HomeMy WebLinkAbout07-23-93 (2)
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IN RE ESTATE OF
ROBERT .. MtlIDIA,
: COURT 01' COJOlOJf PLEAS
: CDXBBRLAND COUll'l'Y
:
Deo.ased.
: oRPHANS' COURT DIVIIIO.
.
.
: NO. 21-86-398
MEKORAJn)UIl OJ' BaDAU Melt. IWMMA A!fl) LISA
H. MORQUI IN OPPOSITION \\'0 PBTITION or
ROBBRT H. i"UY 1'02 PRELIMIRAaY INJUJfCTIOli
AND ttULII TO IKOW CAuse
I. INTRODUCTl:OI!l'
Barbara McX. MUltlllla ("Mrs. Mumma") and Lisa M. Morgan
("Mrs. Morgan") respectfully submit this memorandum of law in
opposition to the Petition for Preliminary Injunction and Rule to
Show Cause ("the petition") filed by Robert M. Frey
(tlPtititioner"). Petitioner seeks to enjoin the sale of certain
businesses and assets owned or controlled by the Estate of Robert
M. Mumma., Sr. (lithe Estate") or the Marital Trust under the Will
of Robert M. Mununa, Sr. ("the Marital Trust"). Mrs. Mumma and
Mrs. Morgan are executrices of the Estate and trustees of the
Marital Trust under the will. Robert M. MUllUllll., II ("Bob") has
filed a Joinder in the Petition ("the Joinder").
1l: . AIlGtIXJlNT
A. Tbe Ve~i~~o~ i8 Koo~ aecau.. the Sale of the pamily-
own.4 Busin...es Baa B.en Complete4.
As a practical matter, ,this Court cannot grant the
injunctive relief requested by Petitioner for the simplest of
reasons - the sale of the businesses in question was completed on
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the morning of July 21, 1993. On that date, following notice to
shareholders of Nine Ninety-Nine, Inc. ("999") and Hummelstown
Quarries, Inc. ("HOl") and to all tenants-in-common under an
Agreement Among Tenants-in-Common dated December 19, 1986 (lithe
MRA-I Agreement"), CRH plc acquired: (1) all. of the issued and
outstanding stock of 999; (2) all of the issued and outstanding
stock of RQI: certain real estate owned by the Mumma family and
subject to the MRA-I Aqreament (lithe Paxton Street. Yards"): (4)
real est.ate owned by the Marital Trust ("the Benders Quarry");
and (5) an option to purchase the Estate's 50% ownership interest
in Lebanon Rock, Inc. These businesses and assets will be
collectively referred to herein as lithe pennsy Supply
Businesses." The total cash purchase price paid by CRR for the
Pennsy Suppl1 Businesses was $32 million.
On or before the morning of July 21, 1993, all
corporate documents, deeds and other paperwork necessary to
complete the sale of the Pennsy Supply Businesses to CRH were
signed and filed. Also on that date, wire transfers of the
purchase funds were completed, and monies were distributed to
various persons, entities and escrows in accordance with the
purchase documents.U CRH is now, and for two days has been, in
full possession of all of the assets and properties comprising
the pennsy Supply Businesses and has assu.'lted control of the
11 The details of the transaction are more fully spelled out in
the Information statement mailed to all Shareholders of 999
and HQI on JUly 9, 1993 and attached as Exhibit A to the
Response of Mrs. Mumma and Mrs. Morgan to the Petition.
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operations of the Businesses. As a result, it is simply not
possible to enjoin the transfer as requested by Petitioner.
Moreover, issuance of a rule to show cause why tbe sale should
net be made subject to Court approval, or why Bob or others
should be given an opportunity to bid on or purchase the Penney
Supply Businesses, would be ineffectual. petitioner'S prayer for
relief therefore should be denied.
B. Mrs. HUIlIIIa a1\4 Mrs. Morqan batS the power, lJD4er
pennsylVaBla Law, tbe Will _n4 the Prior aulinqs or
this court, to Bell the tnterests of the Estate aB4 the
Marital Trust in the pennsy Supply Businesses.
In order to obtain a preliminary injunction, Petitioner
must show that the oonduct he seeks to enjoin is actionable and
that his right to an injunction is clear. City of philadelchia
v. District CQuncil 33. AFSCME, 528 Pa. 355, 361, 598 A.2d 256
(1991); ~lbee Homes. Inc. v. Caddie Homes. Inc., 417 pa. 177,
181, 207 A.2d 768 (1965). Petitioner bears a heavy burden of
persuasion on eaoh of these issues. Sinazon v. Commonwealth
Dept. of ~J Welfare, 496 Pa. 8, 11, 436 A.2d 125 (1981). In
the instant case, Petitioner has alleqed no actionable conduct on
the part of Mrs. Mumma and Mrs. Korqan.V
The Will grants Mrs. Muua and Mrs. Morgan broad powers
to sell or otherwise disposes of assets and properties owned by
the Estate. Neither Pennsylvania law nor the prior rulings cf
~ The criteria for issuance of an injunction are cumulative,
and each criteria must be established "fully and
completely." ~~edit Alliance COrD. v. Philadelphia Minit-
Mart Car Wash Core., 450 Pa. 367, 301 A.2d 816 (1973).
3
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this Court in the above-referenced matter have in any way limited
this power. See 20 Pa. C.S. S 3351 (granting broad right to sell
real and personal property unless will provides otherwise) .
~ndeed, Bob has in the past sought to persuade this Court to
limit the actions which Mrs. Mumma and Mrs. Morgan may take with
respect to the family-owned businesses.
In particular, Bob has argued that Article
THIRTEENTU:V at the Will prevents Mrs. MUIlmIa and Krs. Morgan from
selling the family-owned businesses to non-family interests
without first offering them to family meapers. However, by Order
dated March 8, 1989 in the above-referenced action, this court
held that
under Article THIRTEENTH of decedent's will, the
(executrices] may sell Mumma family company stock to
non-family members once the [executrices) unanimously
agree in writing. Therefore, the language of Article
THIRTEENTH is precatory and not mandatory.
No appeal was taken by Bob from that order, and it has now become
final. Consequently, there was no restriction upon the power of
Mrs. Mumma and Mrs. MOrQan, as executrices and trustees, to sell
J/ Article THIRTEENTH of the Will provides as follows:
Notwithstanding the powers herein otherwise given, I
direct that my stock in privately held corporations,
supervised and administered by me as the Executive or
operating officer prior to my decease or my stock in
privately held corporations which otherwise is owned by
me at my decease be not sold unless all of my trustees,
and particularly my individual trustee or trustees,
shall agree in writing that such stock be sold. It is
my desire that if expedient and possible, the
businesses which I have personally directed durinq 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.
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to CRR the interests of the Estate and of the Marital Trust of
the Estate's interests in the Pennsy Supply ausinessas.
e. A..UIIliD9, Arav.enc!o, that Hr.. lCUlII\l& and MrS. Korgall
AQte4 xmproperly in selling .8tate- or Trust-owned
Asset. or Properties to CRH, the Appropriate ~..edy to
Beneficiarie. under the will i. Throuqh a 71nal
AOQ011Dting'.
A preliminary injunction is a "harsh and extraordinary
remedy." Credit Alliance, 450 Pa. at 371. In order to obtain
preliminary injunctive relief against the proposed sale of the
pennsy supply Businesses to CRH/ Petitioner must show, inter
alia, that a preliminary injunction is necessary to prevent
immediate, irreparable harm not compensable by money damages.
~ city of Philadelphia, 528 pa. at 361; Sinazon, 496 Pa. at 11;
S.D. Bowes. Inc. v. National Bank of the Commonwealth, 404 Pa.
super. 512, 514-15, 591 A.2d 324 (1991).
In the instant case/ the beneficiaries under the will
are not threatened with any harm not compensable by money
damages. Petitioner alleges that the requested relief is
necessary to ensure that appropriate consideration is obtained
for the pennsy Supply Businesses. ~/~, Petition! 15
("Petitioner is unaware of any efforts on behalf of [Mrs. Mumma
and Mrs. Morgan] to obtain a better price for the sale of the
said companies or to obtain competitive bids from [Bob)").
However, even assuming that Mrs. Mumma and Mrs. Morgan have
failed to meet their fiduciary duties to beneficiaries under the
Will, the appropriate vehicle to address such failures is an
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action for surcharge upon the final accounting of Mrs. Mumma and
Mr.. Morqan.~ If at that time it is determined that Mrs. Mumma
and Mrs. Morgan failed to satisfy their obligations, by failing
to obtain a fair price for the pennsy Supply Businesses or
otherwise, the Court may determine the appropriate amount of any
compensation owing to the beneficiaries under the will.Y
D. p.~itioD.r L.cks standiD~ to Seek the ..l~.r .equ..t_4.
Petitioner apparently seekS relief in order to protect
the interests of Bob's minor children. Indeed, Petitioner was
appointed quardian ad litem of the interests of minor persons
interested in the Estate. ~ Order dated December 29, 1988. At
the time of the entry of the Order appointing him guardian ad
litem, Bob had disclaimed his interest under the will in favor of
his minor children. Subsequently, however, 50b souqht to revoke
the disclaimer, and this Court upheld the revocation. By Order
!/ No final accounting has been made by Mrs. Mumma and Mrs.
Morgan. As a result, appropriate persons will have a full
opportunity to address any issue. relating the sale of the
~ennsy Supply Businesses at the time of the final
accountinq.
2/ Petitioner's arqument that the pennsy Supply Businesses are
"unique and nearly impossible to replace," ~ Petition! 3,
is Wholly irrelevant. Whether the busin.s... are unique is
a question wholly distinct from whether the fractional
ownership inte~..t of a conting_nt beneficiary under the
Will in the businesses is unique. There is nothing unique
about a bare investment interest in a business or
corporation. Were this not so, any shareholder of a
corporation could enjoin a sale on the grounds that he
possessed some unique interest in owning a share of stock in
that particular corporation.
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dated July 21, 1993, this Court denied Petitioner's exceptions to
that the Court's order upholding the revocation.
As a result of the July 21 Order, Petitioner has no
standing to seek injunction of the sale of the pennsy supply
Businesses to CRN. Because Bob's disclaimer is, on the current
state of the record, ineffective, Bob is the presumptiv&
remainderman. AS such, he represents the interests of his minor
children under the dootrine of virtual representation.
consequently, on the current state of the record Bob's minor
children have no standing to enjoin actions taken by Mrs. Mumma
and Mrs. Morqan.
E. The Sale of the Peftnsy supply Busin.sse. ~o eRB ~id Hot
Vio1at. 20 Pa. C.8. I 3351.
Bob argues in his Joinder that the sale of the CRH
violated 20 Pa. C.S. i 3356. See Joinder I' 15-18. Bob bases
this contention on the fact that the assets sold to CRH passed
first into Kodie Acquisition corp. ("Kodie"), a corporation
formed by, imaI: ~, Mrs. Mu'mma and Mrs. Morgan. SOb claims
that the transfer of the assets into Xedie prior to the
completion of the sale constituted prohibited self-dealing, and
therefore grounds to enjoin the sale. BOb'S argument rests upon
a misreading both of the faots and of the applicable law.
First, Bob's argument incorreotly implies that Mrs.
Mumma and Mrs. Morgan were the shareholders of Kodie at the time
of the completion of the transaction. In fact, subsequent to
CRH's acquisition of the stock of Kodie, the few shares issued to
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Mrs. Mumma and Mrs. Morsan at the time of the formation of Kedie
were redeemed. This step occurred prior to the release of any of
the purchase price from Xedie to the various selling entities.
Thus, Mrs. Mumma and Mrs. Morgan were no longer shareholders of
Kodie at the time that the time of the completion of the
transaction.W
second, and more importantly, however, the sale of the
pennsy Supply Businesses is not the kind of transaction Which 20
Pa. C.S. S 3356 was intended to prevent. That section is aimed
at the prevention of self-dealing. In the instant case, Mrs.
Mumma and Mrs. Morgan gained absolutely no financial advantage as
a result of the transfer of the assets and properties comprising
the pennsy Supply Businesses into Kedie. That step was merely an
intermediate phase in the completion of the transaction. Mrs.
Mumma and Mrs. Morqan never had the option of keeping the assets
themselves at any price. Moreover, at the completion of the
entire transaction, CRH possessed the entirety of the pennsy
Supply Businesses, and the cash purchase price had been received
by the selling entities. The portion of the purchase price
ultimately to be distributed to Mrs. Mumma and Mrs. Morgan was
calculated solely on the basis of their individual shareholdings
in 999 and HQl, and the value received for those shares was
g; Moreover, as a factual matter, none of the 999 or HQl stook
owned by the Estate or the Marital Trust was purchased by
Kodie. Rather, all outstanding shares were cancelled and,
pursuant to subscription agreements, Kodie acquired newly-
issued shares of 999 and HQl stOOK.
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identical to that received by the other former shareholders of
the corporations.V
~. Tbe Cour~ Should Not Bnjoin tbe Sale of ~h. P.nDsy
Supply Du.in..... Onder 20 pa. C.S. I 3355 B.aau.e the
Only post-Sale Remedy Available to Bob is an Appraisal
Proceeding.
Bob also argues that this Court should enjoin the sale
of the Pennsy Supply Businesses to CRR under 20 Pa. C.S. i 3355.
.liD Joinder '1'5 19-25. In particular, Bob claims that the
injunction of a sale of a Pennsylvania corporation is authorized
by 15 p~. C.S. i~ 512 and 1712. Neither of those sections
anywhere discusses injunctions or addresses the circumstances in
which an injunction may be proper.
In fact, the provision of the Pennsylvania Business
Corporation Law which deals with injunctions is 15 Pa. C.S. i
1105. That section reiterates the pre-existing Pennsylvania law
that a corporate action may be enjoined only if it is fraudulent
or fundamentally unfair. See In re Jones & Lauahlin Steel COrD.,
488 Pa. 524, 412 A.2d 1099 (1980). However, it is important to
note that the sale of the Penney Supply Businesses already has
closed, and that Bob has formally dissented from the corporate
divisions of 999 and HQI by which a portion of the sale of the
pennsy Supply Businesses was achieved. Accordingly, his remedy
11 In addition, even as shareholders of Kodie, Mrs. Mumma and
Mrs. Morgan were at all times bound by fiduciary duties as
executrices and trustees.
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is limited to an appraisal of the fair value of his 999 and HQI
stock. ~. at 531-32; 15 Pa. C.S. ~ 1105.
:In. CONCLUSIOII'
For the foregoing reasons, Barbara MeX. Mumma and Lisa
M. Morgan respectfully request that this Court deny the petition
of Robert M. Frey for Preliminary Injuction and Rule to Show
Cause.
~L L./
ose . A. o-'a'onnor, Jr.
Marc J. Sonnenfeld
Brady L. Green
2000 One Logan square
Philadelphia, PA 19103
(215) 963-5212, 5572, 5079
William F. Martson
lvo v. otto, III
MARTSON, DEARDORFF, WILLIAMS
& OTTO
10 East High street
CarliSle, PA 17013
(717) 243-3341
Attorneys for
Barbara Mcl<. Mumma
and Lisa M. Morqan
10
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