Farmhouse Partners Limited Partnership v. Multi-Housing Tax Credit Partners XXX
ORDER: IT IS HEREBY ORDERED that the Parties Motions for Summary Judgment (Docs. 60 & 64) are DENIED. The Parties shall submit proposed Findings and Recommendations to the Court on or before the trial date of May 31, 2022. MHTCPs Motion to Compel Pro duction of September 1, 2020 Limited Scope Engagement Letter, or for In Camera Review (Doc. 47) is GRANTED. Farmhouse shall produce to MHTCP the Engagement Agreement on or before May 12, 2022. The terms of the agreement shall be held confidential by MHTCP and its attorneys and shall not be revealed to anyone not party to this case. SEE ORDER FOR FULL DETAILS. Signed by Judge Brian Morris on 5/10/2022. (SLR)
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IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MONTANA
FARMHOUSE PARTNERS LIMITED
MULTI-HOUSING TAX CREDIT
Plaintiff Farmhouse Partners Limited Partnership (“Farmhouse”) filed this
Complaint against Defendant Multi-Housing Tax Credit Partners (“MHTCP”),
asserting that MHTCP failed to perform under the parties’ partnership agreement.
(Doc. 10 at 9). The Parties have filed competing cross-motions for summary
judgment. (Docs. 60 & 64.) The Court held a hearing on the Parties’ summary
judgment motions on April 13, 2022. (Doc. 117.) The Court determines that disputed
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facts preclude judgment for either Party. The Court will deny both motions for
Additionally, MHTCP moved to compel Farmhouse to produce a “Limited
Scope Engagement Agreement re: exercise of Options in Bridger I and Bridger II
under limited partnership agreements” (“Engagement Agreement”) sent by John
Amsden on September 1, 2020. (Doc. 48 at 6.) Farmhouse argues that the document
is privileged and not subject to discovery. (Doc. 50.) The Court ordered Farmhouse
to submit the Engagement Agreement for in camera review. (Doc. 51.) The Court
has reviewed the Engagement Agreement. The Court determines that the
Engagement Agreement proves relevant to MHTCP’s defense and relates to a
nonprivileged matter. See Fed. R. Civ. P. 26. Farmhouse shall produce the
This case concerns a dispute between the general partner and limited partner
of a Montana limited partnership called the Farmhouse Partners – College Limited
Partnership (“Partnership”). Farmhouse serves as the general partner to the
Partnership and is itself a limited partnership. The parties that comprise Farmhouse’s
limited partnership are an entity called Dabney Company (the general partner) and
a person named Kendrick Wilson III (the limited partner). William Dabney
(“Dabney”), is the sole shareholder of Dabney Company. MHTCP serves as the
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limited partner to the Partnership and is itself also a partnership.
The principal asset of the Partnership is a low-income housing tax credit
(LIHTC) project in Bozeman, Montana referred to by the Parties as the “Bridger I”
project. The LIHTC program is a federal subsidy program designed to promote the
construction and rehabilitation of rental housing for low and moderate income
households. As a LIHTC project, the Bridger I project was subject to a 15-year
“compliance period.” During that period, the project was to comply with LIHTC
regulations and ensure that tax credits were retained.
Farmhouse and MHTCP agreed that Farmhouse would have the option to
purchase MHTCP’s partnership interest three years after the 15-year compliance
period ended so long as Farmhouse was not “in default.” Doc. 26-1 at 67 (Section
8.1). The Amended and Restated Agreement of Limited Partnership of Farmhouse
Partners –College Limited Partnership (“Partnership Agreement”) provides that
Farmhouse cannot assign or transfer the purchase option or any interests in the
Partnership without MHTCP’s consent. Id. at 77 (Section 12.1). The Partnership
Agreement defines “assignment” to mean “a valid sale, exchange, transfer, pledge
or syndication or other disposition of all or any portion of an Interest.” (Id. at 8.) An
assignment of rights in the Partnership without MHTCP’s consent would cause a
default under the Partnership Agreement. (Id. at 12.) The dispute revolves around
whether Farmhouse improperly assigned its rights in the Partnership and was thus in
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default when it attempted to exercise the purchase option.
This underpinnings of this dispute began when Dabney and his wife Susan
Burrows (“Burrows”) divorced. As set forth in Dabney’s and Burrows’s 2013
divorce settlement agreement, Dabney agreed to transfer interests in LIHTC projects
to Burrows as part of their marital property division. This transfer included interests
in the Bridger I project. Dabney and Burrows executed a second divorce settlement
agreement on September 30, 2016. (Doc. 28-13.) The Montana District Court for the
Eighteenth Judicial District, Gallatin County, approved the settlement agreement.
The second agreement provided that Dabney would transfer or assign Burrows his
rights to purchase MHTCP’s limited partnership interest in the Bridger I project. (Id.
at 8-9.) The divorce settlement further provided that, in the event that MHTCP did
not consent to assigning Burrows the purchase option, Dabney would facilitate the
purchase through Farmhouse under terms acceptable to Burrows. (Id.)
Following the divorce settlement agreement, Farmhouse requested that
MHTCP consent to the assignment of the purchase option to Burrows. (Doc. 66-11.)
MHTCP declined. MHTCP cited its limited working relationship with Burrows.
(Doc. 62-12.) Burrows’s attorney John Amsden, of Beck, Amsden & Stalpes, PLLC,
sent a letter to MHTCP on April 20, 2017. Amsden’s letter stated that Farmhouse’s
right to purchase the limited partnership interest had been assigned to Burrows and
demanded that MHTCP make the necessary arrangements for Burrows’s exercise of
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Farmhouse’s option. (Doc. 62-13.) MHTCP again declined.
MHTCP claimed that Farmhouse had defaulted on the Partnership agreement
by improperly assigning its interest to Burrows. (Docs. 62-14; 62-15.) Farmhouse’s
counsel, and Dabney’s divorce attorney, Trent Gardner, responded to MHTCP’s
claim of a default by stating that there had been no assignment. Gardner asserted that
Amsden and Burrows do not speak for Farmhouse. (Doc. 62-15.)
MHTCP and Burrows attempted separately to negotiate for the purchase of
MHTCP’s interest in the Bridger I project in early 2018. Negotiations between
Burrows and MHTCP failed in March of 2018 after the two could not agree on the
value of MHTCP’s interest. Neither Burrows nor Farmhouse made further attempts
to negotiate with MHTCP.
The purchase option period for the Bridger I project began on January 1, 2021.
Farmhouse attempted to exercise the option on January 26, 2021, consistent with the
timeline provided by the Partnership Agreement. MHTCP claimed that Farmhouse
could not exercise the option due to Farmhouse being in default for assigning its
purchase option to Burrows. MHTCP demanded that the Bridger I project be listed
on the national market as a result of Farmhouse’s default.
Farmhouse responded that there had been no assignment to Burrows and no
corresponding default. Farmhouse filed this suit for specific performance of the
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purchase option. Beck, Amsden & Stalpes, PLLC represents Farmhouse in this
SUMMARY JUDGMENT LEGAL STANDARD
Summary judgment is proper if the moving party demonstrates “that there is
no genuine dispute as to any material fact and the movant is entitled to judgment as
a matter of law.” Fed. R. Civ. P. 56(a). The movant bears the initial burden of
informing the Court of the basis for its motion and identifying those portions of “the
pleadings, depositions, answers to interrogatories, and admissions on file, together
with the affidavits, if any, which it believes demonstrate the absence of a genuine
issue of material fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986) (internal
quotation marks omitted).
The movant satisfies its burden when the documentary evidence produced by
the parties permits only one conclusion. Anderson v. Liberty Lobby, Inc., 477 U.S.
242, 251–52 (1986). Where the moving party has met its initial burden, the party
opposing the motion “may not rest upon the mere allegations or denials of his
pleading, but [. . .] must set forth specific facts showing that there is a genuine issue
for trial.” Id. at 248 (internal quotation marks omitted).
Factual Disputes Remain that Preclude Summary Judgment for Either
The Parties’ motions for summary judgment present a single issue: whether
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Farmhouse defaulted by assigning a right that it could assign only with the consent
of MHTCP. Absent a default, Farmhouse would have the right to exercise the
purchase option under the Partnership Agreement. (See Doc. 26-1 at 67 (Section
8.1).) The Court determines that sufficient facts remain in dispute to preclude
summary judgment on this issue.
The Parties continue to dispute the control that Burrows and her
representatives have asserted over Farmhouse’s exercise of the purchase option. The
Court lacks clarity over the paramount issue in this case as a result. Farmhouse
argues that Burrows has not exerted control over Farmhouse’s attempt to exercise
the purchase option. Farmhouse claims that, as was the case before Burrows’s and
Dabney’s divorce, the Dabney Company has exercised continued control over
Farmhouse. Farmhouse notes that Dabney and Farmhouse are distinct entities and
argues that the contention that Farmhouse assigned an option or ceded control to
Burrows is merely MHTCP’s attempt to increase the value of its interest in the
Bridger I project.
MHTCP claims that an assignment of the purchase option has occurred and
cites as evidence the language in Burrows’s and Dabney’s 2016 divorce agreement,
circumstantial evidence of Burrows’s control of Farmhouse, and statements made
during Dabney’s deposition. Farmhouse was not a party to the divorce agreement.
The divorce agreement alone fails to persuade the Court that a transfer or assignment
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of a right from Farmhouse to Burrows has occured. MHTCP does point, however,
to circumstantial evidence of an improper assignment.
MHTCP cites John Amsden’s letter claiming an assignment to Burrows and
the fact that the John Amsden and the Beck, Amsden & Stalpes, PLLC firm now
represents Farmhouse. MHTCP also notes that Farmhouse has changed how it values
a limited partner interest, in comparison to purchase options that Farmhouse has
exercised for its other properties. This circumstantial evidence creates enough doubt
of an assignment from Farmhouse to Burrows to prevent the Court from granting
summary judgment in favor of Farmhouse. The evidence also does not remove all
doubt that an assignment occured sufficient to grant summary judgment for MHTCP.
The Court notes that even the meaning of Dabney’s testimony, which MHTCP
believes to be strongly in its favor, remains in dispute. Dabney stated during his
deposition that he stood to gain no financial benefit in exercising the purchase
option, and that Burrows would dictate the terms of the purchase option. (Doc. 62-3
at 41-43.) Farmhouse argues that Dabney spoke only in his personal capacity during
the deposition. MHTCP claims that Dabney spoke on behalf of Farmhouse as its
Rule 30(b)(6) designee. The Court has no further mechanism to determine which
party has the correct interpretation other than to hear Dabney’s testimony at trial.
Farmhouse argues that MHTCP’s withholding of consent means that an
assignment in breach of the Partnership Agreement could not have occurred as a
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legal matter. Farmhouse relies on R.C. Hobbs Enterprises LLC v. J.G.L.
Distributing, Inc., 104 P.3d 503 (Mont. 2004), and Rother-Gallagher v. Montana
Power Co., 522 P.2d 1226, 1228 (Mont. 1974), to support its assertion. In R.C.
Hobbs Enterprises, an entity named J.G.L. Distributing agreed to make monthly
payments to a landowner in exchange for temporary possession of the land and the
option to purchase. 104 P.3d at 505. The contract provided that J.G.L. Distributing
could not assign its interest in the purchase option without the landowner’s consent.
Id. J.G.L. Distributing assigned its option right to R.C. Hobbs Enterprises without
obtaining the consent of the landowner. Id. at 506. The landowner refused to honor
the purchase option when R.C. Hobbs attempted to exercise the option. Id. J.G.L.
Distributing then attempted to exercise the option, but the landowner refused citing
J.G.L. Distributing’s improper assignment. Id.
The Montana Supreme Court determined first that the assignment to R.C.
Hobbs Enterprises was void because J.G.L. Distributing lacked the consent required
to make an assignment. Id. at 508. The Montana Supreme Court then turned to J.G.L.
Distributing’s breach of contract. The Montana Supreme Court concluded that no
material breach of contract had occurred and allowed J.G.L. Distributing to assert its
purchase option right. Id. The Montana Supreme Court reasoned that the assignment
had not defeated the purpose of the contract and that the landowner had suffered no
damage as a result of the assignment. Id. at 508-09.
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Farmhouse argues that R.C. Hobbs Enterprises stands for the proposition that
because an assignment is void without MHTCP’s consent, no breach of contract
could have occurred absent that consent. Farmhouse misinterprets the Montana
Supreme Court’s reasoning in R.C. Hobbs Enterprises. Farmhouse correctly notes
that Montana courts will deem an assignment without consent void when a party
withholds consent. Farmhouse is incorrect, however, that an assignment without
consent would not necessarily cause a breach of contract. On the contrary, the
Montana Supreme Court affirmed the district court’s determination that the
assignment in R.C. Hobbs Enterprises constituted a breach of contract. Id. at 508.
The Montana Supreme Court allowed J.G.L. Distributing to exercise the purchase
option only because it determined that the breach had not been material. Id. at 50809.
Rother-Gallagher also supports the assertion that an assignment without
consent is void where the contract required consent. 522 P.2d at 1228. This case
likewise has no bearing on whether an assignment without consent rises to the level
of a breach of contract. Given that an improper assignment, though not legally
enforceable, may constitute a breach of contract, the question whether an assignment
occurred in this case relies upon facts still in dispute.
Farmhouse also argues that the doctrine of laches and judicial estoppel should
bar MHTCP from claiming an assignment occurred. This argument fails to persuade
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the Court. Farmhouse notes correctly that MHTCP earlier took the position that
Farmhouse could not assign the purchase option to Burrows without its consent. (See
Doc. 62-14.) The Court disagrees that this position should now bar MHTCP from
arguing that Farmhouse did assign the purchase option to Burrows. MHTCP’s prior
claim that Farmhouse cannot assign its purchase option to Burrows without violating
the Partnership Agreement does not conflict with its current argument that
Farmhouse has violated the Partnership Agreement by assigning the purchase option
to Burrows without its consent. The former position merely restates the terms of the
Partnership Agreement. MHTCP’s current position reflects the necessary outcome
resulting from an improper assignment in violation of those terms. Those positions
do not conflict and doctrine of laches or judicial estoppel by inconsistent positions
cannot apply. See, e.g., Dagel v. City of Great Falls, 819 P.2d 186, 192–93 (Mont.
1991); Algee v. Hren, 375 P.3d 386, 389 (Mont. 2016).
The Court cannot determine that the evidence produced by the parties permits
only one conclusion due to the factual disputes that persist. Either party may yet
have the more meritorious claim depending on the outcome of these factual disputes.
The Court therefore denies the summary judgment motions of both parties.
Farmhouse Shall Produce the Engagement Agreement.
The Court determines that the Engagement Agreement relates to MHTCP’s
defense. As discussed above, MHTCP bases its defense on the contention that
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Farmhouse improperly assigned its right to purchase MHTCP’s interest to Burrows.
MHTCP grounds its argument on the control that Burrows allegedly has exercised
over Farmhouse’s purchase option. Burrows’s involvement or noninvolvement in
the Engagement Contract thus proves relevant to MHTCP’s defense.
Farmhouse’s argument that disclosing the Engagement Agreement would
infringe upon the privacy rights of Burrows, Dabney, or their families fails to
persuade the Court. The Engagement Agreement is a standard engagement contract
between Beck, Amsden & Stalpes, PLLC, and its clients Farmhouse, Chui
Investments, LLC, and Turnaround Trading and Advisory Services, LLC. Nothing
in the agreement invades the privacy of the individuals exercising control over those
Farmhouse argues that the common interest doctrine should apply to the
Engagement Agreement. The Court previously determined that Farmhouse
appropriately withheld 17 documents under the common interest doctrine. (Doc. 41.)
These 17 documents comprised transmittal email messages between John Amsden
and Trent Gardener and attached documents, either prepared by MHTCP and sent to
Farmhouse, or documents sent by Farmhouse to MHTCP. (Id. at 2-3.) The Court
determined that those documents involved communications developed “in
furtherance of the joint strategy for Farmhouse to exercise the [purchase] option.”
(Id.) Unlike the aforementioned 17 documents, however, the Engagement
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Agreement is not a communication demonstrating a joint strategy.
To assert attorney-client privilege under the common interest doctrine, a party
must establish that (1) the communication is made by separate parties concerning a
matter of common legal interest; (2) the communication is designed to further that
effort; and (3) privilege has not been waived. See Nidec Corp. v. Victor Co. of Japan,
249 F.R.D. 575, 578 (N.D. Cal. 2007). The party must show that the withheld
communication was made “in pursuit of a joint strategy in accordance with” an
agreement. See In re Pacific Pictures Corp., 679 F.3d 1121, 1129 (9th Cir. 2012).
The Engagement Agreement does not constitute a communication to further a
matter of common legal interest. The Engagement Agreement merely establishes the
fee arrangement between Beck, Amsden & Stalpes, PLLC, and its clients. The
common interest doctrine thus does not apply to the Engagement Agreement. Given
that the Engagement Agreement proves relevant and not privileged, the Court
requires Farmhouse to produce the Engagement Agreement.
Accordingly, IT IS HEREBY ORDERED that the Parties’ Motions for
Summary Judgment (Docs. 60 & 64) are DENIED. The Parties shall submit
proposed Findings and Recommendations to the Court on or before the trial date of
May 31, 2022.
MHTCP’s Motion to Compel Production of September 1, 2020 Limited
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Scope Engagement Letter, or for In Camera Review (Doc. 47) is GRANTED.
Farmhouse shall produce to MHTCP the Engagement Agreement on or before May
12, 2022. The terms of the agreement shall be held confidential by MHTCP and its
attorneys and shall not be revealed to anyone not party to this case.
DATED this 10th day of May, 2022.
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