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Lobato v. Herndon

United States District Court, D. Maryland

March 29, 2017

QUIN1N BREECE LOBATO, et al, Plaintiffs,
v.
SUSAN K. HERNDON, et al, Defendants.

          MEMORANDUM OPINION

          GEORGF J. HAZEL United States District Judge

         This is an action by Plaintiffs Quinn Breece Lobato ("Lobato").[1] as current sole Trustee of the Breece/Hcmdon Family Trust ("the Trust"), and Vanessa Christine Breece. Otin Blair Breece. and Adam Samuel Breece. as beneficiaries of the Trust, (collectively. "Plaintiffs"), against Defendants Susan K. I lerndon. Amelia Marie Breece. and Benjamin Scott Breece[2] (collectively. "Defendants"), to recover financial assets held by Herndon and seek damages for alleged fraud, conversion, and tortious interference with contract. See LCF No. 1. Presently pending before the Court is Defendants" Motion to Dismiss Pursuant to Fed.R.Civ.P. 12(b)(2). (3). (4). (5). and (6). ECF No. 14. No hearing is necessary. See Loc. R. 105.6. For the reasons stated below. Defendants' Motion to Dismiss is denied.

         I. BACKGROUND[3]

         Robert Breece and Susan Hcrndon were married on July 29, 1991. See ECF No. 21 at 1.[4]Ms. Herndon had not previously been married, nor had any children. Id. at 24. Mr. Breece had four children from two previous marriages: Vanessa. Olin, Adam, and Quinn Breece. See id[5] Mr. Breece and Ms. Herndon later had two children together. Amelia and Benjamin Breece.[6] Mr. Breece and Ms. Herndon created a "revocable inter vivos trust" the "Brcece/Herndon Family Trust" on September 2. 1992. ECF No. 1 ¶ 11; ECF No. 1-5.[7] At that time. Mr. Breece and Ms. Herndon lived together at 4811 Mercury Drive. Rockville. Maryland 20853 (the "Maryland Residence"). Mr. Breece's four other children also lived in Maryland.

         The design and operation of the Trust is complex, but the relevant provisions, included in the Amended Trust, are as follows: during the lives of both Mr. Breece and Ms. Herndon (the "Grantors" or the "Undersigned"), the Trust was to be divided into two separate sub-trusts, the 'R.O.B. Trust" and the "S.K.I I. Trust." which belonged to Robert Breece and Susan Herndon. respectively. ECF No. 1 ¶ 14: see No. 1-5 at 1. Properly held in these two Trusts was intended to be "exclusive property" of each Grantor, and "separate property at the time of such conveyance or transfer, shall remain the separate property of the Undersigned transferring such property to the Trustees." id. at 1.3.

         As governed by Article XXII of the Trust, alter the first Grantor died, the "Trust Estate" would be divided into "two separate Trusts." the "Marital Trust" and the "Family Trust." ECF No. 1-5 at 9. The Marital Trust would "consist of the survivorfs]. . . separate property in the Trust Estate and a fractional proportion in all property of the [deceased Grantor]." subject to a marital tax exemption. ECF No. 1-5 at 9; ECF No. 19-3 at 6. The Family Trust would consist of "the balance of the Trust Estate remaining after setting aside all property of the Trust Estate that is included in the Marital Trust." ECF No. 1-5 at 11. After the second Grantor died, as governed by Article XXIII of the Trust, "all Trust principal" was to be "held in Trust for the benefit of [the Grantors" | beneficiaries." ECF No. 1-5 at 12. The beneficiaries of the Trust would be the "children of the Undersigned then living and children of the Undersigned then deceased but leaving surviving issue." A/, at 13. Further, part of the Trust was to be "set-aside" for the support and education of beneficiaries under the age of 21. Id.[8]

         In a document known as "Schedule A." dated September 2. 1992. Herndon transferred all of her interests in several "Private Limited Partnership Interests." of which she was the stated owner, to the S.K.H. Trust. ECF No. 1-5 at 18-19. These Partnership Interests included the Herndon Family Limited Partnership (the "HFL Partnership"), as well as the Breece Family Limited Partnership, the S.K.H. Family Limited Partnership, and the Smith Mountain Family Limited Partnership (the "Other Partnerships"). The Limited Partnership Agreement of the HFL Partnership describes Susan Herndon as owning a 98% interest in the HFL Partnership. ECF No. 1-13 at 2.

         Mr. Breece and Ms. Herndon divorced on January 14. 2003. ECF No. 21 at 1-2. A Property Settlement Agreement, dated October 29. 2002. was incorporated into the parties' Final Divorce Decree. ECF No. 1 ¶ 19: ECF No. 21 at 4. Robert Breece died six years later on August 10. 2009. ECF No. 1 ¶ 29. Susan Herndon qualified to act as the Administrator ol" Robert Breece's Estate (the "Estate"). ECF No. 1 ¶ 29. Herndon probated, or established the validity of. a copy of Robert Breece"s Last Will and Testament (the "Will") in the Circuit Court of Warren County, Virginia (the "Warren County Court"). Id. ¶ 30. Upon Plaintiff Lobato's request. Herndon also emailed Lobato a copy of the Will, along with a copy of the Trust, in January 2010, Id. at 5. The copy of the Trust sent by Herndon did not include Schedule A. Id. ¶ 36.

         Plaintiff Quinn Breece Lobato was elected to act as Co-Trustee of the Trust by a majority of the Trust's beneficiaries (four of the six Breece children) on November 14. 2010. ECF No. 1 ¶ 52. Throughout 2010 and 2011. the family was litigating several lawsuits that had been filed against Robert Breece's Estate. Id. at 8. Herndon told Lobato that she did not intend to transfer assets from the Estate to the Trust until the lawsuits were resolved. Id. ¶ 54. Herndon also told Lobato that the Trust had been "created" but not "funded." Id. ¶ 55: sec also ¶; 48. I lowever. I Icrndon allegedly transferred $50, 000 from the Estate to the Trust in November 201 0. unbeknownst to Plaintiffs. Id. c¶ 56-57. The lawsuits against Mr. Breece's Estate were not resolved until November 2011. Id. ¶ 58. On November 27. 2011. Lobato sent Herndon a letter, notifying 1 Icrndon that Lobato had been elected to act as Co-Trustee of the Trust. Id. ¶ 60.

         On November 29. 2011. Herndon's Virginia attorney mailed a letter to Lobato. refusing to recognize Lobato's status as Trustee, and claiming HerndoiTs authority to act as Sole Trustee of the Trust. ECF No. 1 ¶ 60. Lobato filed suit in the Warren County Court in November 2012. seeking a declaratory judgment regarding the validity of her status as Trustee. Id. ¶ 63. During this litigation, two family members. Daniel Breece and Frederick Rodriguez, were appointed to serve as Co-Trustees. ECF No. 1 ¶ 64: see ECF No. 19-3 at 10. Herndon resigned as Trustee in May 2013. ECF No. 1 ¶ 65. The Warren County Court entered an order on October 10. 2014. confirming that the election of Lobato as Trustee was authorized by the terms of the Trust, and that Lobato had the authority to act as Trustee. Id. ¶ 67.[9] In the order, the Warren County Court also removed Daniel Breece as a Trustee, and Mr. Rodriguez resigned as Trustee on October 20. 2014. Id., ¶¶ 68-69. In October 2014. Ms. Lobato received a number of Trust-related documents from Daniel Breeee's wife. Id. ¶ 70. Upon review of these documents. Lobato first discovered "Schedule A." which included the previously-undisclosed Partnerships of Ms. Herndon. Id. ¶ 71, Lobato contends that the HFL Partnership consists of accounts valued at $510, 632.86. ECF No. I at 10. Plaintiffs claim that this money belongs to the Trust, and therefore bring suit against Defendants.

         Plaintiffs fled the instant Complaint on September 30. 2015. Plaintiffs allege claims of Detinue (Count I). Fraud (Count II). Conversion (Count III), and Tortious Interference with Contract (Count IV). In support of Count I. Plaintiffs allege that Herndon has made unauthorized "distributions to herself from the HFL Partnership after Mr. Breeee's death, and now "unjustly detains" the HFL Partnership. ECF No. 1 at 11.[10] In support of Count II. Plaintiffs allege that I Ierndon committed fraud when she made false representations or omissions that the copy of the Trust was a "true and complete copy." and sent accountings to Plaintiff Lobato that "did not include the assets listed on Schedule A." Id. at 12-1 5.[11] In support of Count III. Plaintiffs allege that I Ierndon converted Schedule A by "retaining it and not giving it to Trustee Lobato." Id. at 16. In support of Count IV. Plaintiffs allege that Herndon interfered with Lobato's right to act as Trustee by refusing to acknowledge Lobato's status as Co-Trustee and hiring an attorney to prevent Lobato from acting as Trustee. Id. at 16-17. Defendants, through counsel, have tiled a Motion to Dismiss the Complaint Pursuant to Fed.R.Civ.P. 12(b)(2). (3). (4). (5). and (6). HCT No. 14. Plaintiffs filed their Opposition. BCF No. 19. and Defendants filed their Reply. ECF No. 20.

         II. ANALYSIS

         A. Process and Sen ice of Process - Fed.R.Civ.P. 12(h)(4) and (5)

         i. Standard of Review

         Defendants may. as here, challenge the sufficiency of process or service of process under Fed.R.Civ.P. 12(b)(4) and (b)(5). O'Meara v. Waters, 464 F.Supp.2d 474. 476 (D. Md. 2006). Following such a motion. Plaintiffs bear the burden of establishing the validity of service under Federal Rule of Civil Procedure 4. Id. Rule 4. which governs summons in a civil action, provides in relevant pan that "any person who is at least 18 years old and not a party may serve a summons and complaint." Fed.R.Civ.P. 4(c)(2). Rule 4 further provides that service may be made by "delivering a copy of the summons and of the complaint to the individual personally." Or by "leaving a copy of each at the individual's dwelling or usual place of abode with someone of suitable age and discretion who resides there." Fed.R.Civ.P. 4(e)(2).

         The fourth Circuit has provided that in cases where service of process has given a defendant actual notice of the claim against it. courts may adopt a liberal interpretation of Rule 4 and "uphold the jurisdiction of the court." Karlsson v. Babmowitz, 318 F.2d 666. 668 (4th Cir. 1963). While the "plain requirements for the means of effecting service of process may not be ignored." where the defendant has actual notice of the action, "every technical violation of the rule or failure of strict compliance may not invalidate the service of process." Arnico. Inc. v. PenrodStauffer Bldg. Sys. Inc., 733 F.2d 1087. 1089 (4th Cir. 1984).

         ii. Analysis

         Defendants argue that process was insufficient as to all three Defendants because the "Return of Service" forms did not specify that the process server. Stacey Loving, was over the age of 1 8 and not a party to the action. ECF No. 14-2 at 6. Defendants further argue that with respect to Defendants Susan Hemdon and Benjamin Breecc. the forms also do not specify "the dwelling place where process was left" or "the name of the receiving person or agent." Id. Additionally. Defendants argue that service of process was insufficient as to Benjamin Breece because his "dwelling or usual place of abode" is where he attends college in Terre Haute. Indiana. Id., at 7. Defendants arguments are unpersuasive.

         In support of the sufficiency of service. Plaintiffs attach the affidavit of the process server, Stacey Loving. ECF No. 19-2. While the "Return of Service" form is silent as to her age. Loving testifies in the affidavit that she is "over the age of 18" and "not a party to the above-captioned action." ECF No. 19-2. Moreover, the Return of Service forms do not even list a designated line to write the date of birth of the process server - only lines for a signature, name. address, and phone number. See ECF No. 14-1 at 11-13. Additionally, the plain language of Rule 4 does not require the return of service form to include the date of birth of the process server, or even the production of a return of service form at all. Fed.R.Civ.P. 4(c). Rule 4 ...


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