ordered in the southern district of florida on …...“motion to rescind”). shortly thereafter,...

UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF FLORIDA

WEST PALM BEACH DIVISION In re: MARK CARMEL, Debtor. /

Case No.: 18-18279-MAM Chapter 7

STOK FOLK + KON, P.A., Plaintiff.

Adv. Proc. No. 18-01331-MAM

v.

MARK CARMEL, RANDALL CARMEL, ALLEN LAMBERG, and NORMAN FLEISHER, PANKAUSKI HAUSER PLLC Defendants. /

MEMORANDUM OPINION AND ORDER GRANTING

MOTION TO DISMISS (ECF NO. 40)

THIS MATTER came before the Court upon the Motion to Dismiss Counts I,

II, III, and V of the Amended Adversary Complaint (ECF No. 40) (the “Second Motion

to Dismiss”) filed on October 31, 2018 by Randall Carmel (“Randall”) and Allen

ORDERED in the Southern District of Florida on March 8, 2019.

Mindy A. Mora, JudgeUnited States Bankruptcy Court

_____________________________________________________________________________

Case 18-01331-MAM Doc 151 Filed 03/08/19 of 30

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Lamberg (“Lamberg”, and collectively with Randall, “Trustee Defendants”). The

Court sua sponte issued an order (ECF No. 43) directing the parties to submit briefing

on the issues raised in the Second Motion to Dismiss. Plaintiff Stok Folk + Kon, P.A.

(“Plaintiff”) filed its response (ECF No. 52) (the “Response”) and Trustee Defendants

filed their reply (ECF No. 59) (the “Reply”), along with a Notice of Supplemental

Authority (ECF No. 76) (the “Notice”). Having considered all relevant pleadings,

including the Amended Complaint (defined herein) and the exhibits thereto, the

Court issues this memorandum opinion and order granting Trustee Defendants’

Second Motion to Dismiss.

BACKGROUND

I. Procedural History

Mark Carmel, the above-captioned debtor (“Debtor”), filed his chapter 7

bankruptcy case (the “Bankruptcy Case”) on July 9, 2018 (the “Petition Date”).

Approximately one month later, on August 2, 2018, Plaintiff filed the complaint (ECF

No. 1) (the “Original Complaint”) that commenced this adversary proceeding (the

“Adversary Proceeding”). On August 21, 2018, Randall and Lamberg filed a motion

to dismiss (the “First Motion to Dismiss”) the Original Complaint.

On September 18, 2018, the Court conducted a hearing on the First Motion to

Dismiss. Upon review of the Original Complaint and the First Motion to Dismiss, the

Court determined that the First Motion to Dismiss did not comply with the

requirements of Federal Rule of Procedure 12 (“Rule 12”), as incorporated by and


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made relevant to this Adversary Proceeding by Federal Rule of Bankruptcy Procedure

7012. The Court cautioned, however, that the Court’s determination as to the

procedural deficiency of the First Motion to Dismiss should not be construed as a

finding that the Original Complaint properly asserted each of the various causes of

action.

In connection with the Court’s entry of an order (ECF No. 18) dismissing the

Original Complaint, the parties agreed that Plaintiff would amend the Original

Complaint within 14 days. Plaintiff timely filed its amended complaint (ECF No. 28)

(the “Amended Complaint”) and Trustee Defendants timely responded with the

Second Motion to Dismiss.

II. The Probate Case and Prepetition Dispute

The dispute giving rise to the Amended Complaint occurred long before the

Petition Date. Prepetition, Debtor’s and Randall’s father, Herbert Carmel (the

“Testator”), died testate. His will (the “Will”) provided for the disposition of assets to

certain family members, including Debtor. Randall, in his role as personal

representative under the Will, submitted the Will to probate on May 19, 2017 in the

Circuit Court for Palm Beach County, Florida, Probate Division (the “Probate Court”).

See Exhibit A, Petition for Administration.

Probate of the Will became a hotly contested matter, with Debtor at the

forefront of most pleadings. Approximately five months after the commencement of

the probate case (the “Probate Case”), Debtor engaged Plaintiff to represent his


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interests in the matter.1 See Exhibit D, Retainer Agreement. As part of this

engagement, Plaintiff assisted Debtor in negotiation of a settlement agreement with

Randall to resolve disputes arising in the Probate Case. See Exhibit E, Mediation

Settlement Agreement (the “MSA”).2

a. The MSA and Termination of the Spendthrift Trust

The MSA provided for, among other things, (i) the appointment of a new

personal representative, Norman Fleisher, (ii) an agreement to jointly seek

termination of a spendthrift trust (the “Spendthrift Trust”) created by the Fourth

Codicil of the Will, and (iii) the distribution of interests in certain real property. MSA,

¶¶ 3, 4, 9 & 10. On November 14, 2017, Debtor and Randall filed a Joint Motion

(“Joint Motion”) in the Probate Case for termination of the Spendthrift Trust. See

Exhibit F. The Joint Motion advised the Probate Court of an agreement between the

parties and provided a copy of the MSA memorializing the agreement. In addition,

the Joint Motion attached “Waiver and Relinquishment” forms (the “Waivers”) for

each of Debtor’s six children indicating his or her consent to the dissolution of the

Spendthrift Trust.

Two days later, on November 16, 2017, the Probate Court entered an order

terminating the Spendthrift Trust. See Exhibit G (“Order Terminating Trust”). In the

1 The Exhibits to the Amended Complaint and allegations therein indicate that Pankausi Hauser, P.L.L.C. represented Debtor’s interests prior to Plaintiff’s engagement. 2 The execution date of the MSA is unclear on the face of the document itself. The “date” lines in the document are blank and none of the parties dated their signatures.


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Order Terminating Trust, the Probate Court stated its reliance upon the

representation that all potential beneficiaries, including Debtor’s six children, had

voluntarily consented to the termination of the Spendthrift Trust. See Order

Terminating Trust (“[A]nd the Court being advised that all six (6) children of Mark

Carmel … have irrevocably waived and relinquished any and all of their rights under

the Trust and consent to the Termination of the Trust ….”). By separate order, dated

November 16, 2017, the Probate Court also approved the MSA. See Exhibit H.

Within one week, Debtor moved pro se to rescind the MSA. See Exhibit P (the

“Motion to Rescind”). Shortly thereafter, Debtor filed a document (styled as an

affidavit in support of the Motion to Rescind) stating that three of Debtor’s children

had not, in fact, executed the Waivers. See Exhibit Q. Approximately two weeks later,

Debtor filed a motion with the Probate Court to vacate the Order Terminating Trust.3

b. Lien Interests Asserted by Plaintiff and PH

After entry of the Order Terminating Trust but prior to a hearing upon the

Motions to Vacate, Plaintiff filed notice on November 27, 2017 of an asserted charging

lien (the “SFK Lien”) for services rendered on Debtor’s behalf in the Probate Case.

See Exhibit K. One day later, on November 28, 2017 Pankauski Hauser, P.L.L.C.

(“PH”) likewise filed notice of asserted charging lien (the “PH Lien”) for services

3 See Exhibit V (the “Debtor’s Motion to Vacate”). As noted above, the Probate Case appears to have been rife with conflict. The Amended Complaint attaches another motion to vacate filed by Jonathan Carmel on February 5, 2018 as well as a motion filed by Debtor seeking reconsideration of the Order Terminating Trust. See Exhibits V & W (collectively with Debtor’s Motion to Vacate, the “Motions to Vacate”); see also Exhibit Z.


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rendered on behalf of Debtor in the Probate Case through October 19, 2017. See

Exhibit L. Both liens are asserted against assets bequeathed to Debtor pursuant to

the Will (the “Disputed Assets”), which the Fourth Codicil to the Will specifies are to

be held in the Spendthrift Trust.

On November 29, 2017, Debtor filed a motion to dismiss the SFK Lien. See

Exhibit M. On the same day, SFK filed a motion to enforce and perfect the SFK Lien.

See Exhibit N (the “Motion to Perfect”). The next day, November 30, 2017, Debtor

filed a motion seeking “dismissal” of the Motion to Perfect. See Exhibit O. In response,

Plaintiff filed a motion to strike several of Debtor’s motions, including the Motion to

Rescind and Debtor’s Motion to Vacate. See Exhibit GG.

c. Order Vacating Termination

On March 20, 2018, the Probate Court conducted a hearing (the “March 20

Probate Hearing”) on the Motions to Vacate.4 Upon consideration of the evidence

presented at the March 20 Probate Hearing, the Court ordered that the Order

Terminating Trust was vacated. See Exhibit JJ (“Order Vacating Termination”), page

2.

In the Order Vacating Termination, the Probate Court clarified that entry of

the order was based upon the Court’s consideration of evidence stipulated to by all

parties (including Plaintiff) present at the March 20 Probate Hearing. Exhibit JJ,

4 Exhibit II (Transcript of March 20 Probate Hearing) at 1 (cover page), 40:8-41:1 (discussing resolution of both Motions to Vacate). The Motion to Rescind was withdrawn in open court during the March 20 Probate Hearing. Exhibit II, 28:24-29:3.


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page 1-2.5 The Probate Court specifically found that the stipulated evidence

demonstrated that the termination of the trust lacked a valid consent. Id.

d. Status of Events in the Probate Case

Ten days after entry of the Order Vacating Termination, the Probate Court

issued an order specially setting an evidentiary hearing (the “SFK Lien Hearing”) on

August 15, 2018 upon matters relating to Plaintiff’s assertion of the SFK Lien. See

Exhibit LL. Approximately six weeks prior to the scheduled date of the SFK Lien

Hearing, Debtor filed his Bankruptcy Case, thereby staying proceedings in the

Probate Case as of the Petition Date pursuant to operation of 11 U.S.C. § 362.

III. The Amended Complaint and Second Motion to Dismiss

The Amended Complaint asserts the following causes of action:

Count I Declaratory Judgment Pursuant to 22 U.S.C. § 2201, et seq. (determination as to whether the Disputed Assets constitute property of the estate)

Count II Declaratory Judgment Pursuant to 22 U.S.C. § 2201, et seq. (determination as to the validity, priority, and extent of the SFK Lien against the Disputed Assets)

Count III Declaratory Judgment Pursuant to 22 U.S.C. § 2201, et seq. (determination as to the validity, priority, and extent of the PH Lien against the Disputed Assets)

Count IV Breach of contract

5 The Court relied upon exiting deposition testimony, including the testimony of Jonathan Carmel and a paralegal who purportedly notarized a document without his signature. See generally Exhibits II and JJ.


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Count V Foreclosure of SFK Lien (against the Disputed Assets)

Count VI Fraud in the inducement of the contract

Count VII Exception from Discharge Pursuant to 11 U.S.C. § 523(a)(2)

Count VIII Exception from Discharge Pursuant to 11 U.S.C. § 523(a)(4)

Count IX Exception from Discharge Pursuant to 11 U.S.C. § 523(a)(6)

The Second Motion to Dismiss seeks dismissal of only four counts (I, II, III, and

V)6 of the Amended Complaint, and only as to Trustee Defendants.7 As a basis for

dismissal, Trustee Defendants argue that the numerous documents attached to the

Amended Complaint (which exceed 700 pages in total) contradict the allegations in

the Amended Complaint, and the Amended Complaint therefore fails to state a claim

upon which relief may be granted. Specifically, Trustee Defendants contend that

(a) the Disputed Assets are not part of Debtor’s estate because the Disputed Assets

vested in the Spendthrift Trust upon the death of the Testator, (b) the SFK Lien and

PH Lien did not attach due to this vesting, and (c) the retainer agreement between

Debtor and Plaintiff does not entitle Plaintiff to a contingency fee. See Exhibit D (the

“Retainer Agreement”).

Collectively, the issues raised by these causes of action may well be

determinative of larger issues within the Bankruptcy Case, particularly as to the

6 In the interest of judicial economy, the Court’s analysis herein encompasses Count III, which seeks declaratory relief as to the validity, priority, and extent of the PH Lien. The holding in this Order does not include Count III, however, because Trustee Defendants are not named as defendants to that claim. 7 The remaining co-defendants have answered the Amended Complaint.


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amount and timing of distribution between the creditor parties. Count I in particular

seeks a declaratory judgment of this Court’s in rem jurisdiction as to the Disputed

Assets. A review of Debtor’s schedules and statements of affairs indicates that the

Disputed Assets, if found to be part of Debtor’s bankruptcy estate (the “Bankruptcy

Estate”), are likely the primary (if not only) source of funding for any potential

distribution to creditors.

ANALYSIS

I. Jurisdiction

A bankruptcy court, as a court of limited jurisdiction, may only hear and decide

a limited scope of matters. Bass v. Denney (In re Bass), 171 F.3d 1016, 1022 (5th Cir.

1999). Section 1334(b) of title 28 of the United States Code provides district courts

with original (but not exclusive) jurisdiction over all civil proceedings “arising under

title 11 or arising in or related to cases under title 11.” 28 U.S.C. § 1334(b).8

Section 157(b) and (c) of title 28 further delineate the limits of a bankruptcy

court’s subject matter jurisdiction. 28 U.S.C. § 157(b) & (c). These sections of the

United States Code set forth a non-exhaustive list of “core” versus “non-core” matters,

including matters concerning the administration of the bankruptcy estate and

proceedings affecting the liquidation of assets of the estate. Collectively, 28 U.S.C.

8 Section 157(a) further provides that “[e]ach district court may provide that any or all cases under title 11 and any or all proceedings arising under title 11 or arising in or related to a case under title 11 shall be referred to the bankruptcy judges for the district.” 28 U.S.C. § 157(a). Within this district, the district court has codified a standing “order of reference” referring such matters to this court and other bankruptcy courts within the district. District Court Local Rule 87.2.


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§ 1334(b) and 28 U.S.C. § 157(b) provide the Court with jurisdiction to determine

whether the Disputed Assets constitute property of the Bankruptcy Estate. Because

the Court’s determination will impact the availability of assets for distribution in the

Bankruptcy Case, this is a core proceeding under 28 U.S.C. § 157(b)(2)(A) & (O).

II. Motion to Dismiss Standard

Prior to analyzing the unique jurisdictional issues raised in the Second Motion to

Dismiss, the Court will first consider the procedural sufficiency of both the Amended

Complaint and the Second Motion to Dismiss.

a. Application of Rule 12(b)(6)

To state a viable claim for relief under Federal Rule of Civil Procedure 8(a)

that will survive a Rule 12(b)(6) motion to dismiss,9 the factual allegations of the

Amended Complaint must “state a claim to relief that is plausible on its face.” Bell

Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007). “A claim has facial plausibility

when the plaintiff pleads factual content that allows the court to draw the reasonable

inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal,

556 U.S. 662, 678 (2009). In determining facial plausibility, a court should not assume

the veracity of mere legal conclusions or threadbare recitals of the elements of a cause

of action. Id. However, when “there are well-pleaded factual allegations, a court

should assume their veracity and then determine whether they plausibly give rise to

9 Rule 8(a) and Rule 12(b)(6) are made applicable to bankruptcy proceedings by Rule 7008 and Rule 7012, respectively, of the Federal Rules of Bankruptcy Procedure.


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an entitlement to relief.” Id. at 679.

Although the Amended Complaint sets forth the enumerated counts with

enough specificity to determine the general claims alleged, it contains 72 paragraphs

of background allegations, all of which are incorporated by reference in each of the

enumerated counts. Plaintiffs made no attempt to identify precisely which

paragraphs are pertinent to each of the nine causes of action. Although this type of

inattention to detail treads very close to the format of a “shotgun” pleading, the

Amended Complaint avoids the “mortal sin” of re-incorporating prior counts into

subsequent counts. Weiland v. Palm Beach County Sheriff’s Office, 792 F.3d 1313,

1320-23 (11th Cir. 2015) (describing with disfavor various forms of shotgun

pleadings). In addition, the background allegations venture into topics that are likely

irrelevant to the matters at hand (and are therefore distracting to parse). Despite

these significant flaws, the Court finds that the Amended Complaint provides

adequate notice to the parties of the intended causes of action and the alleged factual

basis for such claims.

Accordingly, the Court will move on to the next point in its analysis, i.e. the

potential relevance of the numerous attachments to the Amended Complaint.

b. Review of Documents Outside the Complaint

In ruling upon a motion to dismiss, the Court may typically consider only the

complaint and documents attached to the complaint. Brooks v. Blue Cross & Blue

Shield of Fla., Inc., 116 F.3d 1364, 1368 (11th Cir. 1997). In this instance, Plaintiffs


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attached over 700 pages of “supporting” documents as exhibits to the Amended

Complaint. Although the Court may consider each of the 700 pages in its analysis,

the Court notes that it would have been preferable for Plaintiff to narrow the Court’s

(and Trustee Defendants’) focus at this stage to only those documents germane to the

concise pleading of the alleged claims.

Again, however, the Court finds that Plaintiff’s lack of precision is not fatal to

the alleged causes of action, and turns to its analysis of whether the claims may

reasonably be construed to state a cause of action under Rule 12(b) over which the

Court has subject matter jurisdiction. Because it is always appropriate for the Court

to analyze its own subject matter jurisdiction even if Trustee Defendants have not

pled Rule 12(b)(1) with specificity, the Court must consider whether the Disputed

Assets are property of Debtor’s Bankruptcy Estate as a threshold jurisdictional issue.

III. The Will, Fourth Codicil, and Vesting of Assets

The immediate resolution of whether the Disputed Assets are, in fact, property

of the Bankruptcy Estate is crucial to this Court’s determination of the Second Motion

to Dismiss. The Amended Complaint alleges that, although the Disputed Assets were

settled into a residual trust upon the death of the Testator, subsequent events led to

the “disbursement” of the Disputed Assets, and that this alleged disbursement caused

the assets to vest in Debtor. The propriety of this allegation must be weighed as a

jurisdictional matter because the nature of Debtor’s interest in the Disputed Assets—

either as a beneficiary of the Spendthrift Trust or as a direct holder of a disbursed


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asset—is determinative of the Court’s jurisdiction over the Disputed Assets.

If the Disputed Assets are part of the Bankruptcy Estate, then this Court has

jurisdiction under 28 U.S.C. §§ 157 and 1334 (and therefore, by operation of statute,

11 U.S.C. § 541) to determine the appropriate distribution of these assets. If the

Disputed Assets are not property of the Bankruptcy Estate pursuant to 11 U.S.C. §

541(c)(2), however, then this Court is without jurisdiction to determine the

appropriate distribution, if any, of the Disputed Assets, as well as the relative priority

of any liens asserted against the Disputed Assets.

Consequently, the Court must analyze both the preliminary vesting of the

Disputed Assets into the residual trust as well as the impact, if any, of subsequent

events upon Debtor’s interest. In making this determination, the Court must

interpret the Will as a whole, looking first to the plain language of the Will and its

accompanying codicils.10

a. The Will

The cornerstone of the Court’s interpretation of the Will must be the Testator’s

intent. Bizzell, 959 So.2d at 317. (“The polestar of trust or will interpretation is the

10 Because probate of the Will remains pending within the state of Florida, the Court’s analysis herein will cite to Florida law. To the extent that New York law may govern certain portions of the Will, the Court finds that those portions are not determinative of the Court’s decision set forth herein. Moreover, the Court finds that New York state law is consistent with Florida law as to general matters of will interpretation. Compare Bryan v. Dethlefs (In re Bizzell), 959 So.2d 314, 317 (Fla. 3d DCA 2007) with In re McCafferty’s Will, 254 N.Y.S. 789, 791-92 (N.Y. Sur. Ct. 1932). Where the Court finds that no material difference between Florida and New York law relevant to the issues exists, no definitive choice of law needs to be made. In re Last Will & Testament & Trust Agreement of Moor, 879 A.2d 648, 650-51 (Del. Ch.), judgment entered sub nom. In re Moor (Del. Ch. 2005).


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settlor’s intent.”). In divining this intent, the Court must construe the Will as a whole,

taking into account the general dispositional scheme. Sorrels v. McNally, 105 So. 106,

109 (Fla. 1925) (“The intention of the testator is to be gathered from a consideration

of all the provisions of the will taken together, rather than from detached portions or

any particular form of words. This rule prevails whether the entire will, or some

specific clause or part of it, is being construed.”); Bizzell, 959 So.2d at 317 (quoting

same); Pounds v. Pounds, 703 So.2d 487, 488 (Fla. 5th DCA 1997).

The Will specifically identifies the Testator’s wife and each of his three

children, demonstrating an intent that each immediate family member be recognized.

See, e.g., Will, p. 1. In the Fourth Article, the Testator directs that his personal effects

should be given to his wife, if she survives him or, if she predeceases him,11 to his

three children in equal shares. Id. In the Twenty-First Article, the Testator explicitly

indicates his intent that the assets in any trust created in the Will be protected from

attachment prior to distribution. Id. at p. 14-15 (“Neither the income nor principal

interest in any trust, while such interest in in the hands of the Trustee and before

such interest is actually paid or delivered to the person entitled thereto, shall be

subject to voluntary or involuntary anticipation, encumbrance, alienation or

11 In the Fifth Article, the Testator directs the creation of a residuary trust for his wife’s care and benefit (the “Wife’s Trust”). Id. at p. 2-4. Upon the death of his wife, the Testator further directs that any funds remaining in the Wife’s Trust should be equally divided amongst the Testator’s then-living children. Id. at 4 (Fifth Article), 5 (Eighth Article). The Fourth Codicil of the Will clarifies that the Testator’s wife predeceased him. Consequently, the Testator’s Estate passed according to the provisions of the Will allowing for this possibility.


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assignment, either in whole or in part, nor shall such interest be subject to any

judicial process to levy upon or attach the same for or on behalf of such person’s

creditors or claimants.”).

As a result of these provisions, the Will demonstrates a clear intent by the

Testator to provide for the specific needs of his family, including Debtor and Debtor’s

children, in equal measure and to protect the bequeathed assets from attachment

whenever possible. This intent is carried over into the codicils of the Will.12

The First Codicil to the Will describes a promissory note, dated March 23, 2009

(the “Promissory Note”), evidencing a loan between the Testator and Debtor. Will,

First Codicil, p. 1. The First Codicil requires a “true-up” of Debtor’s outstanding

obligations under the Promissory Note against Debtor’s distributive share. Id. This

“true-up” appears designed to allow for a more equitable distribution of assets

between the Testator’s children in light of previous monetary gifts to Debtor.

Similarly, the Second Codicil embodies the same intent with respect to

educational loans made or guaranteed by the Testator on behalf of Debtor’s children.

Will, Second Codicil, p. 1. Finally, the Third Codicil to the Will nullifies the First and

Second Codicils13 and substitutes additional clarifying language. Collectively, the

12 The Will, First Codicil, and Second Codicil were each executed in the state of New York. The First Codicil is dated August 18, 2010 and contains a self-proof of will with two witness signatures. The Second Codicil, dated August 24, 2011, likewise contains a self-proof and witness signatures. Despite execution in New York, each codicil explicitly recites that the Testator was domiciled in Palm Beach County at the time of drafting. The Third and Fourth Codicils of the Will were executed in Florida. 13 The Third Codicil to the Will declares the first paragraph of each of the First and Second Codicil to be null and void, and substitutes the following language:


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First, Second, and Third Codicils evidence the Testator’s continuing desire to provide

a distributive share for Debtor despite any prior loans made to Debtor or guaranteed

on behalf of Debtor’s children.

b. The Fourth Codicil

The crucial section of the Will with respect to Debtor’s interest in the Disputed

Assets is the Fourth Codicil of the Will (the “Fourth Codicil”), executed in Florida on

September 10, 2004.14 Paragraph 5 of the Fourth Codicil contains the following

provisions applicable to Debtor and Trustee Defendants in their capacities as the

beneficiary and trustees (respectively) of a residuary trust:

5. Paragraph EIGHTH (B) of my Last Will and Testament, as heretofore amended and modified as set forth in my prior Codicils, is hereby further modified and amended to provide that the part of my residuary estate to my son, MARK CARMEL, shall be devised to my Trustees, as hereinafter named, A. To hold, administer and distribute or apply the net income

derived therefrom in convenient installments, at least quarterly, to or for the benefit of my said son, MARK CARMEL, as long as he shall live.

B. I hereby authorize and empower the Trustees, in their sole and absolute discretion, at any time to disburse from the principal of the trust principal such amounts as they may deem advisable in

In the event that, pursuant to the terms of said Last Will and Testament, my son, MARK CARMEL, or if he shall not survive me, then his issue surviving me, shall become entitled to a distributive share of my estate, there shall be first determined the sum total of all obligations owed to me by my son under education or student loans taken by my said son’s children, the payment of which I guaranteed or endorsed and, by virtue of which, I will be obligated to advance the payment thereof and any sums owed to me for advances made by me for the education of his children.

Will, Third Codicil. 14 See ECF No. 28, Exhibit A, p. 31-34.


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their sole discretion for the health, support and maintenance of my said son. The Trustees[‘] exercise of discretion shall be conclusive as to the advisability of any such disbursement and the same shall not be questioned by anyone.

C. Upon the death of my said son, or upon my death if he shall fail to survive me, the Trustees shall distribute the remainder of the trust estate to the then living issue of my son, MARK CARMEL, per stirpes.

D. No beneficiary of the trust created hereunder shall have any right or power to anticipate, pledge, assign, sell, transfer, alienate or encumber his or her interest in the trust in any way; nor shall any such interest in any manner be liable for or subject to the debts, liabilities or obligations of such beneficiary or claims of any sort against such beneficiary.

6. I appoint my son, RANDALL CARMEL and ALLEN LAMBERG, [sic] to be the Trustees of all trusts created herein. In the event that either one shall predecease me or for any reason fail to qualify as Trustee hereunder, the other surviving me shall act as Trustee. Should both predecease me or fail to qualify as Trustee hereunder, then, in such event, I appoint my daughter, CAREN SICHEL, as Trustee in their place.

7. Any fiduciary appointed herein shall have all powers granted by the Florida Statutes and in addition, the general power to sell any asset, whether real or personal, of my estate for such price and upon such terms as such fiduciary sees fit, without any court order.

Will, Fourth Codicil, ¶¶ 5-7.15

The Fourth Codicil creates a residuary trust specifically for the benefit of

Debtor.16 This provision is unique in two respects: (1) it contains language typical of

“spendthrift” trusts and (2) unlike prior provisions of the Will, this provision indicates

an intent to create a unique method of segregating assets for only one (not all three)

15 Paragraph 8 of the Fourth Codicil specifically provides that all other provisions of the Will “shall remain unchanged and in full force and effect.” Will, Fourth Codicil, ¶ 8. 16 In addition, the Testator ratifies all provisions of the Will and prior Codicils that were not otherwise specifically revoked by the Testator. Will, Fourth Codicil, ¶ 1.


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of the Testator’s children. Compare Will, Fourth Codicil, ¶¶ 2-4 with Will, Fourth

Codicil, ¶¶ 5-7. Collectively, the four codicils to the Will leave no doubt that the

Testator specifically considered how best to disburse assets equitably amongst his

heirs and continually strove to memorialize his intent with as much direction as

possible during the time between the original execution of the Will and his demise.

The Fourth Codicil also demonstrates that the Testator considered the possibility

that Debtor might need to be protected from his own improvidence and revised the

Will accordingly.

c. Whether the Fourth Codicil Creates a Spendthrift Trust

Florida Statutes § 736.0103(19) defines a spendthrift provision as “a term of a

trust that restrains both voluntary and involuntary transfer of a beneficiary’s

interest.” Fla. Stat. § 736.0103(19). In addition to repeating this qualifying definition,

Florida Statutes § 736.0502 provides other statutory guidelines for a valid

spendthrift provision:

(1) A spendthrift provision is valid only if the provision restrains both voluntary and involuntary transfer of a beneficiary's interest. This subsection does not apply to any trust the terms of which are included in an instrument executed before the effective date of this code.

(2) A term of a trust providing that the interest of a beneficiary is held subject to a spendthrift trust, or words of similar import, is sufficient to restrain both voluntary and involuntary transfer of the beneficiary's interest.

(3) A beneficiary may not transfer an interest in a trust in violation of a valid spendthrift provision and, except as otherwise provided in this part, a creditor or assignee of the beneficiary may not reach the interest or a distribution by the trustee before receipt of the interest or distribution by the beneficiary.

(4) A valid spendthrift provision does not prevent the


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appointment of interests through the exercise of a power of appointment.

The typical purpose of a spendthrift provision is to provide for the beneficiary’s

maintenance and support while protecting him from his own improvidence or

incapacity for self-protection. Miller v. Kresser, 34 So.3d 172, 175 (Fla. 4th DCA 2010);

Zlatkiss v. All Am. Team Concepts, LLC, 125 So.3d 953, 955 (Fla. 5th DCA 2013)

(citing same). Even prior to the enactment of Florida Statutes §§ 736.0501-0507,

Florida courts have long recognized the validity of appropriate spendthrift provisions.

Zlatkiss, 125 So.3d at 955.

Paragraph 5(D) of the Fourth Codicil clearly articulates the Testator’s intent

that Debtor’s beneficial interest in the Testator’s residuary estate be restrained from

both voluntary and involuntary transfer. To that end, the Testator ensured that any

funds allocable to Debtor’s beneficial interest would be placed in the Spendthrift

Trust for Debtor’s enduring benefit and that the trustees of the Spendthrift Trust did

not include Debtor himself.17 Accordingly, the Court finds and holds that the Fourth

Codicil contains appropriate language to create a valid spendthrift trust pursuant to

Florida Statutes §§ 736.0103(19) and 736.0502.

d. Vesting of Assets

17 In this way, the Testator avoided issues inherent with trusts over which the beneficiary maintains “absolute dominion” over the property of the trust. C.f. In re Nichols, 434 B.R. 906, 909 (Bankr. M.D. Fla. 2010) (citing debtor’s complete dominion over trust asset as a basis for determining invalidity of spendthrift provision).


20

The next stage of the Court’s inquiry is twofold: did the Disputed Assets vest

in the Spendthrift Trust and, if so, when? Both aspects of the question are easily

answered. Testamentary assets generally vest upon the death of the Testator. Bizzell,

959 So.2d at 317-18. Because the law favors the early vesting of testamentary assets,

vesting upon any later event is the exception rather than the rule. Sorrels, 106 So. at

110 (“The law favors the early vesting of estates, and, in the absence of a clear

manifestation of the intention of the testator to the contrary, estates are held to vest

at the earliest possible date …. The overwhelming weight of authority is to the effect

that devises vest at the death of the testator, unless there is a clear intent to postpone

the vesting.”) (internal citations omitted).

In this instance, the language of the Will (including the Fourth Codicil)

unambiguously provided for vesting of the Disputed Assets in the Spendthrift Trust

upon the Testator’s death.18 The Court therefore finds that the Disputed Assets

vested in the Spendthrift Trust at that time, and the only remaining question in this

portion of the Court’s analysis is whether the Spendthrift Trust remains valid despite

intervening events.

e. Effect of Order Vacating Termination

18 Although certain provisions of the Will provided for a delayed distribution of assets to persons who had not yet attained a specified age, those provisions are not relevant to Debtor, who is well over any age specified in the Will, nor are they relevant to this Court’s determination of whether the assets vested in the Spendthrift Trust itself. In fact, the absence of any such limiting language in the Fourth Codicil as to the Debtor (despite the inclusion of such language in other provisions) further supports the Court’s conclusion that the Disputed Assets were intended to and did vest upon the Testator’s death.


21

The Order Terminating Trust was entered based upon the Probate Court’s

prior (apparently mistaken) understanding that all valid consents to the termination

of the Spendthrift Trust had been appropriately procured. See Order Terminating

Trust. Once that misapprehension had been corrected by competent evidence, the

Probate Court vacated its own prior order. Skipper v. Schumacher, 160 So. 357, 359

(Fla. 1935) (“[E]very court, whether possessed of original or appellate jurisdiction, is

vested with inherent power to vacate its own orders, judgments, or decrees, if void,

and indeed, every such court is in duty bound to do so when appropriate procedure is

invoked for that purpose.”); Zemurray v. Kilgore, 177 So. 714, 718 (Fla. 1937)

(“Orders, decrees, or judgments, procured through fraud, collusion, deceit, or mistake,

may be opened, vacated, or modified at any time, on the proper showing made by the

parties injured.”).

More importantly for the purposes of this Court’s present analysis, the Order

Terminating Trust, once vacated, became of no legal effect. See, e.g., US v. Sigma

Int’l, Inc., 300 F.3d 1278, 1280 (11th Cir. 2002) (referencing prior vacated opinions

and stating that such opinions “have no legal effect whatever”); see also Goolsby v.

State, 914 So.2d 494, 496-97 (Fla. 5th DCA 2005) (“A void order has no force and effect

and is a nullity.”). Collectively, the Order Terminating Trust and Order Vacating

Termination therefore provide that the Disputed Assets presently remain in the

status in which they existed prior to entry of the Order Terminating Trust. That

status, according to existing Probate Court orders and this Court’s own analysis of


22

the Will, is in the Spendthrift Trust.19

IV. Property of the Estate

The Court has determined that (i) the Will contained a valid spendthrift

provision, (ii) this provision appears consistent with the Testator’s intent,

interpreting the Will as a whole, (iii) the assets vested in the Spendthrift Trust upon

the death of the Testator, and (iv) the Probate Court’s vacatur of its own prior order

resulted in a return of the Disputed Assets to the status quo prior to entry of the

Order Terminating Trust, meaning that the Disputed Assets were once again in the

Spendthrift Trust. The only remaining question is whether the Disputed Assets fall

within the Bankruptcy Estate. The Court finds that they do not.

a. Status of Disputed Assets as of the Petition Date

The analysis begins with the status of the Disputed Assets as of the Petition

Date. 11 U.S.C. § 541; Dzikowski v. NASD Regulation, Inc. (In re Scanlon), 239 F.3d

1195, 1197 (11th Cir. 2001) (“A debtor’s estate in bankruptcy consists of all legal and

equitable interests of the debtor in property as of the commencement of the

case.”) (internal quotations omitted and emphasis added). In determining whether

in rem jurisdiction exists over the Disputed Assets, the Court may not reconsider

19 The Court finds it significant that none of the parties to this Adversary Proceeding, including Plaintiff, contested the validity of the Spendthrift Trust prior to entry of the Order Terminating Trust. Plaintiff’s arguments that the (temporary) termination of the Spendthrift Trust functioned as a permanent distribution of the Disputed Assets is contrary to the well-accepted premise that orders, once vacated, are null and void upon vacatur. Signa Int’l, 300 F.3d at 1280; see also Goolsby, 914 So.2d at 496-97. As a result of the Order Terminating Trust becoming null and void, the Disputed Assets were once again vested in the Spendthrift Trust, which sprang back into existence as if it was never terminated.


23

matters previously decided by the Probate Court. Hammer v. Haire, 369 F. App'x 989,

990-91 (11th Cir. 2010) (describing Rooker-Feldman doctrine).20

The Court’s analysis is constrained by well-accepted law to only those matters

not “inextricably intertwined” with existing Probate Court judgments or final orders.

Seigel, 234 F.3d at 1172. As a result, the question of whether the Disputed Assets

ought to be in the Spendthrift Trust (based upon events that allegedly transpired

during the Probate Case) is outside the scope of this Court’s inquiry. Instead, this

Court’s analysis is limited to whether assets held within the Spendthrift Trust as of

the Petition Date may be part of Debtor’s Bankruptcy Estate pursuant to 11 U.S.C.

§ 541.

b. 11 U.S.C. § 541

Section 541(a)(1) of the Bankruptcy Code provides:

The commencement of a case under section 301, 302, or 303 of this title creates an estate. Such estate is comprised of all the following property, wherever located and by whomever held:

(1) Except as provided in subsections (b) and (c)(2) of this section, all legal or equitable interests of the debtor in property as of the commencement of the case.

11 U.S.C. § 541(a)(1). This section has been broadly construed to include nearly all

forms of property held by a debtor. Meehan v. Wallace (In re Meehan), 102 F.3d 1209,

1210 (11th Cir. 1997). By its own language, however, § 541(a)(1) does not extend to

20 “The Rooker–Feldman doctrine provides that federal courts, other than the United States Supreme Court, have no authority to review the final judgments of state courts.” Siegel v. Lepore, 234 F.3d 1163, 1172 (11th Cir. 2000). The doctrine extends to claims that are “inextricably intertwined” with a state court judgment. Id.


24

property that falls within the ambit of § 541(c)(2).

Section 541(c)(2) provides that “[a] restriction on the transfer of a beneficial

interest of the debtor in a trust that is enforceable under applicable nonbankruptcy

law is enforceable in a case under this title.” “This provision is commonly interpreted

to protect a debtor’s beneficial interest in a spendthrift trust from becoming property

of the estate.” In re Rogove, 443 B.R. 182, 186 (Bankr. S.D. Fla. 2010). Numerous

courts, including this one, have found that § 541(c)(2) excludes property in a valid

spendthrift trust from the in rem jurisdiction of the bankruptcy court. See, e.g., id. at

186-187; In re Ciano, 433 B.R. 431, 433-35 (Bankr. N.D. Fla. 2010) (applying Florida

trust law and determining that property was not within bankruptcy estate); In re

Kane, 336 B.R. 575, 577-78 (Bankr. S.D. Fla. 2006) (same); McCauley v. Hersloff (In

re Hersloff), 147 B.R. 262, 266 (Bankr. M.D. Fla. 1992) (applying Maryland trust law).

The Amended Complaint does not allege, and the record does not reflect, that

Debtor exercises absolute dominion and control over the Disputed Assets (i.e.,

through a prepetition disbursement into Debtor’s bank account).21 Because the

Disputed Assets remained within the Spendthrift Trust on the Petition Date, the

Court concludes that the application of § 541(c)(2) results in the Disputed Assets

being excluded from property of the Bankruptcy Estate as of the Petition Date. In re

21 C.f. Miller, 34 So.3d at 176-77; Nichols, 434 B.R. at 909. To the contrary, the chapter 7 trustee has neither filed a motion for turnover pursuant to 11 U.S.C. § 542 nor filed a notice of expected distribution of assets.


25

Ciano, 433 B.R. at 433-35; Hersloff, 147 B.R. at 265-66; In re Schauer, 246 B.R. 384,

387 (Bankr. D.N.D. 2000). 22

V. Federal Probate Exception

The “probate exception” to federal jurisdiction provides another equally

compelling basis for the Court’s determination that matters concerning the

administration of the Testator’s estate, including matters relating to the distribution

of the Disputed Assets, fall outside this Court’s jurisdiction. Marshall v. Marshall,

547 U.S. 293, 311-12 (2006) (“[T]he probate exception reserves to state probate courts

the probate or annulment of a will and the administration of a decedent's estate; it

also precludes federal courts from endeavoring to dispose of property that is in the

custody of a state probate court.”).23

Because two courts may not exercise in rem jurisdiction over the same res at

the same time, it logically follows that where applicable state law provides for a state

court’s in rem jurisdiction over an asset, a federal bankruptcy court should not

assume jurisdiction over such asset unless and until the state court’s jurisdiction has

terminated. Marshall 547 U.S. at 311 (“[W]hen one court is exercising in rem

jurisdiction over a res, a second court will not assume in rem jurisdiction over the

22 The record reflects that Trustee Defendants sought stay relief in the Bankruptcy Case to disburse funds for Debtor’s maintenance and support, representing that the Disputed Assets are not within the actual possession of Debtor. See ECF No. 20, Case No. 18-18279. Although relief from the automatic stay for similar disbursements is no longer necessary in light of the Court’s conclusion herein, submission of Trustee Defendants’ request for relief was appropriate at the time it was sought. 23 C.f. Stuart v. Hatcher, 2018 WL 6329699, at *1 (11th Cir. Dec. 4, 2018) (describing limits of federal probate exception).


26

same res.”); Nickless v. Kessler (In re Berman), 352 B.R. 533, 543 (Bankr. D. Mass.

2006) (“This Court reads Marshall to stand for the proposition that the probate

exception prevents federal courts from exercising in rem jurisdiction over a res when

a state court is simultaneously doing the same.”).

Although this Court has jurisdiction to determine whether the Disputed Assets

became property of the Bankruptcy Estate as of the Petition Date, this jurisdiction is

not boundless, as the probate exception illustrates. Having made the determination

that the Disputed Assets were held in the Spendthrift Trust pursuant to the Probate

Court Order Vacating Termination upon entry of that order and continuing through

the Petition Date, the Court must now refrain from any determination regarding the

appropriate disposition of the Disputed Assets, and leave that determination to the

Probate Court. Strickland v. Peters, 120 F.2d 53, 55 (5th Cir. 1941).

Moreover, the Probate Court explicitly reserved jurisdiction to determine many

of the legal issues implicated by the allegations in the Amended Complaint. See

Exhibit II at 24:16-25, 29:4-12, 34:25-35:3, 41:17-20, 42:3-6, and 46:23-47:4. Based

upon this reservation, the Court finds and holds that even if in rem jurisdiction by

this Court were otherwise appropriate over the Disputed Assets—which the Court

does not find—the Probate Court’s reservation of jurisdiction must be respected

under both the probate exception and general principles of abstention.

VI. Abstention

Section 1334(c)(1) of title 28 of the United States Code “provides that a


27

bankruptcy court may abstain from hearing a particular proceeding arising under

title 11 or arising in or related to a case under title 11 when to do so would be in the

interest of justice, or in the interest of comity with State courts or respect for State

law.” AASI Creditor Liquidating Trust v. Peoplesoft, USA (In re All Am.

Semiconductor, Inc.), 2010 WL 2854153, at *2 (Bankr. S.D. Fla. July 20, 2010)

(internal quotations omitted); 28 U.S.C. § 1334(c)(1). “[T]here is no set ‘test’ to

determine under what circumstances discretionary abstention is appropriate.” All

Am. Semiconductor, 2010 WL 2854153, at *2.

Courts generally consider several factors when determining whether

permissive abstention is appropriate:

(1) The effect, or lack of effect, on the efficient administration of the bankruptcy estate if discretionary abstention is exercised;

(2) The extent to which state law issues predominate over bankruptcy issues;

(3) The difficulty or unsettled nature of the applicable state law; (4) The presence of related proceedings commenced in state court or

other non-bankruptcy courts; (5) The jurisdictional basis, if any, other than § 1334; (6) The degree of relatedness or remoteness of the proceedings to the

main bankruptcy case; (7) The substance rather than the form of an asserted “core”

proceeding;

(8) The feasibility of severing state law claims from core bankruptcy matters to allow judgments to be entered in state court with enforcement left to the bankruptcy court;


28

(9) The burden on the bankruptcy court's docket; (10) The likelihood that the commencement of the proceedings in

bankruptcy court involves forum shopping by one of the parties; (11) The existence of a right to jury trial; (12) The presence in the proceeding of non-debtor parties; (13) Comity; and (14) The possibility of prejudice to other parties in the action.

E.S. Bankest, LLC v. United Beverage Florida, LLC (In re United Container LLC),

284 B.R. 162, 176 (Bankr. S.D. Fla. 2002); All Am. Semiconductor, 2010 WL 2854153,

at *2 (quoting same). “No particular factor is controlling and it is within the discretion

of the court how much weight, if any, should be given to any particular factor.” All

Am. Semiconductor, 2010 WL 2854153, at *2 (citing United Container, 284 B.R. at

176). Courts have broad discretion to abstain from hearing claims based in state law

“whenever appropriate in the interest of justice, or in the interest of comity with state

courts or respect for state law.” United Container, 284 B.R. at 176.

After considering the circumstances relating to the Probate Case and the

Amended Complaint, the Court finds it appropriate under 28 U.S.C. § 1334(c)(1) to

abstain from adjudicating all matters relating to the administration of the Testator’s

estate, including all matters relating to the imposition of liens upon any assets to be

distributed pursuant to the Will. Several of the permissive abstention factors outlined

above are present in this Adversary Proceeding, making a strong case for permissive


29

abstention. In particular, the Court finds that (a) principles of comity, (b) the

presence of other non-debtor parties (including potential beneficiaries to the Will),

and (c) the extent to which state law issues24 predominate over bankruptcy issues

collectively provide a highly persuasive basis for permissive abstention.

In addition, the Court is mindful that the Probate Court anticipated ruling

upon these issues and specifically reserved jurisdiction to do so. Exhibit II at 24:16-

25, 29:4-12, 34:25-35:3, 41:17-20; 42:3-6; and 46:23-47:4. Therefore, to the extent that

the probate exception does not specifically mandate that this court refrain from

determining matters relating to the Probate Case, including Counts II, III, and V of

the Amended Complaint,25 the Court finds and holds that permissive abstention is

warranted.

One other unenumerated factor provides a final basis upon which the Court

believes abstention is appropriate. Central to Plaintiff’s allegations in the Amended

Complaint are factual arguments supporting a potential finding of a fraud upon the

Probate Court. If these allegations are supported by the facts and evidence, then there

is no question that the Probate Court is the appropriate court to issue any necessary

24 Predominating issues of state law include: (a) the extent to which the charging lien asserted by Plaintiff attached to the Disputed Assets while the Order Terminating Trust was extant, (b) the interpretation of the Retainer Agreement and the MSA, both of which agreements are governed by applicable Florida law and directly relate to the Probate Case, and (c) whether the Retainer Agreement in the first instance permits Plaintiff’s assessment of a contingency fee. Each of these state law issues are well within the provenance of the Probate Court, which regularly addresses issues arising under state law. 25 The probate exception does not limit the Court’s jurisdiction to determine whether the Disputed Assets constitute property of the Bankruptcy Estate (which is the relief sought in Count I).


30

orders, remedies, or sanctions, as the court upon which the fraud was visited. Skipper,

160 So. at 359; Zemurray, 177 So. at 718.

CONCLUSION

Accordingly, the Court, having considered the Second Motion to Dismiss, the

Response, the Reply, the Notice, the Amended Complaint and the exhibits thereto,

the record of this Adversary Proceeding, and the record of the Bankruptcy Case, and

being otherwise fully informed in the premises, hereby ORDERS AND ADJUDGES

that:

1. The Second Motion to Dismiss is GRANTED as to Counts I, II, and V of

the Amended Complaint.26

2. To the extent that, absent dismissal, this Court could determine Counts

I, II, and V of the Amended Complaint as to Trustee Defendants, the

Court ABSTAINS for the reasons stated herein.

3. The Court retains jurisdiction over all matters directly relating to the

interpretation and enforcement of this Order.

### Copies furnished to: AUST All interested parties by the Clerk of Court

26 Because Trustee Defendants are not named as defendants to Count III, the Court confines its holding in this Order to Counts I, II, and V.
