Court Opinion

ID: 9396956
Source: CourtListenerOpinion
Date Created: 2023-05-23 23:07:21.692414+00
Date Added: 2024-06-11T17:19:20.524112
License: Public Domain

05/23/2023

                                   DA 22-0524

         IN THE SUPREME COURT OF THE STATE OF MONTANA

                                   2023 MT 97

IN THE MATTER OF THE ESTATE OF

CARL SCOTT,

         Deceased.

APPEAL FROM:    District Court of the Sixth Judicial District,
                In and For the County of Sweet Grass, Cause No. DP 2019-11
                Honorable Brenda R. Gilbert, Presiding Judge

COUNSEL OF RECORD:

          For Appellant Rocky Mountain Elk Foundation:

                Grant R. Kelly, Golden Triangle Law, PLLC, Fort Benton, Montana

          For Appellant Estate of Carl Scott:

                Jim Lippert, Jim Lippert Attorney at Law, P.C., Big Timber, Montana

          For Appellees David Scott Individually and as Personal Representative for
          Kenneth Scott, Deceased:

                C. Mark Hash, Therese Fox Hash, Hash, O’Brien, Biby & Murray,
                PLLP, Kalispell, Montana

                                            Submitted on Briefs: April 19, 2023

                                                      Decided: May 23, 2023

Filed:

                __________________________________________
                                 Clerk
Justice James Jeremiah Shea delivered the Opinion of the Court.

¶1     In this consolidated case, appellants Rocky Mountain Elk Foundation and the Estate

of Scott appeal the August 16, 2022 Order granting the Scott Children’s Motion to Strike

Notice of Disallowance and the February 7, 2022 Order Denying the Personal

Representative’s Motion for Summary Judgment by the Sixth Judicial District Court,

Sweet Grass County.1 We address:

       Issue One: Whether the District Court, while sitting in probate, had subject matter
       jurisdiction to strike the Estate’s Notice of Disallowance.

       Issue Two: Whether the District Court erred by ruling on the Personal
       Representative’s Motion for Summary Judgment.

¶2     We reverse and vacate the District Court’s orders on both issues for lack of subject

matter jurisdiction.

                        FACTUAL AND PROCEDURAL BACKGROUND

¶3     In 1976 Carl Scott and his wife divorced. As part of the divorce, they agreed to a

Separation and Property Settlement Agreement in which Scott stated that he would hold

the “equity in the farm near Polson, Montana,” for his two sons and would “arrange to

transfer that equity or its equivalent value to the two younger boys at such time when, in

his judgment, they have reached a sufficient level of maturity.” The District Court adopted

the Separation and Property Settlement Agreement into the final Divorce Dissolution

Decree.

1
 On March 1, 2023, this Court granted the Rocky Mountain Elk Foundation’s Motion to
Consolidate Cause Nos. DA 22-0524 and DA 22-0525.
                                          2
¶4       Two years later, they agreed to modify the Divorce Dissolution Decree because

Scott’s income decreased. In an affidavit, Scott stated that he was losing income, in part,

because the lessees of the farm were exercising their option to purchase and “under the

terms of the Property Settlement Agreement between the parties, the proceeds of the sale

go to the two younger children.”

¶5       In 2019 Scott died and devised his entire estate to the Rocky Mountain Elk

Foundation (RMEF).        Before his death, Scott did not determine that his sons were

“sufficiently mature” and never transferred any of his equity in the farm to them. Following

the publication of a Notice to Creditors, David Scott, on behalf of himself and the Estate

of his deceased brother Kenneth Scott, filed a creditor claim against the Estate for their

equity in the farm near Polson.

¶6       The personal representative of the Estate filed a Motion for Summary Judgment,

and RMEF, as the Estate’s sole beneficiary, filed a response in support of the motion. The

District Court denied the motion and ruled on the merits of the case. It rejected the Estate’s

arguments that the statute of limitations or the common-law doctrine of laches barred the

claims; it concluded that the Scott Children had a vested interest in the farm’s equity; and

it held that it was the Estate’s obligation to disburse the funds to the children.2

¶7       A couple of months after the District Court issued its judgment, the Estate issued a

Notice of Disallowance for the Scott Children’s claims. Relying on In re Estate of Cooney,

2019 MT 293, 398 Mont. 166, 454 P.3d 1190, it contended that the Scott Children’s claims

2
    RMEF appealed the Order denying summary judgment in Cause No. DA 22-0524.
                                             3
were equitable, and the District Court, while sitting in probate, did not have subject matter

jurisdiction. In light of Cooney, the Estate asserted the District Court’s judgment ordering

the Estate to disburse the funds to the Scott Children was void.

¶8     The Scott Children filed a Motion to Strike the Notice of Disallowance, and the

District Court granted the motion. The District Court reasoned that Cooney “does not

operate to preclude the [Scott Children’s] Creditors’ claims herein, nor the jurisdiction of

this probate court to address them” and concluded that the “Estate has advanced no legal

basis supporting its effort to change the allowances to disallowances.”

                              STANDARDS OF REVIEW

¶9     We review de novo whether a district court has subject matter jurisdiction.

Cooney, ¶ 4. A court’s decision to assert subject matter jurisdiction is a conclusion of law

we review for correctness. Cooney, ¶ 4.

                                      DISCUSSION

       Issue One: Whether the District Court, while sitting in probate, had subject matter
       jurisdiction to strike the Estate’s Notice of Disallowance.

¶10    A district court sitting in probate has limited subject matter jurisdiction. Section

72-1-202, MCA. It may only preside over certain types of cases, and it may not “hear or

determine any matters other than those under the purview of the statute.” Haugen v.

Haugen, 2008 MT 304, ¶ 9, 346 Mont. 1, 192 P.3d 1132 (citing In re Graff’s Estate, 119

Mont. 311, 316-17, 174 P.2d 216, 218 (1946)). Pursuant to § 72-1-202(1)(a), MCA, the

types of cases it may hear include matters related to “estates of decedents, including

                                             4
construction of wills and determination of heirs and successors of decedents, and estates of

protected persons.” Creditor claims are considered claims related to the estate and are

within a probate court’s subject matter jurisdiction. Cooney, ¶ 12.

¶11    A probate court does not have subject matter jurisdiction over equitable claims

arising from a breach of contract. Cooney, ¶ 13. An equitable claim is distinct from a

creditor claim because an equitable claim is a “right or interest in the estate, an equitable

ownership [] after the claims against the estate have been allowed and paid,” whereas a

creditor claim is “a demand against the estate which must be paid or satisfied in advance

of distribution.” Erwin v. Mark, 105 Mont. 361, 372, 73 P.2d 537, 540 (1937). This

difference is consequential because it materially impacts how a decedent’s real and

personal property is ultimately divided and distributed. To treat them the same would

“destroy all distinction between creditors of the estate, on the one hand, and those entitled

as distributees [], after the payment of its debts, on the other.” Erwin, 105 Mont. at 372,

73 P.2d at 540.

¶12    We recently examined how to determine whether a claim is equitable. In Cooney,

John Cooney and his ex-wife agreed to a Separation and Property Settlement Agreement

as part of their divorce. Cooney, ¶ 2. The agreement stated that when Cooney died the

remainder of his ranch property “would be distributed to their daughters . . . and any other

children . . . in equal shares to share and share alike,” otherwise known as a “succession

contract.” Cooney, ¶ 2 (internal quotations omitted). Despite the Separation and Property

Settlement Agreement, Cooney’s final Will did not devise any of his ranch property to his

                                             5
daughters. Cooney, ¶ 3. Cooney’s daughters moved to invalidate the portions of the Will

that contradicted the agreement. Cooney, ¶ 3. The District Court denied the motion

because it did not have subject matter jurisdiction over equitable claims while it sat in

probate. Cooney, ¶ 3.

¶13    We affirmed the District Court’s ruling, concluding that the claims were equitable

because Cooney’s Daughters were seeking specific performance of the Separation

Agreement. “The Daughters seek not a construction of the will or a determination of heirs

and successors, § 72-1-202, MCA, but a judgment to enforce a contract the decedent made

during his lifetime to dispose of his property in a certain way.” Cooney, ¶ 13 (internal

quotations omitted). We concluded, “the Daughters, as third-party beneficiaries to the

contract, have rights or interests in the estate—in other words, a claim to equitable

ownership.” Cooney, ¶ 13.

¶14    The Scott Children argue that Scott’s agreement to “transfer his equity” in the farm

is not a term of a contract, but a debt he incurred during his lifetime. They identify the

language in the 1976 Property Settlement Agreement, his statements in his affidavit which

indicated a reliance on transferring the equity to his sons, and the fact that he never denied

this obligation during his lifetime, as dispositive evidence that Scott intended to transfer

the equity to his sons. Because he failed to do so before he died, they contend that, like

any other creditor, they are entitled to file a claim against the Estate, and the District Court

sitting in probate has subject matter jurisdiction.

                                               6
¶15    To distinguish Cooney, they argue that Cooney’s holding relied on the presence of

a succession contract to devise real property. But in this case, “there is no contractual

obligation to draft a will in the future to transfer real property to heirs; no demand to

transfer real property contrary to a Will; nor is there a trustee to hold real property for the

ultimate devisee.” They summarily reiterate that they are not seeking specific performance

of a contract, rather they are “simply seeking payment of an obligation incurred by [Scott]

during his lifetime. Where [Scott] failed to fulfill that obligation . . . it becomes an

obligation of [Scott’s] Estate.”

¶16    This case is materially indistinguishable from Cooney. As in Cooney, Scott agreed

to a Separation and Property Settlement Agreement in which Scott stated he would give

property to his children. Scott never completed the agreement before he died, and now the

Scott Children, like the Daughters in Cooney, seek specific performance of his agreement.

They assert that they own the equity in the farm and request a judgment to enforce the

contract by requiring the Estate to satisfy Scott’s part of the agreement and give them the

equity. Cooney, ¶ 13. Although the Scott Children insist otherwise, this is a prototypical

case of an equitable claim, and the District Court, while sitting in probate, does not have

subject matter jurisdiction.

¶17    Although Cooney involved a succession contract, the key issue was whether the

Daughters were bringing equitable claims to a probate proceeding.             To answer that

question, this Court explained that the Separation Agreement was a prior contract and the

Daughters were seeking specific performance of that contract. The Scotts’ Property

                                              7
Settlement Agreement is substantially similar in its terms because it required Scott “to

dispose of his property in a certain way.” Cooney, ¶ 13; see Erwin, 105 Mont. at 369-70,

73 P.2d at 539. Equitable claims—seeking enforcement of a contract right—are outside a

probate court’s limited subject matter jurisdiction. Cooney, ¶¶ 12-13.

¶18    The Scott Children also argue that the Notice of Disallowance was improper

because “the district court determined that Cooney was inapplicable to the case at bar; thus,

the Estate then had no legal basis on which to change a statutorily deemed allowance of a

claim to disallowance.” Having concluded that Cooney is applicable to this case and the

District Court had no subject matter jurisdiction, we likewise conclude that the Estate did,

in fact, have a legal basis to issue its Notice of Disallowance.

       Issue Two: Whether the District Court erred by ruling on the Personal
       Representative’s Motion for Summary Judgment.

¶19    Because the District Court did not have subject matter jurisdiction over the Scott

Children’s equitable claims, it accordingly erred by ruling on the Personal Representative’s

Motion for Summary Judgment.

                                      CONCLUSION

¶20    We reverse and vacate the District Court’s grant of the Motion to Strike the Notice

of Disallowance and the District Court’s denial of the Motion for Summary Judgment for

lack of subject matter jurisdiction. We remand to the District Court for further proceedings

consistent with this opinion.

                                              8
                           /S/ JAMES JEREMIAH SHEA

We Concur:

/S/ MIKE McGRATH
/S/ BETH BAKER
/S/ LAURIE McKINNON
/S/ INGRID GUSTAFSON

                       9