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HomeMy WebLinkAbout07-28-93 IN RE: ESTATE OF ROBERT M. MUMMA, IN THE COURT OF COMMON PLEAS : CUMBERLAND COUNTY, PENNSYLVANIA ORPHANS' COURT DIVISION DECEASED . . : NO. 21-86-398 RESPONSE TO THE SUPPLEMENTAL MEMORANDUM OF BARBARA McX. MOMMA AND LISA M. MORGAN TO PETITION OF ROBERT M. FREY FOR PRELIMINARY INJUNCTION AND RULE TO SHOW CAUSE I. Introduction Robert M. Mumma, II ("Mr. Mumma"), respectfully submits this supplemental memorandum of law with respect to issues raised in the Briefs filed in support of the petition of Robert M. Frey, Court-appointed Guardian Ad Litem ("Guardian") for the minor beneficiaries in the above-referenced Estate, for Preliminary Injunction and Rule to Show Cause ("Petition") and in response to certain issues in the aforesaid Supplemental Memorandum filed on behalf of Barbara McK. Mumma and Lisa M. Morgan. II. The Court May Enjoin the Proposed Sale Because the Partial Shareholder Consent Was Not Effective When the Purported Sale Occurred. The Brief filed on behalf of Mr. Mumma on July 26, 1993, argued that the purported sale of the above-captioned Estate and 213'1 EAA/Mumma Supplemental Memorandum/072893/ldd Marital Trust assets was not authorized by partial shareholder consent because the executrices attempted to transfer the sale assets before the partial shareholder consents became effective under 15 Pa.C.S. ~1766(c). Counsel for Mr. Mumma planned to develop this argument more fully during the hearing, where they could obtain the additional factual information they needed to more fully develop the issue. However, since it was not possible to do so at the hearing, Mr. Mumma respectfully submits his position in response to the Supplemental Memorandum presented by counsel for the executrices. Under 15 Pa.C.S. ~1766(c) a partial shareholder consent "shall not become effective until after ~ least ten days written notice of the action has been given to each shareholder entitled to vote thereon who has not consented thereto." (Emphasis added) Under ~1766(c) as explained by the Legislature in the Amended Committee Comment of 1990, the partial shareholder consent is not yet valid. The Comment states: The notice that is required under subsection (b) is notice that the action (i.e., the corporate decision) has been taken, thereby laying the foundation for an action in equity by a nonconsenting shareholder to enjoin consummation of the corporate decision. Notice that the action will be taken at a future date will not trigger the running of the ten-day period, because such an intention may be too speculative to support equitable review of the action. -2- n~1!- ~~~,-, EAA/Mumma Supplemental Memorandum/072893/ldd The notice sent by the executrices had no final closing date for the sale of the assets to CRR, pIc ("CRR"). Not only did the notice fail to provide a schedule for the final sale to CRR, it expressed no clear intention to complete the sale any time in the near future. Rather, it stated only that the transfer would occur at a mutually convenient time for CRR and the executrices. The disclosure documents state: The Stage II Closing at which the sale of the pennsy Supply Business to CRR will be concluded will be held at a time to be agreed upon by CRR, Mrs. Mumma and Lisa. (~, Exhibit F of the Disclosure Documents, p. F-17.) Although the document continues to say "it is anticipated that it will take place as soon as permitted under applicable law," there is no indication of what was involved in the actual closing which could lengthen or shorten this period. Given the contentious nature of the executrices' interactions with Mr. Mumma, this statement alone holds no meaning. Moreover, the executrices are required as a condition of sale to obtain Environmental Protection Agency, Federal Trade Administration and Department of Justice approvals. Since applicable law could include these approvals, there was no way for Mr. Mumma to determine how long it would be before a closing could occur. Only on July 21, 1993, -3- 2J36 EAA/MlIIIIIll Supplemental MemorandUIII/072893/ldd when they attempted to transfer the sale assets, did the executrices demonstrate a clear intent to complete the sale to CRH. Mr. Mumma did not learn of this intent until July 23, 1993. As interpreted by the Amended committee Comment, the statutory ten (10) day minimum has not yet run, and the partial shareholder consent is not effective. There has been no valid sale. Moreover, even if the minimum notice period were tolled by the mailing of the disclosure document, the Legislature intended ~1766(c) to serve as a real protection for nonconsenting shareholders and not as a mere sham provision. Did ~1766(c) simply read "ten days," the partial consent might have been effective on July 20, 1993, ten days after the executrices mailed notice to the nonconsenting shareholders, as counsel for the executrices assert. However, ~1766(c) does not. Instead, the Legislature ensured the rights of shareholders in Mr. Mumma's situation by enacting the statute to read "until after at least ten days notice" and explaining their actions in the Amended Committee Comment: The notice that is required under subsection (b) is notice that the action (i.e., the corporate decision) has been taken, thereby laying the foundation for an action in equity by a nonconsenting shareholder to enjoin consummation of the corporation decision. -4- 2:13'7 EAA/Murma Supplementa l Memorandllll/072893/ Ldd The purpose of ~1766(c) is to protect shareholders such as Mr. Mumma from the very actions taken here by the executrices. The Legislature designed ~1766(c} to provide nonconsenting shareholders the ability to enjoin consummation of proposed corporate decisions. The Legislature intended these rights to give nonconsenting shareholders a real choice. Mr. Mumma could not have made an informed decision to consent or dissent until he could obtain additional information. On July 14, 1993, counsel for Mr. Mumma sent a letter to the executrices requesting to see crucial documents such as the exhibits and schedules to the Subscription Agreement with CRH and financial statements of the companies holding the proposed sale assets. These documents were not provided until July 19, 1993. As the executrices do not communicate with Mr. Mumma, the first chance Mr. Mumma had to meet directly with them or their counsel to discuss the transaction was at the shareholders meeting on July 22, 1993. However, even then counsel for the executrices refused to provide any information whatsoever regarding what they still claimed to be the "proposed sale." Had the statute read "ten days notice," the shareholders consent might have taken effect on July 20, 1993, ten (10) days after notice was mailed. See, 15 Pa.C.S. -5- 2138 EAA/Mumma Supplemental Memorandum/072893/ldd ~1702. However, ~1766(c} contemplates this very situation and chooses equity over a general rule by basing the notice provision on equity considerations as explained in the committee Comment. For the above reasons, the partial shareholder consent did not yet have effect when the executrices attempted to transfer the sale assets on July 21, 1993, and the purported sale is invalid. As presented in the Brief of Robert M. Mumma, II, in Support of Attorney Frey's Petition, there has been no valid sale, and the Court may enjoin an actual sale to CRH by the executrices. III. Conclusion For the foregoing reasons, Mr. Mumma respectfully requests this Court to grant the petition of Robert M. Frey for Preliminary Injunction and Rule to Show Cause. -6- 1").'1 '}~ f" -"\ ",.r...~ EAA/Mumma Supplemental Memorandum/072893/ldd Dated: July 28, 1993 Respectfully submitted, ~JAdei ~ #m~, Gerald K. Morrison, Esquire 1. D. No. 06876 Buchanan Ingersoll Professional Corporation 8th Floor, Vartan Parc 30 North Third Street Harrisburg, Pennsylvania 17101 (717) 237-4800 Attorneys for Robert M. Mumma, II -7- 2110 EAA/Mumma Supplemental Memorandum/072893/ldd CERTIFICATE OF SERVICE AND NOW, this 28th day of July, 1993, I, Elizabeth A. Arnold, Esquire, of Buchanan Ingersoll Professional Corporation, attorneys for Robert M. Mumma, II, hereby certify that the within Response to the Supplemental Memorandum of Barbara McK. Mumma and Lisa M. Morgan to petition of Robert M. Frey for Preliminary Injunction and Rule to Show Cause was served upon the following attorneys of record as follows: By Hand Delivery to: Robert M. Frey, Esquire Frey & Tiley Five South Hanover Street Carlisle, PA 17013 Guardian Ad Litem By First Class Mail, Postage Prepaid, to: Joseph A. O'Connor, Esquire Marc J. Sonnenfeld, Esquire Brady L. Green, Esquire 2000 One Logan Square Philadelphia, PA 19103 wiliam F. Mart son , Esquire lvo V. Otto, III, Esquire Martson, Deardorff, Williams & Otto 10 East High Street Carlisle, PA 17013 Attorneys for Barbara McK. Mumma and Lisa M. Morgan ~ ;4:1r/vwd Eli beth . Arnold, Esquire -8- n1'l~ 14.._ .'. J. z o :j fi o ~ ~ i( 0 w ~ ~ C3 0 (f 3: 0 z ~ ~ ~ Z ~ ~ c( _ ~ Ii ~ => w .. ~ ~ . ~ o o ~ ~ a t:: 8 ~ " l1 ~ ~ w ci ~ ~ Ii; i 'E ~ ~ ~ ~ ~ ~ ~ o z c ~ i' t. ~ l! . w ~ ~ , I .!J!Ut dh Buchanan ~rsoh PROFESSIONAL CORPORATION v '.'< t~ ,. 1993 Ji, Attorneys Gerald K. Morrison 717-237-4901 _ Pare 30 North Third Street Eighth Floor Harrisburg, PA 17101-2023 717-237-4800 Fax: 717-233-0852 July 28, 1993 The Honorable Harold E. Cumberland County Court Cumberland County Court One Court House Square Carlisle, Pennsylvania Sheely of Common Pleas House 17013 Re: In Re: Estate of Robert M. Mumma No. 21-86-398 Dear Judge Sheely: We hereby respectfully submit the attached Supplemental Brief and proposed Order. We are filing them today due to the late filing of the Supplemental Memorandum by opposing counsel at the conclusion of the hearing yesterday. Very truly yours, ~ 'J{ ~dY1 Gerald K. Morrison GKM/ldd Ene. cc: Marc J. Sonnenfeld. Esquire Ivo V. Otto, III, Esquire Robert M. Frey, Esquire Charles E. Shields, III, Esquire IN RE: ESTATE OF ROBERT M. MUMMA, IN THE COURT OF COMMON PLEAS : CUMBERLAND COUNTY, PENNSYLVANIA ORPHANS' COURT DIVISION DECEASED . . NO. 21-86-398 ORDER AND NOW, this day of July, 1993, upon consideration of the verified Petition and Exhibits attached thereto, and the arguments of counsel in support thereof, it is hereby ORDERED AND DECREED, 1. That the purported sale of any interest of the Estate or the Trust in Nine Ninety-Nine, Inc. ("999") and Hummelstown Quarries, Inc. ("HQI") is hereby enjoined. In furtherance of this Order, the Court also directs the following: (a) The parties and CRH, pIc ("CRH") shall take no further action with respect to the purported sale of 999, HQI and related assets; (b) Robert M. Mumma, II ("Mr. Mumma") shall be given until September 15, 1993, to match the offer of CRH to purchase the aforesaid assets; (c) The Executrices shall give full and complete cooperation in providing Mr. Mumma or his designees with all financial information 2132 which he requests financing; (d) The Court hereby appoints Carlton Hughes as Custodian to manage the business operations of the aforesaid assets, to operate them in the ordinary course, to make no sales or transfers of assets outside the ordinary course without further approval of the Court, and to provide such financial information as Mr. Mumma may require and request in order to obtain financing; in order to obtain 2. That this Order shall continue in full force and effect pending a hearing scheduled for September , 1993, at .m. in Courtroom No. Cumberland County Court House, Carlisle, Pennsylvania; 3. That no bond shall be required to be posted by Petitioner. BY THE COURT: P.J. 2 213;' ~'~~ _.,,~J~~~~~~ltl1 PROFESSIONAL CORPORATION VA~TAN PARe 30 NORTH 3rd STREET - 81n FLOOR HARRISBURG. PA n10~ TELEPHONE (7i7) 237-4800 ~,~ ~ ~'" .,.-~"'".'""""'~- ~",,,,,......,,.,.,.~,.,,,,,,.,,,,,,",,",,,~,,,,,,,,=~....,,..,),~-"'~~~"- '~,,"/'" ".- ~..".~ -~-- THIS IS CERTIFIED TO BE A TRUE AND CORRECT COPY OF THE ORIGINAl.. ( \ ATTORNEY JUL 281993:1/"