HomeMy WebLinkAbout21-1977-231 Orphans' (2)
IN RE: : IN THE COURT OF COMMON PLEAS OF
: CUMBERLAND COUNTY, PENNSYLVANIA
ESTATE OF LOY T. HEMPT, :
Deceased : NO. 21-77-231 ORPHANS’ COURT
Trust Created Under Item Fifth of :
The Will : ORPHANS’ COURT DIVISION
:
:
IN RE: EXCEPTIONS TO AUDITOR’S REPORT AND RECOMMENDATIONS
BEFORE BAYLEY, P.J., GUIDO, J.
OPINION AND ORDER OF COURT
Various objections were filed to the First and Final Account for the Estate of Loy
1
T. Hempt, deceased and the Residuary Trust created under his will. An auditor was
appointed to deal with those objections as well as a Petition for Adjudication filed by the
Trustee. He issued a Report and Recommendations to which all parties have filed
exceptions. Those exceptions are currently before us.
We have reviewed all of the testimony and exhibits presented to the auditor. We
have also reviewed the briefs submitted by the parties and have heard argument thereon.
This matter is now ready for disposition.
Factual Background
On December 9, 1964 Loy Hempt (Loy) executed his Last Will and Testament
2
which created the residuary trust (trust) which is at issue herein. By codicil dated
December 12, 1969 he named his wife Margaret as well as his nephew (and business
partner) Max Hempt (Max) to act as co-executors and co-trustees. Loy died on March
19, 1977. He was survived by his wife Margaret, two nieces, Jean Hempt (Jean) and
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Virtually all of the objections were to the portion of the account dealing with the residuary trust.
2
The instant dispute involves the remainder beneficiaries to that trust.
NO. 21-77-231 ORPHANS’ COURT
Dorothy Hempt Mark (Dorothy) as well as two nephews, Robert Kalbach, Sr. (Robert)
and Max. Jean, Dorothy and Max are siblings. Robert is their cousin.
The trust is to be in effect so long as either Loy’s wife Margaret or his niece Jean
is living. The trust income and principal is to provide for their care, support, and welfare,
sole and absolutediscretion”
with the amount of distributions left to the “ of the
3
trustees. Upon the death of Margaret and Jean, any remaining principal and income is to
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be distributed “per stirpes” to Loy’s nephews and other niece. Max and Dorothy are
each to receive forty percent with Robert to receive the other twenty percent.
At the time of his death Loy had substantial liquid assets in the form of cash and
marketable securities. He also held large blocks of stock in three family owned
corporations, Hempt Brother’s, Inc. (“Hempt Brothers”), Valley Land Co. (“Valley
Land”), and C.A. Hempt Estate, Inc. (“C.A. Hempt”). The assets of the residuary trust
include most of the cash and marketable securities referred to above. It also includes all
of Loy’s stock in the family owned corporations, being 21.2% of the outstanding shares
of Hempt Brother’s, 25% of the outstanding shares of C.A. Hempt and 89% of the stock
in Valley Land.
Max and Margaret acted as co-executors and co-trustees until Margaret’s death in
1988. By the terms of the codicil, Loy’s niece Dorothy replaced her as co-executor and
co-trustee.
Loy’s niece Jean was born in January 1927. As a result of a mental disability she
has been institutionalized in the same private facility since 1938. She has substantial
assets in her own right, including stock in two of the family owned corporations, Hempt
3
Kalbach Exhibit 1 (emphasis added).
4
Margaret has died. Jean has not.
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NO. 21-77-231 ORPHANS’ COURT
Brothers and C.A. Hempt. By decree of this Court dated March 8, 1985 entered at No.
117 Orphans’ Court 1985 Jean was adjudicated incompetent and her siblings Max and
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Dorothy were appointed plenary guardians of her estate.
Dorothy died in 1995. She is survived by three sons who now stand in her shoes
as remainder beneficiaries of the trust.
In the summer of 1996 Max and his son Gerald Hempt (Gerald) filed a petition
for “Appointment of Successor Trustee and Successor Guardian of Estate and of Person.”
The Petition sought, inter alia, to have Gerald replace Dorothy as co-guardian of Jean’s
person and property as well as co-trustee of Loy’s residuary trust. The petition was
docketed at No. 117 Orphans’ Court 1985, which is the action in which Jean was
declared to be an incompetent. It was not docketed to this estate file, nor was any notice
of the petition given to Robert or any of Dorothy’s sons. On September 3, 1996 a decree
was entered appointing Gerald as co-guardian of Jean’s estate and person as well as co-
trustee of this trust.
Max and Gerald served as co-guardians and co-trustees until Max’s death in May
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1999. Gerald has acted as sole guardian and sole trustee since that date. In May 2001
Gerald filed a petition to have his brother George Hempt (George) appointed co-guardian
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of Jean’s person and property as well as co-trustee of Loy’s residuary trust. The petition
was not filed to this term and number, nor was notice given to any of the parties
interested in this matter.
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A subsequent decree dated May 10, 1990 appointed them guardians of her person as well as her estate.
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Max is survived by two sons, Gerald and George, as well as two daughters. They are now equal
beneficiaries of Max’s remainder interest in the trust.
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Action on the petition has been stayed by agreement of the parties.
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NO. 21-77-231 ORPHANS’ COURT
Jean was never married, has no children and has never had a will. Because of her
mental disability she lacks the capacity to execute a will. Therefore, she will die
intestate, leaving as her heirs the sons of her sister Dorothy and the children of her
brother Max. Significantly, Robert is not one of her intestate heirs.
Over the years the trustees have distributed more than $870,000 of trust income to
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Jean. Historically the distributions have covered most, although not all, of her
expenses. Furthermore, Jean’s separate income or assets did not affect the timing or
amount of any distribution. This pattern of distribution did not change after Gerald
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became co-trustee. Nor did it change after Max died.
As of December 2000 Jean’s separate estate had liquid assets, including cash and
marketable securities, of more than $1.5 million. She also held 15% of the outstanding
shares of Hempt Brothers as well as 8.3% of the C.A. Hempt stock. Conservatively those
shares were worth $1.2 million. They may have been worth as much as $5.6 million.
Therefore the total value of her separate estate ranged between $2.7 million and $7.1
10
million.
In May of 2001 Gerald and George, acting as co-guardians of Jean’s estate, filed a
petition seeking court approval to implement an estate plan. The proposed plan entailed
making gifts to her seven intestate heirs (Gerald and his three siblings as well as
Dorothy’s three sons). The plan proposed an initial distribution of a little over $100,000
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to each heir with annual gifts thereafter of $10,000 each until Jean’s death.
8
An additional $522,631 of income was transferred to the trust principal.
9
See Kalbach Exhibit 6.
10
See Kalbach Exhibit 20.
11
Action on the petition has been stayed by agreement of the parties.
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NO. 21-77-231 ORPHANS’ COURT
In addition to being an heir of Jean, Gerald also owns large blocks of stock in the
family held corporations. He has a little more than 14% of Hempt Brothers, 12.5% of
C.A. Hempt and all the shares of Valley Land not owned by the trust.
Gerald and George are both officers and directors of Hempt Brothers and C.A.
Hempt. They have been actively involved in the management and operation of those
businesses for many years. Between them they own almost 22% of the outstanding
shares of Hempt Brothers and 25% of C.A. Hempt.
On April 23, 2002 Gerald executed a document which transferred the trust assets
into three separate trusts. The transfer was suggested by Attorney Robert Freedman upon
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whose advice Gerald relied.
Gerald and his brother George, with the counsel of Mr. Freedman, spent more
than a year deciding how the assets should be divided. A letter from Mr. Freedman to
Gerald dated April 11, 2001 provides insight into their goals in allocating the assets. As
the letter stated:
Dear Gerry:
I reanalyzed the potential division of the assets held in the trust under will
of Loy T. Hempt (the “Trust”) . . . I also considered various other
to help you and George acquire greater positions
transactions in order
in some of your family’s businesses.
you want to increase
It is my understanding based on our meeting that
your ownership in Valley Land Company (“Valley Land”) from 11%
(11 shares) to 51% (51 shares) and in C.A. Hempt from 12.5% (3,000
12
Mr. Freedman advised Gerald that the transfer was authorized by Section 7191 of the Probate Estate and
Fiduciaries Code. That section provides in relevant part as follows:
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 of the original trust as a whole.
20 Pa. C.S.A. § 7191. This provision, which eliminated the need for court approval or agreement of the
interested parties, became effective in 1992.
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NO. 21-77-231 ORPHANS’ COURT
shares) to 37.5% (9,000 shares).you and George
. . . At the same time,
would like to ensure that Robert Kalbach not receive any additional
shares of Hempt Brothers, Inc. George wants to
(“Hempt Bros.”).
receive as many additional shares of Hempt Bros. as possible.
In order to attain these goals in the most efficient manner and plan a
strategy going forward, I have worked through various scenarios involving
the division of the Trust, purchases of assets from the Trust or from your
other relatives and a redemption of shares from stockholders of C.A.
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Hempt and Hempt Bros.
(emphasis added). In a subsequent letter to Gerald and George regarding the proposed
division of the trust, Mr. Freedman stated: “In dividing the assets, my two main goals
were to have you receive equally the maximum number of Hempt Bros. shares as
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not to have any Hempt Bros. shares go to Robert H. Kalbach, Sr.”
possible and
(emphasis added).
The trust assets were distributed to the three separate trusts for the benefit of Jean
during her lifetime. Max’s children held a remainder interest in one, Dorothy’s sons were
the remaindermen in another, and Robert was the remainderman in the third. The vast
majority of the Hempt Brothers and Valley Land stock as well as a substantial portion of
the C.A. Hempt stock went to the trust in which Gerald and George held a remainder
interest. The trust in which Robert had a remainder interest received no stock in those
entities. Furthermore, virtually all of the assets transferred to the Hempt family’s trust
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were comprised of stock in the family held businesses, thereby making it illiquid. As a
result, any future income distributions to Jean will likely have to be made from the other
two trusts.
13
Kalbach Exhibit 10.
14
See Kalbach Exhibit 14.
15
It received only $270 in cash.
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NO. 21-77-231 ORPHANS’ COURT
Mr. Freedman billed the trust $41,215.31 between January 2001 through May
2002. Those invoices were for services rendered in connection with separating the trust
assets into the three separate trusts referred to above.
The fair market value of the various family owned corporations is not easily
ascertainable. The values can vary widely depending upon the valuation dates and the
various assumptions used by the appraisers. However, we are satisfied that the values
attached to the family businesses by the trustee were significantly less than their actual
value. Although he relied upon the advice of experts, there is no question that Gerald
used the values which were most beneficial to the separate trust in which he and his
siblings held a remainder interest.
Procedural Background
On July 23, 2002 Gerald filed a First and Final Account for the Estate of Loy T.
Hempt, Deceased and Residuary Trust under the Will of Loy T. Hempt as well as a
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Petition for Adjudication. Objections were timely filed by Dorothy’s heirs and Robert.
William Duncan, Esquire, was appointed to act as auditor. He conducted
evidentiary hearings in connection with the matter. On October 25, 2004 Attorney
Duncan filed his report which contained Findings of Fact, Conclusions of Law and
Recommendations. Gerald, Dorothy’s heirs and Robert have all filed exceptions to the
Auditor’s Report and Recommendations.
Robert alleges that the Auditor erred 1) in failing to remove Gerald as Trustee of
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the Loy T. Hempt Trust, and 2) in failing to surcharge Gerald. Dorothy’s heirs have
16
The Petition for Adjudication asked the Court to confirm the propriety of the income distributions to Jean
as well as Gerald’s division of the trust.
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NO. 21-77-231 ORPHANS’ COURT
raised virtually the same allegations of error. Gerald, as trustee and accountant, contends
that the auditor erred 1) in setting aside his division of the trust, and 2) in making a
recommendation regarding the pro-rata allocation of assets to the remainder beneficiaries
after Jean’s death. For the reasons hereinafter set forth each party’s exceptions will be
sustained in part.
Removal of Gerald as Trustee
At the time this matter was adjudicated the law applicable to the removal of a
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trustee was codified in Section 7121 of the Probate, Estates and Fiduciaries Code. The
relevant portion of that section provides that the grounds for removal or discharge of a
trustee shall be the same as those relating to the removal of a personal representative.
Section 3182(5) of the Code provides that the Court has the power to remove a personal
representative “when, for any reason, the interests of the estate are likely to be
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jeopardized by his continuance in office.” Self dealing and conflict of interest are
among those reasons. As the Superior Court has noted, “(s)ufficient reason for removal
of a fiduciary has been found when the fiduciary’s personal interest is in conflict with
that of the estate, such that the two interests cannot be served simultaneously.” In re
Estate of Westin, 874 A.2d 139, 143 (Pa.Super 2005), specifically citing Section 3182(5).
In the instant case it is clear that Gerald’s personal interests were (and continue to
be) in conflict with those of the trust and its beneficiaries. Under the terms of the trust he
has the “sole and absolute discretion” to disburse income and principal for the “care,
17
Robert filed hundreds of exceptions to the auditor’s report and recommendations. However, since these
are the only issues that were briefed, all others are waived pursuant to Local Rule.
18
20 Pa. C.S.A. § 7121.
19
20 Pa. C.S.A. § 3182(5).
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NO. 21-77-231 ORPHANS’ COURT
support and welfare” of Jean. As one of Jean’s heirs he stands to benefit personally from
those distributions. Furthermore every dollar distributed to Jean operates to the detriment
of Robert who is not an heir to her estate. In addition, as an officer and substantial
stockholder in Hempt Brothers, Valley Land and C.A. Hempt, Gerald has demonstrated a
desire to increase his stake therein and control thereof by using his access to the stock
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held by the trust.
The general rule is that “when a conflict of interest is apparent from the
circumstances, bad faith or fraudulent intent on the part of the fiduciary need not be
proven.” Westin Estate, supra 874 A.2d 139, 143. See also In re Estate of Dobson, 490
Pa. 476, 417A.2d 138 (1980). This rule “is not intended to be remedial of actual wrong,
but preventive of the possibility of it.” In re Noonan’s Estate, 361 Pa. 26, 32, 63 A.2d
80, 84 (1949).
While not conceding that he has a conflict of interest, Gerald contends that, even
if he does, he should not be removed absent an affirmative showing of bad faith. He
points out that the original trustees appointed by Loy would have had the identical
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conflicts. He goes on to cite a long line of cases which hold that any conflict is waived
“where the testator knowingly placed his trustee . . . in a position which he knew might
conflict with the interests of the trust or the beneficiaries thereof . . .” In re Steele’s
Estate, 377 Pa. 250, 258, 103 A.2d 409, 413 (1954). See also In re Flagg’s Estate, 365
Pa. 82, 73 A.2d 411 (1950) and In re Pincus’ Estate, 378 Pa. 102, 105 A.2d 82 (1954).
20
While provision 10(e) of Loy’s will gives the trustee broad powers, including the power to self deal, with
regard to the Hempt Brother’s stock, those powers do not extend to Valley Land or C.A. Hempt.
21
Max was also an heir of Jean’s estate as well as an officer and substantial stockholder in Hempt Brothers
and C.A. Hempt. Furthermore, the successor trustee, Dorothy was one of Jean’s heirs.
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Each of those cases held that under such circumstances the fiduciary cannot be removed
absent an affirmative showing of bad faith. Pincus Estate, supra.
The above cases are exceptions to the general rule. They are also distinguishable
from the case at bar. In each of the cases cited by Gerald, the conflict involved a
fiduciary specifically named by the testator or settlor. As the Pincus Court noted:
Thus, although there may have been a conflict of interest, such conflict
was created by the decedent’s will and such possible conflict was fully cognizable
by the decedent when he wrote his will. Under such circumstances, the evidence
of the conflict of interest would not ipso facto disqualify (the fiduciary) from
acting as he did in connection with the stock transfers now questioned. In order to
effect such disqualification, bad faith on the part of the fiduciary must be
‘Testamentary provisions must be given effect
affirmatively shown.
notwithstanding the existence of the self-dealing rule’.
378 Pa. at 110-11, 105 A.2d at 86 (citations and footnotes omitted), (emphasis added).
While the principle enunciated therein would apply to Max or Dorothy who were named
22
in the will, it does not apply to Gerald who was court appointed. The testamentary
provision to be given effect was Loy’s direction that Max and Dorothy act as his trustees.
Loy knew and trusted the individuals he specifically appointed. While it is safe to say
that he waived any conflict as to them, it is illogical to contend the he waived the conflict
with regard to anyone else.
The instant case is controlled by the general rule, not the exception. A trustee
should be removed where it is apparent that his interests conflict with those of the trust or
its beneficiaries. Applying the general rule to Gerald, we are satisfied that he should no
longer act as trustee.
22
We note that he was appointed by the Court without any notice having been given to the parties in
interest. We further note that he never informed the Court of the conflict or of his strained relations with
Robert and his branch of the family.
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NO. 21-77-231 ORPHANS’ COURT
Surcharge of Gerald
The Kalbach and Mark objectors contend that the auditor erred in failing to
surcharge Gerald for 1) making improper distributions to Jean’s Estate; 2) paying
Attorney Freedman’s fees from the trust; 3) paying the expenses of Valley Land from the
trust; and 4) forcing them to incur legal fees in this litigation. We will address each
contention separately.
Distributions to Jean
Jean’s lack of testamentary capacity makes the heirs to her estate both identifiable
and irrevocably certain. Her peculiar circumstances placed Gerald in an untenable
position as trustee in this case. He is one of Jean’s certain heirs. So are some, but not all,
of the remainder beneficiaries of the trust. Upon Jean’s death Gerald will benefit by
receiving a portion of every dollar distributed to her from the trust. This amounts to
improper self dealing. While Max and Dorothy may have been in the same position, any
conflict was waived because Loy was aware of the conflict when he appointed them.
Since we have found that there was no bad faith in connection with the distributions to
Jean, there can be no surcharge for any distributions in which Max or Dorothy played a
part. See Flagg Estate, supra.
However, lack of bad faith does not offer protection to Gerald. As the
Pennsylvania Supreme Court pointed out in Noonan’s Estate, supra.
Where there is self-dealing on the part of a fiduciary, it is immaterial to
the question of his liability in the premises whether he acted without
. . .
fraudulent intent . ‘It matters not that there was no fraud meditated and
no injury done; the rule [forbidding self-dealing] is not intended to be
. . .
remedial of actual wrong, but preventive of the possibility of it.’ It was
also recognized in Tanner’s Estate that ‘The cases are uniform in declaring
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NO. 21-77-231 ORPHANS’ COURT
that it matters not [when there is self-dealing] how innocent and bona fide,
. . . Public
and free from the suggestion of fault, the transaction may be.’
policy requires this, not only as a shield to the parties represented, but
as a guard against temptation on part of the representative.
63 A.2d at 84 (citations omitted) (emphasis added). Therefore, the distributions made to
Jean by Gerald acting as sole trustee must be repaid to the trust.
Attorney Freedman’s Fees
Attorney Freedman billed the trust more than $41,000 for services rendered in
connection with the creation of the three separate trusts. The division of the trust appears
to have been driven by Gerald’s desire to place himself and his family in a position to
obtain additional shares of the family owned businesses. It was also driven by a desire to
prevent Robert from obtaining any shares of Hempt Brothers or Valley Land. We can
conceive of no benefit to the trust or its beneficiaries (aside from Gerald and his siblings)
by dividing the trust.
Gerald tried to rationalize his actions by arguing that Robert owns other
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businesses that compete with Hempt Brothers. He further explained that he
allocated no stock of family businesses to (Robert’s) share because the
prospective remainder beneficiary of that share has been hostile to the family
members running those businesses, and such hostility bodes ill for the future
smooth management of those family companies if that remainder beneficiary
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became a stockholder.
These arguments totally miss the point. As trustee, Gerald’s duty was to the trust
all
and of its beneficiaries. It was not to Hempt Brothers or any other business entity.
His argument that he was acting to maximize the value of the trust assets by keeping
23
Having reviewed the transcript we are satisfied that the competition, to the extent any really exists, is
inconsequential.
24
See Petition for Adjudication.
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NO. 21-77-231 ORPHANS’ COURT
Robert from owning any stock in the family businesses is purely illusory. Any benefit to
after
those businesses would come Jean’s death, when the trust ceases to exist.
A surcharge is the “penalty for failure to exercise common prudence, common
skill and common caution in the performance of fiduciary duties In re Estate of Dobson,
. . . .”
490 Pa. 476, 484, 417 A.2d 138, 142 (1980). “In general, one who seeks to
surcharge a trustee bears the burden of proving that the trustee breached an applicable
fiduciary duty.” Estate of Stetson, 463 Pa. 64, 84, 345 A.2d 679, 690 (1975).
The duty to avoid a conflict of interest, not to engage in self dealing, and to act
primarily for the benefit of the beneficiaries are all fiduciary duties violated by Gerald in
connection with his division of the trust. He increased his future stake in Hempt Brothers
and Valley Land by assigning the maximum amount of shares to the trust in which he is a
remainder beneficiary. In that regard he was acting primarily for the benefit of himself,
his family, Hempt Brothers and Valley Land. He also acted against the interests of the
other beneficiaries in that any future distributions to Jean would likely have to be made
from the liquid assets of the other two trusts. For those reasons we are satisfied that
Gerald should be surcharged for the fees paid to Attorney Freedman for services rendered
in connection with dividing the trust assets.
Expenses of Valley Land
Valley Land has only one asset, a large and very valuable parcel of undeveloped
real estate. It has no income. Throughout the years the trust has paid the expenses (legal
fees, surveying, engineering costs, etc.) incurred by Valley Land. Those expenses
amounted to $54,473.83. The trustee has conceded that those amounts improperly
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NO. 21-77-231 ORPHANS’ COURT
appeared as expenses on the account. In a supplemental account they have been listed as
loans from the trust to Valley Land. Interest has accrued in the amount of $18,896.94.
The only shareholders in Valley Land are the trust and the trustee, Gerald.
Therefore, the use of trust money for the payment of Valley Land’s expenses, even if it is
considered to be a loan, amounts to improper self dealing by the trustee. To the extent
that there is insufficient liquidity in Valley Land to cover its expenses, the shareholders
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should pay them on a pro-rata basis. Gerald’s share is $8,070.78. He must reimburse
the trust for that amount. When his share has been paid the obligation of Valley Land to
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the trust shall be deemed to be satisfied.
Objector’s Counsel Fees
Finally, the objectors are seeking to surcharge Gerald for the counsel fees they
incurred as a result of this challenge to his actions. An award of counsel fees is
discretionary with the court. In re Estate of Lychos, 323 Pa.Super 74 (1983).
Furthermore, “the general rule is that each party to adversary litigation is required to pay
his or her own counsel fees.” Id. at 88 (citing Estate of Wannamker, 314 Pa.Super 177,
179, 460 A.2d 824, 825 (1983)). In the case at bar we find that Gerald did not act in bad
faith with regard to the distributions to Jean. Furthermore, since he relied upon the
advice of counsel we do not find any bad faith on his part in splitting the trust. The
Supreme Court has recognized “that when a fiduciary acts upon advice of counsel, such
fact is a factor to be considered in determining good faith. . . .” In re Trust Under Deed
of Mintz, 444 Pa. 189, 200, 282 A.2d 295, 301(1971). Admittedly, “this does not provide
25
This figure was calculated as 11% of the $54,473.83 principal plus $18,896.94 interest due.
26
If the new trustee elects to make a loan to Valley Land from the trust assets that would certainly be
within its power.
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NO. 21-77-231 ORPHANS’ COURT
the (fiduciary) with complete immunity to surcharge.” In re Estate of Geniviva, 675 A.2d
306, 311 (Pa.Super. 1996). However, we are satisfied that it dictates against a further
surcharge against him for counsel fees.
Under the circumstances of the instant case, we see no reason to deviate from the general
27
rule that the parties should pay their own legal fees.
Splitting of the Trust
We concur with the auditor’s recommendation that Gerald’s distribution of the
trust assets into three separate trusts should be set aside. In addition to the reasons given
by the auditor, we find that he violated the fiduciary duties noted above in accomplishing
the division.
Distribution after Jean’s Death
Gerald contends that if we decide to set aside the division of the trust, which we
have, we should reject a portion of the Auditor’s Recommendation No. 3. Specifically,
he objects to the direction that “any division of assets upon (Jean’s) death shall be pro-
rated in accord with the respective interests of the remaindermen unless all parties
consent to alternate allocation.” He argues that the issue of distribution of assets after
Jean’s death went beyond the scope of the Auditor’s commission since it did not need to
be decided in order to resolve the objections to the account. We agree.
27
However, in view of the surcharges necessitated by Gerald’s actions, it would be inappropriate for the
trust to pay the legal fees he incurred in this litigation.
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ORDER OF COURT
TH
AND NOW, this 16day of APRIL, 2008, the exceptions to the Auditor’s
Report and Recommendations are sustained in part and overruled in part. For the reasons
set forth in the attached opinion it is hereby ORDERED and DIRECTED as follows:
Gerald L. Hempt is removed as Trustee of the Loy T. Hempt Residuary Trust.
We propose the appointment of Orrstown Bank to act as successor Trustee. This
appointment shall become final unless any party or the proposed Trustee files a specific
objection within 20 days.
Gerald L. Hempt is surcharged for the following:
(a.)$192,500 representing distributions to Jean D. Hempt after the
death of Max C. Hempt.
(b.)$41,215.31 for attorney fees paid in connection with the trust
division.
(c.)$8,070.78 representing 11% of the principal and interest due the
trust as a result of loans to Valley Land Company.
The Trustee’s exception to the Auditor’s recommendation regarding the pro-rata
distribution of assets upon the death of Jean Hempt is sustained and that recommendation
is rejected.
Except as modified above, the Auditor’s Report and Recommendations are hereby
confirmed and are entered as an Order of Court. Consistent therewith, the distributions to
the beneficiary, Jean Hempt before the death of Max C. Hempt are CONFIRMED and the
Trustee’s Account is CONFIRMED (as modified by this order). Furthermore, the
Trustee’s division of the Residuary Trust into three distinct Trusts is set aside and the
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Trustee is hereby ordered to reform the Residuary Trust created under Article FIFTH of
the Will of Loy T. Hempt into a single Trust.
By the Court,
/s/ Edward E. Guido
Edward E. Guido, J.
William Duncan, Esquire
One Irvine Row
Carlisle, Pa. 17013
Donald Kaufman, Esquire
100 Pine Street
P.O. Box 1166
Harrisburg, Pa. 17108-1166
Ivo V. Otto III, Esquire
10 East High Street
Carlisle, Pa. 17013
Daniel L. Sullivan, Esquire
METTE, EVANS & WOODSIDE
3401 North Front Street
P.O. Box 5950
Harrisburg, Pa. 17110-0950
Joel Zullinger, Esquire
14 North Main Street
Suite 200
Chambersburg, Pa. 17201
Trust Department
Orrstown Bank
:sld
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