IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Civil Action No. 95-K-2143
RELIGIOUS TECHNOLOGY CENTER, a California non-profit corporation,
and BRIDGE PUBLICATIONS, INC., a California non-profit
corporation,
Plaintiffs,
v.
F.A.C.T.NET, INC., a Colorado corporation; LAWRENCE WOLLERSHEIM,
an individual; and ROBERT PENNY, an individual,
Defendants.
_________________________________________________________________
MEMORANDUM OF POINTS AND AUTHORITIES
IN SUPPORT OF DEFENDANT'S MOTIONS TO AMEND THE
SCHEDULING ORDER HEREIN AND TO COMPEL THE DEPOSITION
OF DAVID MISCAVIGE
_________________________________________________________________
INTRODUCTION
In opposing Defendants' desire to conduct discovery
regarding the legitimacy of RTC's and BPI's alleged title to the
copyrights and trade secrets at issue (which, in turn, will
determine RTC's and BPI's capacity to bring this action),
Plaintiffs offer little more than a conclusory statement that
such title cannot be questioned or attacked beyond its ultimate
source in the Judgment of Final Distribution in the Estate of L.
Ron Hubbard. As authority, Plaintiffs cite Heiser v. Super.
Ct. (1979) 88 Cal.App.3d 276, 278, for the proposition that a
judgment in a probate proceeding is conclusive against "the whole
world" and, once final, cannot be challenged by anyone, at any
time, in any forum, for any reason.
Plaintiffs' reliance on Heiser is misplaced. The
correct construction of the expression cited by Plaintiffs is set
forth in Estate of Loring (1946) 29 Cal.2d 423, as follows:
"In Martinovich v. Marsicano, [1902] 137 Cal.
354, 70 P. 459, upon which the [respondents]
also rely, a judgment creditor of a devisee
secured a lien upon that devisee's share of
the estate before the decree of distribution.
This court held that the subsequent
distribution of that share to the devisee did
not discharge the creditor's lien. It was
pointed out that `The expression in some of
(the) cases to the effect that under the
notice for distribution the whole world is
brought before the court, and that every
person entitled to assert a claim against the
estate must present the same, or lose his
right thereto, is to be construed in
connection with the authority of the court
over the subject-matter before it. The court
has jurisdiction to distribute only the
estate of which the decedent was possessed at
the time of his death, and it is only a claim
against that estate, or for some portion of
it, for which it can make provision in its
decree. As it can exercise this jurisdiction
over only the persons to whom the estate is
to be distributed, it is only these persons
who can be affected by the notice or required
to give it any attention.' 137 Cal. at page
359, 70 P. at page 461. Thus, none of these
cases support the [respondents'] position,
but merely emphasize that, as this court said
in In re Burdick, [1896] 112 Cal. 387, 393,
44 P. 734, 735, `The decree of distribution
is conclusive only as to the succession or
testamentary rights.'"
In fact, contrary to Plaintiffs' assertions, the
conclusive effect of an order for final distribution in a
California probate proceeding is further limited by both federal
and state law. The federal Copyright Act of 1909 contains "will-
bumping" provisions that, with respect to certain copyrights,
override a will's dispositive provisions and instead vest
ownership in statutory successors. In addition, state law
limitations not only allow inquiry into matters not passed on or
approved by a probate court (including the assignments and
agreements by which RTC allegedly acquired title to the assets in
question), but also permit an order for final distribution to be
set aside and the probate reopened upon findings of fraud, breach
of fiduciary duty, material misrepresentation, conspiracy,
conversion, and concealment. Alternatively, if a court finds
that property was wrongfully acquired, the court may impose a
constructive trust upon such property and order that distribution
be made to the rightful owners.
As demonstrated below, the discovery sought by
Defendants is necessary and proper to explore numerous
contradictions and discrepancies in the series of transactions by
which RTC allegedly acquired the copyrights and trade secrets at
issue. Only by means of such discovery can Defendants ascertain
whether or not RTC has the capacity to bring this action.
STATEMENT OF FACTS
The following "Statement of Facts" is based on
Defendants' information and belief:
1. L. Ron Hubbard ("Decedent") died on January 24,
1986, a resident of the State of California, County of San Luis
Obispo. Decedent was survived by Mary Sue Hubbard, his wife of
over thirty years, and five of his six children, namely, Diana
Meredith DeWolf Hubbard Ryan, Mary Suzette Rochelle Hubbard,
Arthur Ronald Conway Hubbard, Lafayette Ronald Hubbard, Jr. (also
known as L. Ron Hubbard, Jr., Nibs Hubbard, and Ronald DeWolf),
and Katherine May Hubbard Gillespie. Decedent was predeceased by
his son, Quentin Hubbard. It was common knowledge, then and now,
that Decedent had a daughter from a nonmarital relationship,
namely, Alexis Hollister, who also survived Decedent.
2. On February 5, 1986, Norman F. Starkey ("Starkey")
filed a Petition for Probate of Will, for Letters Testamentary,
and for Authorization to Administer Under the Independent
Administration of Estates Act with full authority ("Petition for
Probate") and a Petition for Letters of Special Administration
with the Superior Court of California, County of San Luis Obispo
(the "Probate Court"), in Case No. 20885, the Estate of L. Ron
Hubbard, also known as Lafayette Ronald Hubbard (the "Estate").
3. On February 5, 1986, the Probate Court approved
the appointment of Starkey as Special Administrator of the Estate
and issued the Order Appointing Special Administrator and the
Letters of Special Administration, with general powers and with
special powers to continue the operation of any business owned in
whole or in part by the Estate. The nature of Starkey's
activities as Special Administrator and the date that Starkey was
discharged as Special Administrator are unknown to Defendants.
4. Decedent's will dated January 23, 1986 (the
"Will"), was admitted to probate by Minute Order on February 18,
1986. On that date, the Probate Court also approved the
appointment of Starkey as Executor of the Will and issued the
Order Appointing Executor and Authorizing Independent
Administration of Estate with full authority and the Letters
Testamentary.
5. The terms of the Will included the following:
a. Decedent expressly disinherited his son,
Lafayette Ronald Hubbard, Jr., and his predeceased son,
Quentin Hubbard, and their issue. In Article Seventh,
Decedent stated: "Further, I have intentionally omitted
to provide herein for ALEXIS HOLLISTER, who may pretend
to be my heir, but in fact is not and never has been my
heir." Decedent's daughter, Katherine May Hubbard
Gillespie, was not disinherited in the Will, although
she had been disinherited in at least two prior
wills.
b. The Will was a "pour-over" will. It passed
Decedent's estate to an inter vivos trust, called the
"Author's Family Trust-B," established on January 23,
1986, pursuant to a Trust Agreement by and between
Decedent, as Trustor, and Starkey, as Trustee (the
"Family Trust"). In Article Fifth, Decedent, referring
to the Family Trust, stated: "I have also provided
therein for certain benefits for my wife."
c. Article Third recites Decedent's intention
"to dispose of all property, whether real, personal or
mixed, of whatsoever kind and character . . ."
d. In Article Sixth, Decedent gives to the
Trustee of the Family Trust, among other things, his
"entire right, title, and interest in the nineteen (19)
year period of extended copyright protection and in all
copyright rights provided thereby in all copyrightable
works written or created by me and/or assigned to me
prior to January 1, 1978 . . ." and his "entire right,
title, and interest in the right or ability to renew,
or to file renewal claims for, all copyrights on or in
all copyrightable works written or created by me and/or
assigned to me prior to January 1, 1978."
e. In Article Ninth, Decedent nominated Starkey
as Executor.
6. Starkey, as Executor, filed his Report of Executor
on Waiver of Accounting; for Allowance of Attorney's Fees for
Ordinary Services and Petition for Final Distribution on December
15, 1988 ("Executor's Report and Petition for Final
Distribution"), in which he represented under penalty of perjury,
among other things, that:
a. No preliminary distributions had been made;
b. The whole of the Estate consisted of
Decedent's separate property; and
c. The Estate should be distributed to Starkey,
as Trustee of the Family Trust, in accordance with the
terms of the Will.
Starkey, as Executor, prayed for an order from the Probate Court
that, among other things, "[a]ll the acts and proceedings of
petitioner as executor" be confirmed and approved and the Estate
be distributed to Starkey, as Trustee of the Family Trust.
(Emphasis added.) Notice was given only to Starkey, as Executor
and as Trustee of the Family Trust.
7. On January 3, 1989, the Probate Court entered its
Judgment of Final Distribution. The Court found, among other
things, that:
a. All of the allegations of the Executor's
Report and Petition for Final Distribution were true;
and
b. The Estate consisted entirely of Decedent's
separate property.
In its order, the Probate Court approved "all acts of the
executor relating to the matters in the petition and report" and
ordered the distribution of the Estate to Starkey, as Trustee of
the Family Trust. (Emphasis added.)
8. The date that Starkey was discharged as Executor
is unknown to Defendants.
ARGUMENTS
"WILL BUMPING" PROVISIONS OF
1909 COPYRIGHT ACT OVERRIDE WILL
TO VEST TITLE IN STATUTORY SUCCESSORS
A. Summary of Law.
9. Approximately ______________ of the copyrights at
issue here are subject to the Copyright Act of 1909, 23, 35
Stat. 1075 (1909) (the "1909 Act"). The 1909 Act governs
copyrights to works created prior to January 1, 1978. Works
created on or after that date are subject to the Copyright Act of
1976, 17 U.S.C. 101 et seq. (1978) (the "1976 Act").
10. The 1909 Act provides an initial term of
protection of 28 years from the date of a particular work's
publication. At the end of the initial term, the author, if then
living, or the author's successors as determined by the 1909 Act,
are entitled to renew the copyright for a second term of
protection lasting another 28 years, plus 19 additional years
added by the 1976 Act.
11. If an author survives the initial term under the
1909 Act, then, absent a prior transfer of the renewal rights, he
or she is the only person entitled to renew the copyright and
thereafter may convey the copyright free of restrictions.
However, if the author conveys the renewal rights during the
initial term and lives into the renewal period, then the author
is bound by that conveyance and cannot exercise the renewal
rights. Fred Fisher Music Publishing Co. v. M. Witmark & Sons
(1943) 318 U.S. 643. Nonetheless, if a court finds that a
particular conveyance was executed "under oppressive
circumstances," it may refuse to enforce the conveyance. Id.
12. On the other hand, if an author dies before the
renewal period, the author's conveyance of the copyright or
renewal rights, whether inter vivos or testamentary, is sharply
curtailed under the 1909 Act. Notwithstanding any terms to the
contrary in the instrument of transfer or will or other
testamentary document, such conveyance is effective only as to
the remainder of the initial term; the renewal rights and the
enjoyment of the second term of protection belong exclusively to
the then living successors determined by the 1909 Act. Miller
Music Co. v. Charles N. Daniels, Inc. (1960) 362 U.S. 373.
Similarly, if an author assigns a copyright during the author's
lifetime, but the work is not actually published until after the
author's death, the author is treated as having assigned the
copyright for the initial term only; renewal rights and second-
term protection are owned by the statutory successors. Bartok v.
Boosey & Hawkes, Inc. (2d Cir. 1975) 523 F.2d 941.
13. Under the 1909 Act, the owners of the renewal
rights to a copyright are determined at the commencement of the
renewal period. Section 24 provides that the renewal rights
belong to: ". . . the author of such
work, if still living, or
the widow, widower, or
children of the author,
if the author be not
living, or if such
author, widow, widower,
or children be not
living, then the author's
executors, or in the
absence of a will, his
next of kin . . ."
14. The widow, widower and children of the author
constitute a single class of successors. DeSylva v. Ballentine
(1956) 351 U.S. 570. A child born out of wedlock is counted as a
member of the class, providing that such child is treated as an
heir under the relevant state's intestacy law. Id. If fewer
than all members of a successor class exercise their renewal
rights, the renewal is valid and inures to the benefit of all.
Silverman v. Sunrise Pictures Corp. (2d Cir. 1923) 290 F. 804.
If an author dies testate during the initial term, leaving no
surviving spouse or children, then the only person who may renew
the copyright is the executor of the author's estate and not the
next of kin. Fox Film Corp. v. Knowles (1923) 261 U.S. 326.
However, if no one is then acting as executor, the next of kin
may exercise the renewal rights; if the copyright is not renewed
by the next of kin, then the work falls into the public domain.
Silverman v. Sunrise Pictures Corp. (2d Cir. 1923) 290 F. 804;
Capano Music v. Myers Music, Inc. (S.D.N.Y. 1985) 605 F. Supp.
692.
15. Although a third party may acquire the renewal
rights to a particular work from the apparent statutory
successors during the initial term, the assignment of such rights
likely will be deemed valid only if the conveyance was supported
by adequate consideration, the assignors received full disclosure
of their legal rights by independent counsel, and there is no
evidence of fraud, undue influence, overreaching or other
"oppressive circumstances." Nevins, 69-70; fn.80 (referring to
the invalidation of one such conveyance where no consideration
was paid).
16. If rights to a work protected under either the
1909 Act or the 1976 Act are transferred by an author during his
or her lifetime on or after January 1, 1978, then, during
specified periods, the author's statutory successors may
extinguish the transferee's interest in the work through the
exercise of a right of termination. 1976 Act 203(a) and
304(c). However, no rights of termination apply to transfers
made by will.
B. Application.
17. Due to the "will-bumping" provisions of the
Copyright Act of 1909, Defendants believe that title to
approximately _____________ of the copyrights at issue may not
have been vested in RTC at the time of the events that gave rise
to this action.
18. As demonstrated above, the renewal rights to all
copyrights subject to the 1909 Act in their initial term at the
time of Decedent's death did not pass under Decedent's Will, nor
could such renewal rights or any interest in the second term have
been licensed to RTC by Starkey, as Executor, in the License
Agreement, dated September 17, 1987. Rather, these rights
belonged to such of Mary Sue Hubbard and Decedent's children who
were living at the commencement of the renewal period for each
particular copyright. If any one of the successor class
exercised the renewal rights, then such exercise was deemed to
have been made on behalf of all of them and inured to the benefit
of all of them, including Decedent's son, Lafayette Ronald
Hubbard, Jr., if he was then living, regardless of Decedent's
disinheritance of him in the Will. Similarly, if Alexis
Hollister, reputed to be Decedent's out-of-wedlock daughter, was
living at the time of any such renewal period, then she also
could have exercised such right and shared in the royalties and
other proceeds, despite Decedent's disinheritance of her
(provided that the requisite parent/child relationship could be
established under the California Uniform Parentage Act,
commencing with Family C.
7600).
19. Although it is possible that Starkey, as Executor
or Trustee, or RTC obtained assignments of the renewal rights
from Decedent's family, including Alexis Hollister, the
circumstances and terms of such assignments must be examined to
ascertain whether valid conveyances were made. On the other
hand, if no member of the successor class exercised the renewal
rights, leaving Starkey, if he was then serving as Executor, to
exercise such rights, then inquiry must be made as to whether the
family was unduly influenced, coerced, misled or threatened to
prevent their exercise of such rights.
20. Defendants seek information through proper
discovery relating to the copyrights subject to the 1909 Act and
any purported conveyance of such copyrights and/or the renewal
rights to such copyrights. David Miscavige, who held senior
positions at Author Services, Inc., the organization responsible
for managing Decedent's literary and business affairs, from 1982
to early 1987, has unique percipient knowledge relevant to these
copyrights, and should be required to submit to deposition.
Furthermore, Defendants seek to take the depositions of Starkey,
in his capacities of Executor of the Will and Trustee of the
Family Trust, and Mary Sue Hubbard and Decedent's children,
including Alexis Hollister, as members of the successor class
under the 1909 Act, each of whom is likely to possess unique
percipient knowledge relating to these issues.
INCONSISTENCIES, DISCREPANCIES AND
UNORTHODOX ACTIONS OF EXECUTOR GIVE RISE TO
INFERENCES OF POSSIBLE FRAUD AND/OR OTHER MISCONDUCT
21. Testimony and an objective examination of
documents relating to the inter vivos and testamentary transfers
by which RTC purportedly acquired title to the assets at issue
give rise to inferences of possible fraud and/or other
misconduct. Defendants are entitled to test, through proper
discovery, whether RTC obtained its alleged title through
legitimate means, or whether the assets at issue equitably belong
to others.
A. Judgment of Final Distribution Does Not Bar Further
Proceedings.
22. Plaintiffs argue that the Judgment of Final
Distribution in the Estate conclusively established title to all
property passing from Decedent, but they disregard important
limitations. An order for final distribution in a California
probate proceeding merely passes whatever title the decedent had
at death; it does not determine that the decedent had any title
to the property distributed (Shelton v. Vance (1951) 106
Cal.App.2d 194; Romagnolo v. Romagnolo (1964) 230 Cal.App.2d
315), unless title to such property was specifically adjudicated
(Prob. C. 9860 (formerly 851.5)). An order for final
distribution is binding on all interested parties only as to the
matters that it determines. Stevens v. Torregano (1961) 192
Cal.App.2d 105. Such order is not conclusive as to contracts or
conveyances made by distributees to others. Kingsbury v. Ross
(1933) 217 Cal. 484. Even after an order for distribution
becomes final, a court may exercise its equitable powers to set
aside such order and reopen the probate upon proof of extrinsic
or collateral fraud and breach of duty arising from a fiduciary
or confidential relationship. Estate of Sanders (1985) 40 Cal.3d
607 (e.g., executor substituted himself as primary beneficiary in
new will, concealed from decedent's family which will was
submitted for probate, and misrepresented to decedent's family
that there was no need for them to become involved in settlement
of estate). Alternatively, even when fraud is discovered many
years after the decedent's death and the close of probate, the
delayed accrual rule permits a court to exercise its equitable
powers to impose a constructive trust upon assets fraudulently
obtained and order distribution to the rightful owners. Parson
v. Tickner (1995) 31 Cal.App.4th 1513 (noting that a cause of
action for fraud accrues upon the discovery of facts constituting
the fraud, at which time the three-year limitations period begins
to run).
23. Here, neither the alleged inter vivos transfers to
RTC, nor the assignments and agreements by which Starkey, as
Executor or Trustee, conveyed property to RTC, nor the
concurrences in such inter vivos and testamentary transfers
allegedly made by Decedent's heirs and beneficiaries and the
Church of Spiritual Technology ("CST") were encompassed by
the Judgment of Final Distribution, which expressly approved "all
acts of the executor relating to the matters in the petition and
report." Because none of the transfers to RTC or alleged
subsequent concurrences by Decedent's heirs and beneficiaries and
CST were included in the Executor's Report and Petition for Final
Distribution, none of those matters was rendered conclusive by
the Judgment of Final Distribution; consequently, they remain
open to inquiry and challenge by Defendants and other interested
parties. Furthermore, testimony and objective evidence of
inconsistencies, discrepancies and unorthodox actions by Starkey,
as Executor and Trustee, by Dr. Gene Denk, Decedent's personal
physician, by Sherman Lenske, Decedent's estate planning
attorney, and by other Scientologists suggest a reasonable
inference of extrinsic or collateral fraud, breach of duty
arising from a fiduciary or confidential relationship,
conversion, concealment, conspiracy, material misrepresentation
and/or other misconduct, any and all of which affect the
propriety of RTC's alleged title.
B. Inter Vivos Transfers.
24. RTC alleges that it acquired the United States
rights, including rights to trade secrets but excluding
copyrights, relating to the "Advanced Technology" from Decedent
through a document dated May 16, 1982, entitled "Assignment
Agreement (LRH/RTC)--(Advanced Technology-U.S.)," and an Addendum
thereto, bearing an effective date of January 19, 1982.
Decedent's signature was purportedly acknowledged before David
Miscavige, a notary public and senior executive in the
Scientology organizations. However, the authenticity of
Decedent's signatures on the Assignment and the Addendum is
placed in doubt by the following evidence:
a. Attached hereto is a copy of the Declaration
of a former Scientology member, Diana Voegeding, that,
during the early 1980s, Mr. Miscavige routinely
obtained signatures in his notary book from Decedent
for later use, and that Mr. Miscavige often did not
actually witness Decedent's signature on documents.
b. Attached hereto is a copy of the Declaration
of another former Scientology member, Gerald Armstrong,
dated August 12, 1983. In Paragraph 3, Mr. Armstrong
declares that it was common practice for Scientology
members to forge Decedent's signature on "letters,
contracts, legal documents and inscriptions in books."
One purpose for these forgeries was to conceal
Decedent's whereabouts. For example, Scientology
members in Clearwater, Florida, habitually signed
Decedent's name to documents sent to other
Scientologists to conceal the fact that Decedent was no
longer in that location.
c. Attached hereto is a copy of a Declaration
from a Questioned Documents Examiner,
___________________, questioning the authenticity of
Decedent's signature on the Assignment.
d. The following objective discrepancies appear
from the dates of the Assignment and the Addendum:
(1) The Assignment's notarial
acknowledgment states that Decedent signed
the Assignment on May 10, 1982, but the
Assignment is dated six days later;
(2) The Addendum, bearing an effective
date of January 19, 1982, pre-dates the
Assignment by several months; and
(3) Another document purporting to
convey rights to the Advanced Technology from
RTC to others, dated January 1, 1982, also
pre-dates the Assignment by several months.
e. Finally, David Miscavige's notary license
expired several years ago. Yet, he has not submitted
his notary books to the Los Angeles County Recorder as
required under California law, nor has he responded to
subpoenas to produce the notary books by other
defendants in other actions brought by RTC.
25. A certificate of acknowledgment of a writing is
prima facie evidence of the facts recited in the acknowledgment
and of the genuineness of the signature of the person who
purportedly signed the writing. Evid. C. 1451. This is a
rebuttable presumption affecting the burden of producing
evidence. Evid. C. 601-02 & 1450. The effect of such a
presumption is to "require the trier of fact to assume the
existence of the presumed fact unless and until evidence is
introduced which would support a finding of its nonexistence, in
which case the trier of fact shall determine the existence or
nonexistence of the presumed fact from the evidence and without
regard to the presumption. Nothing in this section shall be
construed to prevent the drawing of any inference that may be
appropriate." Evid. C. 604.
26. Defendants seek evidence with which to rebut the
presumption of the facts recited in the certificate of
acknowledgment on the Assignment and of the genuineness of
Decedent's signature thereto. As the notary in this transaction,
David Miscavige likely possesses unique percipient knowledge
relevant to these issues. Accordingly, Defendants believe that
the deposition of David Miscavige is necessary and proper in this
case.
C. Execution of Decedent's Will.
27. The circumstances surrounding Decedent's purported
execution of the Will raise questions as to whether Decedent was
the victim of fraud or undue influence or lacked testamentary
capacity at the time of such execution, any of which would
invalidate the will and affect RTC's purported title.
28. Evidence tending to show undue influence and/or
fraud include (1) the existence of a confidential relationship
between the testator and the person(s) allegedly exerting undue
influence; (2) propensity to be unduly influenced from old age,
senility, mental infirmity and the like; (3) execution of
testamentary documents unduly benefitting the person(s) allegedly
exerting undue influence; (4) unnatural testamentary provisions;
(5) testamentary provisions apparently at odds with testator's
stated intentions; (6) close relationship with person(s)
allegedly exerting undue influence and opportunity for such
exercise; (7) participation by primary beneficiaries in procuring
execution of testamentary instruments; and (8) vulnerable state
of mind because of isolation, loneliness, etc. Estate of Graves
(1927) 202 Cal. 258; Estate of Mann (1986) 184 Cal.App.3d 169;
Estate of Sarabia (1990) 221 Cal.App.3d 599; Estate of Yale
(1931) 214 Cal. 115. Evidence of a lack of testamentary capacity
includes general mental incompetence (e.g., testator's inability
to understand the nature of the testamentary act or the nature
and situation of his or her property and the inability to recall
the natural objects of the testator's bounty) and the existence
of a mental disorder (e.g., symptoms include hallucinations or
delusions which lead the testator to devise his or her property
in a way that he or she otherwise would not). Estate of Mann
(1986) 184 Cal.App.3d 169; Estate of Smith (1926) 200 Cal. 152.
29. Several of the factors described in the
immediately preceding paragraph are present in this case:
a. Decedent had been living in extreme isolation
for several years prior to his death. (He had been
separated from Mary Sue Hubbard for many years.) Only
"trusted" Scientologists knew his whereabouts and how
to communicate with him. Declaration of Gerald
Armstrong, dated August 12, 1983.
b. Decedent had contact only with
Scientologists, and Scientologists have unduly
benefitted from the Estate.
c. The dispositive provisions of the Will and
the Family Trust are contradictory. In Article Fifth
of the Will, Decedent, referring to the Family Trust,
stated: "I have also provided therein for certain
benefits for my wife." This statement, made under
penalty of perjury and witnessed, is consistent with
Decedent's prior stated intentions about Mary Sue
Hubbard under penalty of perjury in his Declaration,
dated May 15, 1983: "Although we are presently apart,
we remain husband and wife. She is fully supported by
me, and she, unlike DeWolf, is fully provided for in my
Will." However, these two statements made by Decedent
are contradicted by the following statement made by
Starkey, as Trustee of the Family Trust, as "Assignor,"
in a document entitled "Assignment and Assumption
(RTC)," dated November 29, 1993: "The agreement by and
between Assignor and L. Ron Hubbard, dated January 23,
1986, establishing Author's Family Trust-B, requires
distribution to [Church of Spiritual Technology] of all
assets held in trust by Assignor." (Emphasis added.)
The obvious inference is that the Family Trust
contained no provisions for Mary Sue Hubbard, despite
Decedent's previously stated intentions. It seems
unnatural for Decedent to disinherit Mary Sue Hubbard,
whom he fully supported during his lifetime.
d. The estate plan does not conform to
Decedent's intent as described by Decedent's estate
planning attorney, Sherman Lenske. In Paragraph 3 of
Mr. Lenske's Declaration dated November 12, 1995, he
states that he "represented Mr. L. Ron Hubbard in all
aspects of estate planning from the time he engaged me
as his attorney in approximately April 1981 until his
death on January 24, 1986, and also represented the
Executor of his Estate through the probate of his Will,
which was concluded in January 1989. All of the
documents effectuating the estate plan were drafted
either by me or under my supervision, at the direction
of Mr. Hubbard." Later, in Paragraph 10 of the
Declaration, Mr. Lenske states:
"As one part of Mr. Hubbard's estate
planning, he directed that his U.S. rights to
the Advanced Technology, exclusive of
copyrights, be conveyed to RTC at that time
[referring to the time of the May 16, 1982
Assignment] and the remainder would be
transferred to RTC following his death. The
first part of this objective was accomplished
in May 1982 when Mr. Hubbard signed the
Advanced Technology Assignment, and the
remainder was accomplished on November 30,
1988 when Norman F. Starkey, as Executor of
the Will of L. Ron Hubbard, assigned the
remainder of Mr. Hubbard's rights to the
Advanced Technology, other than the
copyrights, to RTC."
Assuming that Mr. Lenske's description of Decedent's
testamentary intent is accurate, it appears that
Decedent's intent to benefit RTC was fixed as far back
as 1982. One wonders why, then, Mr. Lenske drafted
Decedent's estate plan so that all of Decedent's assets
would pass through probate (thereby incurring
unnecessary court costs, probate referee's fees,
attorneys' fees, etc.) to a trust (strangely named the
"Author's Family Trust-B" although containing no
provisions for Decedent's family) that required
distribution of all trust assets to CST. Moreover, one
wonders why Mr. Lenske waited until Decedent was
suffering from his last illness (indeed, on the brink
of death) before having the documents executed.
e. There are significant differences between
Decedent's initials and handwriting on the Will dated
January 23, 1986, and a document purported to be a
prior will of Decedent, dated May 10, 1982.
Specifically, on both documents, a line has been typed,
with the initials "L.R.H." typed underneath the line,
in the lower, right corner of every page. On both
documents, initials have been written in the lower,
right corner on every page, but these initials differ
greatly between the two documents. In the 1982
document, the written initials extend far beneath the
line and over the typed initials, while in the 1986
document, the written initials never extend beneath the
line on the first 11 pages, except for the initials on
pages 3 and 9, which barely extend beneath the line.
Further, the initials that appear on pages 12 and 13 of
the 1986 document (the signature pages for the testator
and the witnesses, respectively) were clearly not
written by the same hand that wrote the initials on the
previous 11 pages. Finally, the testator's signatures
on the two documents do not appear to have been written
by the same hand. Unfortunately, Defendants cannot
compare the dispositive provisions of the two documents
because a blank page has been substituted in
Defendants' copy of the 1982 document for page 3, where
such provisions appear.
f. Attached hereto is a copy of the Certificate
of Death, Coroner Case Information Sheet (Supplementary
Report), Coroner's Investigation Report, Sheriff's
Office Supplementary Report, Coroner Case Information
Sheet, Certificate of Religious Belief, and Post-Mortem
Examination documents. These documents reveal the
following information: According to Decedent's
personal physician, Dr. Gene Denk, who had lived with
Decedent for the past two years, Decedent had displayed
signs of Dysphrasia for eight days before he died and
had suffered a stroke about seven days before he died.
Decedent's Will and the Family Trust were dated January
23, 1986, the day before he died. Although Decedent
was found dead at approximately 8:00 p.m. on January
24, 1986, the death was not reported until a funeral
chapel was contacted at 7:30 a.m. the next morning.
The excuse offered for the delay by Dr. Denk and Earle
Cooley, an attorney, who seem to be the only persons
present at Decedent's home when the funeral chapel was
contacted, was that "they wanted to get the will
together and expedite the procedures for cremation of
Mr. Hubbard's remains." Upon hearing the date of
the Will and Dr. Denk's report of the Decedent's
clinical history, Jon Hines, the Chief Deputy Coroner,
immediately questioned whether Decedent had been in
sound mind at the time he signed the Will since
Decedent's clinical history indicated possible
neurological problems. Mr. Hines later compared the
1986 Will with a copy of Decedent's 1982 will and the
1983 codicil thereto, and remarked in his report that
"The contents of the 1982 Will were basically the same
as the most recent Will." The post-mortem
examination revealed 10 recent needle marks in the
Decedent's gluteal area. Precluded from performing an
autopsy on the basis of Decedent's religious beliefs
set forth in a witnessed document entitled "Certificate
of Religious Belief," dated January 20, 1986, a
toxicology examination was conducted instead.
30. Plaintiffs allege that title passed to RTC either
through the May 16, 1982 Assignment and the Addendum thereto, or
if not, then pursuant to an exclusive License Agreement, dated
September 17, 1987, a document entitled "Advanced Technology
Covenant-Estate/RTC," dated November 30, 1988, and a document
entitled "Addendum to Advanced Technology Covenant-Estate/RTC,"
dated May 13, 1991," executed by Starkey, as Executor or as
Trustee of the Family Trust. However, if the Will was procured
by fraud or undue influence, or is invalid due to Decedent's lack
of testamentary capacity, then Starkey's actions as Executor and
as Trustee must be reexamined by a California probate court.
Defendants believe that such examination will conclude that
Starkey lacked the authority to transfer assets to RTC, thereby
defeating RTC's claims to title.
31. In light of the reasonable questions raised by the
foregoing as to the validity of the Will, Defendants believe that
it is necessary and proper to take the depositions of Norman F.
Starkey, Sherman Lenske, Mary Sue Hubbard, each of the surviving
descendants' of L. Ron Hubbard, Earle Cooley, Dr. Gene Denk,
David Miscavige (as head of RTC and CST at the time of Decedent's
death), Patrick D. Broeker and Anne M. Broeker (as witnesses to
both the 1982 Will and the 1986 Will), Stephen J. Pfauth (as
witness to the 1986 Will), and the fourth witness to the 1986
Will whose name Defendants have not yet ascertained, to inquire
into the circumstances of Decedent's death, execution of the
Will, Decedent's testamentary intent, and mental and physical
health.
D. Probate of Decedent's Will.
32. Even in the absence of a timely action, proof of
extrinsic fraud or breach of duty arising from a fiduciary or
confidential relationship warrants a court's exercise of its
equitable powers to set aside orders and decrees in probate
proceedings. Estate of Sanders (1985) 40 Cal.3d 607. The
Sanders court noted that "[t]he courts are particularly likely to
grant relief from a judgment where there has been a violation of
a special or fiduciary relationship." Id. at 615. "The
fiduciary relationship carries a duty of full disclosure, and
application of the discovery rule `prevents the fiduciary from
obtaining immunity for an initial breach of duty by a subsequent
breach of the obligation of disclosure.'" Parsons v. Tickner
(1995) 31 Cal.App.4th 1513, 1526 (citing Neel v. Magana, Olney,
Levy, Cathcart & Gelfand (1971) 6 Cal.3d 176, 189).
33. As demonstrated below, testimony and objective
evidence of inconsistencies, discrepancies and unorthodox actions
by Starkey, as Executor and Trustee, by CST, as a charitable
organization and the only beneficiary of the Family Trust, and by
RTC suggest possible extrinsic or collateral fraud, breach of
duty arising from a fiduciary or confidential relationship,
conversion, concealment, conspiracy, material misrepresentation
and/or other misconduct, any and all of which affect the
propriety of RTC's alleged title.
(1) Noncompliance With Notice Requirements Violates Due
Process and Deprives Probate Court of Jurisdiction.
34. If an order made by a probate court is based upon
defective notice, then such order exceeds the probate court's
jurisdiction and is open to collateral attack. Mennonite Bd. of
Missions v. Adams (1983) 462 U.S. 791; Tulsa Prof. Collection
Services, Inc. v. Pope (1988) 485 U.S. 478; Estate of Jenanyan
(1982) 31 Cal.3d 703. In Decedent's Estate, proper notice
required not only compliance with former Probate Code 328
(applicable in 1986), requiring that each heir of the testator,
among others, receive notice of the hearing on the Petition for
Probate, but also with constitutional minimum due process
standards intended to ensure that no one is deprived of property
without due process of law. To satisfy such minimum due process
standards, notice must also be served upon each interested person
(including heirs, beneficiaries and potential claimants) whose
whereabouts are known or reasonably ascertainable. Mullane v.
Central Hanover Bank & Trust Co. (1950) 339 U.S. 306; Tulsa Prof.
Collection Services, Inc. v. Pope (1988) 485 U.S. 478; Mennonite
Bd. of Missions v. Adams (1983) 462 U.S. 791. Such notice may be
made by personal service or by mail to a residence or mailing
address, or, if a person entitled to notice cannot be found, to
the county seat of the county where the probate proceeding is
pending. Former Prob. C. 328.
35. The following objective facts suggest that notice
may not have been properly given in the Estate, possibly leaving
the Judgment of Final Distribution open to attack:
a. Starkey signed the Petition for Probate under
penalty of perjury, declaring that "the foregoing is
true and correct." Starkey's declaration applied to
Item 8 of the Petition for Probate, which consists of a
statement that "Listed in attachment 8 are the names,
relationships, ages, and residence or mailing addresses
of all persons mentioned in decedent's will and
codicils, whether living or deceased, . . ." (Emphasis
added.) However, Alexis Hollister, commonly known to
be Decedent's out-of-wedlock daughter and prominently
mentioned in the disinheritance clause of the Will, is
not listed in attachment 8 of the Petition for Probate.
The obvious inference is that Alexis Hollister did not
receive notice of the probate proceedings due to
Starkey's active concealment.
b. In the Coroner's Investigation Report, Jon
Hines, the Chief Deputy Coroner, wrote that Earle
Cooley, Decedent's attorney, informed him that Norman
F. Starkey was named as Executor in the Will and that
Starkey's address was "1404 N. Catalina St., Hollywood,
CA." As evidenced in attachment 8 to the Petition for
Probate, Starkey served notice upon three of Decedent's
children at his own address--1404 No. Catalina, Los
Angeles, CA 90029.
c. Starkey served notice upon Mary Sue Hubbard
at P.O. Box 85130, Los Angeles, CA 90072. Oddly,
service upon one of Decedent's daughters, Katherine May
Hubbard Gillespie (who had been disinherited in at
least two of Decedent's prior wills), was made "in care
of" the same post office box.
(2) Mary Sue Hubbard's Possible Equitable Ownership in
Assets Now Held by RTC.
36. As noted above, Article Third of the Will recites
Decedent's intention "to dispose of all property, whether real,
personal or mixed, of whatsoever kind and character . . ."
Noticeably absent is a statement regarding the community
property, quasi-community property and/or separate property
character of the Estate, or the existence of a marital or
premarital property agreement. Such a statement typically
appears in a married testator's will, especially when, as here,
the marriage was of long duration and the value of the Estate,
appraised as of January 24, 1986, exceeded $26,300,000.
37. Although the language of Article Third of the Will
does not preclude the existence of community property, Starkey,
as Executor, alleged to the Probate Court in Paragraph 11 of the
Executor's Report and Petition for Final Distribution that "The
whole of the estate is decedent's separate property." The
Probate Court found accordingly in its Judgment of Final
Distribution.
38. One wonders how the entire Estate was determined
to be Decedent's separate property, whether Mary Sue Hubbard was
consulted in that determination, and whether Mary Sue Hubbard was
advised by independent counsel as to the possible existence of
community property or quasi-community property. If the Estate
actually consisted in whole or in part of community property or
quasi-community property, then Decedent did not have the power to
convey Mary Sue Hubbard's one-half interest therein, and such
property was improperly included as Estate property.
Consequently, Mary Sue Hubbard may be the equitable owner of a
portion of the property now claimed by RTC.
39. One also wonders whether Mary Sue Hubbard was
advised by independent counsel of her right to "recapture" one-
half of any quasi-community property transferred by Decedent
without her consent during his lifetime. Prob. C. 102. If,
for example, any of the assets conveyed pursuant to the May 16,
1982 Assignment and the Addendum thereto was quasi-community
property, then Mary Sue Hubbard may be the equitable owner of a
portion of such property.
40. Finally, it is clear from Article Fifth of the
Will and from Decedent's Declaration dated May 15, 1983, that
Decedent intended to provide for Mary Sue Hubbard. But,
according to Starkey, the terms of the Family Trust directed that
the entire trust estate was to be distributed to CST instead.
Although Mary Sue Hubbard was married to Decedent at the time
that he executed the Will, she may have been able to prevail in
claiming the share of a pretermitted spouse under Probate Code
6560. That section awards an intestate share to a surviving
spouse who was not married to a decedent at the time Decedent
executed a will and who was not provided for in the will through
oversight, accident, inadvertence or mistake. Whether or not
Mary Sue Hubbard was aware of her rights and what representations
may have been made to her on this subject remain unknown, but it
is possible that she may be the equitable owner of up to one-half
of Decedent's separate property.
(3) Starkey, as Executor, Concealed From the Probate Court
the Assignment of Estate Assets to RTC to Avoid Court Inquiry.
41. Probate Code 1020.1 (operative July 1, 1988)
provides that, the court, prior to distribution of any estate
property to any assignee or transferee of any beneficiary
pursuant to the beneficiary's agreement, request or instructions,
may "inquire into the consideration . . . and
into the circumstances surrounding the
execution of such assignment, transfer,
agreement, request or instructions and if it
finds that the fees, charges or consideration
paid . . . is grossly unreasonable or that
any such assignment, transfer, agreement,
request or instructions was obtained by
duress, fraud or undue influence it may
refuse to make distribution pursuant thereto
except upon such terms as it deems just and
equitable."
42. Despite the terms of the Will directing
distribution of all Estate property to the Family Trust, Starkey,
as Executor, purportedly gave RTC all foreign rights in the
Advanced Technology by a document entitled "Advanced Technology
Covenant--Estate/RTC," dated November 30, 1988, as modified by an
Addendum thereto, dated May 13, 1991. However, Starkey
failed to disclose this assignment to the Probate Court prior to
the conveyance, as required by Probate Code 1020.1. Nor did he
make any such disclosure in the Executor's Report and Petition
for Final Distribution. In fact, he alleged that "[n]o
preliminary distributions have been made," leaving the Probate
Court with the impression that all assets of the Estate were
still in his possession. He continued the pretense by praying
that all estate assets be distributed to himself, as Trustee of
the Family Trust, and even listed such assets for the Probate
Court as though all such assets still belonged to the Estate.
The obvious inference is that Starkey did not want this
conveyance to be examined too closely.
(4) Starkey, as Executor, Failed to Provide CST With Notice
of Assignment and Notice of Executor's Report and Petition for
Final Distribution.
43. Probate Code 10532 (operative July 1, 1988)
requires the personal representative to give Notice of Proposed
Action to interested persons prior to entering into any contract
that by its terms will not be fully performed within two years.
Such Notice must set forth the material terms of the contract and
identify the persons involved in the contract, so that an
interested person has an opportunity to object to the proposed
contract. Prob. C. 10585. Probate Code 1208 (operative July
1, 1988) provides that, if the personal representative and the
trustee are the same person, then notice shall be given to the
beneficiaries of the trust instead of the trustee.
44. There is no indication that Starkey, as Executor,
complied with Probate Code 1208 and 10532. In fact, in
Paragraph 23 of the Declaration of Sherman Lenske, dated November
12, 1995, Mr. Lenske asserts that "[t]he exclusive copyright
license and the assignment of November 30, 1988 were confirmed by
the primary beneficiary of Mr. Hubbard's estate, Church of
Spiritual Technology (CST), after the estate was distributed."
(Emphasis added.) Furthermore, Starkey failed to provide CST
with notice of the hearing on the Executor's Report and Petition
for Final Distribution. According to the Notice of Hearing,
filed December 15, 1988, notice was served only upon Starkey
himself, as Executor and as Trustee of the Family Trust. Again,
one may draw the inference that Starkey wanted to accomplish his
purposes without inquiry from anyone.
(5) CST's Joining in Assignment of Assets to RTC
Constitutes a Breach of Charitable Trust.
45. As stated in the immediately preceding paragraph,
CST confirmed the assignment of all the assets of the Estate to
RTC. In doing so, CST breached its trust to use all assets
received by it for the persons and purposes for which it was
formed, and likely jeopardized its tax-exempt status, as well.
See San Diego Council, Boy Scouts of America v. City of Escondido
(1971) 14 Cal.App.3d 189. Standing to enforce a California
charitable trust generally belongs to the California Attorney
General, but "[t]here is no rule or policy against supplementing
the Attorney General's power of enforcement by allowing other
responsible individuals to sue in behalf of the charity. The
administration of charitable trusts stands only to benefit if in
addition to the Attorney General other suitable means of
enforcement are available." Id. at 195.
46. If CST's affirmance of the assignment of assets to
RTC was in violation of its charitable purposes, then it is
possible that CST is the equitable owner of the assets in
dispute.
(6) Discrepancy Between Law and Motion Calendar and
Judgment of Final Distribution.
47. The Law and Motion Calendar for January 3, 1989,
notes that the Executor's Report and Petition for Final
Distribution was heard before Judge William R. Fredman. However,
the Judgment of Final Distribution states that such hearing
occurred before the Honorable Barry Hammer, Judge Presiding.
Here, again, is an unexplained discrepancy.
CONCLUSION
For the foregoing reasons, the discovery sought by
Defendants is necessary and proper to explore numerous
contradictions, discrepancies and unorthodox actions of the
various parties involved in the series of transactions by which
RTC and/or BPI allegedly acquired the alleged copyrights and
trade secrets at issue. Only by means of such discovery can
Defendants ascertain whether or not RTC and BPI have the capacity
to bring this action.
Dated this ___ day of April, 1997
Respectfully submitted,
MUSICK, PEELER & GARRETT LLP
By:
Graham E. Berry
One Wilshire Boulevard
Suite 2100
Los Angeles, CA 90017
A