In re Charles M. Bair Family Trust

• Decision Date: 29 April 2008
• Docket Number: No. DA 06-0586.,DA 06-0586.
• Citation: 2008 MT 144,343 Mont. 138,183 P.3d 61
• Parties: In re The CHARLES M. BAIR FAMILY TRUST, Petitioner.
• Court: Montana Supreme Court

183 P.3d 61

343 Mont. 138

2008 MT 144

In re The CHARLES M. BAIR FAMILY TRUST, Petitioner.

No. DA 06-0586.

Supreme Court of Montana.

Heard and Submitted October 31, 2007.

Decided April 29, 2008.

For Appellants: Roberta Anner-Hughes (argued), A. Clifford Edwards (argued); Edwards, Frickle, Anner-Hughes, & Culver, Billings, Montana (Friends of the Bair), Hon. Mike McGrath, Attorney General of Montana; Anthony Johnstone (argued), Assistant Attorney General, Helena, Montana (State).

For Appellee: Carey Matovich (argued), Brooke B. Murphy; Matovich & Keller, P.C., Billings, Montana (Board of Advisors), John G. Crist (argued), Benjamin J. Alke; Crist Law Firm, Billings Montana (U.S. Bank).

For Amici Curiae: Hon. Michael A. Cox, Attorney General of Michigan, Thomas L. Casey, Solicitor General, Tracy A. Sonneborn, Assistant Attorney General, Lansing, Michigan; Edward P. Nolde, Special Assistant Attorney General, Bigfork, Montana (Michigan Attorney General, et al.).

Justice W. WILLIAM LEAPHARTdelivered the Opinion of the Court.

¶ 1 The State of Montana ("the State") and Jamie Doggett, Peter Marchi, Richard Moe, Lee Rostad, and Friends of the Bair Museum (collectively, "the Friends of the Bair") appeal from the District Court's decision, in which it determined that the Board of Advisors acted reasonably and did not breach its fiduciary duties to the Charles M. Bair Family Trust. The Trustee, U.S. Bank, N.A., cross-appeals from the District Court's decision to allow the Friends of the Bair to intervene in this action. We reverse.

¶ 2 We restate the issues as follows:

¶ 3 Did the District Court correctly determine that the Trust Agreement did not require the creation of the Museum?

¶ 4 Did the District Court correctly determine that the Board did not breach its fiduciary duties to the Trust?

¶ 5 Did the District Court correctly determine that the Friends of the Bair had standing to intervene in this action?

BACKGROUND

¶ 6 On January 3, 1990, Alberta M. Bair executed a Trust Agreement with First Trust Company of Montana (succeeded in interest by U.S. Bank, N.A. ("the Trustee")). The Trust Agreement provided for the creation of the Charles M. Bair Family Trust ("the Trust"), a charitable trust that was to receive Alberta Bair's estate upon her death.

¶ 7 The Trust Agreement stated, in a section entitled PURPOSES OF THE TRUST, that the "purposes of the Trust are to devote and apply the property and the income to be derived therefrom exclusively for charitable, religious, scientific, literary, or educational purposes...." The section further stated that "no part of the Trust shall inure to the benefit" of any person, entity, or individual. The Trust Agreement prohibited the Trust from carrying on propaganda, attempting to influence legislation, or participating in, or intervening in any political campaign for any candidate for public office. The Trust Agreement required that the Trust be maintained in such a manner that it would maintain tax-exempt status under § 501(c)(3) of the Internal Revenue Code.

¶ 8 The Trust Agreement also created the Board of Advisors ("the Board") and granted the Board the power and authority to make charitable distributions from the Trust's income. The Trust Agreement directed that five members would constitute the Board: the president or the president's nominee of First Trust Company of Montana; the president or the president's nominee of First Bank (N.A.), Billings; the president or the president's nominee of Moulton, Bellingham, Longo & Mather, P.C.; and two members, designated by the Trustee, from the counties of Meagher, Wheatland, and Yellowstone, with not more than one member appointed from either Meagher or Wheatland counties.

¶ 9 The Trust Agreement also provided for the creation of a museum. In the section entitled, CREATION OF THE CHARLES M. BAIR FAMILY MUSEUM, the Trust Agreement stated that it had long been the "cherished aim and foremost desire" of Alberta Bair to establish a museum that would "perpetuate the historic and artistic significance of the Charles M. Bair Ranch and the people associated with it." The Trust Agreement then stated:

It is therefore [Alberta Bair's] will that the Board of Advisors devote [her] entire residence, together with all personal property of lasting historical and artistic value located therein, and together with surrounding grounds and outbuildings necessary for such purpose, to the establishment of a museum to be named the Charles M. Bair Family Museum [("the Museum")] which shall be open for the educational benefit of the general public.

The Trust Agreement granted the Board the option to establish a separate charitable entity to operate the Museum and directed the Board to use "whatever principal and income" of the Trust "necessary to establish, improve and maintain the museum...."

¶ 10 The Trust Agreement authorized the Board, "[i]n fulfilling its purposes of opening the museum to the general public for scholarly, educational and historical purposes," to acquire additional land, to "erect and/or maintain existing structures suitable" to a museum's operation, and to hire employees to operate the museum. The Trust Agreement instructed that the Museum had "first priority on income" distributed by the Board.

¶ 11 The Trust Agreement empowered the Board to "sell, transfer, relocate the museum, or otherwise dispose of all of the property then held as a part of [the Museum]" in two circumstances: (1) following the fifth anniversary of Alberta Bair's death, if the Board, "acting in its sole judgment and discretion," determined that the Museum no longer served its purposes such that it was "inadvisable to continue the museum for public and educational purposes"; and (2) if a "fire or other cause" so damaged or destroyed the Bair Family residence or its contents that the Board determined, in its sole judgment, that "it would be impossible, impractical or inadvisable to repair and restore the same" and for the Museum to carry out its original objectives.

¶ 12 The Trust Agreement assigned a primarily administrative role to the Trustee relating to the Trust's charitable distributions and the Museum. The Trust Agreement granted the Trustee no power to approve or deny specific charitable requests and no decision-making power to determine whether the Museum should be closed or remain open.

¶ 13 Following Alberta Bair's death in 1993, the Board held its initial meeting at Alberta Bair's residence in Martinsdale, Montana. The Board reviewed the Trust Agreement and determined that it indicated a clear directive to create the Museum. Soon after, the Board issued a press release introducing the Board members and informing the public that the Board had been "charged with the responsibility of fulfilling `the cherished aim and foremost desire of Marguerite and Alberta Bair to establish a museum which would perpetuate the historic and artistic significance of the Charles M. Bair Ranch....'" The release also informed the public that, though the Trust Agreement "designates this priority [the Museum], other charitable requests will be considered" by the Board. In 1993, the Trust was valued at approximately $23,500,000.

¶ 14 At the initial meeting, David Leavengood, a restoration architect, provided the Board his assessment regarding the conversion of the Bair Family residence to a museum. The Leavengood Study addressed the issues fundamental to "creating an environment of acceptable standards for a modern museum...." Leavengood stated that he had no doubts that the Bair Ranch had the "potential of being a world-class institution.... The family history, the collection and the building are all in place; the museum's future is bright and needs only careful guidance." His study documented the ranch's existing condition, recommended changes to "correct hazardous aspects[,]" and offered suggestions to transform the residence into a museum. Leavengood's suggestions included installing a fire-sprinkler system, installing a new air-handling system to maintain stable temperatures and humidity levels, installing a sophisticated security system, and constructing an additional building for the Museum. Leavengood estimated the total preplanning costs for converting the Bair Family residence to a Museum to be between $1,935,375 and $2,517,320.

¶ 15 By March 30, 1994, the Board had also established a working relationship with CTA Architects Engineers ("CTA"). CTA generated a Master Plan that identified many of the same concerns as Leavengood's study. CTA's recommendations included installing a fire-sprinkler system, installing electrical and plumbing upgrades, constructing a climate-controlled enclosure with precise temperature and humidity controls for the archives, constructing an additional building for a visitor center, and general repainting and landscaping. CTA's preliminary cost analysis estimated the costs at $1,023,200.

¶ 16 In November 1994, CTA submitted a second estimate entitled, "Revised Project Cost Analysis — Minimum Operation." The revised proposal focused on (1) making critical improvements or repair to the house; (2) installing high priority safety and security items, such as a fire sprinkler, new electrical wiring, fire-protection water storage, and storm windows; (3) simplifying the barn renovation by using existing materials and forgoing a sprinkler system and loft improvements, including the air-handling system with temperature and humidity controls; (4) simplifying the site development; and (5) providing staff support housing consisting of a renovated mobile home for the Caretaker and a new mobile home for the Curator. CTA estimated the costs of its Minimum Operation proposal at $521,000.

¶ 17 Following additional discussions, CTA further amended its Minimum Operation's estimate. CTA's reworked proposal eliminated the fire sprinkler system and the related fire-protection expenses and modified the staff housing. Through these reductions,...