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McLain v. McLain

United States District Court, D. Montana, Billings Division

March 14, 2017

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, Plaintiffs,
v.
FRANCIS MCLAIN, INDIVIDUALLY AND AS CO-MANAGER OF TERA B ANI 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 THE E-3 RANCH TRUST, Defendants. THE UNITED STATES OF AMERICA, Intervenes Defendant and Counter/Cross-Claimant,
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 and BRAD D. HALL Additional Defendants on United States' claims.

          OPINION AND ORDER

          SUSAN P. WATTERS United States District Judge

         This action for declaratory judgment principally concerns the ownership of a ranch located in the Paradise Valley known as the E-3 Ranch. (Doc. 1.) Presently before the Court is Plaintiffs' Motion for Summary Judgment Re: Validity of Trust and Transfer of E-3 Ranch to Caroline McLain. (Doc. 36.) This motion is fully briefed and ripe for the Court's review. (Docs. 37, 38, 53, 54, 57.)

         Having considered the parties' submissions, the Court GRANTS Plaintiffs' motion for summary judgment (Doc. 36.)

         I. BACKGROUND

         A. Factual Background[1]

         Magistrate Judge Ostby previously described the factual background and the relationship of the parties in this case at length in her October 24, 2016, Findings and Recommendations. (Doc. 67.) The Court presumes familiarity with the basic factual background, and will discuss only those facts relevant to the Court's determination of Plaintiffs' motion for summary judgment.

         Bernard McLain ("Bernard") and Kathryn McLain ("Kathryn") had six children. After Kathryn and Bernard passed away, their children and grandchildren fell into a dispute concerning ownership of the E-3 Ranch, which was purportedly owned by different members of the family at various times. Plaintiffs are Faith McLain ("Faith"), Christeen McLain ("Christeen"), John McLain ("John"), Mary McLain ("Mary"), Molly McLain ("Molly"), Mira McLain ("Mira"), and Matthew McLain ("Matthew").[2] Faith, Christeen, John, and Mary are siblings and the children of Bernard and Kathryn. Molly, Mira, and Matthew are the children of James McLain, also known as Harley McLain ("Harley"), who was also one of Bernard and Kathryn's children, and is now deceased.

         Defendants are Francis McLain, also known as Frank McLain ("Frank"), Caroline McLain ("Caroline"), Alakhi Joy McLain ("Alakhi"), Sohnja May McLain ("Sohnja"), and Dane Sehaj McLain ("Dane").[3] Frank is one of Bernard and Kathryn's children. Caroline is Frank's wife, and Alakhi, Sohnja, and Dane are Frank and Carolines's children.

         On June 21, 1996, a Limited Warranty Deed was executed transferring title to the real property at issue in this case (referred to as the "E-3 Ranch" or "Property") from the Dorothy H. Malcolm Revocable Living Successor Trust to Frank and an individual named Brad. D. Hall. (Doc. 54 at ¶ 5.)

         On February 16, 1998, a Contract and Declaration for an "Irrevocable Pure Trust Organization, " referred to as the E-3 Ranch Trust, was drafted at the request of Frank. (Id. at ¶ 11.) Frank hired Richard Humpal to set up the E-3 Ranch trust after meeting him at a "financial planning conference here in Montana" in order to protect Frank's interest in the E-3 Ranch "against possible future creditors." (Id. at 1112.)

         The alleged purpose of the E-3 Ranch Trust, as stated in the Preamble of the Contract and Declaration of Trust was as follows:

The purpose of this indenture is that these same assets will be promptly conveyed to the Trust and controlled by a Trustee or a Board of Trustees, so as to constitute the Corpus of the Trust created for the benefits of the holders of Trust Certificate Units, with these assets to be held in fee simple, the Trustee(s) of this Trust to provide for the safe, logical and economical administration thereof by natural and/or artificial persons acting in a fiduciary capacity, to begin forthwith.

(Id. at¶16;Doc. 38-7.)

         The E-3 Ranch Trust provided for the issuance of 100 Trust Certificate Units. (Doc. 54 at ¶14 (Section Four); Doc. 38-7 (Section Four).) The Trust Certificate Units were "transferrable by an appropriate assignment in writing and by its surrender to the Trustees, " subject to acceptance or rejection by the Trustees. (Id.) The E-3 Ranch Trust limits all liability to funds, property, and assets of the Trust. (Id. (Section Eleven).)

         The E-3 Ranch Trust provided for the appointment of one or more trustees, including the appointment of an Executive Trustee. (Doc. 38-7 (Section Three).) The Trust also provided that a trustee could be any person, and could be replaced in a variety of ways. (Id.) Richard Humpal, Mary, and Harley were named as trustees of the E-3 Ranch Trust. (Doc. 54 at ¶ 18.) Richard Humpal and Harley are now deceased. (Id.) Defendants dispute whether a successor trustee has been appointed, and whether Richard Humpal was ever appointed as Executive Trustee. (Id. at ¶¶ 18-19.)

         On August 1, 1998, an agreement between Frank and the E-3 Ranch Trust titled "Contractual Duties and Compensation of Managing Director" was executed and approved by Richard Humpal as Executive Trustee. (Doc. 38-8.) The agreement stated Frank was the "day-to-day Managing Director of the E-3 Ranch Trust, " and set forth a list of duties he was responsible for. (Id.) The duties included payment of any monthly mortgage, keeping the property in running order, enhancing the value of the property through improvements, bringing in revenue, and setting up rules for the Tera Bani Retreat's meditation retreats and childrens' camps. (Id.) The Agreement also indicated that the 100 Trust Certificate Units had been issued equally to Alakhi, Dane, Sohnja, and the Tera Bani Retreat.[4] (Id.) Defendants dispute Plaintiffs' contention that Frank retained authority over the E-3 Ranch Property via the Agreement. (Doc. 54 at ¶ 17.)

         The E-3 Ranch Trust has not filed with the Montana Secretary of State as a business trust and the Secretary of State has not issued the E-3 Ranch Trust a certificate of organization or license to do business in the State of Montana. (Doc. 54 at ¶ 15.) Defendants dispute any assertion that the E-3 Ranch Trust was obligated to file any papers with the Secretary of State or receive a certificate of organization or license to do ...


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