                  T.C. Memo. 2001-14



                UNITED STATES TAX COURT



     ESTATE OF THEODORE C. CHEMODUROW, DECEASED,
       GAIL C. WILLIAMS, EXECUTOR, Petitioner v.
     COMMISSIONER OF INTERNAL REVENUE, Respondent



Docket No. 1451-00.                Filed January 23, 2001.



     R has moved for a partial summary adjudication
that the value of certain real and personal property is
includable in the gross estate. P avers that the
property is not so includable because the decedent sold
it to his daughter prior to his death. Relying on two
State court actions finding no sale to the daughter, R
argues that the doctrine of collateral estoppel, or
issue preclusion, precludes such a finding. We agree
with R that P is estopped from litigating ownership of
the property. P having set forth no other basis for
P’s assignments of errors, partial summary adjudication
in R’s favor is appropriate.
     Held: R’s motion for partial summary judgment
shall be granted, and the value of the property is
includable in the gross estate.
                                - 2 -

     Dudley M. Lang and R. Wicks Stephens II, for petitioner.

     Frederick J. Lockhart, Jr., for respondent.



                        MEMORANDUM OPINION

     HALPERN, Judge:   This case involves the Federal estate tax.

The decedent is Theodore C. Chemodurow (sometimes, Theodore).      By

notice of deficiency dated December 1, 1999 (the notice),

respondent determined a deficiency in Federal estate tax of

$2,648,640, an addition to tax for failure to file tax return of

$132,432 under section 6651(a)(1), and an accuracy-related

penalty of $529,728 under section 6662(a).   The case is before us

on respondent’s motion for partial summary judgment (the motion).

Petitioner objects.

      Unless otherwise noted, all section references are to the

Internal Revenue Code in effect at the time of decedent’s death,

and all Rule references are to the Tax Court Rules of Practice

and Procedure.

                              Background

Motion for Summary Judgment

     A summary judgment is appropriate “if the pleadings, answers

to interrogatories, depositions, admissions, and any other

acceptable materials, together with the affidavits, if any, show

that there is no genuine issue as to any material fact and that a

decision may be rendered as a matter of law.”   Rule 121(b).   A
                                   - 3 -

summary judgment may be made upon part of the legal issues in

controversy.    See Rule 121(a).

Grounds

     Respondent asks for summary adjudication in his favor that,

at the time of decedent’s death, decedent had an interest in

certain real and personal property (sometimes, the property), the

value of which, by virtue of such interest, is includable in the

gross estate.    Respondent’s grounds are that the ownership of the

property was previously litigated by Gail C. Williams (sometimes

Gail or Ms. Williams), individually, and as personal

representative of decedent’s estate, and that a final

determination was reached adverse to Ms. Williams’ position, as

executor, in the instant case, which affords respondent the

defense of collateral estoppel and precludes petitioner from

relitigating ownership of the property.

Facts on Which We Rely

     In support of the motion, respondent has filed the

declaration of Frederick J. Lockhart, Jr., respondent’s attorney

in this case (the Lockhart declaration).   Attached to the

Lockhart declaration is a copy of the United States Estate (and

Generation-Skipping Transfer) Tax Return, Form 706 (the Form

706), filed on account of decedent’s death, and copies of various

documents filed in two State court actions (which we detail

infra).   In support of petitioner’s opposition to the motion,

petitioner has filed the declaration of Ms. Williams (the
                                 - 4 -

Williams declaration).    We rely on those declarations to the

extent that they are undisputed.    In particular, we rely on the

Form 706 and State court documents attached to the Lockhart

declaration, since their authenticity has not been disputed by

petitioner.     We also rely on two attachments to the motion, which

petitioner also relies on.    Finally, we rely on certain

uncontested averments in the pleadings.1    Principally, the facts

on which we rely to decide the motions are as follows.

     Decedent

     Decedent died on January 8, 1996.     His domicile at the time

of his death was in Yellowstone County, Montana.

     Executor

     Ms. Williams (nee Chemodurow), personal representative of

the estate of decedent, signed the petition.    Her address, as

shown in the petition, is in Bozeman, Montana.

     Form 706

     Schedule A to the Form 706 (Schedule A) is a schedule

requiring a description of all real estate owned by the decedent.

The following item is described on Schedule A:    “80 acres in

Gallatin County, Montana near Bozeman” (the subdivision land).

Schedule A does not include any description of approximately 390

     1
        In petitioner’s memorandum of law in opposition to the
motion, petitioner states petitioner’s reliance on “the Protest
of Petitioner filed herein”. The record contains no such
document, nor does petitioner’s counsel’s cover letter, dated
Dec. 12, 2000, enclosing various documents for filing, contain
reference to any such document.
                                 - 5 -

acres of ranch land adjacent to the subdivision land and

constituting the greater part of what was known as the Abagail

ranch (the Abagail ranch).

     There is no accompanying schedule to the Form 706 that

describes certain personal equipment used in connection with the

Abagail ranch (the ranch equipment).

     Notice

     Among the adjustments giving rise to respondent’s

determination of a deficiency in Federal estate tax are

adjustments increasing the value of the gross estate for the

value of the Abagail ranch and the ranch equipment.   Respondent

made those adjustments on the basis that decedent owned the

Abagail ranch and the ranch equipment on the date of his death.

     Petition

     Among petitioner’s assignments of error in the petition are

the following:

       (a) The Commissioner erroneously determined that the
     gross estate includes the value of the land,
     improvements and water rights of the real property
     known as the Abagail Ranch, which real property was
     sold to the decedent’s daughter on November 16, 1981.

       (b) The Commissioner erroneously determined that
     such sale to the decedent’s daughter was null and void.

                 *    *      *    *      *   *   *

       (e) The Commissioner erroneously determined that the
     gross estate includes the value of farm machinery and
     equipment which was sold to the decedent’s daughter on
     or before August 18, 1995.
                                  - 6 -

     Among the facts upon which petitioner bases the assignments

of error are the following:

     On November 16, 1981, * * * [decedent] sold the Abagail
     Ranch to his daughter Gail Chemodureau * * *.

     From November 16, 1981, until August 30, 1995 * * *
     title to the Abagail Ranch remained in the names of
     * * * [decedent] and his wife * * *. On August 30,
     1995 * * * [decedent and his wife] executed and
     delivered a Warranty Deed conveying Abagail Ranch to
     Gail. Because of a minor error in such deed * * *
     [decedent and his wife] executed and delivered a
     corrected Warranty Deed dated December 20, 1995. * * *

     Gail is the true owner of the Abagail Ranch * * * .
     The Abagail Ranch is not an asset of the Estate and its
     value is not properly included in the gross estate for
     estate tax purposes.

                 *    *       *    *      *   *    *

     In conjunction with formalizing the sale of the Abagail
     Ranch to Gail * * * [decedent] executed and delivered
     to Gail a General Assignment of all farm equipment and
     machinery located at the Abagail Ranch. Consequently,
     Gail is the true owner of the equipment; it is not an
     asset of the Estate; and its value is not properly
     included in the gross estate for estate tax purposes.

     State Court Actions

     Relevant to this proceeding are two actions brought in the

Montana Eighteenth Judicial District Court, Gallatin County,

Montana (the State court).    The first action is styled “CYNDI

JAKUBEK and PAUL JAKUBEK, Plaintiffs, vs. GAIL SUZANN CHEMODUREAU

aka GAIL WILLIAMS individually and in her capacity as Personal

Representative of the ESTATE OF THEODORE CHEMODUROW, Defendants”,

Cause No. DV 96-60 (Cause No. DV 96-60).      Cause No. DV 96-60 was

initiated by complaint (the Second Amended Complaint and Demand
                               - 7 -

for Jury Trial in Cause No. DV 96-60 (second amended complaint)

is dated February 12, 1997).   Ms. Williams answered and made a

counterclaim (the answer and counterclaim).   The second action is

styled “GAIL SUZANN CHEMODUREAU WILLIAMS, Plaintiff, vs. GEORGIA

DARIA HOHENSEE, CYNTHIA JAKUBEK, PAUL JAKUBEK, the heirs et al.,

Defendants”, Cause No. DV 96-109 (Cause No. DV 96-109).   Cause

No. 96-109 was initiated by complaint filed April 1, 1996 (the

complaint).   A cross-complaint (the cross-complaint) was brought

in Cause No. DV 96-109, styled “GEORGIA DARIA HOHENSEE,

Plaintiff, vs. GAIL SUZANN CHEMODUREAU, et al., Defendants.”

     Cause No. DV 96-60 involves several causes of action based

upon agreements plaintiffs claim they entered into with decedent,

including an agreement entitled “LIVESTOCK AGREEMENT” (the

livestock agreement).   Among the averments made by plaintiffs in

support of their causes of action are that (1) by the livestock

agreement, decedent had (A) leased the Abagail ranch to them and

(B) agreed to provide and maintain necessary equipment (i.e., the

ranch equipment) for ranch operations, and (2) Ms. Williams,

individually and as a personal representative of decedent’s

estate, had breached those agreements.   Among the counts in

Ms. Williams’ counterclaim are counts alleging that plaintiffs

are unlawfully in possession of, and have refused to return to

   Ms. Williams, the ranch equipment.

     In Cause No. DV 96-109, Ms. Williams averred that she was

the sole owner of the Abagail ranch and sought to quiet her title
                               - 8 -

as against the claims of the identified defendants and others.

Among defendants identified in the complaint are “the heirs and

devisees of [decedent]”.   With respect to unidentified

defendants, the complaint avers that there might be persons

unknown to Ms. Williams claiming, or who might claim, an interest

in the Abagail ranch, adverse to her interest as the fee simple

holder of the title to the property.   The complaint states that

each and all of the identified defendants, as well as any unknown

persons, “are without any right, title, estate, or interest in,

or lien or encumbrance upon, the Property [Abagail Ranch], and

therefore have no valid estate, right, title, or interest in or

to, or lien or encumbrance upon, the Property or any portion

thereof.”   By the cross-complaint, cross-complainant set forth a

cause of action against Ms. Williams individually, and in her

capacity as personal representative of the estate of decedent,

for specific performance of a land transaction involving the

Abagail ranch.

     Cause Nos. 96-60 and 96-109 were consolidated and a nonjury

trial was held in each, from July 14 through July 18, 1997,    in

Cause No. 96-60, and on November 12 and 13, 1997, in Cause No.

96-109.

     On April 8, 1998, in connection with Cause No. 96-109, the

State court issued its “Findings of Fact, Conclusions of Law and

Order” (the Cause No. 96-109 report), together with attendant

Judgment (the Judgment in Cause No. 96-109).   Two conclusions
                               - 9 -

reached by the State court were that the Abagail ranch was

property includable in the probate estate of decedent and that

Ms. Williams held title to the ranch in constructive trust for

the estate of decedent.   Among the conclusions of law reached by

the State court were the following:

          4. The first issue to be resolved is ownership of
     the Abagail Ranch. Gail claims to have purchased the
     ranch in 1981 from Theodore. There was no evidence
     presented that Theodore agreed to sell the ranch to
     Gail in 1981 or that he considered the ranch sold to
     Gail. In fact, the evidence demonstrated that he
     considered the ranch as his own as reflected in his
     1992 correspondence with Musser and the 1995 Will.
     Gail presented no evidence of payment for the ranch -
     no checks, credit card bills or any other written
     evidence of payment to Theodore from 1981 to the date
     of trial. The Court concludes that Gail did not
     purchase any portion of the Abagail Ranch at any time.

          5. Gail also claims that she acquired the Abagail
     Ranch in 1995 by virtue of the claimed payments over
     the years. In support of this claim, Gail produced two
     deeds describing the identical portion of the Abagail
     Ranch and both from Theodore and his wife Bette to Gail
     - one dated August 1995 and the other December 1995
     * * * . The deeds were ostensibly introduced at trial
     to reflect a transfer of ownership to Gail in 1995.
     Gail admitted that the August deed was defective and
     had to be redone with the December deed. The August
     and December 1995 deeds both indicate that all of the
     consideration had been provided, but Gail admitted that
     at the time of Theodore’s death (January 1996), she
     owed Theodore as much as $40,000-$60,000.

          6. There was no credible evidence that Gail
     provided Theodore with any consideration for any
     portion of the Abagail Ranch at any time. It was
     within Gail’s ability to produce some documentary
     evidence reflecting any payment for the ranch if it
     existed. In light of this absence of what should have
     been available evidence, the Court concludes that no
     payments were ever made to Theodore by Gail for any
     portion of the Abagail Ranch. In addition, there was
     nothing in Theodore’s 1995 tax return, prepared at
                          - 10 -

Gail’s direction, or any of his other tax returns
introduced at trial, that reflected any payments from
Gail to Theodore for the Abagail Ranch.

     7. The Court concludes that Gail provided no
monetary consideration for the Abagail Ranch, as
claimed by Gail. The Court also concludes that love
and affection between Theodore and Gail, if any, is not
considered valuable consideration for the conveyance.
Baker Nat. Bank v. Lestar, 153 Mont. 45, 57; 453 P.2d
774, 781. Without consideration and absent a gift
theory, the attempt to transfer ownership of the
Abagail Ranch to Gail in 1995 is void. Eliason v.
Eliason (1968), 151 Mont. 409, 417; 443 P. 2d 884, 889.

     8. With regards to a gift theory, there was no
evidence presented at trial that the attempted transfer
from Theodore to Gail in 1995 was intended to be a
gift. In order for there to be a valid inter vivos
gift, Theodore must have had donative intent. State
Board of Equalization v. Cole (1948), 122 Mont. 9, 14;
195 P.2d 989, 992. Gail did not argue in her pleadings
or at the time of trial that Theodore ever intended to
gift her any portion of the ranch. Rather, she said
she was to pay for it and Theodore “intended” to sell
it to her.

     9. Because there was no consideration provided by
Gail for the ranch and gift is not an issue in this
case, the Court concludes that the August and December
1995 deeds are null, void and subject to cancellation.
Eliason, 151 Mont. at 417.

     10. In light of the fact that there was no valid
transfer to Gail and no gift, that portion of the
Abagail Ranch subject to the quiet title action should
be a part of the Estate of Theodore Chemodurow. Gail
may have title to the property by virtue of one of two
deeds, but as a matter of equity, Gail holds title to
the property in constructive trust for the Estate of
Theodore Chemodurow.

            *    *    *     *      *   *   *

     In this case, Gail is subject to an equitable duty
to convey it to the Estate until such time as all of
Theodore’s affairs are settled and the probate court
permits her to distribute the estate according to
Theodore’s last Will. To permit Gail to keep the ranch
                             - 11 -

     without having paid for it would unjustly enrich her at
     the expense of Georgia, the Jakubeks and perhaps other
     creditors, including the IRS, who are looking to the
     Estate to satisfy Theodore’s outstanding obligations,
     debts and judgments. This conclusion does not preclude
     Gail from acquiring an interest in the Abagail Ranch
     per Theodore’s last Will, if appropriate, once this
     case and the probate of Theodore’s estate have been
     resolved.

          11. Consequently, the Court concludes that
     portion of the Abagail Ranch that Gail seeks to quiet
     title is held in constructive trust for the Estate of
     Theodore Chemodurow. Except as discussed below, it is
     for the probate court to determine what, if any,
     portion of the Abagail Ranch should be transferred to
     Gail under Theodore’s last Will.

     The Judgment in Cause No. 96-109 incorporated the order

paragraphs from the Cause No. 96-109 report.   Among the order

paragraphs incorporated was the following:

       1. Gail Williams’ request to quiet title in that
     portion of the Abagail Ranch identified in the
     Complaint is DENIED and said property is now held by
     Gail Williams in constructive trust for the benefit of
     the Estate of Theodore Chemodurow.

     The Judgment in Cause No. 96-109 (and, likewise, the

Judgment in Cause No. 96-60, see infra), inclusive of

incorporated Order (in Cause No. 96-109, only), became final as a

result of a Stipulation to Dismiss Appeal and Cross Appeal, with

Prejudice, dated October 6, 1998, and the Order of the State

court approving the dismissal, dated October 27, 1998.   Notices

of Satisfaction of Judgment were filed, and the State court

declined to dismiss the Judgments.

     Also, on April 8, 1998, in connection with Cause No. 96-60,

the State court issued its “Findings of Fact, Conclusions of
                                  - 12 -

Law”.   An attendant Judgment was issued on April 14, 1998 (the

Judgment in Cause No. 96-60).      One conclusion reached by the

State court was that the ranch equipment was includable in the

probate estate of decedent.       Among the findings of fact made by

the State court were the following:

          19. The parties [decedent and the Jakubeks]
     negotiated, drafted and signed a Livestock Agreement
     [(the livestock agreement)] in February 1993 * * *

                  *    *      *      *     *   *    *

          35. The Jakubeks also contend that Gail breached
     the Agreement [the livestock agreement] by refusing to
     provide necessary machinery and equipment to operate
     the ranch and maintain a cow/calf operation. The
     necessary machinery and equipment at issue was a ranch
     truck and ranch tractor. Under the Livestock Agreement
     Theodore specifically agreed:

           . . . to provide and maintain necessary equipment
           for ranch operation, cattle, pasture and hay
           ground. To provide animal health for cows and
           their calves, to include; veterinary services,
           vaccines, and supplies, pasture, hay, straw and
           feed supplements.

                  *    *      *      *     *   *    *

          39. As for the truck, Gail initially promised to
     make the payments on the truck and tractor. (P. Ex.
     24). Later she claimed that she could not make the
     payments because the Estate was without the funds.
     Later still she claimed that she was not responsible
     for making the payments on the truck because the truck
     was sold to “Abagail Ranch, Inc.” and there was no such
     entity. She also claimed she did not need to make
     payments on the truck because of a claimed forged
     signature on the sales documents. * * * Nevertheless,
     she demanded that the truck be returned to her as an
     asset of the Estate * * * and claimed to own the
     tractor as of August 1995. * * *

          40. Gail claimed to have purchased the ranch
     machinery in August of 1995 and produced a document
                               - 13 -

     which she claimed reflected the transfer from Theodore,
     including the tractor. * * *    Yet, there was nothing
     presented at trial to indicate that she paid anything
     for the machinery. The transfer document submitted by
     Gail consists of three pages, the final two being
     prepared by Cyndi. Cyndi testified that the two final
     pages had not been prepared until late September or
     early October of 1995. This is supported by Def. Ex.
     509C which is the third page of Def. Ex. 509B except
     with a date of October 1995 at the bottom. Gail’s
     claim that Def. Ex. 509B was created on or before
     August 30, 1995 is inconsistent with the date on Def.
     Ex. 509C and Cyndi’s testimony.

                 *    *    *     *      *   *   *

          69. As for the unlawful possession of the truck
     and machinery and equipment, Gail at first claimed the
     personal property belonged to the Estate and then they
     belonged to her in accordance with an assignment dated
     August 30, 1995. * * *   Theodore, however, still
     considered the property his as late as September of
     1995 because he gave Paul the back hoe to use as a
     trade in, an item that Gail claims was transferred to
     her in August. * * *

Among the conclusions of law reached by the State court were the

following:

          3. The Livestock Agreement is a valid contract as
     all essential elements to a contract are present,
     namely, identifiable parties capable of contracting,
     their consent, lawful object and consideration. §28-2-
     102, MCA; Klawitter v. Dettmann, (1994), 268 Mont. 275,
     280, 886 P.2d 416, 419.

          4. As reflected in the Livestock Agreement, the
     intent of the parties was to make it binding upon their
     respective heirs, personal representatives and assigns.
     Theodore’s Last Will and Testament also instructs his
     personal representative to pay all debts. (Pl. Ex.1).
     The Livestock Agreement is binding upon Gail as
     Theodore’s personal representative. See Baker v.
     Berger (1994), 265 Mont. 21, 28, 876 P.2d 940, 944.


                 *    *    *     *      *   *   *
                                - 14 -

          17. As personal representative of the Estate,
     Gail breached the Livestock Agreement by (i) refusing
     to pay any of the expenses of the cattle; (ii) letting
     the truck and tractor be repossessed and not replacing
     the same; and (iii) attempting to evict the Jakubeks
     from the property in early 1996.

     The Judgment in Cause No. 96-60 included, among others, the

following order:

     Judgment is hereby entered against Gail Williams,
     individually and in her capacity as personal
     representative of the Estate of Theodore Chemodurow,
     and in favor of Cyndi and Paul Jakubek on each and
     every counterclaim brought by Ms. Williams in DV 96-60.

                              Discussion

I.   Introduction

      The Federal estate tax is imposed on the transfer of the

taxable estate.     See sec. 2001.   The value of the taxable estate

is derived from the value of the gross estate.     See sec. 2051.

The value of the gross estate includes the value of all property

to the extent of the decedent’s interest therein at the time of

his death.   See sec. 2033.    We look to State law to interpret

interests and rights.     See Tracy v. Commissioner, 70 T.C. 397,

402 (1978); cf. Helvering v. Stuart, 317 U.S. 154, 161 (1942).

As relevant to this proceeding, petitioner assigned error to

respondent’s determinations that, at the time of his death,

decedent had an interest in the Abagail ranch and the ranch

equipment.   In support of those assignments, petitioner averred

that, prior to decedent’s death, decedent had sold or otherwise

transferred the property to Ms. Williams, who, at the time of
                               - 15 -

decedent’s death, was the “true owner” of the property.

Petitioner avers no other facts that would support the

assignments of error.   Therefore, if petitioner is estopped from

claiming that, prior to decedent’s death, decedent had sold or

otherwise transferred the property to Ms. Williams, petitioner

has raised no factual issue with respect to the assignments of

error, and we may resolve those assignments as a matter of law.

II.   The Doctrine of Issue Preclusion

      The doctrine of issue preclusion, or collateral estoppel,

provides that, once an issue of fact or law is “actually and

necessarily determined by a court of competent jurisdiction, that

determination is conclusive in subsequent suits based on a

different cause of action involving a party to the prior

litigation.”    Montana v. United States, 440 U.S. 147, 153 (1979)

(citing Parklane Hosiery Co. v. Shore, 439 U.S. 322, 326 n.5

(1979)).   Issue preclusion is a judicially created equitable

doctrine the purposes of which are to protect parties from

unnecessary and redundant litigation, to conserve judicial

resources, and to foster certainty in and reliance on judicial

action.    See, e.g., id. at 153-154; United States v. ITT

Rayonier, Inc.,

627 F.2d 996, 1000 (9th Cir. 1980).      In Peck v. Commissioner, 90

T.C. 162, 166-167 (1988), affd. 904 F.2d 525 (9th Cir. 1990), we

set forth the following five conditions that must be satisfied
                              - 16 -

prior to application of issue preclusion in the context of a

factual dispute (the Peck requirements):

     (1) The issue in the second suit must be identical in
     all respects with the one decided in the first suit.

     (2) There must be a final judgment rendered by a court
     of competent jurisdiction.

     (3) Collateral estoppel may be invoked against parties
     and their privies to the prior judgment.

     (4) The parties must actually have litigated the issues
     and the resolution of these issues must have been
     essential to the prior decision.

     (5) The controlling facts and applicable legal rules
     must remain unchanged from those in the prior
     litigation. [Citations omitted.]

     Even if the Peck requirements are satisfied, however, we

have broad discretion to determine when issue preclusion should

apply, and we may refuse to apply it where, for instance, it is

to be applied offensively, and the party against whom it is to be

applied had little incentive to defend in the first action or

where the second action affords the party procedural

opportunities unavailable in the first action that could readily

cause a different result.   See Parklane Hosiery Co. v. Shore, 439

U.S. 322, 330-331 (1979); see also McQuade v. Commissioner, 84

T.C. 137, 143 (1985).

     In considering respondent’s position that preclusive effect

attaches to the findings of the State court, we inquire whether

the courts of Montana would accord such findings preclusive

effect.   See 28 U.S.C. sec. 1738 (2000) (the records and judicial
                              - 17 -

proceedings of a State shall have the same full faith and credit

in every court within the United States as they have in the

courts of the State from which they are taken); Kremer v.

Chemical Constr. Corp., 456 U.S. 461, 482 (1982) (“Congress has

specifically required all federal courts to give preclusive

effect to state-court judgments whenever the courts of the State

from which the judgments emerged would do so", quoting Allen v.

McCurrey, 449 U.S. 90, 96 (1980)); Bertoli v. Commissioner, 103

T.C. 501, 508 (1994).   The doctrine of collateral estoppel is

recognized in the courts of Montana.   E.g., Rafanelli v. Dale,

971 P.2d 371, 373 (Mont. 1998) (“The doctrine of collateral

estoppel bars a party against whom the claim is asserted or a

party in privity with the earlier party, from relitigating an

issue which has been decided in a different cause of action.”).

The Supreme Court of Montana applies a three-part test to

determine whether collateral estoppel bars litigation:   (1) Was

the issue decided in the prior adjudication identical with the

one presented in the action in question?   (2) Was there a final

judgment on the merits?   (3) Was the party against whom the plea

is asserted a party in privity with a party to the prior

litigation?   See id. at 373-374.   Although the three-part test

applied by the Supreme Court of Montana does not specifically

recognize the fourth and fifth Peck requirements (actual

litigation of an issue whose resolution was essential to prior

case and no change in controlling facts and applicable legal
                                   - 18 -

rules), we believe that those requirements are inherent in

Montana’s three-part test.     Since the parties have couched their

arguments in terms of the Peck requirements, we shall respond

accordingly.

III.    Discussion

       A.   Issue Preclusion

             1.   The Abagail Ranch

       Cause No. 96-109 is an action brought by Ms. Williams to

quiet title to the Abagail ranch.         Such actions are provided for

by Mont. Code Ann. ch. 28 (1999) (Quieting Title to Real

Property).     In pertinent part, Mont. Code Ann. sec. 70-28-101

(1999) provides:

       Quiet title action authorized. An action may be
       brought * * * by any person * * * claiming title to
       real estate against any person or persons, both known
       and unknown, who claim or may claim any right, title,
       estate, or interest therein or lien or encumbrance
       thereon adverse to plaintiff’s ownership * * * for the
       purpose of determining such claim or possible claim
       and quieting the title to said real estate.

In pertinent part, Mont. Code Ann. sec. 70-28-107 (1999)

provides:

       the court in which such action is tried shall have
       jurisdiction to make a complete adjudication of the
       title to the lands named in the complaint * * *,
       including jurisdiction to direct:

                     *    *    *      *     *    *    *

            (d) the doing of any * * * act of a personal
       nature necessary to give effect to the rights of the
       respective parties to such action, as the same may be
       adjudicated by the court.
                               - 19 -

     Among the parties defendant in Cause No. 96-109 are “the

heirs and devisees of [decedent]” and all other persons “known or

unknown” claiming an interest in the Abagail ranch.

     Among Ms. Williams’ prayers for relief is the following:

     That it be decreed and adjudged by this court that the
     Defendants and each and all of them * * * have no
     right, title, estate, or interest in or to, or lien or
     encumbrance upon, the * * * [Abagail Ranch], and that
     the Plaintiff is the sole and lawful owner thereof in
     fee simple absolute, by and through good and valid
     title thereto.

     The State court determined that, notwithstanding that title

to the Abagail ranch may have appeared in the name of

Ms. Williams, any title she held was held in constructive trust

for the estate of decedent.   In particular, the State court

found:   “Gail did not purchase any portion of the Abagail ranch

at any time.”    Based on that finding, the State court concluded

that, for lack of consideration:   “[T]he attempt to transfer

ownership of the Abagail ranch to Gail in 1995 is void”, and “the

August and December 1995 deeds are null, void and subject to

cancellation”.   The State court also concluded: “[T]hat portion

of the Abagail Ranch that Gail seeks to quiet title is held in

constructive trust for the Estate of [decedent].”2    The State

court’s findings and conclusions of law directly contradict


     2
        The State court imposed the following duty upon Gail:
“Gail is subject to an equitable duty to convey it [the Abagail
Ranch] to the Estate until such time as all of * * * [decedent’s]
affairs are settled and the probate court permits her to
distribute the estate according to * * * [decedent’s] last Will.”
                               - 20 -

Ms. Williams’ averments in the complaint that:    “Plaintiff is the

sole owner of the Property [Abagail Ranch]”, and “Plaintiff has

obtained her ownership rights in the Property by operation of law

and warranty deed.”   Ms. Williams’ prayers for relief (including

the prayer set forth above) were denied.    Moreover, the State

court’s findings and conclusions of law directly contradict

petitioner’s averments in this case:    “On November 16, 1981,

* * * [decedent] sold the Abagail Ranch to his daughter Gail

Chemodureau”, and “Gail is the true owner of the Abagail Ranch”.

Respondent has satisfied the first of the Peck requirements; the

identical issue was decided in the first suit (Cause No. 96-109)

as is raised here, viz., whether decedent sold the Abagail ranch

to Ms. Williams.

     Respondent has also satisfied the fourth of the Peck

requirements; ownership of the Abagail ranch was actually

litigated and the answer to that question was essential to the

result in the first suit (Cause No. 96-109), i.e., that Ms.

Williams held the Abagail ranch only as a constructive trustee

for the benefit of the “Estate of [decedent]”.

     The Judgment in Cause No. 96-109 was entered, became final,

and was satisfied.    Petitioner has failed to show that the

controlling facts or applicable law have changed since those

events occurred.   Thus, respondent has satisfied the second and

fifth Peck requirements.    Since petitioner does not challenge the

third Peck requirement, viz., whether petitioner is a party, or
                                - 21 -

in privity to a party, to the prior judgment, we conclude that it

is satisfied.   Respondent has, therefore, satisfied all of the

Peck requirements.

          2.    The Ranch Equipment

     In Cause No. 96-60, plaintiffs claimed that, by the

livestock agreement, decedent leased to them the Abagail ranch

and, in connection with that lease, agreed to provide and

maintain the ranch equipment for their use.     The State court

found that the livestock agreement was a valid contract, and the

intent of the parties to the livestock contract was to make it

binding on their respective heirs, personal representatives, and

assigns (including Ms. Williams, as decedent’s personal

representative).     Plaintiffs claimed that Ms. Williams,

“individually and as personal representative of the Estate [of

decedent]”, had breached the livestock agreement specifically,

that provision of the agreement by which decedent agreed to

provide and maintain the ranch equipment for plaintiffs’ use.     In

the answer and counterclaim, Ms. Williams averred that she owned

the ranch equipment.     She prayed for a judgment on her

counterclaim that, among other things, “the Plaintiffs return to

the Defendant the possession of the Truck * * * [and] tractor and

other farm and ranch equipment unlawfully held by the

Plaintiffs”.    The State court found that, with respect to the

ranch equipment:     “[T]here was nothing presented at trial to

indicate that she [Ms. Williams] paid anything for the
                                - 22 -

machinery.”     The State court entered judgment against Ms.

Williams, and in favor of the plaintiffs, on every count in her

counterclaim.

     For substantially the same reasons as with the Abagail

ranch, we conclude that the Peck requirements are satisfied with

respect to the ranch equipment.     Issues of fact were decided by

the State court following a trial.       The State court rejected

Ms. Williams’ claim that she (rather than the estate) owned the

ranch equipment.     That is the same issue before us.    Resolution

of that issue was essential to the outcome reached by the State

court.   The Judgment in Cause No. 96-60 was entered, became

final, and was satisfied.     Petitioner has failed to show that the

controlling facts or applicable law have changed since those

events occurred.     Petitioner does not question whether petitioner

is a party, or in privity to a party, to the prior judgment.

Respondent has, therefore, satisfied all of the Peck

requirements.

           3.    Exercise of Discretion

     Petitioner argues that we should exercise our discretion to

preclude respondent’s claim of estoppel.       First, petitioner

argues that Ms. Williams did not have the incentive to defend

vigorously the issue of ownership of the Abagail ranch in the

State court.     In the Williams declaration, Ms. Williams states:

     [DV 96-109] was a quiet title action which I commenced
     for the sole purpose of removing as a lien against the
                                 - 23 -

     Abagail Ranch a mortgage securing a note * * * held by
     Georgia Hohensee. * * *

                  *     *    *     *       *    *    *

     At no time during the trial of the consolidated Montana
     cases did I ever believe that I was litigating title to
     the Abagail Ranch in any manner which was intended to
     put at issue as against the whole world that I was the
     owner of the ranch based upon my 1981 agreement with my
     father to purchase the ranch and my subsequent payments
     therefor. * * *

Petitioner claims:    “The worst possible outcome of the 1996

Action for Gail Williams was that:        (a) seven acres of an almost

400 acre ranch would go to Georgia’s estate; (b) the Jakubeks

would indeed have a valid lease (that would soon expire); and

(c) her quiet title action would be denied because of this.       None

of these possible outcomes are particularly onerous.”

     Petitioner ignores that, in Cause No. 96-109, the caption to

the complaint (the caption) includes, as defendants:

     all persons known or unknown claiming or who might
     claim any right, title, estate, or interest, or lien or
     encumbrance upon the real property described in the
     Complaint [Abagail Ranch] or any portion thereof,
     adverse to Plaintiff’s ownership or any cloud on
     Plaintiff’s title thereto whether such claim or
     possible claim be present or contingent, including any
     of dower, inchoate or accrued * * *.

  Petitioner’s claim that Cause No. 96-109 was limited to

determining Ms. Williams’ rights as against only the estate of

Georgia Hohensee is belied by the caption and averments of the

complaint.   Moreover, Mont. Code Ann. sec. 70-28-104(2) (1999)

provides:
                              - 24 -

          (2) If the plaintiff shall desire to obtain a
     complete adjudication of the title to the real estate
     described in the complaint, he may name as defendants
     all known persons who assert or who might assert any
     claim * * * and may join as defendants all persons
     unknown who might make any such claim by adding in the
     caption of the complaint in such action the words “and
     all other persons, unknown, claiming or who might claim
     any right, title, estate, or interest in or lien or
     encumbrance upon the real property described in the
     complaint adverse to plaintiff’s ownership or any cloud
     upon plaintiff’s title thereto, whether such claim or
     possible claim be present or contingent.”

The caption contains language substantially identical to that set

forth in Mont. Code Ann. sec. 70-28-104(2) (1999).     Moreover,

Mont. Code Ann. sec. 70-28-107 (1999), quoted supra, establishes

the jurisdiction of the trial court to make a complete

adjudication of the title to the Abagail ranch.     We cannot escape

the conclusion that, by filing the complaint, Ms. Williams placed

at risk her interest in the Abagail ranch as against all parties,

known and unknown.

     Certainly, the State court recognized that Cause No. 96-109

involved rights other than those asserted by the estate of

Georgia Hohensee and the Jakubeks.     The State court found:   “To

permit Gail to keep the ranch without having paid for it would

unjustly enrich her at the expense of Georgia, the Jakubeks, and

perhaps other creditors, including the IRS, who are looking to

the Estate to satisfy Theodore’s outstanding obligations, debts

and judgments.”   Ms. Williams instigated Cause No. 96-109, and,

initially, she set the boundaries of the controversy, which

brought into question her ownership of the Abagail ranch, as
                              - 25 -

against not only the estate of Georgia Hohensee and the Jakubeks

but also anyone else claiming an interest in the property.

Petitioner has failed to prove that Ms. Williams did not have the

incentive vigorously to defend her ownership of the Abagail

ranch.

     Second, petitioner argues that petitioner has better

procedural opportunities in this Court than Ms. Williams had in

the State court.   In the Williams declaration, she states:

     During the trial of the consolidated Montana cases, the
     court refused to admit important evidence which I
     believe supported my ownership of the Abagail Ranch.
     As I understood it, the reason for the refusal to admit
     the supporting evidence was that my attorney in this
     action had failed to produce that evidence during the
     discovery stage of the cases because he thought it was
     unnecessary.

     In Cause No. 96-109, the State court found:

     At trial, Gail produced an alleged agreement with
     Theodore for the Abagail Ranch and Lot #3 dated in
     August of 1995. The agreement for the 400 acres was
     not listed on Gail’s list of exhibits in the Pretrial
     Order nor was it identified by Gail in her answers to
     the discovery requests. Gail marked the putative
     agreement for the 400 acres as Def. Ex. 510 in DV 96-60
     and it was refused, but another agreement for land in
     the Subdivision had been admitted as Def. Ex. 510A. In
     DV 96-109, Gail switched the exhibit labels on the
     exhibits and attempted to introduce the 400 acre
     agreement as Def. Ex. 510A. The 400 acre agreement was
     again rejected. While the Court eventually admitted
     the document on other grounds, the Court does not find
     this late discovered 400 acres agreement to be a
     credible or authentic document or one of which the
     defendants in DV 96-109 had adequate notice.
     Therefore, the Court considers it of no consequence.

     We assume that the document referred to in the court’s

finding is the document petitioner refers to.   The short answer
                                - 26 -

is that it was admitted into evidence in Cause No. 96-109,

contrary to petitioner’s claim.     The State court’s extensive

findings of fact in Cause Nos. 96-60 and 96-109 reveal that

Ms. Williams was afforded a full and fair opportunity to present

all evidence in support of her various claims.

      We shall not exercise our discretion to preclude

respondent’s claim of estoppel.




           B.    Conclusion

      Petitioner is precluded from claiming that, prior to

decedent’s death, decedent had sold or otherwise transferred the

property to Ms. Williams.

IV.   Summary Judgment

       As stated, petitioner has raised no factual issue with

respect to the assignments of error, other than that, prior to

his death, decedent had sold or otherwise transferred the

property to Ms. Williams.     Petitioner is precluded from making

such a showing.    Petitioner has not questioned the application of

section 2033 or any other provision of the Federal estate tax.

Petitioner, therefore, is left with no basis for assigning error

to respondent’s determination of a deficiency based on the

inclusion of the value of the property in the gross estate.

Petitioner’s assignments of error in that regard are, therefore,

without merit.    We shall grant the motion.
- 27 -


              An appropriate order

         will be issued.
