In re the Michael Aboud & Betty Jo Aboud Inter Vivos Trust

314 P.3d 941, 129 Nev. 915, 2013 WL 6689414
CourtNevada Supreme Court
DecidedDecember 19, 2013
DocketNo. 55303
StatusPublished
Cited by6 cases

This text of 314 P.3d 941 (In re the Michael Aboud & Betty Jo Aboud Inter Vivos Trust) is published on Counsel Stack Legal Research, covering Nevada Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re the Michael Aboud & Betty Jo Aboud Inter Vivos Trust, 314 P.3d 941, 129 Nev. 915, 2013 WL 6689414 (Neb. 2013).

Opinion

OPINION

By the Court,

Hardesty, J.:

This appeal and cross-appeal concern trust property that was transferred from the trust to a limited partnership for consideration and by consent of all of the trust beneficiaries. Subsequently, the partnership transferred the property to a third-party business. We must now determine whether the in rem jurisdiction over trust assets conferred upon a district court by NRS 164.010(1) and NRS 164.015(6) permits that court to impose a constructive trust on this previous trust property based on the alleged improper transfer made by the partnership to the third party. We also must address whether the district court erred by entering a personal monetary judgment against the former trustee and the third party holding former trust assets based on the district court’s in rem jurisdiction.

Because in rem jurisdiction only extends to property and the disputed assets were no longer trust property after they were transferred to the limited partnership, we conclude that NRS 164.010(1) and NRS 164.015(6) did not confer jurisdiction upon the district court to enter a constructive trust on those assets and a personal monetary judgment against the former trastee and third-party company. Because the claims against the former trustee arose from alleged breaches of fiduciary duties to the limited partnership and not to the trust, the district court erred by entering a personal judgment against the former trustee in a trust accounting action.

FACTS

In 1979, Betty Jo and Michael Aboud, a married couple, created an inter vivos trust, which they amended in 1983 and again in [917]*9171993. The inter vivos trust’s assets consisted of various real property and a restaurant known as The Griddle.

Michael Aboud died in 1998, and, pursuant to the trust’s terms, the trust assets were divided and distributed into a survivor’s trust and an irrevocable residual trust. The residual trust named as beneficiaries the couple’s four adult children: appellant/ cross-respondent David Braheem Aboud, respondent Michael J. Aboud, respondent/cross-appellant Michelle Rae Aboud Sheppard, and Robin Maureen Aboud Gonzales.1 Betty Jo and Michael Sheppard, Michelle’s husband, were the successor co-trustees of both trusts.

On the advice of estate planning counsel, Betty Jo and the Aboud children created the Aboud Family Partners Limited Partnership in 1999. Its primary purpose was to own, develop, lease, manage, and sell real property. The partnership agreement named Betty Jo, Michael Sheppard, and the survivor’s trust as general partners. Pursuant to the terms of the agreement, the general partners had exclusive authority to transfer and control the partnership assets. The residual trust and the other Aboud family members, including Michelle, were limited partners who did not have the right to participate in partnership business. Notably, the partnership agreement also contained a clause requiring binding arbitration for “[a]ny controversy or claim arising under this Partnership Agreement.”

In December 2000, Betty Jo and Michael Sheppard, as co-trustees of both the survivor’s trust and the residual trust, transferred all of the trusts’ assets to the partnership, including The Griddle restaurant. In exchange for the transfer, the residual trust received a 49.18% share in the partnership, and the survivor’s trust received a 28.62% interest in the partnership. All of the beneficiaries to the trusts, including Michelle, consented to this transaction.

In 2001, Michael Sheppard resigned as co-trustee of the trusts and as general partner of the partnership. The partnership agreement was amended to name Betty Jo and the survivor’s trust as general partners with the ability to control the partnership assets.

In September 2005, Betty Jo, acting as general partner both individually and as successor trustee of the survivor’s trust, transferred all of the Aboud Family Partners Limited Partnership’s assets, with the exception of The Griddle restaurant, to I.C.A.N., a Nevada corporation formed by David Aboud, who was the sole shareholder. I.C.A.N. Foods, Inc., paid for the assets by executing two promissory notes and David’s renunciation of his beneficial interest in the residual trust. The transfer occurred without the [918]*918knowledge or consent of the remaining residual trust beneficiaries. That same year, Betty Jo, again acting as general partner, also transferred The Griddle from the partnership to I.C.A.N. for no monetary consideration.

In 2006, Betty Jo resigned as trustee of the residual trust and Ashley Hickey, David’s girlfriend, became the sole successor trustee. Shortly thereafter, Michelle filed a petition in the district court requesting that the court assume jurisdiction of the residual trust and require Ashley to perform an accounting of trust assets. The district court assumed jurisdiction of the trust and ordered an accounting. Ashley performed an accounting for the trust for 1999 through 2005, noting that the transactions occurred before she became successor trustee.

After Ashley performed the accounting, Michelle filed a petition to remove Ashley as trustee on the grounds that Ashley did not properly perform the accounting, had a conflict of interest, and had breached her fiduciary duties to the trust by engaging in self-dealing. Michelle sought to have Michael Sheppard appointed as trustee and for Michael Sheppard to perform an accounting. In response, Ashley argued that Betty Jo, not Ashley, was trustee during the time period in which Michelle claims that the alleged self-dealing occurred. Michelle acknowledged this fact in her response and alleged that Betty Jo may have breached her fiduciary duties to the residual trust by failing to properly account for trust property.

Before the district court ruled on this motion, Michelle filed another motion seeking a temporary restraining order and a preliminary injunction to protect the residual trust’s assets. She argued that Ashley had also allegedly breached her fiduciary duty to the trust by failing to disclose that I.C.A.N. had recently used some of the former partnership assets to secure a loan. Michelle requested that the district court freeze both the trust assets and the partnership assets, remove Ashley as trustee, audit the residual trust’s finances, and impose a preliminary injunction.

In Ashley’s opposition, she argued that Michelle, “as a limited partner, simply has no grounds for seeking judicial review” of Betty Jo’s decision as general partner to transfer The Griddle to I.C.A.N. because the terms of the partnership agreement prohibited limited partners from participating in partnership affairs. Ashley further argued that Michelle was clearly attempting to seek judicial review of Betty Jo’s business decision and that Michelle “may be seeking to avoid the arbitration provisions of the partnership agreement by styling her action as a trust case.” Betty Jo joined in this opposition. In response, Michelle argued that Betty Jo owed a fiduciary duty to the residual trust because the residual trust was a limited partner in the Aboud Family Partners Limited Partnership.

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Cite This Page — Counsel Stack

Bluebook (online)
314 P.3d 941, 129 Nev. 915, 2013 WL 6689414, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-the-michael-aboud-betty-jo-aboud-inter-vivos-trust-nev-2013.