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HomeMy WebLinkAbout08-27-14 (2) IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA _o "o s rn In Re: ESTATE OF ROBERT M. c 6 o MUMMA, Deceased ORPHANS' COURTRIpsTOIC - o r- � M mm No. 21-86-398 o 0 3 �o� T CONCISE STATEMENT OF ERRORS COMPLAINER &F c r- m 11 ON APPEAL BY APPELLANT ROBERT M. MUMMA, o � o F, T. 1. This Concise Statement of Errors Complained of on Appeal is filed in compliance with Pa.R.A.P. 1925(b)(4) and served pursuant to the Order this Court entered on August 7, 2014. 2. Pursuant to Pa.R.A.P. 1925(b)(4), the errors complained of on appeal by Appellant Robert M. Mumma 11 are as follows: (A) The trial court erred in not ordering a partial, in-kind, distribution by the Residuary Trust of the Bobali stock owned by the Residuary Trust. It is hornbook law that the intent of the testator is paramount when reviewing the administration of a trust. The trial court's order is clearly in direct conflict with the testator's intent as expressed in the testator's will. First, the language of the Residuary Trust „►early provides that upon the death of Decedent's wife (which occurred on July 17, 2010) all of the principal of the trust, "as it is then constituted," was to be distributed to the testator's four children, "share and share alike, per stirpes and not per capita." Upon the death of Decedent's wife, the Residuary Trust purportedly owned 1.4044 shares of Bobali stock. To order anything other than an in-kind distribution of the stock would be contrary to the testator's intent that the principle of the trust, "as it is then constituted," be distributed in equal shares to testator's four children upon the death of the testator's wife. 1 Furthermore, paragraph THIRTEEN of the testator's will provides that"[i]t is my desire that if expedient and possible,the businesses which 1 hav� 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."The notion that this language is precatory and therefore not binding is not supported by current case law. To the contrary, this language is testamentary and the trustee must abide by it. If the court concludes that Bobali is a business entity that the testator personally directed during his lifetime, to not distribute the stock in-kind among the four family members would clearly be contrary to the intent of the testator. It should be noted, and to use the testator's language, that distributing the Bobali stock "in-kind" would be much more "expedient" and much less costly to the trust than to have Bobali's assets sold and/or the corporation liquidated with cash and real estate distributed to the four children. (B) The lower court erred in holding that Lisa Mumma Morgan, in her capacity as trustee of the Residuary Trust, is authorized to vote the 1.4044 shares of stock of Bobali Corporation owned by the Residuary Trust in accordance with her own judgment even if her own judgment is contrary to the expressed desires and interests of the beneficiaries of the Residuary Trust. A trustee is under a duty to the beneficiaries to administer the trust solely in the interest of the beneficiaries. Restatement, Trusts, §170(1). To allow Lisa Mumma Morgan to vote the shares in her own judgment with no regard to the desires of the beneficiaries is a clear violation of the trustee's fiduciary duty to the beneficiaries. To allow Lisa Mumma Morgan to continue to vote the Bobali shares at all is contrary to the intent of the testator. Although paragraph NINTH (9) authorizes the 2 i ,. 5 trustee to exercise all rights and privileges pertaining to securities, paragraph EIGHTH clearly provides that the Bobali stock, along with the rest of the principal of the trust is to be distributed to the testator's four children upon the death of testator's wife. Testator's wife died July 17, 2010, and to allow the trustee to continue to vote the Bobali stock four years after the Residuary Trust was to terminate clearly violates the testator's intent. It is relevant that Lisa Mumma Morgan is not a third party trustee in this matter. I.n addition to being the trustee, she is also one of the four beneficiaries of the Residuary Trust and like the other beneficiaries, she currently owns shares of Bobali stock beyond the stock to which she is entitled upon the distribution of the Residuary Trust. There is clearly a conflict of interest in Ms. Morgan serving as trustee of the trust in light of the fact that she also owns stock in Bobali. This conflict was created by the testator and therefore Ms. Morgan is not automatically disqualified from serving as trustee of the trust provided she administers the trust solely in the interest of the beneficiaries. To allow Lisa Mumma Morgan to vote the shares solely in her own judgment with no regard to the interests of the other beneficiaries is tantamount to authorizing her to engage in self- dealing as she administers the trust. "If the dealing presented conflict of interest and consequent temptation to the trustee, it will be voided at the option of the beneficiary, regardless of gain or loss to the trustee." George G. Bogart, The Law of Trusts & Trustees, §543 at 217-218. As such, any votes cast of the Bobali stock by Lisa Mumma Morgan, in her capacity as trustee of the Residuary Trust should be voided at the option of the other beneficiaries due to the conflict of interest. It should be noted that in the High-Spec litigation which is currently on-going in Florida, counsel for Lisa Mumma Morgan has recently argued before the District Court 3 of Appeal, Fourth District of Florida, that the Marital Trust created in testator's will has standing to proceed with a shareholders' derivative law suit even if the High-Spec stock has not been transferred from the estate to the Marital Trust because the Marital Trust is the beneficiary of the estate and therefore the Marital Trust is tt : "beneficial owner" of the stock while the stock is held by the estate. The same principal should apply here. (C) The trial court erred in not addressing who is the owner of the interest in Bobali stock. A conclusion that neither testator's estate nor the Residuary Trust is the rightful owner of the Bobali stock would result in the trial court lacking subject matter jurisdiction over the voting rights of the 1.4044 shares in question. The trial court erred in not aressing the slight of hand with which the estate and the Residuary Trust have dealt with the Bobali stock. The stock was not listed on the Inventory the estate filed with this trial court. It was not listed as an asset on the estate's Pennsylvania Inheritance Tax Return nor on its Federal Estate Tax Return. The Dauphin County Court of Common Pleas gave the matter a cursory review, simply holding that the stock "poured over" from the estate to the Residuary Trust. Unlike the Dauphin County Court of Common Pleas, the trial court has subject matter jurisdiction to determine whether the estate or the Residuary Trust own stock in Bobali. The trial court could have reopened the issue of whether the estate, the Residuary Trust, or neither entity own Bobali stock without violating the law of the case doctrine or the coordinate jurisdiction rule for two reasons (1)the Dauphin County opinion that the Bobali stock poured over from the estate to the Residuary Trust is clearly erroneous in light of the fact that there is no evidence in any documents filed with the trial court in this matter which indicates that the estate ever owned the Bobali stock; and (2) the Dauphin County Court of Common 4 Pleas and the trial court are not courts of coordinate jurisdiction. Unlike the Dauphin County Court of Common Pleas,the trial court has subject matter jurisdiction over matters pertaining to the estate and the Residuary Trust and should had addressed the critical issue of whether the estate, the Residuary Trust or neither entity is the rightful owner of Bobali stock. Respectfully submitted, Date. OS 29114 IW-4 `�. haun E. O'Toole Attorney Registration No. 44797 220 Pine Street Harrisburg, Pennsylvania 17101 (717) 695-0389 5 CERTIFICATE OF SERVICE The undersigned hereby certifies that on this date a true and correct copy of the foregoing Concise Statement of Errors Complained of on Appeal was served by first class United States mail, postage prepaid, upon the following: The Honorable J. Wesley Oler; Jr. Court of Common Pleas of Cumberland County, Pennsylvania Orphans' Court Division Cumberland County Courthouse 1 Courthouse Square Carlisle, Pennsylvania 17013; No V. Otto; 111, Esquire George B. Faller, Jr., Esquire Martson Law Offices 10 East High Street Carlisle, Pennsylvania 17013 (717) 243-3341; Brady L. Green, Esquire Wilbraham, Lawler & Buba 1818 Market Street, 31" Floor Philadelphia, Pennsylvania 19103; Richard F. Rinaldo, Esquire Williams Coulson LLC One Gateway Center, 16'h Floor Pittsburgh, Pennsylvania 15222; Linda M. Mumma P.O. Box 70 Mechanicsburg, Pennsylvania 17101; and Anthony L. DeLuca, Esquire 113 Front Street Boiling Springs, Pennsylvania 17007 (717) 258-6844. 06 IVI 1%4 haun E. O'Toole Attorney Registration No. 44797 220 Pine Street Harrisburg, Pennsylvania 17101 (717) 695-0389 Allorney for Appellam, Robert M Mumma, 11