Source: https://casetext.com/case/klabacka-v-nelson
Timestamp: 2018-12-15 01:06:24
Document Index: 217336212

Matched Legal Cases: ['§ 29', '§ 30', '§ 21', '§ 30', '§ 55', '§ 4', '§ 59', '§ 1']

Klabacka v. Nelson, 394 P.3d 940 | Casetext
394 P.3d 940 (Nev. 2017)
SUPREME COURT OF THE STATE OF NEVADAMay 25, 2017
TransFirst Grp. Inc. v. Magliarditi
…A. Spendthrift TrustsThe defendants have identified an intervening change in the law with respect to…
TransFirst Grp., Inc. v. Magliarditi
…In doing so, I made several predictions about Nevada law which have become the subject of a motion for…
No. 66772 No. 68292
Matt KLABACKA, Distribution Trustee of the Eric L. Nelson Nevada Trust Dated May 30, 2001, Appellant/Cross–Respondent, v. Lynita Sue NELSON, Individually and in her Capacity as Investment Trustee of the LSN Nevada Trust Dated May 30, 2001; and Eric L. Nelson, Individually and in his Capacity as Investment Trustee of the Eric L. Nelson Nevada Trust Dated May 30, 2001, Respondents/Cross–Appellants. Matt Klabacka, as Distribution Trustee of the Eric L. Nelson Nevada Trust Dated May 30, 2001, Appellants, v. Eric L. Nelson; Lynita Sue Nelson, Individually; and LSN Nevada Trust Dated May 30, 2001, Respondents.
Solomon Dwiggins & Freer, Ltd., and Jeffrey P. Luszeck and Mark A. Solomon, Las Vegas, for Matt Klabacka, distribution trustee of the Eric L. Nelson Nevada Trust. Dickerson Law Group and Josef M. Karacsonyi, Robert P. Dickerson, and Katherine L. Provost, Las Vegas, for Lynita Sue Nelson, individually and in her capacity as investment trustee of the LSN Nevada Trust. Rhonda K. Forsberg, Chtd., and Rhonda K. Forsberg, Henderson, for Eric L. Nelson, individually and in his capacity as investment trustee of the Eric L. Nelson Nevada Trust.
No property (income or principal) distributable under this Trust Agreement,... shall be subject to anticipation or assignment by
any beneficiary, or to attachment by or of the interference or control of any creditor or assignee of any beneficiary, or be taken or reached by any legal or equitable process in satisfaction of any debt or liability of any beneficiary, and any attempted transfer or encumbrance of any interest in such property by any beneficiary hereunder shall be absolutely and wholly void.
Both trust agreements named Lana Martin, a Nevada resident, as the initial distribution trustee. The parties' respective trusts give them the right to veto any distribution and require that the distribution trustee provide ten days' notice of any impending distribution.
Additionally, the district court found "that the testimony of the parties clearly established that the intent of creating the spendthrift trusts was to provide maximum protection from creditors and was not intended to be a property settlement in the event that the parties divorced." The district court based these findings, in large part, on testimony that purportedly established: (1) the parties intended to occasionally "level off the trusts ," (2) the trust assets had become community property through Eric's comingling, (3) Lynita had delegated her role as investment trustee to Eric, and (4) an oral transmutation agreement occurred between the parties to transmute the separate property back into community property.
The decree disposed of all property, with the exception of Wyoming Downs, an asset purchased during the pendency of the divorce. A corporate entity owned by Lynita's Trust loaned Eric's Trust money toward the purchase price of Wyoming Downs, and Eric's Trust subsequently purchased the property. Eric testified this loan was paid back. The district court noted it was "without sufficient information" to make a determination regarding the disposition of Wyoming Downs at the time it issued the decree, and therefore, did not make any findings or decisions as to the disposition of the property in the decree. On September 22, 2014, the district court disposed of Wyoming Downs, thereby making its judgment final. Eric and Eric's Trust subsequently filed their first notice of appeal.
Subject matter jurisdiction is a question of law we review de novo. Ogawa v. Ogawa , 125 Nev. 660, 667, 221 P.3d 699, 704 (2009). "[I]f the district court lacks subject matter jurisdiction, the judgment is rendered void." Landreth v. Malik , 127 Nev. 175, 179, 251 P.3d 163, 166 (2011).
Additionally, under NRS 164.015(1), "[t]he court has exclusive jurisdiction of proceedings initiated by the petition of an interested person concerning the internal affairs of a nontestamentary trust." As used in both statutes, "court" is defined as "a district court of this State sitting in probate or otherwise adjudicating matters pursuant to this title." NRS 132.116 ; see also NRS 164.005 (applying NRS 132.116 to trust proceedings under Title 13).
We conclude that this case was not initiated for the purpose of enforcing or determining a spendthrift beneficiary's rights under NRS 164.120(2) or determining the internal affairs of a nontestamentary trust under NRS 164.015(1). Rather, the case was initiated as a divorce proceeding under NRS Chapter 125. Whether a family court has subject-matter jurisdiction in divorce proceedings involving issues outside the scope of NRS 3.223 has been firmly decided by this court. In Landreth , this court held a "district court judge sitting in the family court division did not lack the power and authority to dispose of [a] case merely because it involved a subject matter outside the scope of NRS 3.223." 127 Nev. at 180–81, 251 P.3d at 167. The claims at issue here are no different. Accordingly, we reach the same result as we did in Landreth — we conclude that the family court had subject-matter jurisdiction over all claims brought in the Nelsons' divorce, including those relating to property held within the SSSTs.
Next, we examine the validity of the SPA and the SSST agreements. "When the facts in a case are not in dispute, contract interpretation is a question of law, which this court reviews de novo." Lehrer McGovern Bovis, Inc. v. Bullock Insulation, Inc. , 124 Nev. 1102, 1115, 197 P.3d 1032, 1041 (2008). Both the SPA and the parties' respective SSSTs were signed, written agreements. We hold the written instruments at issue here are all valid and the terms therein are unambiguous.
NRS 123.220(1) provides that "[a]ll property, other than [separate property outlined] in NRS 123.130, acquired after marriage by either husband or wife, or both, is community property unless otherwise provided by ... [a ]n agreement in writing between the spouses ." (Emphasis added.) Additionally, "[w]here a written contract is clear and unambiguous on its face, extraneous evidence cannot be introduced to explain its meaning." Kaldi v. Farmers Ins. Exch. , 117 Nev. 273, 281, 21 P.3d 16, 21 (2001) (internal quotation marks omitted). "Extrinsic or parol evidence is not admissible to contradict or vary the terms of an unambiguous written instrument, since all prior negotiations and agreements are deemed to have been merged therein." Frei v. Goodsell , 129 Nev. 403, 409, 305 P.3d 70, 73 (2013) (internal quotation marks omitted).
To determine the validity of the trusts, one must first look to the words of the trust agreement to determine if the settlor had the intent to create a spendthrift trust. 76 Am. Jur. 2d Trusts § 29 (2016). Accordingly, "courts look first and foremost to the language in the trust and interpret that language to effectuate the intent of the settlors." Id. If a trust's language is plain and unambiguous, then courts determine intent from this language alone. Id. § 30.
On the contrary, if the meaning of the writing is uncertain, incomplete, or ambiguous, parol evidence of the circumstances is admissible to determine the settlor's intent. Restatement (Third) of Trusts § 21 cmt. a (Am. Law Inst. 2003). However, "parol evidence is not admissible to contradict or vary the terms of an unambiguous written instrument." Frei , 129 Nev. at 409, 305 P.3d at 73.
A plain reading of the written terms of Eric's Trust agreement reveals the following: Eric's Trust has a spendthrift provision, manifesting a plain and unambiguous intent to create a spendthrift trust, in accordance with NRS 166.050 ; Eric's Trust names Lana Martin, a Nevada resident, as distribution trustee, satisfying NRS 166.015(2)(a) ; the trust agreement is in writing, and the trust is irrevocable; and there is no requirement that any part of the trust's income or principal be distributed to the settlor. Finally, there is no evidence that the trust was created to hinder, delay, or defraud known creditors. Thus, we hold Eric's Trust is a valid Nevada SSST.
Eric's Trust retained a certified public accountant to prepare a report tracing the assets within the two trusts. However, as noted by the district court, the certified public accountant maintained a business relationship with Eric and Eric's Trust for more than a decade. Although the certified public accountant's report concluded that there was "no evidence that any community property was transferred to [Eric's Trust] or that any community property was commingled with the assets of [Eric's Trust]," the district court found the report and corresponding testimony to be unreliable and of little probative value. We recognize that the district court is in the best position to weigh the credibility of witnesses, and we will not substitute our judgment for that of the district court here. See In re Parental Rights as to J.D.N. , 128 Nev. 462, 477, 283 P.3d 842, 852 (2012). However, the subject of the certified public accountant's report—the tracing of trust assets, specifically any potential commingling of trust assets with personal assets—must still be performed. See Schmanski v. Schmanski , 115 Nev. 247, 984 P.2d 752 (1999) (discussing transmutation of separate property and tracing trust assets in divorce). Without proper tracing, the district court is left with only the parties' testimony regarding the characterization of the property, which carries no weight. See Peters v. Peters , 92 Nev. 687, 692, 557 P.2d 713, 716 (1976) ("The opinion of either spouse as to whether property is separate or community is of no weight [whatsoever]."). Accordingly, we conclude the district court erred by not tracing the assets contained within the trusts, either through a reliable expert or other available means. Separate property contained within the spendthrift trusts is not subject to attachment or execution, as discussed below. However, if community property exists within the trusts, the district court shall make an equal distribution of that community property. See NRS 125.150(1)(b).
Despite recognizing the validity of the SPA and SSSTs in the decree, the district court made several missteps in fashioning the ultimate distribution of property, namely: (1) considering parol evidence to determine the parties' intent, despite the written instruments at issue being unambiguous; (2) equalizing assets held within the valid SSSTs; and (3) ordering Eric's personal obligations to be paid by a trust for which he is a beneficiary. The district court erred by using parol evidence to determine the intent of the parties' respective trusts
"Where a written contract is clear and unambiguous on its face, extraneous evidence cannot be introduced to explain its meaning." Kaldi , 117 Nev. at 281, 21 P.3d at 21 (internal quotation marks omitted). "Extrinsic or parol evidence is not admissible to contradict or vary the terms of an unambiguous written instrument, since all prior negotiations and agreements are deemed to have been merged therein." Frei , 129 Nev. at 409, 305 P.3d at 73 (internal quotation marks omitted). This court "review[s] a district court's decision to admit or exclude evidence for abuse of discretion, and we will not interfere with the district court's exercise of its discretion absent a showing of palpable abuse." Id. at 408–09, 305 P.3d at 73.
Here, both Eric's Trust and Lynita's Trust are valid Nevada SSSTs with plain, unambiguous language indicating a clear intent to create a spendthrift trust. Where, as here, a valid SSST agreement is clear and unambiguous, the district court may not consider the parties' testimony regarding their purported intent when fashioning remedies related to that SSST. 76 Am. Jur. 2d Trusts § 30 (2016). The parties' inconsistent testimony regarding the purported community or separate property characterization of the trust assets carries no weight and should not have been considered when the district court fashioned the property division. See Peters , 92 Nev. at 692, 557 P.2d at 716. Accordingly, the district court was precluded from considering this extrinsic evidence to discern the parties' intent, and the district court abused its discretion in doing so.
This court defers to a district court's findings of fact and will only disturb them if they are not supported by substantial evidence. Ogawa , 125 Nev. at 668, 221 P.3d at 704. Questions of law, including statutory interpretation, are reviewed de novo. Waldman v. Maini , 124 Nev. 1121, 1136, 195 P.3d 850, 860 (2008).
NRS Chapters 163 and 166 evince a clear intention to protect spendthrift trust assets against court order. NRS 163.417(1)(c)(1) provides that "a court may not order the exercise of... [a] trustee's discretion to ... [d]istribute any discretionary interest." Additionally, NRS 166.120(2) provides in relevant part:
The district court also ordered Eric's Trust to satisfy Eric's personal obligations—specifically, Eric's child- and spousal-support arrears. In doing so, the district court relied upon SSST statutes from South Dakota and Wyoming, as well as caselaw from Florida, which specifically allow for SSST assets to be reached to satisfy child and spousal support. The statutes and caselaw relied upon by the district court annunciate public policy concerns for allowing spendthrift trusts to be reached for child and spousal support. See Gilbert v. Gilbert , 447 So.2d 299, 301 (Fla. Dist. Ct. App. 1984) ("The cardinal rule of construction in trusts is to determine the intention of the settlor and give effect to his wishes. ... On the other hand, there is a strong public policy argument which favors subjecting the interest of the beneficiary of a trust to a claim for alimony. ... [T]he obligation to pay alimony is a duty, not a debt." (internal quotation marks omitted)); see also S.D. Codified Laws § 55-16-15(1) (2016) (providing that many of South Dakota's statutory spendthrift trust protections "do[ ] not apply in any respect to any person to whom at the time of transfer the transferor is indebted on account of an agreement or order of court for the payment of support or alimony in favor of the transferor's spouse, former spouse, or children, or for a division or distribution of property in favor of the transferor's spouse or former spouse, to the extent of the debt"); Wyo. Stat. Ann. § 4-10-503(b) (2015) ("Even if a trust contains a spendthrift provision, a person who has a judgment or court order against the beneficiary for child support or maintenance may obtain from a court an order attaching present or future distributions to, or for the benefit of, the beneficiary."). The district court also cites to the Restatement (Third) of Trusts § 59 (Am. Law Inst. 2003), which provides "[t]he interest of a beneficiary in a valid spendthrift trust can be reached in satisfaction of an enforceable claim against the beneficiary for ... support of a child, spouse, or former spouse."
We conclude the district court's order runs contrary to Nevada law. Despite the public policy rationale used in the other jurisdictions, Nevada statutes explicitly protect spendthrift trust assets from the personal obligations of beneficiaries. Indeed, "[p]rovision for the [spendthrift trust] beneficiary will be for the support, education, maintenance and benefit of the beneficiary alone, and without reference to ... the needs of any other person, whether dependent upon the beneficiary or not. " NRS 166.090(1) (emphasis added).
This rigid scheme makes Nevada's self-settled spendthrift framework unique; indeed, the "key difference" among Nevada's self-settled spendthrift statutes and statutes of other states with SSSTs, including Florida, South Dakota, and Wyoming, "is that Nevada abandoned the interests of child- and spousal-support creditors, as well as involuntary tort creditors," seemingly in an effort to "attract the trust business of those individuals seeking maximum asset protection." Michael Sjuggerud, Defeating the Self–Settled Spendthrift Trust in Bankruptcy , 28 Fla. St. U. L. Rev. 977, 986 (2001).
We conclude Nevada SSSTs are protected against the court-ordered child-support or spousal-support obligations of the settlor/beneficiary that are not known at the time the trust is created. Here, Eric's child-and spousal-support obligations were not known at the time the trust was created. Accordingly, the district court abused its discretion in ordering Eric's Trust to pay Eric's child- and spousal-support arrears. We further conclude the child- and spousal-support exception articulated in section 59 of the Third Restatement of Trusts is inconsistent with Nevada's statutory framework and the legislative history of NRS Chapter 166, and we expressly reject that exception here.
The district court "[m]ay award such alimony ... in a specified principal sum or as specified periodic payments, as appears just and equitable." NRS 125.150(1)(a). Additionally, this court reviews an award of spousal support for an abuse of the discretion. Gardner v. Gardner , 110 Nev. 1053, 1055–56, 881 P.2d 645, 646 (1994) ; see also Williams v. Waldman , 108 Nev. 466, 471, 836 P.2d 614, 617 (1992) (noting this court generally affirms district courts' rulings in divorce proceedings where supported by substantial evidence and free from appearance of abuse of discretion).
We conclude the district court did not abuse its discretion in awarding spousal support. The district court properly considered the factors under NRS 125.150(9). Additionally, the court has discretion to award spousal support as a lump sum or a periodic payment, and, here, we conclude the district court did not abuse that discretion in awarding a lump sum. See Sargeant v. Sargeant , 88 Nev. 223, 228, 495 P.2d 618, 622 (1972) (affirming a lump sum award of spousal support where the husband's conduct indicated the possibility he might liquidate or interfere with his assets to avoid paying support). However, we conclude the only error was in ordering the spousal support to be paid by Eric's Trust instead of by Eric because, as noted above, Nevada's statutory framework explicitly protects spendthrift trust assets from the personal obligations of beneficiaries—in this case, Eric. Accordingly, we vacate the award in order for the district court to reassess that award against Eric in his personal capacity.
This court defers to a district court's findings of fact and will only disturb them if they are not supported by substantial evidence. Ogawa , 125 Nev. at 668, 221 P.3d at 704. Questions of law are reviewed de novo. Waldman , 124 Nev. at 1136, 195 P.3d at 860.
Likewise, we conclude Lynita's argument on implied consent fails. Implied consent is a high threshold. For example, this court has determined that an issue was tried by implied consent where counsel "had raised the issue in his opening argument, [opposing counsel] had specifically referred to the matter as an issue in the case, ... the factual issue had been explored in discovery, [and] no objection had been raised at trial to the admission of evidence relevant to the issue." Schwartz v. Schwartz , 95 Nev. 202, 205, 591 P.2d 1137, 1140 (1979). Lynita's unjust enrichment claim fails to meet this standard. The phrase "unjust enrichment" was not used during trial; it therefore was not specifically referred to as an issue in the case following its dismissal. Eric's Trust moved to dismiss it, which demonstrates an objection was raised to the admission of evidence relevant to the issue. Therefore, we hold the issue of unjust enrichment was not tried by implied consent and, therefore, the district court erred in considering it when fashioning its remedies in the decree.
"A constructive trust is a remedial device by which the holder of legal title to property is held to be a trustee of that property for the benefit of another who in good conscience is entitled to it." Locken v. Locken , 98 Nev. 369, 372, 650 P.2d 803, 804–05 (1982). Although remedial, a constructive trust is "the result of judicial intervention." Restatement (Third) of Trusts § 1 cmt. e (Am. Law Inst. 2003). Additionally, a constructive trust violates a spendthrift prohibition on assignment or alienation of benefits. See Guidry v. Sheet Metal Workers Nat'l Pension Fund , 493 U.S. 365, 376–77, 110 S.Ct. 680, 107 L.Ed.2d 782 (1990).
We conclude the district court erred in placing constructive trusts over the Russell Road and Lindell properties because the imposition of a constructive trust violates the statutory protections shielding spendthrift trusts from court order. See NRS 166.120 ; see also NRS 163.417(1)(c)(1). Placing a constructive trust over assets in a valid spendthrift trust violates the trust's prohibition on assignment or alienation of assets. See, e.g., Guidry , 493 U.S. at 376–77, 110 S.Ct. 680 (holding imposition of a constructive trust over a pensioner's ERISA benefits violated the plan's spendthrift provisions and that statutorily defined spendthrift protections "reflect[ ] a considered ... policy choice, a decision to safeguard a stream of income for pensioners ... even if that decision prevents others from securing relief [from the assets protected by spendthrift provision]"). Accordingly, we conclude the district court erred in imposing equitable remedies over assets that were held in a valid SSST.
The district court can enforce an order that is pending on appeal and retains jurisdiction over matters that are collateral and independent from the order appealed, such as attorney fees. See Foster v. Dingwall , 126 Nev. 49, 52, 228 P.3d 453, 455 (2010). We conclude that although the district court retains jurisdiction to enforce an order during the pendency of an appeal, most of the June 8, 2015, order will nonetheless be vacated because it concerns property distribution that will be vacated pursuant to this opinion. We therefore vacate the June 8, 2015, order to the extent it enforces or implements portions of the divorce decree relating to assets in Eric's Trust and Lynita's Trust, which are being reversed in this opinion. However, we affirm the June 8, 2015, order with respect to the directives regarding health care costs of the son and Lynita's insurance costs, Eric's payment of costs to remove the security gate, and attorney fees for contempt.
Accordingly, we affirm in part and vacate in part the district court's decree of divorce, affirm in part and vacate in part the district court's June 8, 2015, order modifying and implementing the divorce decree, and remand this matter for further proceedings consistent with this opinion.