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HomeMy WebLinkAbout09-16-13 (2) 655163 . , c� . c- ` _.... >..I ;- r��� ,>... �� . ; . Richard F. Rinaldo m - : �. Pa. I.D. No. 33222 - ` ; Williams Coulson Johnson Lloyd -� � Parker & Tedesco, LLC � `" . One Gateway Center, 16th Floor w � ;r=a J� =�� Pittsburgh, PA 15222 (412-454-0200 Attorneys for Barbara M. Mumma IN THE COURT OF COMMON PLEAS OF CUIVIBERLAND COUNTY, PENNSYLVANIA In re: ORPHANS' COURT DIVISION Estate of Robert M. Mumma, Deceased. No. 21-86-398 OBJECTIONS OF BARBARA M. MUMMA TO REPORT OF AUDITOR DOCKETED AUGUST 7, 2013 In accordance with the Local Rule 8.7-2 of the Local Rules of the Court of Common Pleas of Cumberland County, Orphans' Court Division, Barbara M. Mumma (`Barbara Mumma"), by her counsel of record, hereby files and serves her objections to Report of Auditor dated August 5, 2013 and docketed August 7, 2013 (the "Auditor's Report") at Docket No. 767 by the Auditor appointed by this Court in the above-captioned matter, Joseph D. Buckley, Esquire ("Auditor Buckley"). Pursuant to the Order of Court dated August 19, 2013 and docketed August 20, . , 2013 at Docket No. 772, this Court, per Oler, J., extended until September 16, 2013 the time within which any objections to the Auditor's Report were to be filed. and served. Rule 8.7-2 of the Local Rules of the Court of Common Pleas of Cumberland County does not provide that a brief or memorandum of law is to accompany the Objections at the time they are filed. Barbara Mumma fully intends to file a mem- orandum of law in support of her objections at the appropriate time. These objec- tions will cite to relevant authorities with respect to objections to the Auditor's proposed conclusions of law, but will not purport to be a brief filed in support of the objections. It should be noted, however, that detailed post-hearing briefs and responses were submitted by the various parties, including both Lisa Morgan and Barbara Mumma on two different occasions prior to the filing of the Auditor's Re- port Docketed August 7, 2013. Introduction and Procedural Issues and Background It cannot be doubted that this Orphans' Court matter has been pending for an exceedingly long time, a fact that he led this Court to express its frustration on a number of occasions recently. See, e.g., Docket No. 721, Order of Court dated May 22, 2013 (denying a petition filed by a party other than Barbara Mumma and stating "the resolution of this 1986 estate having already been delayed beyond all reason"). - 2 - ! 1 To be fair, however, there have been a variety of causes for such delay, not all of which are attributable to quarrelling family members. For example, by Order docketed January 7, 2005 this Court appointed Taylor P. Andrews, Esquire as audi- tor of the estate. See Docket No. 87. Three and a half years later, by Order docket- ed September 19, 2008 this Court vacated the appointment of attorney Andrews and appointed a replacement auditor, Joseph D. Buckley, Esquire ("Auditor Buck- ley"). See Docket No. 295. During those 3 years prior to Auditor Buckley's ap- pointment, no hearings were held or significant progress made in the litigation.' Auditor Buckley accurately points out in the August, 2013 Auditor's Report that "[o]ver the course of several years, nearly forty days of hearing were held, thousands of pages of transcripts produced, hundreds of e�ibits presented, numer- ous ancillary legal actions, motions and appeals filed by the parties [including by Lisa Morgan, and not just by various objectors], and a Fifth Account and Request for Distribution filed. Also during the course of the hearings Barbara McK. Mum- ma, the widow of Robert M. Mumma and his executrice (sic) and trustee, passed away." Auditor's Report, at p. 2. � Auditor Buckley recommends in "Additional Matters" No. 50 that Taylor An- drews fees in the amount of$11,856.46 be paid. See Auditor's Report, p. 122. Auditor Buckley provides no further explanation of his rationale for such a rec- ommendation. - 3 - . , Following the conclusion of the nearly forty days of hearings, the parties were directed to file their post-hearing memoranda on or before October 31, 2011, which they did. See, e.g., Docket Nos. 637-638.2 It took Auditor Buckley nearly two full years (22 months) following the submission of post-hearing responses to prepare and file the Auditor's Report in August 2013. Although there are occa- sional citations in the Auditor's Report to e�ibits, there are virtually no citations to the "thousands of pages of transcripts" which Auditor Buckley references at the outset of the Auditor's Report. See Auditor's Report, at p. 2. More troubling, Au- ditor Buckley completely fails to include in the Auditor's Report any references at all to the actual Accounts which were filed and which were the subject of the Ob- jections and the hearings, except to note that the Accounts exist. See Auditor's Re- port, at pp. 2-3. During that time, Auditor Buckley received and was granted sev- eral extensions of time within which to file and serve his report. Following a mo- tion to extend the time for filing objections to the Auditor's Report, which consist- ed of some 130 pages, including 478 "Findings of Fact," not including sub-parts, and 53 "Conclusions of Law," this Court gave the parties until September 16, 2013 2 The record also is clear that Auditor Buckley had previously requested that the parties file post-hearing materials at the conclusion of the 2010 set of hearings, and that Barbara Mumma, acting pro se, did so. See Docket No. 538 (directing that the brief be stricken and referred to the Court Administrator for processing but not di- recting that that post-hearing "response" filed on behalf of Lisa Morgan by her at- torneys on October 8, 2010 also be stricken, despite the fact that it, too, was a brief. See Docket No. 535. - 4 - _ (a period of 40 days) within which to file and serve objections to the Auditor's Re- port, emphasizing that "No further extension to file objections shall be granted." See Docket No. 772. From the outset, it is imperative to emphasize that the Auditor's Report con- tains several glaring and — and to some extent— inexplicable omissions and inaccu- racies with respect to the objections filed on behalf of Barbara Mumma. Perhaps chief among the omissions is the fact that the Auditor's Report states that Barbara Mumma "presented seven issues." See Auditor's Report, at p. 2. Auditor Buckley does not consider and seems to have forgotten that Barbara Mumma also submitted Objections to the Account of the Marital Trust and Objections to the Account of the Residuary Trust on November 22, 2010, setting forth specifically her objec- tions to the 2010 Accounts filed by the Marital and Residuary Trust. See Docket Nos. 546, 547. The fact that Auditor Buckley has neglected to consider the objections filed in 2010 by Barbara Mumma is quite clear even from a cursory examination of her objections. For example, in both sets of objections, Barbara Mumma has objected to the improper allocation of expenses (chiefly attorney's fees) between the Marital and the Residuary Trust and has improperly allocated expenses between principal and income. Auditor Buckley does not address those issues. Similarly, in a dis- crete example easy to identify as completely missing from the Auditor's Report, - 5 - , , Barbara Mumma objected in 2010 that "The Trustee improperly identifies the pur- chase of a $26,772 tractor as an administrative expense and does not identify the tractor as an asset of the Trust nor identify the tractor as being sold." See Objec- tions to the Account of the Residuary Trust, Docket No. 546, at ¶ 18. The word "tractor" does not appear anywhere in the Auditor's Report. Moreover, Mr. Buckley acknowledges that Barbara Mumma presented the expert testimony both of Attorney Daniel Johnson and of Certified Public Ac- countant Joseph D.C. Wilson, III. See Auditor's Report, Findings of Fact 394-407, pp. 69-71. Both opined, based on the evidence, that the trusts had been improperly valued. CPA Wilson estimated that the marital trust assets were undervalued at the time of funding by $20 - $25 million dollars. He also concluded that because of the funding issues, Barbara McK. Mumma had improperly received over $2 mil- lion in distributed assets during her lifetime following the death of her husband. Auditor Buckley's conclusions and recommendations do not address this testimony at all. Similar examples may be found in the Auditor's Report addressing factual issues which flatly contradict the testimony at the hearings. For example, Auditor Buckley asserts on more than one occasion in connection with the CRH sale that it was the fault of Robert Mumma II which cost the estate "approximately $20 mil- lion dollars" (See Auditor's Report at ¶ 158, p. 32), despite the fact that Lisa Mor- - 6 - � , gan's own witness testified that the reduction in the purchase price had nothing to do with the litigation commenced by Robert Mumma II. General Obiections to Proposed Orders Contained In Auditor's Report The proposed orders submitted by Auditor Buckley for approval by this Court (see Auditor's Report, pp. 128-131) are both objectionable. The first is ob- jectionable for the reasons set forth below because the Auditor's Report contains errors of fact and law. The second is objectionable for two reasons: First, the pro- posed order violates both the terms of the will of Robert Mumma (the "Will") and the intention of Robert Mumma, as testator, as set forth in the Will. Second, the proposed liquidation is objectionable for jurisdictional reasons, because it proposes to have this Court authorize Lisa Morgan to perform actions which are outside the jurisdiction of this Court because they affect corporate entities which are not party to this proceeding. l. The Auditor's Report is Objectionable as a Matter of Law Because It Makes Recommendations Which Violate the Intent of the Testator. It is well established that "The settled law in Pennsylvania is that `the polestar in every trust . . . is the settlor's . . . intent and that intent must prevail." In re McKinney, 67 A.3d 824, 831 (Pa. Super. Ct. 2013), quoting In re Estate of McFadden, 2 A.3d 565, 572 (Pa. Super. Ct. 2010). See also In re Hirt, 832 A.2d 438, 448 (Pa. Super. 2003)(same). Moreover, "the rules for determining a settlor's - 7 - � . intent are the same for trusts as for wills." Id. See also In re McFadden, 705 A.2d 930, 931 (Pa. Super. 1998). It is equally well established that "[w]here provisions of a trust instrument conflict, they should be read in such a fashion as to give effect to both and/or fulfill the intent of the settlor." In Ne Hirt, 832 A.2d at 448, citing In re McCune,705 A.2d 861, 867 (Pa. Super. 1997). Nothing could be more clear from the provisions of the will and the trust than the fact that Robert Mumma wanted his children to be equal beneficiaries and to be treated equally following the death of Mr. Mumma's wife, which occurred in 2010. Here, there are four residuary beneficiaries, one of whom is the trustee, Lisa Morgan. "If a trust has two or more beneficiaries, the trustee shall act impartially in investing, managing and distributing the trust property, giving due regard for the beneficiaries' respective interest in light of the purpose of the trust." 20 Pa. C.S. § 7773. See, e.g., Restatement (Third) of Trusts, § 79 (2007). The Auditor's Report also quotes the fifth paragraph of Section Seven of Mr. Mumma's Last Will and Testament, which provides; "Upon the death of my said wife, the principal of this Trust, as it is then constituted, shall be paid over by my surviving trustee unto my children, ROBERT M. MUMMA, II, BARBARA M. McCLURE, LINDA M. ROTH and LISA M. MUMMA, free of this Trust, share - 8 - . , and share alike, per stirpes and not per capita." (emphasis added). See, e.g., Au- ditor's Report Report at p. 109. The second paragraph of Section Eight of Mr. Mumma's Last Will and Tes- tament similarly provides: "Upon the death of my said wife, the principal of this trust, as it is then constituted, or, if my said wife does not survive me, upon my death, my residuary estate, shall be paid over by my surviving trustee or by my successor Executor, as the case may be, unto my children, ROBERT M. MUMMA, II, BARBARA M. McCLURE, LINDA M. ROTH and LISA M. MUlVI1VIA, share and share alike, per stirpes and not per capita." (emphasis added). Auditor Buckley, after quoting these paragraphs, then concludes that Lisa Morgan, as the surviving trustee, has the authority to liquidate and distribute those assets among the four named beneficiaries, and proposes that this Court authorize just that. See Auditor's Report, at p. 131. There is nothing whatsoever in the sec- tions quoted by Auditor Buckley which addresses the question of liquidation at all, as opposed to distribution, much less which somehow authorizes giving Lisa Mor- gan carte blanche to liquidate all of the assets of the trust (not to mention purport- ing to authorize her to sell real estate that is not owned by the trust but is owned by other entities). To the contrary, Mr. Mumma's contrary intent is quite clear: fol- lowing his wife's death, the principal of each trust "as it is then constituted" is to be distributed "share and share alike" among his four children equally. - 9 - , ► In his Report, Auditor Buckley quotes In re Scheidmantel, 868 A.2d 464, 488 (Pa. Super. 2005) for guidance as to determining the intent of the testator or settlor. In Scheidmantel, the Superior Court also emphasized that although a trus- tee does have discretion, "[t]he real question is whether it appears from the record that the trustees acted in "that state of mind" contemplated by the grantor of the trust." Id., quoting In re Briggs' Estate, 27 A.2d 430, 433 (1942)(which cited Re- statement of Trusts, Section 187 (1929)). In re Scheidmantel, 868 A.2d at 481. In Scheidmantel, the Superior Court concluded that "A trustee may be found to have breached his duty of trust if he fails to exercise his discretion in a manner con- sistent with the document that created the trust." Id. Here, the Auditor's Report is objectionable because it requests an order au- thorizing the trustee, Lisa Morgan, to liquidate the assets of the trust before distrib- uting those assets. That recommendation is contrary to the intent and the state of mind of Mr. Mumma in creating the trust as expressed in the unequivocal language of the document itself. The principal of the trust "as it is then constituted," is to be paid over and distributed, "share and share alike" to Mr. Mumma's four chil- dren. What Auditor Buckley's recommendation and report does not address -- and in fact contradicts -- is that fact that Robert Mumma's Will expressly states that the principal is to be distributed on the death of Mr. Mumma's wife "as it is then con- - 10 - . , stituted." The intent of the settlor is clear not only as to the fact that the four chil- dren are to be treated equally, but also that they each receive a one-fourth share of the principal of the trust "as it is then constituted." There is nothing in the Audi- tor's Report that asserts that such a distribution of"share and share alike" from the trust "as it is then constituted" cannot be accomplished, which makes the Auditor's Report objectionable in itself. Although he never actually admits it in the Auditor's Report, Auditor Buckley seems to think that he should equate the assets of the Trust with tangible personal property like a car or a dining room table and chairs which cannot be di- vided equally among multiple beneficiaries. To use an example which Auditor Buckley might recall as eerily familiar, his view seems to be that "you can't take a set of three chairs like those sitting in the courtroom and divide them equally among four beneficiaries." An actual analysis of the Will, however, demonstrates that Robert Mumma, the Testator, thought of that problem and addressed it in the Will. He disposed of such property under separate provisions. The assets of the Trust do not include property such as vehicles or furniture. Instead, the assets of the Trust consist almost entirely of cash or shares of stock or percentage interests in tenancies-in-common, all of which clearly can be distributed equally among the Testator's four children, "share and share alike," as the Testator intended. - 11 - For example, the MRA-1 Tenancy In Common Agreement lists ownership interests in which the Estate of Robert M. Mumma had a listed interest of 81.82507%. See Transcript, E�ibit A-1, at ¶ 7. There is nothing to prevent Lisa Morgan from distributing one fourth of the Trust's interest, an undivided 20.4562675% interest, from the Trust to each of the four residuary beneficiaries. According to the stipulation, then Lisa Morgan would have a 25.9130175% interest in MRA-1, while Barbara Mumma and Linda Mumma each would have an undi- vided 24.6918175% interest in MRA-1 and Robert Mumma II would have an un- divided 24.7033475% interest in the tenancy in common and, presumably, in the properties owned by the tenancy in common. Similar distributions can be made for MRA-II and for the respective shares of stock in D-E Distribution Corporation, G-A-T Distribution Corporation and Bobali Corporation.3 In fact, as set forth in considerable detail in the papers filed in this matter, on the death of Barbara McK. Mumma on July 17, 2010, this distribution should al- ready have occurred during the past nearly three years. As Barbara Mumma averred in paragraph 51 of the New Matter contained in her initial Response to the Petition to Authorize Liquidation which resulted in an earlier Interim Report and which Barbara Mumma has demonstrated and maintained throughout, "There is 3 It bears repeating that the assets of the Trust are the shares of stock in the corpo- rations and the undivided percentage interests in the tenancies in common. The as- sets are not the parcels of real estate. - 12 - � } nothing in the Will which provides that, following the death of Barbara McK. Mumma, the assets of either of the Trusts should be liquidated." New Matter, ¶ 51. Moreover, as Barbara Mumma has asserted from the outset: "Liquidation of the as- sets and sale of all the real properties as sought in the Petition would not only be premature, but also would be economically disadvantageous to the beneficiaries and clearly not in their best interests and would violate both the express provisions of the Will and the intent of the Testator." New Matter, ¶ 54.4 2. The Auditor's Report is Objectionable Because It Recommends That This Court Authorize Actions which Exceed the Jurisdiction of this Court. Second, the Auditor's Report recommends that this Court by order authorize Lisa Morgan to perform actions which are outside the jurisdiction of this Court be- cause they affect corporate parties not before the Court. As the Auditor's Report recognizes, it is not disputed in these proceedings that there are several parcels of real estate referenced in the proceedings which are owned by D-E Distribution Corporation or by G-A-T Distribution Corporation. The assets of the Trust in those cases are not parcels of real estate; they are shares of stock in Pennsylvania corporations not party to this proceeding. In addition, the Trust claims an interest in parcels of real estate owned by Bobali Corporation, also a Pennsylvania corpora- 4 It should be noted that the arguments and issues which form the basis of Barbara Mumma's Objections were raised before Auditor Buckley, either by filings of rec- ord and documents or during the argument before Auditor Buckley or both. - 13 - . , tion not before this Court. In fact, the parcels of real estate owned by Bobali Cor- poration are at issue in a civil action pending before Judge Bratton in the Court of Common Pleas of Dauphin County, Morgan v. Mumma, No. 2010-cv-11490, in which a non jury trial has been completed and is awaiting decision. Other parcels of real estate are owned by one of two tenancies in common, described as MR.A-I and 1VIRA-II (see transcript, E�ibit A-1, at ¶¶ 10-11), which merely establishes that the trust has an undivided percentage interest in the assets of the tenancies in common. Auditor Buckley refers to and relies heavily on two opinions by Judge Sheely at 66 Equity 19885, interpreting those opinions as ab- solving Lisa Morgan of the obligation to seek or obtain the prior permission or consent of the residuary beneficiaries with respect to the assets of the MRA tenan- cies in common. However, Section 3 and Section 13 of the 1VIRA Agreements clearly provide that a Transfer Notice, accompanied by an appraisal, must be pro- vided to those who own an interest in MRA prior to any sale, and there is absolute- ly nothing in either of Judge Sheely's opinions which addresses the notice re- 5 In fact, the first 146 of the "Findings of Fact" identified in the Auditor's Report are, according to Auditor Buckley, taken from one of two Opinions of Judge Sheely issued more than 20 years ago. See, e.g., Auditor's Report, at pp. 12, 28. Auditor Buckley apparently did not notice that Barbara Mumma was not a party to the second of those lawsuits, which resulted in "Findings of Fact" Nos. 121-146. - 14 - quirement. As the transcript before Auditor Buckley demonstrates, no vote was ever taken and no notice was given as required by the MRA Agreements. Moreover, it is significant that the two opinions by Judge Sheely at 66 Equi- ty 1988 were both issued in 1992. At that time, Barbara McK. Mumma, Mr. Mumma's widow, was still very much alive. Accordingly, Section Seven and Sec- tion Eight of Mr. Mumma's Last Will and Testament, which governs the disposi- tion of the trust assets following the death of Barbara McK. Mumma, were not yet operative, applicable or material. Those provisions were not a part of or, so far as can be gleaned from the opinions themselves, ever considered by Judge Sheely in reaching his determination about the MRA Agreements. Now, with the passing of Barbara McK. Mumma, as set forth in more detail infra, the fifth paragraph of Sec- tion Seven and the second paragraph of Section Eight of Mr. Mumma's will are both relevant and material in determining the obligations of the trustee in distrib- uting the assets of the Trust. In short, the passing of Barbara McK. Mumma argu- ably makes Judge Sheely's 1992 Opinions inapplicable to the current interpretation and status of the Trust and the obligations of Lisa Morgan as trustee. In addition, although this issue was addressed at length in the argument be- fore Auditor Buckley and in the papers filed by the parties, Auditor Buckley does not suggest that Lisa Morgan must follow the requirements of the MRA Agree- - 15 - . . ments regarding notice prior to liquidating assets and, presumably, selling real property owned by the MRA tenancies in common. 3. The Auditor's Report is Objectionable Because It Seeks to Have Tnis Court Authorize Lisa Morgan to Liquidate the Assets of the Trusts and Make Final Distributions Based on Accountings Which Only Covered Periods Prior to July 17, 2010 and Which Did Not Account for More Than Three Years of Activity. By Auditor Buckley's own admission, the Auditor's Report and Recom- mendations only address filings by the Trustee, Lisa Morgan, up to July 17, 2010. See Auditor's Report, p. 3 at¶ I; p. 4 at¶N. There was no accounting before Audi- tor Buckley for the more than three-year period July 17, ZO10 to present. In fact, the Trustee only filed and served by mail such an accounting on September 6, 2013, ten days ago. Interested parties have had no realistic opportunity to review those accountings or to file any objections which might be necessary. Moreover, under the Orphans' Court Rules of Cumberland County, the ob- jections to the account or statement of proposed distribution are not even yet due. See Local Rule 6.10-1 of the Orphans' Court of Cumberland County. Auditor Buckley's proposed order with respect to a plan of liquidation and distribution is both objectionable and improper and, at the very least, premature. - 16 - Obiections to Auditor's Report 4. The Auditor's Report Is Objectionable Because It Fails To Properly Ac- count For The Intent of the Testator, Robert Mumma, with Respect to His Children, Following the Death of his Wife, Barbara McK. Mumma. On two separate occasions in the Auditor's Report, Auditor Buckley goes to great lengths to characterize Robert Mumma as a "very savvy business man who loved his wife and children" and goes on to detail what Auditor Buckley believes the Will means as to Robert Mumma's intentions concerning his widow. See, e.g., Auditor's Report, at pp. 83. 111. (Indeed, Auditor Buckley appears to have repeat- ed himself word for word in these two sections as to this matter.) However, what is objectionable in the Auditor's Report as to this issue is that Auditor Buckley then totally ignores the intent of Robert Mumma with respect to Mr. Mumma's four children, who are the beneficiaries of the Trust now that Barbara McK. Mumma has passed away.6 There is no question that "The requirement of loyalty of a trustee is the most intense fiduciary relationship in our law." In re Holmes T�ust, 139 A.2d 548, 551 6 No one, has ever questioned that Robert Mumma intended to provide sufficiently for Barbara McK. Mumma so that she could continue to live comfortably in the manner to which she had become accustomed. However, there is no evidence at all that the proper funding of the Marital Estate, rather than the overfunding of the Marital Estate, as was accomplished here, would not have provided sufficient rev- enue for her to live in comfort. Indeed, had more assets gone into the Residuary Trust, as they should have, Mrs. Mumma would have realized the interest from the Residuary Trust, just as she did from the Marital Trust. The only difference was that she was not permitted to make annual withdrawals of 5%. - 17 - (Pa. 1958). Under Pennsylvania statutes, "A trustee shall administer the trust sole- ly in the interests of the beneficiaries." 20 Pa. C.S. § 7772(a). See, e.g., Restate- ment (Third) of Trusts, § 78(1)(2007)("Except as otherwise provided in the terms of the trust, a trustee has a duty to administer the trust solely in the interests of the beneficiaries . . ."). Here, where the Will provides that there are multiple benefi- ciaries of the residuary trust, there is a further well-established duty of impartiality among the various beneficiaries. "If a trust has two or more beneficiaries, the trus- tee shall act impartially in investing, managing and distributing the trust property, giving due regard to the beneficiaries' respective interests in light of the purposes of the trust." 20 Pa. C.S. § 7773. Under the statute, a trustee may properly be re- moved if "the trustee has committed a serious breach of trust." 20 Pa. C.S. § 7766(b). See, e.g., In re Holmes Trust, 139 A.2d 548, 552 (Pa. 1958)(affirming removal of a trustee after finding hostility and friction between trustee and benefi- ciaries and "avowed favoritism toward one of the beneficiaries"). The Restatement (Third) of Trusts reinforces the underpinnings of Pennsyl- vania law: § 79 Duty of Impartiality; Income Productivity (1) A trustee has a duty to administer the trust in a manner , that is impartial with respect to the various beneficiaries of the trust, requiring that: (a) in investing, protecting and distributing the trust estate, and in other administrative functions, the trustee must act impar- - 18 - tially and with due regard for the diverse beneficial interests creat- ed by the terms of the trust; and (b) in consulting and otherwise communicating with benefi- ciaries, the trustee must proceed in a manner that fairly reflects the diversity of their concerns and beneficial interests. Restatement (Third) of Trusts, § 79 (2007). See, e.g., In re Estate of Hamill, 410 A.2d 770, 773 (Pa. 1980)(recognizing the obligation of a trustee to deal impartially with all beneficiaries, and quoting Restatement (Second) of Trusts in support). The duty to provide information to all of the beneficiaries is equally substan- tial and well established. See, e.g., 20 Pa. C.S. § 7780(3)(a); Restatement (Third) of Trusts, §§ 82, 83 (2007). Contrary to the Auditor's Report, they did not pro- vide that information, even when requested. Finally, there is no question that Lisa Morgan and Barbara McK. Mumma had a fiduciary obligation to act in good faith in all of their dealings. Under Penn- sylvania law, good faith requires the "absence of intent to defraud or seek uncon- scionable advantage." In re Estate of Warden, 2 A.3d 565, 573 (Pa. Super. Ct.)(quoting Black's Law Dictionary, 701 (7th ed. 1999)). Moreover, bad faith is found when "the trustee . . . acts dishonestly, or with an improper even though not a dishonest motive . . . ." In re Estate of Warden, 2 A.3d 565, 574 (Pa. Super Ct. 2010), quoting In re Scheidmantel, 868 A.2d 464, 482 (Pa. Super. 2005). Here, the evidence demonstrates that they acted with improper motive to gain an uncon- scionable advantage and did not act in good faith. Rather, the evidence shows that - 19 - they acted with what the Superior Court in Estate of Warden characterized as "moral obliquity." In re Estate of Warden, 2 A.3d 565, 574 (Pa. Super Ct. 2010), quoting U.S. Fid. & Guar. Co. v. Feibus, 15 F. Supp. 2d 579, 585 (M.D. Pa. 1998). In short, as the Executrixes and Trustees, they did not in fact treat all four of the beneficiaries equally, as required by their fiduciary obligations. Auditor Buck- ley's Report never addresses the unequivocal language of the Will which requires that at the death of Barbara McK. Mumma, the principal of the Trust is to be paid over to the four children of Robert Mumma: "the principal of this Trust, as it is then constituted, . . . share and share alike, per stirpes and not per capita." See Au- ditor's Report, at p. 82, 109. Auditor Buckley quotes the express language of the Will on at least two occasions, and never addresses that language in the Auditor's Report. 5. The Auditor's Report is Objectionable Because It Fails to Address the Objection That the Co-Executrixes Misinterpreted the Will and Over- funded the Marital Trust to the Detriment of Three of the Beneficiaries of the Trust. The funding method for the marital trust is contained in Article Seventh of the Will. It is undisputed that Article Seventh provides that the marital trust is to be funded in "an amount equal to fifty (50%) percent of my total gross estate as fi- nally determined for Federal Estate Tax purposes, taking into account and includ- ing therein, for computation purposes, my undivided interest in the value of all my interests in property which pass or have passed to my wife under other - 20 - provisions of this Will or otherwise than under this Will, but only to the extent that such interests are, for the purpose of the Federal Estate Tax, included in de- termining my gross estate and allowed as a marital deduction."(emphasis added) Under Pennsylvania law, "a will must be so construed, if possible, as to give effect to every word employed by the testator and a construction which renders any of the words nugatory and futile must be rejected." In re Estate of Vandergrift, 177 A.2d 432, 438 (Pa. 1962); In re Estate ofBlum, 328 A.2d 158, 162 (Pa. 1974). Barbara Mumma provided the expert testimony of Daniel P. Johnson, Esquire as to the proper interpretation of this portion of the Will. Mr. Johnson testified that the only interpretation which gives meaning to the words highlighted above requires that the amount that is used to fund the Marital Trust must be reduced by the val- ues identified above. Thus, if the value of the assets actually transferred to the Marital Trust equaled exactly 50%, then the Marital Trust was undeniably over- funded. See generally Bloom v. Selfon, 555 A.2d 75, 77 (Pa. 1989)(the keystone in interpretation of a will is ascertaining the intent of the testator from the actual lan- guage of the will). Moreover, the Will directed that the values to be computed "for the purpose of funding the trust, be valued as of the date of its distribution." Here, they were not. In fact, as Barbara Mumma's expert witness Joseph D. C. Wilson, III, a Cer- tified Public Accountant whose "fields of expertise include accounting, probate, - 21 - Estate and Trust funding and accounting" (see Auditor's Report, Finding of Fact ¶ 404, at p. 70) testified, he was able to quantify the overvaluing of the Marital Trust quite precisely in this regard. According to Mr. Wilson, the Marital Trust was overfunded in the amount of$861,000.00 solely because the amount was miscalcu- lated and the wrong date of valuation employed. Mr. Wilson also testified that the assets that were placed into the Marital Trust were even more substantially undervalued, on the order of between $20 to $25 Million. There is substantial evidence in the record to show that a number of assets were grossly undervalued, including but not limited to Nine Ninety-Nine, Inc., Pennsylvania Supply Company, Kim Company, Union Quarries, Inc. and Bender & Grove (Mt. Holly). Mr. Wilson provided expert testimony on this issue as to the entities listed, and his investigation led him to conclude that the Marital Trust was exorbitantly overfunded to the detriment of the residuary beneficiaries. As additional evidence of the undervaluing of the assets placed in the Mari- tal Trust, Mr. Wilson pointed to the valuations and reports and evidence of Mr. Landrey and Legg Mason, both of which conceded that the value of Pennsy Supply alone was hugely undervalued. Pennsy Supply was valued at $3.5 million for the Estate. The appraisal done by Touche Ross a few months earlier valued it at be- tween $10 Million and $12 Million. Even more, within a year after funding the Marital Trust, CRH made an offer to purchase Pennsy Supply in 1988 which was - 22 - not completed. Eventually, the sale was completed in 1993, when it was sold for approximately $35 Million. Both Mr. Landrey and Legg Mason concluded that Pennsy Supply was worth more in 1988 than it was in 1993. Thus, even if one were to accept the 1993 sales price as evidence of value, that 1993 value would be the absolute minimum at which Pennsy Supply should have been valued for pur- poses of funding the trusts. In fact, the value of Pennsy Supply was at least ten times that of its allocated value. The Auditor's Report does not even mention this testimony. As Mr. Wilson testified, that fact is apparent even from "looking at the in- come that was produced by these assets in the following five years or so." Mr. Wilson looked, for example, at the values assigned for Bender and Grove ($277,185), Hummelstown Quarries ($799,052) and Union Quarries ($1,340,000), and compared those values with the income earned during the following 66 months. Mr. Wilson determined in each case that the income alone generated dur- ing that period far exceeded the assigned value for the properties. For Bender and Grove, the income earned was $786,741. For Hummelstown Quarry, the income was $1,700,000, and for Union Quarries, the income was $2,023,000. The overfunding of the Marital Trust had several improperly damaging ef- fects on the residuary beneficiaries. As Mr. Wilson testified: "The overfunding of the Marital Trust and the undervaluation of the assets that were transferred to the Marital Trust had two effects. They - 23 - each had an effect and had the same effect. The Residuary Trust pro- vides for income to go to Mrs. Mumma; and then at her death, the re- sidual will be distributed among the children. The Marital Trust provides for the income to go to Mrs. Mumma and at her death the corpus to be distributed to the children. But in the Marital Trust, Mrs. Mumma also has a right of withdrawal of 5 per- cent of the principal of the trust each year. If the value of the assets in the Marital Trust are higher than they should be, then the 5-percent distribution will be higher than it should have been. Similarly, if the assets going into the Trust are undervalued, then the assets being — then if any of the 5-percent distributions are made in kind rather than in cash, then the amounts of those distributions will also be understated; that is, if a share of stock was valued at $2,500 when they went into the Marital Trust and $2,500 when it came out as part of the 5-percent distribution but the value of that stock was really $12,500 a share, then clearly much more is coming out in payment of the 5-percent distribution than should have." It is undisputed that Mrs. Mumma took her 5% distributions annually until the 1993 sale of Pennsy Supply to CRH in the form of stock in Pennsy Supply. This conscious decision, made with the support and direct involvement of my sister Lisa and Morgan, Lewis and Bockius, had two effects: First, because Pennsy Sup- ply had been grossly undervalued at the time assets were distributed to the Marital Trust, taking 5% in stock massively and improperly increased the value of the "5- percent" distribution so that in fact the distribution was far in excess of 5% of the true value of the assets as of the date of distribution. But second, and even more improper, both Barbara McK. Mumma and Lisa Morgan absolutely knew in 1988 - 24 - that certain family members, such as Robert Mumma II, opposed the sale of the company to CRH. By taking out the 5% distribution in Pennsy Supply stock, the distribution substantially increased Barbara McK. Mumma's personal voting share in the company, so that she could vote the sale of the company without, presuma- bly, the constraints of fiduciary obligations which were imposed upon her and up- on Lisa Morgan as co-executrixes and co-trustees of the estates, and, presumably, thereby avoiding oversight by this court. Moreover, the sale of the company in 1993 thereby massively maximized the amount of money which went directly to Barbara McK. Mumma, rather than into the Trust, which thereby permitted her to dispose of that added value as a part of her own personal estate, giving it, as she chose, to her daughter Lisa to the exclusion of Barbara Mumma, Linda Mumma, and Robert Mumma II. There can be no question that this scheme constitutes evidence of improper intent and an improper effort by the executrixes/trustees to deny three of Robert Mumma's children the benefits due them equally as the Testator, Robert Mumma, intended. This partiality with respect to beneficiaries is improper under the law. See, e.g., 20 Pa. C.S. § 7773; In re Holmes Trust, 139 A.2d 548, 552 (Pa. 1958); In re Estate of Hamill, 410 A.2d 770, 773 (Pa. 1980). In addition, this breach of fiduciary duty constitutes a basis for a surcharge under Pennsylvania law. Recently, the Superior Court of Pennsylvania reinforced - 25 - established Pennsylvania law. According to the Court: "The court must find the following before ordering a surcharge: (1) that the trustee breached a fiduciary du- ty and (2) that the trustee's breach caused a loss to the trust." In re Estate of War- den, 2 A.3d 565, 573, (Pa. Super. Ct.2010). See, e.g., Estate of Pew, 655 A.2d 521, 542 (Pa. Super. 1994). Both conditions are evidenced by the record in this case. Barbara McK. Mumma and Lisa Morgan consciously and intentionally breached their fiduciary duty to act impartially with respect to the other beneficiaries. The assets placed into the Marital Trust were intentionally undervalued, and then, par- ticularly as to Pennsy Supply, withdrawn from the Marital Trust annually until 1993, which caused a personal gain to Barbara McK. Mumma and to her own per- sonal estate and an improper loss to the Trust, by removing undervalued assets pri- or to sale so that the Trust would not be the recipient of the proceeds of the sale. This motive was improper, gained an unconscionable advantage for Lisa Morgan and Barbara McK. Mumma to the detriment of the other three beneficiaries, Ms. Morgan's siblings, and evidenced what the Superior Court recently delicately char- acterized as implying "the conscious doing of a wrong because of. . . moral obliq- uity." In re Estate of Warden, 2 A.3d 565, 574, (Pa. Super. 2010), quoting U.S. Fid. & Guar. Co. v. Feibus, 15 F. Supp. 2d 579. 585 (M. D. Pa. 1998). A with- drawal right, such as the 5% withdrawal right contained in the Will, is placed in a trust to assure the beneficiary of income sufficient to live comfortably. Obviously, - 26 - . 4 ��.. �.,�.�,,�.�.,,.�.� �e... ,,_. ,.�.,�, �� ��. taking the 5% annual distribution in stock, particularly in a closely held corpora- tion, and not selling the stock for several years, demonstrates that there was a much different and reprehensible motive involved. The Auditor's Report is Objectionable because it fails to adequately address Barbara Mumma's objections based upon the overfunding of the Marital Trust and the intentional undervaluing of the assets placed therein, and order a surcharge as a result of the Trustees' breaches of fiduciary duty with the consequence that all four children all will benefit and be treated equally, as the testator clearly intended. See, e.g., 20 Pa. C.S. §§ 7781 (Remedies for breach of trust); 7782(a)("A trustee who commits a breach of trust is liable to the beneficiaries affected"). 6. The Auditor's Report is Objectionable Because it Fails to Address the Objection That The Trustees Have Breached Their Fiduciary Duty By Improperly Allocating Expenses Between The Marital and The Residu- ary Trusts. A review of the Auditor's Report with respect to its legal conclusions demonstrates quite clearly that Auditor Buckley apparently overlooked or totally ignored Barbara Mumma's objection concerning the improper allocation of ex- penses between the Marital and the Residuary Trusts. On page 112 of the Audi- tor's Report, Auditor Buckley comments on the allocation of the assets between the Marital and the Residuary Trust at the time the estate opened. However, no- where in the Auditor's Report is there an explanation or finding concerning this objection, which is based on the improper allocation of expenses between the two - 27 - Trusts, and the resulting improprieties therefrom. Two patterns which appear to clearly exemplify the pattern of improper allocations of expenses between the Mar- ital and Residuary Trusts during the period 2004-2010: Accounting 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 detriment of the Residuary Trust. Even more per- nicious to the Residuary Trust, however, is the fact that instead of having the Mari- tal 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 Trust) and permitted a continuation of excessive 5% withdrawals during the period 2004 — 2010, none of which was disclosed to the beneficiaries of the Trust until the ac- counts were filed, and which violated the co-trustees' fiduciary duty under Penn- sylvania law. - 28 - A. Accounting Fee Payments to Hadley & Company. This objection is to the allocation of the payments to Hadley and Company. Between the Marital and the Residuary Trust. As to whether Mr. Hadley provided Barbara Mumma with information during the pendency of this matter, the testimo- ny shows that Mr. Hadley claims that he is not allowed to disclose 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 another example of misconduct by the co-trustees dur- ing this period. The Accounts filed for the period 2004-2010 reveal the following: Mr. Had- ley received total payments of $229,342.90 from the Trusts. (See Residuary Ac- count, 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 50%, or $36,967.50, was allocated to principal (Marital Account, pp. 18- 19), and the other 50%, or $36,967.50 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 income. Even more telling is the fact that the Residu- - 29 - ary Account actually specifies which payments to Hadley & 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 designated "Hi-Spec Inc. litigation and the remainder, $82,866.14, is simply entitled "litigation." It is instructive that, according to the Accounting for the Marital Trust, there is not a single recorded payment to Hadley & 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% being charged to principal and 50% being charged to income (Compare pp. 15-17 with pages 40-42 of Residuary Trust Account), that is NOT true with respect to the payments identified as for "litigation" 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 Account, p.17) and $5,358.09 charged to income (See Residuary Account, p. 42) and a payment dated 6/21/10 for "Services Rendered 04/24/10 — 09/19/10 re litigation" has $925.00 - 30 - charged to principal and $925.00 charged to income. (See Residuary Account, pp. 17, 42) In short, the allocation of the fees paid to Hadley & Company during the period is deficient in two respects: first, it improperly allocated an 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. The Auditor's Report never addresses this objection at all. B. Legal Fees. Barbara Mumma's objections to the legal fees appearing in the accounts filed for the Marital and Residuary 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 in- volved; and (3) as to the Florida litigation, the legal fees are outrageously exces- sive because they are clearly disproportionate to any relief which could be realized, and therefore constitute an obvious waste of the assets of the trusts. � By contrast, the auditor fees to be paid to Auditor Buckley were properly allocat- ed, with 50% allocated to the Residuary Trust (see 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. - 31 - 1. Misallocation of Legal Fees Between the Residuary and the Marital Trusts. As was the case with the Accounting fees charged by and paid to Hadley & Company, the Auditor's Report never addresses this objection at all. 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 continued to take a 5% cash withdrawal of principal each year (see Marital Trust Account, p. 23), for a total of $2,274,000.00 during the period in question. (see Marital Trust Account, p. 23). She also received $1,600,000.00 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 substantially erroneous valuing of the as- sets (as discussed above), but also by the artifice of allocating a massive percent- age of the legal fees to the Residuary Trust. The Accounts reveal that, during the period 2004 — 2010, the law firm Mars- ton, Deardorff, Williams & Otto was paid $657,482.07 (see Residuary Account, pp. 17-18; Marital Account, p. 21). Of this total, $551,496.31, or 83.9%, was charged to the Residuary Trust and only $105,985.76, or 16.1%, was charged to the Marital Trust. - 32 - 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 26.4%, was charged to the Marital Trust. After the Objections were filed in 2010, Lisa Morgan, through Ivo Otto, filed a "Supplement under the Account of the Residual Trust transferring a charge of$12,508.86 which was paid to Morgan Lewis & Bockius in 2005 from the Residuary Trust from principal to income, with no explanation. Curiously, Auditor Buckley's 2013 Report contains no findings of fact as to the embarrassingly large amounts of legal fees incurred by the Trusts or the Estates during the pendency of this matter. Instead, Auditor Buckley, although he con- cedes that "the estate bears the burden to show that their counsel fees were proper," (See Auditor's Report, at p. 119) limits his discussion to the fact that the attorneys submitted their invoices and testified— not surprisingly —that their work for the es- tate had been valuable. Auditor Buckley then concludes that "all attorney fees and costs associated with the administration of this estate and the trusts were reasona- ble." See Auditor's Report, at p. 120. He says nothing whatsoever about Barbara Mumma's objection challenging the misallocation of the payments for the fees be- tween the Marital and the Residuary Trusts and apparently forgot that this Objec- tion exists. - 33 - 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 det- riment of Barbara Mumma, 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 (2004 — 2010) totaled $2,510,561.05. Of this total, only $594,713.29 were 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 5% distribution each year. In addition, the misalloca- tion has improperly reduced the assets of the Residuary Trust, which will reduce substantially the amounts available to the four beneficiaries, not only because of the excessive payments for legal fees made from the Residuary Trust, but also be- cause the excessively high 5% withdrawals from the Marital Trust has reduced the remaining principal assets of the Marital Trust available for distribution share and share alike to the four beneficiaries. Auditor Buckley also asserts that the will of Barbara McK. Mumma, which is being probated in Florida, is entirely irrelevant to this proceeding because "Mrs. Mumma's personal estate is irrelevant." See Auditor's Report, at p. 122-123. Au- ditor Buckley misapprehends the issue. The issue relates not to Barbara McK. Mumma but to Lisa Morgan in her capacity as Trustee of her father's estate. As the Trustee, Lisa Morgan is in an untenable position as to her fiduciary duty. Lisa - 34 - 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 Green, then of Morgan, Lewis & Bockius and counsel of record in this proceeding, was one of the witnesses to the will. During the period 2004 — 2010, therefore, Lisa Morgan had an irreconcilable 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 ir- reconcilable conflict of interest. nonetheless, she did so and 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 ac- counts reveal that the Trusts were charged by and paid to Crary Buchanan $545,966.03. (See Residuary Account, pp. 12-15; Marital 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 11/17/08 were charged to the Marital Trust. The entire in- - 35 - ��.,�,.. :�,.�.F �,� .. �� n�_ �. ,.���.. __ voice 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 interest and breach of fiduciary duty is exacerbated if Lisa Morgan now claims that a portion 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 disinherit her siblings with re- spect to the estate their father clearly intended would be shared equally among his four children to the greatest extent possible, using their positions as co-executrixes and co-trustees to do it. There is no question that this violates Pennsylvania law. See 20 Pa. C.S. § 7773. This 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. Again, Auditor Buckley apparently misapprehended the nature of Barbara Mumma's objection in the Auditor's Report. The evidence presented to Auditor Buckley provided no justification for having two different major law firms repre- sent Lisa Morgan and, before her death, Barbara McK. Mumma, as co-executrixes 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 & Bockius. (See Tr. 1614) If - 36 - so, she did not explain the role of Morgan Lewis & Bockius adequately at all. There was no good reason for having senior partners from two different national law firms both attending and participating in the hearings and proceedings. 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 & Bockius and Marston Deardorff Williams & Otto alone, according to the accounts filed, total $2,510,561.O5.g Ironically, given the terms of the Will, at least 75% of the legal fees already paid to Morgan Lewis & Bockius and Marston Deardorff Williams & Otto ulti- mately will have been paid by Barbara Mumma,Linda Mumma and Robert Mum- ma II, because those are payments made out of the estate and trusts. 3. Florida Litigation Fees Excessive. The Auditor's Report does not address a specific issue with respect to exces- sive attorneys' fees, which are those relating to the Florida Hi-Spec litigation. To the extent that one can interpret Auditor Buckley's conclusion on page 120 of the $ When the $545,966.03 paid during this period to Crary Buchanan is added to the total, the total legal fees paid by the trusts during this period alone exceed $3,000,000.00. A review of the previous accounts filed shows that the attorneys representing the trusts during the administration of this estate and the trusts have received huge fees. Morgan Lewis & Bockius alone has received over $7,000,000.00 in fees prior to July 17, 2010. - 37 - Auditor's Report as finding the Crary Buchanan legal expenses "reasonable" in the context of that litigation, then that conclusion is simply wrong. During the period 2004 — 2010 alone, Lisa Morgan and Barbara McK. Mumma authorized and paid the law firm Crary Buchanan $545,966.03, of which $521,116.34 was paid from the Residuary Trust. The amount of those legal fees 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-numbered) of the Residuary Account concedes that the list of assets does not include any recovery in the Flori- da litigation, but claims, without support, that the amount "is in excess of $850,000." Since the account on that same page concedes that the proceedings have not been finalized, it is obvious that there would 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 Pennsyl- vania: "The court must find the following before ordering a surcharge: (1) that the trustee breached a fiduciary duty and (2) that the trustee's breach caused a loss to the trust." In re Estate of Warden, 2 A.3d 565, 572, (Pa. Super., 2010). See, e.g., Estate of Pew, 655 A.2d 521, 542 (Pa. Super. 1994). Both conditions are evi- denced by the record in this case. - 38 - 7. The Auditor's Report Fails Entirely to Address the Objection Concern- ing the Purchase and Status of the McCormick Utility Tractor ldentified in the Accounts. Paragraph No. 18 of Barbara Mumma's Objections to the Account of the Residuary Trust for the period 2004-2010 rather succinctly challenges and objects to the failure to account for the purchase and possible disposition of a tractor in the amount of$26,772. See Docket No. 546, at ¶18. She raised this issue again in her post-hearing submission in support of her objections. See Docket No. 638, at 16, n. 12. Neither Lisa Morgan nor George Hadley was able to account for the disposi- tion or current location of the tractor. There is nothing in the Auditor's Report which addresses this objection at a11.9 8. The Auditor's Report is Objectionable Because It Concludes that The Executrixes/Trustees "have acted appropriate (sic) during the administration of the estate and the trusts and also during the hearings" in Contravention of the Evidence. Auditor Buckley rather summarily dismisses Barbara Mumma's objection that the estate and trusts were administered in a manner which exacerbated family friction, and blames the friction entirely on Robert Mumma II. See Auditor's Re- port, at p. 121. The Auditor's Report, however, fails to address the reaction by the executrixes/trustees to any initial issues with Robert Mumma II and how that reac- 9 Perhaps it is a bit ironic that this sort of objection is more typical of the kind of objection one might find in a more normal estate accounting litigation. Nonethe- less, the Auditor's Report fails entirely to address or rule on the objection. - 39 - tion exacerbated family friction. Moreover, for Auditor Buckley to assert that "Ob- jector produced no competent evidence to support her objection that the Execu- trices/trustees actions exacerbated friction among family members" is, to use Audi- tor Buckley's own words, "simply wrong." One need only read Barbara Mumma's own testimony to see that she pre- sented evidence as to this issue, and it is inconceivable that Auditor Buckley could possible intend to state that Barbara Mumma's testimony on this issue, which iden- tified her own personal knowledge and experience with this friction and its causes over more than twenty years, is somehow not competent. 9. The Auditor's Report is Objectionable Because the Auditor's Report Misstates or Ignores the Evidence and Makes Erroneous Factual Findings In a Number of Instances. The first 225 "Findings of Fact" contained in the Auditor's Report are not those of Auditor Buckley. Instead, Auditor Buckley simply quotes or attempts to characterize the findings of fact and conclusions of prior lawsuits and other civil actions which involve these parties and some of the similar issues, principally two opinions by Judge Sheely issued more than twenty years ago. As set forth above, Barbara Mumma was not a party to at least one of these cases, as well as other liti- gation to which Auditor Buckley refers, such as the Florida litigation captioned Mumma v. Mumma, et al., Case No. 89-503. See also Mumma v. Mumma, 734 So.2d 571 (Florida DCA 1999). Moreover, as to Judge Sheely's findings and con- - 40 - clusions, the issues have changed markedly since Judge Sheely issued his opinions, principally with the death in 2010 of Barbara McK. Mumma. In fact, although Auditor Buckley makes much of the various decisions of the Court of Common Pleas and overtly relies on them for more than 50 pages of the Auditor's Report, Auditor Buckley says nothing whatsoever about the July 3, 1991 decision of the Superior Court of Pennsylvania in eight consolidated appeals, the first-listed of which was captioned Robert M. Mumma, II, et al. v. Elco Con- crete Products, Inc, The Estate of Robert M. Mumma, c% Co-Executors Lisa Mumma Morgan and Barbara McK. Mumma and Har�y G. Lake, No. 331 Harris- burg 1990, in which the Superior Court of Pennsylvania, unlike Auditor Buckley, accurately and correctly explained the corporate structure of various Mumma- related corporations and entities. See, e.g., id. at 4, n.l. A copy of this Opinion of the Superior Court is attached hereto as E�ibit 1. Auditor Buckley's own "Findings of Fact" begin with No. 226 on page 50 of the Auditor's Report. In a number of instances, those findings are clearly errone- ous or, at best, are substantially misstated or incomplete. Below Barbara Mumma sets forth her objections to a number of these findings. a. Finding No. 250. It is correct that Lisa Morgan and her husband, then a practicing attorney himself, moved to Harrisburg in 1987. However, Auditor Buckley neglects to - 41 - mention that Lisa Morgan and her husband have not lived in Pennsylvania for years, and now reside in West Palm Beach, Florida. This is a fact that was undis- puted in the evidence. b. Finding No. 276. To the extent that Mr. Hadley provided "year end statements" to Barbara Mumma, those statements contained very incomplete information and the reports Mr. Hadley provided to Barbara Mumma were far less inclusive or detailed than those which he provided to Lisa Morgan. c. Finding Nos. 279-281. This finding is erroneous. Mr. Hadley most certainly did not make all of his records available to Barbara Mumma, as the testimony demonstrates. To the con- trary, Mr. Hadley repeatedly advised Barbara Mumma that he could not give her access to much of this information with the express permission of Lisa Morgan, which permission was not forthcoming. As one example of the documents which were never produced to Barbara Mumma and, at the early stage of the litigation, to her predecessor counsel, Mr. Hadley never produced any checks or checkbooks as evidence of these expenses, despite repeated requests that he do so. - 42 - d. Finding Nos. 327-334. The questions concerning the merger of Middle Park and Bobali Corporation are at issue in a civil action pending in Dauphin County, captioned Morgan, et al. v. Mumma, et al., No. 2010-CV-11490-EQ. There, a nonjury trial before Judge Bratton raising many of these issues concluded in May, 2013. The parties have completed their post-trial filings, and are awaiting the decision of the Court. Judge Bratton has indicated during that trial that the first issue he plans to address is the issue of stock ownership in Bobali Corporation. e. Finding Nos. 354-360, 373-374. Auditor Buckley again misperceives the nature of the issue and the objec- tion. The issue is not whether Barbara McK. Mumma had the right to take her 5% of the value in kind. Rather, the Objection is based on the fact that, as Certified Public Accountant Joseph D.C. Wilson testified, the marital trust assets were "un- dervalued at the time of funding between 20-25 million dollars." See Auditor's Report, ¶ 406, at 71. Therefore, as set forth in Objections detailed above, this arti- fice permitted Barbara McK. Mumma not only to withdraw "in kind" assets which were far more valuable than 5% of the value of the trust principal at that time, but also to amass significant voting power in certain corporations which enabled Bar- bara McK. Mumma to vote her newly-acquired shares to approve the sale to CRH, with a huge profit to her personal fortune. - 43 - f. Finding Nos. 443-444. Although this finding may be accurate as far as it goes with respect to law- suits commenced by Robert Mumma II in various jurisdictions, the finding is (per- haps intentionally) very incomplete and misleading. There is no mention of the lawsuits brought by Lisa Morgan and, before her death, by Barbara McK. Mumma against Robert Mumma, II or, for that matter, against Barbara Mumma, in various counties. See, e.g., Morgan v. Mumma, supra. Moreover, Auditor Buckley blithely asserts that the "executrices/trustees have answered the claims, including this audit and expended attorneys' fees in ex- cess of five million dollars." See Auditor's Report, ¶ 444, at p. 75. In fact, the evi- dence shows that the attorneys' fees exceed seven million dollars, but Auditor Buckley has made no effort to distinguish among claims made by Robert Mumma II, the audit itself, including the filing of accounts and the like, or lawsuits com- menced and prosecuted by Lisa Morgan and/or Barbara McK. Mumma themselves, in their capacities as executri�trustee. This sort of casual lumping of issues as a purported factual finding is objectionable and inaccurate. g. Finding No. 449. The fact that Auditor Buckley actually decided to include this as a purported factual finding is telling. No further comment is necessary. - 44 - h. Finding Nos. 459-460. The fact that these two findings are substantially incomplete and biased in ignoring the evidence of record is appalling. It is true that Barbara McK. Mumma personally loaned money to Bobali to pay real estate taxes and avoid tax sales. It also is true that Barbara Mumma also personally loaned money to Bobali to pay real estate taxes and avoid tax sales. This is a fact that Lisa Morgan does not dispute. It is part of the evidence before Auditor Buckley, which Auditor Buckley rather conveniently neglects to mention. Barbara Mumma personally loaned Bobali over $120,000 to pay real estate taxes on properties owned by Bobali. Auditor Buckley is well aware of this fact, and his failure to include this undisputed fact as a part of his findings is unconscionable. Moreover, lest this Court be concerned about the current status of the possi- bility of tax sales of Bobali Corporation properties, in the Morgan v. Mumma liti- gation pending before Judge Bratton in Dauphin County, Judge Bratton, with the consent of the Dauphin County Tax Claim Bureau and the other parties to the liti- gation, on September 12, 2013 entered an order staying any tax sale of the two Dauphin County properties owned by Bobali Corporation until 90 days after Judge Bratton issues his opinion in the litigation. As to the one real property parcel owned by Bobali Corporation situate in Perry County, the parties cooperated in finding a way in which to get those taxes paid on the morning of September 13, - 45 - 2013. Thus, there is no immediate danger of a tax sale involving any of the three parcels of real property owned by Bobali Corporation. In passing, it should be noted that the Trust is a minority shareholder of Bobali Corporation. As such, Lisa Morgan would have no right to liquidate any of those three parcels of real property owned by Bobali Corporation. Rather, as set forth in much more detail above, in keeping with the intent of her father as set forth in his Will, her distribution of that asset should consist of distributing among herself and her siblings equal shares of stock in Bobali Corporation at the time such distribution is eventually authorized. i. Finding No. 463. This particular finding, unlimited as to time, is both incomplete and mislead- ing. In fact, during the administration of the estate and the trusts Barbara Mumma has repeatedly requested estate and trust information which has not been provided or made available to her, despite the fact that it was well within Lisa Morgan's possession, custody or control. A rather glaring omission in Finding 463 (unless the term is conveniently subsumed under the term "advisors") is the multitude of attorneys representing the estate and the trusts. The evidence at the hearings and on this record shows that said attorneys have been less than cooperative with re- spect to requests for estate and trust information and documents. - 46 - j. Finding Nos. 476-478. These are the only findings with respect to legal fees. As set forth in more detail above, Barbara Mumma's objections included: (a) an objection based on the hiring of not one but two major and prominent law firms to represent the estate/trusts, with no reason given why one such firm would not have been sufficient. As Auditor Buckley concedes, it is the duty of the estate/trust to justify the fees. See Auditor's Report, at p. 119. In this respect, the estate/trust did not sustain their burden. (b) Similarly, an objection based on the huge fees expended by the es- tate/trust in the Florida Hi-Spec litigation given the amount in controversy. Lisa Morgan never justified that expense, and Auditor Buckley has never addressed this objection. Auditor Buckley claimed that "Objector produced no competent evi- dence to show that executrices/trustees have paid unjustified counsel fees." Ap- parently Auditor Buckley has a unique definition of"competent evidence." 10. The Auditor's Report is Objectionable In That It Contains Both Inac- curate and Unwarranted Conclusions of Law. As to many of the purported conclusions of law set forth in the Auditor's Report, Barbara Mumma's objections are detailed above. For example, Auditor Buckley complains that "It is easy to state a party might have completed a task in a differing manner." See Auditor's Report, at ¶ 44, p. 114. Again, the incomplete and frankly rather cavalier characterization of both Barbara Mumma's objections - 47 - and his justifications for the conclusions of law is disappointing. Significantly, Auditor Buckley seizes on George Hadley's testimony concerning the appraised value of the Fulton Bank Building, and criticizes Barbara Mumma for failing to provide appraisals of the real property or the "interest in shares distributed." Id. at p. 115. However, what is missing from Auditor Buckley's critique set forth in his Conclusion Nos. 44 and 45 is the fact that Auditor Buckley either ignored or forgot to review the testimony of Certified Public Accountant Wilson called by Barbara Mumma. Auditor Buckley also completely ignored the objection to the 5% distri- bution based not on the fact of the distribution itself, which was provided in the Will, but rather on the fact that it permitted Barbara McK. Mumma to arrogate to herself sufficient voting power to push through the sale to CRH. As to Conclusion No. 47, appearing at Auditor's Report pp.116-118, Auditor Buckley asserts that "Objector Barbara M. Mumma produced no competent evi- dence to support this objection." See Auditor's Report, at p. 116. He then goes on to make much of the potential buyer for Bobali Corporation stock. See id. at p. 117. However, Auditor Buckley again conveniently ignores the fact and fails to mention that the evidence establishes beyond peradventure that the only sharehold- ers' meeting of Bobali called in this century was called by Barbara Mumma in her capacity as shareholder, and she did so after requesting that Lisa Morgan, who claims to be the only legitimate officer of Bobali Corporation, refused to call such - 48 - a meeting after receiving a proper request from shareholder Barbara Mumma to call the shareholders' meeting made in accordance with the corporate by-laws which Lisa Morgan claims are in effect. Indeed, Lisa Morgan has not called a meeting of shareholders in decades, and has done nothing to develop the properties owned by Bobali Corporation. Of even greater concern, however, is an offlzand comment by Auditor Buck- ley appearing on page 117 of the Auditor's Report in which Auditor Buckley as- serts that Barbara Mumma has "admitted" that she does not pay any of the real es- tate taxes for the properties owned by Bobali . . . ." Id. at p. 117. This offhand comment is not only flatly wrong, but also it flies directly in the face of the uncon- tradicted evidence at the hearing, which showed that Barbara Mumma has actually made payments of real estate taxes owed by Bobali out of her own pocket and has loanced Bobali Corporation approximately $120,000 of her own funds to enable Bobali Corporation to pay those taxes. Indeed, Lisa Morgan herself has conceded that Barbara Mumma has made payments from her own personal funds to pay tax- es due on properties owned by Bobali Corporation. - 49 - Conclusion For the foregoing reasons, Barbara Mumma respectfully requests that this Court sustain the Objections of Barbara Mumma to the Auditor's Report Docketed August 7, 2013, decline to accept or confirm the Auditor's Report and deny the re- lief sought in the proposed orders attached thereto. Barbara Mumma also express- ly requests that this Court set a briefing schedule and schedule argument on her Objections and any other objections to the Auditor's Report which may be filed. WILLIAMS COULSON JOHNSON LLOYD PARKER & TEDESCO, LLC B < � Y• R chard F. Rinaldo Dated: September 16, 2013 Attorneys for Barbara M. Mumma - 50 - ..r��i..�.,�.r_ ...��......-x,...,� ... ,,.,.._.ee.wn..n Y.:..yr...o-o-3.N•n"--� .��t..,v;... rvk.,.wrc�. ... was+rre�,-�.-,..�.. ,..,r:--°m.,a,H!+uL.�',�'-er�.:w�.a...'�M.�.�..ww..,.. * � .m.�«�:� a...a .w..rx.e.i, n, . , ....-.x .as.-wrwwt-. , � �•' ., • a XFf20X TELHCOPIER 295 : ?— 1-91:12:55 PH: 2i5 564 8120 � 2159635299 : f � o ' — ' �':� ....� _--.�--. _.:��'� .. _...... . _ .'� . . '. .. ._ :. ..... ..• . .. _. • � . • . '• J. P►14004f91 � . . ROBERT H. HUk}iAi II DERZVATIVELY : IN THE 3UPERIOR COVRT • ON' HEAALF OF LEH1►NON ROCK, INC., : OF PENNSYLVl►Nlll . 1►ppellants : - : N0. 00331 NARRIS$URG I990 v. • . : ELCO CONCR�TE PRODUCTS, INC.� 'I'HL : • • ' • E3TJ►TE OF R08ERT 2i. HVI�43A, C/O : CO—EXECITTORS LIS1► HUHH7► HORGAN J1HD s . ' . BARHARA HCK. HUHI�� 8AA81►RA t�iCK. : - � • MU� ?�ND HJ�ftRY G. LJ�►KE - s app0al fron the D�cree 2iay 1, 1990 In the Cvurt o! Comrson Pleas of Dauphin County civil Div�sian, No. 4744 Equity 1988 . ' ROBERT I�i. HLTI�Qi)►� SI DERIV�TZVELY i I!i TNl! SIIPERIOR COUAT Oti DLti?►LF OF I.L�DJIHON ROCK� IHC. : O! Y�?iHBYLV]l?IIA . _ . . �t. : H0. 00332 HARRI3HURG 1990 ! ' EI�O CONCRETE PAOAUCTS, INC., TH,E i E3TATE OF ROBERT H. MT�B�x, C/O s CO-EXECtTI'OR4 LS37� �itJl�i� tfORG1�N �2iD 2 HARBARJ� HC1C. l�t7L�4la►i SAR87►RJ+ MCX. : Httt�il► A2t0 Hi►FtFtY ci. I.��� : . . l�pp'�llants : �,pp�al lroa the Uacrst Nay 1, 1990 . Zn tha Court o! Co�aon pl�as ct Aauphin County - civil Division, Ho. �744 Equity 1988 _ • I.�Z611 liLTlSH7► HORC3�2J i� $AR8l�21► HCR. : Yji TFIE BVPLRIOR COVRT ' HV?Qi11, E7�CUTORB OF THE "LST�TE � Ol� PENNBYLVl►NI� OF ROBERT ]�t. �SU�i 715 50� : ' gK�RLHpI�pER,g Ol� I,�S�IHON AOC2C, INC. ! NO. 00333 H�RAISBURG 1990 li1ND IS9A }�J�H� D'�ORGl1N 112tD SJIRSAR� : - .,. KC1C. �. �I2iD2VIDUJ►LLY t . . • v. . _ � _ ROBERT ?i. ?iU�iti IIl A2�0 I,EB7�HCN t , ROClC� IHC. AltD DGUGL�S GL?,SSFORD : . _ • . J►ppEJ�I, OF: LE871NON ROCR� IHC. �HD : • . � AOBBRT l�i. KU?4�, IZ = • Appsal trom the Dacrat �iny I, 1990 In th• Ccuxt cf Co�on Pl�a: o� Dauphin County . civil Division, xo. 3210 8. 1988 ' � .• �� • - i � , ,� � « _. --------- . :� • XEF24X TELECOP 1 EFt 295 S ?- 1-91:12.55 PFi: 215 3S�t 8 S 2G i � 2t 59635299 f f 4 . . . , .--sr •ir .�.��.-- -.•..- �. -- .� :.. , . :. ... ..'.�. .....t .�:._1: ...,..� .. ........ ... .-. . ♦ . - . J'. 1�1iC04/9l -2- ' - . LISl� �lUTi�t� ?i0RG11N � $71RB�Rh IdCK. �: ZH � StJPERIOR CdURT ' HLikKf►, �CUTOR5 OF THE 85TATE 2 OF PENNSYLVr,NIl� OP ROHERT �i. MTMtiA, AS 50# : sH��cz,n�RS aa 2��uroK Rocx, zxc. : xo. oa���c F�xs�uRC �s�o 1'►2iD LI&J1 2StT?4iJ► 2i0AG�ltt A2�D BJIF�HARJ► t l�iCX. 2�itJHH�� SttDZYxOU]1LLY� : J►ppallants : . . . Vi • � ' • . , � RC3HERT K'. HVHHA� II �2�ID LE8J1NCiN ; • �� . ROCKt INC. �IND DOUGLJ►S GLA55�ORD : Jlppanl �ron th� Dacree May 2, 2990 . 2n ths Court o� Cot�¢an P2oas at Dauphin Caunty . civil. Diviainn, Nn. 3210 s �tga8 ' LEBXH�N AC}C1C, INC. XND R08LRT 2�I. : ZN THS SUP�:RSOR CCtUR� HVM?SA, �Z� . ' : OF P1SHtiSYLVl►HTJI "J►ppaliants : ' ' : N4. 00333 fiJ►R�RZSBURG 1990 , Y: . ! . • s . ELC`0 'C4HCRETE PRDDUCTS, INC. 1tHD : B�,R�B�IRA HCK« HUtiK1►� t 1►ppeai tzcn the i}iacree May l, 199� • �z� th� Court ot Coaaon Plaas o! Dauphfn Ccrunty • Civil Div.�.�ri,on, Na. dT22 �quity X�L87�HOH RO�X� IHC. : IN THE BttPZR20R CCURT � : Q!' PENN3YLV7�►tt� V. * ' t N0. 8G37Z �3UtRR2SELFAG 1990 �LCO CONCRE'I"E PRL1DtJCT3, INC. : . _ . • V* - . . _ ' . ROB]�RT �i. ISTJ�1,� xx • : ' 2 . AFF�iL Gl"": LE�?�40H Rt�C1Cl INC. R2iD : • ' ROSlSRT K. NUKtS�r ZZ • • � . xpp�al froa the Decrea Kay 1� 1990 � , ` 2n tha Ccurt ot Coamon pla�s oL IIauphi.n Ccunty . ' ' civ31 nivis�on, �ta. 4678 Equity . � ` . ' � • X�AOX 7ELECOPlER 295 ; sP+�: 2t5ss. ss2a � - , " _ _ :� �`� 7—_t-9t:y2s5 _. �154535299 : s �S • • •• -_'s- . .✓. ..::_..... .....-•• -- .....:.. .•. --. . . . . . ,• . � J. 111#Q04f91 -3- _ . � . �HJ�NNOH ROCR, zNC. : YN THE SttPERZaR CGURT ' • : aF PEHNSYLYANIA Y. 3 i H0. 00373 ��tISHURG 1990 EI.CO CONCRtT= 3�RODDCTS� SbIC. ; , . V. • . x � R4HERT H. ��►, xr : . . . � APP£�L OF: L•'LCQ COHC'RETE FRObUCTSi : . . IttC. x App�eal frcm the Decz�e H�y i, 1990 In the Cc�urt-a� Coa�on Plaas o! Dauphin County . eivil nivision, Na. d678 Equity ' � ROBE�tT' H. MtfKKJ►, I� DERZVA,TIV'ELY 2 Itt THE BUPLRZCR GGURT ON BEN�LP OF LEB!►2i0N RQCK, INC,, 2 0!` PEHNBYLYaHIx � I�ppsilant : ' : HQ. 00637 �iX�tRI$HVR� 5990 v: s - _ ELC{i �CGNCRETlS FRODUCTS� xNC., Ti3L s � • ZSfiATL" O!" RO81:RT 1'�. HV2�, CJd ; C4-�XLGU'TO!!.s LI�J► ltTJtiTi7� tSO1�tGA2t',�►�N"D = $I►R871Rx HCK. ?SUlSM�� S,�Ri3XkJ� ?SG"!C. ; 2ft'TI�*S?► 112ti1 H?►RRY G. ?�,?�Kg t . : J►ppea2 iro� th� ordsr'Entar�d 8�pt�nbar 7, 1990 • 2n th• Court at Ca�son FZ�aa of A�tuphitt Cottt�ty Civil Divi�cion, fto. �t7�t� Lqui�y i988 Sa��re: JoHHSOx, �ui�ocX nad CERCO2t�. JJ. - lY�SOR]ti2triCtKt , PILEU: .itTi.2 3, I49I R't�#.�r 3s a�n app$a2 troa a �inal d+�crs� o� the �ourt of Coa�csn Ple.a� ot Dauphin County vhich� appa3.nts a recaiver to run th• txc � t • aorpoxations involvad i� this appaa�l. Th3� spp�►s7. ropz•s•n�s tt�+� cansolidat�d appaals and cress-appeals of t3s• indfvidual parti�s. Far thn raaaona statad b�lov vs vaCat� the fitutl d�cree�o��M�ty lr : ' . 3s90 and ths subssquent order ot B�ptamhar 7, 1g9p. Ka furth�x _ zasi►nd �ox proeo+�dinqa con�iatint v3th this mrnor�►n3u�r. � . . Onca aqain this aourt 3s zavieited by the litiqiou: Kuama - s, ; � �r�3.Iy o� +�entrm7. P�►nnsylvnnitt� T2�s Hua�a taaily cc:�arcia� ; _ , E t + �_� ' .- XEROX TELECOPIER 295 : 7- 1-91:12:56 PH: 215 56s 8120 i 21596�5299 : s 6 - . . '.. ._ :.::� ....'.� ..«..---. ...:�.:� .. ........ ... ._. � • - _ - . • J. 111�t004/91 -t- • • . ` entnrpris�:, aotae ot vhich are tha center af this gsttuin�ly • endlaas litiqztion, can b• characterized by a snries o! intarlockinq dirnctorat�s oxnod by various faxtily nanbsra. Tha in:tant action specitically concarna tvo o! thase corporaticns, ' Elca Conczete Producta, Znc., and Lnbanon Rock, Inc. , and thair • ottic4rs, dirsctora and ehar�holdars. Elco i� a PannBylvania � ' corpor�tion forrsod in ,19s7 by Rob�rt Ku�, 8r. (harsirialt�z referred to as ��Huaaa, Sr.") . � Munaa, 3r. vas the presidant.of Elco �roa its loraation until hi� d�ath in 1986.� � � Ths othsr corporation, Labanon Rock, Inc. (harsits�itsr r�tarr�d._to a: �LRI") was,2azaad by Xtuaa, Sr. in 1985. tSunai; � sr. vas tRn prasidant of Z.RI. Th: atock xae held equally bstwssn � • • xunna, sr. and hia son, Robart ?iuiaa, 2I (h�r�i��iter ratsrrad to as "RHIZ") . Por puipoeas or thie ianorandun, vs nCOt�t thn tolioxin� tindinStt o! iact by tba tr�al court: 1 . Sn D�canbsx 1985, and J�nuary o! 1986 th� - laaily n�nbazs dir�v�ly itsvolvad in ths • ogaration o= tha laiily�s bu�iri��sas vtrs [Hu�sa, Br.� � Barbara Nc7Ci� }Susaa (h�rainalt�r . rst�rrad to �s xr�. isj, u�d uiZ=. x�iZs Rltt2 had cm�arciel �ntsr�rise• t2iat ht omfd in his ovn r3Qht, p�rhaps ths larq�at cancarns vsr� hald by th• =an31y and, without quastion, ' • aontroll�d by Min3a,' Sr. Tti� aantrol vas . snintain�d by i s�riia ot int�tzlockiny oorpordtions, but, aqain, froa� tha �vida.nca pnsentad b�toro us� no ons ��riou�ly crontoata that practiaally� ar v�ll :� l�gally, ,tbe � lElco is a vbolly oimed sub�idiary of anothar H�aaa taaily oorporation, P�nnsy Supply. Hunca, 8r. vas tb• pr�sident o� penney Supply. P�nniy Supply xas a xholly c�m�d subsidiasY c= . another Fsnasylvania Corporation knoxts na Nine Hinety-H3.ns, 2na• Kursaa, 9=. xas pr�sident oi thi� caapany as x�ll. Nit�� H3�n�ty- _ � Hia� vas oxnsd by another co�ioratior�, lCia Caapany. Nuaaa. Sr. 'f iaur ahildren also cxn�l stock in th�t ao�apary. itusnaa. fi=• ti+:s th• pr•s3d�nt o! Xin Caapdny, �rhich vna in turrt oYrt� by Penneylv�ia supply Caapany (a distinct antfty lro� BannsY supply) . Nuaaa, ar. ovnnd 7oa ahir�a ot thi■ corporation xhile • thR r�maining t�rslve ahnree vere heid aqctall�► anong his iour childxon. Ku�n, 3r. was pxaaidant oi Peanaylvania 8upply Caapany.� t . � - , , � - � . XEROX TE1.ECt�P1ER �95 : 7— 1-91:t2:5'7 PH, 215 56� 8120 � 21696�6299 : t '� _ ...•u -u — •�•.,. .. _ . . , . . . .. ._ ..:.a .....� ......---- «.. ..� .. ........ ••- --- � � . � 3'. �i14l3G4f91 "'Sr— ' - . . � ' _ . guidinq pntriarchn2 force �n tha fa.�tily Was ' Kuxta�a, Sr. ?� bit �earlier, in 19�2, an ' acguisition had bren nada ot Elao cancr�ta, �t � coapany manutacturfn�f cattcrata praducts, xho�t� � plant xna sdjac+�nt to the qusrry sita in Lebanon Cauntg vhiah, sits bvc�me impartant 3n Docax�ber 19�5 xnd tba�rosft�r. Thig ca�p�ny. Elco, wa� al:o cantroll�d by Mtu�ta, sr. 7�t , t2ta and ai 1985, Kuxsaa, &r. sntarard into an • tsgxea��n� to pc�rchas• this �site, a�nd Huzznxi . ` . sr. had iri fact baeri in touch xith jtha ovn�rs� for sev�aral ysars fn ouf=icisnt mat�sisr that ttY�sY3 knsw ct his possibl+� intarsst in purchasing ths qunrry cperatinn. . _ � . 2he quarry praduc�d a storis xhich vas . ' chaxactariz�d thrauqhout thea� pzaa�adings by ths particrs axs hiqh caZciun Iits�stos'i�� tt product that ccu3d ba o� velue in t2ra �taan taaily'�t cantttuction antarprisso. J►dditicttaily, th�a Eico +ent�rpris: had crushitu,� _ ec,�uipa�nt and coaid us• ather �ton• products, • . vhioh could b• obta3it�d trai tht quatx�y eit+e, , in its op�ratian. Tha�a app�aarsd, tb�r•fore, ' to �n, sr. , to bs an opportunity �or a rt�turally xdv�ntagoon�c caua�rcia� part.n�rsAtp , st ths quarry sits, vith thi h�rgex utide= coa�on enmer�hip aL th� qua�rry that producsd anQ aola �ta �inerala and ths concrats praduc�s canpany, W�t2i its 3taed for xirter�tls _ and lta sxi�ting azu;shinq t+�ailitias, Thus, Kuisa, Sr. dacid�d ta scquir� the qu�e�y snd ir�vited hia s�n, RKI�, ta �oin in this ar�tsrpri:• sr3.th him.; i�11 a� this v�s xocaxplishad in Dscenb�r of 198�, th: rt�v carporation fora�rd aixi tA+� axl• af th� quarry . and its a�ssts conp2itsd, and the father al�� �cn w�rs equal �h�,�aholde�r� o� the nav cc�zposata. anterpris�; t,�bano» Rock, Ina. . � ' 3�h�ra can bs nof s�rfou� quastion th�t �, sr., and thar�;his �az�: RXZZ. anvisiotted fihnt tha aparation uau3�d ba nar►�qad in such a Saehian th�t E2co vauld z�raav� de2orait� fro� � quarry, for ita usss, arid LRZ xould �rsarove .- ' hiqh ca3cfun lit�estane tcr ita corporate . purposss. Thi aatta'r o� pay:aentg, h�tvasn th� . aorp�ratfans, r+slati'vs to th• dolanit� reawnl • ia ona oE ths is$uea`. in the cas#, but it cnnnot b• reasarnbly,disput:d that bath H'uz�,, 3r. anr� his scn contaapl�t�d, 3n Dscaabar at 1985, that both corpar:tiotu xan7�d partiaip�t,t ' in t2�• isctracLfoh of;�ait�nrals lrcra IS�Z��c t�avly acquittd qua=ry tor thair avn comm�rcia�l , putpo��a. � ; � � r � ; XQYOX TELECpp1ER 295 : 7� 1-91:1�:58 PN: . 21� 554 81�Q � 21596?5299 t # g .. • •�,,. _ ,�.tt •tt - -�..�. �. _ � . � f . .. .. s. .. ....r. ..«»....... «..�..� » ...:.... . .,. ...� .• : • t � ' � J. al�oo4/5i -�- - , • . � 2h+e operation procaed�d �n the firat half ` a� 2586 and tha �rvidsncs 'vas abundant to shoX that Hu�ma� Sr. vas tha guid�ttg farce in the smrly opsration af T�banon Roak and tbe jaint ' opsxxtiott �tt tha aits at �.aba�ori Rock and �lca. Frozz xhat w: 3+earn� o� th• farafly:s busit��as� aparatians at th3.s sits, durinq th� • hcaringa, one r�ouid �sav�e •xpect�td thatr it 2ir. Ku�na had livsd, hs vould have cvntinucd to bi � the mandg:r o� th#s�e txct bu�in�ss opsratiozts; . �n lvanq �• hs das�r.�d to angags ir� this activity and va� abin to do it. Fuxth�r� onR , conld c�rtainly hav� an�icipat�d that, dpacpit+e any D+�aember 2985 p2a»s tar ths lutuz�, �xua�a, . Sr. xou2d hava_xu►naq�d thass cozzasrc�.al. • � snt�rpr3.ara in-euch a vay, aonaid�rit�g ths ' changing ecor�orsic� ot tha industzy� that tbe v�riaus coz��rcia3 n�ads of �tch ant�rpri�t, aa x:ll as tha proti� goa2s o� tha fa�zi3y• vould b� b�st servad. Thz�t is, Vt V011lt� tl!!V� exyactcd that, it it� beaaraa aoaQ�roially - adva;nwageous ta prcfduc� dalamits az�d not high aa.l.ciws 2ins�tan: =rox thi� sita, Xwm�a, 8r. tsny x�rll h�va a�aae2+ar�at+�td 82aa�s u�• at tha • quarry and subjugat�rd, for ths tis�a, LR�'s qua�rying a� biqh caloiva linaatons: Canvazu2y, it riigh caiciva ds::and b#cass . aouta and that tor doloa�it• ��11 zvaY, onE ' . cauld hav �xpect�ed �ha� Huaaze,, Sr. vau].d Aav� ' uti2ix�t �h• aaz�pov�r ba hnd availabla fron ' both caxparaticns, da vra23 s� �quipaant and - rsanpcvaz availabl+e in ath�r faxily , ' corparations, to mova ssid pz�ocass the hiqh calciva product tn th� turporaty disadvd�ntt�ga • ot �b+s pzodczction •o�'dalo�ft:. Thw svidsnas c3.sarly •stablishsd thst thf tc type ot �aint a�.nnqaasnt, vith poo3ing af r:souresa, - accurrad at th� b�gitu�ing o! ths op�ration and . . app=oprint• chezgss hnd payaahts x�r� x�de by th• aacouriting pa�rsa�nal r�! th• �amilyf� - corpo=ations. '. i ' Cur eatir.a,tian�' af xhat s�y havw l�+rsr► tha ' aanr�qan�nt coursa ct' tb�st coz�orations 3n tha yaars sinc�e 3�gs� ars� hc�rsvar, suspic�ons • • only, as 1�luaaar Sr. di�d =ud�isnly an �►pri7. x�, , 1986. € . Kunrsa, Sz.'� vidczu, Sazbara HcX. �t�a, �end ona at t2z�ir dnuFbtsrs, Lisa Kum�a 2iorga�i�, Ysq., �b�raaltrz xataars�a►d to a• l�rs. �Lorqar�) , x�rs appoir�t�d Ex+acutria�■ o� �a, Sr. �a . antata ntnd that eat�t�a b$cana and �t this • pair�t continuea to bs� ths rssstinq p2aca v� �u�u, sr. �s �o� :hx��chold+�r�■ int+�r�st 3.n Labanon Rock, RHIZ ia the othnr equ.al sharaho2daac ln Lsbanbr� Rack. : � . . a , XEROX 7ELECQPiER �S5 : 9— t-9i:t2:59 PH: 215 564 8120 i �1696a�289 ; f g_ .. ., „ . . .. .�:i::.t .»... ......�o�. _.. .. - --._.:.. __. ._. . ; . + • ' . • J. ��soa�/�� -�-- - . • _ ,. • . _ � : � ' with tha undiaputad bsnavolrnt xraaagar, , Hu�szs, Sr., gone, chnriqas 3n th� apsratiot� of th• txo carporations, L�abaAon Rnck a�d Elco, at tha Labat�an qeaarry sit• v.�za pazhap■ in:vit�ebl�. By ths azxl at l98? t�trty changs�a • . had accurrad and tha abs�ncs ot' Iiunma, Sr. �s • patriarchal authoritarian �oritxol hodr by tha�t tine, xendaz.d tha t�aily �¢sabsra invalv:d in thasa 1aWSUit,r tv thi pofnt of lanilia2 •' antaBtrcphe. Son: o� ths �a�niiy naabars, RltIZ . cn the ona hand artd �;irs. H �nd Hra« Knrqati, �an tha athar, had �ecc�.� �rd�nt. unr�lentinq, and alnoat savag� adv�rasrias. 2ha r�a3 r�asans toz th� tota3_antagonisa bstvaen tha tWa sid�s prabably vrr� not s33. ravaal�d as RKZZ, itra. �d .' and Hrs. Hcrgan t�:tiiiad in tha prxssdinq� • bs�are us and thim pr�aisa is p;rhaps undarstandabi�, human natur• b+einq vhat y� recogniz�e it to b�a and can�idsrinq tha ba=a tactual taru.x� of �. courtrooa. p�r2u�ps-R�II� . prasuaad, sf.nce h• vs�s sxpariancid in � qe:arrying acti.v,itio� a�d this type o�' tha . fa:i2.y=s busin+ess ogsratians, thnt h+e vould , • aasiiy aesun• his ta�th�r�a pstriarchal rols in th� conduct o� the8e'tWO busin�saes snd m�c ' upsst, tirat by� th� i►tt�aptad invo2v�nt ot � his nather, }i�rs. H, 3n tht intsr�sts cf Elco and L..banon Rock at th� querzy sit:, and th�n. n bit Iatar, by his yownger s3.st�r, �i�rs. Kozqan. tirs. Korqa►n, having givan up htr - pro�a:,cionai sssacia�ion vith a Ph31ad�1Dhia l�v iirsx, r�turn�d tc th• azs�, and bsaau sigrtif3C�ttttly intfra�'st�d irt tht aont3uet o! Elaa•a btssiness as vfll as its x.tba;no�n Ravk�tt . aftaix:, a� sh+� vsa,;xith har a�oth�r, �s noti, ca-axscutrix o� an astats vhieh cwnad hali ot Lebanon Aack. nri t2ii or.�asr band, Kzs.•!i sstd �is�s. xoze3an,� d�:iring to a�c�rcis.� intirasts they aon�idsr�d lec3itimat� in L�b�an Roek vsxa otfandad by RHZI t s r�tuQ�tl to di�rcuss, ir� . any siqniiicant zannar, th• opa=ations o! x,aba�non Raak and to �rsst =1CO xs, iti �ssirao, a t=ssp�sser on th: qua sit�. Th� sxistit�q � rancar l�d tha p�xr�iia i�tfaily ta ga+�k privat+s mediation at: th+�i= prob2�ss as�d xh31� � that vas und�trwAy tb's iira�t civil prxat�litx3 in a aa�mon plsai caurt vas institut�d. In • - tha caursa t�t th� ns�ct eav�ra3 y�ara d rivaD�s ot procsEdinga vare �.nstituted in Ls.banon. - � ?3�uphiri and Cuabwrla�sd Ccwnt3.aa. � ! � ,'�djudication. �/ZIf90 t�t 1-6. i � ' . . i • f } � ' . . � �} � 4 ' ' # _"_—___ • . XEROX TE1.EC0�lER �95 : 7— 1-91:t2:59 P31t 215 �g� 812p i 216S63S299 : rw10 a . ''- ..��sr — •tr �.- — •�••r �- — . . . . �. .� T.:1. .,..1. �..a..�..•. «•.:•.+ • ........ .�.. ..� • . . • � J. l�l400t/9l -s- - - . . Fcur ralated actians w�r: �cansolida.tsd �nto ttiis action. , . . 4676•EQUZx'Y 1988 vns inntitut.�a by z�z aqainst E2aa fox trsspass arid xrcrcgtul raxova2 ct ninsxa2: lroa LRI 2and. LRI al�o � , inr�ituted th� :ckicn at �t7zZ E+�CTIfiY i9se xhich rcquastsd the acurt to rsstxain Elco �'ron furth�x z�ining of Z�R� prop�rty until prQper coanonwa�lth paraiita Mers obtninad. fiha xctict�'at 3ZI0 s -� �.988 is � dsriv�►tivs �uit in:tttut�d '�y tha e�c�cutorr� af tha , - . astats of Hu�u, Sr. to�enjoin �RrIZ2 tros tnnning �FtI vithout t21s _ � • : cons�nt ot th+� •:�nt� sharaholctar. This conplafrit also rsqus's�ed . . � Ri�'Lx+s z+e�av�l as dir:ctor oi L,�RI. Finnliy, I�?"III tiltd 4?44 ! ' E�vv��st 1988 ae a, dErivativ� i+c�ion aqaiz�st Elea all�gitsg trtspassr . t . br��tch at contract and br�ach cf fidtici.azy duty. LovEr Court ,�d�udiaatiaa� x�16j90 at 7-8. Th• lotir8r ccurt ha2d a p3.�tthors ot hrarings r�rq:rdinq vari�ua i��u�s xais�►d �.t7 thas• conn2aints. Ths tzia� �udg� u3,t��e�zt�2y 3a:u�d an �djudicatiori appointinQ a Ya��iv�r to opar�te both El.co M a�nd LR� tar an 3ndaiin�t� piriod. }ic�raov:r, tlu'lc�rsr court fourid : a contrt�ct ta exi�t bstxeMa �IK:c and T.�t= a23.cririnq �t�co ta sitse dalonita an a� pt�resl a� I.&I lazid. Tbw tzial 3udq� c�utrncteri��d � this contrttet a�c a ss=iea ot t�.r►tativ� ag�ean�nts cap�ble' o! nodi�ic.�tion xith th�r purpoxa o! �nxiaisin�7 sccncnio bsnsfit to Zlca elzd LLk��. R�rgardlasr•of wDw�h�r th� xgr�sa+rnts �►ara �xfr tu LR2, t2i• trial oaur� tound thst it vas e�ppYapriets !or the racaiv�r to �cpacifi.r.al3.y p#z�cirz tbte:a aqrs+es.�arita. Th+r �couYt ' . , tound no l�qal agzea�er►t to a�c�st xith ragard to 82ca's tttYth�r , 4 �xplcitat�.ari af LRI �ainarals, but l�it th� r�:alution �f such . , - �eaue �er tha racniver to rasa2va. Thraugb a �ubsaQuant ordar, � tIIe aourt alloved �3ao to tuapoz�zily �in• deloaita on aths= a't'sn� ! . , . : s . � � , XEROX TELECOPIER 295 : 7— 1-91: 1:00 PH: 216 564 8120 3 • �2169636299 3 i11 ' _ ..-sr — .�� �`' ,�..s. -- — � . � . ._ .. .�•s.:. ... ..«..��.'.? «..*..� : «....... •- . -t .... :... . • . � . _ J. �l].400�/91 -9- . . ; _ a o! LRI land panding tha outcana o! thie litigt�tion, it' Elco pa,id . Z�tz a rcy�lty ot torty ce�nts per ton« TU� various partiea F aubsoqu•ntly appa�lwd ta thi�c court r�cis32iS7 a tatal o� tvezity�orit issuea far cu� ccnsider�etioz�. ' • � { In hig appan2, RKII azguss thit the contrac� vhich tha loutr � - - court i`ound bakvann Elca and L1tI is urien�CoYC�nbl� ior a variaty ot _ rw:•an,�, inaludiny: th�r .statute► o� fraucts, Want of consid�raticn, : and lack cf prap$r actasant by T.�tZ to sntar frito th; cont��ct. ; Thia contzact purport: to allow �lca to nin: dolonitn tro�a LRS . i 1�1nd iri an nr�E► kriown tt6� "st�m�s 1C�ob." Th: loxsr� cotu��t �ound that � ' El.co vas to ni�a daloai�� to uncav�r'higb caicits� liaastcn• ior _ . j LRx f s u:s. If na lin�atcns xa`s toumt b�snttth th� do�aait�e, thsn Elco•wauld gay Z�RI Zcr thf do�o�titf, Otharvi,ss, �lco vculd �ust k��p t2�• da2oaiti. i + . . i Wf cannot paa: judr�rsenl» on th• questicn �f xh�t�er tn . . ndequate coritr�ct h�s b��n �ouiid. Suttioa 3,t ta say, th�► tria3. . : court has nat prav�.d�d su�ticisnt 1#gal �ustifiat�t3an icr th� t axistsztca at ttais carntraat. X aontr�ot is �r�loraaabls vh�►t► tha prr�-tiss raach sutual aqrtea�en�, �xchanqa ao��idsxation dnd hnvi i outlinad tha t�trn�s ot their b�irqain xitta►► stttt'tci�rit c�.:rity. St�.ilIl�E Y�.5�l�va�r B�t�lt:v� Irte. ; 363 Pa. Sup�r. 53�1-539� ��b 7!►.�d, SZ9Z1 1.194 {1487}� 'rk�,�tt �•. ��2i�tat� ?.n��,�e., 95$ Pi. 5uy8r. : 600, 60�, S34 J1.Zd $19, n�3-Z4 (19s7j • yeoa� ert ot�,sr •q�Qunds, �x0 Pa• 9�1� Ss� �•�d 1Q36 (19'8�) . �`tu�th�rmora, tha �►qr�+e�a�rt is,• ' ' cttiorc�ab�• vhaz+� the p�i'tiss 'i�tsn3ad t0 canclud4 a bfnd�nq �qr�anor�t aGnci tha w�s�ntia�. ter�s a� ths agz+r�nt �tzQ esrtaitz enough ta prcv3.da thQ ba:is Zor an a.pprapriate z�aedy. �rs�.on,�, � 363 Pa�. Supsr. at �39, 5Z6 X..�d at 119�1 $��iL.�r lSi��� 368 Pa. . i i + 3 � • . � ; . , -------- , ' XEROX TELEGOPfER ^,,,95 S ?- 1-911 l:01 PH. 215 564 8t20 �} , , _ ._ .. �� r� � � 2189636299 ; ii2 • - -- ... ..:�. ... ..«......_. ».....� .. ,_.,--•• .._ .... ' , . � J. x��QO�/4a. —�.o— � _ . . Supar. at 608, 53d �.�d at 82d. Iicvever, i� �n .sssntia2 t�ra is S4�t out ot ths agrsaa�nt, the 1�v ai23 n�t f.nvalid�zt� tha aantrict but aiil inciuda a reasonabl� tar�. 7C� ttte parti�e inalud� tha t�ra but 2�av�r e�cpraar�ad their int�rntioll aahiquoti�t2y, � the court vill no� impo:e a reasonabl+� term and ths cdntr�ct �ay : zail =or ind,�tinit�nas�. S�.t�LIS: �5�, 363 P�. Supar. at 539, 5Z6 a.7d at 1194. Har�, the losrar court �tseas tc� ttnv� conc]�udsd thxt th• aqreemnnts aG-ieau�e hars trare tsntativa aqr�aaanta. Suah a charact+�rizaticn, ?�ovsvsr, xithout nors, da�s r�dt su�f3.c• to lind a legal2y snfcrceabl� cantr+sat. � , Moraavar, tha Sa�sx ccurt tttilsd tv conaidar xh�thsr r.he aantract Was e��oro�abl• undsr pertinsnt praviaians ot ths BtnrYSy3,vania Eusinass Corpo��ttit�ti La�v o! 2988. 3,s p�t. C«5. f 110i � �q. �actiot�s 17Z8 and 2fi7p a� 2itla 15 c�nc�rz� txu t3aa propriaty oL enterir►� it�to a con�ract propas+rd by azi int�za:tsd _ ah�rahold�r or diractcr. Thu�,� it tht intarsstati shttrshaldar or otticer �anatit� fran th: propossd tra.nsact�.on, •ithar parsonztlly or vith xsqnzd ta a»cthsr caa�aar�y xith vhich h• 3s inv�slysd, thsss sa�tions aazxt ba sst3s!'icd. g�r�a, ?�zxsa, fir. va: t�u pr�sidant a! �ico ar�3'a�tftty psrc�»t ��0�� sharahold:= in LRI. �Th+� lov+rr Cottrt h�s not cl�rifi�rl,Iiva�, 8r. �s otifcial pos3.tiori at LRZ to aucartiin viza�.har 'hs vas an ctiic+�=, ar ra�r+�ly a� shar�holdar. li Mu�� 8r. 3� �acind to hxv bapn sn ir�tnrsst�d diractor, thsn th� . r�quir+�xanta ot aaction 172s(a� xust bs aNe.at. t?thezvisa, it•xust � 2» shovvn that ths requirerc�nts of sactfan 1770 ara sst WSth raspact to int�ra��ed :h�rehclde�s.� Ks th$rafoza r+�eatMd tor a xcora di�inita stat�nsnt r+�qardit� ths v�lidity at th�r aoritr'sat and �1ta r�ots that Humaa, Sr.�s poRi�kiort ai patrf�xahal �euthority aexd subj�ctivs irtent i� authorizl.nq th�rss Ktantstiv� t�gxea�+�ntsn �s , � a �, XEF20X 7ELECOPIER 295 : 'y- 1-51: 1.01 PH, 215 564 8120 � 21596�5299 : si3 . ' x . '.. ._ �:•�r .«.r :.«..__f: _.: .:• .. ....._._ . ... __. ` - - :.•. - --- J. ��3400�t/s�. —�.�._ - . . for firtdinqs af fact artd conclua3,an�c of Z�w an tha isxus of • � - vhathor tha ZRY proparly sanctfonad ar ratitiad txt�s� agrae��nts,� �;hs n�xt i�srctss raiaad concazns, the �tppaintaant o� : roo+�ivtr ' for an indefinit�r pericd to oparata bath Elaa and LRI to x�axi.nizs . +aconomic benetit to both ccrp�za�ticns. RHII nzguss that n rscaivar ia nat n�aassazy becr�uaa if th� court shou3d dscic�� tria� . arn �tttcraiablw xgr��rasant��xictf, th�n Lxt2 xsu�t haztor the ttq'ri�n�ttit and no racaiver is n�tded.'� The ]t3.co paxties azgue thnt n cu:tadi�tn, rath+�x thari a r,�c�iv:r, was proper tor LRI cnly, i � . � . � irraiavant to th3� issu�. x3s'�pathy vith r�garda to corpt,rats Zoncal�,ti�• dc»s xtot �xcuss aos�piisrtaa th�rs�rith. �T�iis panal ao�nn�nds th� Iovar caurt�s Rarcul+�en affarts ix� ita halndlinq ot th� in�tnn� casa. X� a.rs .aogniaant ot ths di�ticu2ty in coozdinatinq tbs thousand,� ot gag�s of til.ir►gs =nd tzanac�ipts . i.n this aattsr and ax� zsluc�i�tt to cnva a.qairi plaw ths Ioxe= court in a pos3.tion ar handlinq thass cliaaetricnl2y opyo�eC! partiss. �iaxevar� our ability to s�ariit�qtuily =avit�X tha issut�t .zaf rted �+y tha partisa ia s�riously h�rgarad by tha► 2ovar +�.out�t'st �nilura to r�cluce thR voluminoua Yacord to spac�lfc lindittqs o� tact aztd aona2usions at lav. Pa,A.Civ.p. Ruls 2517 �s� ��j and . {3j,� ;� Pt�. c.s.J►.: 3',�t,3�git '�*.��nags� Zo7 Pa. aup.r. 554, 'S'�7, �i09 7�4�Zd �$� 'SO (t979j. - • ' . � 1f� also �nnt� With intsz�►at th�� 4� 8x. C.S.!►. ; �5d3 confer� author3ty' upon t'hr ttinl cauzt• to awttrd eounsal fe�as vh�n the corsduat ot s litiq�►r�t constituta■ w�xatieuis or obdur�ta b�nnviar. �� F�. c.s.�,. # 7�03 ;?). T2u" lav�r c.c►urt r+otoord in thi� c�s. disclosdt� exceaaiv� acr3zsany and pstty liti,qiousnas� on tha psrt or c�stttin �rti�� to th3s litig�tion. 2'hi: conduat� alon�, •say ba so �qr�gious :s ta varrant an avard ot �tttornay'a t+so� . reg+�rdliss a! xh�thar th• und�r3.yin9r clains �xva �tarit. •$,� g�It�L��11Y Ch�1�U�s_ y, N�SC4. Ill�,� 59 Q.8«L.X. 4'�95 �,U.S. aTtu't8 !ie 1491y {s�nctians uph:ld ag�tinat` liti�s�t ZOr tn�tics of dalay, . opDr�ssion, harttas�r�nt and s�seivs �atp:tulitut� in •�fort to caap�l opp�cxinq parti�ec 3nto ��ctrnustsd aa�ap2fanc�) . ' � '�This p:�s�r]. i�c t�acnvina�d by RKI=�s �ltz�uistfa �2�dq+� oi�_ xc�qul�scsncs to an untnvorably d�cision o� this cot�. Flis paa� cahduct �v3dsnc�es that bs xill' +sua�ad all bv�anaa to forc� a tavcszabis rsxult. • , � . � ; • � ' `'� '�' XEROX TEk�LCOPiER 255 : ?— 1-9t: 1tQ2 PH: 215 564 8120 � . •;,—�r .� .� ...,._. _��..�. .. ....._ 2159635299 : •14 � ' ' . . '_. ._ :.:�s .« .«'� ..•..� .. ' ... ._. . . ' — - J. .�i,l�t OO�t/91 --1�-� . becauae Elca aaintai.n: at.her busi,neas assacit��ions bssidea T.�tI. • Th�y �rgue that bacaus• i.RI 3.s tha anly ca�pany in da�dlcck, a cus�cdiari is th. prapar xsifa= tor I.R't und+cr th�t J�=ociatians Cod�tr .gZ2��• our indapandent ana].yaia ao�p�ls uB ta cor►cludn th1�t a� joint rea.ivaac to cparat� both Eico and LRZ Was it+pznpar. TA�a ' appaintr�ant c�� x raci�ivax is �w�thin th+e diaarstion of the Iovar cottrt and vil� not b� r:vazsed abssnt r�n �u�� o� t2ut disarstiot�. Boa'�os �n v, posr��.r Tr�ct c�a�vnittQ�� Z6�i' Pi. Supar. 8K, 9Q� 399 71.�d 408, 43.1 (19?9) . ReoelVera usy be appointsd rrh■n•vr t2a� ..- . , chaztc�llor ie convinced �hs =fQht is traa �raa� douht, ths �,e�ss , irreparabie vith no adaqu�t� xaaas�y at lav, azxd tha ralis� saught is z�ec�.ssary. �. 2t 3s �lsa �cl+ear hovsv�r that th� appoinLnnnt oi a r�csiver ror a :alvent corparaticn i: a azaa�3c rss�nedy and shat�ld ha r�aoz�ad tc only und:r viy iinit.� circunsta►nces. P�tnt►�y3y.ani� s*� t#�az�..��.��iQn..Y,���nn.t���►en�a3 x�actti� . � . Sssr �6"S F�t. �llr +�13, 330 71.�d �32� 83Z �1976� . T?�et lax�r �+auzt appoin��d th� r�c+�iv�►r as a s�att�x o! •quity to cpaxate th� cozgcax�tians as Kuzx�u, Sr. had snvisian+�d -- tc -- ' aa�ciaix� ttxra.pro�it: o� both corporatiosfs« fih* .lovar aauzt•i� _._ • 1eq� cancivaict� i� inaa�rr�ct, hovsver, b�causa tb• rsceiv�rrship - 3ap+�sad is �Goo trxtr��• +and stdeguwts rased�.�: �xfs�. zt ltv, ur�d�r th+� 1►ssxir►tiona cods, �,,y��► to dsdl vitla th�r dis��rsiori �►rsong , thc parties. Ma�reovar, our o�sth�u�ctfv r��farch hae tailsd ta ! disc2oae a»y iuthority to �ppoint t r#c�eivsr to �oint2y nanngq �s xtftaiz� a� txo di:ti.nct corpora�ta sn�itiss. a.s ths =1CO pxrtias rct�d, �laa, ind Zor tha� nattsr, LR2, do not conduct 'bu�i�n�es � • solily vit?a ths oth+�r aaz�piny. Thu�, th• ia�ca:ition oi �t reao�var � • :� `' a• ----------- - • XF��GX TELEGOP 1 EF2 296 : 7- '!-91: 1.Q3 PN: 215 564 812C �! • , .�_ _ -�r � - �. _ 2158535299 ; ii� - . . .. ._ :»:�e ....! .._.._.._. ...:�.: .. ....._,. ... ._. . . . a J. ��+i00�f91 -23- ' ' _ - tor z�n indatiriite p+ariod o� tine aay havs th• psrvarse ef��ct ot aatv�z^dly daaanstratiztg th: corpornte a:�ticerrs f�ab�lity•to p�ap,�z2y ssuz a busineazs, thsraby :ftsating tha tinancial s�tability _ o! th� ca=porations.� A2so, thera is ztv evfd�ncs•ot ar�y r deadlcck or misaannqoa�nt at Eloc vhich uouid nscss�citate ,th+n appaintm+rnt a= a zecsivsr. It i� ir��angruou� to appoint-a raaaivax !or a carporatian nat ox�rar3.ettcir� iataznal dit'ficulti��. Ths �,ssociatic�ns Cc�da of 1988 pYOVidas: . � Excapt to the :xtsnt Qt�ts�ri�e provid�d in thi�c tit3• #.te ciss: whera a stntutory z�m�'siy is provfdad by this titla, ths cottrt sha21 bave tha� povnrs ot a caurt ot aquity ar ' chancexy in�otar ie thos• yo�tars ralatt to th• �upnrvisiots and cantzoi ct corpor�itivns and - othsz asscciationa. 15 Pe�. C.S.l�. � it�4. The t�ria�l caurt ca�p�st+�ly•dis=$qard�d etatutory rel�di�s avail�►b2a tc it to rseclve t,t:� dsxdlack at LRZ« � surh xen�ediu ar� Zound •ithaY thzaugh tbs appoiritssz�t ot a � au�tadian ta �anag� LR�, cr invo3�ur►ta�ry dia�olu�ion o! LRi. 15 . . Pa. C.3,7►. ;� 17`6y, I981.b This court cszuncst dteids ltbicth is th� pYOj� z�xsc�ly �o�' th: d'andlaak �otitrtd �t I�. Tharafara, ii' ths la�►�r eourt ca7znot prap+trly �e�olvt tha dtttdl+aszk, di�solution fs appropriat�.� l3 �+n, c.s.l�: f x�=i t�) . Ke th•r+e�ora r�taar�d y - __ •'�tth31+� �� ars caqnf.x�nt at tha tact #.3��►t tbs ?iumr+a l�tily has � . likaly vfolat� tha eancti.ty of th• aazp�o�r�tte a�tfty vith thgiY co�ti.nu3nq antics, thi� only svid�ncas zn�fx in�►ility.to qst � a;oztq xith �aah otber, at�d nat t,beir,inabiifty ta t=ansact ' businass .u�th thi,rd barti�a. � � 6Tha Sovsr vourt adjudic�tian do+ts not ind3wct� vt,ethsr L�t2 is a st:atutary elos� aoiporation pc�YStxstnt to iE �a. C.S.lI. � �301. xt it i�, ths� appol.ritmant ot a •provi�ion:l dixacrtcx �ey �isa ba appropriat�. �.S Pa. e.3.�. i 233�i• ' f � �RNZ� has ask+fd tc�r dissa3ution Stt th• lflwrr oouxt proaardinqs, tberator� tha raaiady is prcps=2y batara ths 2c�r�r cauzt. Y �3/ •� -...`_...._...__. • , -�ox T��coai�t 2sr : ?.. y-9�s �:oa pN: 2t� as< si2a �► . . �. :. ._ ..«� ....s� .,.l.:���: ..���.� !- ....:... . r2i"S9B35299- : ft6 ... , . i ' « • . Jr ���QO+�l�i ""i��: � . on this ist$ue tor tindingR at fact nnd .aanclusions� of lav . . consi�t�nt With this meaarandu:�. The �irsal i:su�s v�e �ddr+ass in this �a�scranduz� is vhathsr th+� � ' iowtr aou=t inparope=ly d�ci,dsd certain is�uerc xithout th• � opportunity at ths paxtiss ta pra�rnt �vidsnc� ori ths .issu�s. Thes: f.�acuss ars: �1) xht�h�r R�+l�I shculd ba raaovad as aix:ctcr . of LR�c: t�� E+hot2s�r �tltZZ is prastidant o� LRS: {3) vh�tthir�RHII��t attorn�y should ba disqunlifiad tro= th3.s mattert {�i) vhethar LR�I is a prop�r party ta Equity casas 4678 and 4'7Z�; �5� vhRth�r RKTI i� lfabls tc Elca fcr da�nqs: zssu2tinq frcz�. ::1�-dsaiinq; (6) wheth�r �lcc�a �ining opsrations violatscl tha Pannsylvania Non�aal � surtac• xining Cans�crvation and Recluation act or �tbe Putn�ylvania C2ean SLrexns Laxs �7j vh:thar LRZ is tntitls�d to ' daaaqas =�tsultinQ rroa x besnk accouryt opstiRd by an sa�plesy�se at E�cos l8� vh:thsr Elco ov�� dt�sar��s �o LRx �or �cticns ot 3ts diraators and �eaployaaa, andt �9� trh:th�r E3ao ha: �lnsd bsycnd r tht 3.iait af th� v�starn pit in th� quzszry vh3,ch i: th� pub�act ot th� loxar couz� prx�rad#�n+gs. li7snl Daoz�s, E,/1 f D 0 �t 1-�. t3rt Karcn 7, 2490. t2ta trial ccurt �xai2ed s litt�r to aoun�cil, � tor th• parties askirtg thun ta notity tha aaurt o� othsr renaining. ' �ttars t�tiich �tilx nesd ta ba addr�xaad �sy tha +couzt. �7►pPs�laant �stata at Hwas+e� sr. a�12a�q�s thst th� tri:]. anurt pras�is�d thi • gaarki.s•that pracaa8inqa on thsse .is�u�� vculd be �cch�ulad.'� XOYtYSr, in hir tinal d�cr•s and vithout ths ben�fit ot.iny. w . . � atx�snt an theae isxu:s, tha tr3al, judq� cot�clud�d s.hat�non� or ths �►tazsx�ntion�d isauia aa�re �aazi.tori�tt�. $our �schaust�.vs rssaarch has ta32+�d to uncoYar .any �urplicit . prcniss on tha part c� tti+� tri�l, court. � .• �` +XE"FtpK 7ELECOPIER �95 : 7— 1-9t1 1+04 PN: 216 56< $1�0 � 2159636299 ; � _ `�sr-� ..:-u �1t �.- _ •r-r ... 1? . . .. ._ ..:.s .».. ......�__: ....�..• .. ' � , ........ .. .-- • • � aT• 1�1��00��91 �ls• . . • - � � Qur suprs�ts couzt�: decisinn iri Call h�n v= P�nnsvlvani� . j � . ��ata ,p� ic�, is clsar an this nattsr: adjnd3catary a�ctia�n c�at ba validly taktn by any tzibunal, wh+�th�r.�udicia2 or • adniniatrdtivo, Mxcspt upon a hs�rinq vhersi,n . aach party h�ts apportunity ta ktxcr� of th: . c2s�ta af his oppcn:nt, ta haar th: svide»ca . i.r�traduc�d against hii, to czoss-s�caain� • . vitn�ssen, to intrc�duc• �vidanca on his ovr� � � bs2u�1�, aad ta aak� arqu,autt. . �a].l�,�n w. P�n�3YLvania S�,,tt •polica f 494 P�t. ;61 j 465, 431 Jt.7d � 946� 9S6 �1901) . l�ac�uss tha tris�, �otirt did not a!layrd - appallants u�t aros�-app+r�l2s»ts an oqpnrtutiity to ba ba�trd o» ths a'ba�ve-xaf�rano�d issu�e, tha cas• �ust b� r�cndfd �Or hsar�r�qs • ccn�i�t�.nt xith tha natura o� th+e aSsins. ` xa thaz�stors, vacata th• dscr+�� ��j,,,, tinsl dscrss, s,�d � oz3sr, iaposit�q a r�csiv+ezship on =Ica at�d LRT a2�d atit#►zdit�g 81ca i�nt�rri� riyhta to a3r�: dalox3ts t rwnd tor a iors dafinit� statr�snt on tha sx3stsnc� o! � aontrsat batu+�at� Zlca and 2�RZ: - z+�nd tcx l3r:4inqs o� lact and �aox�cluaion� ot 2av an th� i�su:s of r�sth��: �R2 prop+�rty approvad. a,ny aan�r:c� b�ttx�+�n Eloo �nd LR� �nd �#th�r axs �►pprap=iats .=a�asdy is =anda�t;d w�dsr the • �ttn,aylwania A,ssxiationa coda of 5988 for th• aptration a� I+RSi ' a:sd r.sa�d !oz ividrn�isry h•ariz�qs an i:�u�x rc� prsvious2y dispas+�! a� by th�s tri�1. court. . Th� dscr+ta n,�g�, +enterad ott Pabrutry I6, 1990, tbr linil dsczss snt•z�d o.n Xay l, 1990, and ths ord�r entar�a oa sapt•nb+ar 7, SA90 �r� vacat�d. Th� casa is ram:z�dsd tritb Snstz�tCtions. : �uri�cdiction ralinquiahed. ' DAZ"ID: JUL3 3, 194I " straacrx�i t�rt�ssa . � ' • • . • � • • � ' � . � .. . I - •�--,._' � CERTIFICATE OF SERVICE I hereby certify that a true and correct copy of the foregoing Objections of Barbara M. Mumma to the Report of Auditor pocketed August 7, 2013 was served by first-class United States mail, postage prepaid, this 16th day of September, 2013 to the following: Honorable J. Wesley Oler, Jr. Senior Judge Court of Common Pleas of Cumberland County One Courthouse Square Carlisle, PA 17013 (also via hand delivery) Melissa H. Calvanelli, District Court Administrator Court of Common Pleas of Cumberland County One Courthouse Square Carlisle, PA 17013 Joseph D. Buckley, Esquire 1237 Holly Pike Carlisle, PA 17013 Ivo V. Otto, IV, Esquire George B. Faller, Esquire Jennifer L. Spears, Esquire Martson Law Offices 10 East High Street Carlisle, PA 17013 (certificate of service continues next page) - 51 - . . , (Certificate of service continued) Brady L. Green, Esquire Wilbraham Lawler & Buba 31 St Floor 1818 Market Street Philadelphia, PA 19103 Robert B. Eyre, Esquire Foehl & Eyre. P.C. 27 E. Front Street Media, PA 19063 Ms. Linda M. Mumma, P.O. Box 30436 Bethesda, MD 20824 � � Ric ard F. Rinaldo Counsel for Barbara M. Mumma - 52 -