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HomeMy WebLinkAbout12-30-91 (2) Thomas M. Kittredge Identification No. 04471 Brady L. Green Identification No. 56450 MORGAN, LEWIS & BOCKIUS 2000 One Logan square Philadelphia, PA 19103 (215) 963-5636, 5079 Attorneys for Barbara McK. Mumma and Lisa M. Morgan IN RE ESTATE OF ROBERT M. MUMMA, : COURT OF COMMON PLEAS : CUMBERLAND COUNTY : : ORPHAN'S COURT DIVISION Deceased. : : NO. 21-86-398 MEMORANDUM OF BARBARA McK. MUMMA AND LISA M. MORGAN IN OPPOSITION TO PETITION OF ROBERT M. MUMMA, II TO COMPEL COMPLIANCE WITH REOUEST/DEMAND FOR DOCUMENTS Barbara McK. Mumma and Lisa M. Morgan submit this memorandum in opposition to the Petition of Robert M. Mumma, II ("RMM 11") to Compel Compliance with Request/Demand for Documents. I. BACKGROUND Robert M. Mumma died testate on April 12, 1986. Mr. Mumma's will (lithe Will") and the codicil thereto were probated on June 5, 1986. The Will appointed Barbara McK. Mumma, decedent's widow, and Lisa M. Morgan as executrices of Mr. Mumma's Estate ("the Estate") and trustees of a Marital Trust and a Residuary Trust created thereunder (lithe Trusts"). Under the Will, the remaindermen of the Trusts were the children of Mr. Mumma: Mrs. Morgan, RMM II, Linda M. Roth and Barbara M. McClure. On January 6, 1987, RMM II executed a dislcaimer of his interest under the Will in favor of his children. At the time of 1.357 the execution and filing of the disclaimer, RMM II had two minor children. A third was born on October 12, 1990. On December 27, 1988, Mrs. Mumma and Mrs. Morgan, acting in their individual capacities and as executrices and trustees under the Will, commenced an action in this Court, docketed at No. 66 Equity 1988, seeking a declaratory judgment that, inter alia, RMM II did not possess rights of first refusal to purchase certain businesses, real property and other assets owned by the Estate. RMM II had asserted these alleged rights in an effort to block the proposed sale of the businesses and assets for cash to a large and financially well-established Irish company. Mrs. Mumma and Mrs. Morgan had determined that a sale was in the best interests of all of the beneficiaries under the will, including the minor children of RMM II, and that the cash price offered by the Irish company represented a good deal for the Estate and the Trusts. Indeed, both Mrs. Roth and Mrs. McClure had expressed their desire that the transaction go forward. Mrs. Mumma and Mrs. Morgan were unable to consummate the sale to the Irish company because of the vexatious legal positions taken by and other actions of RMM II, including his assertion of the alleged rights of first refusal. Simultaneously with the filing of No. 66 Equity, Mrs. Mumma and Mrs. Morgan filed a petition seeking appointment of a guardian ad litem for RMM II's minor children, in whose favor he had disclaimed his interest under the Will. This Court granted 2 J358 the petition, and on December 29, 1988, Robert M. Frey, Esquire was appointed as guardian ad litem for the minor persons interested in the estate of Robert M. Mumma, deceased, with authorization to represent said minor perons in all matters related to the sale of (certain Estate-owned businesses] and the actions for Declaratory Judgment and other Relief pertaining thereto, which actions are now pending before this Court, and in any further proceedings in the Court of Common Pleas of Cumberland County or in the Court of Common Pleas of Dauphin Count, Pennsylvania relating to or arising out of such matters. On June 20, 1989, RMM II filed with this Court a petition to revoke his disclaimer, which petition was opposed by the guardian ad litem. On November 17, 1989, this Court granted RMM II's petition, and the guardian ad litem filed exceptions to the decree nisi. No ruling has yet been had upon those exceptions. Also in 1990, RMM II filed against, inter alia, Mrs. Mumma and Mrs. Morgan three additional equity actions, Nos. 14, 15 and 84, with this Court. RMM II is also engaged in numerous lawsuits against Mrs. Mumma and Mrs. Morgan in Dauphin County. on1-ugus"t 9', 1991, Mrs. Mumma and Mrs. Morgan filed interim accounts of their acts and transactions as executrices of the Estate and as trustees of the Trusts under the will. Those accounts covered the period from .~ "lit J.1iMIB6 toJfll:l . tlJ~.111l\~91 with respect to the Estate, the period from November 19, 1986 to March 31, 1991 with respect to the Marital Trust, and the period from November 4, 1986 through March 31, 1991 with respect to the Residuary Trust. Pursuant to those accounts, Mrs. Mumma and Mrs. Morgan provided detailed information with respect to the 3 1359 financial condition of the Estate and of the Trusts, and also as to their activities with respect thereto. On October 2, 1991, RMM II filed with the York County Court of Common Pleas, Orphan's Court Division, a petition seeking his appointment and that of Gary M. Gilbert as guardians of the estate of two of RMM II's minor children.V At the time he filed the petition in York County, RMM II withheld from the court certain material information. In particular, RMM II did not disclose to the court that he owns and operates businesses which compete directly with the Estate-owned businesses.~/ He also did not inform that court that he has asserted rights of first refusal as to certain Estate-owned businesses and real property, which claimed rights constitute a substantial encumbrance upon the ability of the Estate to sell the businesses and real estate for fair market value, to the detriment of all of the beneficiaries of the Estate. Lastly, RMM II did not inform the York county court that he has sought, in the course of the litigation referred to above, to obtain from Mrs. Mumma and Mrs. Morgan sensitive business information concerning the businesses owned by the Estate. That information would enhance the ~/ RMM II did not seek appointment as guardian of the estate of his third child. Z/ The issue of RMM II's status as a competitor has been raised by Mrs. Mumma and Mrs. Morgan by means of a motion for protective order in connection with not only the Orphan's Court proceedings relating to the Estate of Robert M. Mumma, but also with respect to No. 66 Equity 1988 and Nos. 14, 15 and 84 Equity 1990. This Court signed a rule to show cause with respect to the motion. 4 1360 competitive advantage of RMM II's businesses over businesses owned by the Estate, to the detriment of all of the beneficiaries of the Estate and the Trusts. without the benefit and of the withheld information, and upon RMM II's misrepresentation that he "d[oes] not have any individual interest that is adverse to the financial interests" of his minor children, Judge John T. Miller of the York County Court of Common Pleas on October 4, 1991 granted RMM II's petition. On that same date, RMM II filed objections to the accounts filed by Mrs. Mumma and Mrs. Morgan. Those objections included: (a) Objections to the Estate Account consisting of fourteen pages of line-by-line inquiries and protests with regard to numerous account entries; (b) Ojections to the Marital Trust Account consisting of seven pages of line-by-line inquiries and protests regarding numerous account entries; and (c) A statement of General Objections to all three accounts consisting of twelve pages of allegations and mismanagement challenging the overall administration of the Estate and the Trusts. No other person interested in the accounts, including Mrs. Roth, Mrs. McClure or the guardian ad litem, has filed any objection to the accounts. On October 11, 1991, RMM II filed the instant petition, seeking production of thousands of pages of documents relating to legal and business advice and services rendered to Mrs. Mumma and Mrs. Morgan, fire insurance policies, and sensitive and proprietary business information. In response to a reasonable request from counsel for Mrs. Mumma and Mrs. Morgan that RMM II 5 1361 explain his reasons for requesting the information, see Exhibit C to petition, RMM II has maintained that his motive is "irrelevant." See Exhibit D to Petition; Petition 1! 55. In addition, RMM II has nowhere offered any explanation as to why he is entitled to any more information than is provided in the lengthy and comprehensive accounts filed by Mrs. Mumma and Mrs. Morgan. By rule returnable December 18, 1991, this Court ordered Mrs. Mumma and Mrs. Morgan to show cause why RMM II should not receive access to the documents demanded. At the hearing on the petition on that date, this Court ordered the parties to submit briefs setting forth their respective positions relating to RMM II's right to the documents and information sought. II. ARGUMENT A. This Court Should Not Grant The Instant Petition without Allowing Mrs. Mumma and Mrs. Morgan A Full And Complete Opportunity To Respond. As an initial matter, this Court should not grant the instant petition without affording Mrs. Mumma and Mrs. Morgan a full and complete opportunity to respond. Col1'lf!fei'~'8"" .1l~_lIIe at the hearing before this Court on December l&"r-' I 1m CIl1'ITInnnr ' at mS1!p'a"t,RUljJlIJ, il Ilh'e. While counsel regrets any inconvenience that its failure to attend may have caused this Court or other persons, no prejudice to any party has resulted from that failure. RMM II will not suffer any hardship as a result of 6 1362 having a ruling on his petition delayed until all interested persons have had an opportunity to be heard.~/ Moreover, the instant petition not only raises issues of concern to Mrs. Mumma, Mrs. Morgan and RMM II, but also has potentially far-reaching implications for other beneficiaries under the Will. These persons include Mrs. Roth and Mrs. McClure, and also the minor children of RMM II, in favor of whom RMM II has disclaimed his interest in the Estate. Because the interests of each of these persons could be affected by the transmission to a competitor of the Estate-owned businesses of sensitive business and financial information, this Court should allow Mrs. Mumma, Mrs. Morgan and any and all other persons having interests in the Estate or the Trusts, the opportunity fully to address the merits of RMM II's petition. 1/ Pa. R. civ. P. 126 provides that [tJhe rules shall be liberally construed to secure the just, speedy and inexpensive determination of every action or proceeding to which they are applicable. The court at every stage of any such action or proceeding may disregard any error or defect of procedure which does not affect the substantial rights of the parties. Under this rule, courts should refrain from rigid adherence to deadlines in the absence of prejudice to an opposing party. Jamison v. city of Philadelphia, 355 Pa. Super. 376, 379, 513 A.2d 479 (1986), appeal denied, 515 Pa. 581, 527 A.2d 541 (1987); Allison v. Merris, 342 Pa. Super. 571, 572-76, 493 A.2d 738 (1985); Urban v. Urban, 332 Pa. Super. 373, 378-79, 481 A.2d 662 (1984); Goldsborough v. City of Philadelphia, 309 Pa. Super. 347, 350, 455 A.2d 643 (1982). 7 ~363 B. RMM II Is Not Entitled To The Doouments Requested/ Demanded In The Instant Petition. 1. Mrs. Mumma and Mrs. Morgan are Under a Fiduoiary Duty Not to Favor One Benefioiary of the Estate or the Trusts at the Expense of Others. It is axiomatic that a trustee or other fiduciary must deal impartially with all beneficiaries of the trust which he administers. See Restatement (Second) of Trusts 9 183. See also Covle's Estate, 200 Misc. 421, 104 N.Y.S.2d 260, 264 (Sur. ct. 1951) (trustee for different beneficiaries required to administer trust for their benefit impartially). In the instant case, therefore, Mrs. Mumma and Mrs. Morgan are required by their fiduciary obligations to administer the Estate and the Trusts for the benefit of all beneficiaries. Under the terms of the Will, those beneficiaries include not only Mrs. Morgan and RMM II, but also Mrs. Roth, Mrs. McClure, and the issue of all of the children of Robert M. Mumma, including the minor children of RMM II. All such persons are contingent remaindermen under the will. As noted above, RMM II is the owner of businesses which operate in direct and substantial competition with businesses owned by the Estate. In his capacity as a competitor, RMM II possesses interests which are directly and irreconcilably adverse to those of the beneficiaries of the Estate and the Trusts. Moreover, RMM II has been litigating in this Court and in the Court of Common Pleas of Dauphin County against the Estate of Robert M. Mumma. In the course of such litigation, he repeatedly has sought access to sensitive business information and data 8 1364 regarding the Estate-owned businesses. To the extent that RMM II is, in response to the instant petition, granted access to the highly-sensitive commercial and financial data which he now seeks, the Estate-owned businesses may be harmed in their competition with RMM II's businesses. Any diminution of the competitive standing of those businesses would directly and negatively impact upon the value of the Estate itself. Similarly, RMM II has at various times claimed a right of first refusal with respect to any offer to purchase certain operating businesses and real property constituting the bulk of the assets of the Estate and the Marital Trust established under the will. That claimed right of first refusal constitutes a substantial encumbrance upon the ability of the Estate and the Marital Trust to sell such businesses and the real estate for fair market value, to the detriment of all of the beneficiaries of the Estate and the Marital Trust, including the minor children of RMM II. RMM II's assertion of his alleged right of first refusal has, as noted above, already frustrated one cash sale of Estate-owned businesses to a willing and financially sound buyer. As executrices and trustees, Mrs. Mumma and Mrs. Morgan are obligated to avoid the sort of harm to the Estate and its assets which would occur if sensitive business and financial information were made available to RMM II. That information could be used to undermine the position of the Estate-owned businesses, or to further RMM II's attempts to assert his alleged right of first refusal. Providing such information to RMM II 9 1365 under the present circumstances would result in harm to the interests of all beneficiaries of the Estate and of the Trust other than RMM II, including RMM II's minor children, and would clearly constitute a violation of Mrs. Mumma's and Mrs. Morgan's duties as executrices and trustees. 2. RMM II is Not Entitled to Access to the Records Sought in the Instant Petition. Even if providing RMM II with access to the information sought in the instant petition would not constitute a breach of their fiduciary obligations, Mrs. Mumma and Mrs. Morgan are not obligated to meet RMM II's demands in the instant petition because those demands have not been asserted in good faith. Any right of a beneficiary to inspect estate- or trust-related records "must be exercised in good faith and with due regard for the rights of other interested parties." See Estate of Rosenblum, 459 Pa. 201, 215, 328 A.2d 158, 165 (1974). A trustee is not required to submit to "vexatious and unwarrantable" demands for books and papers. Id. at 215-16, 328 A.2d at 165. Given RMM II's status as a competitor of the Estate-owned businesses and his assertion of the alleged first refusal rights, Mrs. Mumma and Mrs. Morgan reasonably and prudently questioned RMM II's motives in demanding the information sought in the instant petition. Accordingly, they requested that RMM II explain his reasons for seeking voluminous and sensitive documentation. In response to that request, RMM II repeatedly has refused to divulge his reasons for demanding the information, 10 1.366 claiming instead that his motive is "irrelevant." He has instead offered only bland and insufficient protestations that he "has no malicious or ulterior motive" and that he "is acting in good faith." See Exhibit D to Petition; Petition 'II 55. Notwithstanding RMM II's claims, it has long since become apparent that the instant petition represents only the latest in a series of attempts by RMM II to obstruct and harass Mrs. Mumma and Mrs. Morgan in their administration of the Estate and the Trusts. This is evidenced by the fact that RMM II has persisted in asserting the demands set forth in the instant petition notwithstanding the fact that Mrs. Mumma and Mrs. Morgan on August 9, 1991, filed detailed interim accounts with respect to the Estate and the Trusts, thereby providing detailed information to RMM II and all other beneficiaries under the will. While neither Mrs. Roth, Mrs. McClure nor the guardian ad litem for RMM II's minor children ever objected to those accounts, RMM II has barraged Mrs. Mumma and Mrs. Morgan with objections, comments and exceptions, and filed the instant petition, which merely reasserts the same demands for documents originally made by RMM II in March 1991. RMM II claims that in making the instant demand for documents he "solely desires to exercise his right in order to protect his and his children's interest in the estate and trusts." Petition 'II 55. However, any interest of RMM II was terminated by his execution of the disclaimer in favor of his children. While this Court has concluded that RMM II is entitled 11 1367 to revoke the disclaimer, the guardian ad litem has filed exceptions to that ruling. Those exceptions have yet to be ruled upon, and in any event an appeal of this Court's decision is. 1'~~, Under these circumstances, any interest of RMM II in the Estate or the Trusts is vague and uncertain at best, and therefore there exist serious doubts as to RMM II's standing to demand the documents sought by the instant petition. The question of RMM II's standing will not conclusively be resolved until the guardian ad litem's exceptions to this Court's order have been ruled upon, and until any appeal has been passed upon by the Superior Court. In the meantime, Mrs. Mumma and Mrs. Morgan might face potential liability to other beneficiaries under the Will were they, in the current uncertain state of affairs with respect to the disclaimer, to provide RMM II with voluminous documents regarding the Estate, the Trusts, and the businesses owned thereby. RMM II's assertion that he seeks to protect the rights of his minor children also is problematical. This contention presumably is based upon the York County order naming RMM II and Mr. Gilbert as guardians of the estates of RMM II's minor daughters.~/ However, that order was entered based, inter alia, upon RMM II's representation that he "d[oes] not have any individual interest that is adverse to the financial interests" of the daughters. RMM II did not disclose to the York County i/ As noted above, RMM II and Mr. Gilbert were not appointed guardians of RMM II's minor son. 12 1368 Court the following material facts: that RMM II has been litigating against the Estate of Robert M. Mumma in which his children, as contingent remaindermen, have a financial interest; that RMM II has claimed a right of first refusal with respect to any offer to purchase the Estate-owned businesses and properties, to the detriment of all of the beneficiaries of the Estate and the Marital Trust, including the minor children of RMM II; and that RMM II owns and manages businesses which operate in direct competition with businesses owned by the Estate and the Marital Trust. As a result, RMM II's assertion to the York County Court that he has no financial interest adverse to that of his minor daughters is unsupportable. This withheld information casts grave doubt upon the efficacy of RMM II's appointment as guardian of his minor daughters. Moreover, even if RMM II's appointment as guardian of his minor daughters was proper, this in no way provides assurances to Mrs. Mumma and Mrs. Morgan that RMM II is pressing the instant demands in good faith, and Mrs. Mumma and Mrs. Morgan remain obligated to conduct the affairs of the Estate and of the Trusts in the best interests of all of the beneficiaries under the Will, including those of Mrs. Morgan, Mrs. Roth, Mrs. McClure, their children, and the children of RMM II. Under the circumstances detailed above, Mrs. Mumma and Mrs. Morgan are not entitled to rely upon RMM II's assertions that he is acting in good faith and has no improper motive when they have ample reason to believe that those assertions are 13 1369 untrue. Rather, they rightly have considered RMM II's status as a competitor, his past actions, his alleged right of first refusal, the dubious status of RMM II's disclaimer, and the facts concealed from the York County Court in determining the appropriate amount of information with which to provide RMM II. These facts have led Mrs. Mumma and Mrs. Morgan to conclude that, as fiduciaries of the Estate and the Trusts under the Will, they may not properly provide RMM II with sensitive business information at the risk of substantial detriment to the interests of the beneficiaries under the Will.~1 2/ Additional evidence of RMM II's lack of good faith in asserting the instant demands may be found in the substance of his demands themselves. Virtually all of those demands seek documents reflecting legal advice rendered to Mrs. Mumma and Mrs. Morgan, or payments made to counsel therefore. Moreover, the requests seek such information regardless of whether Mrs. Mumma and Mrs. Morgan themselves have ever requested or received it. Under these circumstances, it is clear that RMM II has demanded the information solely for the purposes of launching another assault upon Mrs. Mumma, Mrs. Morgan and/or their counsel. In addition to filing numerous lawsuits against Mrs. Mumma, Mrs. Morgan and the Estate, RMM II also has filed in this Court an action against Morgan, Lewis & Bockius and Arthur L. Klein, a partner in that Firm (Civil Action No. 4430 1990) . 14 1.370 III. CONCLUSION For the foregoing reasons, Barbara McK. Mumma and Lisa M. Morgan respectfully request that this Court deny the petition of Robert M. Mumma, II to Compel Compliance with Request/Demand for Documents. In the alternative, Mrs. Mumma and Mrs. Morgan respectfully request that this Court reserve any ruling upon the instant petition until the issue of the validity of RMM II's disclaimer has been resolved with finality, including the conclusion of any appeal which may be taken from a ruling on the guardian ad litem's exceptions to this Court's November 17, 1989 Order. ~~cittr Br~~;sO Green MORGAN, LEWIS & BOCKIUS 2000 One Logan Square Philadelphia, PA 19103 (215) 963-5636, 5079 William F. Martson MARTS ON , DEARDORFF, WILLIAMS & OTTO 10 East High Street Carlisle, PA 17013 (717) 243-3341 Attorneys for Barbara Mck. Mumma and Lisa M. Morgan 15 1371 --'. SOL61 "'V,.I.. :a~'Vr . -.i1NoooO-'-t- Snl)l:lo.. dSIM:i:n 'N'V~~OW --~.-------- nr /' , ~'\ 1991: c', () r " 13m '....i