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HomeMy WebLinkAbout04-28-04 . ~\ 950244.13.014/28/2004 ESTATE OF LOY T. HEMPT Deceased IN THE COURT OF COMMON PLEAS CUMBERLAND COUNTY, PENNSYLVANIA ORPHANS' COURT DIVISION TRUST CREATED UNDER ITEM FIFTH OF THE WILL NO. BmEF ON BEHALF OF ACCOUNTANT I. Introduction. Gerald L. Hempt ("Trustee"), trustee of the Residuary Trust under article FIFTH of the Will ofLoy T. Hempt (the "Trust"), hereby files this Brief on Behalf of Accountant as requested by William A. Duncan, Esq., the Auditor reviewing the Accounting and Petition for Adjudication filed by the Trustee, the Objections to the Accounting and Petition filed by Robert Kalbach, Sr., Robert Kalbach, Jr. and Richard Kalbach (the "Kalbach Objections") and the Objections to the Accounting and Petition filed by Robert Mark, Forrest Mark and Steven Mark (the "Mark Objections") (these objecting parties ar;e referred to collectively as the "Objectants"). The Auditor held a hearing to review the proceedings to date and hear evidence regarding the same. After the Objectants finished their case at the hearing, the Trustee moved for a non-suit, which the Auditor declined to grant at that time. After the conclusion of the Trustee's case at the hearing, the Trustee moved for a directed verdict in its favor, which the Auditor declined to grant at that time. At the conclusion ofthis hearing, the Auditor requested the Trustee and Objectants to submit briefs. Accordingly, the Trustee files this brief in support of his motions at the hearing for non-suit and a directed verdict, and ifthese motions are denied, in support of his underlying Accounting and Petition. . \ Objectants made written objections to the Accounting and Petition. The Objectants did not present evidence in support of, or argue for, many of these objections at the hearing;! thus, the Trustee believes that the Objectants have waived these objections, all of which are insignificant and meritless. Ifthese objections have not been waived by Objectants, the Trustee reserves the right to address these objections in a subsequent brief. II. The Obiectants have failed to establish that Gerald L. Hempt should be removed as Trustee. The Objectants have requested that Gerald L. Hempt be removed as Trustee of the Trust. A. The Obiectants have failed to meet the hiflh burden of proof required to remove Gerald L. Hempt as Trustee. The Pennsylvania statutes give the Orphans' Courts exclusive power to remove a trustee when he: "(1) is wasting or mismanaging the estate, is or is likely to become insolvent, or has failed to perform any duty imposed by the law. . .; (3) has become incapacitated to discharge the duties of his office because of sickness or physical or mental incapacity and his incapacity is likely to continue to the injury of the estate; or (4) has removed from the Commonwealth or has ceased to have a known place of residence therein, without furnishing such security or additional security as the court shall direct; or (5) when, for any other reason, the interests of the estate are likely to be jeopardized by his continuance in office." 20 Pa. C.S. ~ 3182 (made applicable to trustees by 20 Pa. C.S. ~ 7121). 1. The objections not pursued at the hearing are: Kalbach objections number 5, 6, 7, 10, 11, 12, 13, 14, 15, 16 and 17 and the Mark objections (which are not organized by numbered paragraphs) regarding the same claims. - 2 - - ... The courts have interpreted these provisions narrowly, and have consistently held "there must appear a situation where the estate [or trust] is in real danger of substantial loss ifthe fiduciary is permitted to remain." See Glessner's Estate, 22 A.2d 701, 703, 343 Pa. 370, 374 (1941) (citations omitted). Courts are unwilling to remove trustees merely because a beneficiary is dissatisfied with a trustee's management of the trust or because of hostilities between the parties. See In re C.A. White, 484 A.2d 763, 766, 506 Pa. 218, 224 (1984) (holding "[w]ithout a demonstration that the trust corpus is in danger of dissipation, mere displeasure of a beneficiary is an insufficient reason for removing a testamentary trustee."). Removal is a drastic remedy for which more than a breach of trust is required. For example, trustees are often surcharged for investment reasons but very rarely removed for investment reasons. See U In re C.A. White, 484 A.2d at 765-66, 506 Pa. at 223-224 (noting where there were accusations of risky investing, removal of trustee was only to be used in extreme situations to protect trust property). The actions of the Trustee about which the Objectants complain - improper allocation and valuation of assets in dividing the Trust, and excessive distributions of Trust income to the life tenant - are not grounds for removal. The Trustee did not act arbitrarily. He relied on expert appraisers and attorneys in valuing the Trust assets and in dividing the Trust. Kalbach Exhibit 1 (Stipulation #21); Transcript, pages 129-141 and 288; Hempt Exhibit 5; and Kalbach Exhibit 13. In deciding to pay most of the life tenant's living expenses from the income of the Trust, he relied on the provision in Loy T. Hempt's will authorizing him in his absolute discretion to decide how much to distribute to the life tenants and further allowing, but not requiring, him to consider the life tenant's own resources. Kalbach Exhibit 1. These income - 3 - .. distributions were a continuation of the practice engaged in since the inception of the Trust. Transcript, pages 252-253. The Trustee testified that none of his actions were motivated by ill will toward the Objectants and there was no evidence to the contrary. Transcript, page 278. In these circumstances, the Objectants request to remove the Trustee utterly fails to meet the requisite legal standard. B. The allefled conflicts of interest are not sufficient wounds for removal of the Trustee. 1. The testator originally intended that the Trustee be an officer of the family business whose stock was owned by the Trust. The Objectants appear to allege that Gerald L. Hempt should be removed as a Trustee because he is an officer and director of a family business whose stock is an asset of the Trust, and because he is a remainder beneficiary ofthe Trust. The Objectants claim this puts him in a position of having conflicting interests. But who put him in that position? The testator Loy T. Hempt in his will named his nephew Max C. Hempt as his Trustee. At that time Loy and Max were both stockholders in Hempt Brothers, Inc. and C. A. Hempt Estate, Inc., and Max was a principal officer of both companies. By this appointment, Loy clearly intended to waive any conflict of interest with respect to Max's duties as Trustee and his duties as an officer and stockholder ofthe family businesses.2 2. Because Loy knew Max was an officer and stockholder of Hempt Brothers, Inc., Loy's will contained specific provisions regarding the trustee's ability to deal with Hempt Brothers, Inc. stock. These provisions provided that the trustee could: "vote the stock. . . elect or employ as directors, officers, employees or agents of said company any persons, including a trustee hereunder. .. In general, to deal with such company with the same freedom of action, I now have." Article TENTH of the Will. A more explicit waiver of conflicts of interest is hard to imagine. -4- . It is black letter law that if a person (such as Loy) creating a trust (such as the Trust) sets up a situation of conflicting interests (such as appointing as a Trustee a person who is involved in the management of a business whose stock is an asset of the Trust and has an interest in the remainder of the Trust), he thereby is deemed to waive any conflict of interest. Flagg Estate, 73 A.2d 411,414,365 Pa. 82, 88 (1950) ("[t]he testator, having the power to do so, created the conflict which became a fact or condition in the administration and devolution of his property to observed by his executors and trustees."); Steele Estate, 103 A.2d 409,413,377 Pa. 250, 258 (1954) ("... the doctrine of self-dealing does not apply where the testator knowingly places his trustee or a trust beneficiary in a position which he knew might conflict with the interest of the Trust or beneficiaries thereof, and gave her power to act in a dual capacity."). In Steele Estate, the creator ofthe trust named a person to act as trustee who was a beneficiary of the trust and who was an officer ofthe corporation part of whose stock was an asset of the trust -- exactly as with Loy's appointment of Max. The Pennsylvania Supreme Court upheld the validity of this appointment. See Steele Estate, 103 A.2d at 412-14,377 Pa. at 257- 59. In such situations of conflicting interest, all that is required of the trustee is that he acts in good faith and as a reasonable person would in such situations. See Flagg Estate, 73 A.2d at 415,365 Pa. at 89; Steele Estate, 103 A.2d at 413-14,377 Pa. at 259. In other words, the law measures his actual conduct, not his status as a wearer of several hats. When the Court appointed Max's son Gerald (who at the time of his appointment was, like his father Max, an officer and stockholder of the family businesses and a remainder - 5 - beneficiary of the Trust)3 as a co-trustee, this Court was simply extending Loy's waiver of any conflict of interest to the new co-trustee. 2. The Trustee's income distributions and Trust division are authorized and proper. Objectants suggestion that the Trustee feathered his own nest at their expense is totally unsupported by the record. First, with respect to distributions of Trust income to Jean Doris Hempt, the life tenant, there is no evidence in the record that doing so favored the Trustee personally. There was evidence that it disfavored Robert Kalbach, Sr., but because of inheritance taxes and the difference between the interests of the life tenant's heirs in her estate and their interests in the Trust, disfavoring Kalbach is not the same as favoring the Trustee personally.4 And in any event, the Trustee's testimony was that he and his predecessor Trustee had always regarded the Trust as the life tenant's primary support was unrebutted by any evidence that the Trustee took this position to favor himself. Transcript, pages 252-254, Kalbach Exhibit 6. Second, with respect to the division ofthe Trust, the evidence showed that the reasons the Trustee divided the Trust as he did were: (1) to prevent a competitor of Hempt Brothers, Inc. from owning stock in Hempt Brothers, Inc.; (2) to the extent possible, to allocate 3. Kalbach Exhibit 1 (Stipulation #18); and Transcript, pages 48 and 51. 4. Indeed, using Trust funds to provide for the life tenant may financially disfavor the Trustee. This is because on the life tenant's death the Trustee would receive 10% (he is one of four Hempts who together receive 40%) of the Trust assets but only about 7% (as an heir his interest is 14%, but there is a federal estate tax of up to 50% due) of the guardianship assets. In any event, the Trustee did not concern himself with such self- interested calculations in exercising the discretion granted to him by the Will. - 6 - stock in family businesses to those people who were employed by those businesses; and (3) to avoid having a disgruntled former employee of Hempt Brothers, Inc. as a stockholder ofHempt Brothers, Inc. Transcript, pages 45, 110,259,281-282 and 288. These are all sound reasons and do not show any attempt by the Trustee to feather his own nest. And it is in the Trust's interest that a principal asset of the Trust be protected. In making the actual division, the Trustee relied on advice of counsel, professional real estate appraisers, and a professional corporate valuation expert. Kalbach Exhibit 1 (Stipulation #21); Transcript, pages 129-141 and 288; Hempt Exhibit 5; and Kalbach Exhibit 13. While the Objectants have their own views as to the proper valuation of the Trust's assets for purposes of division (which as described below in section III-C are without merit), such disagreement is not a basis to remove the Trustee. Accordingly, the valuations used by the Trustee for purposes of dividing the Trust were fully supported by the evidence, and the alleged conflict of interest resulted in no prejudice to the Objectants. III. The Trustee's division of the Trust should be confirmed. The Objectants have requested that the division of the Trust into three trusts be reversed. 5 5. The Auditor has requested that counsel address whether the Court has the power to order the division of the Trust be reversed without removing the Trustee (and vice versa, whether the Court has the power to remove the Trustee without reversing the division of the Trust). There is no reported case (or unreported case of which Petitioner is aware) where a court has ordered the division ofa trust by a trustee pursuant to 20 Pa. C.S. ~ 7121(a) be reversed. However, if the Auditor orders either of these actions, it is not necessary for the effectiveness of one remedy to order the other action. For example, the division of the Trust can be undone (by ordering the Trustee to combine the three trusts - 7 - , , A. The Trustee's division of the Trust was a reasonable exercise of the discretion granted to him bv 20 Pa. C.S. Q7191. 20 Pa. C.S. ~ 7191 allows a trustee discretion to divide a trust. "A trustee may, without court approval, divide a trust into separate trusts, allocating to each separate trust either a fractional share of each asset and each liability held by the original trust or assets having an appropriate aggregate fair market value and fairly representing the appreciation or depreciation in the assets ofthe original trust as a whole. If the division reflects disclaimers or different tax elections, the division shall relate back to the date to which the disclaimer or tax election relates." 20 Pa.C.S. ~ 7191(a). Generally where a trustee acts over a trust pursuant to a discretionary power, there is no breach of duty unless the trustee's actions are an abuse of discretion or not in good faith. See Forrish V. Kennedy, 105 A.2d 67,69-70,377 Pa. 370, 375-77 (1955). "Where discretion is conferred upon the trustee with respect to the exercise of a power, its exercise is not subject to control by the court, except to prevent an abuse by the trustee of his discretion." Restatement (Second) of Trusts ~ 187 (1959); see also Austin Wakeman Scott and William Franklin Fratcher, The Law of Trusts ~ 187 (4th ed. 1989) "[T]he court will not interfere unless the trustee in exercising or failing to exercise the power acts dishonestly, or with an improper even though not a dishonest motive, or fails to use his judgment, or acts beyond the bounds of a reasonable judgment. The mere fact that if the discretion had been conferred upon the court, the court would have exercised the power pursuant to 20 Pa. C.S. ~ 7192) without the removal of the Trustee. Similarly, the Trustee may be removed without reversing the division of the Trust. - 8 - i ~ differently, is not a sufficient reason for interfering with the exercise of the power by the trustee." Restatement (Second) of Trusts ~ 187 cmt. e; see also Scott, The Law of Trusts ~ 187. See also 20 Pa. C.S. ~ 8106(a), adopting the abuse of discretion standard in the context of the Principal and Income Act. ("A court shall not change a fiduciary's decision to exercise or not to exercise a discretionary power conferred by this chapter unless it determines that the decision was an abuse of the fiduciary's discretion.") The law does not require the Trustee consult with current or potential beneficiaries before exercising the trustee's discretion. However, in this case, the Trustee in effect requested this Court's approval for the exercise of his discretion by filing an accounting and petition and giving notice to the Kalbachs and Marks so that both this Court and potential parties in interest were aware ofthe Trustee's actions. For the reasons stated above - reliance on experts, sound valuations, and lack of contrary evidence - Objectants have failed to establish that the Trustee's action in dividing the Trust was not within a range of reasonable choices or in bad faith. Accordingly, the Trustee's division of the Trust was not a breach of trust and should be confirmed. B. The current division of the Trust facilitates the continued and future efficient administration of the Trust and the familv businesses whose stock is owned bv the Trust. The Objectants allege that there is no benefit from the division ofthe Trust into three trusts, and therefore the division should be reversed. The testator directed that upon the death of the life tenant Jean Doris Hempt, the Trust be divided into three shares and paid to the Hempt, Mark and Kalbach families. The Trustee anticipated that at the time of the eventual distribution of the Trust there likely would be - 9- . ... disputes among the beneficiaries regarding the division ofthe assets (a fact proven by the contested nature of the current proceedings). If there were any such disputes at Jean's death, the distribution of the Trust assets would be delayed because of the need for court proceedings. During this delay period - which could be several years6 - it would be uncertain: who could vote the stock ofthe family businesses (the Trustee or the remaindermen?); whether Hempt Brothers, Inc. could bid on Commonwealth highway construction contracts (since Mr. Kalbach might be an owner of Hempt Brothers, Inc. stock, two bidders would have a common owner); and, whether any Trust assets could be sold (who would be the owner with the power of sale?). Resolving these issues now avoids having these problems later, since now the Trustee can vote the stock of family businesses, Hempt Brothers, Inc., can bid on highway projects, and the Trustee can sell assets, because one person is trustee of all three trusts. C. The valuations of the Trust assets were accurate and Draper. First, there is no disagreement about the valuation of the marketable securities. Second, Objectants put on no evidence whatsoever questioning the Trustee's valuation of C.A. Hempt Estate, Inc. The Trustee relied on a real estate appraiser to value the principal assets of that company, and, chose the middle of three methods of valuing the stock. Kalbach Exhibit 13. Third, the Trustee valued the Trust's stock of Valley Land Company by relying on a professional real estate appraiser and then discounting his valuation by 45% to reflect taxes and expenses of sale. Transcript, pages 129-141. Objectants did not challenge the real estate 6. The present proceedings commenced with the filing of an account on July 23, 2002. - 10- .. valuation and, after much testimony, Objectants expert agreed with the 45% discount. Transcript pages 227-230. Thus, Objectants in the end did not dispute the Trustee's valuation of Valley Land Company. Fourth, regarding the valuation of Hempt Brothers, Inc. stock held by the Trust there was disagreement, but the Objectants' expert was inherently inconsistent on the key point. Both Trustee's expert and the Objectants' expert used the same method to value Hempt Brothers, Inc. stock. Transcript, pages 192, 196, 197 and 313. But Objectants' expert made a critical error: he testified that the buy-sell agreement was a factor to be considered and that he considered it in his valuation, but then in his actual financial calculations he totally ignored it. Transcript pages 182-184 and 189-190; and Kalbach Exhibit 17, pages 7-22. This made an enormous difference. By his calculations, the stock was worth $2,239/share although the buy-sell book value was $643.49/share. Kalbach Exhibit 17, page 1; and Transcript, page 330. Objectants' expert's valuation is totally useless because it in fact gives no weight to the buy-sell agreement.7 By contrast, Trustee's expert testified at length about how the buy- sell is critically relevant. The buy-sell agreement is determinative of the value of Hempt Brothers, Inc. The buy-sell agreement requires shareholders to offer shares of Hempt Brothers, Inc. at book value to the company before selling the shares to third parties and requires third party buyers to do the 7. In addition, correcting Objectants' expert for errors based on facts of which he was unaware of (largely real estate properties that had been sold and profits derived from realty sales rather that equipment sales), produces a valuation of$I,485/share. Transcript, page 347; and Hempt Exhibit 7, page 9. - 11 - . " same. Hempt Exhibit 6. The buy-sell agreement permits shareholders to give shares to their descendants, who are bound by the same restrictions. Hempt Exhibit 6. A willing buyer would not pay more than book value for the shares as the buyer's only recourse to later sell these shares (which do not pay a dividend) would be to offer them to the company for book value, which offer the Company would have every reason to accept. Transcript, page 329. Courts routinely value family businesses after hearing expert testimony. Most commonly this occurs in the estate tax area and in equitable distribution upon divorce. Often those cases result in the court arriving at a number between the numbers of the two experts. While the court could do this in this case, in actual fact this case is considerably easier to decide because, as the Trustee's expert testified, the book value figure required by the buy-sell agreement ends the investigation. The Auditor could easily amend the division of the Trust nunc pro tunc to reflect book value on 2/28/02 ($790/share), which is closer in time than the Trustee's 8/31/01 valuation to the 4/28/02 division. See Appendix A, which shows the division of the Trust using the $643/share Hempt Brothers, Inc. value and the division of the Trust using the $790/share Hempt Brothers, Inc. value. The change in value produces little change in the distribution ofthe family businesses. D. It is irrelevant that the division of the trust does not divide the income 40/40/20. At the hearing the Objectants for the first time suggested that even if each divided trust received a proportionate share of the value of the principal of the Trust and a proportionate share of the tax cost basis ofthe Trust's assets, each divided trust did not receive a proportionate - 12 - .. , ' . share of the income.s In other words, although the principal was divided 40/40120, the income was not. There are two problems with this Objection. First, the statute, 20 Pa. C.S. ~ 7191(a), does not require that the income be proportionately divided. Indeed, if it did, all assets would have to be divided pro rata, and the statute specifically does not require that. Second, if, after the division, the Trustee administers any of the three trusts in an improper way, Objectants can then object; but it is premature to object now. For example, if the Trustee in the future improperly decides to pay all Jean's expenses from one of the three trusts, and to accumulate the income in the other two trusts, the beneficiaries of that one trust could then complain. The Objectants may be implying that there is no fair way to handle the payment of Jean's expenses from the three trusts. If so, their concern is ill-founded. For example, since Loy T. Hempt's Will authorizes the Trustee to pay both income and principal to Jean, the Trustee could make payments to Jean from the three trusts in a 40/40/20 ratio even though the income earned by the three trusts is not in a 40/40/20 ratio. If the Objectants are suggesting that it is inherently unfair to divide the income other than 40/40/20, there is no basis for such a contention. The value ofthe assets reflects in part their present and future ability to produce income, and that value was divided 40/40/20. 8. The Objectants never filed a written objection on this point. Hence the objection is deemed waived. However, Petitioner will nonetheless address this issue. - 13 - , t . ... Moreover, both the Mark and Kalbach Objectors trusts received assets that produce more than their proportionate share of income. 9 IV. The Court's appointment of Gerald L. Hempt as co-trustee of the Trust was valid. In 1996, Max C. Hempt was the sole guardian of Jean's estate and sole Trustee of Loy's Trust. Kalbach Exhibit 1 (Stipulation #12); and Kalbach Exhibit 1 (Stipulation #13). He filed a petition with the Court requesting the Court to appoint his son, Gerald L. Hempt, as co- guardian and co-trustee.lO Max C. Hempt did not give notice to Objectants of the filing of this petition. Objectants assert that when filling a vacancy in the office of trustee, notice must be given to all parties in interest. The statute, 20 Pa. C.S. ~ 7101, cited by Objectants, provides in full: "The court, after such notice to parties in interest as it shall direct, may appoint a trustee to fill a vacancy in the office of trustee, subject to the provisions, if any, of the trust instrument." 9. On the Trust's 2001 income tax return (covering the period March, 2001 to February 28, 2002), the Trust's total income reported was $96,999.15. Neither Valley Land Company nor Hempt Brothers, Inc. paid a dividend. C.A. Hempt Estate, Inc. paid a dividend of $5.00/share. Under the Trustee's division, the Hempt family receives 1,235 shares of C.A. Hempt Estate, Inc., Hempt Brothers, Inc. stock, Valley Land Company stock and a nominal amount of the Trust's liquid assets. Thus, assuming similar income returns, the Hempt family divided trust would receive roughly $6,175 in income (1,235 shares of C.A. Hempt Estate, Inc. x $5.00/share), which is only 6.37% ofthe Trust's total income- clearly less than its 40% share of the Trust's value. The Mark and Kalbach shares would receive more than 40% and 20%, respectively, of the total income. 10. Kalbach Exhibit 3. That petition was captioned "In the Matter of Jean Doris Hempt, an Incompetent." The caption did not refer to Loy's Trust. Consequently, on this Court's docket the petition and ultimate Court decree appear under the name of Jean Doris Hempt, and nothing appears in the docket under the name ofLoy's Trust. Objectants cite no legal authority in support of their suggestion that this incomplete caption makes invalid this Court's appointment of Trustee as co-trustee; and to Trustee's knowledge there is no such law. - 14- . " t .. Thus, pursuant to the statute, it is for the court to direct whether notice must be given and to whom. The legislative history of the statute supports the conclusion that notice does not have to be given to all parties in interest. One ofthe previous versions of the statute specifically required that notice be given "to all persons interested, so far as such notice can reasonably be given.. .."ll However, this requirement was removed from the statute in 1949. The fact that this mandatory requirement of notice to all parties in interest has been removed from the statute indicates that not giving notice does not void the proceeding. 12 In his 1996 Petition, Max C. Hempt stated that no one's interests would be adversely affected by the filing of the petition. Kalbach Exhibit 3, page 5. He further stated that notice had not been given to Jean because such notice would be futile, due to her disability. Kalbach Exhibit 3, page 5. Thus, Max C. Hempt did not give notice to anyone, as was made clear in the 1996 Petition. The Court implicitly agreed with this decision when it granted the 1996 Petition without instructing Max C. Hempt to give notice of its filing. Furthermore, both Robert Kalbach, Sr. and Robert Mark testified that they were aware at one time that Max C. Hempt was the sole Trustee of the Trust yet made no inquiries as to who was the Trustee of the Trust after Max's death (of which both admitted they were aware). 11. See Act of 1917 Pub. L. No. 193, ~ 56(b) (1917). 12. Objectants rely on the Official Comment to the statute to suggest that notice must be given to all parties in interest. The legislature has recognized that the comments to a statute may be indicative of the legislature's intent and useful where the statute is unclear. However, "[ w ] hen the words of a statute are clear and free from all ambiguity, the letter of it is not to be disregarded under the pretext of pursuing its spirit." 1 Pa. C.S. ~ 1921. It would be improper to resort to the comments to fabricate a new meaning for a statute that is clear on its face. - 15 - ....~, . .. Transcript, pages 31-34 and 148. Assuming arguendo that the appointment of Gerald L. Hempt as Trustee was improper - although it was not - the doctrine of laches prevents them from now challenging the appointment as they have known of Gerald's appointment for years and have not inquired or challenged the appointment previously. Objectants further assert that the Court improperly appointed Gerald L. Hempt as a Trustee of the Trust and therefore all his actions with respect to the Trust are void ab initio. Assuming arguendo that the Court improperly appointed Gerald L. Hempt as a Trustee (which appointment was proper), courts have held that actions of a fiduciary erroneously or improperly appointed are binding where the fiduciary was acting under the belief that he was properly appointed.i3 Although Pennsylvania courts have reversed court orders where required notice was not given, i4 those cases are quite distinguishable from this one. In those cases, notice was required and the effect of voiding the trustee's action was practicable. is By contrast, if all actions of Trustee over the past 8 years were considered 13. See, e.g., Cooke v. Marshall, 46 A, 447, 196 Pa. 200, 202 (1900) (finding administration of company affairs by trustees improperly elected "must be regarded as legal in all respects"); Baird v. Bank ofWashimrton, 11 Sergo & Rawle 411,413 (Pa. 1824) (ruling that officer who was elected at a meeting of the board of directors which did not comply with the company's bylaws was an officer defacto and his acts were binding upon the company). 14. See. e.g., Estate of Alexander, 758 A,2d 182, 188 (pa. Super. Ct. 2000) (overturning adjudication of estate and ordering refund of distributions to charitable beneficiaries where executor failed to give notice to all beneficiaries under will); In re Sylvester, 598 A,2d 76,84,409 Pa. Super. 439, 455 (1991) (reversing order approving permanent guardianship). 15. Alexander, 758 A.2d at 192 (ordering refund from two hospitals who were contingent beneficiaries where executor misrepresented to court that he made reasonable efforts to locate primary beneficiaries); Sylvester, 598 A,2d at 84, 409 Pa. Super. at 455 (reversing - 16- ~. . .. void, the task at hand would be unmanageable, and in some respects impossible. For example, all investment decisions would need to be undone, all tax returns for the Trust would have to be amended and all distributions, including the payment of expenses, would have to be refunded and reevaluated - an unfeasible task. Each of those cases involved a statute that required notice be given.16 The relevant statute with respect to the 1996 Petition is 20 Pa. C.S. ~ 7101, which requires notice be given "to parties in interest as [the Court] shall direct...." This statute does not mandate notice to all parties in interest, unless directed by the court, and the Court did not so direct. V. Conclusion. For the reasons set forth above, the Accounting should be confirmed as filed, and all of the Kalbach Objections and Mark Objections should be dismissed. order approving permanent guardianship where incapacitated person did not receive notice of guardianship proceedings). 16. See 20 Pa. C.S. ~ 3503 ("No account shall be confirmed unless the accountant has given written notice of the filing of the account.. ..") (cited in Alexander, 758 A.2d at 187); see also 20 Pa. C.S. ~ 5511 ("Written notice ofthe petition shall be given... to the alleged incapacitated person.") (cited in Svlvester, 598 A.2d at 83, 409 Pa. Super. at 454) (emphasis added). - 17 - . ~t .. A Re\lliuL Ivo V. Otto, III Attorney ill #27763 Martson, Deardorff, Williams & Otto 11 East High Street Carlisle, PA 17013 Donald B. Kaufinan Attorney ill # 49674 McNees Wallace & Nurick LLC 100 Pine Street P.O. Box 1166 Harrisburg, PA 17108 Attorneys for the Trustee, Gerald L. Hempt Dated ~d-J' , 2004 - 18 -