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In re Aboud

Supreme Court of Nevada

December 19, 2013

In the Matter of the MICHAEL ABOUD AND BETTY JO ABOUD INTER VIVOS TRUST DATED JANUARY 5, 1979, as amended.
v.
Michelle Rae Aboud Sheppard and Michael Aboud, Respondents. I.C.A.N. Foods, Inc.; Kendall Swensen, as Personal Representative of the Estate of Betty Jo Aboud; and David Braheem Aboud, Appellants, Michelle Rae Aboud Sheppard, Cross-Appellant,
v.
I.C.A.N. Foods, Inc.; Kendall Swensen, as Personal Representative of the Estate of Betty Jo Aboud; and David Braheem Aboud, Cross-Respondents.

Lemons, Grundy & Eisenberg and Tiffinay B. Pagni, Robert L. Eisenberg, and Douglas R. Brown, Reno, for Appellants/Cross-Respondents.

J. Douglas Clark Attorney at Law, Ltd., and J. Douglas Clark, Reno, for Respondent/Cross-Appellant Michelle Rae Aboud Sheppard.

Michael Aboud, Sun Valley, in Proper Person.

BEFORE PICKERING, C.J., HARDESTY and SAITTA, JJ.

OPINION

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

Page 942

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 trustee 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 1993. 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 cotrustees 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 ...


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