Gibbs v. James Altenhofen, Delwin C. Nordtvedt, & CHMS, P.C.

• Decision Date: 29 July 2014
• Docket Number: No. DA 13–0642.,DA 13–0642.
• Citation: 376 Mont. 61,330 P.3d 458
• Parties: Timothy J. GIBBS, Roderick D. Gibbs, L.H. “Lee” Gibbs, and L.H. “Lee” Gibbs, Reginald L. Gibbs, Trustees of The R'Delle Gibbs Family Trust, Plaintiffs and Appellants, v. James ALTENHOFEN, Delwin C. Nordtvedt, and CHMS, P.C., Defendants and Appellees.
• Court: Montana Supreme Court

376 Mont. 61

330 P.3d 458

Timothy J. GIBBS, Roderick D. Gibbs, L.H. “Lee” Gibbs, and L.H. “Lee” Gibbs, Reginald L. Gibbs, Trustees of The R'Delle Gibbs Family Trust, Plaintiffs and Appellants,

v.James ALTENHOFEN, Delwin C. Nordtvedt, and CHMS, P.C., Defendants and Appellees.

No. DA 13–0642.

Supreme Court of Montana.

Submitted on Briefs June 25, 2014.

Decided July 29, 2014.

For Appellants: Thomas E. Towe, Yvette K. Lafrentz, Towe, Ball, Mackey, Sommerfeld & Turner, PLLP, Billings, Montana.

For Appellees: Leonard H. Smith, Chirstopher C. Stoneback, Crowley Fleck PLLP, Billings, Montana (Attorneys for Delwin C. Nordtvedt and CHMS, P.C.). John R. Christensen, David T. Sulzbacher, Christensen, Fulton & Filz, PLLC, Billings, Montana (Attorney for James Altenhofen).

Justice PATRICIA COTTER delivered the Opinion of the Court.

¶ 1 Timothy Gibbs (Tim), Roderick Gibbs (Rod), and L.H. “Lee” Gibbs, individually, and L.H. “Lee” Gibbs and Reginald Gibbs, as trustees of the R'Delle Gibbs Family Trust (collectively the Gibbs), appeal from orders of the Seventh Judicial District Court, Dawson County, granting James Altenhofen, Delwin Nordtvedt, and CHMS's motions for summary judgment. We affirm in part and reverse and remand in part.

ISSUES

¶ 2 The Gibbs raise the following issues on appeal:

1. Did the District Court err in finding that the Gibbs' claims against Nordtvedt were barred by the doctrine of claim preclusion?

2. Did the District Court err in finding that some of the Gibbs' claims were barred by the doctrine of judicial estoppel?

3. Did the District Court err in finding that some of the Gibbs' claims were barred by the doctrine of issue preclusion?

4. Did the District Court err in concluding that there were no genuine issues of material fact to preclude summary judgment?

5. Did the District Court err in dismissing Altenhofen as a party defendant because the claim against him was time-barred?

FACTUAL AND PROCEDURAL BACKGROUND

¶ 3 Lee and R'Delle Gibbs owned a family ranch in Dawson County, Montana, and had four children: Tim, Rod, Roy, and Reginald Gibbs. R'Delle executed a trust agreement in July 2000 conveying her one-half interest in the ranch in trust for the benefit of R'Delle and Lee during their lifetimes. Upon R'Delle's death in August 2000, Lee disclaimed his interest in the trust property, and R'Delle's one-half interest in the property passed into the family, trust. Pursuant to the trust, the real property was to be divided equally between Tim and Rod if the ranch operations were profitable within six months of the last remaining parent's death.

¶ 4 In November 2001, the Gibbs asked Altenhofen to serve as trustee of the family trust. They later removed him as trustee on June 29, 2005, at which time he gave the trust records to the successor trustee, Nordtvedt. Nordtvedt was a certified public accountant with the firm CHMS, P.C. in Glendive, Montana. On October 6, 2006, the Gibbs received a letter from Nordtvedt advising them of potential claims against Altenhofen for misappropriation of trust funds.

¶ 5 The trust took over ranch operations in 2003, and Tim and Rod controlled operations in 2004 and 2005. When the trust became delinquent in its obligations, Altenhofen, and later Nordtvedt, tried to sell the trust's one-half interest in the ranch. On August 5, 2005, Nordtvedt filed an action in the Thirteenth Judicial District Court, Yellowstone County, requesting that the court determine whether any restrictions existed in the trust agreement limiting the trustee's power to sell the real and personal property included in the trust estate. Nordtvedt moved for summary judgment, arguing that not only did he have the authority to sell the trust's real property to non-beneficiary third parties, but that he was obligated to do so as a prudent investor. By this point, Lee had decided to sell his half of the property and had signed a buy/sell agreement. Tim and Rod filed cross-claims against Nordtvedt, alleging, inter alia, breach of the duties of loyalty, to administer the trust, to deal impartially with beneficiaries, and to avoid conflicts of interest. The court granted Nordtvedt's motion, agreeing with Nordtvedt that “the prudent investor rule does indeed call for the sale of the property.” Judgment was entered in Nordtvedt's favor on March 30, 2006. Tim and Rod did not seek to alter or amend the judgment pursuant to M.R. Civ. P. 59. They did not seek relief under M.R. Civ. P. 60 and did not appeal the court's decision.

¶ 6 The Gibbs filed a complaint against Altenhofen, Nordtvedt, and CHMS on July 11, 2008, alleging claims for breach of fiduciary duty. The Gibbs alleged that Nordtvedt had a conflict of interest and breached his fiduciary duty in approving the sale of the ranch, obtaining court approval for the sale, giving up an arrangement with the Farm Service Administration of the Department of Agriculture, failing to take any action against Altenhofen, and charging excessive fees. On May 8, 2013, Nordtvedt moved for summary judgment. The court granted the motion on August 30, 2013, concluding that the Gibbs were seeking to relitigate claims and issues that either were raised, or could have been raised, in the 2005 litigation. The court determined that the claims against Nordtvedt were barred by the doctrines of issue preclusion, judicial estoppel, and claim preclusion.

¶ 7 In their complaint, the Gibbs also alleged that Altenhofen breached his fiduciary duty by using trust property for his own benefit and by charging excessive fees. On February 2, 2012, Altenhofen filed a second motion for summary judgment, which the District Court granted on July 10, 2012. The Gibbs and Altenhofen disagreed about whether the court should apply the two-year statute of limitations for conversion claims, the three-year statute of limitations for tort claims, or the three-year statute of limitations for actions brought under the trust code. The court concluded that the claims were not conversion claims, and that, under either three-year statute, the Gibbs' claims against Altenhofen were barred because the complaint was not filed within three years of the date that they discovered or reasonably should have discovered the existence of the claims. The Gibbs timely appealed both orders.

STANDARD OF REVIEW

¶ 8 This Court reviews a district court's rulings on motions for summary judgment de novo. Dewey v. Stringer, 2014 MT 136, ¶ 6, 375 Mont. 176, 325 P.3d 1236 (citation omitted). Summary judgment is appropriate only when “the pleadings, depositions, answers to interrogatories, and admissions on file,” together with any affidavits, demonstrate that no genuine issue exists as to any material fact and that the moving party is entitled to judgment as a matter of law. Dewey, ¶ 6 (citation and internal quotation marks omitted).

DISCUSSION

¶ 9 1. Did the District Court err in finding that the Gibbs' claims against Nordtvedt were barred by the doctrine of claim preclusion?

¶ 10 The doctrine of claim preclusion (res judicata) bars the relitigation of a claim that a party has already had an opportunity to litigate or that the party could have litigated in the first action. Brilz v. Metro. Gen. Ins. Co., 2012 MT 184, ¶ 21, 366 Mont. 78, 285 P.3d 494 (citations omitted). Thus, “a party may be precluded from litigating a matter that has never been litigated and that may involve valid rights to relief.” Brilz, ¶ 21. The elements of claim preclusion are: (1) the parties or their privies are the same in the first and second actions; (2) the subject matter of the actions is the same; (3) the issues are the same in both actions, or are ones that could have been raised in the first action, and they relate to the same subject matter; (4) the capacities of the parties are the same in reference to the subject matter and the issues between them; and (5) a valid final judgment has been entered on the merits in the first action by a court of competent jurisdiction. Brilz, ¶ 22 (citations and quotation marks omitted). Here, the Gibbs argue that none of the five elements have been met. We address each element in turn; we address the second and third elements last.

¶ 11 As to the first element of whether the parties or their privies are the same in both actions, the concept of a privy in this context applies to one whose interest has been legally represented in litigation. Privies are “those who are so connected in estate or in blood or in law as to be identified with the same interest and, consequently, affected with each other by litigation.” Wamsley v. Nodak Mut. Ins. Co., 2008 MT 56, ¶ 53, 341 Mont. 467, 178 P.3d 102 (citation omitted). The parties on appeal are: Tim, Rod, and Lee; Lee and Reginald as trustees; and Nordtvedt and CHMS.¹ The parties in the original litigation were Tim, Rod, the trust, and Nordtvedt. Nordtvedt and CHMS were in privity because Nordtvedt was a shareholder in CHMS when he was acting as trustee. It is irrelevant that the Gibbs originally sued Nordtvedt in his capacity as trustee and now sue him individually; at issue in both lawsuits are actions he took as trustee.

¶ 12 As noted, Lee was not a party to the first action. This being so, and because Lee actually supported the trust's decision to sell the property at the time of the first action, he was arguably not in privity with the other Gibbs so as to support a finding of claim preclusion against him. However, his claims against Nordtvedt do not survive in any event, because the doctrine of judicial estoppel bars Lee's present claims against Nordtvedt. See ¶¶ 18–19. The District Court did not err in concluding that the privity requirement of claim preclusion is satisfied for all Plaintiffs but Lee.

¶ 13 The District Court concluded that the capacities of the parties involved have not changed in the way they relate to the subject matter and issues. The District Court did not err in finding that Rod, Tim, and the trustees, on behalf of the trust, claim damages...