Galardi v. Galardi (In re Galardi)
| Decision Date | 09 March 2023 |
| Docket Number | 22-50035-JPS,Adversary Proceeding 22-5008-JPS |
| Parties | In the Matter of: TERI G. GALARDI, Debtor v. TERI G. GALARDI, Defendant JACK E. GALARDI, JR. And EMELITA P. SY, as the Trustee of the JACK E. GALARDI, JR. SUB-TRUST, Plaintiffs |
| Court | U.S. Bankruptcy Court — Middle District of Georgia |
For Plaintiffs: Will Bussell Geer Rountree, Leitman, Klein & Geer, LLC Century I Garrett A. Nail Portnoy, Garner & Nail, LLC
For Debtor/Defendant: Louis G. McBryan McBRYAN, LLC
BEFORE James P. Smith United States Bankruptcy Judge
Before the Court is Defendant's renewed motion to dismiss or, in the alternative, motion to abstain. Along with her motion and brief, Defendant has filed with this Court the voluminous record from the Clark County, Nevada District Court case Case Number P-18-096792-T (the "Nevada case"), the pre-petition litigation between Plaintiff and Defendant involving a trust set up for Plaintiff and Defendant's administration thereof as trustee. [1] In her motion to dismiss Defendant argues that Plaintiff's complaint should be dismissed because all of Plaintiff's claims are barred by the applicable Nevada statute of limitations. In the alternative, Defendant asks this Court to abstain pursuant to 28 U.S.C. §1334(c)(1).
In response, Plaintiff argues that Defendant waived the statute of limitations defense by failing to timely assert that defense in the Nevada case. Alternatively, Plaintiff argues that Defendant's debt to Plaintiff on a note and mortgage are "Established Claims" for which there is no statue of limitations. He further argues that the three year statute of limitations on his breach of fiduciary duty claims did not begin to run until December 6, 2018, and, therefore, his assertion of those claims in the Nevada case was timely.
For the reasons explained below, the Court will deny the motion to dismiss. However, the Court will grant the motion to abstain.
"On a motion to dismiss, the facts stated in [Plaintiff's] complaint and all reasonable inferences therefrom are taken as true." Stephens v. Dept. of Health and Human Servs., 901 F.2d 1571, 1573 (11th Cir. 1990).
The court may also consider documents attached to the motion to dismiss that Plaintiff refers to in his complaint, that are central to his claims and who's contents are not in dispute. Harris v. Ivax Corp., 182 F.3d 799, 802 n. 2 (11th Cir. 1999); Brooks v. Blue Cross & Blue Shield of Fla. Inc., 116 F.3d 1364, 1368-69 (11th Cir. 1997). Accordingly, the following is a summary of the complaint's allegations.
Prior to his death, the father of Plaintiff and Defendant formed a revocable living trust under the laws in the state of Nevada (the "Family Trust"). The father died in 2012 and, pursuant to the terms of his will, Defendant was named the personal representative of the estate. Probation of the will was completed in June 2014.
Under the terms of the Family Trust, Defendant was appointed successor trustee. The Family Trust provided that, after paying for any final expenses of the father and making a certain specified distribution to a third party, seventy- five percent of the remaining trust assets were to be distributed to Defendant and twenty- five percent of the assets were to be distributed to a sub-trust of which Plaintiff is the sole beneficiary (the "JGJ Sub-Trust"). Pursuant to the Family Trust, Defendant was named successor trustee of the JGJ Sub-Trust. The income and principle of the JGJ Sub-Trust was to be distributed, in Defendant's discretion, for the support of Plaintiff. [2]
According to the complaint, the twenty- five percent to which the JGJ Sub-Trust was entitled totaled $8,630,635. However, the JGJ Sub-Trust only received $6,693,388.60. To make up the difference, in November 2014, Defendant caused a sub-trust in her name to give the JGJ Sub-Trust a note for $1,688,742, which Defendant personally guaranteed ("the Teri Note"). The father's residence, where Plaintiff then resided and where he continues to reside, was also placed in the JGJ Sub-Trust and Defendant assumed the mortgage debt on that residence. The complaint alleges that Defendant failed to make payments on the Teri Note from December 1, 2014 through April 2017.
The complaint alleges that Defendant, as trustee of the Family Trust, elected not to put any of the income producing assets of the Family Trust into the JGJ Sub-Trust. The complaint describes the assets placed in the JGJ Sub-Trust and describes decisions by Defendant relating to those assets that caused loss to the JGJ Sub-Trust. The complaint alleges that her decisions as to how the assets of the Family Trust were to be divided, the management of those assets, her failure to make payments on the Teri Note and her decision to use her personal assets (the Teri Note and the assumption of the mortgage) to partially fund the JGJ Sub-Trust, instead of using only assets from the Family Trust as required by the Family Trust terms, were all breaches of her fiduciary duties to the JGJ Sub-Trust and Plaintiff. The complaint alleges that these actions were intentional and were certain to cause injury to Plaintiff.
The complaint further alleges that Plaintiff became aware of Defendant's breach of fiduciary duties in 2018. He filed the Nevada case to have Defendant removed as trustee of the JGJ Sub-Trust. The complaint alleges that the Nevada court ordered Defendant to give an accounting of her handling of the assets of the JGJ Sub-Trust by a date certain, and that she failed to comply with that order. The complaint further alleges that the Nevada court entered a Stipulation And Order on September 27, 2019, in which Defendant resigned as the trustee of the JGJ Sub-Trust and Emelita P. Sy was named successor trustee.
The complaint alleges that on January 12, 2021, Plaintiff filed a "Petition for Recovery of Assets From Teri Galardi" in the Nevada court. This action was stayed by the filing of this bankruptcy case.
The complaint asserts that Defendant's actions as trustee of the JGJ Sub-Trust caused Plaintiff and the Sub-Trust damages. Count I of the complaint asserts a claim under 11 U.S.C. §523(a)(4) for damages caused by Defendant's breach of fiduciary duty. Counts II and III assert claims under 11 U.S.C. §523(a)(6) and 11 U.S.C. §523(a)(2)(A) for damages in the amount of $2,000,000. The complaint asks the Court to enter judgement against Defendant and declare the debt nondischargeable.
As Defendant argues, "A Rule 12 (b)(6) dismissal on statute of limitations grounds is appropriate 'if it is apparent from the face of the complaint that the claim is time-bar.'" Gonsalvez v. Celebrity Cruises Inc., 750 F.3d 1195, 1197 (11th Cir. 2013) (quoting La Grasta v. First Union Sec., Inc., 358 F.3d 840, 845 (11th Cir. 2004)). Defendant argues that under Nevada law, there is a three- year statute of limitations for breach of fiduciary claims. Defendant further argues that the statute began to run no later than March 20, 2015. Accordingly, Defendant argues that the statute had run when Plaintiff filed the Petition for Recovery of Assets in the Nevada case on January 12, 2021 (Doc.37, Tab 7, hereinafter "Petition for Recovery").
Plaintiff acknowledges that the applicable statute of limitations under Nevada law is three years. However, he alleges in his complaint that the statute did not begin to run until 2018, when he first became aware of Defendant's alleged breaches of fiduciary duty. Citing Nev. Rev. St. 11.190 (3)(g)(d), Plaintiff argues that the statute does not begin to run until the aggrieved party discovers the facts constituting the fraud or mistake. Accordingly, he alleges that the Petition for Recovery was filed before the statute expired.
Since the Court must accept as true the allegation by Plaintiff that he first learned of the breaches in 2018, the Court must accept his argument that the statute did not begin to run until that time and that the statute had not expired when he filed his Petition for Recovery on January 12, 2021. Accordingly, it is not apparent from the face of the complaint that Plaintiff's claims are time barred and the motion to dismiss must be denied. [3]
As an alternative to dismissing the case, Defendant asks this Court to exercise permissive abstention pursuant to 28 U.S.C. §1334 (c)(1). That statute provides, in relevant part:
Courts employ a multifactor test to determine whether abstention is appropriate. Courts consider the following nonexclusive factors:
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