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Callender v. Callender

United States District Court, D. Maryland

July 27, 2018

DONALD J. CALLENDER and CONVERGENCE MANAGEMENT ASSOCIATES, LLC, Plaintiffs,
v.
WADE CALLENDER and ERICA CALLENDER, Defendants.

          MEMORANDUM OPINION

          THEODORE D. CHUAN United States District Judge

         Plaintiffs Donald J. Callender and Convergence Management Associates, LLC ("CMA" or "Convergence") have filed this state law tort action against Defendants Wade Callender and Erica Callender arising from an intra-family dispute relating to a previously dismissed lawsuit in this Court. Presently pending before the CoUrt is Wade Calender's Motion to Dismiss or, in the Alternative, Motion for Summary Judgment, Erica Calender's Motion to Dismiss, and Plaintiffs' Motion for Leave of the Court to File a Surreply. Having reviewed the submitted materials, the Court finds that no hearing is necessary. See D. Md. Local R. 105.6. For the reasons set forth below, Wade Calender's Motion is GRANTED IN PART and DENIED IN PART, Erica Calender's Motion is GRANTED, and Plaintiffs' Motion is DENIED.

         BACKGROUND

         This case is the second action before this Court involving the Callender family. Donald Callender, divorced from Diane Callender, is the father of Defendant Wade Callender and the father-in-law of Erica Callender, Wade Calender's wife. Donald and Diane Callender have another son, Christian Callender, who is not a party to this suit. In 2001, Donald Callender established CMA, a Maryland limited liability company ("LLC") of which he is the sole member, which provides financial services to various clients. In approximately 2007, Donald and Diane Callender retained an attorney, James P. Seidl, to develop an "asset protection" strategy for the family's assets. Callender v. Callender, No. C-14-1314 (Cir. Ct. Calvert Cty.) 11/3/16 Hearing Tr. ("Divorce Action Tr.") at 22-26, Wade Callender Mot. Dismiss Ex. 2, ECF No. 7-2.

         This strategy began with the creation of at least three legal entities: Loch Sloidh Realty Trust, a Maryland grantor revocable trust; the Falkirk Family Limited Partnership ("Falkirk" or "the Partnership"), a Virginia family limited partnership; and the Pegasus Living Trust ("Pegasus",, a Maryland grantor revocable trust described by Seidl as a "standard living trust." Divorce Action Tr. at 25-27. Donald and Diane Callender were named as the trustees of Pegasus.

         On April 13, 2007, the date that Falkirk was established, Donald Callender executed an "Assignment of Interest" ("the Assignment"), notarized by Seidl, which stated in full:

By this Instrument, the Assignor's interest in the Convergence Management Associates, LLC, a Maryland Limited Liability Company, federal tax ID number 01-0604814, whose principal place of business is currently Prince Frederick, Maryland, is hereby assigned to the General Partners of the Falkirk Family Limited Partnership, a Virginia Limited Partnership, signed on April 13, 2007, under the terms of the Partnership in effect at the time of the Assignor's death.
Hereby assigned are all of the company's assets, including but not limited to its real, personal, tangible, intangible and mixed property, accounts receivable, bank accounts, good will and investments, now owned or later acquired by the Company.
This assignment is for estate planning purposes only, is subject to, and is therefore null and void to the extent it violates, the Article of Organization, the Company's Operating Agreement, or other Business Agreements, is contrary to law, inadvertently terminates any tax election or results in unintended adverse tax or legal results under federal, state or local law.

Assignment at 1, Wade Callender Mot. Dismiss Ex. 4, ECF No. 7-2.

         As of May 4, 200,, CMA had been named as the general partner of Falkirk but held only a 1.345% interest in Falkirk. Donald and Diane Callender, limited partners of Falkirk, held interests of 0.1345% and 1.48%, respectively. The bulk of the interest in Falkirk was held by Christian and Wade Callender, who each held a 48.516% interest as limited partners.

         In 2014, Diane Callender filed for divorce from Donald Callender in the Circuit Court for Calvert County, Maryland ("the Divorce Action"). On December 31, 2015, as the Divorce Action was ongoing, Donald Callender filed suit in this Court against Erica Callender, alleging that she fraudulently withdrew money from another LLC owned by Donald Callender ("the 2015 Action"). See Compl., Callender v. Callender, No. TDC-15-4015 (D. Md. Dec. 31, 2015) (ECF No. 1).[1] Although the 2015 Action was originally brought by Donald Callender in his personal capacity, CMA and the allegedly victimized company, Convergex Caribbean, Ltd. ("Convergex"), were substituted in as plaintiffs after the Court ruled that Donald Callender lacked prudential standing to pursue the case.

         On November 3, 2016, Judge E. Gregory Wells of the Circuit Court for Calvert County held a hearing in the Divorce Action to determine how to divide up the marital property between Donald and Diane Callender. At the hearing, Seidl was called as a witness to explain the relevant legal entities and interpret the various documents that governed the Calenders' property. When asked about the Assignment, Seidl provided the following testimony:

A [Seidl]: Yeah, I'm not actually sure, but I think we actually did an assignment, yes, and that would be the normal course of things.
Q [Counsel]: So therefore Convergence is owned by Falkirk and [Donald] Callender at one time owned 100 percent of Convergence, correct?
A: That's right.
Q: Therefore, by transferring it in, he was still the general partner, but he no longer had an ownership interest in Convergence outside of whatever interest he had in Falkirk, correct?
A: I'm not sure if! would say it that way.
Q: Then you say it the way you want to.
A: Well, so the husband, I call DJ, DJ still owned Convergence Associates, and he would still be governed by that document, for example, we're still a Maryland document.
Q: Right.
A: So he assigned his ownership to Falkirk. Does that answer your question?
Q: Yes. He gave up his ownership interest in Falkirk - in Convergence and he assigned it to Falkirk, correct?
A: I'm stuck on the word gave up his interest.
Q: Assigned it?
A: I would say he would still own interest - he was still 100 percent ...

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