McLain et al v. McLain et al

Filing 132

ORDER ADOPTING IN PART FINDINGS AND RECOMMENDATIONS. It is Hereby Ordered that Judge Cavan's 122 Findings and Recommendations are adopted in full except for: The recommendation that Bernard's interest in the E-3 Ranch automatically ves ted in his devisees upon his death, which is rejected; and the recommendation that the Court stay the case, which is rejected. The McLain Defendant's motion for summary judgment 82 and the McLain Defendant's cross motion for summary judgment 96 are denied. Signed by Judge Susan P. Watters on 3/12/2018. (EMH)

IN THE UNITED STATES DISTRICT COURT FOR THE
DISTRICT OF MONTANA
BILLINGS DIVISION

F ml" ED
~

i

MAR 1 2 2018

FAITH MCLAIN, CHRISTEEN
MCLAIN, JOHN MCLAIN, MOLLY
MCLAIN, MIRA MCLAIN, AND
MATTHEW MCLAIN, AS
BENEFICIARIES OF THE ESTATE
OF BERNARD MCLAIN, AND
MARY MCLAIN, INDIVIDUALLY
AS BENEFICIARY OF THE ESTATE
OF BERNARD MCLAIN AND AS
TRUSTEE OF THE E-3 RANCH
TRUST,

Civil No. 1:16-cv-00036-SPW

ORDER

Plaintiffs,
V.

FRANCIS MCLAIN, INDIVIDUALLY
AND AS CO-MANAGER OF TERA
BANI RETREAT MINISTRIES,
CAROLINE MCLAIN,
INDIVIDUALLY AND AS
MANAGING DIRECTOR OF TERA
BANI RETREAT MINISTRIES,
ALAKHI JOY MCLAIN, SOHNJA
MAY MCLAIN, AND DANE SEHAJ
MCLAIN, AS PURPORTED
CERTIFICATE HOLDERS OF THEE3 RANCH TRUST,
Defendants.
THE UNITED STATES OF
AMERICA,
Intervenor Defendant and
Counter/Cross Claimant,
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Clerk, u s District Court
District Of Montana
Billings

V.

FAITH MCLAIN, CHRISTEEN
MCLAIN,
JOHN MCLAIN, MOLLY MCLAIN,
MIRA MCLAIN, AND MATTHEW
MCLAIN, as Beneficiaries of THE
ESTATE OF BERNARD MCLAIN;
and MARY MCLAIN, as Beneficiary of
the ESTATE OF BERNARD MCLAIN,
and as Trustee of the E-3 RANCH
TRUST,
Counterclaim Defendants,
and
FRANCIS MCLAIN, Individually, and
as Co-Manager of TERA BANI
RETREAT MINISTRIES; CAROLINE
MCLAIN, Individually, and as
Managing Director of TERA BANI
RETREAT MINISTRIES; and
ALAKHI JOY MCLAIN, SOHNJA
MAY MCLAIN, AND DANE SEHAJ
MCLAIN, as Beneficiaries of the E-3
RANCH TRUST,
Crossclaim Defendants,
and
AMERICAN BANK OF MONTANA,
Additional Defendant on
United States' Claims

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Before the Court are United States Magistrate Judge Timothy Cavan's
findings and recommendations filed January 17, 2018. (Doc. 122). Judge Cavan
recommends this Court deny the McClain Defendants' motion for summary
judgment (Doc. 82) to quiet title in half the interest in the E-3 Ranch, deny the
McClain Plaintiffs' cross motion for summary judgment (Doc. 96) on the same
issue, and stay the action pending appointment of a personal representative for the
estate of Bernard McClain.

I.

Standard of review
The McClain Defendants filed timely objections to the findings and

recommendations. (Doc. 124). The McClain Defendants are entitled to de novo
review of those portions of Judge Cavan's findings and recommendations to which
they properly object. 28 U.S.C. § 636(b)(l); Fed. R. Civ. P. 72(b)(3).

II.

Background
The McClain Defendants object to what they perceive as Judge Cavan's

characterization of the facts. The McClain Defendants' objections to Judge
Cavan's background section do not affect the outcome. Judge Cavan's background
section is adopted in full.

III.

Discussion
The McClain Defendants make four objections. First, they argue the

McLain Plaintiffs are barred from litigating what the agreement was between

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Frank McClain and Brad Hall because, in their view, the McClain Plaintiffs are
uninterested parties to the agreement. Second, they argue even if the McClain
Plaintiffs are not barred from litigating what the agreement was, the undisputed
facts show the agreement was that Frank and Brad would each take a one-half
interest in the E-3 Ranch. Third, they argue the McClain Plaintiffs are barred from
defending the quiet title claim because they did not possess or have an interest in
the property within the previous five years. Fourth, they argue the case should not
be stayed because the estate of Bernard is not a necessary party.

A.

The McClain Plaintiffs are not barred from litigating what the
agreement was between Frank and Brad

The McClain Defendants argue the McClain Plaintiffs may not seek a
determination of the agreement between Frank and Brad because the McClain
Plaintiffs are strangers to the agreement. The Court disagrees.
The McClain Defendants are correct that, generally, strangers to a contract
do not have standing to sue for a breach of the contract. Palmer v. Bahm, 128 P.3d
1031, 1034 (Mont. 2006). However, the McClain Defendants are incorrect that

Palmer bars the parties litigating what the agreement was between Frank and Brad.
The McClain Plaintiffs are arguably interested parties to the agreement, not
strangers, because Frank conveyed to Bernard via quitclaim deed "all interest,
equity, and claim" Frank had in the E-3 Ranch. (Doc. 5-1 at 37). The transfer of
property is an executed contract subject to all rules concerning contracts. Mont.
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Code Ann. § 70-1-502. Similar to an assignee and assignor relationship under
contract principles, a grantee stands in the shoes of the grantor. Watts v. HSBC

Bank U.S. Trustee, 308 P.3d 57, 61 (Mont. 2013); Carter v. Heitzman, 198 A.D.2d
649, 649-650 (N.Y. App. Div. 1993). Bernard, and arguably his devisees, are the
grantees of Frank's interest in the E-3 Ranch, and stand in Frank's shoes.
Furthermore, determinations of prior conveyances are fairly common in
quiet title actions because a quitclaim deed transfers only such title and interest as
the grantor had when he delivered the title. Turner v. Wells Fargo Bank, NA., 291
P.3d 1082, 1090 (Mont. 2012). The McClain Plaintiffs, as Bernard's devisees,
have a colorable claim to Bernard's interest in the E-3 Ranch, which in tum
depends on what Frank's interest was in the E-3 Ranch. Frank's interest in the E-3
Ranch depends on what the agreement was between him and Brad. The McClain
Plaintiffs therefore do not seek to enforce the agreement between Frank and Brad,
but rather seek to determine what the agreement was because the terms of the
agreement are material to the determination of this outcome. See Somont Oil Co.,

Inc. v. Nutter, 743 P.2d 1016, 1021-1022 (Mont. 1987) (determining plaintiffs
interest in parcel of land by analyzing prior conveyances of the land made by other
persons); Carter, 198 A.D.2d at 649-650 (in quiet title action, determining interests
of plaintiff and defendant by analyzing prior conveyances of the land made by

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other persons). The McClain Plaintiffs are not barred from seeking a
determination of what the agreement was between Frank and Brad.

B.

Whether Frank and Brad agreed to each take a one-half interest
in the E-3 Ranch is a disputed fact

The McClain Defendants argue the undisputed facts establish Frank and
Brad agreed to each take a one-half interest in the E-3 Ranch. The Court disagrees.
In his findings and recommendations, Judge Cavan succinctly laid out the
disputed facts on this issue. (Doc. 122 at 20-22). Among them is the sworn
affidavit of Frank filed in a different action that stated Brad had no interest in the
E-3 Ranch other than 10 acres. (Doc. 122 at 21). The McClain Defendants state
"Frank's representation that Hall had no interest other than 10 acres [is] the only
instance in the record where Hall and Frank were in disagreement about Hall's
interest in the property." (Doc. 124 at 12). Judge Cavan's findings and
recommendations include several other pieces of evidence that indicate the
agreement between Frank and Brad was not that they would each take a one-half
interest, but, regardless, the McClain Defendants admit that at one point Frank
swore under oath that Hall's interest in the property was limited to 10 acres. That
alone establishes a disputed fact precluding summary judgment.

C.

The McClain Plaintiffs are not barred from defending the quiet
title action because disputed facts show they may have had a
possessory interest in the property within the previous five years

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The McClain Defendants argue the McClain Plaintiffs are barred from
defending the quiet title action because they had no possessory interest in the
property within five years of the action commencing. To support this contention,
the McClain Defendants argue that equitable principles or operations of law may
prevent Bernard's interest in the property from automatically vesting in his
devisees. The Court agrees with the McClain Defendants in part, but finds
summary judgment is still precluded.
Montana Code Annotated § 70-19-402 requires one who wishes to quiet title
to real property, or defend such action, to have seized or possessed the property
within five years of the cause action. Peterson v. Hopkins, 684 P.2d 1061, 1065
(Mont. 1984). Judge Cavan held the McClain Plaintiffs had a possessory interest
in the property because they are Bernard's devisees, upon whom title vested
immediately upon Bernard's death. (Doc. 122 at 24) (citing Shephard v. Widhalm,
290 P.3d 712, 716 (Mont. 2012)). The McClain Defendants argue equitable
principles or operations of law may establish Bernard had no interest in the E-3
Ranch upon his death and ask for the opportunity to file motions on the issue.
The Court agrees with Judge Cavan that Bernard's interest in the E-3 Ranch,
whatever it may have been, vested immediately in his devisees upon his death.
However, the Court also agrees with the McClain Defendants that equitable
principles may establish Bernard had no interest in the E-3 Ranch upon his death,

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in which case the McClain Plaintiffs may not have any possessory interest in the E3 Ranch. Summary judgment on this issue is precluded because whether equitable
principles may establish Bernard had no interest in the E-3 Ranch upon his death is
a question of law that rests on issues of fact not before the Court. The parties shall
be allowed the opportunity to file motions on the issue.
The McClain Defendants argue that even if the McClain Plaintiffs'
possessory interest in the E-3 Ranch is contested with regard to Bernard's interest,
they seek only to quiet title on the interest Brad conveyed to Frank and Caroline,
for which the McClain Plaintiffs have no interest. The McClain Defendants are
technically correct that the McClain Plaintiffs have no interest in the portion Brad
conveyed to Frank and Caroline. However, Brad's portion remains a contested
issue. The Court cannot quiet title on the interest Brad conveyed to Frank and
Caroline until it is determined what Brad's interest in the E-3 Ranch was, which, as
stated above, rests on disputed facts.
The Court grants the McClain Defendants' objection in part. The portion of
Judge Cavan's findings and recommendations concluding a possessory interest in
the E-3 Ranch automatically vested in Bernard's devisees is overruled. The
motion for summary judgment is otherwise denied.

D.

The stay

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Judge Cavan recommended staying the case until a personal representative
for Bernard's estate can be appointed and joined in this matter. The McClain
Defendants argue the case should not be stayed because Bernard's estate may
ultimately not have an interest in the E-3 Ranch and staying the case will cause
unnecessary delay.
The Court agrees with Judge Cavan that a personal representative for
Bernard's estate may be helpful going forward. However, the Court also agrees
with the McClain Defendants that Bernard's estate may not have an interest in the
E-3 Ranch. The Court rejects the stay, but may revisit the issue if it becomes
apparent the estate's input is required.

IV.

Conclusion and order
It is hereby ordered:
1. Judge Cavan's findings and recommendations (Doc. 122) are adopted in

full except for:
A. The recommendation that Bernard's interest in the E-3 Ranch
automatically vested in his devisees upon his death, which is rejected;
and
B. The recommendation that the Court stay the case, which is
rejected.

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2. The McLain Defendant's motion for summary judgment (Doc. 82) and
the McLain Defendant's cross motion for summary judgment (Doc. 96) are denied.

usan P. Watters
United States District Court Judge

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