Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Klabacka v. Nelson

Supreme Court of Nevada

May 25, 2017

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.

         Consolidated appeal and cross-appeal from a decree of divorce and appeal from findings of fact and conclusions of law modifying a divorce decree. Eighth Judicial District Court, Family Court Division, Clark County; Frank P. Sullivan, Judge.

          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.

         BEFORE THE COURT EN BANC.

          OPINION

          GIBBONS, J.

         These appeals involve a divorce and a division of assets held in self-settled spendthrift trusts owned by the former husband and wife. Suffice it to say, the parties have substantial trust issues. Ten years into their marriage, Eric and Lynita Nelson signed a separate property agreement (the SPA) that transmuted their property into separate property and placed that property into the parties' respective separate property trusts. Later, the parties converted those trusts into self-settled spendthrift trusts (SSSTs) and funded them with their respective separate property. The SSSTs were, respectively, the Eric L. Nelson Nevada Trust (Eric's Trust) and the Lynita S. Nelson Nevada Trust (Lynita's Trust). In 2009, the parties began divorce proceedings and subsequently added the SSSTs as necessary parties. Issues presented within the divorce proceedings bring us to the instant appeals.

         We conclude (1) the family court has subject-matter jurisdiction over the trust-related claims in the Nelsons' divorce; (2) the SPA and SSSTs are valid and unambiguous; (3) the district court erred in considering parol evidence to determine the parties' intent behind the SPA and SSSTs; (4) the district court erred in equalizing the trust assets; (5) the district court erred in ordering Eric's personal obligations to be paid by Eric's Trust; (6) the district court did not err in awarding Lynita a lump sum alimony award of $800, 000, but erred insofar that the alimony was awarded against Eric's Trust, and not Eric in his personal capacity; (7) the district court erred in making findings of unjust enrichment after the claim was dismissed; (8) the constructive trusts placed over the Russell Road and Lindell properties should be vacated; and (9) the June 8, 2015, order should be vacated to the extent it enforces or implements portions of the divorce decree relating to assets in Eric's Trust and Lynita's Trust and affirmed in all other respects.

         Given the complexity of the divorce decree (the decree), we conclude that (1) the dissolution of marital bonds between Eric and Lynita is affirmed, (2) the district court's alimony award is affirmed in part but vacated to the extent it is awarded against Eric's Trust instead of Eric in his personal capacity, (3) the district court's child support award is affirmed in part but vacated to the extent it is awarded against Eric's Trust instead of Eric in his personal capacity, (4) all other portions of the decree are vacated, (5) the June 8, 2015, order, is vacated to the extent it enforces or implements portions of the divorce decree relating to assets in Eric's Trust and Lynita's Trust and affirmed in all other respects, and (6) the case is remanded to the district court for further proceedings consistent with this opinion.

         FACTS AND PROCEDURAL HISTORY

         The SPA

         In 1993, Eric and Lynita entered into the SPA in order to transmute the family's, community assets into the parties' respective separate property. The SPA equally divided the parties' assets into two separate property trusts. Both parties consulted counsel prior to signing the document, and Lynita consulted additional outside counsel prior to her signing.

         In relevant part, the SPA states that "the parties hereto desire to split the community estate into the sole and separate property of each spouse in accordance with and for the purposes contained in NRS 123.130 through 123.170, inclusive." Additionally, the SPA provides that ''[t]he [p]arties agree that [the SPA] shall be controlling in determining the ownership of each party's property regardless of the manner in which the property was previously held or titled, acquired through capital or personal efforts, or whether the property is real, personal or any variation thereof."

         The SSSTs

         In 2001, Eric and Lynita converted their separate property trusts into Eric's Trust and Lynita's Trust, respectively, and funded the SSSTs with the separate property contained within the separate property trusts. The trust agreements for Eric's Trust and Lynita's Trust are nearly identical. Both trust agreements are in writing and establish an irrevocable trust. Each trust has a spendthrift provision that provides, in relevant part:

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.[1] 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.

         The parties named themselves as the investment trustee for their respective trusts. Pursuant to Section 11.14 of the trust agreements,

the "Investment Trustee(s)" shall at all times have the exclusive custody of the entire Trust estate and shall be the legal owner of the Trust estate. The title to Trust properties need not include the name of the Distribution Trustee, and all Trustee powers ... may be effected under the sole and exclusive control of the Investment Trustees, subject to the requirements for authorization of distributions to Trustor....

         Many transfers of property occurred between the trusts between 2001 and 2009, most of which were gifts from one trust to the other.

         Initial divorce proceeding

         Eric filed for divorce in 2009. During the initial stages of trial, Eric testified that the SPA and trust agreements were signed in an effort to protect the parties' assets from creditors and that much of the property contained within the trusts was community property. After six days of trial, the SSSTs were added to the divorce action as necessary parties. Lynita then filed an amended complaint against Eric's Trust and its former distribution trustees alleging various torts. Eric's Trust moved to dismiss Lynita's tort claims. The district court dismissed nearly all of the tort claims, including unjust enrichment and breach of fiduciary duty. Additionally, the district court denied the motion to dismiss as to several of Lynita's other claims against Eric and Eric's Trust, including constructive trust.

         During the trial, Eric's Trust retained an expert certified public accountant to analyze the trust accounting for both SSSTs. The expert "found 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, noting the expert's financial relationship with Eric and the expert's purportedly unreliable testimony, found the expert's report and testimony to be of little probative value.

         Decree of divorce

         On June 3, 2013, the district court issued the decree. The district court found that the SPA was valid and the parties' SSSTs were validly established and funded with separate property. The district court kept Eric's Trust and Lynita's Trust intact for creditor-protection purposes. However, the district court noted "the [c]ourt could [have] invalidate[d] both Trusts" under theories of constructive trust or unjust enrichment based on Eric's extensive testimony regarding the community nature of the assets held by each trust, the breaches of Eric's fiduciary duties, and the lack of trust formalities.

         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.

         In addition to the dissolution of marriage, the district court ordered; (1) an equalization of $8.7 million in total trust assets to remain in or be transferred into each trust, (2) the Brianhead cabin property to be divided equally between the trusts, (3) the interest in the Russell Road property and its note/deed for rents and taxes be divided equally between the trusts, (4) Eric's Trust to use the distribution of $1.5 million from a previously enjoined trust account to pay Lynita spousal support in a lump sum of $800, 000, (5) Eric's Trust to pay Lynita child support arrears; (6) Eric's Trust to pay Lynita's attorney fees, (7) Eric's Trust to pay expert fees, and (8) Eric to pay child support for each child and half of the private school tuition for his daughter.

         Constructive trusts: Eric's purported breach of fiduciary duty and unjust enrichment

         The district court found that Lynita delegated her role as investment trustee to Eric and that Eric had acted as the de facto investment trustee since the inception of Lynita's Trust. The district court reasoned that, because Eric acted in such a capacity, his actions involving the transfer of property between the trusts and his various corporate entities amounted to a breach of fiduciary duty. Further, the district court reasoned this breach of fiduciary duty resulted in transfers of property that unjustly enriched Eric. This finding of unjust enrichment led to the district court imposing constructive trusts over two properties held within the SSSTs-the Lindell property and the Russell Road property.

         Wyoming Downs and the June 8, 2015, order

         The decree disposed of all property, with the exception of Wyoming Downs, an asset purchased during the pendency of the divorce.[2]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.

         Following the first notice of appeal, Lynita filed a motion with the district court to enforce the decree. Specifically, Lynita sought a court order mandating Eric or Eric's Trust to disclose certain documents and rent payments for, among other things, the Lindell and Russell Road properties. On June 8, 2015, the district court ordered Eric and Eric's Trust to pay the additional monies to Lynita pursuant to her motion to enforce the ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.