted.
5. Admi tted.
6. Admitted.
7. It is denied that the corporations referred to were
liquidated "by the executrices of the Decedent I s estate." In
fact, said liquidations occurred by unanimous vote of all of the
directors and shareholders of said corporations, which included
RMMII. The other averments of paragraphs 7 are admitted.
8. Admitted with the following qualifications: the number
of shares referred to in the 15th line as 55.58368 should be
55.8368. It is further averred that the transfer to the marital
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trust was accomplished in accordance with the directions of the
testator as reflected in his will, and all actions by Respondents
were likewise consistent with the intent of the testator as
reflected in his will. In addition, it is averred that stock was
used to accomplish the withdrawal right because of the cash
situation of the Estate.
9. Admitted with qualification: while the figures are
correct, the conclusion that the distributions changed control of
the Corporation is denied as being erroneous and ill founded.
Although in different capacities, the said Barbara McK. Mumma and
Lisa M. Morgan controlled more than fifty per cent (50%) of said
Corporation since the inception of the Estate, and this was not
changed by the distributions.
10. Denied; the objections speak for themselves, and clearly
reveal there is no basis for them. Additionally, control over
"Decedent's family enterprises" was something which existed in
Respondents from the inception of the Estate, and such control was
in all respects in fulfillment of the intent of Decedent as set
forth in his will. It is further averred that a will executed
prior to the one which was probated, and which was revoked several
years prior to decedent's death, had named RMMII as a fiduciary,
and execution of decedent's subsequent Will was based, in part,
upon Decedent's desire to remove RMMII as a fiduciary and to vest
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control over his family enterprises in Respondents. This action
took place because of Decedent's recognition that RMMII was
deceitful, not worthy of trust, and would use his position to
benefit himself in preference to other members of the family.
Unfortunately, RMMII has proved his father's concerns to have been
well-founded, as shown by his self-serving manipulations of Lebanon
Rock, Inc. (LRI), as set forth hereinafter.
It is further denied that a transfer to Lisa M. Morgan, which
transfer is not even contemplated, or a sale of the family business
interests to third persons, is in contravention of Decedent I s
testamentary intent, and it is averred that same is not only
consistent therewith, but that it has already been determined by
this Court that sale to third parties is authorized pursuant to the
terms of the Decedent's will.
It is further averred that only Petitioners have filed
Objections, and that all of the beneficiaries of this Estate,
except for RMMII, including the guardian appointed by this
Court, are agreeable with the First and Partial Account.
Finally, it is averred that Barbara McK. Mumma is free to
transfer her own assets or not transfer them, by will or gift, to
whomever she chooses. It is also averred that RMMII's assertion
that the sale of family business interests to third parties is in
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contravention of Decedent's testamentary intent is in direct
contravention to the relief RMMII seeks pursuant to paragraph 17 of
his Petition, which is the same relief that Petitioners have been
seeking in the Court of Common Pleas of Dauphin County for several
years.
It is further averred that, as Petitioner has asserted in his
Dauphin County litigation, no sale is feasible until many other
issues of that litigation are first resolved.
11. The averments of paragraph 11 are admitted except for the
following: Elco's parent corporation is pennsy Supply, Inc., not
Nine Ninety-Nine. Additionally, the litigation was started not by
Elco, but by RMMII, who without proper authorization, instituted
suit in Dauphin County in February of 1988 purportedly on behalf of
LRI against Elco. It is further averred that the ongoing
litigation in Dauphin County, which is now completing its fourth
year, is, in actuality, litigation instituted by RMMII for his own
personal gain and benefit, against not only Elco, but also the
Estate as well as other parties. In fact, the only one of the four
actions in Dauphin County instituted by the Estate is one wherein
the Estate has brought a derivative shareholder's action against
RMMII because of his wasteful operation of LRI, his unauthorized
self-dealing, and his diversion of monies from LRI to himself, all
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of which have created substantial losses for the Estate instead of
profits.
12. Denied; the averments of paragraph 11 are herewith
incorporated by reference. It is further averred that the
pennsylvania Superior Court remanded the entire matter back to the
Dauphin County Court, with directions to hold additional hearings
and render a new adjudication. Some of said hearings have already
been held since the Superior Court's decision in July of 1991, and
the issues before the Dauphin County Court are the subject of
hearings scheduled for the immediate future, all as set forth in
the October 18, 1991, Order of Judge Herbert A. Schaffner, attached
hereto and made a part hereof as Exhibit "A", (said Order having
been amended with respect to dates of some hearings, which were
continued by request of RMMII). It is further averred that the
proceedings before the Dauphin County Court clearly show that it
was the intent and agreement reached prior to Decedent's death that
Elco Concrete have the right to mine dolomite in the quarry owned
by Lebanon Rock, and that the desire to expand the activities of
Lebanon Rock to include dolomite quarrying is something which only
RMMII desires for his own personal financial gain and benefit, to
the detriment of not only the Estate, but also to Lebanon Rock
itself. It is further averred that Judge Schaffner, after three
and one-half years of hearings, has ordered that Lebanon Rock not
be allowed to quarry dolomite and has further authorized Elco to
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continue to quarry dolomite with the payment of a fair royalty to
Lebanon Rock, and has found that this arrangement is not
"economically adverse" to LRI.
13. Denied; Respondents have exercised their controlling
interests in Elco to enhance its profits and value, which is
something which benefits all of the beneficiaries of the Estate,
including RMMII if he, in fact, is a beneficiary. It is denied,
however, that such action has undermined the profitability of
Lebanon Rock, and it is averred instead that Lebanon Rock could be
very profitable if RMMII, while owning only a fifty percent (50%)
interest, had not seized unilateral control of said Company in the
latter part of 1987, and started to operate it for his own personal
benefit, and in a manner which is economically adverse to the
Estate as the owner of the other fifty per cent (50%) interest of
Lebanon Rock.
The actions and attempted actions of Respondents with regard
to LRI have been consistent with the manner in which Decedent had
operated these companies prior to this death and the agreements
which were made by him with respect thereto.
It is denied that the interests of Respondents in Elco are
directly in conflict with their fiduciary duties to Lebanon Rock,
and it is averred that if the original agreements and
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understandings would have continued to be performed, the Estate
would have benefitted both through the enhanced profitability of
Elco, as well as profitability of Lebanon Rock.
It is further averred that since the latter part of 1987,
Lebanon Rock has been under the sole, dictatorial operation of
RMMII, who totally excludes the Estate from any participation in or
knowledge of the operation of said company, who self-deals with the
company constantly without approval of the Respondents and without
even informing them or providing them with information concerning
said self-dealings, and who improperly extracts monies from said
Company for his own personal benefit. RMMII' s unilateral and
wasteful operation of Lebanon Rock has resulted in losses every
year, such that said Corporation, which was established as a Sub-
Chapter "s" corporation to pass through profits directly to its
owners, including the Estate, has failed to provide one penny of
income or cash to the Estate for a period which is now in excess of
four (4) years.
pennsy Supply, Inc. and its subsidiaries are the largest
operating assets in the Estate, and the greatest benefit to all
beneficiaries is to have all of the Decedent's corporate interests,
including LRI, operated in a harmonious manner which would preserve
the original intent of the Decedent and enhance the value of all
the estate assets.
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It is further averred that neither of the Respondents receives
any salary or benefits from Elco or Nine Ninety-Nine, and that
while they are employed by and receive salaries from pennsy Supply,
Inc., neither salary is excessive; in fact, their combined salaries
are substantially less than what Decedent received as salary prior
to his death. It is further averred that director's fees to each
of the Respondents are nominal.
14. Denied; as set forth in paragraph 13 above, the original
agreement and understanding with respect to these two corporations
and as instituted by Decedent was that they should operate
harmoniously at the quarry, each with its separate function;
Lebanon Rock was to be in the high calcium business, and when that
was exhausted, it was to engage in real estate development. Elco,
which had been operating at the premises for several years prior to
the time Lebanon Rock was formed, was to continue in the dolomite
business, and was to quarry dolomite in a manner such that it would
expose high calcium for quarrying by Lebanon Rock, in which
situation there would be no charge required to be paid from Elco to
Lebanon Rock for the dolomite. After such quarrying was completed,
Elco was to continue to quarry dolomite in other areas of the
quarry, which, since they did not expose and thereby make easier
the extraction of high calcium by LRI, would require the payment of
a royalty by Elco to LRI. All of this was succinctly testified to
by all witnesses, except RMMII, including most recently William D.
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Boswell, Esq., who was the attorney for all parties when the quarry
was acquired.
At the December 12, 1991, hearing before Judge
Schaffner in Dauphin county, Attorney Boswell, called as a witness
for RMMII, testified as follows at N.T. 171-174:
"Q . . . Now, with respect to the companies, you
referred to Elco. What was the arrangement to be so far
as you knew with Elco and the dolomite at the quarry?
A The -- my understanding was that Elco would be
used to remove the dolomite from the deposits of white
stone, so that the white stone could be removed and sold
through CACO Three to the public. And in consideration
of opening up the deposits of white stone, all of the
dolomite that was taken off after the overburden was
taken off went to them as consideration for the removal
and giving us the -- not us, giving Lebanon Rock the
opportunity to get the white stone.
Q
Them meaning Elco?
A
right.
Elco got that as consideration, yes, that's
Q Now, how about after the dolomite was finished
being removed from the areas that would expose high
calcium, what was Elco's situation then with respect to
dolomite?
A Well, then there was discussion between Lebanon
Rock and Elco, and in Mr. Mumma's mind that any other
dolomite should be at a royalty basis. And it's my
recollection we were talking somewhere between 30 and 50
cents a ton.
Q And is that that Elco would continue to quarry
the dolomite, but at that point since it wasn't
uncovering high calcium they would then pay a royalty to
Lebanon Rock? Is that the understanding as far as you
knew?
A
Yes.. II
"A. That was the talk before. And then, of course,
as you know white stone was not allover the area, so
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there was dolomite and that was going to be the stone
that would be under a royalty.
Q Did Mr. Mumma ever discuss with you the fact
that this arrangement, this royalty, would in a sense
finance his retirement or provide him with --
A Well, yeah, he remarked that that would be an
income factor to Lebanon Rock. . ."
"A .. So there was some very desirable land that was
acquired. And the ultimate idea with Lebanon Rock was it
would also be into the development, land development,
business, both from an industrial, commercial, and
housing basis. . ."
Elco completed quarrying dolomite which exposed high calcium
in the summer of 1990, and since september of 1990 has been
quarrying dolomite from another area of the quarry and paying to
Lebanon Rock a royalty of forty cents per ton, which RMMII in his
testimony of September 4, 1990, conceded was a fair royalty. All
of this has been consistent with Orders entered by the Court of
Common Pleas of Dauphin County, the most recent of which is found
in the first sentence of the Dauphin County Court's Order of
October 18, 1991, which is attached hereto as Exhibit "A".
Contrary to the averments of the Petition, the deadlock at
Lebanon Rock has been created only because of RMMII's insistence
that the Corporation should do only that which he wants done, as
well as his total exclusion of Respondents from any participation
in or knowledge of the operation or management of said Corporation.
To the extent that RMMII has been operating LRI for his own
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benefit, he has been undermining the value of that Estate asset as
well as all other of the operating companies of the Estate. It is
admitted that the Estate does not believe it is in the best
interests of the beneficiaries to sell its interest in Lebanon Rock
to RMMII, because it might seriously undermine the value of its
interests in Elco. It is further averred that RMMII proposed an
acquisition price in early 1988, on a basis that he would sell or
buy at that figure, but same was withdrawn before anything further
could occur. The most beneficial arrangement for the Estate and
its beneficiaries would be for the interest of RMMII to be acquired
by the Estate, which it would be desirous of doing.
15. Denied as stated. As asserted above, the deadlock has
been created because of the unilateral assumption by RMMII of
operation and control of Lebanon Rock, and his total exclusion of
the Respondents from any knowledge of, participation in, or voice
with respect thereto. It is further averred that the Petition
referred to was granted by the Court of Common Pleas of Dauphin
County, by its Order of October 18, 1991, attached hereto as
Exhibit "A", on the basis that that Court, after well over three
years of litigation, understands all of the various factors
involved in these matters and recognizes that Lebanon Rock does not
have any authority or basis for entering the dolomite business in
competition with Elco. Any action by a temporary fiduciary to
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authorize same would compel a further round of expensive litigation
to be brought by Respondents to protect the Estate's value.
It is further averred that Lisa M. Morgan is not a director of
Lebanon Rock, and has been told on several occasions by RMMII that
she is not welcome to attend any meetings. With respect to Barbara
McK. Mumma, she stopped attending meetings of the Board of
Directors in the summer of 1989, since she could no longer tolerate
the abuse and harassment which RMMII visited upon her during such
meetings. Additionally, he never abided by any decisions or
opinions of hers as a director, and the meetings always ended in
stalemate with respect to any significant issues. Furthermore,
RMMII did not even have the courtesy of checking with Mrs. Mumma
prior to calling a meeting, to ascertain whether or not she could
attend at the date and time he arbitrarily selected. In order to
attempt to re-institute Directors' meetings, a letter was sent to
RMMII setting forth the basis upon which said meetings would occur,
a copy of which is attached hereto as Exhibit "B". RMMII has
refused to comply with any of the conditions therein and continues
to refuse to supply appropriate documentation and information to
Respondents concerning the operations, decisions, and management of
Lebanon Rock. Additionally, the Dauphin county Court, through its
Order of April 11, 1989, established a procedure whereby one person
representing RMMII and another representing the Estate, would meet
at the quarry every Friday morning to discuss operations and
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procedures with respect to Lebanon Rock. RMMII has consistently
refused to supply any documentation or information concerning
financial and other related matters to the Estate's representative
at said meetings, or even to his own representative. He also has
refused to recognize any control or input by the Estate's
representative at said meetings.
The Petition referred to is attached hereto and marked Exhibit
"C". Its contents are herewith incorporated by reference.
Finally, it is averred that RMMII is estopped from complaining
about deadlock in the management and operation of the Company, and
the failure to attend Directors' meetings, since he has been
running the Company in a unilateral manner since the latter part of
1987. His real reason for filing the instant Petition is that the
Dauphin County Court has finally restricted his unilateral
operations carried out in the name of Lebanon Rock, and further,
that the Dauphin County Court appears likely to be proceeding to
appoint a custodian for said Corporation, whose job it would be to
operate the Company in a manner that might not allow RMMII to
continue to bleed assets from Lebanon Rock. The instant Petition
is an attempt to derail the Dauphin County actions.
At a hearing held before the Dauphin County Court on September
4, 1990, it was shown that mining and selling of dolomite by
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Lebanon Rock would not be profitable for Lebanon Rock. While RMMII
presented an Affidavit purporting to show that it would be
profitable, said Affidavit was predicated upon intentionally false
and misleading information supplied by him, and has been completely
discredited by the former controller of Lebanon Rock. It is
further averred that the royalty arrangement whereby Elco pays
Lebanon Rock for dolomite which it quarries, has resulted in
Lebanon Rock receiving royalties from September, 1990, to date well
in excess of $100,000., which is pure profit for Lebanon Rock, and
for which it incurs no cost or expense.
It is further denied that the Superior Court acted as alleged,
and, in fact, the Superior Court merely vacated the decree of the
Dauphin county Court and remanded the matter to that Court for
further consideration. The Dauphin county Court had appointed a
receiver for LRI, and the superior Court remanded because the
corporation Law has replaced the common law, and thus a custodian,
and not a receiver, is the appropriate remedy. A copy of the
memorandum of the Superior Court is attached hereto as Exhibit "0".
It is further submitted that all evidence supports the
conclusion that Elco does have the right to mine dolomite in the
quarry, the only exception being the self-serving and
unsubstantiated oral testimony of RMMII. It is further averred
that RMMII's primary interest in Lebanon Rock is as a lessee of
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equipment from companies owned by RMMII, thus causing said
Corporation to incur improper and unnecessary charges which
directly benefit only RMMII. In addition, RMMII is causing another
company owned solely by him to receive a five per cent (5%)
commission on all gross sales of Lebanon Rock, Inc., and thus the
increase in gross sales of said Corporation would increase his
receipts without reference to whether or not same would be
profitable for Lebanon Rock.
Finally, it is averred that the interests of Elco are not
being advanced at the "expense" of Lebanon Rock, since the
Respondents are carrying out the original intentions and agreements
of Decedent, which are to operate both Companies in a harmonious
and mutually cooperative and beneficial fashion. Whatever conflict
of interest exists is that which existed in Decedent, who knowingly
placed Respondents in positions which he knew might conflict and
gave them power to act in that dual capacity.
As found by the
Dauphin County Court in its September 4, 1990, Order:
" . . . Mrs. Mumma, it must be pointed out, is a vice
President of Lebanon Rock, and a Co-Executor of her
husband's estate, which estate owns 50% of the stock of
Lebanon Rock. Thus, while she surely speaks for Elco,
she has a very significant interest in Lebanon Rock as
well and, thus, has a broad interest in the use of this
quarry site. Historically, as well, Elco employees have
quarried in the quarry, have removed the dolomite
product, have taken it to their own crushing facilities,
and have marketed the product. It seems reasonable to
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not disturb this part of the operation, which
evidence establishes has worked reasonably well . .
the
"
The Court adopted the proposal of Elco, as being "more
reasonable" than a proposal submitted by RMMII whereby he, under
the guise of Lebanon Rock, would quarry and sell dolomite to the
exclusion of Elco. While that Order was vacated by the Superior
Court, the factual basis for it was not eroded, and, indeed, it
formed the basis of the Court's Order of October 18, 1991, whereby
the royalty arrangement was retained pending the Court's resolution
of the issue as to the appointment of a custodian.
Finally, it is specifically denied that Respondents are
attempting to "undermine the profitability of Lebanon Rock . .
II.
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it is RMMII who has been in total control of the management and
operations of said Company for in excess of three and one-half
years, who has consistently "undermined" the profitability of
Lebanon Rock by operating same for his own personal benefit and
gain, and without ever being able to show a profit that would allow
monies to be distributed to the Estate.
16. Denied; while the statute is accurately quoted, it is
averred that the provisions are not applicable in a case such as
the present one where testator knowingly placed his fiduciaries in
positions which he knew might conflict, and nevertheless gave them
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power to act in that dual capacity. Additionally, said statute is
not applicable because Respondents have been acting in the best
interests of the Estate. It is RMMII who has been acting in a
manner to harm and injure the Estate by his unilateral operation
of Lebanon Rock, Inc. for his own selfish gain, which has deprived
the Estate of the earnings which it should have received if said
Corporation were operated properly and without diversion of its
funds for the personal benefit of RMMII. Respondents have not been
allowed to exercise any fiduciary interest in Lebanon Rock because
of the unilateral and oppressive actions of RMMII, which have
precluded any involvement by them in the operations of said
Corporation. It is for this reason that Respondents have been
engaged in the Dauphin County Court for over three (3) years in
attempting to have the Court appoint a custodian for Lebanon Rock,
who would manage its affairs independently of RMMII and of
Respondents and thereby provide a benefit to the Estate and RMMII,
instead of only to him. Any enhancement of the interests of
Respondents in Elco redounds to the benefit of all the other
beneficiaries of the Estate, including the children of RMMII.
It is denied that Respondents own any individual interest in
Elco Concrete since same is a wholly owned subsidiary of pennsy
Supply, Inc.
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It is further averred that RMMII has a very substantial
conflict of interest in that he personally owns businesses which
compete with pennsy Supply, Inc. and related companies, and his
attempts to undermine the viability of Elco through his unilateral
and abusive control of Lebanon Rock, a situation which he desires
to continue at all costs, is for the purpose of increasing his own
personal financial interests to the detriment of the Estate.
The averments of paragraphs 14 and 15 are herewith
incorporated by reference.
17. Denied; the appointment of a temporary fiduciary would
unduly prolong and interfere with the already excessively lengthy
and complex litigation that has been ongoing in Dauphin County for
over three (3) years. It has spawned well over one thousand pages
of testimony, numerous exhibits, hundreds of pages of pleadings,
thousands of pages of briefs, many opinions by Judge Schaffner, and
appeals to and remand by the Superior Court. Additionally, any
temporary fiduciary would be subject to the whims and control of
RMMII, as have your Respondents, in the operation and management of
Lebanon Rock, unless and until they would agree completely with
RMMII to allow him to control and operate the Company in whatever
way he desires. Thus, the deadlock would not be broken unless
RMMII is restrained from continuing to operate said Corporation, as
he has during the last three and one-half years. It is averred
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that the Estate, similar to its request in Dauphin County, desires
and would be agreeable to the appointment of an independent third
person to operate and manage Lebanon Rock, Inc. in a manner that
would provide for a fair and balanced operation which would remove
the self-dealing and wasteful operations that RMMII has engaged in
over the last three and one-half years, would respect the
agreements made in the past, and operate said Company in a manner
that would bring the greatest overall benefit to the Estate. It is
further averred that sale of the Estate's stock in Lebanon Rock
would be detrimental to the best interests of the Estate, since
such a sale could well adversely affect the value of Elco and thus
be detrimental in the overall picture to the best interests of the
Estate. Rather, a purchase by the Estate at a fair price of
RMMII's shares would preserve and enhance the Estate's assets.
18. Denied; there is no valid reason why Respondents should
not continue as fiduciaries as intended by Decedent, and the
averments of paragraphs 14, 15, and 16 are herewith incorporated by
reference. It is further averred that RMMII has banking dealings
with Dauphin Deposit Bank and Trust Company, and that said Bank
could be under extreme pressure to merely rubber stamp the desires
and actions of RMMII, and to prefer methods of operation that would
benefit RMMII in preference to the Estate. As set forth in
paragraph 17, the solution for Lebanon Rock is to have an
independent person appointed to operate said Company as a
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custodian, a matter which is now before the Dauphin County Court,
upon which ten hearings were held prior to April, 1990, and,
following the Superior Court remand, on December 11 and 12, 1991,
and upon which a further hearing is scheduled for January 23, 1992.
If RMMII was truly interested in the best interests of the
Estate, rather than of himself, he would have agreed long ago to
the appointment of an independent person to operate and manage
Lebanon Rock. It is further averred that RMMII believes that he
cannot control and manipulate Barbara McK. Mumma so that she would
allow him to continue to operate Lebanon Rock for his own personal
benefit and gain, as he has been doing for the past four and one-
half years.
WHEREFORE, Respondents pray that the Petition for the
Appointment of a Temporary Fiduciary and the Rule to Show Cause
issued thereon be dismissed.
NEW MATTER
19. The entire matter involving the operation of Lebanon Rock
is before the Dauphin County Court and has been before it for
almost four years. Ten hearings were held prior to April, 1990,
and additional hearings were held in December, 1991, on this issue,
and more are scheduled for later in January, 1992. These hearings
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are being held in accordance with the remand order of the
pennsylvania Superior Court dated July 3, 1991. This Court should
not at this point interfere with such litigation, which will
ultimately resolve the controversy between RMMII and Respondents.
20. RMMII is guilty of laches in instituting this proceeding
in October of 1991, after the matter had been before the Dauphin
county Court for more than three years.
21. As set forth in the voluminous hearings before the
Dauphin county Court, it is RMMII who has been in total control of
the operations and management of Lebanon Rock and has precluded any
involvement or participation by Respondents. This has been to the
detriment of the Estate, and has caused Respondents to proceed with
and defend the litigation in the Dauphin County Court so that the
Estate might obtain at long last benefits from its stock ownership
in Lebanon Rock.
22. What is needed with respect to Lebanon Rock is to have
RMMII removed from his position of unilateral control and
management for his own gain, a remedy which the Estate has been
pursuing in the Dauphin County Court, and which will not be
affected in any way by appointment of a temporary fiduciary with
respect to the Estate's stock ownership in said corporation; see
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p.3 of Judge Schaffner's Memorandum of January 14, 1992, attached
hereto as Exhibit "E":
"The decision whether a temporary fiduciary should be
appointed to manage the shares of Lebanon Rock, Inc.
owned by the estate will not affect our decision
concerning whether a custodian should be appointed to
manage the entire operation of Lebanon Rock, Inc. because
of the deadlock."
23. Any relief granted by this Court should be conditioned
upon RMMII removing himself completely from all operating and
management involvement in Lebanon Rock, as well as returning to it
all monies which he has taken out for his own personal use or which
have been taken out pursuant to self-dealing agreements which have
not been approved by appropriate corporate action.
24. The statute under which the Petition was filed is
inapplicable in this case because any conflict was created by the
Decedent who knowingly placed Respondents in positions which he
knew might conflict, and nevertheless gave them power to act in
that dual capacity.
25. Petitioners do not have standing to file the Petition
since RMMII has not been finally determined to be a beneficiary of
the Estate, and the Petitioners are not authorized to act on behalf
-23-
1445
of their wards with respect to Estate matters in Cumberland or
Dauphin counties; only Robert M. Frey, Esq., is empowered.
26. There is no improper conflict of interest on the part of
Respondents since the evidence is clear that there was an agreement
which prescribes the relationship between Lebanon Rock and Elco,
and Respondents are attempting to adhere to same. It is only the
oppressive and fraudulent action of RMMII through his usurpation of
unilateral control over Lebanon Rock and continued self-dealing
that has caused any problem with respect to the two companies.
27. contrary to the wishes of Respondents, RMMII has, since
the latter part of 1987, managed and operated Lebanon Rock as
though said Corporation was entirely his, rather than just fifty
per cent (50%), and has taken hundreds of thousands of dollars out
of the Corporation for personal use, has engaged in continual
self-dealing without approval of or disclosure to Respondents, and
has never operated said Corporation so as to provide any financial
benefit to the Estate.
28. Granting the Petition would not resolve the problems that
the Estate has with respect to Lebanon Rock, but would only
aggravate the situation and further complicate the proceedings that
have been ongoing in Dauphin County for almost four (4) years.
-24-
14/16
"
29. RMMII has waived any right to bring the matter involving
Lebanon Rock, and various disagreements in its operations, before
this Court, as per his testimony at the hearing of October 2, 1989,
before the Dauphin County Court, where he stated at N.T. 115:
"Q: ... Mr. Mumma, how do you think the disagreements,
if you want one thing as director and she wants another,
how do you think that should be resolved? How do you
explain it and she maintains her position and you
maintain your position, how do you think it should be
resolved?
A: I think if that is the case, the issue should
be brought before this Court, . . ."
30. Respondents have at all times acted reasonably and
faithfully under the circumstances in discharging their fiduciary
duties with respect to Lebanon Rock, and their actions have been
for the overall benefit of the Estate and all its beneficiaries.
31. The statute under which this proceeding was instituted
does not provide a basis for the relief sought, since the purpose
of said statute, as expressed in the "Official Comment" at 20 Pa.
C.S.A. 4301, is to provide for replacement "where the original
fiduciary is temporarily incapable or unwilling to act because of
absence from the country, conflict of interests or other similar
reasons"; there is no averment that Respondents are "incapable or
unwilling to act".
-25-
14.17
",
, .
32. There is no averment that Respondents were acting in
regard to Lebanon Rock because of a personal conflict of interest.
33. The Petition fails to allege an essential element upon
which relief can be granted, in that there is no averment of bad
faith, and no averment that the estate or the interests of the
beneficiaries are in jeopardy or endangered.
34. Fiduciaries are entitled and required to exercise
discretion in preserving a balance between the interests of various
estate assets, and Respondents have done that in a prudent and
responsible manner in their administration of the Estate's interest
in Lebanon Rock.
35. The facts of the Petition do not allege a conflict of
interest upon which replacement of Respondents can be predicated.
-26-
.11.18
"
. '
WHEREFORE, Respondents pray that the Petition for the
Appointment of a Temporary Fiduciary and the Rule issued thereon be
dismissed.
Respectfully submitted,
SHIPMAN, P.C.
BY:
KATZMAN SQUIRE
Attorney for Estate of Robert M.
Mumma, Deceased
320E Market Street
P. O. Box 1268
Harrisburg, PA 17108-1268
(717) 234-4161
Attorney ID# 07198
Date: January 15, 1992
-27-
14,19
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IN RE:
LITIGATION INVOLVING
IN THE COURT OF COMMON PLEAS
DAUPHIN COUNTY, PENNSYLVANIA
ELCO CONCRETE PRODUCTS, I NC. ,
LEBANON ROCK, I NC. ,
KOBERT M. ~iUHHAi II.
LISA M. MORGAN,
BARBARA McK. MUMMA,
THE ESTATE OF ROBERT M.
MUMMA, et al
:10. :'(J78 Ef!1JIJY
NO. 4722 EQUITY
NO. 3210 S 1988
NO. 4744 EQUITY
ORDER
AND NOW, this 18th day of October, 1991. we direct that Elco
Concrete Products, Inc. shall continue to have access to the quarry
for the mining of dolomite in accordance with the provisions of
our September 7, 1990 order and we direct that Lebanon Rock, Inc.,
pending further order of this Court, not mine dolomite for sale
to third persons.
On Friday, November 29, 1991 at 9:00 A.M. we
will hear evidence in support of the contending positions of the
adversaries on the corporate management of Lebanon Rock, Inc.
Specificaly, we will address the issues of deadlock in the
management of Lebanon Rock, Inc. and the statutory means to deal
with that corporate situation as provided in the Associations
Code, Title 15, Pa.C.S.A.
Additionally, we will hear evidence
on the issue of whether Robert M. ~lumma II is the president of
Lebanon Rock, Inc. and whether Robert M. Mumma II should be removed
as a director of that corporation.
We direct that counsel for
the parties submit to us memorandums of law, no later than November
15, 1991, setting forth the provisions of the Associations Code
which counsel deem appropriate for us to consider, the relief
that they think the Court should grant, if any, and the testimony
that supports their position that already appears of record,
1450
EXHIBIT ;,
. .
(counsel shall
as well as an
refer us to the appropriate transcript and page),
outline of the testimony proposed to be presented
on November 29, 1991 on thc~c issu~s.
The Court will hear evidence, during two days of hearings,
commencing at 9:00 A.M. on December 3D, 1991 and continuing on
December 31, 1991, on the following issues:
1. Whether a contract was formed between Elco Concrete
Products, Inc. and Lebanon Rock, Inc. pertinent to the current
operations in the quarry as well as those anticipated or desired
by the parties, extending into 1992.
2. Whether Elco has mined outside the pit limit.
3. Whether or not Elco should be permitted to mine, in the
future, outside the pit limit.
4. Whether Lebanon Rock, Inc. is entitled to damages for
Elco's quarrying inside and outside the pit limit.
The Court will 'hear evidence, in two days of hearings,
commencing at 9:00 A.M., January 23, 1992, and continuing through
January 24, 1992, on the following issues:
1. Whether Lebanon Rock is entitled to damages resulting
from the bank account opened by an employee of Elco.
2. Whether Lebanon Rock is entitled to damages for improper
actions undertaken by the directors and employees of Elco.
3. Whether damages are appropriate by virtue of the alleged
breach of agreement to guarantee the line of credit.
4. "The 30 acre dispute."
The parties shall submit to the Court on
9, 1992 memorandums of law setting forth the
or before January
factual data which
1451
;,'
they
believe
supports
and page
position.
the i r po sit ion. ( wit h ref ere n c e .t 0
references) and appropriate legal
These memorandums shall include
eX'isting
authority
suggested
transcripts
for their
specific findings of fact and conclusions of law.
The Court will hear evidence, during two days of hearings,
commencing at 9:00 A.M. on February 24, 1992 and continuing through
February 25,1992, on the following issues:
1. Whether the mining operations violated the Pennsylvania
Noncoal Surface Mining Conservation and Reclamation Act.
2. Whether Robert M. C1umma II is liable to Elco for damages
resulting from self-dealing.
3. Whether Richard B. Wickersham,
Esq. should have been
disqualified as counsel for Lebanon Rock, Inc.
4. Whether Lebanon Rock, Inc. was a proper party to equity
cases Nos. 4678 and 4722.
5. The proposed sale of Lebanon Rock, Inc.
6. Whether or not Lebanon Rock Inc. is entitled to counsel
fees.
The parties shall submit to the Court on or before February
14, 1992 memorandums of law settinR forth the factual data which
they believe supports their position, (with reference to existing
transcripts and page references) and appropriate legal authority
for their position. These memorandums shall include suggested
specific findings of fact and conclusions of law.
BY T E COURT
Herbert A. Schaffn r, Judge
1.452
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LAW OFPICES
GOLDBERG, KATZMAN & SHIPMAN, P.C.
01208 HARKET !JTREIl!l:T
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ARTHUR L. OOLDBl!;AG
"ONALCI H. KATZMAN
NAAAT ..OOUU'I[AG
r. U;IE IIHIPMAN
,....UL J. 1:'''01111'0
NI:IL HI["OI[ll~SHOT
oJ. ,JAY COOP!;"
THOHAIII:. Il!IRItHNIt"
DAVID e. ".loLI:..
aAHES H. SN!:!:HAN
NICHAI:L A. 'IHIO
O[A..."O M. HAC~A'n:VICH :
JOHN A. 'TATI.I:"
.......IL L. II1'''''''''O.II.U1'''Y
TRUDY H. "'eO"AW' "
. GUT H. "ROOKS
.III:",.I:'I!ION d. SN''''''A"
, HA"O.......T.... YIENKOWIIKf,
STRAWIJIlRRY SQUARE
P. O. BOX .eee
HARRJSBURO, PENNSYLVANIA .7108.1288
TIELI:PHONE
(717' 23.......'8'
>A,
(71?' 23""'8e08
YORK orne!:,
liD 1:. .......RKET '1'.
. YORK, ...... 17"01
(717) 8""3'70'2
ICORRI:!lPOHO TO
HARRISBURG O""'CI:)
May 21, 1990
Jon A. Baughman, Esq.
':pepper, Hamilton & Scheetz
, 3000 Two Logan Square
',,18th & Arch 'Streets
Philadelphia, PA 19103-2799
via: Fax No. 215-981-4750
, '~
In r:f:':
Lebanon Rock, Inc. -- Meetings of Board of Directors
Dear Jon: ~
, '
Now that Judge Schaffner has issued a final decree, Mrs. Mumma
has suggested'that I write to you concerning the many requests that
have been made for having meetings of the Board of Directors of
Lebanon Rock. The reasons Mrs. Mumma ceased attending such
meetings since last summer have been well expressed and documented,
" and those factors, while they will not be repeated here, constitute
the bases for the following conditions which are to be observed in
future meetings.
: :'"
The'following conditions all appear to us to be appropriate
if meaningful and productive meetings of the Board of Directors are
to take place. They are:
....
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1) All financial statements and records for Lebanon Rock must
be provided to Mrs. Mumma at least one week prior to any scheduled
meeting;
~ :;
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2) All financial statements and records since those last made
available' (through the fall of 1989), which despite repeated
requests have not been provided, must be made available
immediately;
3) An agenda is to be furnished by each party at least one
week prior to the meeting, with the understanding that all items
placed on the agenda by both parties will be discussed fully and
dealt with, and that no others will be brought up at the meeting;
145,1
EXHIBIT B
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John A. Baughman, Esq.
May 21, 1990
Page Two
. '
4) Full and complete data and information shall be provided
by each party with respect to each item placed by that party on the
agenda, said information and data to be supplied along with the
agenda listing such items;
5) Each party has the right to be accompanied to the meeting
by any personnel of their choice, and any such personnel shall have
the right to speak at the meeting as the person who he or she is
accompanying authorizes;
6) The meetings of the Board of Directors are not to be used
as a substitute for the Friday morning meetings that will continue
in accordance with the court's prior order;
7) Full reports of each meeting shall be taken by a court
reporter at the expense of Lebanon Rock;
B) Before calling a meeting, each party shall ascertain the
availability of the other to attend, and no meeting shall be called
unless the parties mutually agree on a date, time and place;
9) All meetings will last no longer than one hour, unless
both parties consent, specifically on the record to a specific
extension of time.
The above conditions have only one purpose in mind, and that
is to make these meetings as productive as possible, and to
eliminate or at ,least reduce any rancor and unpleasantness.
Hopefully, your client will express agreement with these
conditions, and we can suggest that the next meeting of the Board
of Directors occur either on June 4 or June 6, 1990, at Robert's
office on North Front street in Harrisburg.
Very truly yours,
Ronald M. Katzman
RMK/lkk
cc: Mrs. Barbara McK. Mumma
1455
,.
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J
Ronald M. Katzman, Esq.
Attorney lD # D7198
Goldberg, Katzman & Shipman, P. c.
320E Market Street, Strawberry Sq.
P. O. Box 1268
Marrisburg, PA 17108
(717)234-4161
-------------------------------------------------------r----------
I
LISA MUMMA MORGAN &
BARBARA McK. MUMMA, Executors
of the Estate of Robert M.
Mumma, as 50% Shareholder of
LEBANON ROCK, INC.,
IN THE COURT OF COMMON PLEAS
OF DAUPHIN COUNTY, PENNSYLVANIA
AND
LISA MUMMA MORGAN and
BARBARA McK. MUMMA,
Individually,
NO.
3210 S 1988
:
Plaintiffs
vs.
CIVIL ACTION - LAW AND EQUITY
ROBERT M. MUMMA, II,
and LEBANON ROCK, INC.,
Defendants
PETITION FOR SPECIAL RELIEF
And now comes the Estate of Robert M. Mumma ("Estate"),
derivatively on behalf of Lebanon Rock, Inc. ("LRI"), and files
this Petition for Special Relief, averring in support thereof as
follows:
'. (: ,~ ).,
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:1456
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CLi'
EXHIBIT C
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1. Plaintiff/Petitioner (the Estate) is a 50% shareholder of
LRI, as has been established heretofore in the record in this
litigation.
2. Defendant/Respondent RMMII is a 50% shareholder of LRI, as
has been established heretofore in the record in this litigation.
3. Defendant/Respondent LRI is a corporation organized and
existing under the laws of Pennsylvania, and is named as a nominal
Defendant/Respondent herein, in that:
a. this is a derivative petition brought by the Estate as
shareholder against the other shareholder, RMMII, who, as further
averred below, has, without authority, announced through his agent,
Peter Carpey, that LRI intends immediately to implement plans to
engage in the mining and sale of dolomite from the Prescott Quarry;
b. Even though a demand has been made by the Estate on
RMMII regarding his not causing LRI to enter into the business of
mining and selling dolomite (see Exhibit "A" hereof), it is averred
that such a demand is futile, consistent with RMMII's intransigence
in the face of similar demands of the Estate as has been
conclusively established on the existing record in this litigation,
such that it is in vain for the Estate to make such a demand of
RMMII on the instant issue;
c. the Estate as 50% shareholder objects and does not
concur in the announced intentions of RMMII regarding LRI's entry
2
1457
into the business of mining and selling dolomite for its own
account; and
d. the Estate, so as to protect its interests in LRI, and
to protect LRI itself, has brought this action in its derivative
capacity, because, as is required by Pa.R.Civ.Proc. 1506(a) (3) (ii),
there is a strong prima facie case in favor of the claim asserted
herein, and without this action, serious harm and injustice will
result, as is further averred below.
4. On September 27, 1991, at the regularly scheduled "Friday
Morning Meeting" of Mr. carpey and Mr. Lake held pursuant to this
Court's Order of April 11, 1989, the former announced that LRI was
about to commence the mining of dolomite for its own account, and
that LRI was in fact intending also to sell said dolomite to third
parties.
5. The record in this litigation has clearly established that
since the Prescott Quarry was acquired in December 1985, it was
intended that LRI would only engage in the mining and sale of high
calcium products. For example:
(a) In Proposed Findings of Fact submitted to this Court
under date of July 25, 1989, RMMII stated that:
(i) "55. Mumma Sr. 's intention (regarding the
quarry) was to have LRI exploit the hi-cal
reserves for about three years, and then to
cease hi-cal mining at LRI...On LRI's ceasing
hi-cal extraction, Mumma Sr. apparently
foresaw two sources of revenue to LRI. First,
3
:1458
the development of real estate along Route
422.. .Second, a royalty agreement with Elco
for the extraction of dolomite."
(ii) "9. LRI was formed to purchase the
Quarry.. .RMMII and his father intended that
LRI would mine and market hi -cal from the
quarry, and at a later point, develop some of
the land around the quarry..."
(b) In his sworn Complaint at Docket No. 4744 in this court,
RMMII averred under oath that:
"28. After initial removal of exposed
limestone in the winter of 1985-86, Lebanon
Rock had no plans to quarry limestone except
in the Specific Areas, where Lebanon Rock
intended to extract 600,000 tons of limestone.
Any ouarryinq beyond this remained for
discussion bY the shareholders of Lebanon
Rock." (emphasis added)
(c) At a May 25, 1989, LRI Board of Directors meeting, RMMII
stated that:
.....there is no reason for Lebanon Rock not to
continue right on down the line and producing
as much high calcium as they can. As a
director of the corporation I would like to
remind you that you have a fiduciary
responsibility to maximize the profit of the
corporation. The way to do that is to mine
hiah calcium." (emphasis added)
(d) At a June 1, 1989, LRI Board of Directors meeting, RMMII
stated that:
"The future of Lebanon Rock is going to be
that we're going to continue to m1ne all the
high calcium stone that we can, and make as
much money as we can..."
4
1.459
6. Despite these statements, RMMII, prior to announcing his
plans for LRI to now enter into the dolomite business, did not
!
discuss the matter with the Estate as the other 50% s~areholder.
Instead, he acted on his own, and without the Estate's,consent.
7.
This Court's Order of September 7, 1990
i
!
(Vac~ted
,
,
by the
Superior court), rejected RMMII's unilateral suggestidn that LRI
,
get into the dolomite business. Petitioner submits that nothing has
occurred in the interim which should change the Court's position,
nor has the Estate changed its position that it does not agree to
LRI entering the dolomite business.
8. un's entry into the business of mining and selling
dolomite would allow RMMII, through LRI, a corporation in which he
is only a 50% shareholder, to
(a) assume further unilateral and unauthorized control of
LRI despite the continuing objections of the Estate, ~II's equal
shareholder;
(b) jeopardize the continuing viability of LRI as a
separate business enterprise with separate interests at the
Prescott Quarry;
(c) further use LRI for his own personal benefit, in
that, upon information and belief, the Estate believes and
therefore avers that LRI can only enter into the dolomite business
by renting equipment from companies owned and controlled
exclusively by RMMII, which will cause LRI, as RMMII has done on
5
1460
previous occasions, to bankroll with the funds of LRI, RMMII's
acquisition of assets for his other business enterprises.
9. Even if the expressed intentions and agreement of RMMII
that LRI should engage in no new businesses unless approved by the
shareholders is to be ignored, the entry by LRI into any new
business ventures should not be the sole prerogative of RMMII, but
should be something which is unanimously agreed to by the two
persons who meet, pursuant to the Court's Order of April 11, 1989,
each Friday morning for the purpose, as stated by RMMII in his
brief to the superior Court dated June 18, 1990 (page 6) to
"discuss and plan the operational matters involving the quarry."
(emphasis supplied)
10. Additionally, RMMII recognized that LRI should not engage
in any new ventures if the Directors (who are also the
shareholders) disagree, as set forth at N.T. 115 of the hearing of
October 2, 1989:
" Q. Mr. Mumma, how do you think the
disagreements, if you want one thing as director and she
wants another, how do you think that should be resolved?
How do you explain it and she maintains her position and
you maintain your position, how do you think it should be
resolved?
A. I think if that is the case, the issue should
be brought before this Court, . . ."
11. on information and belief, if LRI is caused to enter
into the dolomite business by unilateral action of RMMII, it could
6
1461
involve LRI in anticompetitive practices, since he would be able to
engage in predatory pricing for dolomite in the Lebanon county
market in conjunction with other companies controlled by him which
also sell dolomite products in that geographic area.
12. Given that the Estate owns 50% of LRI, its entry into the
dolomite business, under the control of RMMII, may subject the
Estate to liability because of monopolistic and anticompetitive
practices in the dolomite business, if the conduct of RMMII is
permitted and later imputed to the Estate.
13. RMMII should not on his own put LRI into the dolomite
business over the Estate's clear objection; whether or not there is
any other issue dividing the owners of LRI, RMMII cannot dictate
its future.
14. As was demonstrated at the hearing of september 4, 1990,
wherein RMMII proposed that LRI be allowed to enter the business of
quarrying dolomite, such activity would cause a detrimental
financial impact to LRI, which would adversely impact the Estate as
a 50% shareholder.
15. RMMII does not have the power to unilaterally involve LRI
into the dolomite business; as he admitted in paragraph 16 of his
Answer to Third party complaint filed to No. 4678 Equity 1988, his
job president of the corporation was to "initiate a search for an
7
1462
"
independent manager for Lebanon Rock, Inc., at the quarry
II.
. ,
if any such decisions cannot be made by the unanimous agreement of
the shareholders, then it should be made only by the "independent
manager" which RMMII has failed to obtain for a period in excess of
three years and which failure the Court should correct by
appointment of a custodian.
16. This Court previously held (which holding was adopted by
the superior Court at p.5 of its decision of July 3, 1991) that
"there can be no serious question that Mumma, Sr., and then his
son, RMMII, envisioned that the operation would be managed in such
a fashion that Elco would remove dolomite from the quarry, for its
uses, and LRI would remove high-calcium limestone for its corporate
purposes."
All of the evidence heretofore produced to the Court
clearly supports the conclusion that LRI was not to be in the
business of quarrying or selling dolomite.
17. The Estate's position in this matter will succeed on the
merits, on the simple basis that one equal owner of a corporation
cannot, without the other's consent, dictate the destiny of the
enterprise.
18. Immediate and irreparable injury will result if RMMII's
conduct is not immediately and summarily enjoined.
8
:1463
19. The Estate's right to relief is clear.
20. Failing to grant the Estate the relief it see~s would do
more harm than good, as it would effectively foreclose the Estate
,
from any hope of participating in the affairs of LRI, [and permit
RMMII to act in utter disregard of agreements and <!:ommitments
previously made by him.
WHEREFORE, the Estate prays that:
a) this Court disallow and prohibit, the entry of LRI
into the dolomite business, without the Estate's consent; and
b) the Court award such other relief as it determines to
be just and proper under the circumstances.
Respectfully Submitted,
GOLDBERG, KATZMAN & SHIPMAN, P. C.
By' ~ff~~~n: E"q.
Attorney ID # 198
320E Market Street
Strawberry square
P. O. Box 1268
Harrisburg, PA 17108
(717) 234-4161
Attorneys for Lisa Mumma Morgan,
Barbara McK. Mumma, and The Estate of
Robert M. Mumma, deceased
9
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ROB.I!:RT M. MUMMA
110M S53'
HAA..I..U"O. PA. 17'021
I!X.CUT..'XE.
BAFtIlARA McK. MUMMA
LISA MUMMA MORGAN
September 30, 1991
Hand Deliver
Mr. Robert M. Mumma, II
614 N. Front Street
Harrisburg, PA 17101
Dear Bob:
I was advised on Friday that Mr. Carpey stated that you,
through Lebanon Rock, intend to Quarry dolomite and sell it
pursuant to a contract or series of contracts which Mike
Shenk is attempting to arrange.
As you know full well, and as you youself have stated
under oath, any activities of Lebanon Rock other than the
Quarrying and selling of high-calcium were to be undertaken
only upon agreement of the shareholders.
As you also are well aware, Lisa and I, representing 50%
of the shares, as well as myself representing 50% of the
directors,' are completely against Lebanon Rock Quarrying and
selling dolomite.
If I do not receive written, adequate assurances from
you immediately that the information divulged on Friday was
incorrect, I will instruct our attorneys to bring the matter
before the court as Quickly as possible.
Sincerely,
-kmJ
Barbara McK. Mumma
BMcKM/blm
(C(Q)[Pr
Exhibil "A-'
1465
J., ~14'OO.4/91
ROBERT M. MUMMA, II DERIVATIVELY
ON' BEHALF OF LEBANON ROCK, INC.,
Appellants
v.
ELCO CONCRETE PRODUCTS, INC., THE :
ESTATE OF ROBERT M. MUMMA, C/O
CO-EXECUTORS LISA MUMMA MORGAN AND :
BARBARA MCK. MUMMA, BARBARA MCK.
MUMMA AND HARRY G. LAKE
Jill 8
{fig! .
IN THE SUPERIOR COURT
OF PENNSYLVANIA
NO. 00331 HARRISBURG 1990
Appeal from the Decree May 1, 1990
In the Court of Common Pleas of Dauphin County
civil Division, No. 4744 Equity 1988
ROBERT M. MUMMA, II DERIVATIVELY
ON BEHALF OF LEBANON ROCK, INC.
v.
ELCO CONCRETE PRODUCTS, INC., THE
ESTATE OF ROBERT M. MUMMA, C/O
CO-EXECUTORS LISA MUMMA MORGAN AND
BARBARA MCK. MUMMA, BARBARA MCK.
MUMMA AND HARRY G. LAKE,
Appellants
IN THE SUPERIOR COURT
OF PENNSYLVANIA
NO. 00332 HARRISBURG 1990
Appeal from the Decree May 1, 1990
In the Court of Common Pleas of Dauphin County
civil Division, No. 4744 Equity 1988
LISA MUMMA MORGAN & BARBARA MCK.
MUMMA, EXECUTORS OF THE ESTATE
OF ROBERT M. MUMMA, AS 50%
SHAREHOLDERS OF LEBANON ROCK, INC.
AND LISA MUMMA MORGAN AND BARBARA
MCK. MUMMA, INDIVIDUALLY
v.
ROBERT M. MUMMA II, AND LEBANON
ROCK, INC. AND DOUGLAS GLASSFORD
APPEAL OF: LEBANON ROCK, INC. AND
ROBERT M. MUMMA, II
IN THE SUPERIOR COURT
OF PENNSYLVANIA
NO. 00333 HARRISBURG 1990
:
.
.
Appeal from the Decree May 1, 1990
In the Court of Common Pleas of Dauphin county
civil Division, No. 3210 S. 1988
1466
EXHIBIT D
J. '~140'94/91 -2-
LISA MUMMA MORGAN & BARBARA MCK.
MUMMA, EXECUTORS OF THE ESTATE
OF ROBERT M. MUMMA, AS 50\
SHAREHOLDERS OF LEBANON ROCK, INC.
AND LISA MUMMA MORGAN AND BARBARA
MCK. MUMMA, INDIVIDUALLY,
Appellants
:
IN THE SUPERIOR COURT
OF PENNSYLVANIA
NO. 00334 HARRISBURG 1990
:
.
.
v.
ROBERT M. MUMMA, II AND LEBANON
ROCK, INC. AND DOUGLAS GLASSFORD
:
Appeal from the Decree May 1, 1990
In the Court of Common Pleas of Dauphin County
civil Division, No. 3210 S 1988
LEBANON ROCK, INC. AND ROBERT M.
MUMMA, II,
IN THE SUPERIOR COURT
OF PENNSYLVANIA
Appellants
: NO. 00335 HARRISBURG 1990
v.
ELCO CONCRETE PRODUCTS, INC. AND
BARBARA MCK. MUMMA
.
.
Appeal from the Decree May 1, 1990
In the Court of Common Pleas of Dauphin County
civil Division, No. 4722 Equity
.
.
IN THE SUPERIOR COURT
OF PENNSYLVANIA
LEBANON ROCK, INC.
v.
: NO. 00372 HARRISBURG 1990
ELCO CONCRETE PRODUCTS, INC.
v.
ROBERT M. MUMMA, II
APPEAL OF: LEBANON ROCK, INC. AND :
ROBERT M. MUMMA, II
Appeal from the Decree May 1, 1990
In the Court of Common Pleas of Dauphin county
Civil Division, No. 4678 Equity
:1467
J. ',Al'4el,04/91 -3-
LEBANON ROCK, INC.
IN THE SUPERIOR COURT
OF PENNSYLVANIA
v.
: NO. 00373 HARRISBURG 1990
ELCO CONCRETE PRODUCTS, INC.
v.
:
ROBERT M. MUMMA, II
APPEAL OF: ELCO CONCRETE PRODUCTS,:
INC.
Appeal from the Decree May 1, 1990
In the Court of Common Pleas of Dauphin County
civil Division, No. 4678 Equity
ROBERT M. MUMMA, II DERIVATIVELY
ON BEHALF OF LEBANON ROCK, INC.,
Appellant
IN THE SUPERIOR COURT
OF PENNSYLVANIA
NO. 00637 HARRISBURG 1990
v.
ELCO CONCRETE PRODUCTS, INC., THE
ESTATE OF ROBERT M. MUMMA, C/O
CO-EXECUTORS LISA MUMMA MORGAN AND
BARBARA MCK. MUMMA, BARBARA MCK.
MUMMA AND HARRY G. LAKE
Appeal from the Order Entered september 7, 1990
In the Court of Common Pleas of Dauphin county
civil Division, No. 4744 Equity 1988
Before: JOHNSON, HUDOCK and CERCONE, JJ.
MEMORANDUM:
FILED: JULY 3, 1991
This is an appeal from a final decree of the Court of Cornmon
Pleas of Dauphin County w1 ,.
-
n _ '~~ar to run the two
corporations involved in this appeal. This appeal represents the
consolidated appeals and cross-appeals of the individual parties.
For the reasons stated below we vacate the final decre~,~f"Y 1,
1990 and the subsequent order of september 7, 1990. We further
remand for proceedings consistent with this memorandum.
Once again this court is revisited by the litigious Mumma
family of Central Pennsylvania. The Mumma family commercial
1468
;r.. .{\140.<?4/91 -4-
en~erprises, some of which are the center of this genuinely
endless litigation, can be characterized by a series of
interlocking directorates owned by various family members. The
instant action specifically concerns two of these corporations,
Elco Concrete Products, Inc., and Lebanon Rock, Inc., and their
officers, directors and shareholders. Elco il!l"a'~FIl'l.ylv.ania
~~-i7#'.n formed in 1982 by Robert Mumma, Sr. (hereinafter
referred to as "Mumma, Sr."). Mumma, Sr. was the president of
Elco from its formation until his death in 1986.1
The other corporation, Lebanon Rock, Inc. (hereinafter
referred to as "LRI") was formed by Mumma, Sr. in 1985. Mumma,
Sr. was the president of LRI. The stock was held equally between
Mumma, Sr. and his son, Robert Mumma, II (hereinafter referred to
as "RMII"). For purposes of this memorandum, we accept the
following findings of fact by the trial court:
In December 1985, and January of 1986 the
family members directly involved in the
operation of the family'S businesses were
[Mumma, Sr.], Barbara McKim Mumma [hereinafter
referred to as Mrs. M], and RMII. While RMII
had commercial enterprises that he owned in
his own right, perhaps the largest concerns
were held by the family and, without question,
controlled by Mumma, Sr. The control was
maintained by a series of interlocking
corporations, but, again, from the evidence
presented before us, no one seriously contests
that practically, as well as legally, the
1Elco is a wholly owned subsidiary of another Mumma family
corporation, Penney Supply. Mumma, Sr. was the president of
pennsy Supply. Pennsy Supply was a wholly owned SUbsidiary of
another pennsylvania corporation known as Nine Ninety-Nine, Inc.
Mumma, Sr. was president of this company as well. Nine Ninety-
Nine was owned by another corporation, Kim Company. Mumma, Sr.'s
four children also owned stock in that company. Mumma, Sr. was
the president of Kim Company, which was in turn owned by
Pennsylvania Supply Company (a distinct entity from pennsy
Supply). Mumma, Sr. owned 700 shares of this corporation while
the remaining twelve shares were held equally among his four
children. Mumma, Sr. was president of pennsylvania Supply
Company.
1-469
J ~'.AI4()04/91 -5-
guiding patriarchal force in the family was
Mumma, Sr. A bit earlier, in 1982, an
acquisition had been made of Elco Concrete, a
company manufacturing concrete products, whose
plant was adjacent to the quarry site in
Lebanon County which site became important in
December 1985 and thereafter. This company,
Elco, was also controlled by Mumma, Sr. At
the end of 1985, Mumma, Sr. entered into an
agreement to purchase this site, and Mumma,
Sr. had in fact been in touch with [the
owners] for several years in sufficient manner
that [they] knew of his possible interest in
purchasing the quarry operation.
The quarry produced a stone which was
characterized throughout these proceedings by
the parties as high calcium limestone, a
product that could be of value in the Mumma
family's construction enterprises. .
Additionally, the Elco enterprise had crushing
equipment and could use other stone products,
which could be obtained from the quarry site,
in its operation. There appeared, therefore,
to Mumma, Sr., to be an opportunity for a
naturally advantageous commercial partnership
at the quarry site, with the merger under
common ownership of the quarry that produced
and sold its minerals and the concrete
products company, with its need for minerals
and its existing crushing facilities. Thus,
Mumma, Sr. decided to acquire the quarry and
invited his son, RMII, to join in this
enterprise with him. All of this was
accomplished in December of 1985, the new
corporation formed and the sale of the quarry
and its assets completed, and the father and
son were equal shareholders of the new
corporate enterprise, Lebanon Rock, Inc.
There can be no serious question that
Mumma, Sr., and then his son, RMII, envisioned
that the operation would be managed in such a
fashion that Elco would remove dolomite from
the quarry, for its uses, and LRI would remove
high calcium limestone for its corporate
purposes. The matter of payments, between the
corporations, relative to the dolomite removal
is one of the issues in the case, but it
cannot be reasonably disputed that both Mumma,
Sr. and his son contemplated, in December of
1985, that both corporations would participate
in the extraction of minerals from LRI's newly
acquired quarry for their own commercial
purposes.
1.470
~..AI40~4/91 -6-
The operation proceeded in the first half
of 1986 and the evidence was abundant to show
that Mumma, Sr. was the guiding force in the
early operation of Lebanon Rock and the joint
operation at the site of Lebanon Rock and
Elco. From what we learned of the family's
business operations at this site, during the
hearings, one would have expected that, if Mr.
Mumma had lived, he would have continued to be
the manager of these two business operations,
so long as he desirsd to engage in this
activity and was able to do it. Further, one
could certainly have anticipated that, despite
any December 1985 plans for the future, Mumma,
sr. would have managed these commercial
enterprises in such a way, considering the
changing economics of the industry, that the
various commercial needs of each enterprise,
as well as the profit goals of the family,
would be best served. That is, we would have
expected that, if it became commercially
advantageous to produce dolomite and not high
calcium limestone from this site, Mumma, Sr.
may well have accelerated Elco's use of the
quarry and subjugated, for the time, LRI's
quarrying of high calcium limestone.
conversely, if high calcium demand became
acute and that for dolomite fell away, one
could have expected that Mumma, Sr. would have
utilized the manpower he had available from
both corporations, as well as equipment and
manpower available in other family
corporations, to move and process the high
calcium product to the temporary disadvantage
of the production of dolomite. The evidence
clearly established that this type of joint
management, with pooling of resources,
occurred at the beginning of the operation and
appropriate charges and payments were made by
the accounting personnel of the family's
corporations.
Our estimations of what may have been the
management course of these corporations in the
years since 1985 are, however, suspicions
only, as Mumma, Sr. died suddenly on April 12,
1986.
Mumma, Sr.'s widow, Barbara McK. Mumma,
and one of their daughters, Lisa Mumma Morgan,
Esq., (hereafter referred to as Mrs. Morgan),
were appointed Executrices of Mumma, Sr.'s
estate and that estate became and at this
point continues to be, the resting place of
Mumma, Sr.'s 50% shareholder's interest in
Lebanon Rock. RMII is the other equal
shareholder in Lebanon Rock.
1471
J ~',A14Q04/9~ -7-
With the undisputed benevolent manager,
Mumma, Sr., gone, changes in the operation of
the two corporations, Lebanon Rock and Elco,
at the Lebanon quarry site were perhaps
inevitable. By the end of 1997 many changes
had occurred and the absence of Mumma, Sr.'s
patriarchal authoritarian control had, by that
time, rendered the family members involved in
these lawsuits to the point of familial
catastrophe. Some of the family members, RMII
on the one hand and Mrs. M and Mrs. Morgan, on
the other, had become ardent, unrelenting, and
almost savage adversaries. The real reasons
for the total antagonism between the two sides
probably were not all revealed as RMII, Mrs. M
and Mrs. Morgan testified in the proceedings
before us and this premise is perhaps
understandable, human nature being what we
recognize it to be and considering the bare
factual forum of a courtroom. perhaps RMII
presumed, since he was experienced in
quarrying activities and this type of the
family's business operations, that he would
easily assume his father's patriarchal role in
the conduct of these two businesses and was
upset, first by the attempted involvement of
his mother, Mrs. M, in the interests of Elco
and Lebanon Rock at the quarry site, and then,
a bit later, by his younger sister, Mrs.
Morgan. Mrs. Morgan, having given up her
professional association with a Philadelphia
law firm, returned to the area, and became
significantly interested in the conduct of
Elco's business as well as in Lebanon Rock's
affairs, as she was, with her mother, as note,
Co-Executrix of an estate which owned half of
Lebanon Rock. On the other hand, Mrs.'M and
Mrs. Morgan, desiring to exercise interests
they considered legitimate in Lebanon Rock
were offended by RMII's refusal to discuss, in
any significant manner, the operations of
Lebanon Rock and to treat Elco as, in essence,
a trespasser on the quarry site. The existing
rancor led the parties initially to seek
private mediation of their problems and while
that was underway the first civil proceeding
in a common pleas court was instituted. In
the course of the next several years a number
of proceedings were instituted in Lebanon,
Dauphin and CUmberland Counties.
Adjudication, 2/21/90 at ~-6.
1472
J.. ,A14004/91 -8-
Four related actions were consolidated into this action.
4678 EQUITY 1988 was instituted by LRI against E1co for trespass
and wrongful removal of minerals from LRI land. LRI also
instituted the action at 4722 EQUITY 1988 which requested the
court to restrain Elco from further mining of LRI property until
proper Commonwealth permits were obtained. The action at 3210 S
1988 is a derivative suit instituted by the executors of the
estate of Mumma, Sr. to enjoin RMII from running LRI without the
consent of the estate shareholder. This complaint also requested
RMII's removal as director of LRI. Finally, RMII filed 4744
EQUITY 1988 as a derivative action against Elco alleging trespass,
breach of contract and breach of fiduciary duty. Lower Court
Adjudication, 2/16/90 at 7-8.
The lower court held a plethora of hearings regarding various
issues raised in these complaints. The trial judge ultimatel~
i.~ ,~
'_~'i.W,~,,"
',J:,: J,i
issued an adjudication appointing a receiver to operate both Elco
~,"".~.~se period. Moreover, the lower court found
a contract to exist between Elco and LRI allowing Elco to mine
dolomite on a parcel of LRI land. The trial judge characterized
this contract as a series of tentative agreements capable of
modification with the purpose of maximizing economic benefit to
Elco and LRI. Regardless of whether the agreements were fair to
LRI, the trial court found that it was appropriate for the
receiver to specifically perform these agreements. The court
found no legal agreement to exist with regard to Elco's further
exploitation of LRI minerals, but left the resolution of such
issue for the receiver to resolve. Through a subsequent order,
the court allowed Elco to temporarily mine dolomite on other areas
1473
J. A140D4/91 -9-
of LRI land pending the outcome of this litigation, if Elco paid
LRI a royalty of forty cents per ton. The various parties
subsequently appealed to this court raising a total of twenty-one
issues for our consideration.
In his appeal, RMII argues that the contract which the lower
court found between Elco and LRI is unenforceable for a variety of
reasons, including: the statute of frauds, want of consideration,
and lack of proper consent by LRI to enter into the contract.
This contract purports to allow Elco to mine dolomite from LRI
land in an area known as "Sam's Knob." The lower. court found that
Elco was to mine dolomite to uncover high calcium limestone for
LRI's use. If no limestone was found beneath the dolomite, then
Elco would pay LRI for the dolomite. Otherwise, Elco would just
keep the dolomite.
W. eIlflriot pass judgment on the question of whether an
'!JilIJnv.T-'tfil!l~'j'_.lfJ~m "Id. SUff~;.'i"'_fj'" trial
cOllrt has rMJ4t1_~1.r'~t_lt.l'tj~~. M~_~.- for the
E-4l1J11U11_1lf rnLllIII\lL40ct. A contract is enforceable when the
parties reach mutual agreement, exchange consideration and have
outlined the terms of their bargain with sufficient clarity.
Greene v. Oliver Realtv. Inc., 363 Pa. Super. 534, 539, 526 A.2d
1192, 1194 (1987); Burkett v. Allstate Ins. Co., 368 Pa. Super.
600, 608, 534 A.2d 819, 823-24 (1987), vacated on other qrounds,
520 Pa. 94, 552 A.2d 1036 (1988). Furthermore, the agreement is
enforceable where the parties intended to conclude a binding
agreement and the essential terms of the agreement are certain
enough to provide the basis for an appropriate remedy. Greene,
363 Pa. Super. at 539, 526 A.2d at 1194; Burkett, sUDra, 368 Pa.
147,1
J. Al~004/9l -10
.' .,
super. at 608, 534 A.2d at 824. However, if an essential term is
left out of the agreement, the law will not invalidate the
contract but will include a reasonable term. If the parties
include the term but have expressed their intention ambiguously,
the court will not impose a reasonable term and the contract may
fail for indefiniteness. Greene, supra, 363 Pa. Super. at 539,
526 A.2d at 1194. Here, the lower court seems to have concluded
that the agreements at issue here were tentative agreements. Such
a characterization, however, without more, does not suffice to
find a legally enforceable contract.
Moreover, the lower court failed to consider whether the
contract was enforceable under pertinent provisions of the
Pennsylvania Business Corporation Law of 1988. 15 Pa. C.S. i 1101
~ seq. Sections 1728 and 1770 of Title 15 concern the the
propriety of entering into a contract proposed by an interested
shareholder or director. Thus,. if the interested shareholder or
officer benefits from the proposed transaction, either personally
or with regard to another company with which he is involved, these
sections must be satisfied. Here, Mumma, Sr. was the president
of Elco and a fifty percent (50%) shareholder in LRI. The lower
court has not clarified Mumma, Sr.'s official position at LRI to
ascertain whether he was an officer, or merely a shareholder. If
Mumma, Sr. is found to have been an interested director, then the
requirements of section l728(a) must be met. otherwise, it must
be shown that the requirements of section 1770 are met with
respect to interested shareholders.2 We therefore remand for a
more definite statement regarding the validity of the contract and
2We note that Mumma, Sr.'s position of patriarchal authority and
SUbjective intent in authorizing these "tentative agreements" is
1475
J..A14004/91 -11-
.' ..
for findings of fact and conclusions of law on the issue of
whether the LRI properly sanctioned or ratified these
agreements. 3
The next issue raised concerns the appointment of a receiver
for an indefinite period to operate both Elco and LRI to maximize
economic benefit to both corporations. RMII argues that a
receiver is not necessary because if the court should decide that
an enforceable agreement exists, then LRI must honor the agreement
and no receiver is needed.4 The Elco parties argue that a
custodian, rather than a receiver, was proper for LRI only,
irrelevant to this issue. His apathy with regards to corporate
formalities does not excuse compliance therewith.
3This panel commends the lower court's Herculean efforts in its
handling of the instant case. We are cognizant of the difficulty
in coordinating the"thousands of pages of filings and transcripts
in this matter and are reluctant to once again place the lower
court in a position of handling these diametrically opposed
parties. However, our ability to meaningfully review the issues
raised by the parties is seriously hampered by the lower court's
failure to reduce the voluminous record to specific findings of
fact and conclusions of law. Pa.R.civ.p. Rule 1517 (a) (2) and
(3), 42 Pa. C.S.A.; Knaoo v. Knaoo, 267 Pa. Super. 554, 557, 407
A.2d 48, 50 (1979).
We also note with interest that 42 Pa. C.S.A. t 2503 confers
authority upon the trial court to award counsel fees when the
conduct of a litigant constitutes vexatious or obdurate behavior.
42 Pa. C.S.A. t 2503 (7). The lower court record in this case
discloses excessive acrimony and petty litigiousness on the part
of certain parties to this litigation. This conduct, alone, may
be so egregious as to warrant an award of attorney's fees
regardless of whether the underlying claims have merit. See
aenerally Chambers v. Nasco. Inc., 59 U.S.L.W. 4595 (U.S. June 6,
1991) (sanctions upheld against litigant for tactics of delay,
oppression, harassment and massive expenditure in effort to compel
opposing parties into exhausted compliance).
4This panel is unconvinced by RMII's altruistic pledge of
acquiescence to an unfavorable decision of this court. His past
conduct evidences that he will exceed all bounds to force a
favorable result.
1476
J'. :lU40P4/91 -12-
be~ause Elco maintains other business associations besides LRI.
They argue that because LRI is the only company in deadlock, a
custodian is the proper relief for LRI under the Associations
Code, suora.
O~f ir4- -'. -'11'-'11 .....III11a.lll..arllr.- AJHIIlIlit,If!fffti"ll'j'oint
r"!l~ ~ Un! .11_ .n'n.~. . ulln....., ..~ ~ ~i,[,,"',~<Qper. The
appointment of a receiver is within the discretion of the lower
court and will not be reversed absent an abuse of that discretion.
Boaosian v. Foerderer Tract Committee, 264 Pa. Super. 84, 90, 399
A.2d 408, 411 (1979). Receivers may be appointed whenever the
chancellor is convinced the right is free from doubt, the loss
irreparable with no adequate remedy at law, and the relief sought
is necessary. Id. It is also clear however that the appointment
of a receiver for a solvent corporation is a drastic remedy and
should be resorted to only under very limited circumstances.
pennsvlvania Securities Commission v. continental Manufacturina
Co., 465 Pa. 411, 413, 350 A.2d 831, 832 (1976).
The lower court appointed the receiver as a matter of equity
to operate the corporations as Mumma, Sr. had envisioned -- to
maximize the profits of both corporations. The lower court's
legal conclusion is incorrect, however, because the receivership
imposed is too extreme and adequate remedies exist at law, under
the Associations Code, supra, to deal with the dissension among
the parties. Moreover, our exhaustive research has failed to
disclose any authority to appoint a receiver to jointly manage the
affairs of two distinct corporate entities. As the Elco parties
noted, Elco, and for that matter, LRI, do not conduct business
solely with the other company. Thus, the imposition of a receiver
1.4'77
~~!"'F
J'. :!-UO,04/91 -13-
for an indefinite period of time may have the perverse effect of
outwardly demonstrating the corporate officer's inability to
properly run a business, thereby affecting the financial stability
of the corporations.5 Also, there is no evidence of any
deadlock or mismanagement at Elco which would necessitate the
appointment of a receiver. It is incongruous to appoint a
receiver for a corporation not experiencing internal difficulties.
The Associations Code of 1988 provides:
Except to the extent otherwise provided in
this title in cases where a statutory remedy
is provided by this title, the court shall
have the powers of a court of equity or
chancery insofar as those powers relate to the
supervision and control of corporations and
other associations.
15 Pa. C.B.A. t 104. The trial court completely disregarded
statutory remedies available to it to E~sol~_~!heusi_ElacllQc.kat LRI.
Such remedies are found either through the appointment of a
. - -" _.._-~..._------.
---
custodian to manage LRI, or inVOluntary dissolution of LRI. 15
- --- -------..---- '.-------..-.,-..----- -~--------_.._-.-_---_._._--._.,- .. _._~._._-----_..~_._-
Pa. C.S.A. AA 1767, 1981.6 This court cannot decide which is
------
the proper remedy for the deadlock found at LRI. Therefore, if
the lower court cannot properly resolve the deadlock, dissolution
is appropriate.7 15 Pa. C.S.A. A 1981 (3). We therefore remand
5While we are cognizant of the fact that the Mumma family has
likely violated the sanctity of the corporate entity with their
continuing antics, this only evidences their inability to get
along with each other, and not their inability to transact
business with third parties.
6The lower court adjudication does not indicate whether LRI is a
statutory close corporation pursuant to 15 Pa. C.S.A. A 2301. If
it is, the appointment of a provisional director may also be
appropriate. 15 Pa. C.S.A. A 2334.
7RMII has asked for dissolution in the lower court proceedings,
therefore the remedy is properly before the lower court.
14'78
J.' A14<004/91 -14'
. "
on this issue for findings of fact and conclusions of law
consistent with this memorandum.
The final issue we address in this memorandum is whether the
lower court improperly decided certain issues without the
opportunity of the parties to present evidence on the issues.
These issues are:
(1) whether RMII should be removed as director
of LRI; (2) whether RMII is president of LRI; (3) whether RMII's
attorney should be disqualified from this matter; (4) whether LRI
is a proper party to Equity cases 4678 and 4722; (5) whether RMII
is liable to Elco for damages resulting from self-dealing; (6)
whether Elco's mining operations violated the Pennsylvania Noncoal
Surface Mining Conservation and Reclamation Act or the
Pennsylvania Clean Streams Law; (7) whether LRI is entitled to
damages reSUlting from a bank account opened by an employee of
Elco; (8) whether Elco owes damages to LRI for actions of its
directors and employees, and; (9) whether Elco has mined beyond
the limit of the western pit in the quarry which is the subject of
the lower court proceedings. Final Decree, 5/1/90 at 1-2.
On March 7, 1990. the trial court mailed a letter to counsel
for the parties asking them to notify the court of other remaining
matters which still need to be addressed by the court. Appellant
Estate of Mumma, Sr. alleges that the trial court promised the
parties that proceedings on these issues would be scheduled.S
However, in his final decree and without the benefit of any
argument on these issues, the trial judge concluded that none of
the aforementioned issues were meritorious.
Sour exhaustive research has failed to uncover any explicit
promise on the part of the trial court.
14'79
J.'~1400~/91 -15-
Our supreme court's decision in Callahan v. Pennsylvania
state pOlice, is clear on this matter:
adjudicatory action cannot be validly taken by
any tribunal, whether judicial or
administrative, except upon a hearing wherein
each party has opportunity to know of the
claims of his opponent, to hear the evidence
introduced against him, to cross-examine
witnesses, to introduce evidence on his own
behalf, and to make argument.
Callahan v. pennsvlvania state Police, 494 Pa. 461, 465, 431 A.2d
946, 948 (1981). Because the trial court did not afford
appellants and cross-appellants an opportunity to be heard on the
above-referenced issues, the case must be remanded for hearings
consistent with the nature of the claims.
We therefore, vacate the decree ~, final decree, and
order, imposing a receivership on Elco and LRI and awarding Elco
interim rights to mine dolomite: remand for a more definite
statement on the existence of a contract between Elco and LRI:
remand for findings of fact and 'conclusions of law on the issues
of whether LRI properly approved any contract between Elco and LRI
and whether an appropriate remedy is mandated under the
Pennsylvania Associations code of 1988 for the operation of LRI:
and remand for evidentiary hearings on issues not previously
disposed of by the trial court.
The decree ~ entered on February 16, 1990, the final
decree entered on May 1, 1990, and the order entered on September
7, 1990 are vacated. The case is remanded with instrqctions.
Jurisdiction relinquished.
DATED: JULY 3, 1991
JUDGMENT ENTERED
~~1..~ '" ~/.I.
DUCT"! PlOTllOtlO'tAa'C
#- _ J
~*'..
1480
'-.
. '
IN RE:
LITIGATION INVOLVING
IN THE COURT OF COHHON PLEAS
DAUPHIN COUNTY, PENNSYLVANIA
ELCO CONCRETE PRODUCTS, INC.,
LEBANON ROCK, INC.,
ROBERT M. MUMMA, II,
LISA M. MORGAN,
BARBARA McK. MUMMA,
THE ESTATE OF ROBERT M.
MUMMA, et al
NO. 4678 EQUITY
NO. 4722 EQUITY
NO. 3210 S 1988
NO. 4744 EQUITY
MEMORANDUM
A motion to stay proceedings pursuant to Rule of Civil
Procedure 213.1 filed on behalf of Barbara HcK. Mumma and Lisa
M. Morgan, Co-Executrices of the Estate of Robert M. Mumma, is
presently before the Court for disposition.
Robert M. Mumma II, individually, and Robert M. Mumma II
and Gary H. Gilbert, Co-Guardians of the Estates of Susan Mann
Mumma and Marguerite Mann Mumma filed a petition for the
appointment of a temporary fiduciary pursuant to Chapter 43 of
the Probate, Estates and Fiduciaries Code, 20 Pa.C.S.64301 et
seq., with the Orphans' Court Division of the Court of Common
Pleas of Cumberland County.
The petitioners allege that Barbara
McK. Mumma and Lisa M. Morgan as Co-Executrices of the Estate
of Robert M. Mumma. control in their fiduciary capacity, 5,000
shares of common stock or 50% of Lebanon Rock, Inc. The estate
also owns and controls Elco Concrete Products, Inc. The petitioner
outlines the extensive litigation between Lebanon Rock and Elco
in this court and alleges that the Co-Executrices have exercised
their controlling interest in Elco in a manner designed to enhance
its profits and value while undermining the profitability of
Lebanon Rock. The petitioners request that the Orphan,,_~___g?_,::t
Division of the Court of Common Pleas of Cumberland County appoint
Dauphin Deposit Bank and Trust Company and Barbara McClure as
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fiduciaries over the 5,000 shares of Lehanon Rock, Tile. owned
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by the Estate of Robert M. Mumma.
A hearing is scheduled for
January 17, 1992 before President Judge Harold E. Sheely.
On January 6, 1992, a motion to stay proceedings pursuant
to Pennsylvania Rule of Civil Procedure 213.1 was filed on behalf
of the Estate of Robert M. Mumma by Co-Executrices Barbara McK.
Mumma and Lisa M. Morgan.
The petitioners claim that the subject
matter of the hearing scheduled before President Judge Sheely
in Cumberland County is similar to the issues pending before this
Court regarding the Lebanon Rock, Inc. and Elco Concrete Products,
Inc. interrelationship and the management of Lebanon Rock, Inc.
The petitioners cite Rule 213.1 and contend that the ultimate
resolution of the issues pending before this Court will resolve
the issues raised in the petition filed in Cumberland County.
The petitioners request that this Court stay the proceedings in
Cumberland county on the petition for the appointment of a
temporary fiduciary.
Pennsylvania Rule of Civil Procedure 213.1 is entitled
"Coordination of Actions in Different Counties" and states in
pertinent part the following:
"(a) In actions pending in different counties
which involve a common question of law or fact or
which arise from the same transactioll or occurrence,
any party, with notice to all other parties, may file
a motion requesting the court in whicll a complaint
was first filed to order coordination of the actions.
Any party may file an answer to the motion and the
court may hold a hearing.
(b) The court in which the complaint was first
filed may stay the proceedings in any action which is
the subject of the motion.
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(c) In determining whether to order coordination
and which location is appropriate for the coordination
proceedings, the court shall consider, among other
matters:
(1) Whether the common question of fact or
law is predominating and significant to the litigation;
(d) If the court orders that actions shall be
coordinated, it may
(1) Stay any or all of the proceedings in any
fiction subJecl lo lhe order, or
(2) Transfer any or all further proceedings
in the actions to the court or courts in which any
of the actions is pending, or
(3) Make any other appropriate order.~
One of the issues before this Court in the pending litigation
is whether a custodian should be appointed to oversee the entire
operation of Lebanon Rock, Inc. because of the alleged deadlock
in the management of Lebanon Rock, Inc.
The issue pending before
the Cumberland County Court is whether a temporary fiduciary should
be appointed to oversee the 5,000 shares of Lebanon Rock, Inc.
which are presently controlled by the Co-Executrices of the Estate
of Robert M. Mumma.
Although the actions in both courts concern
Lebanon Rock, Inc., the pending issures are not similar. The
decision whether a temporary fiduciary should be appointed to
manage the shares of Lebanon Rock, Inc. owned by the estate will
not affect our decision concerning whether a custodian should
be appointed to manage the entire operation of Lebanon Rock, Inc.
because of the deadlock.
Section 4301 of the Probate, Estates
and Fiduciaries Code provides for the appointment of a temporary
fiduciary where the service of the present fiduciary is not in
the best interests of the estate. 20 P~.C.S.~4301.
We conclude
that the issues pending before this Court and the Cumberland County
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Court are not sufficiently similar to warrant the granting of
the extraordinary relief permitted under Hule of Civil Procedure
213.1.
Furthermore, the petitioners have not followed the procedure
outlined in Rule 213.1. Rule 2l3.l(a) requires that a motion
requesting the court in which the complaint was first filed to
order coordination of the actions.
While a motion for coordination
of the actions is pending, the court may stay the proceedings
in any action which is the subject of the motion.
Pa.R.C.P.
213.1(b). The petitioners did not request that the actions be
coordinated but merely requested the Court to grant the ancillary
relief of staying the Cumberland County action. For these reasons
we hereby enter the following
ORDER
AND NOW, this
Ii
day of January, 1992, the motion to
stay proceedings pursuant to Pa.R.C.P. 213.1 is hereby denied.
..
. .
erbert A. Schaffner, J ge
....,
Distribution:
William C. Costopoulos, Esq., P.O. Box 222, 831 Market Str~et,
Lemoyne, PA 17043
,
~onald M. Katzman, Esq., P.O. Box 1268, Harrisburg, I,'A ;7108
. .
Jon A. Baughman, Esq., Pepper, Hamilton & Sir..he'etz, 3000 L0gan
Square, 18th and Arch Streets, Philadelphia,~PA 19103-2799
John Witherow, Esq., 10 South Market Square, P.O. Box 1181,
Harrisburg, PA 17108
Charles E. Shields, Esq., National Bank Building, 2 West Main
St., Mechanicsburg, PA 17055
Thomas M. Kittredge, Esq., Morgan, Lewis & Bockius, 2000 One Logan
Square, Philadelphia, PA 19103
148,1
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VERIFICATION
We, Barbara McK. Mumma and Lisa Mumma Morgan, state that we are
co-Executrixes of The Estate of Robert M. Mumma and that we have read
the foregoing Answer with New Matter to Petition for the Appointment of
a Temporary Fiduciary and do hereby swear or affirm that the facts set
forth in the foregoing are true and correct to the best of our
knowledge, information and belief. We understand that this
Verification is made subject to the penalties of 18 Pa.C.5. ~4904,
relating to unsworn falsification to aU~2~N_~
Barbara McK. Mumma
;??< CV'V
Dated: J(U; /j~ If? 2.
1.L185
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CERTIFICATE OF SERVICE
I hereby certify that I am this date serving a copy of the
foregoing Answer with New Matter to Petition for the Appointment of
a Temporary Fiduciary upon the person(s) and in the manner
indicated below, which service satisfies the requirements of the
Pennsylvania Rules of civil Procedure, by depositing a copy of same
in the united States Mail, Harrisburg, Pennsylvania, with first-
class postage, prepaid, as follows:
Charles E. Shields, III Esq.
Commonwealth National Bank Bldg.
2 West Main street
Mechanicsburg, PA 17055
William C. costopoulos, Esq.
831 Market Street
Lemoyne, PA 17043
GOLDBERG, KATZMAN & SHIPMAN, P.C.
By: RONA~~~QUIRE
320E Market Street
P. O. Box 1268
Harrisburg, PA 17108-1268
(717) 233-4161
Attorney I.D. #07198
Attorneys for Estate of Robert M.
Mumma, Deceased
Dated: January 15, 1992
RMK!MLM:B:mumma.ans
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