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HomeMy WebLinkAbout04-13-12 e.,.' °_ .3 r ~-. _t -•v ..-... _. -- _ ~ - ~ 3"~ _. .. +...~~ lJ ~`i 1. IN RE: : IN THE COURT OF COMMON PLEAS OF :CUMBERLAND COUNTY, PENNSYLVANIA ESTATE OF GEORGE F. DIXON, JR. :ORPHANS' COURT DIVISION DECEASED No. 21-1994-0754 IN RE: : IN THE COURT OF COMMON PLEAS OF :CUMBERLAND COUNTY, PENNSYLVANIA ESTATE OF LOTTIE IVY DIXON :ORPHANS' COURT DIVISION DECEASED No. 21-07-0686 EXECUTOR'S REPLY IN SUPPORT OF MOTION FOR ATTORNEYS' FEES During the four and a half years since Mrs. Dixon's death, the Brothers have made unfounded accusations against the Executor and meritless objections to the Estate Account. The Brothers failed to pursue their allegations diligently, neglected discovery and pre-trial requirements, ignored the evidence, and engaged in last minute delay tactics. When the time came for the Brothers to prove their objections, they withdrew many of them and produced absolutely no evidence showing that any assets were missing and no evidence that the Executor engaged in any inappropriate conduct. Now, the Executor seeks attorneys' fees from the Brothers and their current counsel for their dilatory, obdurate, and vexatious conduct during the course of this proceeding. The Executor has presented testimony and documentary evidence in C ~~~ support of his Motion, and the Brothers and the Obermayer have submitted no evidence in response. True to form, however, the Brothers and Obermayer, in their Proposed Findings of Fact and Conclusions of Law submitted in response to the Executor's Motion for Attorneys' Fees, continue to make unsupported allegations, inaccurate statements, and inappropriate attacks on the Executor. Those meritless assertions can be given no weight. The time has come for the Brothers and Obermayer to be held accountable for their wrongful conduct and for the Executor to be made whole for the attorneys' fees that he incurred in defending the Brothers' witch-hunt. The Executor's Motion for Attorneys' Fees should be granted. I. Response to the Brothers' Proposed Findings of Fact The Brothers' Proposed Findings of Fact contains many "facts" that are unsupported by any evidence of record, inaccurate, false, or irrelevant. The Executor identifies and responds to those proposed findings of fact in turn below: 18. The fact that the Brothers asserted objections in their capacity as co-trustees does not establish that the objections were reasonable or necessary to protect the trusts, and, in fact, as proven by the uncontroverted evidence submitted by the Executor at the February 2012 hearing, several of the objections had no merit. (Tr. 10-61). By way of just one example, no personal property or jewelry was bequeathed to either of the trusts, so the Brothers' objection to the valuation of the personal property and jewelry did not promote any interest of the trusts. (Tr. 10- 12). 19. The Brothers falsely suggest that one or more of their objections were "found to have merit by the Auditor." None of the Brothers' objections were sustained on their merits by the Auditor. (Auditor's Report and Recommendations). The only objection that was not 2 resolved or withdrawn prior to the February 2010 hearing was the claim that asserts were missing from the Estate. As to that objection, the Auditor ruled that the Brothers had "failed to sustain their burden of proof." (Auditor's Report and Recommendations), p. 18. The two objections that resulted in payments of approximately $20,000 to the Estate were conceded by the Executor. (Auditor's Report and Recommendations, p. 13; Auditor's Directive of February 22, 2010, ¶ 5, 8). 25. The Brothers cite to a March 2008 letter from Rhoads &Sinon LLP that was not introduced as evidence at the hearing and therefore cannot be considered.l To the extent that the letter could be considered, it is notable that its content is inconsistent with Mrs. Dixon's Will and contradicted by law. Mrs. Dixon's Will2 states: if any property held in any testamentary or inter vivos trust created by my late husband, GEORGE F. DIXON, JR., is includable in my estate for purposes of any Death Tax, then any Death Tax attributable to the inclusion of an such roperty in my estate for the purposes of that Death Tax shall be paid out of such roperty or by the recipients of such propertv. (emphasis added) Thus, contrary to the March 2008 letter, Mrs. Dixon's Will does not provide that any part of the unified tax credit should be apportioned to the QTIP assets; it provides that any Death Tax attributable to the QTIP assets must be paid out of the QTIP or by the recipients of the QTIP assets. Further, while citing 20 Pa. C.S.A. § 3702(d), the 2008 letter from Rhoads &Sinon LLP disregards 20 Pa. C.S.A. § 3702(f), which specifically provides that "any increase in estate tax ' Neither the Brothers nor Obermayer presented any testimony or exhibits at the February 23, 2012 hearing on the Executor's Motion for Attorneys' Fees. 2 The Will was filed of record at Orphans' Court Docket No. 21-07-0686 on July 19, 2007. caused by the inclusion ... of a qualified terminable interest trust... shall be apportioned against that trust." Nor does the Mach 2008 letter address IRC § 2207A which provides for an estate to recover the excess taxes paid by the estate as a result of a QTIP Trust from the persons who receive the QTIP assets. Therefore, even if the March 20081etter had been introduced as evidence at the hearing, which it was not, all that letter proves is that the Brothers' objection to the apportionment of the Unified Tax Credit was unsupported by fact and law. 26. The Brothers' claim that the objection to the apportionment of the Unified Tax Credit "reasonably relied upon the statements and explanations of the drafters of the Will" is completely unsupported by any evidence of record. Neither the Brothers nor Obermayer testified at the hearing to explain the basis of the Brothers' objection to the apportionment of the Unified Tax Credit. Additionally, it should be noted that Rhoads &Sinon LLP appeared as counsel for M&T Bank ("M&T"), and M&T did not join in the Brothers' objection to allocation of the Unified Tax Credit, which suggests that Rhoads &Sinon LLP recognized that the Unified Tax Credit had been allocated properly by the Executor. 27. As detailed in paragraphs 25 and 26 above, the March 2008 letter from Rhoads & Sinon LLP contradicts both Mrs. Dixon's Will and the applicable law, so it did not provide any legitimate basis for the objection, nor could it have served as an explanation for the Brothers' objection to the allocation of the Unified Tax Credit, which objection was filed months after the March 20081etter. 29. As detailed in paragraphs 25 and 26 above, the Brothers' objection to the allocation of the Unified Tax Credit had no basis in fact and no basis in law. 4 30. The Brothers' proffered explanation of the basis of their objection to the Estate's retention of the tax refund is not supported by any evidence. First, the Brothers mischaracterize the correspondence attached to that objection. The letter from M&T's counsel expresses that counsel's "expectation" that any refund related to an overpayment of estate tax on the QTIP would be returned to the QTIP. Notably absent is any correspondence from the Executor's counsel agreeing to that "expectation" or forming any "understanding." Second, the Brothers' objection asserted that the tax refund had been "confiscated" by the Estate, despite the fact that the Estate had credited the relevant portion of the tax refund to the QTIP as a set-off against the debt owed to the Estate by the QTIP. (Tr. 15-17). Had the Estate retained the estate tax refund and not credited that amount against the debt owed by the QTIP to the Estate, then the Brothers would have had a legitimate factual and legal basis for their objection. In actuality, the Estate's set-off was appropriate under the facts and the law. Third, the Brothers conceded that there was no basis for their objection when they withdrew it and affirmatively stated "Objectors agree that the offset was appropriate...." (Ex. 9, p. 2). 31. As explained in paragraph 30 above, there was no legitimate basis for the Brothers' objection to the Estate's set-off of estate tax refund. An undisputed debt was owed to the Estate by the QTIP, but the QTIP refused to pay it, so the Estate retained the tax refund and credited it against the debt owed by the QTIP to the Estate. (Tr. 15-17). Under these circumstances there was no legitimate factual or legal basis for the objection asserting that the refund had been "confiscated." As the Brothers eventually conceded, the set-off was appropriate. (Ex. 9, p. 2). 32.-33. As explained in paragraphs 30 and 31 above, there was no basis for the objection to the Estate's retention of the estate tax refund. 38. The Brothers' assertion that there were "significant gaps" in the checking account records and cancelled checks that they obtained from M&T Bank in the Fall of 2008 is an absolute fiction. There is not a shred of evidence in the record that supports that statement. To the contrary, the Martson firm represented to the Auditor in September 2008 that, with the Executor's cooperation, the Martson firm had received the monthly statements and cancelled checks for the M&T account. (Ex. 3C). The Brothers' October 21, 2009 Pre-Hearing Memorandum specifically states "Objectors [the Brothers] requested and received all of Mrs. Dixon's financial accounts." (Ex. 8, p. 2). Even when the Brothers moved for an extension of the discovery deadline in October 2009, they did not assert that there were "gaps" in the checking account records. See, Motion to Extend Discovery Deadline, filed of record on October 9, 2009. Notably, the Brothers do not cite to any evidence of records in support of this proposed finding of fact. 39. Likewise, there is absolutely no evidence to support the Brothers' claim that they took appropriate steps to fill these newly-alleged "gaps" in the checking account records. The Brothers make this bald statement without any citation to record evidence. As explained in paragraph 38 above, the evidence of records proves that the Brothers had received all of the checking account records directly from M&T by September 2008 (Ex. 3C). 40. The Brothers grossly mischaracterize the evidence regarding the discovery of the Executor's personal financial information. The Executor did not block discovery of his personal financial information. The evidence establishes that the Brothers never sou ht the Executor's 6 personal account statements in discovery. Specifically, in October 2008, the Brothers' counsel stated that they would demonstrate the relevance of an inquiry into the Executor's personal financial information. (Ex. 3E.). Not only did the Brothers' counsel fail to do so, then never even served a re uest for roduction u on the Executor. The five interrogatories that the Brothers served upon the Executor did not include any requests for the Executor's personal account information. (See, Motion to Extend Discovery Deadline, filed of record on October 9, 2009 and attaching as Exhibit A the Executor's interrogatory responses). Further, when the Brothers' counsel made a late showing of a need for the Executor's personal brokerage account statements, the Executor produced those account statements. (Tr. 40-41). The Executor also answered every single question posed to him at his deposition. (Tr. 38). Thus, contrary to the Brothers' false assertion that the Executor "blocked" discovery of his personal financial information, in fact, the Brothers never timely sought discovery of that information and the Executor fully cooperated in all discovery directed to him by the Brothers. 41. The Brothers also grossly mischaracterize the evidence with regard to the discovery of Mrs. Dixon's financial records for the years prior to 2001. The Executor objected to providing information from prior to 2001 on the basis that he was not living with Mrs. Dixon prior to 2002 and on the basis that complete records for the period prior to 2001 were not available. (See, Motion to Extend Discovery Deadline, filed of record on October 9, 2009 and attaching as Exhibit A the Executor's interrogatory responses). The Brothers never complained that the Executor's interrogatory responses were inadequate, never requested supplemental responses, never served a request for production of documents, and never filed a motion to compel further discovery responses from the Executor. (Tr. 37). Further, it is undisputed that 7 the Executor provided authorizations for the Brothers to obtain every single available financial record from the financial institutions with whom Mrs. Dixon held accounts. (Ex. 2C). Thus, there is no evidence that the Executor "blocked" discovery of Mrs. Dixon's financial records for the years prior to 2001. 42. The Brothers' allegation that the Executor was in a position of conflicting interest has absolutely no relevance to the issues raised in the Executor's Motion for Attorneys' Fees, which motion turns upon whether the Brothers and Oberman engaged in sanctionable conduct. Furthermore, the Auditor has already concluded that the Brothers did not submit prima facie evidence that the Executor had a conflict of interest. (Auditor's Report and Recommendations, p. 2, 26). 47-52. The Brothers' allegations about the M&T checking account have absolutely no relevance to the issues raised in the Executor's Motion for Attorneys' Fees, which motion turns upon whether the Brothers and Obermayer engaged in sanctionable conduct. The time for the Brothers to prove their objection that "substantial assets" includable in the Estate were missing occurred in February 2010. The Auditor has already concluded that the Brothers "failed to sustain their burden of proof' to show that any assets were missing from the Estate. (Auditor's Report and Recommendations, p. 18). 54. The Brothers grossly mischaracterize the Executor's conduct in discovery and cite to no evidence upon which the Auditor can conclude that the Executor refused to provide relevant financial records and information. The record reflects that the Executor not only voluntarily provided over 1700 pages of Mrs. Dixon's financial information to the Brothers, he provided the Brothers with authorizations so that they could obtain every single available 8 financial record directly from the financial institutions with whom Mrs. Dixon did business. (Tr. 19-24; Ex. 1 A, 1 B, 1 C, 2A, 2B, 2C). Further, as detailed in paragraphs 40 and 41 above, the Executor fully complied with his discovery obligations. 55. There is absolutely no evidence that establishes that the Brothers were unable to obtain all necessary financial records and information, and there is no evidence that 24 months of bank statements were never produced. The Brothers introduced no evidence to establish these alleged facts, despite their opportunity to do so. As detailed in paragraph 38 above, the evidence of record establishes that the Brothers obtained all of Mrs. Dixon's financial account information. 56. The Brothers' Motion to Extend Discovery Deadline did not outline any alleged "missing information and additional records that were needed." That motion requested only that the discovery deadline be extended "to allow additional time for Movants to inquire into Marshall Dixon's finances." (See, Motion to Extend Discovery Deadline, filed of record on October 9, 2009). The Brothers had identified and asserted a need for that discovery in September 2008, (Ex. 3C). 57. The Brothers falsely state that the Auditor's Report on Discovery Issues does not address their request for information about the Executor's credit card accounts. In fact, the Auditor's report summarizes that the Brothers asserted that the credit card statements were necessary to determine which payments were gifts and which were reimbursements, which the Brothers claimed was relevant to the allocation of death taxes. (Ex. 7). Also, the Auditor noted that the Brothers would be entitled to the benefit of an inference that the payments were gifts, if, when asked at the hearing, the Executor was unable to say whether the payments were reimbursements for expenses that the Executor paid for Mrs. Dixon. (Ex. 7). 9 61. The Brothers mischaracterize the content of their October 2009 pre-hearing memorandum. That memorandum does not provide any itemized list of assets that the Brothers contended were missing from the Estate, even though the Brothers were required to provide such a list by the Auditor's Directive. (Ex. 6, 8). In referencing the payments made to the Executor from Mrs. Dixon's accounts, the Brothers asserted that they needed to know what gifts were made in order to "determine the full extent of gifts received by Marshall for which no [gift] tax has been paid." (Ex. 8, p. 5-6). 62.-63. The Brothers had the opportunity in February 2010 to present evidence supporting their claim that assets were missing from the Estate and they failed to do so. The Brothers' assertions that there were "countless" transfers to the Executor went unproven by the Brothers at the hearing. (Auditor's Report and Recommendations). The Brothers' continuing efforts to cast the Executor in a negative light through unproven allegations are completely irrelevant to the issues presented in the Executor's Motion for Attorneys' Fees. 65. The Brothers falsely claim that there is no evidence of their concession that they would not be able to prove that Mrs. Dixon was subject to incapacity or undue influence. The Auditor's Report on Discovery Issues notes that the Brothers "do not suggest that they can prove incapacity or undue influence." (Ex. 7, p. 2). The Auditor's Report and Recommendations notes that "the Brothers conceded at the discovery conference on November 11, 2009, with the benefit of counsel, that the Brothers would not be able to prove that Lottie was subject to incapacity or undue influence during her lifetime." (Auditor's Report and Recommendations, p. 20). 66. The Brothers falsely claim that the December 5, 2009 pre-hearing memorandum was due at the same time that the Martson Firm was petitioning to withdraw as counsel. The 10 pre-hearing memorandum was due five days prior to the date that the Martson Firm petitioned to withdraw and nine days before that petition was granted. 73-74. The Brothers misrepresent the content of their February 13, 2010 Addendum to Objectors' Supplemental Pre-Hearing Memorandum. That Memorandum states that the lists attached as Exhibit 1 to that Memorandum "delineate the assets that should have been included in the decedent's estate...." (Ex. 10). Those lists include hundreds of checks, most of which were written to third parties who provided care, services, or goods to Mrs. Dixon, some of which were written to the Brothers themselves and their sister Charlotte, and very few of which were written to the Executor. (Ex. 10; Tr. 54-55). The Brothers never stated then, as they do now, that some of the checks in those lists were "obviously not to or for the benefit of Marshall." To the contrary, the Brothers asserted that the hundreds of checks shown on the lists delineated the assets that they contended were missing from the Estate which forced the Estate to prepare to defend the suggestion that all of those checks represented some kind of theft, deception, fraud or misrepresentation, which the Brothers also alleged in their February 13, 2010 Addendum. (Ex. 10, p. 2; Tr. 54-55). 75. There is no evidence that Obermayer filed the Petition for Administrator Pro Tem "after a detailed review of the file," because neither the Brothers nor anyone from Obermayer presented any evidence at the hearing on the Executor's Motion for Attorneys' Fees. Whether or not Obermayer actually conducted a "detailed review of the file" is irrelevant. By filing the Petition for Administrator Pro Tem, Obermayer certified that the factual allegations in the document had evidentiary support. Pa. R. Civ. P. 1023.1(c)(3). Although discovery had closed in the case, and although the Brothers had investigated their claims of wrongdoing by the 11 Executor for more than two and a half years prior to the filing of the Petition, there was no evidence supporting many of the factual allegations made in the Petition, including the allegation that the Executor defrauded Mrs. Dixon out of $1.5 million. Notably, on February 9, 2010, (three days before the Petition for Administrator Pro Tem was filed) the Brothers conceded that they had no witnesses and no exhibits to present in support of their allegation that the Executor had dissipated Mrs. Dixon's assets through improper conduct. (Ex. 9). On the day after they filed the Petition for Administrator Pro Tem, the Brothers provided a list of the assets that were allegedly missing from the Estate, but that list did not reflect that the Executor had defrauded Mrs. Dixon out of $1.5 million. (Ex. 10). In fact, the Brothers now concede that many of the checks on that list were "obviously not written to or for the benefit of Marshall." On February 24, 2010, a hearing was held so that the Brothers could present evidence in support of their objection that assets were missing from the Estate and their claims that the Executor engaged in theft, deception, fraud, and misrepresentation. They failed to prove that even a single dollar was dissipated from the Estate by the Executor and the failed to present a___y evidence that the Executor engaged in fraud or other misconduct. (Auditor's Report and Recommendations). When the Brothers had the opportunity to prove their allegations and they wholly failed to do so, they cannot now argue that the allegations of fraud and dissipation of assets asserted in the Petition for Administrator Pro Tem had evidentiary support. Thus, whether Obermayer filed the Petition for Administrator Pro Tem without reviewing the file or with a recognition that there was no evidentiary support for the factual allegations in the Petition, their conduct fell below the required standards. 12 76. The Brothers mischaracterize the basis for their Petition for Administrator Pro Tem. Although the Obermayer Firm could have filed the Petition solely alleging the basis for the claim of conflict of interest, they did not do so. Instead, they chose to file a Petition replete with factual allegations and personal attacks on the Executor that were unsupported by any evidence, after the Brothers had had years to develop the relevant evidence and fully investigate Mrs. Dixon's finances. (Petition for Appointment of Administrator Pro Tem, filed of record on February 12, 2010). 77. Neither the Brothers nor Obermayer presented any evidence opposing the Executor's Motion for Attorneys' Fees, so they cannot now attempt to explain away the false factual allegations made in the Petition for Administrator Pro Tem, including the false assertions that the Executor defrauded Mrs. Dixon out of $1.5 million and engaged in self-dealing. Further, the Brothers and Obermayer cannot escape the fact that they failed to produce any evidence to show that the Executor had defrauded Mrs. Dixon out of any funds at all. (Auditor's Re ort and Recommendations). 79. As established at the hearing and explained below, the allegations in the Petition for Administrator Pro Tem that the Brothers filed on February 12, 2010, were never supported by any evidence. In October 2009, the Brothers were required to provide an itemized list of assets missing from the Estate, yet they identified no assets that were missing from the Estate, and asserted only that Mrs. Dixon had made gifts to the Executor of approximately $220,000 for which gift taxes had not been paid. (Ex. 8). On February 9, 2010, the Brothers conceded that they had no witnesses and no exhibits to present in support of their objection that assets were missing from the Estate. (Ex. 9, p. 6). On February 13, 2010, the Brothers provided a list of the 13 assets that were allegedly missing from the Estate, but that list did not reflect that the Executor had defrauded Mrs. Dixon out of $1.5 million. (Ex. 10). In fact, the Brothers now concede that the list provided on February 13, 2010 many of the checks on that list were "obviously not written to or for the benefit of Marshall. (Brothers' Proposed Findin of Fact, ¶ 74). On February 24, 2010, a hearing was held so that the Brothers could present evidence in support of their objection that assets were missing from the Estate. They wholly failed to produce any such evidence. (Auditor's Report and Recommendations). For example, the Brothers did not prove that the Executor used a single dollar of Mrs. Dixon's funds without her knowledge or permission. (Com are, Auditors Re ort and Recommendations, ¶ 95-125 with Petition for Administrator Pro Tem, ¶ 19). The Brothers produced no evidence that the Executor used Mrs. Dixon's credit cards to invest in his business ventures. (Com are, Auditors Report and Recommendations, ¶ 95-125 with Petition_for Administrator Pro Tem, ¶ 20). The Brothers produced no evidence of any transfers from Mrs. Dixon's brokerage account to the Executor (Compare, Auditors Report and Recommendations, ¶ 95-125 with Petition for Administrator Pro Tem, ¶ 21). The Brothers produced no evidence that the Executor transferred Mrs. Dixon's assets to himself or for his benefit without Mrs. Dixon's knowledge. (Com are, Auditors Report and Recommendations, ¶ 95-125 with Petition for Administrator Pro Tem, ¶ 27). The Brothers produced no evidence that the Executor took assets from Mrs. Dixon without her permission. (Compare, Auditors Report and Recommendations, ¶ 95-125 with Petition for Administrator Pro Tem, ¶ 9, 23, 46). The Brothers did not prove that the Executor defrauded Mrs. Dixon out of even $1, let alone $1.5 million. (Compare, Auditors Report and Recommendations, ¶ 95-125 with Petition for Administrator Pro Tem, ¶ 9). 14 Thus, while the Brothers continue to claim, even now, that the factual allegations of the Petition for Administrator Pro Tem have evidentiary support, they have never presented any evidence of those allegations, despite have multiple opportunities to do so in the pre-hearing papers and at the hearings in February 2010 and February 2012. 81.-82. Because neither the Brothers nor Obermayer testified at the hearing, there is no evidence about when the "Candy Dixon's Cash Flow 1994 through June, 2007" was prepared, nor is there any evidence that the document was "meant to be refined or revised as additional data and information became available." Further, the Brothers acknowledge that they provided the Cash Flow statement to the Executor as a potential exhibit for the February 2010 hearing. (Brothers' Proposed Finding of Fact, ¶ 80). Because they provided the exhibit at 3:00 on the afternoon before the February 2010 hearing (Tr. 123), the claim that the Cash Flow statement was to be "refined or revised" is patently false. 83. Because neither the Brothers nor Obermayer testified at the hearing, there is no evidence about what the basis was for the allegations made in the Brothers' Pre-Hearing Memoranda and Petition for Administrator Pro Tem. As detailed in paragraph 79 above, the allegations in the Petition for Administrator Pro Tem and the Brothers' Pre-Hearing Memoranda, including the claim that the Executor defrauded Mrs. Dixon out of $1.5 million, were made without any supporting evidence, as is clear from the Brothers' complete failure to produce any such evidence. 84.-100. The Brothers attempt in these paragraphs to present evidence regarding the Cash Flow statement that was not presented at the hearing and was not subject to cross- examination by the Executor. If the Brothers or Obermayer had wished to defend the Executor's 15 evidence in support of the Motion for Attorneys' Fees, the time to present their defense was at the February 2012 hearing. Because the Brothers did not do so, the evidence that they attempt to place before the Auditor in their proposed findings of fact cannot be considered. Even if the Brothers' explanations could be considered, they are disingenuous and contradicted by the evidence that is before the Auditor. First, the Brothers contend that, although they titled the document "Candy Dixon's Cash Flow 1994 through June, 2007" (emphasis added), the figure on that document identified as "QTIP average" was not intended to reflect Mrs. Dixon's income from the QTIP, but was intended to reflect the entire income to the QTIP. Second, they contend that the deduction for "fees and professional services" reflects fees and services paid by the QTIP and not by Mrs. Dixon. Such arguments are completely unavailing given that that the document is clearly identified as summary of Mrs. Dixon's income and expenses, and not a summary of the income and expenses of the QTIP. Third, although the Cash Flow statement covers the period from 1994 through June 2007, the Brothers erroneously include QTIP distributions that were made to Mrs. Dixon's estate after her death in June 2007 when they assert that the total QTIP distributions to Mrs. Dixon were at least $2,075,800. The accurate figure, as reflected in the QTIP Account is $2,007,800. (QTIP Account, p. 286, 291; Tr.72-73). The Brothers also now claim that a Revocable Trust in the amount of $803,321 was included in the figure for "stocks and funds" even though such a claim is inconsistent with the description "stocks and funds," that is written in the Cash Flow Statement. More importantly, no evidence of the Revocable Trust's value has ever been presented. The Brothers cite to the "Rev Trust Account," but no such account has ever been filed. Also, the Brothers make no adjustment for the fact that the brokerage account balance dropped significantly between 1994 and 1998, and 16 remained below $50,000 for the last six and a half years of Mrs. Dixon's life. (Ex. 12, 13). They also make no allowance for charitable contributions, real estate taxes on the three parcels owned by Mrs. Dixon, and a variety of other expenses. (Tr. 83-84). Thus, even had the Brothers properly presented evidence in an attempt to explain away the Cash Flow statement, which they did not, the Brothers still cannot show that there was any support for their claim that the Executor defrauded Mrs. Dixon out of $1.5 million. Further, as detailed in paragraph 79 above, when the Brothers were given the opportunity to prove their allegations they wholly failed to do so. 101. As explained in paragraphs 76 and 79 above, although the Obermayer Firm could have filed the Petition solely alleging the basis for the claim of conflict of interest, they did not do so. Instead, they chose to file a Petition replete with unfounded factual allegations and personal attacks on the Executor. 102.-103. The Brothers repeatedly stated that they needed to know how much in gifts Mrs. Dixon made to the Executor because that figure was needed to address the allocation of taxes. This position is reflected in their October 2009 pre-hearing memorandum and in the Auditor's Report on Discovery Issues. (Ex. 8, Ex. 7). 104.-105. The fact that the Brothers have not previously been admonished for their improper conduct in this matter does not prove, or even suggest, that the Brothers acted properly. The fact that the Executor did not previously seek sanctions against the Brothers or Obermayer does not establish that their conduct in this matter is not sanctionable. In fact, the parties expressly agreed that motions for attorneys' fees would be addressed after the hearing on the 17 merits, so this is the appropriate time and process for the Auditor to consider the Brothers' and Obermayer's conduct and determine whether they should be sanctioned. 106. The Brothers mischaracterize the Auditor's Report and Recommendations. The Auditor stated that he did "not see any persuasive authority, upon similar facts" that the Brothers' conduct rose to the level of vexatiousness or bad faith that would call for the Auditor to contravene the general rule that the costs of the audit be paid by the Estate. (Auditor's Report and Recommendations, ¶ 24). This statement was made prior to the Executor's presentation of evidence on the issues raised in the Motion for Attorneys' Fees and is not conclusive of the issues raised in the present Motion. 107. The Executor's counsel testified that all of the tasks reflected in the McNees invoices (with the exception of one entry, Tr. 115) represented legal work that was performed in connection with the litigation of the Brothers' objections and was necessary . (Tr. 88, 95, 97, 115-18). There is no evidence to the contrary. 108. The Executor's counsel testified that the fees incurred were substantially higher than they should have been because of the Brothers' conduct. (Tr. 97). There is no evidence to the contrary. 109. The Executor's counsel testified that all of the tasks reflected in the McNees invoices (with the exception of one entry) represented legal work that was performed in connection with the litigation of the Brothers' objections. (Tr. 97, 110-115, 117-118 ). There is no evidence to the contrary. 18 II. ArEUment Because the Brothers' Proposed Findings of Fact are replete with unsupported, false, and inaccurate statement, their conclusions of law and argument are founded upon faulty premises which the Brothers set forth in bullet points on pages 16 -19 of their submission. To the extent that those misstatements are addressed in the Executor's response above, the Executor will not belabor every bullet point here. The Executor briefly summarizes the relevant points as follows: • The evidence proves that the Brothers did not have a good faith basis for asserting several of the objections to the Estate Account, and the Brothers provided no evidence to the contrary. • Although the Brothers repeatedly state that the Auditor found merit in some of their objections, that is simply not true, as the Brothers and Obermayer well know. The Executor conceded two of the objections, and one objection was pursued at the February 2010 hearing. The Auditor found that the Brothers wholly failed to sustain their burden of proof at the hearing. Further, the Auditor did not have a different view of the facts and law; the Brothers presented no relevant evidence at the hearing. They presented no evidence of fraud, theft, deception, or misrepresentation and no evidence of "missing assets." They presented no evidence regarding transfers from Mrs. Dixon's brokerage account. They presented no evidence regarding the alleged depletion of the Revocable Trust. They presented no evidence that the Executor used Mrs. Dixon's credit cards. • There is no evidence that there were or are any missing financial records or gaps in the financial records. In fact, the evidence is clear that in early June 2008, the Executor provided authorizations to the Brothers that allowed them to obtain every single 19 document regarding Mrs. Dixon's financial accounts directly from the financial institutions. Further, the Brothers themselves represented that they had received all of Mrs. Dixon's financial information. • The evidence is perfectly clear that the Executor not only fully and timely complied with all discovery obligations, he also voluntarily provided over 1700 pages of documents to the Brothers and authorized the Brothers to obtain all financial account information directly from Mrs. Dixon's financial institutions. • There is no evidence that the Brothers pursued their investigation into Mrs. Dixon's accounts diligently. In fact, all of the evidence is to the contrary. The Brothers promised to obtain an appraisal of the personal property; they never did so. The Brothers promised to show a basis for requesting the Executor's personal account information; they never did so and they never requested that information during the discovery period. The Brothers served five interrogatories and zero requests for production upon the Executor. The Brothers had more than two years to investigate Mrs. Dixon's financial accounts, but they sought an extension of the discovery deadline, arguing in their brief that they needed time to investigate items that they had been aware of for year. • There is no evidence that the Executor caused unnecessary legal fees and expenses, and any such evidence would be irrelevant to the questions of whether the Brothers and Obermayer should sanctioned. The Brothers also frame the legal issue upon the unfounded assumption that the Brothers' objections were filed "in good faith and with reasonable basis [sic] in law and fact" and the false 20 statement that the Auditor "has found that the Brothers' pursuit of their contentions was not arbitrary, vexatious or in bad faith." Of course, the entire purpose of the hearing on February 23, 2012 was to determine whether the Brothers' actions, and those of the Brothers' current counsel, show a basis for the award of a sanction under 42 Pa. C.S.A. § 2503(7). A. The Executor Has Proven That The Brothers and Obermayer Engaged In Conduct Sanctionable Under 42 Pa. C.S.A. § 2503. The Brothers' primary argument in opposition to the Executor's Motion for Attorneys' Fees is that their conduct does not meet the standard for dilatory, obdurate, and vexatious conduct under 42 Pa. C.S.A. § 2503(7). In making that argument, the Brothers do little more than cite cases applying § 2503 and then make conclusory statements that they have not engaged in any sanctionable conduct. Such conclusory statements cannot stand in the face of the evidence presented. As the Executor explained at length in its previous submission, the evidence clearly proves that the Brothers engaged in dilatory, obdurate, and vexatious conduct by asserting objections that had no factual or legal basis, by filing the Petition for Administrator Pro Tem with no evidentiary support for its factual allegations, by engaging in dilatory conduct in discovery, by delaying and failing to comply with pre-hearing requirements, and by asserting new legal theories after the close of discovery that had no evidentiary support. The Brothers have failed to counter the Executor's proof, or even to provide a scintilla of evidence in defense, so the Executor's motion must be granted. As the Superior Court explained in In re Roos' Estate, 451 A.2d 255 (Pa. Super. 1982), when a moving party has made a prima facie showing on a motion for fees under § 2503, and the other party "merely alleged, without 21 producing a scintilla of evidence, that her actions were not vexatious," the motion for fees must be granted. Id. at 259. • Have the Brothers provided a factual or legal basis for their objection to the valuation of the personal property? They have not. • Have they explained how they, as co-trustees, had standing to pursue that objection when none of the personal property was bequeathed to the trusts? They have not. • Have they explained how their objection to the allocation of the Unified Tax Credit was supported by Mrs. Dixon's Will or the relevant state or federal laws? They have not. • Have they explained a factual or legal basis for their objection asserting that the Estate "confiscated" the tax refund? They have not. • Have they explained why, after stating in September 2008 that they would seek discovery of the Executor's personal financial information, they did not do so before the close of discovery? They have not. • Have they explained why they failed to comply with the specific and clear requirements for pre-hearing memoranda? They have not. • Have they explained why they claimed that hundreds of checks written by Mrs. Dixon for her own personal and home expenses and other checks written to the 22 Brothers themselves delineated assets that the Executor had dissipated? They have not.3 • Have they explained why, after the close of discovery, they made factual allegations in the Petition for Administrator Pro Tem that they could not prove at the hearing? They have not. • Have they explained why, eleven days before the hearing, they asserted that the Executor had dissipated assets through theft, deception, fraud, and misrepresentation, but at the hearing they produced absolutely no evidence of any of those theories? They have not. The Brothers' silence on key points of evidence speaks for itself. 1. The Brothers Engaged In Vexatious Conduct. The Brothers seem to believe that as long as they can assert ~ basis for their objections that they have proven that their objections were not vexatious. This argument ignores the first prong of the Thunber~ test which considers whether the claim was asserted "without sufficient ground in fact or law." Thunberg v. Strause, 682 A.2d 295, 299 (Pa. 1996). By way of one example, the Brothers' objection to the allocation of the Unified Tax Credit does not avoid being vexatious unless the Brothers can point to fact (such as provision of Mrs. Dixon Will) or law (such as the state and federal laws addressing estate taxes) that provide a basis for that objection. In fact, the Brothers and Obermayer now seem to be furiously back-pedaling from this meritless position because they now claim, in contradiction of the position taken in the February 13, 2010 pre-hearing memorandum, that those checks were "obviously not to or for the benefit of the Executor. The Brothers and Obermayer cannot re-write their past conduct in an effort to avoid being sanctioned. 23 They have not done so, and cannot do so, because no basis in fact or law exists for that objection. Similarly, the Brothers' objection to the Estate's setoff of the QTIP tax refund does not avoid being vexatious just because the Brothers expected to receive cash-in-hand; the Brothers must show some basis in law that the Estate's setoff was inappropriate or some fact supporting the assertion that the refund was "confiscated" by the Estate. Not only have the Brothers failed to do so, they actually conceded that the setoff was appropriate when they withdrew that objection. (Ex. 9, p. 2). Therefore, the Brothers' efforts to validate their objections without reference to fact and law is simply insufficient. Perhaps recognizing the weakness of their position, the Brothers and Obermayer try to make much of second prong of the Thunbera test for vexatious conduct, arguing that their objections did not serve the sole purpose of causing annoyance. The evidence is clear in this case that the only purpose that was served by the objections that the Brothers filed without factual or legal support, was to cause annoyance of the Executor. The evidence clearly established that the four clearly unfounded objections4 asserted by the Brothers served no purpose in protecting the QTIP or Reversionary Trusts or recovering funds to those Trust. They certainly served no purpose of allowing the Brothers to investigate Mrs. Dixon's finances, because the Executor voluntarily provided authorizations for the Brothers to obtain all of her financial information months prior to the Brothers' filing of the objections. Furthermore, the evidence was clear that the Brothers' pursuit of those objections caused the Executor to suffer the 4 These include the objection to the valuation of the personal property and jewelry, the objection to allocation of the Unified Tax Credit, the objection to the Estate's setoff of the tax refund due to the QTIP, and the objection that substantial assets were missing from the Estate. 24 strain and cost of unnecessary litigation, increased the Executor's attorneys fees substantially, and depleted the Estate assets to the detriment of the Executor and his sister (and not to the detriment of the Brothers). The Brothers' bald claim that they had a reasonable basis to assert those objections does not make it so, nor does it disprove the evidence showing that the four unfounded objections served no legitimate purpose and only caused annoyance and expense to the Executor. 2. The Brothers Engaged In Dilatory and Obdurate Conduct. The Brothers also claim that their conduct was not dilatory or obdurate, but they do not provide any reasonable explanation for their lack of diligence in the case or their stubborn refusal to recognize the invalidity of their objections. For example, the evidence shows that the Brothers did not take discovery about the checks written from the M&T checking account during the year between the time that they received the checks in September 2008 and the close of discovery in September 2009. The Brothers have offered no evidence to counter the evidence showing this lack of diligence. The evidence shows that the Brothers claimed in September 2008 that they would seek discovery of the Executor's personal financial accounts, that they did not do so during the discovery period, and that they sought to extend the discovery deadline in October 2009 in order to obtain discovery of that information. The Brothers have not explained how this conduct does not reflect an unnecessary delay. Likewise, the evidence is uncontroverted that the Brothers delayed producing their discovery responses, delayed filing their second pre-hearing memorandum, delayed itemizing the alleged "missing" assets, and delayed identifying their witnesses and exhibits, all of which caused additional legal work to the Executor. While the 25 Brothers baldly claim that the "were as anxious as anyone to see the case proceed swiftly and did all that they could to encourage that process," the evidence belies those assertions. Similarly, the Brothers have provided no evidence to contradict the proof of their obdurate conduct. As detailed in the Executor's prior submission and above, the evidence clearly proves that the Brothers stubbornly persisted in asserting factually unsupported and legally unsupportable positions. The Brothers' reliance on In re Estate of Miller, 18 A.3d 1163 (Pa. Super. 2011) is misplaced. In that case, the Superior Court reversed an award of attorneys' fees made against the Miller Estate under § 2503 because the court awarded fees against the wrong party (i.e., against the Estate rather than against the one co-executor that acted improperly) and because the improper conduct occurred in the course of the co-executor's administration of the Estate and prior to the filing of the legal action. 18 A.3d at 1173-74. For those reasons, the Superior Court ruled that the conduct at issue had to be judged according to the standards for estate fiduciaries, and not pursuant to § 2503. Id. 1174. The conduct that forms the basis of the Executor's Motion is the dilatory, obdurate, and vexatious conduct of the Brothers and their counsel that occurred in the course of the litigation of the Brothers' objections. Therefore, § 2503 is applicable, and In re Estate of Miller does not provide otherwise. Id. B. The Filing of the Petition for Administrator Pro Tem Is Sanctionable Under 42 Pa. C.S.A. § 2503. The Brothers repeatedly assert that the filing of the Petition for Administrator Pro Tem is not sanctionable because the petition was based upon the Executor's conflict of interest and relevant law. That argument ignores that the Petition for Administrator Pro Tem contained 26 multiple factual allegations that had no evidentiary support in violation of Pa. R. Civ. P. 1023.1. In Brenkle v. Arblaster, 466 A.2d 1075, 1078-79 (Pa. Super. 1983), the Court upheld an attorneys' fee award under § 2503 although the appellants had asserted "colorable legal claims", because the Court determined that the appellants knew that the claims "were factually frivolous." Id. at 1078-79. Here, the Petition for Administrator Pro Tem, regardless of the fact that it may have a colorable legal basis, had no factual basis. The absence of a factual basis for the Petition has been proven by the Executor, not only because the Brothers' claim that $1.5 million was missing was mathematically impossible (based upon the Brothers' own Cash Flow statement), but also because there was no evidence of fraud of any kind or in any amount. As detailed in paragraph 79, there was also no evidentiary basis for the Petition's unfounded allegations that the Executor used Mrs. Dixon's funds without her knowledge or permission, that Executor used Mrs. Dixon's credit cards to invest in his business ventures, that there were unauthorized transfers from Mrs. Dixon's brokerage account to the Executor, that the Executor transferred Mrs. Dixon's assets to himself or for his benefit without Mrs. Dixon's knowledge or that the Executor took assets from Mrs. Dixon without her permission. The "facts" upon which the Petition was based were identical to the "facts" upon which the Brothers asserted that the Executor dissipated assets from Mrs. Dixon's estate. When the Brothers were required to prove their objection that the Executor dissipated Mrs. Dixon's assets, they produced no evidence. If those allegations had evidentiary support the Brothers would have presented at the hearing; they did not do so. Thus, there is no question that the Petition for 27 Administrator Pro Tem was based upon "facts" that were not supported by evidence, as required by Pa. R. Civ. P. 1023.1 and Pa. Rule of Professional Conduct 3.1. In their post-hearing submission, the Brothers have proffered various explanations and corrections of their own Cash Flow statement in an effort to defend their false assertion that $1.5 million was "missing" from the Estate. Neither the Brothers nor Obermayer presented those explanations at the hearing, where they would have been subject to cross-examination by the Executor. Because those explanations are not evidence, they cannot even be considered. As explained in paragraphs 81 to 100 above, however, even if those explanations could be considered, they are unconvincing because they contradict the Cash Flow statement and brokerage account statements. (Ex. 11A, 11B, 12, 13). Moreover, even if the Brothers had produced evidence, instead of the bald claim that $2 million was "missing" from Mrs. Dixon's estate, there is still no evidentiary basis for the other factual allegations in that pleading. The Brothers and Obermayer also assert the Petition for Administrator Pro Tem was filed because there were unanswered questions about Mrs. Dixon's assets. This argument ignores the fact that, when the Petition was filed, the Brothers had been engaged in a completely unfettered investigation of Mrs. Dixon's financial accounts for over two and a half years. The scope of that investigation was quite narrow -only one checking account, one brokerage account, and two trusts (for which the Brothers served as co-trustees) were involved. Any reasonable amount of diligence by the Brothers would have allowed them to obtain answers to all of their questions within a matter of a few months, especially in this case, where the Executor fully and promptly cooperated in all informal and formal discovery processes. If the Brothers had unanswered 28 questions after spending 30 months investigating Mrs. Dixon's accounts, they had only themselves to blame. C. Obermayer Should Be Held Jointly and Severally Liable For The Fees Incurred By the Executor While Obermayer Was Counsel. Obermayer attempts to avoid liability by advocating an inappropriately narrow application of 42 Pa. C.S.A. § 2503 and by repeating its assertion that the Petition for Administrator Pro Tem was founded upon existing law. Both arguments are unavailing. First, Pennsylvania statutes clearly provide that any "participant", including counsel, can be sanctioned for engaging in dilatory, obdurate, and vexatious conduct. 42 Pa. C.S.A. § 2503(7); 42 Pa. C.S.A. § 102. Thus, the issue of Obermayer's joint and several liability must be determined based upon whether there is evidence that Obermayer engaged in dilatory, obdurate, and vexatious conduct. The issue is not whether Obermayer engaged in conduct that is identical to that of the attorneys in Estate of Liscio, 638 A.2d 1019 (Pa. Super. 1994) or Simmons v. City of Philadelphia, 471 A.2d 909 (Pa. Commw. 1984). Nor is the issue whether the Obermayer had a basis in law for filing the Petition for Administrator Pro Tem. As the Executor had already addressed, discovery had closed and all of the evidence showed that there was no evidentiary basis for the factual allegations made in the Petition for Administrator Pro Tem. Notably, Obermayer does not even try to defend its other improper conduct. Obermayer offers no argument in response to the evidence showing that its attorneys submitted pre-hearing memoranda that asserted unsupportable legal theories of undue influence, theft, deception, fraud, and misrepresentation (Ex. 9. 10) -theories for which no evidence was offered at the February 2010 hearing. (Auditor's Report and Recommendations). Obermayer offers no explanation for 29 their failure to identify their witnesses and exhibits in their February 9pre-hearing memorandum. (Ex. 9). The firm provides no legitimate explanation for the assertion in the February 13 memorandum that hundreds of checks written by Mrs. Dixon to third parties and the Brothers constituted assets that the Executor had dissipated from the Estate. (Ex. 10). As explained at the hearing, this conduct by the Brothers and Obermayer significantly increased the attorneys fees incurred by the Executor. (Tr. 47-60). Therefore, Obermayer should be sanctioned. E. The Attorneys' Fees Sought By The Executor Are Reasonable. Again without any evidence to support their assertions, the Brothers claim that the attorneys' fees sought by the Executor are unreasonable and excessive. The Brothers claim that the fees sought include fees that "were not necessitated by the Brothers' involvement," but that claim is contradicted by the evidence. For example, when questioned about the fees related to the review of the Rhoads & Sinon file and the meeting with that firm, counsel for the Executor explained that the Brothers had raised a question about Mrs. Dixon's capacity to sign her law will or codicil, so the fees related directly to the Brothers' involvement. The Executor's counsel also testified that fees for estate administration work was not included in the fees sought in the Executor's motion, that the fees sought related to the litigation of the Brothers' objections, and that the fees incurred were substantially higher as a result of the Brothers' dilatory, obdurate, and vexatious conduct. (Tr. 88, 95, 97). Further, the Executor's counsel testified that she was able to relate the work performed to the Brothers' objections based upon the invoices, her knowledge of the case, and her familiarity with the activities that were occurring as the case progressed. (Tr. 115-18). And, the Executor's counsel testified to the additional work and increased fees that resulted from each of the Brothers' unfounded objections and from the Brothers' other improper 30 conduct. The Brothers offered no evidence to the contrary. Therefore, there is no evidence upon which the Auditor can conclude that the fees sought are either excessive or unreasonable. III. Conclusion As a sanction for the dilatory, obdurate, and vexatious conduct of the Brothers during this action, the Executor requests that the Brothers be ordered to reimburse to the Executor the $206,895.82 in attorneys' fees that the Executor incurred in this action, and that the law firm of Obermayer Rebmann Maxwell and Hippel LLP be declared jointly and severally liable for the Executor's fees in the amount of $102,808.97. McNEES WALLACE & NURICK LLC By: Eliza eth ullaugh (PA 76397) Kimberly M. Colonna (PA 80362) 100 Pine Street, P.O. Box 1166 Harrisburg, PA 17108-1166 717- 232-8000 Counsel for Marshall Dixon as Executor of the Estate of Lottie Ivy Dixon Date: April 13, 2012 31 CERTIFICATE OF SERVICE The undersigned hereby certifies that on this date a true and correct copy of the forgoing documents were served by first class mail, postage prepaid, addressed as follows: Walter W. Cohen, Esquire Kevin J. Kehner, Esquire Obermayer Rebmann Maxwell &Hippel LLP 200 Locust Street, Suite 400 Harrisburg, PA 17101 Paul C. Heintz, Esquire Nina B. Stryker, Esquire Erin E. McQuiggan, Esquire Obermayer Rebmann Maxwell &Hippel LLP One Penn Center, 19`h Floor 1617 JFK Boulevard Philadelphia, PA 19103 Mark Bradshaw, Esquire Stevens & Lee, P.C. 17 N. Second St., 16`h Floor Harrisburg, PA 17101 Daniel L. Sullivan, Esq. Saidis Sullivan & Rogers 26 West High Street Carlisle, PA 17013 Wayne F. Shade, Esquire 53 W. Pomfret St. Carlisle, PA 17013 Charlotte Ivy Dixon 323 Bayview Street Camden, ME 04843 Kimberly . Colonna Dated: April 13, 2012