DA 06
- 0567 IN THE SUPREME COURT OF THE STATE OF MONTANA

2008 MT 237 JOE SEIPEL, an Individual d/b/a MARKET RESEARCH GROUP, Plaint iff and Appellant,
v. OLYMPIC COAST INVESTMENTS, a Washington corporation; QUENTINRHOADES, individually, and the Law Firm of SULLIVAN, TABARACCI & RHOADES, P.C., and JOHN DOES, 1 THROUGH 20, Defendants and Appellees.

APPEAL FROM: District Court of the Eighth Judicial District,

In and f or the Coun

ty of Cascade , Cause No. ADV 05
- 320 Honorable Kenneth R. Neill, Presiding Judge COUNSEL OF RECORD:

For Appellant: Gary M. Zadick; Ugrin, Alexander, Zadick & Higgins, P.C., Great Falls, Montana Patrick F. Flaherty, Attorney at Law, Great Falls, Montana For Appellee s : Gary L. Graham; Garlington, Lohn & Robinson, PLLP, Missoula, Montana Submitted on Briefs: April 15, 2008 Decided: July 2, 2008 Filed:

__________________________________________ Clerk July 2 20082

Chief Justice Karla M. Gray delivered the Opini on of the Court. ¶1 Joe Se ipel appeals from an order and judgment of the Eighth Judicial District Court, Cascade County, granting the defendants’ motion for summary judgment and dismiss ing hi s action for malicious prosecutionand abuse of process . We reverse and remand. ¶2 We restate the issue s a s whether the District Court erred in gr anting summary judgment on Seipel’s claim for mali cious prosecution and whether the court erred in granting summary judgment on Seipel’s claim for abuse of process

. BACKGROUND ¶3 This action arises out of a federal court action Olympic Coast Investments (Olympic) , a Washington corporation, filed against Joe Seipelin 2003

. Quentin Rho ades and the Law Firm of Sullivan, Tabaracci & Rho ades, P.C., represented Olympic in that matter
. ¶4 Olympic’s federal court action was premised on a professional property appraisal Seipel performed

for Olympicin 1998 and revised in 2000

. Seipel valued theproperty

—
an RV park outside of Anaconda, Montana

—at $1.1 million

. O lympic later disbursed $680, 000 in financing

—s ecured by a trust indenture

—to David Barr for purchase of the property
. Barr defaulted on his obligation, which totaled $780,000 at the time , and the property sold at auction for approximately $425,000 in December of 2002
. ¶5 Olympic subse quently filed a complaint against Seipel in federal district court in Montana, alleging that Seipel had overvalu ed the property and s eeking to recover3

damages from him on various theories. Seipel mo ved for summary judgment based , in part , on Olympic’s lac k of capacity to maintain the suit

. He claimed Olympic had not obtained a statutorily

- required certificate of authority to do business in Montanaa s an express or “Massachusetts” trust , which Olympic then claimed to be

. In February of 2005, the federal district court he ard arguments on Seipel’s motion for summary judgment

. The court noted that, although it had given Olympic the opportunityto do so, Olympic had not amended its complaint to allegeanything other than that it was proceeding as a trustee of an express business trust, suing in its own name to pursue the action on behalf of the trust and its beneficiaries

. The c ourt granted Seipel ’ s motion and dismissed the case without prejudice , providing a comprehensive oral explanation f or its ruling

. ¶6 In March of 2005, Seipel filed thisactionf or malicious prosecutionand abuse of processin the District Court a gainst Olympic, Rhoades and Rhoades’ law firm (collectively, “the defendants”). H e alleged the federal court action was without merit and filed f or improper motives

. S eipel also alleged the defendants were aware of the legal and factual infirmities of Olympic’sclaimsin the federal court action

. ¶7 The defendants mo ve d for summary judgment

. They contended the federal court action had not terminated favorably for Seipel , as required to establish amalicious prosecution claim

. They also contended S eipel had failed to present evidence that Olympic had an ulterior motive in filing that action , as required to establish an abuse of process claim

. Seip el opposed the motion for summary judgment

. ¶8 The Distri ct Court agreed with Olympicand granted summary judgment for the4

defendantson both of Seipel’s claims . Seipel appeals. ST ANDARD OF REVIEW ¶9 Summary judgment is an extreme remedy which should not be substituted for trial if a material factual controversy exists. Molina v. Panco Const., Inc ., 2002 MT 136, ¶ 14, 310 Mont. 185, ¶ 14, 49 P.3d 570, ¶ 14 ( citations omitted) . Pursuant to M. R. Civ. P. 56(c), summary judgment is proper only if “the pleadings , depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” We review a summary judgment de novo . Cole v. Valley Ice Garden, L.L.C., 2005 MT 115, ¶ 4, 327 Mont. 99, ¶ 4, 113 P.3d 275, ¶ 4. ISSUE 1 ¶10 Did th e District Court e rr in granting summary judgment on Seipel’s claim for malicious prosecution ? ¶11 A plaintiff’s burden at trial in a civil action for malicious prosecution is to introduce evidence which allows reasonable jurors to find the following elements :

(1) a judicial proceeding was commenced and prosecuted against the plaintiff

; (2) the defendant was responsible for instigating, prosecuting or continuing theproceeding; (3) the defendant acted without probable cause; (4) the defendant was actuated by malice; (5) the judicial proceeding terminated favorably for plaintiff; and (6) the plaintiff sustained damages. Plouffe v. M

ontana D ept. of Public Health a nd Human Services , 2002 MT 64, ¶ 16, 309 Mont. 184, ¶ 16, 45 P.3d 10, ¶ 16 (citations omitted). Because the elements are written in the conjunctive, each must be satisfied. In the summary judgment context , then, a5

plaintiff must raise a genuine issue of material fact on each element to withstand summary judgment. See generally Plouffe , ¶ 17 ; O’Fallon v. Farmers Ins. Exch ange , 260 Mont. 233, 239
- 41, 859 P.2d 1008, 1012
- 13 (1993)

. In the present case, the D istrict C ourt c oncluded Seipel could raise no issue of material fact on element (5) of his malicious prosecution c laim

—that Olympic’ s federal proceeding terminated in his favor

—because the federal court’s decision to dismiss Olympic’s action without prejudice addressed

only Olympic’s capacity to sue and not the merits of the case

. S eipel asserts error. ¶12 Seipel arguesthe prior proceeding terminated favorably for him because, while the federal court left the door open for individual investors in Olympic to sue , it closed the door on Olympic’s ability to sue him again

. Hep oints out that, in dismissing Olympic’s suit , the federal judge explained t o Rhoades

—Olympic’s counsel

—that Olympic ’sfailure to comply with Montana law concerning its statusresulted in lack of capacity to maintain the suit: The plaintiff chose the manner of positioning itself as to its status and capacity to maintain suit. There’s no question, in the view of the court, that the plaintiff was directly apprised by the court at the time o f the Novem b er 12 hearing that it would have to identify how it intended to proceed, and after the plaintiff itself had suggested, at least, that it might consider adding individual investors in this program as parties. Presumably, the plainti f f took whatever course of action it f elt was appropriate and did so with a clear understanding of the potential for that course of action. Having said all of that, Mr. Rho ades, in the view of this court, the court would be entirely ju stified in dismiss i n g this cas e with prejudi ce. B ut I’ m going to do something short of that. I ’ m going to di s miss thi sl awsuit without prejudice. And I want you to clearly understand, and I want you to pa sson to your client group, whomever it may be, and to the peopl e to whom you are responsible, that I do so solely to afford the investors in this6

[Olympic] program or scheme an opportunity to preserve whatever claims or rights they may still have to protect their interests in this matter. I em phasize that I have made absolutely no determination about the merits of this case. Ihave reached the conclusion I have reached solely on the basis of the course of action that the plaintiff, with ample opportunity to do otherwise, chose to take. The motion to dismiss this c ase without prejudice

—or the motion to dismiss is granted; the dismissal will be without prejudice. Based on this language, Seipel contends the dismissal of the federal court case was a determination in his favor for purposes of a malicious prosecutionaction

. He relies on Plouffefor the propositionthat a “favorable termination” need not necessarily come after a trial on the merits. ¶13 Olympic , on the other hand, contends the federal court’s dismissal without prejudice was not a determination in Seipel’s favor for purpos eso f Seipel’s malicious prosecution claim, quoting the federal court’s statement that it had “made absolutely no determination about the merits.” It relies on Sacco v. High Country Independent Press, Inc. , 271 Mont. 209, 244, 896 P.2d 411 , 432( 1995) , inwhich we quoted approvingly from a California case requiring that the termination of the prior proceeding underlying a malicious prosecution claim must “reflect on the merits” of the underlying action. ¶14 Plouffe was an action for malicious prosecution fo llowingvoluntary dismissal of
an underlying action without prejudice. Among other things, the trial judge concluded as a matter of law that the “favorable termination” element had not been met. Plouffe , ¶ 1 7
. On appeal, w e stated the voluntary dismissal of the underlying action could lead to a reasonable inference that the plaintiff in that case had achieved its goals outside the7

lawsuit ; alternatively, it also could lead to a reasonable inference that the plaintiff simply abandoned the action as meritl ess. As a result, we concluded the question of whether the underlying action had terminated favorably for the plaintiff in the malicious prosecution action was an issue for a jury to resolve on remand. Plouffe , ¶ 3 7
. ¶15 In Sacco , a criminal complaint against plaintiff Sacco had been amended and then dismissed as barred by the statute of limitations. We held that this reflected on the merits of the criminal complaint because of the “natural assumption that one does not simply abandon a meritorious action once instituted.” As a result, we concluded the termination of the previous action had been in Sacco’s favor and the district court had erred in determining that Sacco could not prove the fifth element of malicious prosecution

. Sacco , 271 Mont. at 245, 89 6 P.2d at 433 (citation omitted). ¶16 Plouffeand Saccoare neither inconsistent nor mutually exclusive, as Olympic
seems to suggest. We did not say, in Sacco , that the previous action must have been resolved on its merits in order to support the fifth element of a malicious prosecution claim. Indeed , dismissal without prejudice did not preclude a claim of malicious prosecutionin Sacco
. M oreover, in Plouffe , ¶ 34, we cited Saccore garding f avorable termination of the underlying action. ¶17 Here, the federal court judge stated he had “made absolutely no determination about the merits of this case” and dismiss ed Olympic’s action without prejudice to allow Olympic’s investors to preserve “whatever claims or rights they may still have.” Those statements would permit a reasonable inference that the action did not terminate favorably for Seipel. On the other hand, the court also state d dismissing the case with8

prejudicewould have been “entirely justified

. ” That statement would support a reasonable inference that the action terminated favorably for Seipel. ¶18 We conclude Seipel , likethe successful appellant in Plouff e , raised a genuine issue of material fact as to whether the termination of the federal court proceeding reflected on the merits of that action and wa s favorabl e tohim

. As a result, w e hold the District Court erred as a matter of law in granting the defendants’ motion for summary judgment on Seipel’s claim for malicious prosecution. ISSUE 2 ¶19 Did th e District Court err in granting summary judgment on Seip el’s claim for abuse of pr ocess ? ¶20 The elements of an abuse of process claim are an ulterior purpose and a willful act in the use of process not proper in the regular conduct of the proceeding. Seltzer v. Morton , 2007 MT 62, ¶ 57, 336 Mont. 225, ¶ 57, 15 4 P. 3d 561, ¶ 57 (citation omitted). As with a claim of malicious prosecution, a plaintiff resisting a motion for summary judgment must raise a genuine issue of material fact on each element of abuse of process , because the elements are written in the con junctive. ¶21 The District Court granted Olympic’s mo tion for summary judgment and dismissed Seipel’s abuse of process claim on the basis that Seipel had not raised a genuine issue of material fact on either element o f the tort
. S eipelc ontends , however, that Olympic sued

him in federal court with the ulterior motive of extracting money from him without a valid claim. He advancesthe affidavit of Scott Fisk

— his attorney in the federal court action

—toraise genuine issues of material fact on each of the elements of9

his abuse of process claim. ¶22 In his 25
-page affidavit, Fisk stated the allegation in Olympic’s original federal court complaint that , in its capacity as a Washington corporation , it had suffered actual money damages in excess of the requisite jurisdictional sum o f $75,000

—a position Olympic had maintained for more than one year of litigation

— was not true , and that Olympic acknowledged knowing this was not true only after being forced to do so through Seipel’s discovery

. Fisk stated that, in fact, di scovery in the proceeding as originally filed revealed that Olympic actually made in excess of $100,000 on the transactions, by collecting loan origination and other miscellaneous fees. ¶23 Fisk further stated that Olympic then abandoned its own claims for damages and declared it was a trustee for a foreign “Massachusetts” or “business” trust s eeking remedies on behalf of the trust and its beneficiaries. Fisk’s affidavit related that Olympic’s attorney, Rhoades, had stated in federal district court that Olympi c was a “trustee” of an“ express business trust ,” but that Olympic had subsequently admitted there was no business trust and Olympic was not a business trustee. According to Fisk, Olympic has conceded it had not registered as a business trust in either Wa shington or Montana
. F inally, Fisk asserted that, in arranging financing for the propertyat i ssue , Olympic had conducted high

- risk mortgage paper securities transactions on behalf of investors without complying with Washington state laws concerning saleso f such securities to Washington state residents. Fisk supported the allegations in his affidavit with references to pleadings, discovery and transcripts from the earlier federal action. ¶24 The defendants claim that, in the context of the tort of abuse of process, there must10

be evidence that the defendant used process to coerce the plaintiff to do some “collateral ” thing which thep laintiff could not be compelled to dol egally and regularly

. They advance Brault v. Smith , 209 Mont. 21, 28
- 30 , 679 P.2d 236,2 40 (1984), wherewe affirmed a district court decision that no abuse of process claim could be pursued based
on the filing of a valid legal claim without perversion of process beyond its intended purpose . ¶25 As we recently clarified, where the record estab lishes that an abuse

- of

-process plaintiff based his claim on the defendant’s purpose in bringing the prior suit , a s well as the conduct of utilizing the suit as an instrument of coercion, the defendant is not entitled to summary judgment. Seltzer , ¶ ¶ 57
- 6 0. H ere, Fisk’s affidavit supports Seipel’s allegations that Olympic had no valid legal claim against him and knew it , but filed an action against him in federal court nonetheless

. This record is sufficient to remove Seipel’s abuse of process action from the Brault

“valid legal claim” framework. ¶26 The defendants also quote our decision in First Bank (N.A.)

-Billings v. Clark, 236 Mont. 195, 204, 771 P.2d 84, 90 (1989) , that “ [r] esort to the legal process for resolution of a controversy is wrongful only u pon proof that prosecution of the action was malicious.” They contend the sole remedy for the filing of a baseless lawsuit is a malicious prosecution claim. That contention is simply incorrect. First Bank included a malicious prosecution claim, but did not involve anabuse of process claim. U se of the court system to file a baseless legal claim may constitute an abuse of process. Leasing , Inc. v. Discovery Ski Corp ., 235 Mont. 133, 1 36, 765 P.2d 176, 178 ( 1988)( citation omitted)

.11

¶27 Here, Fisk’s affidavit would permit a reasonable inference that, in filing the federal lawsuit, Olympic acted with an ulterior purpose of extracting money from Seipel that he did not owe, so as to satisfy the first element of abuse of process . Fisk’s affidavit would also permit areasonable inference that Olym p ic willfully filed the federal suit without a valid claim, so as to satisfy the second element of abuse of process

. ¶28 We conclude Seipel has raised g enuine issue so f material fact as to whether the defendants had an ulterior purpose in filing the federal court action against him and whether, by filing that suit, they engaged in a willful act not proper in the conduct of the proceeding

. As a result, we hold that the District Court erred in granting summary judgment for the defendant s on the abuse of process claim

. ¶29 Reversed and remanded for further proceedings consistent with this Opinion.
/S/ KARLA M. GRAY
We concur: /S/ JAMES C. NELSON /S/ W. WILLIAM LEAPHART /S/ BRIAN MORRIS

Justice John Warner concurs and dissents. ¶30 I concur with the Court that the District Court erred in granting the defendants’ motion for summary judgment on Seipel’s claim for malicious prosecution. H owever, I12

agree with the District Court that the defendants are entitled to summary judgment o n Seipel’s claim for abuse of process. ¶31 An abuse of process claim requires an attempt by the plaintiff to use process to
coerce the defendant to do some collateral thing which he could not be legally and regularly compelled to do. The Court today deletes an essential element of an abuse of process claim which distinguished it from an action for malicious prosecution. An “abuse” or “malicious abuse” of process is its employment to obtain a result which the process was not intended by law to effect.

. . . . The fundamental distinction between malicious use and malicious abuse of process is that the first is an em ployment of process for its ostensible purpose, although without probable cause, whereas the second is employment of process for a purpose not contemplated by law. 72 C.J.S. Process § 152 (2005). ¶32 In accord with the common law, in Montana, until the Court’s decision today, the purpose to obtain some collateral result has been an essential element of the tort of abuse of process. Bra ult, 209 Mont. at 29, 679 P.2d at 240; Seltzer, ¶ 57. ¶33 In this case, the Court erroneously concludes that Seipel can go forward with his abuse of process claim simply because he presented evidence that Olympic had no valid claim against him and knew it, but nonetheless filed the action against him in federal court. ¶ 2 5. The Court states, citing Leasing, Inc. , that use of the court system to file a baseless claim may constitute an abuse of process. ¶ 26. The Court misreads Leasing, Inc
. There, no tort was alleged and no damages were claimed. In Leasing, Inc ., the Lewis and Clark County District Court dismissed a lawsuit filed in Justice Court in13

Granite County because a contract, which was the basis of that suit, provided that it was to be performed inLewis and Clark County and also provided that the venue of any action on the contract was Le wis and Clark County. This Court affirmed the District Court’s dismissal of the Justice Court suit, agreeing that filing the action in Granite County was an abuseo f process. Leasing, Inc. , 235 Mont. at 136, 765 P.2d at 178. In Leasing, Inc. , the suit in the Granite County Justice Court was filed to require the defendant, Leasing, Inc., to litigate in Granite County, rather than proceed with a proper suit on the same contract it had previously filed in the District Court for Lewis and Clark County. The purpose of the Granite County suit was to make Leasing, Inc. do a collateral thing which the Justice Court could not legally and regularly compel it to do. The prayed for result was beyond the authority of the Justice Court. The suit in the Granite County Justice Court was thus described as an abuse of process. The Leasing , I nc. C ourt did directly cite to that portion of Brault which states that to constitute an abuse of process “there must be an attempt by the plaintiff to use process to coerce the defendant to do
some collateral thing which he could not be legally and regularly compelled to do.” Leasing, Inc. , 235 Mont. at 136, 765 P.2d at 178 (citing Brault, 209 Mont. at 28
- 29, 679 P.2d at 240). ¶34 The requirement of a collateral purpose to sustain an abuse of process claim was reiterated in the Court’s latest case on the subject, Seltzer . In Seltzer, the plaintiff did not base his abuse of process claim on the isolated fact that the defendants filed a baseless lawsuit against him. He based his claim on the defendants’ untoward purpose in bringing the suit and their conduct of utilizing the suit as an instrument of coercion, rather than a14

legitimate means to r esolve a genuine dispute. Seltzer’s complaint explicitly specified an alleged ulterior motive, defendants’ use of the lawsuit complained of to attempt to force him to untruthfully recant an opinion. S eltzer claimed that the plaintiffs in the alleged abus ive suit had no intention of taking the underlying case to trial and that they simply utilized the lawsuit as a means to force him to recant his opinion. Seltzer, ¶ 5 8. The Court, citing to Brault, 209 Mont. at 29, 679 P.2d at 240, again stated that an abuse of process entails an attempt by the plaintiff to use process to coerce the defendant to do
some collateral thing which he could not be legally and regularly compelled to do. Seltzer, ¶ 57. ¶35 Thus, a proper application of Montana law would require thatin order to recover damages for abuse of process, a plaintiff must prove that (1) the defendant commenced a suit against him for an ulterior purpose and (2) the suit was a willful act in the use of the process not proper in the regular conduct of the proc eeding. To establish the second element, there must be an attempt by the plaintiff to use process to coerce the defendant to do some collateral thing which he could not be legally and regularly compelled to do. Brault, 209 Mont. at 29, 679 P.2d at 240. ¶36 In this case, the alleged abusive suit filed by the defendants in federal court was for the purpose of recovering damages based on an over- valuation of property. The suit
was dismissed because Olympic did not obtain a certificate granting it authority to do business in Montana. It was not dismissed because it prayed for relief that the federal district court could not legally and regularly compel.15

¶37 The suit in federal court is not an abuse of process, even though it may constitute a malicious prosecution if Seipel can prove the necessary six e lements of such a claim. Seipel did not, and could not under these facts, present evidence that the federal lawsuit attempted to get him to do some collateral thing which he could not be legally and regularly com

pelled to do. The purpose of the federal action was to recover damages for
an alleged tort and breach of contract. The lawsuit itself was a legitimate means to resolve a ge nuine dispute. Collection of damages resulting from a negligently prepared apprai sal is a proper purpose and use of process. The mere fact that the suit had some collateral effect on the parties does not constitute abuse of process. Brault, 209 Mont. at 29, 679 P.2d at 240 (citing Creasev. Pleasant Grove City , 5 19 P.2d 888, 890 (Utah 1974)). ¶38 There is good reason for the rule that an abuse of process requires more than the simple use of the court system to file a baseless claim. The tort of abuse of process requires that the underlying suit constitute an attempt by the plaintiff to u se process to
coerce the defendant to do some collateral thing which he could not be legally and regularly compelled to do . If this essential element is eliminated, almost every successful defendant can sue the unsuccessful plaintiff for abuse of process. It i s, after all, predictable that a successful defendant will claim that the suit against him, her, or it was baseless. A description of the tort of abuse of process, which points out the gravity of the Court’s mistake today, is articulated by the editors of American Jurisprudence 2d: “Abuse of process” may generally be defined as the use of a legal process, whether criminal or civil, against another primarily to accomplish a purpose for which the process was not designed. In this regard, the16

Restatement of Torts, 2d, states that one who uses a legal process, whether criminal or civil, against another primarily to accomplish a purpose for which it is not designed is subject to liability to the other for harm caused by the abuse of process. It has also been stated that abuse of process is the misuse of legal process to accomplish some purpose outside the scope of the process itself, and that abuse of process occurs where someone attempts to achieve through use of the court that which the court is it self powerless to order. In its most basic sense, an action for abuse of process is intended to prevent parties from using litigation to pursue objectives other than those claimed in the suit, such as using a court’s process as a weapon to compel another party to pay a different debt or to take some action or refrain from it. Thus, the essence of a cause of action for abuse of process is a perversion of the process to accomplish some improper purpose. Because of its potential chilling effect onthe right of access to the courts, the tort of abuse of process is disfavored, and must be narrowly or strictly construed to insure the individual a fair opportunity to present his or her claim. 1 Am. Jur. 2d Abuse of Process § 1 (2005). ¶39 The Court’s dec ision to eliminate an essential element of the common law action for abuse of process could have a chilling effect on the policy of keeping Montana courthouses open to all. Plaintiffs, who often have limited means, must now consider not only whether they have a reasonable expectation of recovering damages; they must assess whether they can afford to defend an abuse of process suit if they are unsuccessful. ¶40 I dissent from the Court’s decision on issue two.
/S/ JOHN WARNER Justice Jim Rice joins in the foregoing concurrence and dissent.
/S/ JIM RICE