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McCann v. McCann

Supreme Court of Montana

August 28, 2018

TIMOTHY M. McCANN and THOMAS M. McCANN, Plaintiffs,
v.
SHEILA McCANN and PAUL J. McCANN, JR., individually and in their capacities as Director(s) and/or Officer(s) in the corporate defendants; PAUL J. McCANN, JR., individually and in his capacity as co-conservator of ANNE MARIE McCANN, and DOUGLAS WOLD, individually and in his capacity as counsel and co-conservator of ANNE MARIE McCANN; JEFFERSON MANAGEMENT COMPANY, a Montana Corporation; GNI, INC., a Delaware Corporation; DDI, INC., a Montana Corporation; FDC-MT, INC., a Montana Corporation M Corp, a Montana Corporation; TSI, INC., a Montana Corporation; DRI, INC., a Montana Corporation; FIRST MONTANA TITLE COMPANY, a Montana Corporation; LANDCO, Corporation; WESTERN LAND CORP., a Delaware Corporation; WESTERN SECURITIES COMPANY, a South Dakota Corporation; WESTERN SECURITIES, a Minnesota Corporation; UAC INC., a Montana Corporation; MERRITT PROPERTIES INC., a Montana Corporation, EMPIRE TITLE INC., a Montana Corporation; MIRAMAR INC., a Montana Corporation; LAKE PLACE, INC., a Montana Corporation; FDC INC, a Delaware Corporation; and CONSULTING ASSOCIATES INC., a Montana Corporation, Defendants and Appellees. GENET McCANN, Plaintiff and Appellant,

          Submitted on Briefs: July 25, 2018

          District Court of the Thirteenth Judicial District, In and For the County of Yellowstone, Cause No. DV 14-1273 Honorable Russell C. Fagg, Presiding Judge

          For Appellant: Genet McCann, self-represented, Big Sky, Montana

          For Appellees: Mark D. Parker, Parker, Heitz & Cosgrove, PLLC, Billings, Montana (for McCanns), Guy W. Rogers, Jon Wilson, Brown Law Firm, P.C., Billings, Montana (for Douglas Wold)

          OPINION

          Jim Rice, Justice.

         ¶1 Genet McCann (Genet) appeals from the District Court's entry of judgment as a matter of law in favor of the Defendants, including individuals and corporate entities, at the close of her case-in-chief in the bench trial held on her claims. We affirm and remand for a determination of attorney fees, addressing the following issues:

1. Did the District Court err by granting the motion for judgment in favor of the McCann and corporate Defendants?
2. Did the District Court err by granting the motion for judgment in favor of Defendant Douglas Wold?
3. Did the District Court err in granting Wold attorney fees?
4. Was Genet denied a fair trial?
5. Should Genet be declared a vexatious litigant?

         FACTUAL AND PROCEDURAL BACKGROUND

         ¶2 Paul McCann, Sr. (Paul Sr.) passed away in 2013, and his estate included considerable assets, including ownership interests in a number of corporations. After Paul Sr.'s death, a guardianship and conservatorship of his wife, A.M.M., and her interests were established due to her diminished capacity. Paul Sr. and A.M.M. have eight adult children, including five who were involved in related legal proceedings: Thomas McCann, Paul McCann Jr. (Paul Jr.), Genet, Timothy McCann, and Sheila McCann (Sheila).

         ¶3 The District Court appointed Paul Jr. and attorney Douglas Wold to serve as co-conservators of A.M.M.'s estate. Genet, either personally, or as counsel for Timothy, has been involved in unsuccessful litigation challenging the guardianship and conservatorship, including three appeals to this Court. In re Guardianship & Conservatorship of A.M.M., 2015 MT 250, 380 Mont. 451, 356 P.3d 474 (In re A.M.M. I); In re Guardianship & Conservatorship of A.M.M., 2016 MT 213, 384 Mont. 413, 380 P.3d 736 (In re A.M.M. II); and In re Guardianship & Conservatorship of A.M.M., No. DA 16-0729, 2017 MT 227N, 2017 Mont. LEXIS 566 (In re A.M.M. III). Genet was licensed to practice law in Montana, but since the trial in this matter, has been disbarred due to professional misconduct in the guardianship proceedings. In re McCann, 2018 MT 140, 391 Mont. 443, 421 P.3d 265 (In re McCann I); In re McCann, No. PR 16-0635, Or. (Mont. June 6, 2018) (In re McCann II). Genet has attempted to challenge her disbarment several times in U.S. District Court, so far unsuccessfully. In re McCann, No. CV 18-02-H-SEH (D. Mont. Jan. 11, 2018) (In re McCann III), mandamus denied, No. 18-71154, 2018 U.S. App. Lexis 10532 (9th Cir. Apr. 25, 2018); In re McCann, No. CV 18-03-H-SEH (D. Mont. Jan. 11, 2018) (In re McCann IV); McCann v. Supreme Court of Montana, No. CV 18-42-H-SEH (D. Mont. June 11, 2018) (McCann v. Supreme Court I); McCann v. Supreme Court of Montana, No. CV 18-57-H-SEH (D. Mont. June 11, 2018) (McCann v. Supreme Court II).

         ¶4 In September 2014, Genet, Thomas, and Timothy brought this action against the named corporate Defendants, which are affiliated with the estate; against Sheila and Paul Jr., individually and in their role as directors or officers of the corporate Defendants; and against Paul Jr. and Wold, individually and in their capacity as co-conservators of the estate. Subsequently, Thomas and Timothy withdrew and settled, respectively. Although naming Wold, Genet did not serve him until January 2017, over two years after she filed the complaint and seventeen days before trial. Wold nonetheless appeared ready to defend.

         ¶5 On the scheduled day for trial, Genet arrived several hours late. The District Court introductorily noted that Genet's claims were "not entirely clear," but understood them to constitute a derivative action seeking forced dissolution of the corporations based upon allegations of corporate oppression under § 35-1-938(2)(b), MCA. Genet proceeded to offer evidence in support of her case, which focused primarily on allegations of corporate records mismanagement. Genet called several witnesses, including court-appointed auditor Natalya Abdrasilova, CPA, who testified that she found missing or incomplete stock records, and court-appointed signature analyst Brent Lund, who identified possible forgeries on several stock certificates. Genet also offered testimony, including by a priest, who testified about the wishes of A.M.M., an issue that had previously been litigated in the guardianship and conservatorship proceedings.

         ¶6 During cross-examination of these witnesses, the defense attempted to demonstrate that any failure to properly maintain records had occurred long ago, and that the Defendants, particularly Paul Jr. and Wold, had worked diligently to correct and bring current the corporate shareholder list and financial records. Testimony indicated that the legal standing of the corporations had been neglected or mismanaged in Paul Sr.'s later years, but this had substantially improved due to the efforts of Paul Jr. and Wold. The District Court, Hon. James Manley presiding, had approved annual conservatorship accountings and granted permission for Wold to serve as counsel to resolve legal issues related to the corporations, including wage claims, record requests, an issue with the State Auditor, and unpaid taxes. The original twenty corporations had been structurally reorganized and reduced to eleven corporate entities. Numerous board of director and shareholding meetings had been conducted and, for the first time in a long time, the corporations paid stockholder dividends, which totaled four million dollars during 2016. The reorganization included a process of gifting shares from one of the corporations to the heirs of the estate, including Genet.

         ¶7 At the close of Genet's case-in-chief, the McCann and corporate Defendants moved for judgment as a matter of law, arguing Genet had failed to prove her oppression claim. Specifically, they argued they had already corrected past shortcomings in the management of corporate records, and these matters were insufficient to establish oppression. The District Court granted the motion, reasoning that Genet "wholly failed" to establish an oppression claim.

         ¶8 Likewise, the District Court granted Wold's motion for judgment as a matter of law, concluding an oppression claim could not be maintained against Wold because he was not a director and that the only control he had asserted over the corporations was in his role as a co-conservator of A.M.M.'s estate-an issue Genet was collaterally estopped from relitigating in this proceeding. Further, the District Court held Genet had presented no evidence that Wold had engaged in any false reporting or other misconduct, stating Wold's actions "both as co-conservator and as legal counsel were of high quality and in conformance with his ethical and fiduciary duties . . . ."

         ¶9 Following trial, the District Court granted Wold attorney fees pursuant to the equity exception to the American Rule, reasoning that "since there is no basis for the claims against Mr. Wold, [Genet] never should have named him as a party and had no reason to sue him . . . . Such an award is necessary to make Mr. Wold whole and is supported by justice, equity, and good conscience." Alternatively, the District Court held that Wold was entitled to fees under § 35-1-547(2), MCA, to the extent the case was a derivative action, acknowledging again that Genet's claims against Wold were not entirely clear. The District Court granted Wold both his pro se fees for preparing to defend the case, attorney fees for counsel he hired to defend him at trial following service of process, and costs. In total, the District Court awarded Wold $56, 055.50 in fees and costs.

         ¶10 Genet appealed the District Court's entry of judgment against her claims and the imposition of attorney fees and costs. The McCann and corporate Defendants filed a combined response brief on appeal, and Wold filed a separate response brief. All of the Defendants requested, in their briefing, that Genet be declared a vexatious litigant by this Court.

         STANDARD ...


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