HomeMy WebLinkAbout09-16-13 (3) Robert B. Eyre, Esquire Attorneys for Robert M. Mumma, II
LD. No. 41990
Foehl & Eyre, P.C.
27 East Front Street � �-
�. � -
Media, PA 19063 - -
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610-566-5926 -
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IN THE COURT OF COMMON PLEAS OF CUM��RLA�TD
COUNTY, PENNSYLVANIA �'. ��' g.,> �-- ':_ ,
In re: ESTATE OF ROBERT M. .
MUMMA, Deceased. . ORPHANS' COURT DIVISION
. No. 21-86-398
OBJECTIONS OF ROBERT M. MUMMA, TO AUGUST 7, 2013
REPORT OF AUDITOR JOSEPH D. BUCKLEY, ESQUIRE
Robert M. Mumma, II, by and through his undersigned counsel, files
the following objections to the August 7, 2013 Report of Auditor Joseph D.
Buckley, Esquire (the "Report"):
Introduction
1. The Report comes nearly 9 years after this Court first appointed
an auditor to audit accounts of the fiduciaries of above-captioned Estate and
related Marital and Residuary Trust.�
2. The first auditor Taylor P. Andrews produced no audit in
almost four years, before being removed and by Order entered September
� The initial Order appointing Taylor P.Andrews, Esquire auditor—entered January 7,2005 (Docket No.
87)does not specify the nature
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19, 2008 (Docket No. 295) and appointing the present auditor, Joseph D.
Buckley, Esquire (hereinafter, the "Auditor").
3. Over four more years passed, before the present Auditor issued
the Report, purporting to address objections of Robert M. Mumma II (`Bob"
or "RMM II")� and Barbara M. (`Babs") Mumma to the initial and
intervening (in all, fourteen) accounts filed by the fiduciaries of the Estate
and related Marital and Residuary Trusts.
4. The Report (at pp. 2-3) lists the fourteen accounts that were to
be audited, but never directly discusses, reviews or evaluates their contents.
5. The Report does not even list, let alone address, the actual
objections to the accounts filed by RMM II and Babs Mumma, but instead
reviews a list of"issues," (set forth on pages 5-11 of the Report), forty-two
of which are attributed to RMM II (Report at p.2), seven of which are
attributed to Babs Mumma (Id.), two of which were "added" by the Auditor
(Id. at p.4) and another two of which were "raised" by the Estate. (Id.)
6. The Report misapprehends the Auditor's appointment as "to
make findings of fact and conclusions of law to..." these issues, and so the
Auditor (it appears) neither addressed the objections themselves nor audited
the accounts, but instead opined on the resolution of"issues." �
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7. Despite "nearly forty days of hearing" (Report at p.2), the
Report does not cite to transcripts for support of its findings, but appears to
rely on the Auditor's recollection of what transpired in these forty days,
spread over two years, and concluded over two years ago.
8. Most of the "Findings of Fact" do not even purport to rely on
testimony and evidence presented to the Auditor, but on excerpts of the �
decisions of other tribunals, in other proceedings, the relevance of which to
the accounts and objections at issue is not apparent, including:
a. Findings of Fact Nos. 1 through 120, which purport to be
excerpts of facts "determined" by Judge Sheeley in a
Cumberland County Court of Common Pleas matter docketed
at 66 Equity 1988 (the "Equity 66" matter);
b. Findings of Fact Nos. 121 through 146, which purport to be
"facts together with subheadings found by Judge Sheeley" in a
in a Cumberland County Court of Common Pleas matter
docketed at no. 99-2765 Equity Term (the "99-2765 Equity"
matter);
c. Findings of Fact Nos. 147 to 185, which purport to be "facts
found by Judge Sheeley following hearings held July 25-26,
1993 following a request form preliminary injunction" filed by
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RMM in this Estate (the "1993 Preliminary Injunction
Matter");
d. Findings of Fact Nos. 186 to 226, which purport to be "facts
together with subheadings found by Judge Robert Matemsom"
in a matter filed in the Circuit Court of Florida for Martin
County Florida and docket there at No. 89-503 (the "High
Spec" matter).
While citing to two other Cumberland County Court of Common Pleas cases
purporting to hold "that claims in the restrictive share agreement in High
Spec, Inc. are barred by res judicata citing the Florida litigation" (Report at �
p.49), the Report sets forth no reasoned application of principles of res
judicata or collateral estoppel to determine whether and to what extent these
purported findings are relevant and binding in the instant matter, other than
the prefatory statement that it was "prudent to take judicial notice to the
relevant findings as they were made following hearings and trials when the
information was fresh in the minds of witnesses." (Report at p.4)
9. The extent of the Auditor's reference to prior decisions of other
tribunals, without any reasoned application of principles of res judicata or
collateral estoppel, and the comparative lack of attention to the accounts and
specific objections placed before him for audit, and extensive testimony
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presented to directly to him, together support the conclusion that the Auditor
was unduly influenced by these previous decisions, and the resulting
predisposition that RMM II's claims are generally meritless.
10. This predisposition, it is submitted, led to a Report that, as a
whole as well as in the specific respects discussed below, displays a lack of
due consideration by the Auditor of his core responsibilities to audit the
accounts and address the specific objections of RMM II and Babs Mumma
to those accounts.
Renewal of Motion for Extension of Time to File Objections
11. These same characteristics of the Report—the extensive and
vague reliance on prior decisions of other tribunals, the lack of reference or
citation to the specific testimony and evidence relied upon to support the
Auditor's "own" findings and the failure to address the specifics of the
accounts and objections before him, made the task of preparing these
objections significantly more difficult.
12. Rather than being told what portion of the extensive hearing
transcripts the Auditor contends support his findings and conclusions, RMM
II and his counsel (and this Court as well) are expected to review the
transcripts of"nearly forty days of hearings" to discern whether such support
is to be found in the record and where.
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13. The extensive reliance on decisions of other tribunals makes
this task even more burdensome—particularly given the lack of such basic
information as the dates, docket references and page numbers for the
relevant decisions and findings.
These were among the reasons cited by RMM II and his counsel in their
previously filed Motion of Robert M. Mumma, II For Extension Of Time To
File Objections To August 7, 2013 Report Of Auditor Joseph D. Buckley,
Esquire ("Extension Motion").
14. The request for 55 days—to October 14, 2013—to file these
objections was entirely reasonable, particularly in light of the extensive
delays in the production of the Report, and the need of the undersigned
counsel, who was not involved in the proceedings before the Auditor, to
become fully acquainted with the record of not only these proceedings but
the four additional pieces of litigation the Auditor refers to in his Report.
15. There was and is no reasonable basis to deny the further
extension through October 14, 2013, particularly given the fact that no actual
distribution is proposed in the accounts or approved by the Auditor as �
required by Orphans' Court Rule 8.3 (requiring an auditor's report to
"specify, or indicate by reference to the statement of proposed distribution,
the names of the persons to whom the balance available for distribution is
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awarded and the amount or share awarded to each of such persons.")
Instead, this Report merely authorizes the Trustees to proceed with a plan of
liquidation before distribution that violates the express provisions of Article
Seventh of the Will—relief that is already the subject of an appeal pending �
before the Superior Court.3
16. RMM II accordingly renew their Extension Motion herein,
requesting an additional 28 days (through October 14, 2013) to supplement
the objections stated herein, and hereby reserving their right to do so.
Objection No. 1: Failure of the Auditor to Consider Background
Concerning tne Estate of Walter M. Mumma and its Relevance to the
Instant Objections:
17. RMM II admitted documentary evidence, and offered
testimony, concerning the concerning the assets, administration and
distributions of the Estate of his Grandfather, Walter M. Mumma (Dauphin
County Estate No. 201-1961).
18. This evidence was important to at least two issues relevant to
his RMM II's objections to the accounts:
a. As corroboration of other evidence of the existence of
restrictions on the shares of Pennsylvania Supply Company of
Harrisburg ("PSC") and its subsidiaries, intended to assure that
3 This same relief was granted in this Court's Order of (Docket No.�,and is the subject
of appeals of RMM II and Babs Mumma in the Superior Court at and
respectively.
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the bulk of the assets of these companies, including the
quarries that accounted for such a large portion their value,
passed to Walter's grandchildren (also the children of the
RMM and four residual beneficiaries of his Estate) RMM II,
Babs Mumma, Lisa M. Morgan ("Lisa Morgan") and Linda
Mumma ("Linda Mumma"); and
b. as evidence of the intentions of Robert M. Mumma, the
decedent in the above-captioned Estate ("RMM" or
"Decedent") to protect his children's interests in these same
assets, including through the limitation of the amount of the
bequest to his wife, Barbara McKimmon Mumma ("Kim
Mumma") to the pecuniary trust in Article Seventh of the Will
(referred to as the "Marital Trust"), and the provision in both
Article Seventh and Article Eighth of the Will for the entire
residuary to be held for the benefit of his children (RMM II,
Babs Mumma, Lisa Morgan and Linda Mumma), to be �
distributed, upon Kims' Death, "as it is then constituted...share
and share alike..."
19. The evidence offered included, without limitation, the
following:
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a. The Inventory of Walter's Estate (Exhibit 01-27 ) showing the
assets to be probated under his Will, including of particualr
relevance to this Estate:
b. Walter's Will (Exhibit _) providing in Article Second for the
residue of his estate to be placed in trust with Dauphin Deposit
Trust Company ("DDTC") and RMM (the Decedent in this
Estate), to be divided and held by them in separate trusts to
holding equal shares of the residue assets for each of his
grandchildren, (Article Second, (a) and (b)), half to be
distributed upon the beneficiary reaching the age of 21 and the
balance to be distributed at age 25 (Article Second (d)). �
c. An Order of the Dauphin County Orphans' Court (Exhibit ,
the "Dauphin County Order"), directing that the Silver Springs
Quarry, previously owned by Highspire Sand & Gravel, be
held in trust for the benefit of Walter's grandchildren.
20. These provisions in Walter's Estate were the origins of the
plan—implemented through various shareholder agreements, bylaw
restrictions, key man insurance policies and the Will of RMM—all of which
were designed to protect the interests of Walter's grandchildren in the
Mumma family businesses and their assets.
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21. The Silver Springs Quarry Property is the same property that
the Estate claims was owned by Pennsy Supply, Inc. and later by Nine
Ninety-Nine, Inc. ("999"), before the majority of the stock of 999 was
transferred to the Marital Trust, and scooped out of the Marital Trust by Kim
Mumma, all to allow her and her daughter, co-fiduciary Lisa Morgan, to
secure the benefits of the sale of the Silver Springs Quarry, as well as other
quarry properties intended by Walter to be preserved for the benefit of his
grandchildren.
22. These facts were discussed at length in the Post-Hearing Brief
of RMM II submitted to the Auditor in (RMM II Post-
Hearing Brief," Exhibit "A" hereto) the detailed arguments in which are
nowhere addressed in the Auditor's Report.
23. Contrary to the findings and conclusions of the Auditor—
whose Report refers to none of the foregoing evidence relating to Walter's
Estate—there is substantial evidence of the existence of shareholder
agreements and bylaw restrictions prohibiting the transfers of stock of the
corporations—such as Pennsy Supply Inc., Lebanon Rock, Middle Park, Inc.
and, of greatest importance, stock Pennsylvania Supply Company of
Harrisburg ("PSC").
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24. This evidence is not only fot�nd in these original intentions of
Walter Mumma and Dauphin County Order (Exhibits and ), but
also in the following:
a. The Shareholder's Agreement between Kim Company and
Simpson (Exhibit ) restricting sale of shares of
Pennsy Supply Inc., owner of the Silver Springs Quarry.
Despite the Agreement cited by Judge
Sheeley in Equity 66 as terminating the Shareholder's
Agreement as between the shareholders, that inter-shareholder
agreement does not evidence any intention, nor it is submitted, �
can it be given the effect of changing the bylaws of the
company (Exhibit , the "Pennsy Supply Inc.
Bylaws") that, by operation of section 33 (Pennsy Supply Inc.
Bylaws at p.l l) incorporated the same restrictions as part of
the Bylaws of the company.
b. [The Klein memo referencing restrictions on PSC shares]
c. The testimony of Hadley himself—cited by the Auditor
(Report at p. )—referencing the need to block the share
ownership of Hummelstown Quarries, Inc. to protect the
Mumma family interests from third party transfers and control.
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d. The terms of the MRA Agreements themselves, and the
testimony concerning their similar purpose of maintaining the
protection of the interests of the Mumma family from transfers
to third parties.
e. [others]
25. These examples demonstrate a clear pattern—that has its
origins in the intentions of Walter Mumma's Will, to maintain the closely
held control of the Mumma family companies and their assets for the
primary benefit of his grandchildren.
26. The same intention is expressed in the Will of Decedent RMM
in this Estate: Contrary to the findings and conclusions of the Auditor, the
Will nowhere expresses the intention that maximizing the benefit for his
wife, co-fiduciary Kim Mumma, was the object of the Will. To the contrary:
a. The Will expressly limits the interests of Kim Mumma, as �
beneficiary of the Marital Trust, to a pecuniary gift equal to
one-half of the gross estate, computed based on the amount
accepted by the IRS in Decedent's Federal Estate Tax Return.
b. That this pecuniary gift is to be computed based on the amount
of the gross estate as determined for Federal Estate Tax
purposes clearly acts as a limitation on the benefit to be
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provided to her under the Will, is reinforced by the applicable
law and fiduciary accounting standards that require all gains
and appreciation in the assets in the Marital Trust to inure to
the benefit of the Residuary Trust, not the Marital Trust—a
principle affirmed in the detailed reports and testimony of two,
highly qualified and credible estate tax experts, Jonathan Crist
and Joseph Wilson. Althouse Estate, 404 Pa. 412, 172 A.2d
146 (1961) (See Attorney Crist Report, Exhibit , and
testimony at 4/21/09 Transcript, pp._ to _; and Joseph
Wilson Report, Exhibit , and testimony at 10/26/09
Transcript at pp. _ to _)
c. The intention to limit the benefits to Kim Mumma under the
Marital Trust in favor of the protection of the interests of the
residuary beneficiaries is further reinforced by the excluding
Kim from decisions concerning the discretionary distribution
of principle for her health, maintenance, welfare and support,
and vesting such decisions in one of the residuary
beneficiaries, co-Trustee Lisa Morgan. (Will, Article Seventh,
at p.3, granting such discretion to "My individual trustee, other
than my wife...")
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27. Of perhaps greatest relevance to the point here—of the
consistent pattern of imposing restrictions on stock and other interests in the
assets derived from Walter Mumma's estate and intended for the benefit of
his grandchildren—and the intention of the Will of Decedent RMM to
continue these restrictions, is Article Thirteenth of the Will expressing this
intention:
It is my desire that if expedient and possible, the
businesses which I have personally directed during
my lifetime and of which I have had an interest be
continued for the benefit of and under the
management and control of my immediate family.
(Will, Article Thirteenth)
28. Though using the verbage, "It is my desire...," this language is
not merely precatory, as the "desire" is coupled with an instruction that it be
pursued "if expedient and possible..."
29. In any event, it is a strong indication that maintaining the
benefits and control of the Mumma family businesses derived from Walter's
Estate for his "immediate family" was a priority, and the Will clearly
identifies who were to be the ultimate beneficiaries of the continuation of
that status quo—his children, and not Kim Mumma whose benefits was
limited to a fixed pecuniary gift.
30. ***
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WHEREFORE, Movant requests this Court enter an order in the form
submitted with this Motion, extending the time to object to the Auditor's
Report to October 14, 2013.
Dated: Au ust 14, 2013 ��
g
Robert B. Eyre, Esquire
Foehl & Eyre, P.C.
27 East Front Street
Media, PA 19063
610-566-5926 �
At rne for obert M. Mumm ,
,
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IN THE COURT OF COMMON PLEAS OF CUMBERLAND
COUNTY, PENNSYLVANIA
In re: ESTATE OF ROBERT M. . �
MUMMA, Deceased. : ORPHANS' COURT DIVISION
. No. 21-86-398
CERTIFICATE AND PROOF OF SERVICE
I hereby certify that a true and correct copy of the foregoing Motion has
been served pursuant to Pa. R.A.P. 906(a) by first-class United States mail,
postage prepaid, this 14t" day of August, 2013, on the following:
Hon. J. Wesley Oler, Jr.,
Senior Judge
Court of Common Pleas of Cumberland County
One Courthouse Square °
Carlisle, PA 17013
(via hand delivery)
Amy R. Fritz, Court Reporter
Central Pennsylvania Court Reporting Services
P.O. Box 508
Carlisle, PA 17013
Joseph D. Buckley, Esquire
1237 Holly Pike
Carlisle, PA 17013
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�, R
10NATHAN M. CRIST
hTTORNEY 8 COUNSELOR AT LAW
226 WEST CHOCOLATE nVENUE TELEPHONE (7V) 533�6600
HERSHEY, PENNSYLVANIA 17033 FAX (7V) 533•624d
May 25,2004
Miller Lipsitt, LLC _-
P.O. Box 959 --
C�mp Hill,PA. 17011 �\��
RE: ESTATE OF ROBERT M. MUMMA, DECEASED —'
NO. 21-86-398 (CUMBERLAND COUNTY)
ESTATE ACCOUNTING
INTERIM ACCOUNTINGS FOR MARITAL
TRUST UNDER WILL
INTERIM ACCOUNTINGS FOR RESIDUARY
TRUST UNDER WILL
Gentlemen:
You have retained me to review and comment on the Administration of
the Estate of Rob�rt M. Mumma, Deceased (hereinafter the "Decedent") and in
particular the filed Account for Decedent's proUated Estate (the"Account")and
the filed interim accountings for both the Marital Trust (the"Marital Trust") and
the Residuary Trust (the "Residuary Trust") which were created under the Will
of the Decedent.
BACKGROUND MATERIAL
You provided me for review various documentation which including: (i)
the probated Will and Codicil of the Decedent: (ii) the filed Account for the
Estate which covers the period from 04/12/1986 up through and including
09/30/2003 (Contained in 4 Volumes); (ii) the filed Interim Accountings for the
f
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May 25,2qp4
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Marital Trust unaer Decedent`s Wili which cover the periods from 11/19 j19$6
up through and inciuding 12/ 32/ 2003 �Cantaine�i in 4 Volumes); {iii} the filea
Interim Accountings for the Residuary Trust under Decedent's Will wl-uch cover
the periods from 11/24J19$6 up through and including 12/31J2Q03 (Contained
in 2 Volumes}; tiv} the Pennsylvania lnventory as filed far the Decedent's Estate;
{v}the Federa� Form 70b US Federal Estate Tax Reh�rn as filed for the Decedent`s
Estate(with attachments}; (vi� the Pennsylvania lnheritance Tax Return as £iled
for the Decedent's Estate (with attachments); (vii) Appraisal of Helsel Realtors
dated January 29,2987(inciucies real estate owned by the Decedent as well as
other real estate owned by the various family corporations}; (viii} the Federal and
Penr�sylvania Fiduciary Income Tax returns for the Decedent's Estate for the
fiscal years ended March 31 1987 and Mar�ch 31, 1988; (ix) the Federal and
Pennsyivania Fiduciary Income Tax returns for the Marital Trust Under Will far
the fiscal years ended December 32, 1987 and December 31, 198$, (x) your
iitigatian file in the rnatter of Rabert M. M�.�nnma vs. Dau�hin Deposit Bank and
Trust Cornpany docketed ta Na 4753�1993 in the Caurt of Cornmon Pleas of
Dauphin County which incIudes PA Revenue Departrnent Form 485 (�afety
Deposit Box Inventary Form�, the pieadings,the depasitions of Robert M.
Mumma II,Bank Nlanager ponald Cromweit,the Co-Executr'vc Barbara Mar�n
Murnma, Barbara Mucnma,William Bos�vell, as well as Dauphin Deposit's
Summary Judgment Motion,Summary Judg,ment Briefs of both parties and the
opinion af Lawrence Clark denying Dauphzn Deposit's Motian Far Surnmary
Judgment;{xi}Internal Merno from L}avid R. Landry of the law firm of Stradley,
Ronon,Stevens and Young dated April 27,1989 relating ta the plans of the Co-
Executrices of the Estate to "squeeze-out" Robert M. Mumma's shares of the
various corparations.
I also interviewed and questioned Robert M. Mumrna II with regard to his
farnily histary, the dynarnics among the surviving heirs,and the interplay among
s
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the various family holdings and corporations which in which the Estate had an
interest.
DECEDENT' S WILL AND TRUSTS
Will/Codicil After certain personal property bequests, Decedent's Will
gives a certain amount unto a standard pecuniary formula Marital Trust with
the rest,residue and remainder to the Residuary Trust. Decedent's Spouse,
BARBARA McK. MUMMA and his daughter, LISA M. MORGAN, are together
appointed as the Co-executrices of the Will and as Co-Trustees of both the
Marital Trust and the Residuary Trust.
Marital Trust The Martial Trust amount is limited to 50°� of the Gross
Estate as finally determined for Federal Estate Tax purposes. The annual net
income of the Marital Trust is payable to the wife and Co-Trustee, BARBARA
McK. MUMMA at least yearly. Her daughter and Co-Trustee, LISA M.
MORGAN is alone given the right to invade principal of the Marital Trust for the
benefit of BARBARA McK. MUMMA "for her support, health,welfare,
maintenance or comfort,to maintain for her a standard of living which she has
during our married life enjoyed, taking into account, however, my wife's income
from other sources, including, but not lirnited to, all income from trusts, estates
and business interests, as well as available principal assets." In addition to this
aforesaid principal invasion right- for which Decedent expressly requires there
must be"a deficiency in other available funds" - BARBARA McK. MLTMMA is a
given an annual non-cumulative right to withdraw from the principal of the
Marital Trust the greater of Five Thousand ($5,000.00) Dollars or up to Five (5%)
percent of the then principal of the Marital Trust.
Upon the death of BARBARA McK. MUMMA the remaining principal of
the Marital Trust is to be divided equally of Decedent's four children, ROBERT
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May 25,2004
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M. MUMMA II, BARBARA M. McCLURE, LINDA M. ROTH, and LISA M.
MORGAN.
The Marital Trust was first funded on November 19,1986 with$2,500.00
in cash from the Decedent's Estate. By December 31, 1987 the Marital Trust had
received additional property totaling$6, 287,308.65 from the Decedent's Estate.
Residu , Trust The Residuar��Trust is given "all the rest, residue and
remainder" of the Estate. The annual net income of the Residuary Trust is
payable to the wife and Co-Trustee, BARBARA McK. MUMMA at least yearly.
Her daughter and Co-Trustee, LISA M. NiORGAN is alone given the right to
invade principal of the Marital Trust for the beneEit of BARBARA McK.
MUMMA"£or her support, health, welfare, maintenance or comfort, to maintain
for her a standard of living which she has during our married life enjoyed, taking
into account, however, my wife's income from other sources, including, but not
limited to,all income from trusts,estates and business interests,as well as
available principal assets."
Upon the death of BARBARA McK. MUMMA the remaining principal of
the Residuary Trust is to be divided equally of Decedent's four children,
ROBERT M. MUMMA II, BARBARA M. McCLURE, LINDA M. ROTH, and LISA
M. MORGAN.
The Residuary Trust was first funded on November 24, 2986 with ��
$2,500.00 in cash from the Decedent's Estate. However,unlike the Marital Trust, �
no other property was transferreci to the Residuary Trust from the Decedent' s
Estate unti114 years later in the year 2000.
PECUNIARY FORMULA/RESIDUARY TRUST ALLOCATIONS
A pecuniary formula bequest entitles a surviving spouse only to a fixed
amount of property specified in dollars. However rather than using a set dollar
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May 25, 2004
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arnount, a pecuniary forinula determines the dollar amount at the time of the
Testator's aeath. Where there is a pecuniary formula, the marital trust is limited
to the calculated fixed dollar amount. All income earned by a decedent's estate
during adrninistration is to be allocated to the residuary trust. See, In re: Estate
of Fike,506 A.2d 398 (1986). Likewise all capital gains or capital appreciation in
the estate assets during administration is to be allocated to the residuary trust.
See, Althouse Estate,404 Pa. 412,172 A.2d 146 (1961).
SPECIFIC PROBLEMS WITH THE ESTATE &TRUST ACCOUNTINGS
I. THE PRINCIPAL PORTIO[�T OF THE MARITAL TRUST
APPEARS TO BE OVERFUNDED
Decedent's Will specifically limits the funding amount to be awarded to
the Marital Trust to fifty (50%) of the gross federal estate (as determined on the
Federal Estate Tax return) with deduction for the value of all property included
in the federaI estate which has passed to the wife outside of probate:
SEVENTH: If my tuife, BARBARA McK.MUMMA, sur�ives r►re,l giz�e rrnd bequentli
fo the trustees l�ereinaffer named,an amount equal to fifh�(50%)perrent of m�total
gross estr�te ns final[y deterntined for Federa! Estate Taz purposes, tnki�ig into accoi�nt
and includi►►g therein,for computation purposes, rny undivided interest in the value of
all my inferests in properh�which pass or whicit or hnve�assed Eo my urif�under other
provisions of this Will, or othenuise than under this Wilt, but only to fhe extent thnt such
interests nre,for purposes of the Federal Estate Tax, included in determining itt�gross
estnte and alTowed ns a nuirital deduction.
Prior to the enactment of the Economic Recovery Tax Act of 1981
("ERTA"), this 50% limitation was the maximum amount which would qualify
for a maxital deduction under federal estate tax law. ERTA liberalized this area
by permitting an unlimited marital deduction. Decedent's Will was executed on
May 19,1982 after the effective date of ERTA. Decedent's Codicil (which did not
make any substantive changes to the Will)was executed on October 12, 1984 only
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18 months prior to his death. I therefore conclude that Decedent expressly
intended to limit the principal amount in the Marital Trust to the 50% limitation.
The Account as filed fails to compute the amount to be awarded to the
Marital Trust with reference to the Federal Estate Tax Return, nor does the
Account appear to give credit(for computation purposes) against the amount to
be awarded to the Marital Trust for the value of the joint marital and other
property which had passed to BARBARA McK. MUMMA under other
provisions of the Will or outside of probate(which property was required to be
included in the Federal Estate Tax return as filed).
Total Gross Estate (Federal) $16,645,786.00
�/z of Total Gross Fed Estate $8,322,893.00
Less: Schedule M Spousal
Joint&Other Property
Passing Outside Probate (861,018.00�
Total Amount Which Should
Have Been Awarded to
Marital Trust � 7,461,875.00
Under the Account as filed,the following principal amounts were actually
distributed to the Marital Trust:
1986- 1987(Vol l,Page 60) $6,289,808.65
2001 - 2002(Vo14,Sch E,Page 1) 2,358,359.85
Total Principal Distributions
To Marital Trust $8,648,168.50
The principal portion of the Marital Trust is therefore appears to Ue over
funded by$1,186,293.50 calculated as follows:
Actual Principal Distributions $8,648,168.50
Required Under Will (7,461,875.00�
Martial Trust Overfunded: 1,186,293.50
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I note that the Account as filed shows an 'Estate Tax Adjustment' dated
06/22/90 in the amount of$28,370.00 for additional federal estate taxes paid. I
was not provided with the Estate's closing letter from the IRS; therefore I have no
way of knowing if any of this additional estate tax resulted from asset valuation
adjustments on the federal estate tax return. If any asset valuation adjustments
occurred on the federal estate tax return,then the carrying values of those
affected assets should have had corresponding adjustments on the Account, as
the Will directs that the adjusted amounts for federal estate tax purposes are to
be used as the Uasis for determining the gift to the Marital Trust.
The Account as filed thus (i) fails to conform to the express requirements
in the Will for calculation of the Marital Trust amount and (ii) fails to provide
requisite information necessary to deterinine the amount to be properly awarded
to the Marital Trust.
II. IMPROPER ACCOUNTING FOR�DISTRIBUTION OF ESTATE
INCOME TO BARBARA McK. MUMMA
Under the Superior Court's holding of In re: Estate of Fike,Supra, all net
income earned by the Estate during administration(other than required interest
on distributive shares under 20 Pa. C.S.A. �3543)should be allocated to and paid
over to the Residuary Trust,where such income then becomes part of the
principal of the Residuary Trust. Once part of the principal af the residuary
trust, these amounts would be then subject to withdrawal and distribution to
BARBARA McK. MUMMA only for her health, support etc and at the time oE
each such withdrawal BARBARA McK. MUMMA must have a"deficiency in
other available funds".
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Even though she was not an income beneficiary of the Bstate, the Account
as filed shows that BARBARA McK. MUMMA was distriUuted directly from the
Estate repetitive cash distributions totaling$1,b25,620.60 as follows:
06/05/91 150,000.00
03/31/92 150,000.00
11/10/92 25,000.00
02/05/97 500,000.00
12/23/98 400,000.00
10/29/01 400,620.04
Ol/04/02 7,859.65
TOTAL 1,625,620.69
During the period from Apri101, 1991 through December 31, 2003 the
Martial Trust Accountings show that Marital Trust distributed cash of
$4,743,229.80 directly to BARBARA McK. MUMMA while at the same Hme the
Mazital Trust continued to retain an additional sums totaling over 2,000,000.00 in
earned income which under the terms of the Marital Trust could also have been
distributed to BARBARA McK. MUMMA instead of Ueing retained within the
Marital Trust.
In my opinion there simply does not appear to be any reasonable
justification for this taking of$1,625,620.69 cash out of the Estate income
especially when at the same time BARBARA McK. MUMMA had undistributed
Marital Trust income available to her.
III. IMPROPER ACCOUNTING OF PRINCIPAL DISTRIBUTIONS
TO BARBARA McK. MUMMA
A.) THE FULTON BANK BUILDING
The Fulton Bank Building located at 599 Twelfth Street in Lemoyne
Pennsylvania (hereinafter the "FBB") is listed on the Estate Account as a principal
r � �
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real property asset of the Decedent with a date of death carrying value of
$5U0,000.00.
The Estate Account provides that as of March 31, 1988 the FBB was
transferred to the Marital Trust as a distribution of income in the a�nount of
$500,000.00. Not only is this an improper characterizadon of this asset, but there
is no conesponding credit on principal side of the Estate.
The Marital Trust Accounting as filed provides that as of March 31, 1988,
the FBB was transferred to BARBARA McK. MUMMA as a distribution of income
to her in the amount of$500,000.00 (Vo11, Schedule D-1, Page 86).
It is my opinion that the Estate's attempted re-characterization of the
Fulton Bank Building as income is improper under fiduciary accounting standards.
Furthermore the distribution of this asset by the Marital Trust as an income item
directly to BARBARA McK. MUMMA appears to have been designed to
circumvent the standards for principal distributions from the Marital Trust (health,
support etc and a "cieficiency in other available funds") at a time when BARBAItA
McK. MUMMA had already exhausted her 5% annual right to principal
withdrawal (which does not require such a standard for withdrawals).
B.) IMPROPER ACCOUNTING OF STOCK DISTRIBUTIONS TO
BARBARA McK. MUMMA
A.) The Accounting for the Marital Trust (VoI 1,Schedule A-1,Page
34) shows receipt on December 28, 1987 of(i) 55.8368 shares of Nine Ninery Nine,
Inc. Common with a value of$144,902.36 and (ii) 70.8421 shares of Nine Ninety
Nine, Inc 10% Preferred with a value of$104, 655.92. The origin of these shares is
unclear but they appear to Ue stock dividends. They are listed on the Marital Trust
accounting as"Other Receipts" under the income schedule.
B.) These same 55.8368 shares of Nine Ninety Nine, Inc. Common with
a value of$144,902.36 and) 70.8421 shares of Nine Ninety Nine, Inc 10% Preferred
1 • � •
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with a value of$104, 655.92 are listed as distributed as income to BARBARA McK.
MUMMA. In the case of the 70.8421 shares of Ninety Nine Inc 10% Preferred,
these shares are listed as being distributed to BARBARA McK. MUMMA on
November 19,1986 -more than one year before their alleged receipt by the Marital
Trust.
C.) Under the express direction of Decedent's Will, any stock
dividends received by either the Estate or a trust created under the Will are to be
treated as principal and not income:
TWELFTH: 1 direct tl�at all dividends upon sluires of stock nt nny tinre consfituting •
part of m�estate or nny Trust lterelnj establisl�ed payable in sfock of tlu�corporrrtio�r declaring the
same shntl be deemed to be corpus,except that such dividends paid regularly(i.e.nt regular or
substantinlly regulnr intetvals)o��t of current earnings nrn�,at the discretion of�rt�Execufors or
trustees be deemed to be inconrc.... .
D.) It is my opinion that the Estate's attempted re-characterization of
these stock dividends as income is improper not only under fiduciary accounting
standards but under the express direction of Decedent's Will. Furthermore the
distribution of these stock dividends by the Marital Trust as an income item
directly to BARBARA McK. MUMMA appears to have been designed to
circumvent the standazds for principal distributions from the Marital Trust (health,
support etc and a "deficiency in other available funds") at a time when BARBARA
McK. MUMMA had already exhausted her 5% annual right to principal
withdrawal which does not requixe such a standard.
N. THE ACCOUNT AS FILED FAILS TO ADEQUATELY EXPLAIN OR
DOCUMENT SIGNIFICANT CHANGES IN CERTAIN MATOR
INVESTMENT HOLDINGS OF THE ESTATE.
A.) One of the primary assets of the Decedent's estate was listed as 700
shares of Pennsylvania Supply Company,a closely-held Mumma family
corporation,which shares are reported on the Account with a fiduciary
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acquisition/carrying value of$9,144,473.00. According to the Account as filed,
Decedent's shares of Penrisylvania Supply Company were liquidated on or about
December 19, 1986. (See Vol l, Page 15)
Although it is not cle�r from the Account as filed, apparently Decedent's
shares of Pennsylvania Supply Company were ultimately exchanged for other
investments including: (i) an unknown number of shares of Hummelstown
Quarries, Inc. (with a reported Inventory Value of$593, 421.04); (ii) an unknown
number of shares of Nine Ninety Nine,Inc (with a reported Inventory Value of
$2,495,6b5.85); (iii) an unknown number of shares of Union Quarries, Inc. (with a
reported Inventory Value of$1,050,000.00); (iv) an unspecified interest in a
certain real estate listed as Mumma Realtv Associates 1 (with a reported
combined Inventory Value in excess of$3,745,211.80); and (v)an unspecified
interest in certain real estate listed as Mumma Realty Associates II (with a
reported combined Inventory Value in excess of$848,213.85). (See Vol 1,Page 16
&Page 118).
The Account as filed is fails to provide any concise or detailed information
relating to the exchange of the shares of Pennsylvania Supply Company for the
various above-referenced assets including any explanation of for assignment of
carrying values. The Account as filed reports alleged capital gains on alleged
distributions of the shares of Hummelstown Quazries, Inc, Nine Ninety Nine, Inc
and Union Quarries, Inc Uut there no way to determine or verify the capital gains
as there is no explanation of Inventory values for those shares as listed in the
Estate accounting.
Other assets appear and disappear on the Account as if by magic. For
example, the Account shows$487,771.03 of capital gains on July 21,1993 on the
sale of the 'Paxton Street Yards', yet where this asset came from and the nature of
this asset is never explained.
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This lack of concise and detailed information relating to the exchange of
the shares of Pennsylvania Supply Company and the acquisition of substituted
assets is directly contrary to the mandate of the Fiduciary Accounting Standards
as set forth in the Pennsylvania Orphans Court Rules: �
A second schedule(entitled "Chnnges in lnvestment Hoidirtgs")should sliou�all
hansactions a/fecting n particulnr securihj I�Iding such as purclu�se of additionnl sl�ares,
pnrtial snles, stock splits,c)innge of corpornte narne, divestment distributions,etc. This
schedule, similar to a ledger account for eacli liolding, zuill recancile opening and closing
entri�s for pnrticuIar 1�oldings,expinin clianges in cnrn�ing vniue nnd nvoid extensive
searches through tl�e accoimt for inforrnntion scattered among otl�er scliedcdes.
(Emphasis Supplied).
It appears that much of the Estate Account as well as the Marital Trust
Account were prepared by Hadley &Company of Buffalo New York (who had
served as the Decedent's accountants before his death). Since Hadley in not in
Pennsylvania, this may partially explain the failures of the accountings to comply
with the express inandates of the Fiduciary Accounting Standards in the
Pennsylvania Orphans Court rules however this should not excuse attorneys
Morgan, Lewis and Bockius which seems to have taken Hadley's various
accountings and simply added front cover pages and ending verifications.
B.) The lack of proper accounting for the exchange of the shares of
Pennsylvania Supply Company has makes it impossible to adequately determine
if there are any capital gains on the exchange of the Pennsylvania Supply
Company shares or if there has been subsequent appreciation in the value of the
assets which were received in the exchange.
To the extent that the Estate has capital gains on the exchange of the
shares of Pennsylvania Supply Company, or has had subsequent appreciaHon in
the value of the assets received for the shares of Perulsylvania Supply Company,
then the Account as filed has improperly allocated such capital gains and
subsequent increases in value of those exchanged assets to the Marital Trust.
Under Althouse Estate,404 Pa. 412, 172 A.2d 146 (1961) in those instances where
, • . '
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there is a pecuniary formula Marital Trust all capital gains as well all increases in
the value of any estate assets which occur during administration must be
allocated solely to the Residuary Trust.
V. LIQUIDATION OF THE PENNSYLVANIA SUPPLY COMPANY
STOCK WAS CONTRARY TO THE EXPRESS WISHES OF THE DECEDENT
AND APPEARS TO HAVE BEEN UNNECESSARY.
A.) The express wishes of the Decedent with regard to his holdings in
private family held corporations are contained in Paragraph Thirteen of his Will:
THIRTEENI'H: Notzvitl:stnnding the pozvers herein vthenvise given, I direct tj�nt m�
stock in priz�ntely}�eld corporntions, superuised and ndministered by nu as tl�e Execufive or
operafing officer prior Eo nr�decease,or r���stock in privntely lteld corporrctions which othennise
is owned by rne at»iy decense, be not sold urzless all of my trustees c�nd particulariy m�
individual trustee or trustees, s}u�ll agree in writing fhnt sudi stock shnil be sold. It is m�desire
thaf if expedient and possible, the businesses which I haae personully directed during my lifetime °
and of which I have l�nd mi interest be conNnued for the beneftt of and under tl�e mnnagenrent and
control of n��fnmil�.
According to Decedent's Federal Estate Tax Return as filed,Decedent's
total gross estate was valued at$1b,645,786.00. Decedent's shares of
Pennsylvania Supply Company stock were included at a value of 9,144,473.00. In
other words,even with the$861,018.00 of nonprobate property removed from
the Federal Estate Tax return calculations, Decedent's Estate had $6,640,295 in
assets other than the Pennsylvania Supply Company stock. Most of these other
assets were fairly liquid and/or income producing.
According to Decedent's Federal Estate Tax Return as filed, Funeral and
Estate Administration Expenses amounted to 560,040.00, and Decedent's
Debts/Mortgages amounted to$4,614,191.00. Federal Estate taxes payable were
$42,695.00;Pennsylvania lnheritance Tax was$617,480.Q0. The total of expenses �
and inheritance/estate taxes payable by the Estate was$5,834,406.00.
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- Other Assets Available $6,640,295.00
Estate Expenses/Taxes �5,834,406.00�
Balance Available $ 805,889.00
As the above calculations demonstrate, tllere was na necessity from an
estate administration standpoint for the liquidation of the P�nnsylvania Supply
Company stock. At the tirne that the PeYUlsylvania Supply Company stock was
liquidated, the surviving spouse, BARBARA McK. MUMMA and each of
Dececient's four children, ROBERT M. MUMMA II, BARBARA M. McCLURE,
L.INDA M. ROTH,and LISA M. MORGAN, all had significant personal assets
and/or income from other sources. There simply were no compelling reasons
for the Estate's liquidation of the Pennsylvania Supply Company stock.
B.) It appears that liquidation of the Pennsylvania Supply Company
stock was part of a common plan or scheme by the Co-executrices, BARBARA
McK. MUMMA and LISA A. MORGAN,to vest blocks of certain stock of
subsidiary corporations of Pennsylvania Supply Company unto BARBARA McK.
MUMMA free of trust. By moving a sig�nificant percentage of these shares
outside of#he Estate, BARBARA McK. MUMMA could help guide a sale to
buyer CRH if problems or objections should be raised. CRH was not certain that
the Co-executrices had the authority to sell and wanted indemnification in case
the sale be challenged. (See Stradley, Ronon,Stevens&Young Memo dated
04/27/89).
(1) In December 1987 the Co-executrices,caused the Estate to
Transfer to the Marital Trust property having a value of$6,289,808.85
including 615 shares of Hummelstown Quarries, Inc.; 50 shares of Union
Quarries, Inc.;653.5870 shares (Common) of Nine Ninety Nine, Inc.; and
829.2340 shares (10% Preferred) of Nine Ninety Nine, Inc (hereinafter
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collectively referred to as the"Transferred Stock"). The above referenced
shares of the Transferred Stock were received by the Estate as part of the
liquidation of the Pennsylvania Supply Company stock.
(2) The allocation of the aforesaid shares of the Transferred
Stock to the Marital Trust is not a decision that a reasonably prudent
fiduciary would have made. By allocating the Transferred Stock (instead
of cash) to the pecuniary formula Marital Trust, the Estate was needlessly
forced to incur capital gains of$1,170.687.90 resulting in the payment of
over$360,000.00 in federal and state fiduciary income taxes. Had the Co-
executrices allocated the Transferred Stock to the Residuary Trust, such
allocation would not have resulted in the payment of any fiduciary
income taxes.
(3) The Martial Trust grants to BARBARA McK. MUMMA a
discretionary, non-cumulative, annual right of withdrawal oE up to five
(5%) percent of any then existing principal of the Marital Trust. No such
withdrawal rights are contained in the Residuary Trust.
(4) Although the withdrawal rights granted to BARBARA McK.
MUMMA do not vest her with a right to select individual assets of the
Marital Trust to fund the withdrawals, beginning in 1987 and continually
annually up through 1993 BARBARA McK. MUMMA systematically
exercised her 5% witharawal rights under the Martial Trust to convey
various shares of Hummelstown Quarries, Inc. and Nine Ninety Nine, Inc.
(both common and preferred) to herself individually. �nce the sale to
CRH was completed BARBARA McK. MUMMA stopped exercising her
withdrawal rights.
(5) It does not appear that the systematic withdrawal of the
shares of Hummelstown Quarries,Inc. and Nine Ninety Nine, Inc (both
common and preferred) by BARBARA McK. MUMMA from the Marital
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Trust was financially motivated. During the period from 1987 through
1993 while she was making said systemaric withdrawals of shares of
Hummelstown Quarries, Inc. and Nine Ninety Nine, Inc (both common
and preferred) into her own name, BARBARA McK. MUMMA did not
withdraw from the Marital Trust the over One Million ($1,000,000.00)
Dollars in accumulated income which was available for distribution to her
under the express terms of the Marital Trust.
C. According to the Accountings, the Marital Trust liquidated its stock
holdings in both Hummelstown Quarries, Inc. and Nine Ninety Nine Inc.
(Common) on or about July 21, 1993. According to Robert M. Mumma II,
BARBARA McK. MUMMA liquidated her personally owned shares in
Hummelstown Quarries, Inc and Nine Ninery Nine, Inc. (Common) on or about
July 21,1993 as part of the same transaction as the sale of shares of Hummelstown
Quarries, Inc. and Nine Ninety Nine,Inc. by the Marital Trust.
VI. THE CO-EXECUTRICES OF THE ESTATE FAILED TO �
PRESERVE ASSETS CONTAINED IN DECEDENT'S SAFETY DEPOSIT BOX
3332 AT THE DAUPHIN DEPOSIT BANK AT THE TIME OF HIS DEATH
AND/OR FAILED TO ADEQUATELY INVESTIGATE THE
DISAPPEARANCE OF DECEDENT'S ASSETS CONTAINED IN SAID
SAFETY DEPOSIT BOX.
A.) On the date of his death Decedent was the joint owner(with
Robert M. Mumma II) of Safe Deposit Box 3332 located at the Dauphin Deposit
Bank and Trust Company in Harrisburg,Pennsylvania (hereinafter"SDB 3332").
This was the largest safe deposit box that Dauphin Deposit rented and was the
size of a small foot locker.
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B,) In August of 1985 ROBERT M. MUMMA, II and his father
inventoriea the contents of SDB 3332. This August 1985 visit was the last time
that SDB 3332 was entered prior to Decedent's death. At the time of this August
1985 inventory SDB 3332 contained various assets belonging to or titled in the
name of the Decedent, including his share certificates for Pennsylvania Supply
Company (and its subsidiaries) as well as corporate records and shareholder
agreements relating to Decedent's Pennsylvania Supply Company stock.
C.) On April 23, 1986, eleven days after Decedent's death, ROBERT M.
MUMMA, II and his mother, BARBARA McK. MUMMA, entered SDB 3332 to
recover Decedent's will. At the time of recovery of Decedent's will Objector saw
various assets owned by the Decedent as well as the Pennsylvania Supply
Company corporate records and shareholder agreements referred to in
Subparagraph B above present in SDB 3332. ROBERT M. MUMMA II and
BARBARA McK. MUMMA were informed at this time that SDB 3332 would be
sealed pending inventary by the Pennsylvania Department Of Revenue.
D.) On November 2, 1989 a formal inventory of SDB 3332 by an
officer of the Pennsylvania Department of Revenue in the presence oE BARBARA
McK. MUMMA revealed only personal papers and letters of the Decedent;
neither Decedent's shares or other assets nor any corporate records or
shareholders agreements relating to the Pennsylvania Supply Company were
present.
E.) The Co-executrices of the Estate have failed to properly investigate
and/or pursue responsible parties for the loss of Decedent's assets in SDB3332.
F.) According to ROBERT M. MUMMA, II the missing corporate
records of Pennsylvania Supply Company contained shareholders buy/sell
agreements which (a) would have limited the value of the Pennsylvania Supply
Company stock and (b) given ROBERT M. MUMMA II and the other children
who were the remaining shareholders of Pennsylvania Supply Company either
_�..,��, .�n�,,,�.�..� , . �.�,�� �d..�.,.�n .���.�,.�,..�,�..�.
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,
the right of first refusal to purchase said shares of Pennsylvania Company Stock
or to have Pennsylvania Supply Company itself re-purchase its own stock which
would increase the value of the remaining outstanding shares in the hands of the
family members including ROBERT M. MWMMA, II.
G.) ROBERT M. MUMMA II believes that the Co-executrices of the
Estate are either responsible for or complicit in the disappearance of the
corporate records of the Pennsylvania Supply Company as well as other items
from SDB 3332.
H.) I note that unlike ROBERT M. MUMMA II the Co-executrices of the
Estate have not instituted any formal legal action against Dauphin Deposit with
regard to the estate losses from SDB 3332. ROBERT M. MUMMA II filed his
own acNon against Dauphin Deposit after a certificate for 314 shares of 999, Inc. �
(a subsidiary company of the Pennsylvania Supply Company) which was issued
solely in ROBERT M. MUMMA II'S own name and which ROBERT M. MUMMA
II believed might have been contained in SDB 3332 turned up in the offices of
legal counsel for CRH in San Francisco as part of CRH's due diligence for its
purchase of the Pennsylvania Supply Company.
I) In reviewing the extensive discovery in Mumma's on-going action
against Dauphin Deposit, it appears that no one disputes that various corporate
records, including those of Pennsylvania Supply Company, are"missing".
BARABRA McK. MUMMA admits is her deposition (PP 84- 91) that there were
more items in SDB 3332 when the will search was performed then when the
inventory and closeout of the box occurred. Form REV 485 which is the
inventory of Box 3332 on file with the Pennsylvania Department of Revenue
states the box had "no items of value". Apparently the Estate's attitude is that -
the missing documents simply cannot be located.
J.) Shareholders Agreements of the type described by ROBERT M.
MUMMA II as having been in existence for the Pennsylvania Supply Company
. , '
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(3) Co-executrix, Lisa M. Morgan was a member of MLB;
Decedent's will does not contain any provision authorizing
the executrices or the trustees to hire or retain themselves;
(4) MLB preparation of the Estate Accounting was not in
accordance with Decedent's will and applicable law as
evidenced above;
(5} MLB breached its duries to the residuary beneficiaries of
both the Martial and Residuary trusts by failing to act
impartially for the benefit of all beneficiaries and instead
aligning itself with BARBARA McK. MUMMA in her plan or
scheme to liquidate the Pennsylvania Supply Company and
failing to prevent BARBARA McK. MUMMA from
improperly diverting funds from the Estate.
(6) A portion of the MLB fees were personal expenses of the Co-
executrices and Co-Trustees including as part of their
personal scheme to"squeeze out" ROBERT M. MUMMA
lI'S interests in certain family corporations. (See Stradley,
Ronan,Stevens &Young Memo dated (}4/27/89).
VIII. ATTORNEY FEES PAID BY THE MARITAL TRUST TO .
STRADLEY, RONON, STEVENS &YOUNG
It is my opinion that a portion of the attorney fees paid by the Marital
Trust to Stradley, Ronon,Stevens &Young were personal expenses of the Co-
Trustees as part of their personal scheme to"squeeze out" ROBERT M.
MUMMMA II's interests in certain family corporations and therefore are not
proper expenses of the Marital Trust. (See Stradley, Ronon,Stevens &Young
Memo dated 04/27/89).
. .• .
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IX. CONCLUSIONS/RECOMMENDATIONS
A.) THE COURT SHOULD ORDER THE REMOVAL OF BARBARA
McK. MUMMA AND LISA M. MORGAN AS CO-EXCUTRICES OF THE �
ESTATE AND AS CO-TRUSTEES OF BOTH THE MARITAL AND
RESIDUARY TRUSTS AND APPOINT AN INDPENDENT PARTY TO ACT
IN THEIR PLACE AND STEAD.
1.) The accountings for the Estate,the Marital Trust, and the Residuary
Trust will need to be substantially redone:
a.) The principal amount awarded to the Marital Trust under
the Account as filed does not comply with the pecuniary formula
set forth in Decedent's Will.
b.) Income earned by the Estate during administration has not
been properly allocated to the Residuary Trust.
c.) Capital gains earned by the Estate during administration
have not been properly allocated to the Residuary Trust.
d.) Significant changes in major investment holdings have not
been documented and accounted in accordance with the Fiduciary
Accounting Standards in the Pennsylvania Orphans Court Rules.
e.) The unauthorized income distributions from the Bstate
directly to BARBARA McK.MUMMA need to be reversed.
f.) The items of principal and capital gains which were
transferred to BARBARA McK. MUMMA need to be reversed.
2.) The general intent of the pecuniary formula marital /residual trust
combination as found in DecedenYs Will is to put a minimal fixed amount in the
marital trust portion with everything else over into the residuary trust-with the
� . . � .
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Residuary Trust being the predominant recipient. However the various
accountings as filed by the current fiduciaries have effecrively reversed this
intent and instead have favored the Marital Trust over the Residuary Trust.
a.) By December 31, 1987 the fiduciaries has assigned assets to
the Marital Trust- primarily stock of the subsidiary corporations of
the Pennsylvania Supply Company that the fiduciaries wished to
sell to CRH -totaling$6,287,308.65,. However no significant assets
were assigned to the Residuary Trust until over 14 years later in
2002-2003 when the Residuary Trust received$3,686,315.38 of
comprising those assets which the Estate at that time had left
remaining.
b.) The Will of the Decedent did not authorize the sort of
'cherry picking' of assets between the Marital and the Residuary
Trust which occurred under the accounts as filed. Generally in the
absence of an express direction in the Will, both the Marital and
Residuary Trusts are to be awarded a proportionate share of each
of the assets.
c.) It appears that the'cherry picking' and transfer of assets by
the fiduciaries of the Estate to the Marital Trust was part of a
common plan or scheme to vest a block of the stock of certain
subsidiary corporations of Pennsylvania Supply Company unto
BARBARA McK. MUMMA free of trust.
d.) BARBARA McK. MUMMA had an annual five (5°�) percent
principal withdrawal right from the Marital Trust which right was
not contained in the Residuary Trust. These withdrawal rights
were used solely upon the stocks in question. After the sale to
CRH, BARBARA McK. MUMMA stopped exercising her rights of
withdrawal. During the time that these principal withdrawal
, � .
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rights were Ueing exercised BARBRA McK. MUMMA had available
to her over One Million ($1,000,000.00) Dollars of Marital Trust
income which she could have requested from the Marital Trust yet
she did not do so.
e.) This'cherry picking' of assets caused the Estate to incur in
excess of$360,000.00 in federal and Pennsylvania fiduciary income
taxes all or a significant portion of which income taxes could have
been avoided. The fiduciaries should be surcharged for the Estate's
payment of these un.necessary fiduciary income taxes.
3.) The standard for trust fiduciaries dealing with successive interests
has remained unchanged since its original promulgation in Section 232 of the
Restatement of Trusts (1935):
"[TJo deal impartinlly as bet�c�een the successive beneficiaries and to nct zvith due
regnrd to t)uir respective interests."
Under the express terms of Decedent's Will, all distributions of principal
to BARBARA McK. MUMMA Erom either the Marital or the Residuary Trust
(other than the aforesaid 5% withdrawal right) are subject not only to the rather
traditional health, maintenance etc. standard but also to the express requirement
that BARBARA McK. MUMMA have"a deficiency in other available funds"
available to her. This indicates the Decedent's clear intent that the principal of
both the Marital and Residuarv trusts is not be invaded unless absolutely
necessary -in order to preserve funds for the residuary beneficiaries.
Given the repeated instances where the trust fiduciaries have ignored the
express directions of Decedent's Will and have manipulated the Marital Trust for
their own gains, they have repeatedly demonstrated their inability to act with
impartiality to the residuary beneficiaries. I therefore believe that BAR$ARA
� �'>>
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McK. MUMMA anci LISA M. MORGAN should be removed as co-executrices of
the Estate and co-trustees of both the Marital and Residuary Trusts with an
independent fiduciary appointed in their place and stead.
B. THE SALE TO CRH NEEDS TO BE VOIDED BY THE COURT
ALONG WITH A COURT ORDERED AN INVESTIGATION ORDERED
INTO THE DISAPPEARANCE OF DECEDENT'S MISSING ASSETS AND
PAPERS
1.) Although the Decedent's express wishes were that his family
corporations not be sold, it appears that sale of a major portion of the assets of
the Pennsylvania Supply Company became an almost immediate goal of the Co-
Executrices soon after their appointment. Since Decedent's Estate had more
than enough assets to satisfy creditors and pay applicaUle Federal Estate and
Pennsylvania lnheritance Taxes without the sale of any portion of the
Pennsylvania Supply Company assets, the motives behind the sale are clearly
suspect.
2.) I arn particularly ciisturbed by the sequence of events surrounding
Decedent's missing assets and papers which were contained in DecedenYs Safe
Deposit Box 3332 at the Dauphin Deposit Bank. As BARBARA McK. MUMMA
admitted in her deposition, there were a lot more items contained SDB3332 at the
time she conducted the Will search then H�hen she closed this safety deposit box.
As SDB3332 was held jointly by the Decedent and his son ROBERT M. MUMMA
II, no one should have been permitted to enter or close SDB3332 without the
physical presence of ROBERT M. MUMMMA II. Since the representatives of the
Estate were pushing for a sale of the Pennsylvania Supply Company assets to
CRH and ROBERT M. MUMMA II was opposing such a sale, the loss (ar rather
failure to find) the shareholders agreement which ROBERT M. MUMMA II
claims existed and which he indicated would have prevented the proposed sale
� ' � � .'
Miller Lipsitt, LLC
May 25, 2004
Page 25 of 25
to CRH the conduct of the representative of the Estate dernands an independent
and impartial court ordered investigation.
C. THE CONDUCT OF MORGAN,LEWIS AND
BOCKIUS/STRADLEY, RONON,STEVENS AND YOUNG
An attorney that serves as counsel to an estate or trust owes a duty to see
that the administration of the estate and/or trust protects the interest of all who
share in the estate or the trust(creditors, fiduciaries, present as well as future
beneficiaries). As the memo from David Landrey of Stradley. Ronon,Stevens
and Young dated 04/27/1989 makes clear both Morgan,Lewis and Bockius and
Stradley, Ronon,Stevens and Young seerned more concerned with the sale of
assets to CRH and "squeezing out" ROBERT M. MUMMA II's shares then they
were in protecting his interests as a beneficiary of both the Marital and Residuary
Trusts. This is exactly the sort of conduct which reinforces the negative
connotations that so many have of our profession. As a result of their conduct,I
believe that compensation to both firms for their services which were paid from
the Marital Trust should be denied by the Court.
•� ,
. �.� v
� � ' :-Z
Jon han M. Crist,J.D.,L (Taxation)
�� �• i/
CIRRICULUM VITAE FOR .
JONATHAN M. CRIST
Education
St. Bonaventure University Grad: May 1972
St. Bonaventure, N.Y. B.S (Bus Admin)
Cum Laude
Dickinson School of Law Grad: June 1979
Carlisle, PA. Juris Doctor
Temple University Grad: May 1983
Philadelphia, PA. L.L.M. (Taxation)
EmplovmentNVork History Professional Associations
Solo Practice American Bar Association
226 West Chocolate Ave. Pennsylvania Bar Association
Hershey, PA. 17033 Dauphin County Bar Association
(Mar 2004 through Present)
Latsha, Davis 8 Yohe, P.C.
Mechanicsburg, PA. 17055 �
Senior Associate
(Mar 1999—Mar 2004)
Solo Practice
226 West Chocolate Ave.
Hershey, PA. 17033
(Oct 1992-Mar 1999)
Partner
Hedger 8�Hedger
801 E. Park Drive
Harrisburg, PA 17111
(Sept 1989—Oct 1992)
Skarlatos&Zonarich
Harrisburg, PA
Associate(May 1983-Sept 1989)
Beckley 8 Madden
Harrisburg, PA.
Associate(Sept 1979- May 1983)
Admitted To Practice Before .
Pennsylvania Supreme Court (1979)
US District Court—Middle District of Pennsylvania(1979)
US Tax Court(1983)
US Supreme Court(1985)
In re Estate of Robert M. Mumma, . COURT OF COMMON PLEAS
Deceased . CUMBERLAND COUNTY
: ORPHANS' COURT DIVISION
. No. 2 l-36-0398
POST-HEARING BRIEF OF ROBERT M. MUMMA,II AS BENEFICIARY UNDER
THE WILL OF ROBER M. MUMMA,DECEASED
L AUTHORITY
The Cumberland County Orphans' Court has jurisdiction pursuant to 20 Pa. C.S. § 711, et
seq., Pa. O.C.R. 8 and C.C.O.C.R. 8.
IL CASE HISTORY
Robert M. Mumma("Decedent"), Petitioner's father, died on April 12, 1986. In his Last
Will and Testament(the"Will"), Decedent established two trusts. One was a Marital Trust,
comprised of fifty percent(50%) of his estate� and the other was a Residual Trust. Will, pp. 2-4.
The Will provides that the income from both trusts was to be distributed to Decedent's
wife, Barbara McK. Mumma during her lifetime. Will, p. 2. Mrs. Mumma had the right to
invade principal from the Marital Trust for reasonable needs to maintain her standard of living,
as well as a right to take the greater of a $5,000.00 or five percent(5%) distribution of the
principal value of the trust, to be distributed upon request from her on an annual basis. Will, pp.
2-3. The Will directed that at Mrs. Mumma's death, the residual assets of the Marital Trust were
to be distributed to Decedent's four children per stirpes. Will, p. 4. The principal ofthe Residual
Trust was also to be distributed to Decedent's four children upon Mrs. Mumma's death. Id.
At his death, Decedent owned, operated, was an executive of, or was otherwise closely
involved with numerous closely held companies. These included Pennsylvania Supply Co.,
Pennsy Supply Inc., Kim Co., Nine-Ninety-Nine, Inc. and Hummelstown Quarries, Inc., among
others.2 The executive boards and shareholders of all of these companies were comprised of
Decedent, Mrs. Mumma, and their four children. Further, Decedent and Petitioner each owned a
fifty percent(50%) interest in two other companies, Lebanon Rock, Inc. and High-Spec, Inc., a
real estate holding company.
At the time of his death, Decedent owned a 98.31% interest in Pennsylvania Supply
Company ("PSC"). PSC served as an umbrella holding company for Decedent's numerous and
wide-ranging business interests. The remaining minority shareholders of PSC were Petitioner
and his three sisters, each holding an outright interest of 0.42%. PSC also held an 83.42%
interest in Kim Co., another holding company closely owned and operated by the Mumma
family. The remaining minority shareholders of Kim Co. were Mrs. Mumma and the four
Mumma children. Id. Kim Co. was a 50% shareholder of Union Quarries, and owned a 40.95%
interest in the common stock and all of the 10%preferred stock of Nine-Ninety-Nine, Inc. The
minority shareholders of Nine-Ninety-Nine, Inc. common stock were the four Mumma children.
The three shareholders of Nine-Ninety-Nine, Inc. 8%preferred stock were Petitioner's three
sisters.Nine-Ninety-Nine, Inc. owned the entire 100% interest in Pennsy Supply, Inc., which
itself had three wholly owned subsidiaries. In addition, PSC had a 14.29°/a interest in Middle
Park, Inc., a realty holding company, whose other shareholders were the four Mumma children.
The genesis of the bulk of the Trust assets can be traced back to the will of Walter M.
Mumma, Decedent's father. Walter M. Mumma died in 1961. The primary assets of Walter M.
Mumma's Estate were five (5) shares of PSC, two (2) shares of Pennsy Supply, Inc. and twenty-
four(24) shares of Highspire Sand and Gravel Limited (HS&G). Walter M. Mumma's Will
' The actual amount of the Marital Trust is 50%of the gross estate,less any amount granted to DecedenYs wife
under probate.
2
created a trust for the benefit of his four grandchildren, Petitioner and his sisters. Decedent and
the Dauphin Deposit Trust Company (DDT) were appointed Executors by the Dauphin County
Orphans' Court. Walter M. Mumma's Will created four(4)trusts for the benefit of his four(4)
grandchildren. The trusts were funded by 25 percent of Walter M. Mumma's Estate's assets,
with any leftover shares going to Petitioner. The trusts were funded pursuant to the"share and
share alike"provision of Walter M. Mumma's Will.
PSC had two wholly owned subsidiaries: Pennsy Supply, Inc. (PS,I - Entity# 272024)
and Fiala Crushed Stone Corp. (FCS - Entity# 120660).3 HS&G owned the Silver Springs
Quarry. FCS operated this quarry and sales of the product were conducted under Pennsy Supply,
Inc. Immediately after Walter M. Mumma's death, Pennsy Supply, Inc. and FCS were merged.
Fiala survived and changed its name to Pennsy Supply Inc. This was still Entity #120660.
HS&G was liquidated. Walter M. Mumma's estate received the Silver Springs Quarry as a
distribution under the plan of liquidation. A third party, Jerry Simpson, purchased 1250 shares
of PSI stock at par value of$100 for a total of$125,000.00. Walter M. Mumma's estate
contributed the Silver Springs Quarry and other assets to PSI in exchange for 1250 shares at par
value. The estate then exchanged this stock for 1333 shares of Kim Co. stock.
On or around December 29, 1961, Kim Co. and Simpson executed a Shareholder
Agreement("Kim Co. Shareholder Agreement"). Subject to that Agreement, Simpson was
required to first offer his shares of Kim Co. back to Pennsy Supply Inc. subject to its 30-day right
of first refusal. The Agreement provided that any PSI shares held by Kim Co. upon its
dissolution were to be offered back to the company, then to the shareholders, and only then to the
Z For the purposes of this brief,Nine-Ninety-Nine, Inc.and Pennsy Supply, [nc.are one and the same.
3 Pennsy Supply, Inc.was incorporated in 1958. [n an Amendment of Merger in 1961,Pennsy Supply,Inc.merged
with Fiala Crushed Stone Corp.
3
open market. Kim Co. Shareholder Agreement, Dec. 29, 1961. Pennsy Supply Inc. signed a
joinder to the Agreement. Specifically, the Agreement held that
shares of[Kim Co.] now held or to be hereafter leased shall not be sold,
assigned, transferred, hypothecated, encumbered or otherwise disposed of,
either during the lifetime of the shareholder or after death, except in accordance
with the provisions of this Agreement.
Id. Paragraph 3 of the Agreement further provided that any shares issued to Decedent or
Petitioner were subject to the same restrictions. On January 5, 1962, PS[ by action of its Board
of Directors approved a joinder to this agreement. The terms of this agreement were the terms of
PSI Bylaw 33, adopted by the Directors and ledgered on all outstanding shares held by Kim Co.
and Simpson.
On August l, 1963 Simpson entered into an agreement to sell 1250 shares of Kim Co. to
Decedent. Simpson received $125,000.00 and Decedent received 1250 shares of Kim Co. See
Assignments of Shares Separate from Certificate, Aug. 1, 1963. Kim Co. also agreed to waive
the terms of shareholder's agreement. The agreement further terminated Simpson's rights under
the December 29,1961 agreement. PSI was not party to the agreement.
Decedent then gifted all 1250 shares to his four children on August 5, 1963. These shares
were held by Decedent as custodian for each child. Petitioner was issued 314 shares and each of
his sisters was issued 313 shares. Petitioner served as a director and officer of PSI from 1968
until his resignation in 1978. During this time he attended Board meetings and signed contracts
and financial agreements on behalf of the company. Theoris Ebert also signed many of these
documents and attended these meetings as Secretary of PSI.
PSI owned the Silver Springs Quarry and subsidiaries Kimbob, Inc., Derry Aire, Inc. and
Pennsy Supply, Inc. (PS,I - Entity# 272025). In 1980 Decedent and Petitioner determined to
divide the aggregate operations from the building material, concrete, asphalt and trucking
4
operations.
Mumma family attorney William D. Boswell formed a new corporation, Ten-O-One, Inc.
(1001) in October 1981. On January 4, 1982 Boswell and H.G. Lake changed the name of 1001
to Pennsy Supply, Inc. Immediately thereafter Pennsy Supply, Inc. changed its name to Nine
Ninety-Nine, Inc. ("NNN").
Decedent died on April 12, 1986. Mrs. Mumma and Lisa M. Morgan, one of Decedent's
daughters, were named co-Executrices and Trustees of the Marital and Residual Trusts. At the
time of Decedent's death, Petitioner and his three sisters each owned three (3) shares of
Pennsylvania Supply Co.,the vast majority of the shares being owned by Decedent. Petitioner
and his sisters each owned 150,000 shares of Middle Park, Inc. Financial Analysis, Summary
IX. Petitioner also owned 334 shares of Kim Co. and 314 shares of NNN common stock. Id.
Decedent's Will named Mrs. Mumma and Lisa Mumma Morgan, Decedent's daughter and
Petitioner's sister, as co-executrices and trustees of both the Marital and Residual Trusts. Initial
meetings with Estate counsel determined that all four Mumma children were 25% beneficiaries
of Decedent's estate, subject to the two Trusts.
In November 1986, estate counsel from the firm Morgan Lewis and Bockius (ML&B)
advised that Kim Co. should be dissolved for tax reasons. In December 1986, the shareholders of
Kim Co. elected to liquidate the assets of Kim Co. into PSC. Kim Co. Liquidation Agreement.
The 1250 shares of PS[ held by Kim Co. were to be transferred to a liquidating trustee, for
distribution to the Kim Co. shareholders. At the time, Petitioner was Vice President and his sister
Barbara Mann Mumma was Secretary of Kim Co. As determined by ML&B the shareholders of
Kim Co. were the four children, Mrs. Mumma, and PSC. [t was at this point that the terms of the
December 29, 1961 agreement were not complied with and Petitioner was not advised of the
5
restrictions upon the Kim Co. shares. In December 1986, the shareholders of Kim Co. elected to
liquidate the assets of Kim Co. into PSC. Kim Co. Liquidation Agreement. .
Shortly thereafter, the co-executrices began negotiations to unilaterally sell shares of
NNN and Hummelstown Quarries, Inc. ("HQ["), along with real estate holdings, to be sold as the
assets of PSI, to an Irish company called CRH plc. Affidavit of Robert M. Mumma, II, in
Opposition to Defendant's Motion for Summary Judgment, Cumberland Co. C.C.P.No. 99-2765
("Affidavit"). Petitioner asserted his right to first refusal but was rebuffed by his mother shortly
thereafter. Id.;see also Letter from Barbara McK. Mumma to Robert M. Mumma, II,November
20, 1986, Letter from Robert M. Mumma, II to Barbara McK. Mumma,November 2, 1988,
Letter from Robert M. Mumma, II to CRH, June 30, 1989. Upon Petitioner's exercise of his
right of first refusal, CRH backed out of the sale. Affidavit. This triggered years of complex and
intertwined litigation over the Decedent's estate that is still ongoing to this day, and of which the
instant matter is a part.
In December 1988 Decedent's Estate took the position that it controlled a holding
company,Nine-Ninety-Nine, Inc. (NNN)that held all 2500 shares of PSI. On December 27,
1988 NNN held a shareholders' meeting to elect directors and approve the sale of its subsidiary,
Pennsy Supply, Inc. to CRH plc, an Irish holding company. The motion to sell the company was
denied.
CRH determined in September of 1989 that for various reasons it would not pursue the
purchase of Pennsy Supply, Inc.
In 1993 all outstanding shares of NNN were canceled by action of the directors of NNN.
One thousand (1,000) new shares of NNN were issued to Kodie Acquisition Corp. At that point,
1000 shares were outstanding, none of which were held by Petitioner. On July 8, 1993 ML&B
6
prepared a Subscription Agreement for the Acquisition of the Kodie shares. All shares of Kodie
were then sold to CRH plc. At the time of this sale Petitioner was not a shareholder of NNN.
Meanwhile, numerous shares of the various corporations were transferred to fund the two
Trusts.
III. FINANCIAL ANALYSIS
The will provides at THIRD that all taxes etc. be paid out of the general estate as an expense
of administration. Analysis of the wills of Robert M. Mumma indicates that he established two
trusts.
1. Marital Trust representing 50%of the gross estate
2. Residual Trust
The Will provides that income from both trusts must be distributed to the wife during her
lifetime. The wife has the right to invade principal from the trust for reasonable needs to
maintain his wife at a standard of living equal to what she enjoyed during her lifetime and a 5%
of the value of the principal portion of the trust to be distributed by a request from her on an
annual basis, this right is not cumulative. The Will directed at the death of the wife that residual
assets would be distributed to the four children.
Marital Trust
Will—Section Seven
Para�raph 1
The Will of Robert M. Mumma provides for the establishment of a marital trust. It
bequeaths 50%of the gross estate as determined for estate tax purposes to the marital trust for
7
the benefit of his wife, Barbara Mumma. That amount is to be reduced by any other benefits
Barbara received outside of probate, such as the salary continuation plans decedent devised as a
source of income directly from the corporations.4 The total gross estate as reported on line 1 of
Form 706 was $16,645,786 (See Summary I); one-half of this amount is $8,322,893.
Summary I
Estate of Robert Mur�una Reconciliation to Federal Form 706
Total Beginning Balance of Assets -First Accounting(Estate p.9) 15,462,407 '
Properties Not Included in First Accounting
' Sailfish Point Property-Third Accounting(Estate Sch.AA Sold 4/2/99) 365,000 '
L.eadville,CO Property-Fourth Accounting(Estate Sch.AA Sold 9/4/98 i 3,161 ''
Total Assets per Estate Accountings 15,830,568 '
Life Insurance Policies -Form 706,Schedule D 516,765
Joint Property-Form 706,Schedule E($596,906.87 X 50%) 298,453 '
Total Gross Estate-Form 706 16,645,786
Para�raph 1
Per the Will, the trust was to be funded by cash, property, or a combination thereof; transferred
property was to"be valued as of the date of its distribution."
Para�ph 3
The Will states that Barbara Mumma was to receive all of the income from the trust,to be paid
out at least yearly.
Para�raph 3
4 Since Mrs.Mumma held a very minor interest in Kim Co.and no interest in PSC,or Pennsy Supply Inc/NNN the
salary continuation plans were paid at the expense of the other shareholders.After the death of Decedent the other
shareholders were the four children.Since the cost of the plan already reduced the corporate earnings it was
appropriate to reduce the contribution to the marital trust.
8
As stated in the Will, the trustee is authorized to distribute "in addition to the income
hereinabove specified, so much of the principal of this Trust as she may deem necessary or
advisable to reasonably provide her(the wife's) support, health, welfare, maintenance, or
comfort, to maintain for her a standard of living which she has during our married life enjoyed,
� taking into account, however, my wife's income from other sources i�tcluding, but not limited to,
all income from trusts, estates, and business interests, as well as available principal assets. "
Para�ph 3
In addition to the limited invasion right mentioned above,the beneficiary may "request annually
in writing a distribution to her by the trustees from the principal of this Trust of up to Five
Thousand($S,000)Dollars or up to five (S%)percent(or$S,000 if greater) distribution of the
then principal of this Trust, whichever shall be the greater." This right is not cumulative. We
have not received copies of these written requests.
In reviewing the documents, the trust distributed shares of Nine Ninety-Nine, Inc. and
Hummelstown Quarries, Inc. to Mrs. Mumma.
Attachments Summary IX and Summary X detail the ownership interest of Decedent based upon
the Pennsylvania inheritance tax return filed by the estate. This flow chart indicates that
DecedenYs Estate had a controlling interest in all the entities that are listed in the tax summary
which the exception of some minority interests owned by the children and wife. All family
members controlled these entities with the exception of the Union Quarries which was also
owned by Grantor Trust of M. C. Hempt of 50%; all other assets were controlled by 100%of
Robert M. Mumma's family members. Additionally,the accounting for the estates and trusts
9
there is no indication of any valuation or data related to Middle Park Inc. of which Pennsylvania
Supply Company had a 14.29% interest and the four children owned the remaining shares.
Analysis of the documents of the estate and trusts indicate that there were certain
distributions and assets to Mrs. Mumma that satisfied a portion of her income interests and also
her 5%right to principal distribution under the Will. Additionally, after Decedent died there was
liquidation ofthe stock of PSC, making it difficult to trace these assets within the accounting of
the estate.
Distributions to Mrs. Mumma from Marital Trust:
The following shares of NNN, Inc. were distributed as income from the Marital Trust:
Su�I
Transfers from Marital Trust Income to Barbara Mumma
Accountine
' �'�IIY.�. ' i ' '
T�^st Paee ' Date ' Shares Value '
First 86 Nine Ninety-Nine,Inc.-Common Shares -01/OS/1988 55.8368 ! $ 144,902.36:
First 86 Nine Ninety-Nine,lnc.-Preferred Shares 11/19/1986 70.8421 104,655.92
Total $ 249,558.28
The following shares of Nine Ninety-Nine, Inc. and Hummelstown Quarries, Inc. were
distributed as 5%of the then principal of the trust:
For each of the distributions of NNN, Inc. from income and principal, the common shares
were consistently valued at $2,595.10 per share, and the preferred shares were consistently
valued at$1,477.31 per share. The shares of Hummelstown Quarries, Inc. were consistently
valued at$1,299.27. These were the values attributed to the shares at the time that they were
transferred from the Estate of Robert M. Mumma into the Marital Trust on December 28, 1987.
10
Based on the Will, the then principal value ofthe trust assets would be based on the fair
market value of all assets held in the trust at the date of distribution. It appears that this did not
occur. We have not received copies of any appraisals that show the value of trust assets on any of
the above dates of distribution. As indicated in Summary V, the transfer of stock on July 5, 1993
(27 shares common and 31 shares preferred)was valued much lower than the resulting sale price
on July 2l, 1993 would have indicated.s
Will—Section Seven
Para�raph 4
The Will authorizes the executors, at their discretion,to make a QTIP election for any amount of
this property. The Will also states that it is the decedent's expectation that election will be made
for all property. This election was made on Federal Form 706.
Paragraph 5
The Will additionally states that upon the death of Barbara Mumma, all principal is to be divided
equally between the four children per stirpes.
QTIP Election
Form 706 indicates that an election was made under IRC §2056(b)(7)to claim a marital
deduction for qualified terminal interest property. The total amount elected was $10,811,784.
This includes the $8,322,893 to be transferred to the marital trust, the $1,627,963 to be
5 After funding the value of the principal amount is going to change as happens in the real estate and stock market.
The will specifically says 5%of the principal and that requires a valuation at the time of distribution,Easy to
accomplish with publicly traded stocks,more difficult with real estate or closely held corporations.
11
transferred to the residuary trust, and $861,018 of jointly held property, life insurance policies
and specific bequests to Barbara Mumma.
Residuary Trust
Will—Section Ei�
Paragraph 1
According to the Will; all the rest, residue and remainder of the estate property was to be placed
in a Residuary Trust, "to hold, manage, invest and reinvest in the same, to collect the income
and pay over or apply the net income to or for the benefit of my wife, Barbara McK. Mumma, at
least yearly. "
Para�ph 1
The Will states that the trustee, other than Barbara Mumma, was authorized to distribute
Principal to Barbara Mumma. It specifically states that "in addition to the income hereinabove
specified, so much of the principal of this Trust as she may deem necessary or advisable to
reasonably provide for her support, health, welfare, maintenance, or comfort, to maintain for her
a standard of living which she has during our married life enjoyed, taking into account, however,
my wife's incorrte from other sources including, but not limited to, all irecome,from trusts, estates,
and business interests, as well as available principal assets. "
Para�ph 2
12
Upon the death of Barbara Mumma, all principal is to be divided equally between the four
children per stirpes.
Nine Ninety-Nine,Inc. Stock
On December 28, 1987 common and preferred shares of Nine Ninety-Nine, Inc. were transferred
from the Estate into the Marital Trust. The shares which had been valued at $2,495,665.85 were
received into the trust at a value of$3,170,423.01 causing the Estate to realize a gain on
distribution in the amount of$675,057.16.
During the period from December 28, 1987 to July 5, 1993 shares were transferred from the
Marital Trust to Barbara Mumma. Mrs. Mumma received a total of 50.70%of the common
shares and 35.9%of the preferred shares.
Therefore, based on this analysis, a controlling interest in the common stock of Nine Ninety-
Nine, Inc. was distributed to Barbara Mumma. On July 21, 1993, 638.228 common shares of
Nine Ninety-Nine, Inc. were sold. The fiduciary acquisition value of the stock, $1,759,984.15
agrees to the total value of common and preferred stock remaining in the marital trust after
transfers. Since the number of shares above (349.745 common and 576.966 preferred) does not
agree to the total sold (638.228 common), it appears that the preferred shares were converted to
common stock; i.e. one common share received for every two preferred shares. (349.745 +
576.966/2=638.228)
Throughout this entire period,the Nine Ninety-Nine, Inc. stock was consistently valued at the
value it held on the date that it was transferred from the estate. This value was used for the final
transfer of shares on July 5, 1993 (See Summary III)which preceded the final sale of shares by
13
16 days, even though the sale reflects that the shares were worth more than three times this value
on July 21, 1993 (See Summary V). The total shares transferred from principal to Barbara
Mumma, 303.842 common and 252.268 preferred, or 429.976 total common (303.842 +
252.268/2=429.976) had a fair market value of$4,225,245.16 on July 21, 1993 (429.976 shares
@$9,826.70). As compared to the value at which the shares were transferred, $1,161,180.58
(See Summary IV), this represents a difference of$3,064,064.58 ($4,225,245.16 -
$1,161,180.58).
Hummelstown Quarries, Inc.
On December I5, 1987, shares of Hummelstown Quarries, Inc. were transferred from the Estate
into the Marital Trust. The shares which had been valued at$593,421.04 were received into the
trust at a value of$799,051.80 causing the Estate to realize a gain on distribution in the amount
of$205,630.76.
During the period from December 28, 1987 to July 5, 1993, shares were transferred from the
marital trust to Barbara Mumma.
On July 21, 1993, 500 common shares of Hummelstown Quarries, Inc. were sold.
Throughout this entire period, the Hummelstown Quarries, [nc. stock was consistently valued at
the value it had on the date that it was transferred from the estate. This value was used for the
final transfer of shares on July 5, 1993 (See Summary III) which preceded the final sale of shares
by 16 days, even though the sale reflects that the shares were worth more than three times this
value on July 21, 1993 (See Summary VII). The 115 shares transferred from principal to Barbara
Mumma, had a fair market value of$506,221.95 on July 21, 1993 (115 shares @ $4,401.93). As
14
compared to the value at which the shares were transferred, $149,416.18 (See Summary V[),this
represents a difference of$356,805.77 ($506,221.95 - $149,416.18).
Pennsylvania Supply Company
Pennsylvania Supply Company was liquidated on December 19, 1986. Robert M.
Mumma held 700 of the total 712 outstanding shares as of the date of death. Proceeds from
liquidation were $9,242,798.30 on the 700 shares valued at $9,144,473.00. This created a gain on
liyuidation in the amount of$98,325.30. (See First Accounting, Estate, page 15.) The Financial
Statement of Pennsylvania Supply Company dated December l9, 1986 indicates in Footnote 1 l,
page 12 that on July 8, 1986 the company redeemed 85 shares of common stock for$500,000.
Therefore, after the redemption the estate held 615 of the remaining 627 shares outstanding.
The assets listed on Summary VIII below were not included in the beginning balance of
properties listed in the First Accounting. I have assumed that they were received into the Estate
upon liquidation of Pennsylvania Supply Company.
Summary VIII
Pennsylvania Supply Company was made up of a number of subsidiary companies. Summaries
IX and X illustrate the ownership of these subsidiaries. The information for these charts was
obtained from the Pennsylvania lnheritance Tax Return REV-1500. The Pennsylvania
Inheritance Tax Return also indicates life insurance policies totaling $1,007,089 were owned by
the subsidiaries. This may account for a portion of the difference in the above analysis.
15
The total proceeds from the sale of Pennsy Supply Businesses were approximately $40 million.b
Summary XI shows the sales presumed are included in this figure.The sales proceeds received by
Barbara Mumma are based on the sales price of similar shares sold within the marital trust.
Summary XI
Proceeds from Sale ofPennsylvania Supply Company
Marital Trust Sales Proceeds
Nine Ninety-Nine,Inc.(See Summary� ' $ 6,271,675.92
Bender&Grove-Mount Holly(See M arital Trust-
Second Accounting-Part 1-Schedule B) 1,373,180.09
Hummelstown Quarries,Inc.(See Summary Vll) 2,200,963.38 '
Total Marital Trust Sales $ 9,845,819.39
Lebanon Rock,lna
(See Estate Second Accounting-Part I-Schedule A-I) '
Funds Received for Option to Purchase ' 140,120.42
Inventory Value Assigied 2,000,000.00
Total L,ebanon Rock,Ina 2,140,120.42'
Total Proceeds Reported by Trust and Estate 11,985,939.81
Barbara M umma Transfers*
Nine Ninety-Nine,Ina '
359.6788 Common and 323.I 101 Preferred Shares 5,122,009.35
Hummelstown Quarries,Inc.
]15 shares c� $4,401.93/share(See Summary VII) �. 506,221.58 �� �
Total Barbara M umma Transfers ' S,628,230.93
Total $ 17,614,170.74
Less:Total Estimate Sales Proceeds ' (40,000,000.00j
Unlocated Difference $ (22,385,829.26j
'*Assuming a conversion of 1 share common received for every 2 shares of preferred:
Barbara M umma Transfers Before Conversion' After Conversion
Corrvnon Shares 359.6788 359.6788
Preferred Shares 323.1 101 161.5551 '
Total Common Shares After Conversion 521.2339
Sale Price per Share(See Summary� $ 9,826.70
Total Proceeds of Sale of Nine Ninety-Nine,[na , '$ 5,122,009.35'
6 This price is$20,000,000 less than the price proposed for the sale in 1989. In 1989 the sale was for Pennsy Supply,
]na The final sale was for Nine Ninety Nine,Inc.
16
As indicated from the flow charts, there is a preponderance of ownership of Pennsylvania
Supply Company and its subsidiaries by the Estate of Robert Mumma. However, in our analysis
of the accountings of the estate and trusts that are presented, we were able to trace about
$17,614,170.74 of the approximately $40,000,000 received from the sale of the Pennsy Supply
Businesses. As the flowchart of the ownership of the companies owned by the estate indicates,
there were minority ownerships in Pennsy Supply Businesses and its subsidiaries, primarily by
the children of Robert and Barbara Mumma.
The transfers,to satisfy Barbara Mumma's income or 5%annual request of principal, use
values which appear to be at odds with the Will which requires transfers to be valued at current
value. As indicated by the total transfers of both Nine Ninety-Nine, Inc. and Hummelstown
Quarries, Inc., there is significant disparity between the values used at transfer date and the
ultimate sale price. Specific attention can be drawn to the transfers that occurred only a few days
prior to the sale.
The intent of the Will was to establish QTIP trusts which would ultimately transfer the
value ofthe assets to the children of Robert and Barbara Mumma. The marital trust provided
income and requested 5%annual principal withdrawals to be paid to Barbara Mumma. The only
other right to invade was based upon the need for the maintenance of Barbara Mumma's
lifestyle; no such withdrawals were made. It appears, based on the documents we have viewed,
that the valuations of assets transferred upon request by Barbara Mumma or in satisfaction of
income were significantly understated thus reducing the intended residual value of assets
remaining for final distribution to the children as under the will. Additionally, an amount in
17
excess of 50%of the proceeds from the sale of Pennsy Supply Businesses does not appear on
any of the estate or trust documents or tax returns that we have been provided.
Morgan Lewis and Bockius proposed a plan of liquidation to the shareholders of
Pennsylvania Supply Company and Kim Co. Their stated purpose was to transfer by liquidation
of the companies the assets directly to the shareholders. Morgan Lewis drafted a Plan of
Liquidation and Dissolution, forms for filing with the Pennsylvania Corporation bureau and
determined that the direct distribution of the real estate assets would not be subject to transfer
taxes. On November 30, 1986 the shareholders adopted the plan of liquidation. It was agreed that
Pennsylvania Supply Company and Kim Company would not be dissolved, but remain as active
entities. Despite this agreed upon plan the estate, Morgan Lewis and Hadley usurped the
authority of the shareholders and took another tack. On December 19,1986 Morgan Lewis filed
articles of incorporation for Hummelstown Quarries Inc.
Analysis of the Financial Statements of Pennsylvania Supply Company dated December 19,
1986 , Footnote l, page 6 indicates that the statements apply to "the period July 1, 1986 through
December 19, 1986 immediately prior to the investment of certain assets subject to the related
liabilities in Hummelstown Quarries, Inc. in exchange for 627 shares of common stock. "The
schedule below the note list the value of the Net assets invested as $42,171. This is the net value
of the assets listed in Note 3 OPERATIONS
18
This translates to the quarry properties at Hummelstown, Bowmansdale, and Dromgold were the
assets contributed to Hummelstown Quarries'at a net value of$42,171 on the afternoon of
December 19, 1986.
NOTE 1 continues to "Subssequent to this investment, Pennsylvania Supply Company was
liquidated after close of business on December 19, 1986. The compnay's assets and liabilities
were then effectively distributed to its shareholders. That same day after the close of business
Hadley valued the 615 shares of HQI distributed to the estate at $593,421. In the estate
accounting the 615 shares reach anew high of$799,051.80.
NOTE 3 OPERATIONS. `Operations of the company include property rental and extraction of
stone deposits under royalry agreement.
Rental Properties are located principally in Harrisburg:However, certain rentals are received
for properties in South Hanover Township, Watts Township and Bowmansdale.
Royalry is revenue (minimum $ 210,000 per year)fi�om an affiliate for materials removed from a
quarry owned by the corrtpany in South Hanover Township, Dauphin County. "
The only operation required by Pennsylvania Supply Company to receive the royalty payments
was to cash the checks. Pennsy Supply, Inc. was the affiliate that produced the aggregates.
Using a capitalization rate of 5%gives a minimum value of$4,200,000 for the assets
distributed to HQI. The value of the property is directly related to the price of the aggregates.
Given it's close proximity to Hershey and the additional processing of a high calcium limestone
'Testimony of Hadley was that he(with approval of the executrix and MLB)decided that individuals should not
19
(plans were ongoing to produce this product when Decedent died) even the $4,200.000 value is
low.
The conclusion after evaluating the transactions and documents is that Barbara Mumma
would have the right to income from both trusts during her lifetime and right to invade. The Will
indicated that any distribution of assets would be valued at the date those assets are being
distributed. Therefore, if the assets were never re-valued other than the value used to transfer
these assets into the trusts, it appears the assets transferred to satisfy the 5% principal withdraw
rights affected to asset value that was retained by the estate and trust. The subsequent sale of
operating businesses was for$40,000,000, we have been able to account for proceeds in the
estate as detailed on summary XI, $11,985,939.81 that were actually received by the trust
established by the estates of Robert M. Mumma. Assets transferred to Barbara Mumma
accounted for additional proceeds of$5,628,230.93. Proceeds for$17,614,170.74 from the sale
of Nine Ninety-Nine Inc. and other operating businesses were able to be accounted for.
Therefore, in excess of$22,000,000 of the proceeds for the sale of this corporation have not been
accounted for within these documents.
As of August 5, 1961, the four beneficiaries of this Estate and Walter M. Mumma's Estate
rightfully should have owned 100 percent of Pennsy Supply Inc—50%from original Simpson
shares, gifted to them by Decedent, and fifty percent(50%) from shares previously held in
Walter's Estate. Except for the dilution of interest in the exchange of 1250 shares of Pennsy
Supply Inc. for Kim Co. Proceeds received by the Marital Trust and by Mrs. Mumma are directly
related to the dilutive effect of the exchange of 1250 shares of PSI for 1333 shares of Kim Co.
The purpose of the transfer restriction in PS[ Bylaw#33 was to prevent this very situation.
own quarries.Both Decedent and Petitioner already owned quarries(Benders and Fiddlers)in our personal names.
20
The transaction related to the merger of Hummelstown Quarry, Inc. which is denoted on the
financial statements of Pennsylvania Supply Company on December 19, 1986. On page 6 of that
financial statement, under corporate liquidation indicates that Hummelstown Quarry, Inc. assets
subsequent to the issuance of the statement but before liquidation were transferred to the
corporation in exchange for 627 shares of common stock. One interpretation of this footnote is
that a 50%ownership in the outstanding shares of Pennsylvania Supply Company was
transferred in this merger. After the liquidation of Hummelstown Quarry, Inc., the shareholders
of Hummelstown Quarry, Inc. receive 627 shares in effect they receive a 50% interest in
Pennsylvania Supply Company for the Hummelstown Quarry, Inc. assets which are also denoted
on page 6 of the financial statements for Pennsylvania Supply Company for 1986. The estate
ultimately presented a value of$799,051.80 for their 615 shares of Hummelstown Quarry, Inc.
that appeared in the estate accounting after the liquidation. However, since Pennsylvania Supply
Company on the initial valuation of the estate had a date of death value of$9,144,473, if 50%
interest would approximate $4,570,000. The merger of Hummelstown Quarry, Inc. also which
appears to be disproportionate to the ultimate proceeds received for the sale of Hummelstown
Quarry, Inc. of$2.2 million dollars.
If the above conclusions are accurate the value of assets transferred to Barbara Mumma were
significantly understated below fair market value. This could have created asset transfer well in
excess of what was anticipated under the will of Robert M. Mumma. The assets transferred to
Barbara Mumma would be controlled by her Will and under her estate could distribute these
assets to beneficiaries not stated in Robert M. Mumma's Will.
21
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IV. ISSUES PRESENTED
1. Whether the actions and/or omissions of the executrices/trustees violated their fiduciary
duty to the Trusts? (Suggested answer: Yes.)
2. Whether the actions and/or omissions of the executrices/trustees violated the intent of
Decedent's Will? (Suggested answer: Yes.)
3. Whether the actions and/or omissions of the executrices/trustees were in violation of
applicable state law?(Suggested answer: Yes.)
V. ARGUMENT
A. THE ACTIONS AND/OR OMISSIONS OF THE EXECUTRICES/TRUSTEES
VIOLATED THEIR FIDUCIARY DUTY AND APPLICABLE STATE LAW.
Fiduciaries of an estate or trust are governed by both common law as well as the
Pennsylvania Probate, Estate and Fiduciaries Code. 20 Pa.C.S. §101, et seq. Fiduciaries include
personal representatives, guardians and trustees. 20 Pa.C.S. §102. In administering a trust, a
fiduciary"shall administer a trust or estate impartially based on what is fair and reasonable to all
of the beneficiaries." 20 Pa.C.S. §8102. In a corporate setting, corporate directors and officers
are bound by the fiduciary duties set forth by the Pennsylvania Business Corporation Law
(`BCL"), 15 Pa.C.S. §1101, et seq. Corporate directors are bound by the BCL to exercise a
standard of care
in good faith, in a manner he reasonably believes to be in the best interests of the
corporation and with such care, including reasonable inquiry, skill and diligence, as a
person of ordinary prudence would use under similar circumstances.
IS Pa.C.S. §1712(a). Similarly, a corporate officer is required to perform his duties as a
corporate officer under the same standard, and can avoid liability by doing so. 15 Pa.C.S.
§1712(c). In addition, a fiduciary is bound by the Uniform Trust Act, which prescribes the basic
obligations of a trustee. A trustee shall "administer the trust in good faith, in accordance with its
22
provisions and purposes and the interests of the beneficiaries and in accordance with applicable
law." 20 Pa.C.S. §7771. "A trustee shall administer the trust solely in the interests of the
beneficiaries." 20 Pa.C.S. §7772(a).
Pennsylvania courts have upheld this standard. "Perhaps the most fundamental duty of a
trustee is that he must display throughout the administration of the trust complete loyalty to the
beneficiary and must exclude all selfish interest and all consideration of the interests of third
persons." Warehime v. Warehime, 722 A.2d 1060, 1063-64 (Pa. Super. 1998), citing Bogert,
Trusts& Trustees §543, at 217-218 (2nd Ed. Rev. 1993).
Throughout the decades-long mishandling of the estate, the Executrices/Trustees have,
time and again, violated their fiduciary duties to the estate and its beneficiaries.
a. The allocations of Decedent's High-Spec, Inc. and Lebanon Rock,Inc. stock
to the Trust violated Petitioner's right of first refusal,violated fiduciary duty
and state law, and were self-dealing.
The allocations of Decedent's corporate stock to the Marital Trust violated Petitioner's
right of first refusal pursuant to several shareholder agreements.
In 1986, the Executrices/Trustees began negotiating with CRH plc, an Irish corporation,
to sell the assets of Pennsy Supply Inc. to CRH. Pursuant to the Pennsy Supply Inc. bylaws as
well as a shareholder agreement in place, the shareholders were required to offer the shares back
to the company, then to the other shareholders, and only then to the open market. Pennsy Supply
Inc. Bylaws, par. 33; Pennsy Supply Inc. Shareholder Agreement. Petitioner had inherited,
however small a minority, a few shares of Pennsy Supply [nc. from Decedent. However, the
Executrices/Trustees compiled an offer to sell the entirety of the assets of Pennsy Supply Inc.
without first offering the shares back to the company or to the remaining shareholders.
23
The closest that Executrices/Trustees ever came to fulfilling their fiduciary duties was to
state that they would "entertain"an offer from Petitioner to purchase Pennsy Supply Inc. Letter,
Mrs. Mumma to Petitioner,Nov. 20, 1986. In addition to being contrary to the corporate bylaws
and shareholder agreement, the Petitioner informed the Executrices/Trustees, as well as CRH, by
several letters over the course of several years that he wished to exercise his right of first refusal.
Letter, Petitioner to Mrs. Mumma, Nov. 2, 1988; Letter, Petitioner to Jack Hayes, June 30, 1989.
Later,the Executrices/Trustees sold the Estate's shares in High-Spec, Inc. and Lebanon
Rock Inc. without offering the shares back to the sole remaining shareholder, Petitioner, pursuant
to a share restrictive agreement. High-Spec, Inc./Lebanon Rock Inc. Share-Restrictive
Agreement. Under those agreements,the shares were required to be offered back to the
company, then to the remaining shareholders, and only then for public sale. Despite this,the
Executrices/Trustees sold the Estate's interest in High-Spec, Inc. and Lebanon Rock, Inc.
It is plain on its face that the Executrices/Trustees failed to exercise their basic fiduciary
duties. Far from acting impartially in the best interest of all beneficiaries, the
Executrices/Trustees engaged in self-dealing. The courts of this Commonwealth have repeatedly
and frequently condemned self-dealing as a violation of fiduciary duty. "An executor is a
fiduciary no less than is a trustee and, as such, primarily owes a duty of loyalty to a beneficiary
of his trust." In re Estate of Harrison, 745 A.2d 676, 679(Pa. Super. 2000), citing In re
Noonan's Estate, 361 Pa. 26, 30, 63 A.2d 80, 82 (1949). The Pennsylvania courts have been
clear on the prohibition against self-dealing for over a century:
The test of forbidden self-dealing is whether the fiduciary had a personal interest in the
subject transaction of such a substantial nature that it might have affected his judgment in
a material connection ... [T]he fiduciary's disqualifying interest need not be such as `did
affect his judgment' but merely such as `might affect his judgment.'
24
Estate of Harrison, 63 A.2d at 84, quoting In re Downing's Estate, 162 Pa. Super. 354, 57 A.2d
710, 712 (1948).
In the instant case, it is clear that the Executrices/Trustees had personal interests in the
subject matter over which they were entrusted with fiduciary responsibilities. Mrs. Mumma was
an executrix of the Will as well as a Trustee of both Trusts and the beneficiary of the Marital
Trust. Ms. Morgan was also an executrix as well as Trustee of both Trusts and beneficiary of the
Residual Trust. Neither were detached from the situation or were otherwise disinterested; rather,
their unique status among the family gave them both the opportunity and motive to engage in
self-dealing to the detriment of the other beneficiaries of the Residual Trust.
b. The Executrices/Trustees have engaged in oppressive conduct and violated
state law and fiduciary duty by not recognizing or concealing shareholder
agreements that govern the ownership of corporate stock.
The Executrices/Trustees have engaged in a pattern of continuously and egregiously
failing to abide by or otherwise concealing shareholder agreements that govern the ownership of
corporate stock. In so doing, their bad faith actions have caused pecuniary harm to Petitioner
and the other beneficiaries of the Trusts.
In November 1986, it was recommended to the owners that the shares of Kim Co. be
liquidated to avoid certain tax implications. All six of the shareholders of Kim Co. agreed to the
sale and a plan of liquidation and dissolution was executed. Kim Co. Liquidation/Dissolution
Agreement. The plan specifically called for the liquidation of Kim Co. and the subsequent
liquidation of Pennsylvania Supply Co. with all assets to be specifically distributed to the
shareholders pro rata. After the failure to sell Pennsy Supply, Inc. to CRH, the
Executrices/Trustees sold all the assets of Nine-Ninety-Nine, Inc. (NNN)to CRH. NNN was
merely a new corporate identity of Pennsy Supply, Inc. The various machinations in which the
25
Executrices/Trustees engaged in order to gain control of the voting stock of Pennsy Supply Inc.
violated their fiduciary duties to Petitioner and the other beneficiaries.
Pursuant to the BCL, oppressive conduct occurs when
in the case of a closely held corporation, the directors or those in control of the
corporation have acted illegally, oppressively or fraudulently toward one or more holders
or owners of 5%or more of the outstanding shares of any class of the corporation in their
capacities as shareholders, directors, officers or employees.
15 Pa.C.S.A. §1767(a)(2). Oppressive conduct has been defined by the courts as "unjust or cruel
exercise of authority or power." Ford v. Ford, 878 A.2d 894, 900 (Pa.Super. 2005), citing Leech
v. Leech, 762 A.2d 718 (Pa.Super. 2000) (citation omitted). Conduct of a corporate director is
oppressive if it"defeats the reasonable expectations of the minority shareholders." Ford, 878
A.2d at 903. Freezing out the majority in order to benefit the minority is a breach of fiduciary
duty. Id. at 905. While in this matter, it was the minority shareholders themselves engaging in
oppressive conduct against the majority shareholders,the precepts hold true nonetheless, as this
is a close corporation situation in which the fiduciaries owe an even more stringent duty of care
than usual. Here, it is clear that Morgan Lewis' proposed liquidation of Kim Co. and subsequent
failure to file a draft of their own proposed liquidation plan solely to facilitate the sale of the
assets of Pennsy Supply, Inc. followed by the assets of NNN. Oppressive conduct is in violation
of both the BCL and common law fiduciary duty.
Additionally, as part of the Kim Co. liquidation, the Estate unilaterally converted the
shareholders' interest in Union Quarries, Inc. as well as the shareholders' royalty interest. The
Estate continued to mine the quarry and failed to pay royalties to the shareholders, all while
operating without a valid transfer agreement. This was done by circumventing the transfer of
stock and failure to fill out transfer documents. More crucially, no transfer agreement was ever
signed by either Petitioner or his sister Barbara M. Mumma as officers of the corporation.
26
Rather, a transfer agreement was fraudulently signed by Mrs. Mumma as"Chairman," a position
not provided for in the bylaws or articles of incorporation. Conversion of the assets and royalties
of Union Quarries, Inc. continues to this day, and it is presumed that all proceeds go to the Trust.
Further oppressive conduct has been going on since 1986 when Elco, a subsidiary of
Pennsy Supply, Inc. began mining dolemetic limestone at Lebanon Rock, Inc.'s quarry. After
seven (7)years of legal disputes, the Superior Court held that without a written document, Elco
had no right to mine the quarry. The Estate then entered into an option agreement and sold the
royalties to a third-party buyer.
c. The actions and omissions of the Executrices/Trustees with respect to the
shareholder agreements that woutd have precluded the estate from acquiring
stock in multiple corporations, including but not limited to, Pennsylvania
Supply Co.g,Pennsy Supply Inc.,Bobali Corp.9,Lebanon Rock, Inc.,High-
Spec, Inc.,Nine-Ninety-Nine,Inc.
d. The Executrices/Trustees improperly assumed ownership interests in the
shares in High-Spec, Inc.,Pennsylvania Supply Co., and/or Lebanon Rock,
Inc.
The Pennsy Supply Inc./Nine Ninety Nine Inc. stock that was owned by Kim Co. was
acquired by Mrs. Mumma in 1961. That stock had been owned by the estate of Walter M.
Mumma, Decedent's father. The beneficiaries of Walter M. Mumma's estate were his
grandchildren (Petitioner and his three sisters). By an order of August 8, 1961, the Dauphin
County Court directed that the Silver Springs Quarry(which at the time had a book value
$73,900.00)was an asset of Walter M. Mumma's estate. Decedent and Dauphin Deposit were
co-executors of Walter M. Mumma's estate. Rather than deeding the quarry to Walter's estate it
was deeded to Pennsy Supply Inc. Walter's estate then received 1250 shares (at par value
$Walter M.Mumma's Will specifically mentions that shares held by him were subject to an Agreement with his
fellow shareholder,Robert M.Mumma(Decedent).
9 Bobali Corp.was for►nerly known as Gibson Boulevard,Inc. Shares of Gibson Boulevard, Inc.were covered by a
shareholder agreement.
27
$100.00), a 50% interest in Pennsy Supply [nc. Decedent owned 7130 shares of Kim Co. (at par
value $10.00). Decedent then exchanged the 1250 shares of Pennsy Supply Inc. stock for 1333
shares of Kim Co. stock(value $13,333.00).
The purpose of the Dec. 29, 1961 Shareholders' Agreement between Simpson and Kim
Co. and joinder of Pennsy Supply Inc. was to protect the interests of Petitioner and his sisters by
giving them the right to buy back the original ownership interest in Pennsy Supply [nc. if Kim
Co. were ever dissolved or Kim Co. ever sought to transfer its interest. See Kim Co. Shareholder
Agreement, Dec. 29, 1961. These transactions were not carried out at market value but rather at
book value. Due to this, the beneficiaries of Walter M. Mumma's Estate were highly diluted in
their ownership interests in the quarry by the transfer of 1250 shares of Pennsy Supply Inc. to
Kim Co. The other 50%of Pennsy Supply [nc. was owned by Jerry T. Simpson. In 1963
Simpson elected to sell his interest. Simpson and Decedent entered into an agreement whereby
Decedent purchased Simpson's shares. On August l, 1963, Simpson and Decedent entered into
a sale agreement that incorporated the December 29, 1961 Agreement. Without the authority of
the Board of Directors of Pennsy Supply Inc. or Kim Co., Decedent negotiated the August 1,
1963 Agreement with Simpson to buy Simpson's shares. As such,this violated the terms ofthe
December 29, 1961 Agreement, but Decedent purchased Simpson's stock. That stock was then
distributed amongst Decedent's four children.
Effectively, all of the stock of the corporation was either owned or had been owned by
the four Mumma children. The dilutive effect of the prior transfer of Walter M. Mumma's
Estate's interest in Pennsy Supply Inc. resulted in a less than fair market value for the Pennsy
Supply Inc. Absent the transfer from Walter M. Mumma's Estate of the 1250 shares of Pennsy
Supply Inc., the four Mumma children would have owned 100 percent of Pennsy Supply Inc. in
28
1963. However, the purpose of Bylaw 33 was to allow that interest to be returned to them if Kim
Co. ever elected to transfer its interest or upon its dissolution. Absent any effort by Kim Co. to
take such action, upon the death of Decedent, pursuant to the terms of the Will, the four Mumma
children automatically recovered their prior-owned ownership interests.
Lisa M. Morgan, Executrix/Trustee and one of Petitioner's sisters, later testified at a
Cumberland County Orphans' Court auditor hearing that the Executrices/Trustees hired William
Zeiders of Morgan, Lewis& Bockius in the spring or summer of 1986 when they decided to sell
the business. This sets the decision to sell before the first meeting of the beneficiaries in August
1986. The proposal to liquidate Kim Co. and PSC was made in November 1986. Each
beneficiary was lead to believe that each was getting his or her share of these locations and
percentage of the royalties and rents. However, the Executrices/Trustees diverted the properties
that were business locations, Hummelstown into another new company, Hummelstown Quarries,
Inc., that defeated the entire purpose. This was really designed as a step in putting together the
package of"Pennsy Supply Businesses". From the testimony of long-time Mumma family
accountant George Hadley it was clear that they purposefully chose to not distribute the assets to
the shareholders. It was also determined that Kim Co. had undisclosed sales of real estate and
diverted additional funds to the Estate and not the shareholders. In fact there were sales of over
$2,000,000 of assets by Mrs. Mumma acting alone as Chief Executive Officer—a position not
provided for in the bylaws. The Executrices/Trustees managed to sell this real estate without the
directors' resolution that was previously necessary. Ultimately, the Executrices/Trustees
deceived the shareholders, withheld the transfer restrictions in the bylaws and ended up with a
package they could sell to CRH using the assets of PSC, Pennsy Supply Inc. and Kim Co.
e. The Executrices/Trustees violated the Share Restrictive Agreement
applicable to High-Spec,Inc.when they refused to offer the Decedent's
29
shares in High-Spec,Inc. to the remaining shareholder at book value and
when they transferred the Decedent's shares in High-Spec,Inc. to the
Residuary Trust in January 2002.
Separately from all the other Mumma family businesses, Petitioner and Decedent had
created two other companies: a real estate investment company called High-Spec, Inc. and a
quarry called Lebanon Rock, Inc. Petitioner and Decedent were each fifty percent(50%)owners
and shareholders in both companies. Both companies operated under a Share Restrictive
Agreement. Under the Agreements, the companies required that any shares be first offered back
to the companies, then to the shareholders, and only then for public sale. Similarly, the
Agreements held that upon death of a shareholder, the shareholder's personal representative was
required to offer the shares in the same order. See Lebanon Rock, Inc. and High-Spec, Inc. Share
Restrictive Agreements.
Upon Decedent's death, the Executrices/Trustees immediately began to move to liquidate
the assets of High-Spec. In 1998, a condo in Sailfish Point, Florida, that was owned by High-
Spec was sold for$359,332.91. Estate—Third Accounting. Then, in January 2002, 5,000 shares
of High-Spec were transferred to the Residual Trust, with another 5,000 shares being transferred
This was in direct violation of the Share Restrictive Agreement and the BCL. Per the BCL, any
transfer of shares in violation of a Share Restrictive Agreement shall be ineffective and the
corporation shall have the right to purchase the shares back from the transferee for the same price
as the ineffective transfer. 15 Pa.C.S. §2323.
B. THE ACTIONS AND/OR OMISSIONS OF THE EXECUTRICES/TRUSTEES
VIOLATED THE INTENT OF THE WILL
a. The Executrices/Trustees' failure to significantly fund the Residual Trust
unti12002,while the Marital Trust was funded in 1987,violated the intent of
the Decedent's Will.
30
On December 28, 1987 common and preferred shares of NNN were transferred from the
Estate into the Marital Trust. The shares which had been valued at $2,495,665.85 were received
into the trust at a value of$3,170,423.01 causing the Estate to realize a gain on distribution in the
amount of$675,057.16. During the period from December 28, 1987 to July 5, 1993 shares were
transferred from the Marital Trust to Mrs. Mumma. Mrs. Mumma received a total of 50.70%of
the common shares and 35.9%of the preferred shares.
A controlling interest in the common stock of NNN was distributed to Mrs. Mumma. On
July 21, 1993, 638.228 common shares of NNN were sold. The fiduciary acquisition value of the
stock, $1,759,984.15 agrees to the total value of common and preferred stock remaining in the
marital trust after transfers. Since the number of shares(349.745 common and 576.966 preferred)
does not agree to the total sold (638.228 common), it appears that the preferred shares were
converted to common stock; i.e. one common share received for every two preferred shares.
(349.745 +576.966/2=638.228)
Throughout this entire period,the NNN stock was consistently valued at the value it held
on the date that it was transferred from the estate. This value was used for the final transfer of
shares on July 5, 1993 which preceded the final sale of shares by 16 days, even though the sale
reflects that the shares were worth more than three times this value on July 21, 1993. The total
shares transferred from principal to Mrs. Mumma, 303.842 common and 252.268 preferred, or
429.976 total common (303.842+252.268/2 =429.976)had a fair market value of
$4,225,245.16 on July 21, 1993 (429.976 shares @$9,826.70). As compared to the value at
which the shares were transferred, $1,161,180.58, this represents a difference of$3,064,064.58
($4,225,245.16 - $1,161,180.58).
31
On December I5, 1987, shares of Hummelstown Quarries, Inc. ("HQI")were transferred
from the Estate into the Marital Trust. The shares which had been valued at $593,421.04 were
received into the trust at a value of$799,051.80 causing the F,state to realize a gain on
distribution in the amount of$205,630.76. During the period from December 28, 1987 to July 5,
1993, shares were transferred from the marital trust to Mrs. Mumma. On July 21, 1993, 500
common shares of HQI were sold.
Throughout this entire period, the HQI stock was consistently valued at the value it had
on the date that it was transferred from the estate. This value was used for the final transfer of
shares on July 5, 1993 which preceded the final sale of shares by 16 days, even though the sale
reflects that the shares were worth more than three times this value on July 21, 1993. The 115
shares transferred from principal to Mrs. Mumma had a fair market value of$506,221.95 on July
21, 1993 (115 shares @ $4,401.93). As compared to the value at which the shares were
transferred, $149,416.18 (See Summary VI), this represents a difference of$356,805.77
($506,221.95 - $149,416.18).
PSC was liquidated on December 19, 1986. Decedent held 700 of the total 712
outstanding shares as of the date of death. Proceeds from liquidation were $9,242,798.30 on the
700 shares valued at $9,144,473.00. This created a gain on liquidation in the amount of
$98,325.30.See First Accounting, Estate, p. 15. The Financial Statement of Pennsylvania Supply
Company dated December 19, 1986 indicates in Footnote 1 l, page 12 that on July 8, 1986 the
company redeemed 85 shares of common stock for$500,000. Therefore, after the redemption the
estate held 615 of the remaining 627 shares outstanding. The total proceeds from the sales of the
Pennsy Supply businesses was around $40 million.
32
There is a preponderance of ownership of PSC and its subsidiaries by the Estate of
Decedent. However, only $17,614,170.74 of the approximately $40,000,000 received from the
sale of the Pennsy Supply Businesses was able to be traced. There were also minority ownerships
in Pennsy Supply Businesses and its subsidiaries, primarily by the four Mumma children.
The transfers, to satisfy Mrs. Mumma's income or 5%annual request of principal, use values
which appear to be at odds with the Will. The Will required transfers to be valued at current
value. As indicated by the total transfers of both Nine Ninety-Nine, Inc. and Hummelstown
Quarries, Inc., there is significant disparity between the values used at transfer date and the
ultimate sale price. Specific attention can be drawn to the transfers that occurred only a few days
prior to the sale.
The intent of the Will was to establish QTIP trusts which would ultimately transfer the value
of the assets to the children of Robert and Barbara Mumma. The marital trust provided income
and requested 5%annual principal withdrawals to be paid to Mrs. Mumma. The only other right
to invade was based upon the need for the maintenance of Mrs. Mumma's lifestyle; no such
withdrawals were made. It appears, based on the documents, that the valuations of assets
transferred upon request by Mrs. Mumma or in satisfaction of income were significantly
understated thus reducing the intended residual value of assets remaining for final distribution to
the children as under the will. Additionally, an amount in excess of 50%of the proceeds from the
sale of Pennsy Supply Businesses does not appear on any of the estate or trust documents or tax
returns.
Morgan Lewis and Bockius proposed a plan of liquidation to the shareholders of PSC and
Kim Co. Their stated purpose was to transfer by liquidation of the companies the assets directly
to the shareholders. Morgan Lewis drafted a Plan of Liquidation and Dissolution, forms for filing
33
with the Pennsylvania Corporation bureau and determined that the direct distribution of the real
estate assets would not be subject to transfer taxes. On November 30, 1986 the shareholders
adopted the plan of liquidation. It was agreed that PSC and Kim Co. would not be dissolved, but
remain as active entities. Despite this agreed upon plan the estate, Morgan Lewis and Hadley
usurped the authority of the shareholders and took another tack. On December 19, 1986 Morgan
Lewis filed articles of incorporation for Hummelstown Quarries Inc.
Financial Statements of Pennsylvania Supply Company dated December 19, 1986, Footnote
1, page 6 indicates that the statements apply to "the period July 1, 1986 through December 19,
1986 immediately prior to the investment of certain assets subject to the related liabilities in
Hummelstown Quarries, Inc. in exchange for 627 shares of common stock. "The schedule below
the note list the value of the Net assets invested as $42,171. This is the net value of the assets
listed in Note 3 OPERATIONS.
This translates to the quarry properties at Hummelstown, Bowmansdale, and Dromgold were
the assets contributed to Hummelstown Quarries� at a net value of$ 42,171 on the afternoon of
December 19, 1986. NOTE 1 continues to "Subsequent to this investment, Pennsylvania Supply
Company was liquidated after close of business on December 19, 1986. The company's assets
and liabilities were then effectively distributed to its shareholders. That same day after the close
of business Hadley valued the 615 shares of HQI distributed to the estate at $593,421. In the
estate accounting the 615 shares reach a new high of$799,051.80.
NOTE 3 OPERATIONS. `Operations of the company include property rental and extraction
of stone deposits under royalty agreement. Rental Properties are located principally in
Harrisburg.• However, certain rentals are received for properties in South Hanover Township,
Watts Township and Bowmansdale. Royalty is revenue (minimum $210,000 per year)from an
34
affiliate for materials removed,from a quarry owned by the company in South Hanover
Township, Dauphin County." The only operation required by PSC to receive the royalty
payments was to cash the checks. Pennsy Supply, Inc. was the affiliate that produced the
aggregates.
Mrs. Mumma would have the right to income from both trusts during her lifetime and
right to invade. The Will indicated that any distribution of assets would be valued at the date
those assets are being distributed. Therefore, if the assets were never re-valued other than the
value used to transfer these assets into the trusts, it appears the assets transferred to satisfy the
5%principal withdraw rights affected to asset value that was retained by the estate and trust. The
subseyuent sale of operating businesses was for$40,000,000, we have been able to account for
proceeds in the estate as detailed on summary XI, $11,985,939.81 that were actually received by
the trust established by the estates of Decedent. Assets transferred to Mrs. Mumma accounted for
additional proceeds of$5,628,230.93. Proceeds of$17,614,170.74 from the sale of NNN and
other operating businesses were accounted for. Therefore, in excess of$22,000,000 of the
proceeds for the sale of this corporation have not been accounted for, which would indicate
significant value of DecedenYs estate's 9831% initial interest of PSC was significantly diluted.
The transaction related to the merger of HQI is denoted on the financial statements of PSC on
December 19, 1986. On page 6 of that financial statement, under corporate liquidation indicates
that Hummelstown Quarry, Inc. assets subsequent to the issuance of the statement but before
liyuidation were transferred to the corporation in exchange for 627 shares of common stock. It is
Petitioner's contention that a 50%ownership in the outstanding shares of PSC was transferred in
this merger. After the liquidation of HQI, the shareholders of HQI receive 627 shares - in effect
they receive a 50% interest in PSC for the HQI assets, which are also denoted on page 6 of the
35
financial statements for Pennsylvania Supply Company for 1986. The estate ultimately presented
a value of$799,051.80 for their 615 shares of HQI that appeared in the estate accounting after
the liquidation. However, since PSC on the initial valuation of the estate had a date of death
value of$9,144,473, if 50% interest would approximate $4,570,000. The merger of HQI also
which appears to be disproportionate to the ultimate proceeds received for the sale of HQI of
$2.2 million dollars.
If the above conclusions are accurate the value of assets transferred to Mrs. Mumma were
significantly understated below fair market value. This could have created asset transfer well in
excess of what was anticipated under the Will. The assets transferred to Mrs. Mumma would be
controlled by her Will and under her estate could distribute these assets to beneficiaries not
stated in Decedent's Will.
It is well-settled that the purpose and goal of all testamentary law is to best effectuate the
intent of the testator. In re Estate of Piet, 949 A.2d 886, 890 (Pa.Super. 2008) (citations
omitted). Here, the Executrices/Trustees clearly, repeatedly and systematically denied the intent
of Decedent's Will in order to engage in self-dealing. Further,the Executrices/Trustees violated
the Uniform Principal and Income Act, 20 Pa.C.S. §8101, et seq., which directs that a fiduciary
must distribute income and principal according to the trust instrument, even contrary to a
provision in the law. 20 Pa.C.S. §8103(a). Even if a trustee invokes his or her discretionary
power, it must be only to the extent that the end result is fair and reasonable to all beneficiaries.
20 Pa.C.S. §8103(b). In this case,the Executrices/Trustees clearly violated both provisions of
the Act.
36
b. The Executrices/Trustees fraudulently terminated the corporate
existence of Middle Park,Inc.via merger with another corporate entity.�o
VI. CONCLUSION AND RELIEF REQUESTED
In July 1986, PSC redeemed 85 shares @$5582/share. The cost to redeem the remaining 615
shares is $3,600,000.00. This would have yielded $4,100,000.00 to the Marital Trust. The
additional proceeds from the life insurance as well as the salary continuation payments to Mrs.
Mumma would have been more than ample to provide for her needs and meet the intent of the
Will. Additionally, there was $1 million in life insurance proceeds, owned by the subsidiaries,
that coupled with notes, would have provided the funds necessary to redeem all the stock over a
five-year period. Had the Estate chosen this course of action, as intended by Decedent,there
would have been no need for the Estate to expend the exorbitant legal and accounting fees that it
has to this date, and this Honorable Court would not have been burdened by this ongoing
litigation.
For all of the reasons stated above, the objections of Petitioner, Robert M. Mumma, II should
be sustained. The following accounts should be denied: Account of the Marital Trust Under the
Will of Robert M. Mumma, Deceased, for the Period January 1, 2004 through July 17, 2010,
filed September 10, 2010 and Account of the Residual Trust Under the Will of Robert M.
Mumma, Deceased, for the Period January 1, 2004 through July 17, 2010, filed September 10,
2010.
Respectfully Submitted,
10 While this is a bona fide dispute between Petitioner and the Estate,Petitioner respectfully submits that this is not a
matter under the jurisdiction of the Cumberland County Orphans'Court. PSC owned shares in Middle Park,Inc.but
the shares were not reported on PSC's Dec. 19, 1986 Financial Statements.
37
RC}BERT M. MtJMMA, II
PetitzoneN, Pro Se
Bax F
Grantham, PA 17027
(711}448-1127
3$
Obiections to findings of fact
General Objections:
The audit was based on hearsay . The accountings were compilations of
purported transactions of estate assets. Primarily these were monetary
transactions that should have been documented by checks, receipts,
invoices etc. Judge Oler, on advice of the auditor issued an order
denying the objectors request for Bank statements, checkbooks, and
supporting information documenting the underlying transactions. With .
out this evidence the entries presented in the accounting are merely an
entry. While not verbal it is just a unsubstantiated representation made
by an unknown scribe.
The lack of this information prevented determination of the cash flow.
It is not possible to determine what funds were borrowed, paid, from
what sources and to whom, how much money was on hand and
available. Since there are many back and forth transfers from
Pennsylvania Supply Company, Kim Co. and Nine Ninety Nine it
appears that the Estate was originally funded with funds from sales of
assets of these corporations that were not approved by the corporation.
There are at least six sales of real estate where the executor acted on
behalf of the corporation without the required authority. This results in
assets of Pennsylvania Supply Company and Kim Co being converted
into cash of the estate. When those companies were liquidated the
loans were essentially wiped off the record.
Records of the companies were not provided. Requests for this
information was denied to the corporate officers by Hadley the °
accountant, and the executors. All of this was done to further a scheme
to sell the assets that represented the four Mumma siblings inheritance
from Walter Mumma. The lack of access to the financial records
amounts to a process that obstructed justice, and denied a full and fair
hearing on actions of the executor's , and their advisors to, "bust out "
the estates of both Walter and Robert Mumma for their own benefit.
The auditor adopted findings of fact from prior cases. These findings
have been shown by the introduction of new evidence to be untrue.
New evidence proves that the bulk of the assets included in the Robert
M. Mumma estate were derived from the Estate of Walter M. Mumma
probated in Dauphin County in 1961. The beneficiaries of that estate °
were deprived of there ownership of those assets by actions of the
executors.
The following findings from Equity 66 are objected to and are not
factual given the evidence provided to the Auditor.
3, 8, 10, 12, 13, 15, 16, 17, 19, 2 0, 21, 2 2, 2 7, 2 8, 2 9, 31, 3 3, 3 7, 3 8, 3 9,
40, 41, 42, 43, 52, 54, 57, 62, 84, 116.
The auditor adopted findings of fact from Equity N0. 99-2765 . Auditor
mistakenly believes that these were the findings of judge Sheeley. The
case was in front of Judge Oler. New evidence Exhibit 01-01 from the
records of Pennsy Supply, Inc. and the PA Department of Environmental
Protection , show that from 1981 to 1993 there existed simultaneously
two Pennsy Supply companies ( entity #s 120660 and 740666). The
document The document cites a mistake was made and the quarry
permits were issued to the wrong company ( not the one CRH bought). �
This and other newly discovered evidence produced at the auditors
hearinhs refute the following findings of fact:
123, 131, 132, 133, 134, 136, 137, 138, 139, 140, 141, 142, 143, 144,
145,
The auditor adopts findings of fact from Orphans court No. 21- 86-398,
Judge Sheeley. These findings are not supported by the evidence
presented to the Auditor that includes the inventory of Walter M.
Mumma's estate and Orders from the Dauphin County Court, regarding
ownership of the Silver Springs Quarry. Testimony of David Landry
refutes finding 158.
The following findings from this case are objected to and are not factual
given the evidence provided to the Auditor.
157, 158, 160, 167
The auditor has proposed the following findings that are objected to
based on the evidence presented to the auditor does not support them.
188, 210, 212, 218, 232, 235, 240, 254, 288, 270, 279,282, 292,293, 294,
295, 303, 306, 307, 310, 313, 316, 319, 320, 321, 322, 324, 326, 327,
333, 334, 353, 355, 358, 359, 364, 365, 369, 370, 372, 373, 393, 399,
424, 427, 435, 465, 466,
Obiections to Conclusion of Law
Objector Robert M. Mumma, II objects to the conclusions of law
1 . The estate value was determined by George Hadley. He originally
reported value of $5-6 million to the beneficiaries. MLB increased
that in july 1987 to $17,000,000. In September of 1988 the
executrix were aware the value was in excess of $60,000,000.
The CRH offer (01 -42) supports this objection.
Undervaluing the assets was designed to allow the executrix to
cram more into the Martial trust as part of a scheme to sell the
Pennsy Supply Inc businesses and take the profits out through the
Marital Trust. The executors lumped all of the Quarry and building
material assets into a block knowing they wanted to sell it.
2. The executrix elected to calculate this amount using the old
formula and not the new transitional formula. This was provided by
reviewing the filed tax return. 0 page 3 line 15 the elected to not
use the transitional method.
3. See Christ report
4. It is a pecuniary trustand had a maximum dollar amount of
contribution. Only 5% of the remaining principal could be scooped
out annually. The trustees allowed distributions far in excess of this
amount bu undervaluing the distributed asset.
5. The failure to revalue the stock before distribution was improper
accounting.
6. No Estate income was allowed to be distributed to Barbara
McKimmie Mumma.
7. Equity 66 did not relate to the December 29, agreement. The
agreement was never produced to the four mumma shareholder by
the Estate. Thus it was not a subject of the case. This was a clear
obstruction of justice.
8. All capital gains and extate income were to go to the residuary
trust. See Crist report.
9. The account itself shows when and what was fund to the Trusts
and Estate.
10.The Fulton Bank Building was not income. It was principal and
should not have been distributed except as part of the scoop out 5%
1 1 .They undervalued it as an asset.
12. 13. These properties supported the values of the aggregate
operations. They were not valued for the mineral reserves that were
in the millions of available reserves.
14. The executors transferred Union Quarries stock fro a trustfor kim
Company to the Marital trust without any authority.
15. This is clear from the Lebanon Rock, high Spec aNine Ninety
nine/Pennsy Supply Inc and Middlepark trans actions they participated
in.
16. The executors failure to abide by the agreements violated the
desires of Robert M. Mumma that the businesses continue under the
control ofhis immediate family
17 actually decedent did not own shares in PSI, Bobali,NNN. The shares
of PSC and LRI were not properly handled and violated the intention of
the will.
18.The High Spec agreement does not allow transfers to an estate
except with the written permission of all the shareholders. They never
had this permission. I agree this action was anything but proper.
20. The value of Pennsylvania Supply Company was based on the
underlying value of it's subsidiaries. These were not based on intrinsic
values including the Mineral reserves but soley on multiples of recent
years profits. This is not the industry standard.
22 The executors caused corporate assets primarily cash to be
transferred to the estate and then to the executor. This cah wa not
replenished before the liquidation of PSC and Kim Cc.
23.This matter is subject to another forum.
24Hummelstown Quarries did not have a meeting on Dec 19, in
Harrisburg. It di not elect directors r officers. The existence of HQI
was kept secret from me so I would support the plan of liquidation and
continue to expect that the quarry properties were being transferred
to the shareholders. They also concealed the books records and
agreements belonging to Pennsy Supply Inc.
27. 28. 29. The corporate records we were able to produce regarding
thes matters confirm that no such aactions were approved . In order
to sell real estate and other titled assets they adopted positions not
approved by the shareholders. These include Chairman of the Board.
Chief Counsel, salaries for Lisa.
30 They did not account for the change in value of the assets to be
sold to CRH to reflect the true market value to the IRS
31 .32.33. These issues of where the money went, and who has
benefitted are still to be accounted for with the final distribution of all
Trust assets and the final accounting.
34.35.36.37.The final results of the distributions will determine the
propriety of the advice.
38.There was no accounting for the decedents Swiss Bank account at
the UBS bank, or his Chase Account in London.
39. These documents and files for businesses e was involved in were
not produced. That includes files for High Spec Lebanon Rock among
others.
40. Thhe only considered one offer. There were at least 5 other
interested partys that were not allowed to bid.
41 . It is clear that the plan for Walter and Robert Mumma was to have
the businesses remain in the family. The rush to cash out and move to
Florida was nothing but an exercise of greed on part of the executors.
It certainly was not beneficial for the other family members who were
never allowed to participate after Dad died and will probably not
participate in any distribution.
I object to all of the remaining conclusions.