Loading...
HomeMy WebLinkAbout07-01-04 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' REPLY BRIEF TO TRUSTEE'S SUPPLEMENTAL BRIEF I. INTRODUCTION On or about June 28, 2004, Gerald L. Hempt ("Trustee") served a Supplemental Brief addressing two issues: (1) the doctrine of laches and (2) proprietary of income distributions to Jean Hempt. This Reply Briefis submitted to clarify the law and to demonstrate that Trustee's assertions are meritless and unpersuasive. The issue of the propriety of income distributions to Jean Hempt has been extensively briefed previously and will be addressed herein only briefly, infra. The issue of laches, on the other hand, newly raised, requires more extensive response under the circumstances of this case. The Trustee's argument regarding laches is not only seriously off-mark, its inescapable premise, obviously unstated and unlikely intended, is that the more cleverly and effectively a successor trustee hides his appointment (so that more time passes before a challenge to the appointment), the stronger will be a laches defense. The reward of subterfuge cannot be the rule oflaw. II. THE DOCTRINE OF LACHES HAS NO ROLE IN THIS CASE. Trustee states in his Supplemental Brief that "The principle oflaches has been applied by the Superior Court in a case very similar to the present case. In Briggs' Estate. 150 Pa. Super. 66,27 A.2d 430 (1942) . . . ." Trustee is simply wrong is his assertion. Briggs' Estate did not involve laches and the Court did not apply the principle of laches. Briggs Estate involved the doctrine of waiver. The Brig~s' case is not similar to the present case. The appellant in Briggs' Estate complained of a discretionary distribution to one Martha Bauman by successor trustees under the will of May Briggs, in part because notice of the appointment of the successor trustees was not given to appellant. The opinion then states: "But, in our opinion, appellant has effectively waived the right to make the contention. Neither in a telephone conversation with one of the trustees immediately following the appointment, nor in a subsequent letter written to each of the trustees, did she raise any question of the failure to give her notice. She failed to raise the question in her exceptions filed June 12, 1940. And she failed to raise the question in her additional exceptions filed July 17, 1940 after the confirmation of the account nisi. The question was raised for the first time in exceptions, filed January 20, 1941, to the opinion of the court of January 14, 1941. The case is clearly distinguishable from Lancaster & Mintzer's Apnea!. III Pa. 524, 531,4 A. 333, where there was a petition for the removal ofa trustee who had been appointed on oral motion and without notice to appellant, and where the court pointed out that '[appellant] did no act of acquiescence. ", Briggs Estate, 150 Pa. Super at 71-72. 2 The Superior Court concluded that the conduct of the appellant in dealing with the trustees constituted an acquiescence by the beneficiary in the trustees' appointment. This is not the application of the equitable defense oflaches. The word "laches" does not appear anywhere in the opinion of Judge Kenworthey. However, as to the issue of "acquiescence" on the part of Objectors herein, suffice it to say that the conduct of the Objectors in the instant case can in no way be deemed to constitute acquiescence in the appointment of Gerald L. Hempt as co-trustee with his father Max Hempt. The record shows only that they knew Max Hempt died in May of 1999. They were not lawyers. They had no reason to inquire as to the status of the trusteeship of the Loy Hempt Trust or the propriety of Gerald L. Hempt's appointment until his misconduct prompted them to seek redress. There is no evidence of any trustee - beneficiary contacts that would cause them to question what was happening to the Loy T. Hempt Trust, and as the record shows, the 1996 Petition seeking the appointment of Gerald L. Hempt as a co-trustee was consciously crafted and presented as a guardianship petition for Jean Hempt to conceal that fact. And if Objectors had inquired of the Clerk of the Orphans' Court as to the status of the Loy T. Hempt Trust, they would have been advised that nothing appears in the records of the Clerk of the Orphans' Court of Cumberland County as to the appointment of a successor trustee. There is attached hereto for the Auditor's convenience a copy of Kalbach Exhibit 19, the docket entry in File 21-77-231 for the Estate ofLoy T. Hempt, bare of any reference to the appointment of a successor co-trustee in 1996. 3 Since the Trustee has chosen to characterize BriSZlZs as a "laches" issue, it is appropriate to discuss the issue in the present setting. The elements of the defense of laches may be summed up in several relevant cases. In City ofReadinlZ. Pa. v. Austin, 816 F. Supp. 351, 367 (E.D.Pa. 1993), the Court's opinion states: "Thus, the elements of the defense oflaches are '(1) lack of diligence by the party against whom the defense is asserted, and (2) prejudice to the party asserting the defense.' Equal Emplovment ODDortunity Comm'n v. Great Atlantic & Pacific Tea Co., 735 F.2d 69,80 (3d Cir.1984) (quoting Castello v. United States, 365 U.S. 265, 282,81 S.Ct. 534, 543, 5 L.Ed.2d 551 (1961)). A delay may be excused upon a showing that the party asserting the defense substantially contributed to the delay through concealment, misrepresentation, unfilled promises, or any other inequitable conduct. See Gruca v. United States Steel Corp., 495 F.2d 1252, 1259-60 (3d Cir. 1974). Additionally, the delay must be the cause of the prejudice to the party asserting the defense. Waddell v. Small Tube Prod.. Inc., 799 F.2d 69, (3d Cir. 1986)." (Emphasis supplied). The elements of the equitable defense of laches are conjunctive, and since laches is a defense, the burden of establishing them is on the defendant. See E.E.O.C. v. Great Atlantic and Pacific Tea Co., 735 F.2d 69 (3d Cir. 1984). The record before the Auditor is devoid of any evidence oflack of diligence on the part of the Objectors. Again, the Objectors knew Max T. Hempt had died. In the absence of any overt activity on the part of Gerald L. Hempt affecting their interests, they cannot reasonably be expected to question the status of the trusteeship. When their interests were threatened by the purported Trustee's dereliction, they responded accordingly in a timely fashion. 4 Next is the issue of prejudice to the party raising the issue of laches. Gerald L. Hempt has not shown any "prejudice" to him in the legal sense as an element of laches. The witnesses are available, the records are available, and he can present any defense to his actions accordingly. No third parties are harmed. The record is devoid of any facts as to the required showing of "prejudice" against Gerald L. Hempt. Objectors have been prejudiced by delay, not Gerald L. Hempt. Lastly, but of great significance, is the fact that any delay or lack of diligence on the part of Objectors in objecting to the appointment of Gerald L. Hempt was caused by the active concealment by Max T. Hempt and Gerald L. Hempt of the true nature of the 1996 proceedings in re the guardianship of Doris Jean Hempt. In Hansel v. Hansel, 300 Pa. Super. 548,446 A.2d 1294 (1982), the defense oflaches was invoked against a son with respect to his complaint in equity against fiduciaries for partners in a partnership in which his father had an interest. The laches defense was rejected, based largely on the fraud of the appellees: [7-9] "This reasoning is incorrect. Although it is true that 12 years elapsed between Robert Sr.'s death and the filing of the first complaint by appellant, we are convinced from a reading of the entire record that appellant cannot be charged with a lack of diligence in prosecuting his claim. Lutherland v. Dahlen, supra. Appellant filed his claim approximately one year after the account was finally filed in 1974. While an account should properly have been filed at the time of Robert Sr.'s death, the fact that one was not is not chargeable to appellant. It was not until 1975, upon his appointment as administrator d.b.n.c.t.a. of his father's estate, that 5 appellant earned the right to seek an accounting. Since suit was filed that same year, it cannot be said that appellant was not diligent. We also find that aDpellant cannot be cha7i!ed with lack of dilillence in prosecutinll his claim for another reason: fraud on the Dart of appellees. Even if appellant could have brought an action for an accounting prior to 1975, the record indicates that he was prevented from doing so due to appellees' attempts to conceal their actions with respect to the partnership assets. Concealment or deceit tolls the application of the doctrine of laches. Miller v. Hawkins, 416 Pa. 180,205 A.2d 429 (1964)." 446 A.2d at 1299 (Emphasis supplied.) In summary, the facts of this case preclude the defense of laches. Objectors were precluded from knowing the facts of Gerald L. Hemp!' s appointment by his active concealment thereof and the perpetration of a fraud upon the Orphans' Court Division of the Court of Common Pleas of Cumberland County. They were not sophisticated estate attorneys who could be expected to rush to the courthouse to determine who took charge after Max Hempt's death. And if they had, they would have found nothing to indicate that their concerns might be too late. III. THE GERHARDT CASE NEITHER CONTROLS THE INSTANT CASE NOR IS INSTRUCTIVE IN ITS REASONING Trustee suggests in his Supplemental Brief that the September 23,2003 decision in Estate of MildreCl H. Gerhardt is controlling or instructive in the instant case. However, the facts herein are uniquely different and are distinguishable from Gerhardt. First, the Trustee in Gerhardt was a corporate fiduciary which was not simultaneously a beneficiary, nor did the corporate fiduciary have any other role in the Gerhardt plan of 6 distribution. Here, Gerald L. Hempt is both the Trustee of the Loy T. Hempt Residuary Trust ordering distributions from the Trust to Jean Hempt, while simultaneously benefiting as a remainderman of the Jean Hempt Estate. Thus, he stands to benefit personally from his income distributions to Jean. Compounding the complexity and conflict of these two roles, Gerald Hempt has used his position as Guardian of the Jean Hempt Estate (which is yet a third hat he wears simultaneously) to seek Court permission to distribute enormous sums of money accumulated in the Jean Hempt Estate to himself, his siblings and some of his cousins (but not Robert Kalbach, Sr.). The totality of these relationships cannot be ignored in evaluating the propriety of Gerald Hempt's actions as Trustee of the Loy T. Hempt Residuary Trust. No similar multiple roles were in play in Gerhardt and there is no suggestion in Gerhardt of Trustee self- dealing. Second, the status of Jean Hempt, the sole remaining primary beneficiary of the Loy T. Hempt Residuary Trust, is markedly different than in Gerhardt. Jean Hempt is an adjudged incapacitated person who has resided in institutional care for virtually her entire life. She has narrowly defined financial needs. Gerald Hempt has already acknowledged in his Petition to Make Gifts (Kalbach Exhibit 4) that Jean has assets well in excess of those needed for her to live in her customary manner. Finally, in Gerhardt the corporate fiduciary was granted the discretion in invade principal, taking into account other funds and sources of income of the beneficiary, while consideration of 7 other funds and sources of income was conspicuously omitted with respect to the distribution of income. Loy T. Hempt, on the other hand, provided in his Will (Article 11): Wherever in this Trust Trustees are given a discretionary power to determine whether or to what extent principal or income shall be distributed to or used for the benefit of the beneficiary, Trustees may consider, to such extent as they deem proper, the resources and sources of funds available to such beneficiary. The Kalbach Objectors acknowledge the discretion given to the Trustee under this language. As set forth in earlier briefs, however, the exercise of discretion is not a license to abuse discretion, such as happened here. Discretion is not a license to self-deal. It is not a license to act in utter disregard of the fiduciary duty owed to a beneficiary. Simply put, Gerhardt must be distinguished and neither controls nor persuades. IV. CONCLUSION The arguments advanced by Trustee in their Supplemental Brief neither control nor persuade. On the contrary, for the reasons stated herein and in the Kalbach Objectors' previous extensive filings, the relief requested by the Kalbach Objectors should be granted. 8 Respectfully submitted, METIE, 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 3401 North Front Street P. O. Box 5950 Harrisburg, P A 17110-0950 (717) 232-5000 - Phone (717) 236-1816 - Fax DATED: l'''''~ Attorneys for Kalbach Objectors FILl: No. t NAME OF DECEDENT 21-77 231 . EXECUTOFl MAX lmMPl' "'~~ DOROTHY HEMPT MARK ADM'R DESIGNATION RESIDENCE g~~~F MARCH 19.1977 MONTH DAY YEAR ABSTRACT OF PROCEEDINGS BOOK No. PAGE' -~. ~~- _1.9-1I__~_ ~~f~A~! :Rev.oke.d-_____ . _ W~LL 7.~ 3.~?__ . D1!;Q. 19 ~.2I7 -1!fYE1IT.@X.________. _ ___.___._ ____'0 -.--_.W.39_~~~... _._ .. .. _TAX_.19. 72-=5. _.PE.G.. ~~,L~3.J.7 __~EPl!Q':tI9.!'l:S_.___ _._._____._____.__._.. _ _._____... _ _ ___. '_ ._._ ___ ~.-'- -.~~ ?~- ~2.?~ :.-~~~J.t!'l~_~_._'!'~.){._~p~.?=~~_~..____. ... h_'l'AX. ._J. ::n:: C'l'IO ---..--.- -'-- --- - J1AL -L),97-.--.n:P.~fd;.~'KATE_.'r.4Z_Rm!:lliN __._._. ____.__.._ _n __ ___ -..--.------- .11f>L 9_ -9751.. -.----p.!ID-..r~m~I=._E.$~Ao;r~..'L~X_B?"r~rf__..___ _'_ '" -APR.. 2918 . REMAINDER-APPRAISEMENT.__ -_____. -TAX 10 .72- _. - ------ ... ~lW.. -;"7. ..1...992 ..LETTERS TEST~ENTARY_r" __ .___.._ _. .~w;.rL~. 20. 08 __.n__ "-- OM" . ~_' OO.;L .-T~lJ6I.jeRhJs.,J.IF.etEi:III~N1+.R~lMfl'INAJ6AJ3.. FIC/",MY . __ ._. ___ "-- - -..---- J"f.Jly ~_a_ ~.;l_ _T#lJS ol(!'.f/~_f.t_"t- ?iNttI,ljJ:<x. ________._. __. - _._._____~==_~~=_.lh IL - ~t. . _~_ -- JP!~'f:cO~TrJ:Jwt-liil1F-t.tu.M@g~~~..~~ __~.~'_.___ ,=:- --= =-= =- --=-: ;e,illroet ~::fliiiWiJJlt,j~o~';R.. -::-::- ---'--'~ .-'-"- - - -.--. . .. - -----... -- ---- .---.- ..---.-- -'-'- -~-- ----.---.- ----.- - --~. '---...--. ...-- - .-...- .-. - ..... ._-~ -.-. -_. .-...--.-..-.---- - . --- __ _.'_'n_ __._.. -....-...- -... -.- ---.., -. - . .- . .. .--- . -_.. .. ..----. ..-.. - --"'_._ n _. _. ...__. .... A TRUE Copy FROM RECORD In Testimony wh&rGf. I hereunto . set my hand and the seal of said Court at Carlisle PA .1/1:3:"?-;;;;;~ V-fi<d Clerk of the 0rp/1ariS Court ~. "I . CUmbeo1and County ~ i.ft:f /t0ck JEY#/;? .. ~ - $'-0</ s~ "EXHIBIT A" . ' . .. 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 & OTTO 10 East High Street Carlisle, P A 17013 Donald Kaufinan, Esquire McNEES, WALLACE & NURlCK 100 Pine Street P.O. Box 1166 Harrisburg, P A 171 08-1166 Joel Zullinger, Esquire ZULLINGER & DAVIS 14 North Main Street Suite 200 Chambersburg, P A 17201 Respectfully submitted, METTE, EVANS & WOODSIDE By: \}~~1-~ Howell C. Mette, Esquire Sup. Ct. J.D. No. 7217 Daniel L. Sullivan, Esquire Sup. Ct. J.D. No. 34548 Vicky Ann Trimmer, Esquire Sup. Ct. J.D. No. 49679 340 I North Front Street P. O. Box 5950 Harrisburg, P A 17110-0950 (717) 232-5000 - Phone (717) 236-1816 - Fax DATED: lIdO'( Attorneys for Kalbach Objectors 401988vl