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Falls v. Goldman Sachs Trust Company, N.A.

United States District Court, E.D. North Carolina, Western Division

May 1, 2017

RALPH L. FALLS, III, Plaintiff,
GOLDMAN SACHS TRUST COMPANY, N.A. as Executor of the Estate of Ralph L. Falls, Jr.; GOLDMAN SACHS TRUST COMPANY, N.A. as Trustee of the Ralph Lane Falls Revocable Declaration of Trust; DIANE C. SELLERS; LOUISE FALLS CONE individually and on behalf of her minor children and unborn issue; TOBY CONE; MARY COOPER FALLS WING individually and on behalf of her minor children and unborn issue; GILLIAN FALLS CONE individually and on behalf of her minor children and unborn issue; K.L.C. by her next friends and parents, Louise Falls Cone and Toby Cone, Defendants.


          LOUISE W. FLANAGAN United States District Judge.

         This matter is before the court upon motion to dismiss plaintiff's claim for breach of lease, filed by defendant Goldman Sachs Trust Company, N.A. (“Goldman Sachs”) (DE 36); motion to excuse defendants Gillian Falls Cone and K.L.C. from physically attending mediation (DE 83); and two motions filed by John C. Hine (“Hine”) to quash subpoenas (DE 85, 98). The issues raised have been briefed fully and are ripe for ruling. For the reasons that follow, the motion to dismiss is granted, motion to excuse is granted, and motions to quash are granted in part and denied in part.


         Plaintiff commenced this action on August 12, 2016, asserting the following claims: 1) claim seeking declaration that a certain Fifth Amendment to Revocable Declaration of Trust of Ralph L. Falls, Jr. is invalid; 2) tort claim of malicious interference with the right to inherit, asserted against defendant Dianne C. Sellers (“Sellers”); 3) breach of lease claim against the Estate of Ralph L. Falls, Jr. (the “Estate”); 4) alternative claim seeking declaration regarding the enforcement of a lease provision in the Fifth Amendment to Revocable Declaration of Trust of Ralph L. Falls, Jr. Plaintiff seeks declaratory relief and damages, as well as costs and attorney's fees.

         Defendant Goldman Sachs filed the instant motion to dismiss the breach of lease claim on November 2, 2016, on the basis that the claim is barred by statute of limitations on its face. After remaining defendants filed answers, this court held a Rule 16(b) scheduling conference on January 3, 2017, whereupon the court set forth a case schedule to include an initial period of discovery to facilitate early global settlement efforts, in the instant case and a separate case involving plaintiff and defendant Goldman Sachs arising out of an alleged breach of loan agreement, No. 5:14-CV-777-FL (the “Loan Case”).

         To promote the global settlement, the court stayed all case activities in the Loan Case, including trial, pending completion of an initial phase of discovery in the instant case memorialized in January 5, 2017, order and January 17, 2017, consent order (the “scheduling orders”).

         On February 24, 2017, defendants Gillian Falls Cone (“Gillian”), Louise Falls Cone (“Cone”), Toby Cone, and K.L.C. (collectively, the “Cone defendants”) filed the instant motion to excuse Gillian and K.L.C. from physically attending mediation. They note that “the parties have tentatively reached an agreement to mediate this matter on June 5, 2017, before mediator Ray Owens.” (DE 83 at 2). The Cone defendants request that Gillian, who is 19, be available by telephone, and that K.L.C., who is 17, be excused altogether from participation in mediation. Plaintiff and defendant Mary Cooper Falls Wing (“Wing”), confirming agreement of the parties to mediate on June 5, 2017, [1] oppose the motion in part, and do not object to excusing K.L.C.'s attendance, so long as Gillian is ordered to attend physically and represent the interests of K.L.C. The Cone defendants filed a reply, including attachment of affidavit by Gillian.

         In the meantime, on February 28, 2017, and April 19, 2017, Hine, an attorney who advised Decedent in trust and estate matters for a number of years up to about 2013, filed the instant motions to quash subpoenas served by plaintiff and defendant Sellers, on the basis that the subpoenas seek documents protected by attorney-client privilege and, in some instances, documents that are irrelevant to the instant matter.[2] Upon order by this court, Hine submitted for in camera review a sampling of documents responsive to the subpoena served by plaintiff. Plaintiff and defendant Sellers have filed separate responses in opposition.


         Ralph L. Falls, Jr., a citizen and resident of Wake County, North Carolina, died at the age of 74 on May 11, 2015 . Decedent's adult children are plaintiff, Cone, and Wing. The facts alleged in the complaint are summarized as follows for purposes of the instant motions.

         A. Decedent's Trust and Estate Planning

         For decades until about 2013, Decedent continuously employed the services of and relied upon the advice of Hine to handle all aspects of his estate planning. Throughout Hine's representation of Decedent, Decedent's clear intention, as evidenced through contemporaneous documents, was to leave the bulk of his estate to his children, including plaintiff.

         Decedent established in 2002 a qualified personal residence trust, which provided that upon expiration of a ten-year term, the trust property, including a house on Evans Street in Morehead City, North Carolina (the “Morehead City house”) that Decedent used as his personal residence, would pass to plaintiff, outright and free of trust. In 2005, anticipating that title to the Morehead City house would pass to plaintiff August 30, 2012, plaintiff and Decedent executed a lease (the “Lease”), subject of the instant breach of lease claim, whereby Decedent (as tenant) agreed to rent the Morehead City house from plaintiff (as landlord) starting August 30, 2012, for a one-year term, with option to renew fifteen years thereafter, with monthly rent paid in “a monthly sum mutually agreed between [plaintiff] and [Decedent], ” or if not agreed then to be determined by a qualified appraiser. (DE 1-3 at 2).

         Decedent began a relationship with Sellers in or around 2008. Decedent consulted with Hine about his estate plan in or around 2010 and executed a purported last will and testament prepared by Hine (hereinafter, “the purported will prepared by Hine”) that made clear his intentions that Sellers was not to be a beneficiary of his estate. Decedent named Sellers as executrix of his estate in order that she would receive only a commission for administering his estate and would otherwise not share as a beneficiary in Decedent's estate.

         In or around August 2011, without explanation or notice to Hine, Decedent engaged Walter Brodie Burwell, Jr., Esq. (“Burwell”) to change his estate planning documents. Sellers convinced Decedent to retain Burwell, with whom she had a pre-existing attorney-client relationship, as part of her plan to influence Decedent to change his estate planning documents to include her as a beneficiary of Decedent's estate. On or about August 4, 2011, Decedent executed the Ralph Lane Falls Revocable Declaration of Trust (the “Revocable Trust”) prepared by Burwell. The Revocable Trust was the primary instrument that provided how Decedent's assets would be distributed upon his death. Decedent transferred most of his real and personal property to the Revocable Trust during his lifetime. Defendants, including Sellers, the Cone defendants, and Wing have or claim an interest in the Revocable Trust.

         Decedent experienced a number of serious health issues from 2012 until his death in 2015. These health issues increased Decedent's dependence on Sellers and others controlled by Sellers to provide for his health and safety. Decedent executed a Health Care Power of Attorney designating Sellers as his health care agent in September 2012, and a General Power of Attorney designating Sellers as his attorney-in-fact in January 2013. Sellers took numerous steps to interfere with and destroy the relationship between Decedent and plaintiff and to deny plaintiff access to Decedent until his death, including causing Decedent to pursue the Loan Case against plaintiff in November 2014, asserting therein that plaintiff failed to repay a loan to Decedent.

         Decedent executed a purported last will and testament on or about July 17, 2014, prepared by Burwell (the “purported will prepared by Burwell”), which conveyed all of Decedent's real and personal property to a trustee acting under the Revocable Trust, as then amended. On December 10, 2014, Decedent executed a Fifth Amendment to the Revocable Trust (the “Fifth Amendment”), prepared by Burwell, “which disinherit[s] [plaintiff] and make[s] [Sellers] the largest beneficiary of Decedent's estate.” (Compl. ¶ 65). Plaintiff is “not a beneficiary” of the Fifth Amendment. (Id. ¶ 75). The Fifth Amendment designates Goldman Sachs as trustee upon Decedent's death, with Sellers and Cone designated as successor trustee in the event of Goldman Sachs's removal or failure to act. (DE 1-12 at 5). The Fifth Amendment also directs the trustee to “keep all leases in full force and effect and fully perform all obligations existing” under the Lease. (DE 1-12 at 4). Under the terms of the Fifth Amendment, a substantial portion of Decedent's estate is to pass outside of probate under the Revocable Trust.

         On December 10, 2014, Decedent and Sellers obtained a certificate of marriage in Wake County, North Carolina. On that date of both the execution of the Fifth Amendment and purported marriage, Decedent was suffering from diminished mental capacity as the result of recurrence of brain tumors, was dependent upon and submissive to Sellers, and did not have the capacity of dispose of property, execute estate planning documents, or marry.

         During his lifetime, Decedent never agreed on a fair market value of rent, and never paid any rent to plaintiff under the Lease. Goldman Sachs has refused to make any rental payments to plaintiff. Plaintiff alleges that the fair market value rental amount under the Lease is $2, 500.00 per month.

         B. The Estate Proceeding

         On June 8, 2015, the Wake County Clerk of Superior Court admitted to probate Decedent's purported will prepared by Burwell. That same date, on the basis thereof, the Wake County Clerk of Superior Court appointed Goldman Sachs as Executor of the Estate in File No. 15-E-1997 (the “Estate Proceeding”). On September 4, 2015, Goldman Sachs filed an “Inventory for Decedent's Estate, ” specifying property of the Estate valued at $29, 517.31. (DE 1-13). On September 10, 2015, plaintiff filed a creditor's claim in the Estate Proceeding, seeking to recover $255, 000.00, plus rent and other amounts due, based upon the Lease. On February 6, 2016, Goldman Sachs filed in the Estate Proceeding a rejection of plaintiff's creditor's claim, along with a complaint for declaratory judgment seeking a declaration that the Estate is not liable to plaintiff under creditor's claim and requesting the clerk to transfer that proceeding to Wake County Superior Court.

         On March 3, 2016, plaintiff removed the Estate Proceeding to this court based upon diversity of citizenship. While pending in this court, plaintiff filed in the Estate Proceeding an answer to the complaint for declaratory judgment and counterclaim premised upon Decedent's breach of the Lease, among other counterclaims. On March 30, 2016, Goldman Sachs filed a motion to remand on the basis that plaintiff properly should be treated as a plaintiff in the Estate Proceeding, for purposes of the federal removal statute. This court granted the motion to remand on that basis on July 15, 2016. After remand of the Estate Proceeding to state court, plaintiff moved therein on July 20, 2016, to dismiss for lack of subject matter jurisdiction Goldman Sachs's complaint for declaratory judgment and request for transfer. The Wake County Clerk of Superior Court granted the motion to dismiss for lack of subject matter jurisdiction on September 2, 2016.


         A. Motion to Dismiss (DE 36)

         1. Standard of Review

         “To survive a motion to dismiss” under Rule 12(b)(6), “a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 663 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). In evaluating whether a claim is stated, “[the] court accepts all well-pled facts as true and construes these facts in the light most favorable to the plaintiff, ” but does not consider “legal conclusions, elements of a cause of action, . . . bare assertions devoid of further factual enhancement[, ] . . . unwarranted inferences, unreasonable conclusions, or arguments.” Nemet Chevrolet, Ltd. v., Inc., 591 F.3d 250, 255 (4th Cir. 2009) (citations omitted). While a motion to dismiss ordinarily “does not resolve contests surrounding the facts, the merits of a claim, or the applicability of defenses, ” Republican Party of N.C. v. Martin, 980 F.2d 943, 952 (4th Cir. 1992), “[a] court may grant a 12(b)(6) motion on statute of limitations grounds . . . if the time bar is apparent on the face of the complaint.” Semenova v. Maryland Transit Admin., 845 F.3d 564, 567 (4th Cir. 2017) (quotations omitted).

         2. Analysis

         In his breach of lease claim, plaintiff seeks to recover from the Estate “rent due and owing under the Lease, ” in addition to “damages caused to the [Morehead City house] as a result of the failure by the Decedent and the Estate to properly maintain [it] during the term of the Lease.” (DE 110). Defendant Goldman Sachs moves to dismiss on the basis that the claim is barred by the statute of limitations contained in N.C. Gen. Stat. § 28A-19-16.

If a claim is presented to and rejected by the personal representative or collector, and not referred as provided in G.S. 28A-19-15, the claimant must, within three months, after due notice in writing of such rejection, commence an action for the recovery thereof, . . . or be forever barred from maintaining an action thereon.

N.C. Gen. Stat. § 28A-19-16. “The purpose of this statute is to expedite the administration and settlement of estates.” Rutherford v. Harbison, 254 N.C. 236, 238 (1961) (applying predecessor version of statute, at N.C. Gen. Stat. § 28-112). “The language is positive and explicit, and the section must be enforced in accordance with the plain meaning of its terms.” Id.

         Here, plaintiff filed “a Creditor's Claim” in the Estate Proceeding seeking to recover rent and other amounts accruing under the Lease on September 10, 2015. (Compl. ¶ 76; see Estate Proceeding, No. 5:16-cv-98-FL (DE 1-1)). Defendant Goldman Sachs, as executor, filed a rejection of the Creditor's Claim in the Estate Proceeding on February 4, 2016, (Compl. ¶ 78; see Estate Proceeding, No. 5:16-cv-98-FL (DE 1-2)), triggering commencement of the three month time period for plaintiff to “commence an action for the recovery thereof.” N.C. Gen. Stat. § 28A-19-16. Plaintiff commenced the instant action on August 12, 2016, over three months after expiration of the limitations period set forth in § 28A-19-16. Therefore, plaintiff's breach of lease claim against the Estate is barred by the statute of limitations.

         Plaintiff argues nonetheless that he satisfied requirements of § 28A-19-16, because he commenced an action on his creditor's claim by filing a counterclaim within the Estate Proceeding in this court on March 17, 2016. (See Estate Proceeding, No. 5:16-cv-98-FL (DE 15 at 14-15)). The state court, however, dismissed the Estate Proceeding for lack of subject matter jurisdiction, upon plaintiff's motion, after remand to state court. (DE 37-1; 51-1). Commencement of a prior action dismissed for lack of subject matter jurisdiction does not serve to toll the running of this statute of limitations under North Carolina law, unless the dismissal order specifies an extension of the limitations period. See N.C. Rule of Civil Procedure 41(b) (providing that dismissing court may “specify in its order that a new action based on the same claim may be commenced within one year or less after such dismissal”); see also Hargrave v. Gardner, 264 N.C. 117, 119 (1965) (finding no indication “that defendant has waived his right to plead the statute [of limitations]; the court has no authority to waive it for him or to deprive him of this or any other defense, and has not undertaken to do so”); 84 Lumber Co. v. Barkley, 120 N.C.App. 271, 272 (1995) (holding that where dismissing “order contains no specification whatsoever with regard to the time in which plaintiff may commence a new action based on the same claim . . . the applicable statute of limitations is controlling with regard to the time in which plaintiff was allowed to refile”).

         Plaintiff next argues that his counterclaim filed in the Estate Proceeding is to be “given effect” in the instant action in order to prevent the breach of lease claim from being time-barred. The case law plaintiff cites as a basis for this argument, however, does not support the proposition asserted. Rather, the cases cited reflect the undisputed proposition that documents timely filed in federal court prior to remand must be given effect in the same proceeding once remanded to state court. See, e.g, McKethan v. Wells Fargo Bank, N.A., 779 S.E.2d 671, 674 (Ga.Ct.App. 2015) (“Where, as here, a pleading . . . has been timely filed, logic, reasoning and comity all support the conclusion that a similar rule should be applied by the Georgia courts upon remand.”). Whether the state court in the Estate Proceeding gave effect to the filings plaintiff made in federal court is an issue not before this court.

         Plaintiff also suggests that this court should deem the breach of lease claim timely filed because defendant Goldman Sachs has “long known of [plaintiff's] claim for rent due under the Lease.” (DE 51 at 11). Defendant Goldman Sachs's knowledge of plaintiff's claim for rent in advance of its rejection of claim in February 2016, however, is irrelevant to the running of the statute of limitations. See Craver v. Spaugh, 226 N.C. 450, 451-52 (1946). As for the period after its rejection of claim, the record permits an inference only of Goldman Sachs's knowledge of a counterclaim for breach of lease in the Estate Proceeding, which was dismissed on plaintiff's own motion for lack of subject matter jurisdiction. Plaintiff does not allege any facts or proffer any evidence that Goldman Sachs had knowledge that plaintiff would seek to assert a breach of lease claim in a new action prior to filing of the instant action on August 12, 2016.

         In any event, the cases cited by plaintiff for excusing running of statute of limitations on the basis of actual notice of a claim are inapposite, because those cases concern the relation back of an amended claim to an original claim in an ongoing case. See, e.g., Cherry v. Perdue Farms, Inc., No. 2:10-CV-23-FL, 2010 WL 5437222, at *3 (E.D. N.C. Dec. 27, 2010) (holding that “the filing date of plaintiff's proposed [amended age discrimination] claim relates back to the date of filing of the original pleading” because of actual notice of the nature of plaintiff's claims); Wallis v. United States, 102 F.Supp. 211, 212 (E.D. N.C. 1952) (holding in Federal Tort Claims Act case that “the addition of the . . . real party to the nominal plaintiff subsequent to the running of the statute of limitations relates back to the commencement of the action and that, therefore, the action is not barred by the statute of limitations”).

         Plaintiff also asserts that North Carolina Rule of Civil Procedure 12(a)(2) served to extend the time for filing plaintiff's ...

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