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HomeMy WebLinkAbout08-05-93 . IN THE ESTATE OF ROBERT M. MUMMA, Deceased : IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA : ORPHANS' COURT DIVISION . . NO. 21-86-398 IN RE: REOUEST FOR PRELIMINARY INJUNCTION BEFORE SHEELY. P.J. ORDER OF COURT ~. AND NOW, this '-\ ttl-day of J~~(<J(993' we hereby DENY the petition for a preliminary injunction and REFUSE to enter a rule to show cause on the above-captioned matter. By the Court, . ~ t---:-- ~/ Harold E. Sheely, P.J. Charles E. Shields, III, Esquire ~ ~. ~~~_~~~ For Robert M. Mumma, II Marc J. Sonnenfeld, Esquire mo.Jl.eJ (!.'fUl ._~ -5 Lf3 Brady L. Green, Esquire ' 0 For Barbara McK Mumma and Lisa M. Morgan Ivo V. Otto, III, Esquire , '~"Nt 1 1/ &S~q3 For Barbara McK Mumma and Lisa M. Morgan r'\..D, VJ.'" G if .!~ jL...eJIIY\. Richard W. Stevenson, ESquirefYlcJlJ)~ -1f--S.q3 For Barbara M. McClure John H. Young, Esquire (f)0ll..J ~ - 'i! .-6' -93 For Linda M. Roth Gerald K. Morrison, Esquire mfuW ~ -f-S-qa For Robert M. Mumma, II :pbf ~u.,-'/.I (;) ~bu-t 6-. Pre) ~ -4. 8 Robert M. Frey, Esquire, Guardian ad litem 2328 T . .'~ , (',.",\'.':,' C:ll",J C:;~~':~ 0:::. ~:~: 0<.:) c.,;)LiJ ~a;; 'A ct:J .d: u;' ~ "" P' , ''':'~< ....'"(,.;." o::i: \>-I:::> -,U U -- ~ - -- IN THE ESTATE OF ROBERT M. MUMMA, Deceased : IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA : ORPHANS' COURT DIVISION . . NO. 21-86-398 IN RE: REOUEST FOR PRELIMINARY INJUNCTION BEFORE SHEELY. P.J. OPINION AND ORDER OF COURT Here we are asked to decide; I} whether there is a threat of immediate and irreparable harm that damages cannot remedy; 2} whether the injury as a result of denying the injunction must be greater than the injury as a result of granting the equitable relief; and 3} whether the grant of the injunction will properly restore the parties to the situation as it existed prior to the alleged wrongful conduct. Hearings were held for a preliminary injunction on July 26 and July 27, 1993, upon which the following findings of fact are made. FINDINGS OF FACT The Disclaimer 1. Robert M. Mumma (hereinafter the Decedent) died on April 12, 1986. 2. His wife, Barbara McK. Mumma (hereinafter Barbara McK.), and his daughter, Lisa M. Morgan (hereinafter Lisa), are the executrices of the Estate of the Decedent and trustees of the Marital Trust under the will. 3. The Decedent's son, Robert M. Mumma, Jr. (hereinafter Robert), filed a disclaimer under his father's will 2329 NO. 21-86-398 on January 12, 1987. 4. The effect of the disclaimer is that Robert is treated as if he pre-deceased his father. Thus Robert's children would receive his interest under the Decedent's will. 5. Robert M. Frey, Esquire (hereinafter Guardian), was appointed as guardian ad litem to represent the interest of Robert's minor children on December 29, 1988. 6. On June 20, 1989, Robert filed a petition to revoke his disclaimer. 7. This court allowed Robert to revoke his disclaimer on March 21, 1991. 8. The effect of the revocation is that Robert will no longer be treated as if he pre-deceased his father. Thus, Robert rather than his children, will take under the Decedent's will. 9. Guardian plans to appeal the March 21, 1991 decision to the Pennsylvania Superior Court on behalf of the minor children. 10. Guardian's standing is dependent on the Superior Court's ruling on this court's March 21, 1991 decision. The NeQotiations 12. Lisa and Barbara McK. as officers of the corporations entered into negotiations to sell various assets and properties comprising the pennsy Supply businesses to CRH Industries in the latter part of 1988. 13. CRH offered to buy pennsy Supply, but the deal 2 2330 NO. 21-86-398 fell through because of threats of litigation made by Robert costing pennsy Supply approximately $20 million dollars. 14. In the summer of 1989, Robert made an offer of his own to buy the pennsy Supply businesses. 15. On December 9, 1991, Robert made an offer to enter negotiations for the purchase of the pennsy Supply businesses for $35 million dollars. 16. The terms of the December 9 offer include: a) Robert would own all stock and assets of Nine Ninety-Nine, Inc., pennsy Supply, Inc., Hummelstown Quarries, Inc., Newport Quarry, Bender's Quarry, Silver Spring Quarry, Lebanon Rock, Inc., and Mumma Realty. b) Robert would own these companies and their assets free and clear of all existing liens, encumbrances, and liabilities, including long term contracts, employment contracts, executive covenants, option rights and any rights of first refusal to which they may be subject. c) The purchase agreements would contain representations and warranties with non- complete agreements of Lisa and Barbara McK. d) Such purchase price of $35 million dollars is subject to adjustment for any "material adverse" change of such assets since the date of the Decedent's death. e) Robert would own a right of first refusal in Union Quarries with the agreement that his mother's power to withdrawal from the marital trust would not extend to Union Quarries. f) Robert would be paid one-fourth of the estate and trust assets either in cash or in property in such manner as is satisfactory to Robert, offsetting the purchase price. 3 2331 NO. 21-86-398 g) The Estate and Marital Trust will indemnify Robert against subsequently developing tax liens or liabilities and any environmental clean-up responsibilities relating to activities prior to the closing. h) All parties will discontinue all legal actions presently pending. 17. On December 30, 1991, Lisa and Barbara McK. as corporate officers rejected Robert's offer in a formal reply, the basis of which was; the amount offered, the assets involved, the status of the litigation between parties and other pending claims. 18. On March 24, 1992, this court held in a declaratory judgment action in equity that Robert was never given a right of first refusal to purchase the pennsy Supply businesses. Barbara McK. Mumma and Lisa Morqan, individuallv and as Executrices of the Estate of Robert M. Mumma, deceased and Linda M. Roth. plaintiffs v. Robert M. Mumma. II and Barbara McClure. Defendants, No. 66 Equity 1988, Opinion and Order filed March 24, 1992. 19. During the Spring of 1992, Lisa and Barbara McK. went forward and tried to market the pennsy Supply businesses to several other people. 20. In the summer of 1992, negotiations resumed with CRH. 21. As of January 1, 1993, Lisa and Barbara McK. were strictly dealing with CRH because they were far along enough that they did not consider selling to other potential buyers. 4 2332 NO. 21-86-398 22. January 5, 1993, Lisa and Barbara McK. entered into a confidentiality agreement. The Terms of the Sale 23. As of May 8, 1993, Lisa and Barbara McK. entered into a letter of intent. 24. The terms of the sale include: a) In exchange for the $32 million dollars from CRH, these five separate business interests were sold; i) stock in Nine Ninety-Nine, Inc., the holding company for the pennsy Supply businesses, ii) stock in Hummelstown Quarry, the corporation that actually holds the real estate which pennsy Supply leases, iii) one hundred per cent ownership of Benders Quarry in Mt. Holly Springs, iv) the Paxton Street yards, the main office building in Harrisburg, and v) for an additional $2 million dollars, CRH would be given 120 days from the date of closing to exercise an option to buy a 50% in Lebanon Rock, Inc., raising the total purchase price to $34 million dollars. b) The money from the sale would be allocated over the five separate business interests and distributed according to each shareholder's percentage of ownership with an escrow account for dissenting shareholders. c) CRH insisted that a corporation be formed so that they could buy the five business interests as a whole from a single seller in order to maximize tax benefits and to avoid law suits with Robert over the sale of each interest. Kodie Corporation was formed to comply with this demand. 5 2333 NO. 21-86-398 d) By purchasing the separate interests through Kodie Corporation, CRH assumes all of the liabilities of each individual interest. e) Non-business assets were retained by pennsy Supply in proportion to the stock owners' percentage of ownership for future development. f) CRH agreed to honor existing long term contracts including employment contracts protecting long term employees and a cap on CRH's right of indemnification. g) CRH would own no interest in union Quarry and could only obtain a 50% interest in Lebanon Rock by paying an additional $2 million dollars. h) The purchase price was fixed at $32 million dollars, no adjustments, no financing, no pledging of Pennsy Supply's assets, the full amount in cash. 25. Lisa put $4 million dollars in escrowfor CRH, $2 million dollars for breaches of warranty or covenants for the businesses and $2 million dollars for family litigation. 26. As owners of Kodie Corporation, Lisa and Barbara McK. received no separate consideration , employment contract or consulting contract, or separate benefits. 27. The closing of the sale was set up into two stages: Stage I was scheduled for July 8, 1993, and completion of the sale closing; Stage II was scheduled at least ten days after the notice of Stage I was mailed. The Notice 28. Stage I was scheduled for July 8, 1993, but no assets would be transferred until there was confirmation that CRH 6 2334 NO. 21-86-398 released the $32 million dollars. 29. On July 9, 1993, notices were mailed to the non- participating stockholders, who, at that time, were Robert and Barbara McClure. 30. By way of power of attorney, Barbara McClure signed on as a participating stockholder leaving Robert as the only non-participating shareholder. 31. Notice was sent to all shareholders pursuant to Business Corporation Law (BCL), 15 Pa. C.S.A. SI766(b), and since the minor children were not shareholders, no notice was sent to Guardian. 32. Stage II was scheduled for July 20, 1993, in order to comply with BCL regulation, 15 Pa. C.S.A. SI766(c). The Preliminary In;unction 33. Robert actually received his notice of Stage I of the sale closing on July 12, 1993. 34. Guardian learned of the Stage I closing on Friday, July 16, 1993, from Robert who encouraged Guardian to file a petition for an ex parte preliminary injunction. 35. There was an understanding between Robert and Guardian that Guardian would file for the preliminary injunction which Robert would later join and Robert would once again disclaim any interest under his father's will. 36. Guardian filed a petition on Monday, July 19, 1993, for a preliminary injunction seeking to enjoin the sale of 7 2335 NO. 21-86-398 Nine Ninety-Nine, Inc., and Hummelstown Quarry and a rule to show cause why the sale of those assets should not be approved by this court. 37. Robert joined in the petition July 21, 1993, but to date has not disclaimed his interest in his father's will. 38. A copy of the petition was not served on Lisa, Linda, Barbara McK., or Barbara McClure. 39. On July 21, 1993, this court denied the ex parte injunction but set a date for a hearing on July 26, 1993. 40. Stage II of the sale closing was completed July 21, 1993, and they did not learn of the petition for the injunction until after the closing. 41. A shareholders' meeting was held July 22, 1993, where Stage I and II of the sale closing was ratified by a majority of the shareholders. 42. The proceeds from the sale were allocated over each of the five business interests and distributed according to each shareholder's percentage in ownership of those interests with an escrow account for dissenting shareholders. DISCUSSION The Standard of Review Injunctive relief, in particular a preliminary injunction is considered an extraordinary remedy and may only be 8 2336 NO. 21-86-398 granted if the moving party has established a clear right to the relief sought. Soia v. Factorvville Sportsmen's Club, 361 Pa. Super. 473, 477, 522 A.2d 1129, 1131 (1987). Furthermore, a preliminary injunction which goes beyond restraint and commands action is reserved for unusual cases. rd. The threshold issue the court must address is whether the moving party will succeed on the merits of its claim. See Leonard. et al. v. Thornburah. et al., 75 Pa. Commw. 553, 558, 463 A.2d 77, 80 (1983). A preliminary injunction will only be granted where the moving party can demonstrate that three pre-requisites exist; 1) there is a threat of immediate and irreparable harm that damages cannot remedy; 2) the injury as a result of denying the injunction must be greater than the injury as a result of granting the equitable relief; and 3) the grant of the injunction must properly restore the parties to the situation as it existed prior to the alleged wrongful conduct. Schaeffer v. Frev, 403 Pa. Super. 560, 565, 589 A.2d 752, 755 (1991). Finally, a review of this decision is limited to whether there are any apparently reasonable grounds for the action taken by this court. rd. at 564, 589 A.2d at 754. II. Establishina a Clear Riaht to Relief bv Demonstratina the Likelihood of Success on the Merits. The crux of this issue revolves around the legality of the sale of the Kodie Corporation to CRH. On one hand, Robert maintains that the sale violated the notice provisions of the Business Corporate Law (BCC), 15 Pa. C.S.A. S1766(c) which 9 2337 NO. 21-86-398 provides: (c) Effectiveness of action by partial written consent--An action taken pursuant to subsection (b) (relating to action permitted to be taken without a meeting upon partial written consent) shall not become effective until after at least ten days written notice of the action has been given to each shareholder entitled to vote thereon who has not consented thereto. This subsection may not be relaxed by any provision of these articles. Under the BCL, a person is deemed to have been given notice when the notice is deposited in the mail. 15 Pa. C.S.A. SI702(a) provides: (a) General rule--Whenever written notice is required to be given to any person under these provisions of this subpart or by the articles or by laws of any business corporation, it may be given to the person either personally or by sending a copy thereof by first class or express mail. . . If the notice is sent bv mail, telegraph or courier service, it shall be deemed to have been qiven to the person entitled thereto when deposited in the United States mail or with a telegraph office or courier service for delivery to that person or, in the case of telex or TWX, when dispatched (emphasis added). Robert maintains that the Stage I closing was ineffective because he received notice through the mail on July 12, 1993, so it could not be in effect until July 23, 1993. However, the notice was deposited in the mail July 9, 1993, so Robert is deemed to have been given notice on the 9th. Thus, the Stage I closing was in effect on July 21, 1993, when the Stage II closing was finalized. The shareholders had a meeting July 22, 1993, and ratified the 10 2338 NO. 21-86-398 sale. We find therefore that notice was timely filed within the provisions of 15 Pa. C.S.A. S1766(c). Robert also disputed the form of the notice given. He maintains that there was no expression of when the sale would be complete. However, the notice said that the sale would be completed as permitted under the provisions of 15 Pa. C.S.A. S1766(c). We also find that the notice sent adequately informed Robert of when the sale was to be completed. Since the notice was adequate and was timely filed, we do not believe it is likely that Robert will succeed on the merits of the case. On the other hand, Guardian maintains that the sale should be enjoined because the executrices and trustees needed court approval. Obviously they have the power to sell estate assets to CRH under 20 Pa. C.S.A. S3354. Other than the bald assertion of self dealing by Robert, the evidence presented is uncontradicted that 1) at the insistence of CRH, Kodie Corporation was used as a vehicle for the sale, and 2) neither the executrices or trustees received any separate or additional compensation or benefit from the sale. It is our finding that Guardian, whose standing is tenuous, is not likely to succeed on the merits of a claim that the sale is void due to self-dealing. III. The Injury in Denvinq the Iniunction Versus the Iniury in Grantinq the Iniunction. Even if we assume for the sake of argument, that there is an immediate and irreparable harm which damages cannot remedy, 11 2339 ; NO. 21-86-398 we are not persuaded from the evidence that the injury from denying the injunction outweighs the injury from granting the injunction. If we deny the injunction, Robert will not have an opportunity to buy these particular businesses. However, we have previously decided that Robert has no right of first refusal. There simply is no duty to ever sell these businesses to Robert. So he may never have the opportunity to buy these particular businesses, even if we grant the injunction. Alternatively, we have already made the finding that the sale is complete and closed. So to grant the injunction at this point would mean that the $32 million dollar sale and the proceeds therefrom which have been distributed among the shareholders, would be rescinded. This means that they would be liable for their percentage of the earnings. CRH who has been running Pennsy Supply would have to stop and hand it back. pennsy Supply would not only lose an attractive offer but other potential investors would be discouraged form buying pennsy Supply causing the purchase price to fall even lower. Also, we are not satisfied that Robert is presently financially able to buy pennsy Supply. Granting the injunction would force pennsy Supply to give up its bird in the hand for a handful of uncertainties. Therefore, we are not satisfied that the injury from denying the injunction outweighs the injury from granting the injunction. IV. preservinq ~he S~a~us Quo 12 2340 NO. 21-86-398 Our next determination is whether granting the injunction will restore the parties to the situation as it existed prior to the alleged wrongful conduct. Prior to the closing of the sale, Robert had no right of first refusal and Lisa and Barbara McK. decided not to sell to Robert. Robert would be in the same position if we were to grant this injunction. However, pennsy Supply would not be in the same position. Prior to the closing, they had a buyer willing to pay $32 million dollars in cash along with favorable terms under the sale. If the injunction were granted, Pennsy Supply would suffer a tremendous loss. Therefore, we find that granting the injunction will not restore the parties to the situation as it existed prior to the closing of the sale. V. Conclusion In short, neither party seeking the preliminary injunction have established a clear right to the relief they seek. Additionally, it is our opinion based on the evidence presented that granting the injunction would result in doing more harm than if we refuse to grant the injunction. Finally, it our belief that granting the injunction will not restore the parties to the situation as it existed prior to the closing of the sale. Therefore, we enter the following order.' 'Since we are denying a preliminary injunction, we are not required to enter a,decree nisi. See, Petro v. Kennedv Township Board of Commissioners, 49 Pa. Commw. 305, 311, 411 A.2d 849, 852 (1980). 13 2341 NO. 21-86-398 ORDER OF COUR'! AND NOW, this day of , 1993, we hereby DENY the petition for a preliminary injunction and REFUSE to enter a rule to show cause on the above-captioned matter. By the Court, /s/ Harold E. Sheely Harold E. Sheely, P.J. Charles E. Shields, III, Esquire For Robert M. Mumma, II Marc J. Sonnenfeld, Esquire Brady L. Green, Esquire For Barbara McK Mumma and Lisa M. Morgan Ivo V. Otto, III, Esquire For Barbara McK Mumma and Lisa M. Morgan Richard W. Stevenson, Esquire For Barbara M. McClure John H. Young, Esquire For Linda M. Roth Gerald K. Morrison, Esquire For Robert M. Mumma, II Robert M. Frey, Esquire, Guardian ad litem :pbf 14 2342