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HomeMy WebLinkAbout05-03-04 (2) . . INRE: ESTATE OF LOY T. HEMPT IN THE COURT OF COMMON PLEAS CUMBERLAND COUNTY, P A ORPHAN'S COURT DIVISION . NO. 21-77-231 . KALBACH OBJECTORS' PROPOSED CONCLUSIONS OF LAW . 1. The Court and this Master/Auditor have jurisdiction to adjudicate the Objections of the Kalbach Objectors to the First and Final Account of the Estate ofLoy T. Hempt, Deceased and Residuary Trust Under Will ofLoy T. Hempt, Deceased. . 2. The Objections of the Kalbach Objectors were timely filed. . 3. Gerald L. Hempt was never legally appointed as a Trustee of the Loy T. Hempt Residuary Trust for the following reasons, anyone of which alone is sufficient to vitiate the . Final Decree of September 3, 1996 entered by the Honorable Harold F. Sheeley- (a) Notice of the filing of the Co-Guardian Petition was not given to the residuary beneficiaries of the Loy T. Hempt Trust, as is required by 20 Pa. C.S.A. ~7101 and Pennsylvania Orphan's Court Rule 12.6. . ",. (b) The Petition of Gerald L. Hempt was erroneously captioned "In the Matter of Jean Davis Hempt, an Incompetent" when its purpose was to appoint Gerald L. Hempt Co-Trustee of the Loy T. Hempt Trust. . . . . (c) Paragraph 16 of the Petition erroneously states that the appointment of Gerald L. Hempt as a Co-Trustee of the Loy T. Hempt Trust ". . . will not adversely affect the interests of any other person. . ." when in fact the inherent conflicts of interest and self-dealing on the part of Gerald L. Hempt as a Trustee were then, and have continued to be, detrimental to the interests of the Objectors as remaindermen of the Trust. . . 4. Gerald L. Hempt must be removed from a position as Trustee of the Loy T. Hempt Residuary Trust because continuation in that role would be detrimental to the interests of the beneficiaries. . 5. Gerald L. Hempt must be removed from a position as Trustee of the Loy T. Hempt Residuary Trust because of his failure to adhere to fiduciary standards and duties. . 6. Gerald L. Hempt must be removed from a position as Trustee of the Loy T. . Hempt Residuary Trust because of the unwarranted preferences he has extended to the interests of himself and his brother, George, as two of the eight residual beneficiaries. . 7. Gerald L. Hempt must be removed from a position as Trustee of the Loy T. Hempt Residuary Trust because of his demonstrated pattern of indifference toward the Mark and Kalbach residual beneficiaries. . . 2 . . . 8. Gerald L. Hempt must be removed from a position as Trustee of the Loy T. Hempt Residuary Trust because of the friction between him and Robert Kalbach, a beneficiary, coupled with a lack of meaningful communication between Gerald L. Hempt and Mr. Kalbach. . . 9. The Court need not extend any deference to Gerald L. Hempt as Trustee since he was not appointed to the Trustee position by the settlor, Loy T. Hempt. . 10. Gerald L. Hempt has a conflict of interest in his role as Trustee because of his shareholder, officer, director and employee roles with Hempt Brothers, Inc., shares of which comprise a substantial portion of the assets of the Loy T. Hempt Residual Trust. . 11. Gerald L. Hempt has a conflict of interest in his role as Trustee because of his ownership interest and personal involvement with C.A. Hempt Estate, Inc., shares of which comprise a substantial portion of the assets of the Loy T. Hempt Residuary Trust. .. . 12. Gerald L. Hempt has a conflict of interest in his role as Trustee because of his ownership interest and personal involvement in Valley Land Company, shares of which comprise a substantial portion of the assets of the Loy T. Hempt Residuary Trust. . 13. Gerald L. Hempt has a conflict of interest in his multiple roles as (1) Trustee of the Loy T. Hempt Residuary Trust, (2) residual beneficiary of the Loy T. Hempt Residuary . 3 . . . Trust, (3) Guardian of the Estate of the lifetime beneficiary, Jean Hempt, and (4) intestate heir of Jean Hempt. . 14. Gerald L. Hempt, as Trustee of the Loy T. Hempt Residuary Trust, owes a fiduciary duty to Robert H. Kalbach, Sr., a beneficiary. . . 15. Gerald L. Hempt, as Trustee of the Loy T. Hempt Residuary Trust, owes to Robert Kalbach, a beneficiary, a duty to act for Robert H. Kalbach, Sr.'s benefit as to all matters within the scope of the Trust. . 16. Within the scope of his fiduciary relationship with Robert H. Kalbach, Sr., Gerald L. Hempt is under a duty not to profit personally at the expense of Robert H. Kalbach, Sr.. . 17. Gerald L. Hempt, as Trustee of the Loy T. Hempt Residuary Trust, owes Robert H. Kalbach, Sr., a beneficiary, a strict duty ofloyalty. . 18. Gerald L. Hempt, as Trustee of the Loy T. Hempt Residuary Trust, has a duty to . act in a reasonable manner to ascertain Jean Hempt's needs, and to ascertain her other resources that may appropriately and reasonably be available to her for purposes relevant to his discretionary powers as Trustee. . 4 . . . 19. Gerald L. Hempt's distributions to Jean Hempt Estate from the Loy T. Hempt Residuary Trust were clearly excessive. . 20. Gerald L. Hempt engaged in self-dealing in the distribution of funds from the Loy T. Hempt Residuary Trust to the Jean Hempt Estate beyond the needs of Jean Hempt. . 21. Gerald L. Hempt abused his discretion in transferring funds from the Loy T. Hempt Residuary Trust to the Jean Hempt Estate beyond the needs of Jean Hempt. . 22. Gerald L. Hempt breached his fiduciary duty in transferring funds from the Loy T. Hempt Residuary Trust to the Jean Hempt Estate beyond the needs of Jean Hempt. . . 23. Gerald L. Hempt breached his duty of loyalty to Robert H. Kalbach, Sr. in his distribution of assets from the Loy T. Hempt Residuary Trust to the Jean Hempt Estate beyond the needs of Jean Hempt. . 24. Gerald L. Hempt acted in bad faith and for an improper motive in distributing money from the Loy T. Hempt Residuary Trust to the Jean Hempt Estate beyond the needs of Jean Hempt. . 25. Gerald L. Hempt breached his fiduciary duty by failing to act impartially among all of the Loy T. Hempt Residuary Trust beneficiaries. . 5 . . . 26. Gerald L. Hempt engaged in self-dealing in his division of the Loy T. Hempt Residuary Trust into three trusts and in his allocation of assets among the three trusts. . 27. Gerald L. Hempt breached his fiduciary duty in his division of the Loy T. Hempt Residuary Trust into three trusts and in his allocation of assets among the three trusts. . . 28. Gerald L. Hempt breached his duty of loyalty to Robert H. Kalbach, Sr. in his division of the Loy T. Hempt Residuary Trust into three trusts and in his allocation of assets among the three trusts. . 29. Gerald L. Hempt acted in bad faith and for an improper motive in dividing the Loy T. Hempt Residuary Trust into three trusts and in his allocation of assets among the three trusts. . 30. The discretion granted to the trustee in the Loy T. Hempt Residuary Trust does not relieve Gerald L. Hempt of all accountability, nor permit him to act in bad faith, nor to act . with an improper motive, nor to engage in self-dealing, nor to act in violation of his fiduciary duty, his duty ofloyalty, and his duty of impartiality. . 31. Gerald L. Hempt could not reasonably have relied on the advice of Robert Freedman in dividing the Loy T. Hempt Residuary Trust into three trusts and in allocating assets in the manner the assets were allocated, since he knew at all times that the advice provided to . 6 . . . him by Mr. Freedman was for his personal benefit, to meet his personal goals, and to benefit him personally, at the expense of the other Trust beneficiaries. . 32. The fair market value of Hempt Brothers, Inc. owned by the Loy T. Hempt Trust was not properly determined and utilized for purposes of an asset division under 20 Pa. C.S.A. . S7l91. 33. The fair market value of Valley Land Company owned by the Loy T. Hempt . Trust was not properly determined and utilized for purposes of an asset division under 20 Pa. C.S.A. S7191. . 34. The fair market value of C.A. Hempt Estate, Inc. owned by the Loy T. Hempt Trust was not properly determined and utilized for purposes of an asset division under 20 Pa. C.S.A. S7191. . . 35. A Trust division under 20 Pa. C.S.A. S7191 is unreasonable, improper and unlawful under the circumstances of this case when the assets comprising the Trust are not subject to easily ascertainable fair market values, can carry widely disparate values depending on various assumptions and at different valuation dates, and cannot meet the rigorous valuation allocations required by the statute. . . 7 . . · 36. The Trust division under the circumstances of this case served no purpose for Trust administration and did not benefit the Trust itself. . . 37. The Trust division and allocation of assets into the three trusts under the circumstances of this case can hinder trust administration because of the illiquidity of the assets allocated to the Hempt Family separate trust. . 38. Trust division under 20 Pa. C.S.A. ~7191 is unreasonable, improper and unlawful under the circumstances of this case when the purpose of the division and asset allocation is to benefit the Trustee personally, who is also a beneficiary of the Trust. . 39. Trust division under 20 Pa. C.S.A. ~7191 is unreasonable, improper and unlawful when used by a Trustee to allocate to himself as beneficiary those specific trust assets he covets. . 40. The division of the Loy T. Hempt Residuary Trust into three separate trusts on a non-prorata basis without court approval and the consent of the parties in interest is illegal and . cannot be justified on the basis of the 1992 and 1999 amendments to Section 7191 of the Probate, Estates and Fiduciary Code because such amendments are not made retroactive to apply to a trust established under the 1964 Will ofLoy T. Hempt who died in 1977. . . 41. The division of the Loy T. Hempt Residuary Trust into three separate trusts on a non-prorata basis without court approval and the consent of the parties in interest is illegal and 8 . . . cannot be justified on the basis of the 1992 and 1999 amendments to Section 7191 of the Probate, Estates and Fiduciary Code because the application of Section 7191(a) as amended to the Loy T. Hempt Trust would be a deprivation of the pre-existing rights of the remaindermen (a) without due process oflaw contrary to Section 1 of the Fourteenth Amendment to the Constitution of the United States and Article I, Section 9 of the Pennsylvania Constitution and (b) would be contrary to Article I, Section 17 of the Pennsylvania Constitution which provides that no ex post facto law nor any law imposing the obligation of contract shall be passed. . . . 42. Gerald L. Hempt's breaches of his fiduciary duties were deliberate, flagrant and outrageous. . 43. The division of the Loy T. Hempt Residuary Trust into three trusts is invalid and the three separate trusts allegedly created in the division must be reconstituted as a single trust. . . 44. Gerald L. Hempt must be removed as Trustee of the Loy T. Hempt Residuary Trust with the vacancy to be filled by an independent trustee to be appointed by the Court with input from the beneficiaries. . 45. Gerald L. Hempt must be surcharged and ordered to pay to the Loy T. Hempt Residuary Trust the amount of Eight Hundred Six Thousand Five Hundred Eighty-Eight ($806,588.00) Dollars, calculated by deducting the difference of $76,707 between Jean Hempt's total expenses for the Woods School and miscellaneous expenses ($855,395.00), and her pre-tax . 9 . . . income from sources other than the Loy T. Hempt Residuary Trust ($778,789.00) from the total amount paid from the Loy T. Hempt Residuary Trust to the Jean Hempt Estate ($883,194.00). All sums are for the time period 1982 through 2001. . 46. Gerald L. Hempt must be further surcharged and ordered to pay to the Loy T. . Hempt Residuary Trust the amount of Forty-One Thousand Two Hundred Fifteen Dollars Thirty- One ($41,215.31) Cents, which is the amount paid by the Loy T. Hempt Residuary Trust to Robert Freedman and his law firm. . 47. Gerald L. Hempt must account for and be further surcharged and ordered to pay to the Loy T. Hempt Residuary Trust all amounts paid by the Loy T. Hempt Residuary Trust to . Robert Freedman and his law firm that are not yet included in the Account filed by Gerald L. Hempt. . 48. Gerald L. Hempt must be further surcharged and ordered to pay to Robert H. Kalbach, Sr. all reasonable attorneys' fees and expenses incurred by the Kalbach Objectors in the · course of the objection proceedings. This amount will be determined in a separate finding. . . 10 396970vl . . . . By: . . DATED: May 3, 2004 . . . . . . Respectfully submitted, METTE, EVANS & WOODSIDE ~(1-~ Howell C. Mette, Esquire Sup. Ct. LD. No. 7217 Daniel L. Sullivan, Esquire Sup. Ct. LD. No. 34548 Vicky Ann Trimmer, Esquire Sup. Ct. LD. No. 49679 3401 North Front Street P. O. Box 5950 Harrisburg, PA 17110-0950 (717) 232-5000 - Phone (717) 236-1816 - Fax Attorneys for Kalbach Objectors 11 . . CERTIFICATE OF SERVICE I certify that I am this day serving a copy of the foregoing document upon the person(s) and in the manner indicated below, which service satisfies the requirements of the Pennsylvania . Rules of Civil Procedure, by depositing a copy of same in the United States Mail at Harrisburg, Pennsylvania, with first-class postage, prepaid, as follows: . Ivo V. Otto III Esquire MARTSON, DEARDORF, WILLIAMS & OTfO 10 East High Street Carlisle, P A 17013 Donald Kaufman, Esquire McNEES, WALLACE & NURlCK 100 Pine Street P.O. Box 1166 Harrisburg, P A 17108-1166 . Joel Zullinger Esquire ZULLINGER & DAVIS 14 North Main Street Suite 200 Chambersburg, PA 17201 . Respectfully submitted, METrE, EVANS & WOODSIDE . By: \~-1-~. ~ Howell C. Mette, Esquire Sup. Ct. I.D. No. 7217 Daniel L. Sullivan, Esquire Sup. Ct. I.D. No. 34548 Vicky Ann Trimmer, Esquire Sup. Ct. I.D. No. 49679 . I . 3401 North Front Street P. O. Box 5950 Harrisburg, P A 17110-0950 (717) 232-5000 - Phone (717) 236-1816 - Fax . DATED: May 3, 2004 Attorneys for Kalbach Objectors l 12 397132vl .