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HomeMy WebLinkAbout11-20-09n.a ~: Q 'O ~ _ _^.i -~ '_~ , '.-~-~ ~~ c ;. .::~: - :::-- IN RE: ESTATE OF : IN THE COURT OF COMMQ,l~-+'PLEA~'OF LOTTIE IVY DIXON, :CUMBERLAND COUNTY, PENNSY~ANIA ~~~ Deceased :ORPHANS' COURT DIVISION N0.21-07-0686 IN RE: ESTATE OF : IN THE COURT OF COMMON PLEAS OF GEORGE F. DIXON, JR., :CUMBERLAND COUNTY, PENNSYLVANIA Deceased :ORPHANS' COURT DIVISION QTIP -Trust : N0.21- 1994-0754 AUDITOR'S REPORT ON DISCOVERY ISSUES The parties in these consolidated matters are Richard E. Dixon, George F. Dixon, III (hereinafter "the brothers"), and Manufacturers and Traders Trust Company (hereinafter ``the Bank"), Trustees of the George F. Dixon, Jr. QTIP Trust. The brothers are objectors to the First Intermediate Accounting of Marshall L. Dixon (hereinafter "Marshall"), Executor of the Estate of Lottie Ivy Dixon. The brothers, as beneficiaries of the QTIP Trust are also objectors to the First and Final Account of the Bank as Trustee of the QTIP Trust. Marshall L. Dixon, individually and in his capacity as Executor of the Estate of Lottie Ivy Dixon, is an objector to the First and Final Account and Statement of Proposed Distribution of the Bank as Trustee of the QTIP Trust. The Bank is also a parry as institutional Co-Trustee of the QTIP Trust. On June 17, 2009, the auditor's directive for scheduling was endorsed as an order WAYNE F. SHADE Attorney at LaH 53 West Pomfret Street Carlisle. Pennsylvania 17013 of court. By August 21, 2009, counsel for the Bank determined that they had an unspecified conflict of interest and would need to withdraw from the case. With the entry of Stevens & Lee into the case on behalf of the Bank, the parties agreed to extend each deadline in the scheduling order by thirty days. The total assets in the QTIP Trust and the Estate of Lottie Ivy Dixon, were in excess of $12,000,000. For many years prior to Lottie's death on June 28, 2007, Marshall lived with Lottie, who was his mother. Marshall was never an agent for Lottie under a financial power of attorney. From an unspecified date in 2003, Lottie made Marshall a joint owner, with her, of a checking account at M&T Bank. Marshall and Lottie continued in joint ownership of that account until Louie's death. The brothers do not suggest that they will be able to prove that Lottie was subject to incapacity or undue influence during her lifetime. However, the brothers, who are also sons of Lottie, question dozens of checks in the total amount of approximately $220,000 that were drawn against that account to pay ~ various credit card statements or otherwise either to or for the benefit of Marshall. On September 23, 2009, the brothers took the deposition of Marshall. During the deposition, Marshall testified that some of the payments were for his mother's expenses, some were gifts to him and some were in reimbursement for items that he had purchased for his mother. He was unable to specify the extent to which any given check was a gift or a reimbursement or a combination of both. WAYNE F. SHADI Artomev at Law 53 West Pomfret Stree, Carlisle, Pennsylvania 17013 -2- Henry Rhoads, Esquire, was counsel for Lottie with respect to her estate planning. In August of 2009, the brothers first received a copy of a memorandum that was written by Attorney Rhoads on December 15, 2003, to his file. The memorandum stated that, on December 10 (presumably 2003) when Attorney Rhoads was at Lottie's residence, Lottie showed him a statement from Richard Purcell Associates indicating a balance of about $500,000. The memorandum also made reference to a separate account that was quite small. The references to the accounts in question are to stock brokerage accounts. At her date of death, Lottie had a small brokerage account, but she did not have another brokerage account. The account that she had did not contain anything close to $500,000. At Marshall's deposition, he was unable to reconcile the statement of Attorney Rhoads with Lottie's holdings at her date of death. The brothers apparently believe that approximately $500,000 of Lottie's equities were transferred to Marshall during Lottie's lifetime. Counsel for Marshall suggest that Attorney Rhoads was actually looking at Marshall's account that had a balance of about $500,000 at that time. On October 9, 2009, the brothers filed a Motion to Extend the Discovery Deadline WAVNe F. SHADE Attomev at Law 53 West Pomfret Street Carlisle, Pennsvlvani~t 17011 beyond the agreed September 30, 2009, to enable them to further investigate Marshall"s finances. The asserted reason for their request was that the deposition of Marshall revealed that his answers to the interrogatories of the brothers were not complete. On October 15, 2009, your Honorable Court, in the person of the Honorable J. Wesley Oler, -3- Jr., J., issued a Rule to Show Cause why the requested extension of the discovery deadline should not be granted and referred the question to the auditor for a brief interim report and recommended order. A discovery conference was held on October 11, 2009. At a discovery conference on November 12, 2009, the brothers' discovery requests were specified as requests for copies of credit card statements of Marshall for accounts where bills were paid by Lottie from 2001 through her date of death, requests for information as to whether or not various credit cards were accounts of Marshall or his related business entities and requests for copies of Marshall's brokerage account statements from January 1, 2003, through the date of death of Lottie. The brothers suggested that the purpose of the requests concerning credit card payments by Lottie or other payments by Lottie to or for the benefit of Marshall was to enable the brothers to determine the extent to which the various payments were gifts to Marshall or reimbursements to him for items that he had purchased for Lottie. The brothers suggested that the purpose of the request concerning Marshall's brokerage account statements was to determine whether he had transferred assets from Lottie to his accounts. The estate of Lottie maintains the amounts of payments to or for the benefit of WAYNF F. SHADI Attorney at Law 53 West Pumfret Stree Carlisle. I'ennsylvani: I ;~O l s Marshall are irrelevant where Marshall was a joint owner of the checking account from which the payments were made. The brothers contend that, to the extent that the -4- payments were gifts to Marshall, the cumulative amounts of the gifts are relevant to allocation of death taxes among the beneficiaries. Even assuming that the cumulative amount of the gifts to Marshall is relevant to death tax allocation, it would be suggested that Marshall can be asked at the hearing, as to each disbursement from the jointly owned checking account, whether it represented a gift to him or an expense of his mother or a reimbursement of an expense that he paid for his mother or soiree combination thereof. If Marshall would be unable to specify whether a disbursement represented a gift to him, the brothers would seem to be entitled to an adverse inference that it was a gift to him where he was a joint owner of the checking account from which the payments were made. As far as the brokerage account issue is concerned, it is recommended that WAYNE F. SHADI Attorney at Lays 53 West Pomfret Stree Carlisle, P~ennsvlvani; 1;013 Marshall he required to disclose his brokerage account statements from January 1, 2003, to the date of death of Lottie. However, there does not appear to be an immediate need to extend the discovery deadline to implement that recommendation. Apre-hearing conference is scheduled for December 9, 2009. Hearings are scheduled for December 16, 17, and 18, 2009. It is recommended that, if Marshall is unable to disclose the brokerage statements by December 3, 2009, request of the brothers for an extension of the discovery deadline be reconsidered at the pre-hearing conference. -5- Therefore, the auditor recommends that discovery not be extended at this time. A proposed order is attached. Date: November 20, 2009 Respectfully submitted, G; Wayne .Shade, Esquire, Auditor WAYNE F, SHADE Attorney at Law 53 West Pomfret Street Carlisle, Pennsylvania (7013 -6-