Farmhouse Partners Limited Partnership v. Multi-Housing Tax Credit Partners XXX
2:21-cv-00048
D. Mont.May 10, 2022Background
- Farmhouse Partners (general partner) sued MHTCP (limited partner) seeking specific performance to exercise a purchase option on the Bridger I LIHTC project after the 15-year compliance period and the option waiting period elapsed.
- Farmhouse alleged no improper assignment; MHTCP contended Farmhouse assigned the purchase option to Susan Burrows via Dabney’s divorce settlement, which would constitute a default barring Farmhouse from exercising the option.
- Key pre-dispute events: Dabney’s divorce settlement (2016) purported to transfer rights to Burrows; MHTCP refused consent to any assignment; Burrows’ counsel John Amsden sent letters claiming the option had been assigned and later represented Farmhouse in this litigation.
- Farmhouse attempted to exercise the option on January 26, 2021; MHTCP refused, asserting default and seeking to list the project on the market.
- The parties filed cross-motions for summary judgment; the Court found genuine factual disputes about whether an assignment occurred and who controlled Farmhouse, and therefore denied both summary judgment motions.
- The Court also ordered production of a September 1, 2020 engagement agreement (in camera reviewed) as relevant and not protected by the common-interest doctrine, subject to a confidentiality restriction.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Farmhouse defaulted by assigning the purchase option without MHTCP's consent | No assignment occurred; Dabney Company retained control; even if assignment occurred it is void without consent and cannot cause default | Assignment occurred (divorce settlement, Amsden letter, circumstantial evidence, Dabney deposition statements) and thus Farmhouse is in default | Denied summary judgment for both: factual disputes (assignment, control) preclude resolution on summary judgment |
| Effect of R.C. Hobbs (void assignment) on breach claim | Hobbs means a void assignment cannot constitute a breach, so MHTCP cannot refuse the option as a legal matter | Hobbs does not preclude a claim for breach; a void assignment can still be a breach depending on materiality and damages | Court rejects Farmhouse’s broad reading of Hobbs; void assignment can be a breach, but whether breach occurred is a factual question |
| Whether laches or judicial estoppel bars MHTCP from asserting that an assignment occurred | MHTCP previously said Farmhouse could not assign to Burrows without consent, so MHTCP is estopped/in barred by laches from now claiming assignment occurred | Positions are consistent: earlier statement restated contract terms; current claim is consequence of an alleged improper assignment | Court holds laches/judicial estoppel inapplicable; MHTCP not barred from arguing assignment |
| Whether the September 1, 2020 Engagement Agreement is privileged/common-interest and protected from production | Engagement Agreement is privileged/common-interest and private; should be withheld | Engagement Agreement is relevant to MHTCP’s defense and not a communication made to further a joint legal strategy; not privileged | Court orders production: Engagement Agreement is relevant and not protected by the common-interest doctrine; must be produced under confidentiality |
Key Cases Cited
- R.C. Hobbs Enterprises LLC v. J.G.L. Distributing, Inc., 104 P.3d 503 (Mont. 2004) (void assignment without required consent may nonetheless constitute a breach; materiality of breach controls relief)
- Rother-Gallagher v. Montana Power Co., 522 P.2d 1226 (Mont. 1974) (contractual consent requirement can render an attempted assignment void)
- Dagel v. City of Great Falls, 819 P.2d 186 (Mont. 1991) (doctrine of inconsistent positions/judicial estoppel discussion)
- Algee v. Hren, 375 P.3d 386 (Mont. 2016) (judicial estoppel and laches principles)
- Nidec Corp. v. Victor Co. of Japan, 249 F.R.D. 575 (N.D. Cal. 2007) (elements required to invoke the common-interest doctrine)
- In re Pacific Pictures Corp., 679 F.3d 1121 (9th Cir. 2012) (common-interest doctrine requires communications made in pursuit of a joint legal strategy)
- Celotex Corp. v. Catrett, 477 U.S. 317 (1986) (summary judgment burden-shifting principles)
- Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986) (standard for determining genuine issues of material fact on summary judgment)