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HomeMy WebLinkAbout10-31-11 (2)1N THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA In re: ) Orphans Court Division Oii OCT 31 ~ 01 'i 15 Estate of Robert M. Mumma, ) Number 21-86-398 Deceased ) ~ o .~. POST-HEARING ~~ARBARA M. MUMMA ~~~ '~ ,~ IN SUPPORT OF OBJECTIONS FILED BY BARBARA M. MUMMA T0,=~1~l~UI~S ~- `T~ 9F THE RESIDUARY TRUST AND MARITAL TR 1sT FILED BY LISA-6t~~DRG.~-N ; ':' ~ -~ .':~ Pursuant m the schedule directing the filing of pmt-hearing briefs in thi~tter on or bey. ~ ~~ ~ -~, fore October 31, 2011, Barbara M. Mumma hereby files said Post-Hearing Brief In Support of her Objections to the Accounts of the Residuary Trust and Marital Trust Filed By Lisa M. Mor- gan in the abovareferencxd matter. The Accounts in question were filed September 10, 2010 and are accountings for the period January 1, 2004 to July 17, 2010. Objections were previously filed to the Accounts filed for the period 1986 thmugh December 31, 2003, and I filed my post- hearing brief in support of my objections to those accounts on October 8, 2010. No accounts have been filed for the period following July 17, 2010, which was the date of my mother's death. In or~r to truly understand the pattern of misconduct and breaches of fiduciary duty in which Lisa Morgan and, before her death, my mother, Barbara McK. Mumma, engaged, it is ne- cessary to recognize that we now have a piece of information which we did not have during the previous hearings. We have my mother's will dated Apri128, 2003. By her will, Barbara McK. Mumma left the vast majority of her estate to Lisa Morgan and her children. Under the law, if this was her intent, she was allowed to do that. What she was N T allowed to do, however, was to ~nspu+e with her daughter Lisa for years to manipulate the assets, liabilities and expenses of the trusRs created by 1ViY FATIiER'3 WII.L so that, together ~P~~1 they could continue the pattern of over-valuing the marital trust which began virtually from the outset of the administration of the estate. ~ My father's intent is clear and is expressed unequivocally in his will: As to the residuary trust: Upon the death of my said wife, the principal of this trust, as it is then consti- tuted, or, if my wife does not survive me, upon my death, my residuary estate, shall be paid over by my surviving trustce or by my successor Exectttior, as the case may be, unto my children, ROBERT M. MUMMA, II, BARBARA M. McCLURE, LINDA M. BOTH AND LISA M. MUMMA, share and_ r I per stirpes and not per capita (Father's Will, $ Eighth, ~ 2xemphasis added). As to the marital trust: Upon the death of my said wife, the principal of this Trust, as it is then constituted, shall be paid over by my surviving trustce unto my children, ROBERT M. MUMMA, II, BARBARA M. McCLURE, LINDA M. BOTH AND LISA M. MUMMA free of this Trust, share and share i~,~ per stirpes and not per capita (Father's Will, § Seventh, ~ Sxemphasis added). ~ My brief in support of objcctions to the original accounts through December 31, 2003 was filed October 8, 2010 and I incorporate those objections and that brief here, rather than repeating the objections and arguments. I will refer to those issues only as necessary to reference my ob- jections to the accounts filed for the period January 1, 2004 -July 17, 2010. 2 Despite Mr. O'Connor's unsupported claims at the hearing (Tr. pp. 18741876) there is noth- ing at all in the will which provides that undistributed income remaining in the Marital Trust at the time of my mother's death is somehow supposed to be treated as part of my mother's estate, and not a Trust asset. Neither Lisa Morgan nor her attorneys have provided any support for the theory that undistributed income remaining in a Trust at the time of death is somehow to be treated as if it really had been d/st~Ibuted. See 20 Pa. C.S. § 3543(d) (applicable during the pe- riod of estate administration). Moreover, it is obvious that the purpose of the Marital Trust was W "provide for her support, health, welfare, maintenance of comfort, to maintain for her a stan- dard of living which she has during our married life enjoyed ... "(Father's Will, § Seventh, ~ 3). My father's intent clearly was ,~IQ~ to provide after my mother's death for the residue of the Marital Trust to benefit only one of his children to the exclusion of the other three. I respectfully submit that it is to be treated as any other asset of the Marital or Residuary Trust existing at that time, and should be distributed to the four beneficiaries -share and share alike. -2- e A review of the Accounts filed September 10, 2010 entitled "Account of the Marital Tn~st Under the Will of Robert M. Mumma, Deceased" and "Ac;courn of the Residual Trust Un- der the Will of Robert M. Mumma, Deceased" demonstrates that, over the period January 1, 2004 through July 17, 2010, the Trustees improperly allocated expenses between the Marital Trust and the Residuary Trust, Improperly allocated expenses between income and principal, in- chiding axounting and legal fees, improperly allocated income distributions as principal distri- butions and cominied to improperly calculate the S% withdrawal right for distributions from the Marital Trust to Barbara McK. Mumma. Moreover, I respectfully submit that the balance of the trust assets ruining in the Ma- rital Trust and Residuary Trust, regardless of whether the Trustee has attempted to characterize them as principal or income, is properly distributable to the reuinder beneficiaries, as intended by mY ~ "~ and share alike," and is not properly distributable to the estate of Barbara MeK. Mumma. To the extent that the remaining Trustee, Lisa Morgan, attempts to argue that any portion of the remaining assets of either of the trusts is somehow distributable to the Estate of Barbera McK. Monona, as to which Lisa Morgan is the principal beneficiary, it is clear that Ms. Morgan has an undeniable and in+econcilable conflict of interest and must not be allowed to violate her fiduciary duty of impartiality and fidelity to ~jj of the beneficiaries here. Aroument I. UNDER ESTABLISHED PENNSYLVANIA LAW, TRUSTEES HAVE A FIDU- CIARY DUTY TO ACT SOLELY IN THE INTERESTS OF THE BENEFICIA- RIES AND TO ACT FAIRLY AND IMPARTIALLY WITH RESPECT TO ALL OF THE BENEFICIARIES WITHOUT FAVORITISM TOWARD ONE OF THE BENEFICIIARIES TO THE DETRIMENT OF THE OTHERS. Under Pennsylvania statutes, "A tnistee shall administer the trust solely in the interests of the beneficiaries." 20 Pa. C.S. § 7772(a). SBB, e.~, Re.~tatement ('T'hird) of Trusts, § 78(1 ~2007)("I?xcxpt as otherwise provided in the teens of the trust, a trustee has a duty to admi- -3- In my post-hearing brief filed October 8, 2010, I addressee! three specific areas of objec- lion to the Accounts filed for the period prior to December 31, 20033: I. The Co-Executrixes Misinterpreted the Will and Overfunded the Marital Tn~st to the Detrlmetrt of the Beneficiaries of the Residuary Trust; II. The Co-Executrixes and Co-Trustces Mismanaged and Caused to Remain Unpro- ductive aNumber of Trust Assets Throughout the More than Twenty Years that They have Served; and III. The Co-Executrixes and Co-Trustces Breached Their Fiduciary Duties to the Be- neficiaries Other Than Themselves by Failing to Provide Adequate and Timely Information and Reports and by Administering the Trusts and the Estate in a Manner Which They Knew Full Well Would Exacerbate Family Friction and Dis- cord. (October 8, 2010 Post-Hearing Brief, pp. 6-14). I will not repeat those arguments here4, except to state as follows: To the extent that the Marital Estate was substantially overvalued from the beginning, that overvaluation continued to permit my mother to take excessive 5% distributions throughout the period 2004-2010. Moreover, the mismanaged and unproductive assets which I identified in my post-hearing brief remained mismanaged and unproductive during the period 2004-2010. In fact, a review of the public record and docket of the Court of Common Pleas of Dauphin County 3 I was duly appointed co-executrix of this estate on September 17, 2010 by the Register of Wills of Cumberland County, Pennsylvania, following my mother's death of July 17, 2010. De- spite my appointment, neither Lisa Morgan nor anyone else affiliated with the administration of the estate has ever contacted me, offered to provide me with any information concernir-g the es- tates, offered to make any information available to me or even responded to any of my inquiries regarding these matters. a In their 117-page post-hearing brief, the attorneys for Lisa Morgan and my mother attempted to justify the admitted "extraordinary length" of their brief by unfairly and disingenuously cha- racterizing my seven objections (See my Response in opposition to their motion to dismiss objeo- tiaras, at p,1), one of which I had withdrawn, as "myriad and nonspecific" and attempting to lump my objections into the same responsive brief with other objections filed to the accounts. See Post-Hearing Brief of Lisa Morgan and Barbara McK. Mumma, at 1, n.l. In this way, it appears that counsel for Lisa and my mother were attempting to diminish any potential focus on the ob- jections which I had filed and their nonresponsive answers. For example, I saw nothing in the 117-page brief which responded to my item No. 3 above. -5- ..P'' ~7 in Lisa Morgan, Individually and in her capac/1y as Executor of the Estate of Barbara McK/m- mie Mumma and Trustee of the Residuary Trust of Robert M. Mumma, Sr. v. Robert M. Mumma, l/, Barbara Mann Mumma and Unda Mann Mumma, and Bobali Corporation (Nominal De/en- dant), Docket No. 2010 CV 11490 EQ, reveals that again in 2011 a tax upset sale was narrowly avoided. In this instance, however, in 2011 Lisa Morgan, Robert Mumma II and myself all even- tually coopen3ted and contributed to get the taxes paid. Had there been more of this cooperation in the past, some of these problems and issues might have bear avoided. Finally, with the single exception of the 13obali tax payment which occurred in 2011, outside the period of the Accounts in question, Lisa Morgan and, during her life, my mother, continued during the period 20042010 to fail and refuse to provide adequate and timely information and reports and by continuing to administer the trusts and the estate in a manner that increases family friction and discords II. THE TRUSTEES HAVE BREACHED THEIR FIDUCIARY DUTY BY IMPRO- PERLY ALLOCATING EXPENSES BETWEEN THE MARITAL AND THE RE- SIDUARY TRUSTS. In this post-hearing brief, I would like to focus on two patterns which appear to clearly exemplify the pattern of improper allocations of expenses betwan the marital and residuary trusts during the period 2004-2010: Acxounting fees and Legal Fees. In each case, the pattern demonstrates that the vast majority of the expenses were charged to the Residuary Trust, thereby continuing to inflate improperly the value of the Marital Trust to the detrimart of the Residuary Trust Even more pernicious to the Residuary Tnist, however, is the fact that instead of having s Evar after the period in question, the lack of information provided has ban an issue. For ex- ample, Lisa sought permission of the Court to make a 5300,000 distribution in 2011, which mat- tes' has been refen~d to Auditor Buckley, and only after a conference call with Mr. Buckley and a request from Mr. Buckley this month to release certain financial information was even some in- formation concerning the financial state of the entities in question released. As I stated in my previous post-hearing brief, the Restatement (Third) of Trusts explains that the purpose of mod- em law in this regard is to "foster a reasonable degree of openness and transparency, as well as acxountability." Restatement (Third) of Trusts, § 82, Commart a (200. That simply has not occurred in the administration of this estate and these trusts. -6- ~'- ~ ~~~ the Marital Trust pay its proper share of the expenses, the co-trustees, during the period 2004 - 2010, crammed the expenses into the Residuary Trust and financed their payment by making loans from the Marital Trust to the Residuary Trust. This also improperly inflated the value of the assets of the Marital Trust (even more since the Marital Trust was charging interest on the loans to the Residuary Truk) star permitted a continuation of excessive 5°Yo withdrawals during the period 2004 - 2010, none of which was disclosed to the beneficiaries of the Trust until the axounts were filed, and which violated the co-trustees' fiduciary duty under Pennsylvania law. A. Accounting Fee Payments to Hadley & Company. Frora the outset, let me emphasize that this objection is to the 8//OCBtion of the payments to Hadley and Company. I am not in a position to claim that his charges were unreasonable or excessive, although it is regrettable that he has generally been unwilling to provide me with any information concerning the estate or the trusts. Mr. Hadley claims that he is not allowed to dis- close the information without the consent of Lisa Morgan. if that is true, then Lisa Morgan has declined to permit Mr. Hadley to disclose the information to the other beneficiaries of the trusts, and this becomes yet arwther example of misconduct by the co-trustees during this period. The Accounts filed for the period 2004-2010 reveal the following: Mr. Hadley received total payments of $229,342.90 from the Trusts. (SBBResiduary Account, pp. 5-17; 40-42; Marital Account, pp. 18-19, 162-164). Mr. Hadley received total payments of $73,935.00 from the Marital Trust, of which SO%, or 536,967.50, was allocated to principal (Marital Account, pp. 18-19), and the other 50%, or 536,967.50 was allocated to income (Marital Account, pp.162-164). However, Mr. Hadley received from the Residuary Trust total payments of $155,407.90 during this same period (Residuary Account, pp. 15-17, 40-42.) Of this amount, 73.4°/., or $117,120.48, was allocated to principal, and only 24.6%, or $38,287.42, was allocated to in- -7- 'p'',1i~ come. Even more telling is the fact that the Residuary Account actually specifies which pay- ments to Hadley 8t Company were for "litigation": The Residuary Account statement concedes that Mr. Hadley was paid $85,116.14 for invoices for "litigation," of which $2,250 was designat- ed "Hi-Spec Inc. litigation and the remainder, $82,866.14, is simply entitled "litigation." It is instructive that, according to the Aceounting for the Marital Trust, there is not a sin- gle recorded payment to Hadley 8t Company during the period 2004-2010 which is identified as for "litigation." (See Marital Account, pp. 18-19, 162-164). Even more curious is the fact that a review of the payment records appearing on pages 15-17 and 40-42 of the Accounting for the Residuary Trust shows that there is a remarkable inconsistency in the allocation of the payments. Whereas the payments for "accounting services" are generally split evenly, with 50'/o being charged to principal and 50% being charged to income (Compere pp. i 5-17 w%th pages 402 of Residuary Trust Account), that is NOT true with respect to the payments identified as for "litiga- tion" beginning with the payment dated 4/7/2009. There, 100% of the payment is allocated to principal of the Residuary Trust There are only two exceptions: the 4/26/2010 payment entitled "litigation" appears to be split, with $5,358.09 being charged to principal (See Residuary Ac- count, p.17) and $5,358.09 charged to income (SBe Residuary Accoutrt, p. 42) and a payment dated 6/21/10 for "Services Rendered 04/24/10 -09119/10 n litigation" has $925.00 charged to principal and $925.00 charged to income. (SeB Residuary Account, pp. 17, 42)6 In short, the allocation of the fees paid to Hadley dt Company during the period is deficient in two : first, it improperly allocated sn excessive percentage of the total to the Residuary Trust, and second, it improperly allocated virtually the entire fee for litigation services to principal of the Residuary Trust. 6 Since the Accounting period covered by the Accounts ended July 17, 2010, it is not clear what those payments for servicxs to be rendered through the following 60 days might have been for. -8- 4+a,1 B. Legal Fees. My objections to the legal foes appearing in the accounts filed for the Marital sud Resid- uary Trusts have three aspects: (1) the legal fees have been misallocated between the Marital Trust and the Residuary Trust to the detriment of the Residuary Trust; (2) the legal fees as a whole are excessive on their face based on the number of firms and attorneys, paralegals and staff involved; and (3) as to the Florida litigation, the legal fees are outrageously excessive bo- cause they are clearly disproportionate to any relief which could be realized, and therefore con- stitute an obvious waste of the assets of ~e trusts. 1. Misallocation of Legal Fees Between Residuary and Marital Trusts. As was the case with the Accounting fees charged by arai paid to Hadley 8t Company, the legal fees charged and paid during the period 2004 - 2010 reflect a gross misallocation to the detriment of the Residuary Trust. During this period, 2004 - 2010, Barbara McK. Mumma con- timed to take a 5% cash withdrawal of principal each year (see Marital Trust Account, p. 23), for a total of X2,274,000.00 during the period in question. (see Marital Trust Acxourrt, p. 23). She also received 51,600,000.00 during this period as distributions of income. (See Marital Trust Account, p. 167, Schedule E-1). The amount which Barbara McK. Mumma, with the assistance and approval of Lisa Morgan, was able to withdraw from the Marital Trust was improperly and artificially inflated not only by the initial massive overvaluing of the assets (as discussed in my previous objections and post-hearing brief), but also by the artifix of allocating a massive percentage of the legal fees to the Residuary Tnast.~ ~ By contrast, the auditor fees to be paid to Joseph Buckley were properly allocated, with 50% allocated to the Residuary Trust (se8 Residuary Account, p. 17; Marital Account, pp. 12-13). This allocation is instructive in its own right, because it demonstrates the misallocation of the other legal fees billed and paid during the same period. -9- The Accounts reveal that, during the period 2004 - 2010, the law firm Marston, Dear dvrff, Williams dt Otto was paid $657,482.07 (see Residuary Account, pp. 17-18; Marital Ac- count, p. 21}. Of this total, $551,4%.31, or 83.9'/0, was charged to the Residuary Tnast and only $105,985.76, or 16.1 %, was charged to the Marital Trust. Similarly, the accounts reveal that, during the period 2004 - 2010, the law firm Morgan Lewis & Bockius received $1,853,078.98 (see Residuary Account, p. 18; Marital Account, PP• 21-22). Of this total, $1,364,351.45, or 73.6%, was charged to the Residuary Trust and only $488,727.53, or 26.49/0, was charged to the Marital Trvst.a The net result of the misallocation of the fees charged and paid had several consequences which benefited Barbara McK. Mumma and Lisa Morgan to the detriment of myself; Linda Mumma and Robert Mumma, II. First, on a purely mathematical basis, the legal fees paid to these two firms alone during the period in question totaled $2,510,561.05. Of this total, only $594,713.29 wera paid by the Marital Trust, thereby improperly inflating the assets remaining in the Marital Trust and permitting Barbara McK. Mumma to continue to take an improperly high S% distribution each year. In addition, the misallocation has improperly reduced the assets of the Residuary Trust, which wilt reduce substantially the amounts available to the four beneficia- ries, not only because of the excessive payments for legal fees made from the Residuary Trust, but also because the excessively high 5% withdrawals from the Marital Trust has reduced the remaining principal assets of the Marital Tnist available for distribution share and share alike to the four beneficiaries. 9 s After I filed my Qbjections, Lisa Morgan, through No Otto, filed a "Supplement under the Ac- count of the Residaal Trust transferring a charge of $12,508.86 which was paid to Morgan Lewis 8t 13ockius in 2005'.. from the Residuary Trust from principal to income, with no explanation. 9 This is a separate manifestation of the overvaluing of the Marital Trust which began prior to 2004, and which was the subject of my earlier objections which are incorporated herein, -10- ~e~ It should be emphasized that, as the Trustee, Lisa Morgan is in an untenable position as to this beach of fiduciary duty. Lisa Morgan is the sole (essentially) beneficiary of her mother's will, executed in 2003. It would strain credulity, to say the least, to suggest that she was unaware of its provisions, particularly since Brady Grcen of Morgan, Lewis 8c Bockius was one of the witnesses to the will. Dieing the period 2004 - 2010, therefore, Lisa Morgan had as irneconcila- bte conflict of interest. To the extent that the excessive distributions to her mother enriched her mother's estate, Lisa was the beneficiary to the detriment of her siblings, because she was only one of four beneficiaries of her father's estate. She could no longer properly continue as co- executrix or co-trustee at that point because she had an irreconcilable conflict of interest. none- theless, she did sa end continued the pattern of misconduct. Perhaps the most egregious manifestation of the misallocation of legal fees between the Residuary Trust and the Marital Trust is found in the legal fees paid to Crary Buchanan for the "Hi-Spec litigation" in Florida. During this period, the accounts reveal that the Trusts were charged by and paid to Crary Buchanan $545,966.03. (See Residuary Account, pp. 12-15; Ma- rital Account, p.18). Of this total, $521, 116.34, or 95.4%, was charged to the Residuary Trust and only $24,849.69, or 4.6%, to the Marital Trust. Moreover, a review of the accounts shows that the allocation makes no sense: The entire invoice for the months dated 8/15/08, 9/15/08 and 11/l~/08 were charged to the Marital Trust. The entire invoice for all other months was charged entirely to the Residuary Trust. (Compare Marital Account, p. 18 with Residuary Account, pp. 12-15). This conflict of inLetest and breach of fiduciary duty is exacerbated if Lisa Morgan now claims that a portipn of the Marital Trust remaining after her mother's death is somehow part of her mother's estate, and does not remain in her father's estate for distribution -share and share alike - to the four siblings. This would mean that Lisa Morgan and her mother conspired to dis- -I1- inherit me, Linda and Bob from the estate our father intended would be shared equally among us to the greatest extent possible, using their positions as co-executrixes and co-t<ustces to do it. There is no question that this violates Pennsylvania law. SBB 20 Pa. C.S. § 7773. This constitutes grounds for removal. SEE 20 Pa. C.S. § 7766(b). It also constitutes grounds for damages in the form of the imposition of a surcharge. 20 Pa. C.S. §§ 7781(a}, 7781(b)(3). 2. Excessive Legal Fees. To be candid, I am not in a position to challenge the hourly rates of major law firms like Morgan Lewis & Bockius and Martton Deardorff Williams & Otto. These are law firms with national reputations whose hourly rates are extremely high. My objection to the legal fees is based on the fact that there is simply no justification for having two different major law firms represent Lisa Morgan and, before her death, my mother, as co-exceutrixes and co-trustees throughout the long litigation of this case. Lisa Morgan claimed that this somehow reduced the total legal fees because the Marston firm's hourly rates were less than those charged by Morgan Lewis 8c Boclaus. (S88 Tr. 1614) However, there was no good reason for having senior partners from two different national law firms both attending and participating in the hearings and pro- ceodings. This duplication of work and effort unreasonably increased the legal fees charged to the estate as a whole and, as set forth above, misallocated the legal fees between the residuary and marital trusts during the period 2004 - 2010. During the period 2004 - 2010, the legal fees to Morgan Lewis 8t Bockius and Marston Deardorff Williams & Otto alone, according to the ac- eountsfiled, total 52,510,561.05.10 10 When the 5545,'966.03 paid during this period to Cn~ry Buchanan is added to the total, the to- tal legal fees paid by the trusts during this period alone excxed 53,000,000.00. A review of the previous accounts kited shows that the attorneys representing the trusts during the administration of this estate and the trusts have received huge fees. Morgan Lewis & Bockitus alone has ro- ceived over 57,000,000.00 in fees. -12- 'l' _ ~1' A Obviously, given the teams of my father's will, at least 75% of the legal fees already paid to Morgan Lewis 8t Boclaus and Marston Deardorff Williams 8c Otto ultimately will have been paid by myself, Linda and Bob, because those are payments made out of the estate and mists. Thus, this duplication of attorneys and effort has a disproportionately high impact on us. Given that the payments have already bean made, the only remedy is a surcharge directed against Lisa and my mother's estate to recoup some of these losses. S8820 Pa. C.S. §§ 7781(b~3). 3. Florida Litigation Fees Excessive. During the period 2004 - 2010 alone, Lisa Morgan and my rather authorized and paid the law firm Crary Buchanan $545,966.03, of which $521,116.34 was paid from the Residuary Tnrst. The amount of those legal fens is absurd and indefensible on its face, given the nature of the dispute and the amount in controversy. Perhaps recognizing this patent absurdity, the third page (un-number+ed) of the Residuary Account corrodes that the list of assets does not include any t+awvery in the Florida litigation, but claims, without support, that the amount "is in excess of $850,000." Since the account on that same page concedes that the procxdings have not been finalized, it is obvious that there will be even more legal fees than have already been revealed. ~ ~ This breach of fiduciary duty with respect to legal fees constitutes a basis for a surcharge under Pennsylvania law. According to the Superior Court of Pennsylvania: "The court must find the following before ordering a surcharge; (1) that the trustee breached a fiduciary duty and (2) that the trustce's breach caused a loss to the trust." /n re Estate of Warden, 2 A.3d 565, 572, (Pa. Super., 2010). SBe, B.y., Estate O1 Perv, 655 A.2d 521, 542 (Pa. Super. 1994). Both conditions " Perhaps one area for cooperation among the four beneficiaries of the Trusts might be for all four of the beneficiaries to agree to discontinue the Florida litigation and not seek recovery of any amounts, in return for a stipulation that all four beneficiaries will agree that doing so does not constitute a breach of duty by Lisa Morgan as Trustee and that no one will seek a surcharge or base an objection on the discontinuance of this expensive and divisive litigation which has already cost far more than it is worth. At the hearing, Lisa Morgan conceded that the dollar amount of the controversy when the case was filed was only $450,000, of which the estate's in- terest was only half, or $225,000. (SeBTr. p. 1601). -13- '~_ t ~~\ are evidenced by the record in this case. My mother and my sister Lisa consciously and inten- tionally breached their fiduciary duty to act impartially with respect to the beneficiaries. The most recent accounts filed demonstrate that this pattern has continued and, with respect to the allocation of charges between the Residuary Trust and the Marital Trust, has caused an even greater loss to the three beneficiaries to the benefit of Lisa Morgan herself. This perhaps is pre- cisely the type of subtle misconduct the Superior Court was considering when it characterized a breach of fiduciary duty as implying "the conscious doing of a wrong because of ...moral obliquity." /n re Estate o/ Warden, 2 A.3d 565, 574 (Pa. Super., 2010), quoting U.S fid. & Guar. Co. v. Feibus~ 1 S F. Supp. 2d 579.585 (M. D. Pa. 1998). III. ANY ISSUES RELATING TO THE DISTRIBUTION OF TRUST ASSETS ARE PREMATURE. The Accounts in question as to which this post-hearing brief has been filed cover the pe- riod January 1, 2x04 through July 17, 2010. It is now October 31, 201 I, and, with the exce~ion of Lisa Morgan and her lawyers arKi accountants, no one, including the Auditor, has any current information as to the assets and liabilities of the trusts, to the current value of the assets or to the payments which have been made for the expenses of the trusts over the last fifteen months. Therefore, it would seem patently premature and likely would be improper for the Auditor to ad- dress issues relating to the eventual distribution of the assets of the trusts at this time. In any event, we have been directed to file this post-hearing brief to address the pending objections to the accounts which actually have been filed, and not to address questions relating to the distribu- tion of assets. However, it should be noted that, with the single exce~ion of the most taint request for approval of a X300,000 distribution which was refereed to the Auditor for consideration by Judge Oler, throughout the history of this estate and trusts, neither. Lisa Morgan nor, during her life- time, my mother, ever requested approval for a distribution. To the contrary, based on their posi- -14- a+ ,~1. lion that through their positions as co-executrixes and co-trustees they controlled majority inter- ests in entities such as MRA I and MRA II and D-E Distribution Corporation, they dirocteci "dis- tributions" from those entities at times that t e felt the need for cash, whether that be personally or for the estate and trusts, so that they could pay, for example, the massive legal fees which I have discussed in detail above. At no time did they ever make a distribution during the period 2001 - 2010 or, for that matter, before that time or after, based on whether I or one of my other siblings, such as my sister Linda, might legitimately also need funds. SBe 20 Pa. C.S. § 7773; /n rB Ho/mes Tnlst, 139 A.2d 548, 552 (Pa. 1958); See 8/so Restatement (Third) of Trusts, § 79 (2007). In my view, this is another manifestation of the "moral obliquity" on the part of my sis- ter Lisa and my mother which has characterized the last 25 years of the history of their miscon- duct with respect th my father's estate and the trusts. SBB lII re Estate of Warden, 2 A.3d 565, 574 (Pa. Super. 2010). In fact, it is that very same position taken by Lisa as executrix aad trustee which -that the Trusts' interests in MRA I, in MRA II and in D-E Distribution Corporation, together with Lisa Morgan's personal holdings, com4titute a majority interest in those entities and therefore al- lows Lisa Morgan to act unilaterally with respect to those entities -which has constituted a strong motivation for Lisa Morgan to fail to distribute the assets of the trusts. Were she to distri- bute the trusts' assets in accordance with the terms of my father's will, "share and share alike, pet stirpes and not per capita," Lisa Morgan could no longer claim to contml the majority inter- est in aay of these entities and would no longer be able to treat the entities as her own personal fiefdom. She would become a minority shareholder, as would each of us as her siblings, and we would actually need to work together and cooperate to make progress and develop or dispose of the assets. This is .something that, over the years, Lisa Morgan has not shown the slightest inter- eat in doing. -15- 4 ~~ Ultimately, however, at this point in the proceeding questions relating to the distribution of trust assets now are pmmatiu+e because the pending objections have not yet been decided. Here, I provide only one example as illustnative: As discussed in detail above, Lisa Morgan and my mother improperly allocated an excessive percentage of accounting and attorneys' fees to the Residuary Tn~t. This misallocation arbitnrrily and improperly inflated the purported asset value of the Marital Trust by several hundred thousand dollars during the period 2004 - 2010. This inflation, in turn, permitted my mother to take an excessively high amount annually pursuant to her right to withdraw 5% annually from the principal of the Marital Trust. That impropriety should result in a surcharge against both Lisa Morgan and my mother's estate which should re- sult in funds being returned to the trusts prior to a final determination of the proper distribution of the assets of the trusts. ~ 2 u One final note: One of my objections to the account filed for the Residuary Trust questioned the purchase of a "McCormick utility tractor" on ]0/26J06 charged to the Residuary Trust. (SBB Residuary Account, p.40) My objection was that there was nothing to show that the tractor had been sold and there was nothing to indicate that it remained an asset to the trust. Although this is not a major financial issue when considered in light of the huge monetary issues in this case, Lisa Morgan's answers at the hearing were illustrative of the lack of information being provided and were very unsatisfactory. (See Tr. pp. 1595-1599) She speculated that the purchase was to mow the horse farm (Tr. 1595) and, after several minutes spent searching the account, she speculated that it might have been "booked as a loan" (Tr. 159'1 and thought it might be included with one of the loans shown on the account. However, page 40 of the Residuary Account does not say that there was a loan. It says there was a purchase of the tractor, and the tractor is not shown as a trust asset, despite her speculation. Moreover, as Mr. Hadley conceded, if loans were made be- tween annual rapo~tir-g periods, there would be no way in the accounts to trace the t<ansactions the way he prepared them without actually having access to the supporting documartation. This supporting documartation is what Mr. Hadley stated he is not allowed to disclose without Lisa Morgan's permission and instruction to do so. -16- ~, I sion I respectfully request that the Court sustain my objections as set forth above, remove my sister Lisa as co-executrix and as the remaining trustee of the residuary trust and order a sur- charge in an appropriate amount against my sister Lisa individually, and against the estate of my mother. See, ep., 20 Pa. C.S. §§ 7782(a); 7782(bx3). Respectfully submitted, a-r~-~~c.-'7'1t.- Dated: October 31, 2011 Barbara M. Mumma 541 Bridgeview Drive Lemoyne, PA 17043 717-730.218$ -17- 1 .Certificate of Service I hereby certify that the foregoing Post-Hearing Brief of Barbara M. Mumma in Support of Ob- jections Filed by Barbara M. Mumma to Accounts Filed by Barbara. McK. Mumma and Lisa M. Morgan was served this date by e-mail and first-class mail, postage prepaid, addressed as fol- lows: Joseph D. Buckley, Esquire 1237 Holly Pike Carlisle, PA 17013 (Court Appointed Auditor) No V. Otto, III, Esquire George B. Faller, Jr., Esquire Jennifer L. Spears, Esquire Manson Deardorff Williams Otto Gilroy 8t Faller Mattson Law Offices 10 East High Street Carlisle, PA 17013 Brady L. Green, Esquire Morgan, Lewis & Bockius LLP 1701 Market Street Philadelphia, PA 19103-2921 Robert M. Mumma, II 840 Market Street, Suite 164 Lemoyne, PA 17043 Ms. Linda M. Mumma P.O. Box 370 Grantham, PA 17027 Dated: October 31, 2011 -~, .7^ j~vy~.~~ a~~- ,.J~., ~~s j~rsssce.+L_ Barbara M. Mumma 541 Bridgeview Drive Lemoyne, PA 17043 -18- .~~