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HomeMy WebLinkAbout03-11-04 JOSEPH D. BRENNER, SR., JOSEPH D. : IN THE COURT OF COMMON PLEAS BRENNER, JR. and MARGARET B. : OF CUMBERLAND COUNTY, BUSHEY, : PENNSYLVANIA Plaintiffs : : ORPHANS' COURT DIVISION V. .' : No. 21-04-087 MANUFACTURERS AND TRADERS : TRUST COMPANY, a New York : Corporation, DAVID C. GORITY, an : Individual, and CURT R. STAUFFER, an : Individual, : Defendants : DEFENDANTS' pRELIMINARY OBJECTIONS ~ ~ AND NOW COME Defendants, Manufacturers and Trad st. (hereinafter "M&T"), David C. Gority ("Gority"), and Curt R. Stauffer ("Stauffer"), and m~ke the following preliminary objections to Plaintiffs' Petition for Issuance of a Citation (the "Petition"), stating in support thereof as follows: I. BACKGROUND 1. This action is, in substance, a surcharge action brought against M&T as co-Trustee of certain trust by certain other co-Trustees. 2. The action was originally filed in the general civil division of this Court on August 22, 2003. However, because this action relates to issues pertaining to trust instruments, and constitutes a surcharge action, this Court held, by Opinion and Order dated January 21, 2004, that the Orphans' Court Division of this Court has exclusive jurisdiction over this action pursuant to 20 Pa. C.S. § 711. The Civil Division thus transferred the same here with leave to file the instant Petition. A true and correct copy of this Opinion and Order are attached hereto as Exhibit "A." 3. Following this Courts Opinion and Order of January 21, 2004, Plaintiffs filed the Petition, which is substantially identical to their previous civil division complaint. 1 SLI 380215vl/66255.037 4. Other than having been filed in the appropriate division of the Court, the Petition includes all the very same deficiencies which were the subject matter of Defendants' previous Preliminary Objections. These deficiencies include demands for a jury trial and for punitive damages, as well as naming as Defendants employees of the institutional fiduciary (M&T) in addition to M&T itself. II. OBJECTIONS A. MOTION TO STRIKE JURY TRIAL DEMAND PURSUANT TO PA. R. CIV. P. 1028(A)(2) FOR FAILURE TO CONFORM TO LAW OR RULE OF COURT. 5. Plaintiffs' Petition is endorsed with a jury trial demand. 6. As specifically found in this Court's January 21, 2004 Opinion and Order, this action may only be pursued in the Orphans' Court division of this Court. See Exhibit "A". 7. Jury trials are available in Orphans' Court matters only in very limited circumstances, as enumerated in Section 777 of the Pennsylvania Estates and Fiduciaries Code. 20 Pa. C.S. § 777. 8. Except with regard to those instances where jury trials are statutorily made available as of right (20 Pa. C.S. § 777(a) and (b)), there is no "right" to a jury trial in Ophan's Court. Instead, conducting such a trial is within the discretion of the Court, and would be advisory in any event. 9. A surcharge action such as that framed by the current Complaint is not within the narrowly enumerated classes as to which a jury is available as of right in Orphans' Court. 10. Even Plaintiffs affirmatively conceded, in prior briefing on this very issue, that they have no entitlement to a jury trial now that the case is in Orphans' Court. 11. As a result, the jury trial "demand" is improper and must be stricken. 2 SLI 380215vl/66255.037 WHEREFORE, Defendants respectfully request that the demand for trial by jury be stricken. B. MOTION TO STRIKE SPECIFIC PUNITIVE DAMAGES CLAIM PURSUANT TO PA. R. CIV. P. 1028(a)(2) FOR FAILURE TO ADHERE TO LAW OR RULE OF COURT. 12. Plaintiffs' Petition purports to state claims for punitive damages. See Complaint, ¶¶ 47, 54. 13. Punitive damages are unavailable in a surcharge action as a matter of law. 14. Even Plaintiffs conceded, in prior briefing on this very issue, that they can cite no binding authority supporting their punitive damages claim. 15. Plaintiffs' demand for relief including punitive damages is improper and unauthorized and must be stricken. WHEREFORE, Defendants respectfully request that the demand for punitive damages be stricken. C. MOTION TO STRIKE DAMAGE CLAIMS PURSUANT TO PA. R. CIV. P. 1028(a)(2) AND 1021(d) FOR FAILURE TO CONFORM TO LAW OR RULE OF COURT. 16. Plaintiffs' Petition seeks particularized damages. See Complaint, ¶¶ 46, 53, 57 and 60. 17. Although the amounts claimed are specifically set forth, there is no indication of the manner in which these purported damages have been calculated. 18. The Rules of Civil Procedure, specifically Pa. R. Civ. P. 1021 (b), state that "any pleading demanding relief for unliquidated damages shall not claim any specific sum." 19. The amount claimed in Plaintiffs' Petition claims a specific sum, yet same is not based upon a clearly discernible, objective and calculable basis. 3 SLI 380215vl/66255.037 20. Even Plaintiffs implicitly conceded, in prior briefing on this very issue, that their Complaint did not identify any basis upon which the damages had been calculated. 21. Similarly, the demand for relief in the Petition is unliquidated and unauthorized, and must be stricken. WHEREFORE, Defendants respectfully request that plaintiffs' specific demand for particularized damages be stricken as failing to adhere to law or rule of court. D. MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM PURSUANT TO PA. R. CIV. P. 1028(A)(4) RE: INDIVIDUAL DEFENDANTS GORITY AND STAUFFER. 22. This is a surcharge action based upon a supposed breach of fiduciary duty by an institutional fiduciary, M&T Bank. 23. The source of M&T's fiduciary duty is a written agreement, specifically a trust instrument. 24. Although Plaintiffs' Petition purports to state a claim against two of the corporate trustees' agents and employees, these individuals were not, themselves, the named fiduciaries in the trust instrument. 25. The named fiduciary was M&T's predecessor in interest, Farmers Trust Company. 26. Surcharge actions must, by definition, be brought against the named fiduciary itself. There is no cause of action against the employees of a fiduciary. 27. The purported basis upon which the individuals are sued is "aiding and abetting" a breach of fiduciary duty. This is not a recognized cause of action. 28. Even assuming such a cause of action existed, a corporation's agents are not directly responsible to a third party for acts taken on behalf of their corporate principal. 4 SL1 380215vl/66255.037 29. Similarly, M&T's agents cannot be responsible for any arguable breach of a fiduciary duty imposed by a contract to which they are not a party 30. The individual Defendants are unnecessary parties and have been improperly joined for purposes of intimidation or harassment. 31. Even Plaintiffs conceded, in prior briefing on this very issue, that there is no express authority for such claim. 32. The Petition is insufficient to state a claim against these individual Defendants, and they should be summarily dismissed from this action. WHEREFORE, Defendants David C. Gority and Curt R. Stauffer respectfully request their dismissal as parties. Dated: March (~ , 2004 STEVENS&LEE By ~~~'~~ Mark D. Bradshaw Attorney I.D. No. 61975 Christopher M. Cicconi Attorney I.D. No. 19331 4750 Lindle Road P.O. Box 11670 Harrisburg, PA 17108-1670 (717) 561-5242 Attorneys for Manufacturers and Traders Trust Company, a New York Corporation, David C. Gority, an Individual, and Curt R. Stauffer, an Individual, Defendants 5 SL1 380215vl/66255.037 EXHIBIT A JOSEPH D. BRENNER, SR, IN THE COURT OF COMMON PLEAS OF JOSEPH D. BRENNER, JR. AND CUMBERLAND COUNTY; PENNSYLVANIA MARGARET B. BUSHEY, PLAINTIFFS V. MANUFACTURERS AND TRADERS TRUST COMPANY a New York Corporation, DAVID C. GORITY, an Individual and CURT R. STAUFFER, an' Individual, "'~'~' DEFENDANTS 03-4125 CIVIL TERM IN RE: DEFENDANTS' PRELIMINARY OBJECTIONS TO PLAINTIFFS' COMPLAINT ORDER OF COURT AND NOW, this ,:~! ~ day of January, 2004, IT IS ORDERED: (1) Plaintiffs' complaint, IS STRICKEN. (2) The action is transferred to the Orphans' Court division. (3) Plaintiffs are granted twenty days to file a petition for the issuance of a citation. Edgar B. Bayley, J. Richard C. Snelbaker, Esquire P.O. Box 318 44 W. Main Street Mechanicsburg, PA 17055 For Plaintiffs 03-4125 CIVIL TERM Mark D. Bradshaw, Esquire P.O. Box 11670 Harrisburg, PA 17108-1670 For Defendants :sal JOSEPH D. BRENNER, SR., IN THE COURT OF COMMON PLEAS OF JOSEPH D. BRENNER, JR. AND CUMBERLAND COUNTY, PENNSYLVANIA MARGARET B. BUSHEY, PLAINTIFFS V, · MANUFACTURERS AND TRADERS TRUST COMPANY a New York Corporation, DAVID C. GORITY, an Individual and CURT R. STAUFFER, an: Individual, DEFENDANTS 03-4125 CIVIL TERM IN RE: DEFENDANTS' PRELIMINARY OBJECTIONS TO PLAINTIFFS' COMPLAINT OPINION AND ORDER OF COURT Bayley, J., January 21, 2004:-- On August 22, 2003, plaintiffs Joseph D. Brenner, Sr., Joseph D. Brenner, Jr. and Margaret B. Bushey, filed this civil complaint against defendants, Manufacturers and Traders Trust Company (M&T), David C. Gority and Curt R. Stauffer. Plaintiffs' aver that Joseph D. Brenner, Jr., and Margaret B. Bushey are two of the four children of Joseph D. Brenner, Sr., and his wife Jane Brenner, deceased. David Gority is vice president and trust officer of M&T. Curt R. Stauffer is assistant vice president and portfolio manager of M&T. In the early 1990's, Brenner Sr. and his wife, 'Jane Brenner, created several trusts for the benefit of their children and grandchildren, the sole asset of the trusts being Amp, Inc. stock which was subsequently converted by acquisition to Tyco International Ltd. stock. In November 1994, Brenner Sr. and Jane Brenner · executed an Irrevocable Agreement of Trust for the benefit of their four children, and 03-4125 CIVIL TERM upon their deaths to their children. Bushey and Brenner Jr. have been co-trustees of the Grandchildren Trust since October 24, 1997. In November, 1994, Jane Brenner executed four trusts for the benefit of Brenner Sr. and the four Brenner children. Since October 24, 1997, M&T has been co-trustee with Brenner Sr. of the Children Trusts. David Gority has been primarily responsible for working with Brenner Jr., Bushey and Brenner Sr. as co-trustees of the Grandchildren Trust and Children Trusts. Beginning in the fall of 2001, Curt Stauffer has assisted Gority with the administration of both trusts. On January 23, 2002, Gority and Stauffer, in the course of their duties as M&T empl~)yees, recommended that the Children Trusts and Grandchildren Trust diversify by liquidating some of the Tyco stock. As co-trustees, plaintiffs agreed to liquidate twenty percent of the' stock. After further discussions between all of the co-trustees, forty percent of the Tyco stock was sold from the Grandchildren Trust during the first half of 2002. No stock was sold from the Children Trusts. In March, 2002, as a result of market events that negatively impacted the market value of Tyco stock, Gority and Stauffer recommended liquidation of the stock in the Children Trusts. Brenner Sr. did not consent. Subsequently, the CEO of Tyco was arrested, causing the stock to sharply drop in value. M&T's employees then recommended to the co-trustees a further diversification of the assets in the trusts. In early June, 2002, Gority and Stauffer met with Brenner Sr. to discuss diversifying the Children Trusts. Brenner Sr. executed an agreement consenting to immediate liquidation of one-third of the Tyco -2- 03-4125 CIVIL TERM stock in the Children Trusts-and to place a stop loss order at nine dollars a share on the remaining stocks. Brenner Jr. and Bushey did not attend that meeting. After obtaining the approval of Bushey and Brenner, Jr. to liquidate the shares and diversify both trusts, Gority and Stauffer implemented the agreed-upon plan for the liquidation of all of the Tyco shares from the Children Trusts and the Grandchildren Trust. On June 12, 2002, as a result of the stop loss order, all remaining shares of Tyco stock were sold from the trusts. As to M&T, plaintiffs allege: (1) the bank had an obligation to deal honestly with its co-trustees, (2) it had an obligation to act in the best interests of the trusts, (3) its "panic decision to liquidate the entirety of the Tyco stock held in the [trusts] on June 12, 2002, was not in the best interest of the beneficiaries, and was a breach of M&T's fiduciary duty to the beneficiaries," and: In light of Brenner Sr.'s failing health and reduced capacity, and pursuant to the agreement reached between Gority and Bushey, M&T had an obligation to take appropriate and necessary measures to protect the assets and beneficiaries of the Children's Trusts, including, inter alia, involving Bushey and/or Brenner Jr. in any substantive decisions regarding the Children's Trusts. M&T breached its fiduciary duties of the Children's Trusts by capitalizing on its co-trustee Brenner Sr.'s reduced physical and mental condition in order to accomplish its unilateral plan to liquidate all Tyco stock held by the trusts. M&T disposed of the entirety of the assets in the Children's Trusts without the informed consent and agreement of its co- trustee. M&T breached its fiduciary duty by failing to include either Bushey or Brenner Jr. in the meeting of June 12, 2002, which was in fact the.most important, most substantive meeting ever held regarding the Children's Trusts. If either Brenner Jr. or Bushey had been present to explain what -3- 03-4125 CIVIL TERM M&T wanted to their father, Brenner Sr. would not have "agreed" to M&T's liquidation plan or signed M&T's documents. As to the Grandchildren Trust, plaintiffs allege: M&T breached its fiduciary duties to the Grandchildren's Trust by misleading and coercing its co-trustee Brenner Jr. and Bushey to accede to its unilateral decision to liquidate all Tyco stock held by the trust. M&T disposed of the entirety of the assets in the Grandchildren's Trust without the informed consent and agreement of its co-trustees. As to Gority and Stauffer, plaintiffs allege that they "aided and abetted M&T's breach of fiduciary duty with respect to the [trusts]." Plaintiffs seek the following damages: (1) $764,573 against M&T for alleged breach of its fiduciary duty as co-trustee of the Children Trusts, (2) $199,605 against M&T for alleged breach of its fiduciary duty as co-trustee of the Grandchildren Trust, (3) $764,573 against Godty and Stauffer for allegedly aiding and abetting M&T's breach of fiduciary duty in regard to the Children Trusts, and (4) $199,605 against Gority and Stauffer for allegedly aiding and abetting M&T's breach of fiduciary duty in regard to the Grandchildren Trust. Plaintiffs seek punitive damages against M&T for allegedly acting "with intent or reckless indifference." Plaintiffs demand a jury trial. Defendants filed preliminary objections to the complaint which were briefed and argued on December 3, 2003. They maintain that the causes of action in the civil division involving the administration of trust investments constitutes an action for a surcharge over which the Orphans' Court division has exclusive jurisdiction pursuant to 20 Pa.C.S. § 711. Section 711, titled Mandatory exercise of jurisdiction through orphans' court division in general, provides: -4- 03-4125 CIVIL TERM Except as provided in section 712 (relating to nonmandatory exercise of jurisdiction through the orphan's court division) and section 713 (relating to special provisions for Philadelphia County), the jurisdiction of the court of common pleas over the following shall be exercised through its orphans' court division:... (3) Inter vivos trusts.raThe administration and distribution of the real and personal property of inter vivos trusts, and the reformation of setting aside of any such trusts, whether created before or after the effective date of this chapter, except any inter vivos trust jurisdiction of which was acquired by the court of common pleas prior to January 1, 1969 unless the president judge of such court orders the jurisdiction of the trust to be exercised through the orphans' court division. "Inter vivos trust" means an express trust other than a trust created by a will, taking effect during the lifetime or at or after the death of the settlor. (Emphasis added.) Section 712, tiffed Nonmandatory exercise of jurisdiction'through orphans' court division, provides that: "The jurisdiction of the court of common pleas over the following may be exercised through either its orphans' court division or appropriate division," to include "Title to real estate," "Guardian of person," and: (3) Other matters.--The disposition of any case where there are substantial questions concerning matters enumerated in section 711 and also matters not enumerated in that section. (Emphasis added.) Plaintiffs' cite Baskin & Sears v. Edward J. Boyle Company, 506 Pa. 62 (1984), in which the will of Edward J. Boyle, Jr., was probated in the Orphans' Court Division of Allegheny County. It provided, inter alia, for a bequest to the decedent's estate which would qualify for the maximum marital deduction to Pittsburgh National Bank as trustee Of a revocable life insurance trust. Exceptions by the trust beneficiary were filed to the executor's First and Final Account and to the trustee's First and Partial -5- 03-4125 CIVIL TERM Account. Ensuing litigation was resolved by a family settlement agreement. The Orphans' Court then confirmed the executor's account and entered a final distribution. A subsequent complaint filed in the civil division alleged negligent estate planning and administration, unfair trade practices, malpractice fraud, and intentional infliction of emotional distress. The Supreme Court concluded that the complaint was only collaterally related to the administration and distribution of the decedent's estate and the revocable life insurance trust. The Court held: As such, the action does not fall within the orphans' court's mandatory exercise of jurisdiction as set forth in that section [711]. Thus, the claims proceeded in the civil division under the non-mandatory provisions of Section 712. Unlike the complaint in Baskin, the crux of plaintiffs' complaint is that M&T, as trustee, through its employees Gority and Stauffer, breached fiduciary duties while administering the inter vivos Children Trusts and Grandchildren Trust which resulted in a pecuniary loss to the trusts. In Homer v. First Pennsylvania Banking and Trust Company, 412 Pa. 72 (1963), the children of a life tenant in a testamentary trust brought an action in assumpsit against the trustee in the civil division of Montgomery County seeking damages on the basis that: (1) in an action in the Orphans' Court of Philadelphia County the trustee had improperly employed an attorney with a conflict of interest, (2) the trustee's attorney mislead the Orphans' Court to produce an adjudication and a final decree that the Supreme Court of Pennsylvania determined was erroneous, and (3) the trustee was grossly negligent and careless in the -6- 03-4125 CIVIL TERM administration of the trust and had neglected and failed to properly defend and protect the interests of the plaintiffs. The Supreme Court of Pennsylvania construed the suit as an action for a surcharge of the fiduciary, and held that the claim was within the jurisdiction of the Orphans' Court division. Likewise, in the case sub judice, plaintiffs are seeking to surcharge defendants which is directly, not collaterally, related to their administration of the inter vivos trusts, and falls under the mandatory jurisdiction requirement of Section 711(3). See also, Pew Trusts, 14 Fiduciary Reporter. 2d 393 (Montgomery County 1994). Accordingly, the causes of action lie within the Orphans' Court division. Plaintiffs further argue that this court has jurisdiction under Section 712(3) because their claim against Gority and Stauffer for aiding and abetting M&T's breach of fiduciary duty constitutes a question not enumerated in Section 711(3). As pleaded however, the claim against the co-trustee M&T rests on the actions of its employees Gority and Stauffer in the course of their administration of the inter vivos trusts for the bank. The allegations against the employees are directly related to the administration of the inter vivos trusts. Therefore, there is no substantial question involving any matter not enumerated in Section 711(3). Defendants' other preliminary objections to plaintiffs' complaint maintain that: (1) the demand for a jury trial should be stricken, (2) the claim for punitive damages should be stricken, (3) the demand for particularized compensatory damages should be stricken, and (4) the claims against David C. Gority and Curt R. Stauffer should be -7- 03-4125 CIVIL TERM dismissed. We need not address these objections. In In re Estate of Freedman, 307 Pa. Super. 413 (1982), the beneficiaries of the Freedman trust filed a complaint in assumpsit and trespass in the civil division of Allegheny County naming Equibank N.A. as defendant. The assets of the Freedman Estate had been placed in a common trust established by Equibank's predecessor. Plaintiffs, seeking damages, alleged inter alia, that the trustee, Equibank, mismanaged the common trust fund resulting in a substantial depletion of the assets. Equibank filed preliminary objections maintaining that the Orphans' Court division had jurisdiction over the action. The court transferred the action to the Orphans' Court. Equibank then filed preliminary objections in the Orphans' Court raising, inter alia, that plaintiff had to file a petition for a citation. Plaintiffs countered with a petition for remand to the civil division. The Court struck the complaint allowing twenty days for appellants to proceed by petition and citation in the Orphans' Court. On appeal, the Superior Court of Pennsylvania, citing Horner, supra, held that: the lower court correctly found that appellants' case should be heard in the Orphans' Court as that court has exclusive jurisdiction over both testamentary and inter vivos trusts and therefore over an action to surcharge a trustee of such a trust. The Court further stated that, "The legislature has mandated that such proceedings in Orphans' Court be commenced by petition for issuance of a citation. 20 Pa.C.S. § 761." The order of the Orphans' Court was affirmed and plaintiffs were granted time ~ Section 761 provides that, "All applications to the orphans' court division shall be by petition..." -8- 03-4125 CIVIL TERM to file a petition for the issuance of a citation. Likewise, in the present case, we will strike plaintiffs' complaint, transfer the action to the Orphans' Court division, and grant plaintiffs time to file a petition. It is the allegations in that petition, not the within complaint, that will form the basis of plaintiffs' claims. ORDER OF COURT AND NOW, this 4:~/~day of January, 2004, IT IS ORDERED: (1) Plaintiffs' complaint, IS STRICKEN. (2) The action is transferred to the Orphans' Court division. (3) Plaintiffs are granted twenty days to file a petition for the issuance of a citation. Edgar B. Bayley, J. Richard C. Snelbaker, Esquire P.O. Box 318 44 W. Main Street Mechanicsburg, PA 17055 For Plaintiffs Mark D. Bradshaw, Esquire P.O. Box 11670 Harrisburg, PA 17108-1670 For Defendants :sal -9- JOSEPH D. BRENNER, SR., JOSEPH D. : IN THE COURT OF COMMON PLEAS BRENNER, JR. and MARGARET B. : OF CUMBERLAND COUNTY, BUSHEY, : PENNSYLVANIA Plaintiffs : : ORPHANS' COURT DIVISION V. .. : No. 21-04-087 MANUFACTURERS AND TRADERS : TRUST COMPANY, a New York : Corporation, DAVID C. GORITY, an : Individual, and CURT R. STAUFFER, an : Individual, : Defendants : CERTIFICATE OF SERVICE I, MARK D. BRADSHAW, ESQUIRE, certify that on this date, I served a certified true and correct copy of the foregoing Defendants' Preliminary Objections upon the following counsel of record, by depositing the same in the United States mail, postage prepaid, addressed as follows: Keith O. Brenneman, Esquire Snelbaker, Brenneman & Spare, P.C. 44 West Main Street P.O. Box 318 Mechanicsburg, PA 17055-6249 William F. Martson, Esquire Tonkon Torp, LLP 1600 Pioneer Tower 888 S.W. Fifth Avenue Portland, OR 97204-2099 Date: March ~., 2004 SL1 380215vl/66255.037