No. 14585 

### INTHE SUPREBECOURT OFTHESTATE OFIWlTPANA 1979

RIcH?mD D. MSUIRE, Plaintiff and Appellant,

-VSJESS C. ARMITAGE, DefendantandRespondent.

Appeal froan: DistrictCourt of theFifthJudicialDistrict, HonorableW. W. Lessley, Judgepresiding. Counselof Record: ForAppellant: ThnasC. Honzel argued, Helena, Fbntana For F&spndent: ~rruw, SedivyandOlson, Bozm,mntana ThomasA. Olsonargued,Bozeman, Fbntana

Suhnitted: June 12, 1979

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La Filed:Honorable JamesM. Salansky, District Judge, sitting in place of Mr. Justice Sheehy,delivered the Opinion of the Court. Plaintiff appeals from the findings of fact, conclusions of law and judgment entered by the District Court,Madison County, dismissing plaintiff's complaint and awarding defendant general damages, attorney fees, and costs on the grounds that the suit had been maliciously prosecuted. In August 1972,plaintiff, Richard McGuire, contacted defendant, JessArmitage, for the purpose of discussing the sale of certain realproperty owned jointly by plaintiff, with his now deceased wife and Keith and Leah Rush. Defendant,a licensed real estate agent, orally agreed to list the property. Approximately

onemonth later, defendant located a possible buyer, a neighboring landowner named HerbertWellington. A buy-sell agreementwas executed providing that the McGuires would maintain possession of the house on the land until April 15, 1973, if they needed a personal dwelling. The document also provided that a final agreementwould follow. Plaintiff informed defendant that he wanted the final agreement to be drawn quickly because his wife was ill and he wanted money to build a new house. Defendant suggested that James H. Morrow, an attorney in Bozeman, Montana, prepare the final agreement. Plaintiff agreed, and a contract for deed was signed on October 31, 1972. Somemonths later, Wellington filed suit in District Court to evict plaintiff from the land because plaintiff had remained in the house in violation of the agreement. Wellington's attorney in thematter was James H. Morrow. (Therecord of the action,

cause No. 6306, is appended to the District Court file.) In a judgment entered April 3, 1974, the District Court ordered plaintiff to turn over possession of the dwelling house and surrounding real property to Wellington.InMarch 1973,plaintiff filed a written complaint with the Montana Board of Real Estate alleging defendanthad failed to disclose that James H. Morrow was representing Wellington at the time of the real estate transaction. Edmund F. Sheehy, a special investigator for the Department of Licensing,Montana Real Estate Board, conducted an investigation of thematter in Ennis, Montana, and the surrounding area. A report

was then filed by Sheehy with the secretary of the ~oard of ~eal Estate, Matt Brown. Brown, in turn, gave the information to the Board and the complaint was dismissed. An index card in the Board's file was marked "no issue", and dated July 23, indicating that the case was closed. Plaintiff, however, was never notified of the disposition of the case. On June 14, 1977,plaintiff filed a complaint in ~istrict Court, Madison County, alleging that defendant had failed to disclose James H. Morrow's status as Wellington's attorney, thereby damaging plaintiff because certain terms had not been included in the final agreement. The causewas tried by the District Court, sittingwithout a jury, on May 11, 1978. On June 14, 1978, the District Court entered findings of fact and conclusions of law. The court found that defendant had disclosed to plaintiff that James H. Morrow was Wellington's attorney and dismissed the complaint. In response to defendant's counterclaim, the court found that plaintiff did not have probable cause to file the complaint and concluded that the suit had been maliciously prosecuted. It

was determined that defendant had suffered injury to his reputation, health, business and credit. The District Court estimated that

an award of $1,000would compensate defendant for the damages incurred. Judgment was entered August 11, 1978,directing plaintiff to pay defendant's damages, attorney fees and costs. Plaintiff's notice of appeal was filed on September 1, 1978. Plaintiff frames the issues in the followingmanner:1. Did the District Court err in denying plaintiff's motion to dismiss defendant's counterclaim? 2. Was there sufficient evidencepresented to support finding of factNo. 10 that plaintiff's complaint with the Board of Real Estate had been dismissed? 3. Was there sufficient evidencepresented to support finding of factNo. 13 that in filing the complaint in this case, the plaintiff did not have probable cause? 

### 4. Was there sufficient evidence presented to conclude that defendant was entitled to have judgment against the plaintiff on his counterclaim? 5. Did the District Court err in using causeNo. 6306 for concluding that plaintiff's complaint should be dismissed and that defendant should have judgment on the counterclaim? 6. Did the District Court err in dismissingplaintiff's complaint? A malicious prosecution has been briefly defined as one that is begun inmalice, without probable cause to believe that it can succeed, and that finally ends in failure. McIntosh v. City and County of Denver (1936), 98Colo. 403, 55 P.2d 1337. The elements necessary to make out a prima facie case of malicious prosecution were noted by this Court 65years ago in Stephensv. Conley (1914), 48 Mont. 352, 369, 138

### P. 189, 193-194. A plaintiff is required to allege and prove: "(a) That a judicial proceeding was commenced and prosecuted againsthim; (b) that the defendantwas responsible for instigating,prosecuting or continuing suchproceeding; (c) that there was want of probable cause for defendant's act or acts; (d) that he was actuated by malice; (e)that the proceeding terminated favorably for plaintiff; and (f)that plaintiff suffered damage with the amount thereof," More recently, the same elements were set forth at 52 

### Am Jur 2d Malicious Prosecution, 56,p. 190,wherein it was noted that the judicialproceeding complained of may be civil, criminaladministrativeor disciplinary in nature. In the case on appeal, the judicialproceeding which defendant alleged was maliciously prosecuted was before an administrative board--the Montana Board of Real Estate. An action for malicious prosecution may be founded upon the institution of a proceeding before an administrativeagency. This rule is in no way dependent upon the type of judicial reviewwhich is allowed after decision of the administrative agency involved. Hardy v. Vial (1957),48 Cal.2d 577, 311 P.2d 494; Restatement 2d,Torts, 8680;Anno. 143A.L.R. 157. Want of probable cause is the very gist of an action for malicious prosecution. Wilson v. Gehring (1968), 152Mont. 221, 448 P.2d 678;Noblett v. Bartsch (1903), 31Wash. 24, 71 P. 551. Although malice may be inferred fromwant of probable cause,Wendel

v. Metropolitan Life Ins. Co. (1928),83Mont. 252, 272 P. 245, want of probable cause cannot be inferred frommalice. Cornner v. Hamilton (1922), 62Mont. 239, 204 P. 489. The requirement that the judicialproceeding has been terminated favorably to the plaintiff necessarily implies that an action formalicious prosecution may not be asserted by way of a crosscomplaint or counterclaim in the originalproceeding. Baker v. Littman (1956), 138 Cal.App.2d 510, 292 P.2d 595. This Court in Bollinger v. Jarrett (1965), 146 Mont. 355, 406 P.2d 834,relied

on Baker in refusing to overturn a summary judgment against a counterclaim for malicious prosecution. However, the Court's opinion unnecessarily narrows the rule: "It is also contended that it was error for the court to render summary judgment against appellantbuyers' counterclaim. The basis of the counterclaim was that the sellers' action wrongfully injured the credit standing of the buyers. The only possible grounds for such a claim are libel and malicious prosecution, neither of which can be sustained here. There isno libel because any publication made in a judicialproceeding isprivileged under R.C.M. 1947 864-208. And malicious prosecution founded on a civilaction is not the proper subject of a counterclaim since it requiresproof of termination of the former proceeding in favor of the defendant therein. Baker v. Littman, 138 Cal.App.2d 510, 292 P.2d 595; 54 C.J.S. Malicious Prosecution 854,p. 1021." (Emphasis added.) 146 Mont. at 360, 406 P.2d at 837. A counterclaim formaliciousprosecution would not be premature if the claim is based on a previously terminated proceeding. 52

### Am Jur 2d Malicious Prosecution, 814,p. 195. The Bollinger case incorrectly states that malicious prosecution may not be the subject of a counterclaim,without explaining that the rule applies only where the counterclaim is made during the originalproceeding. If the above-mentioned rules are applied to the instant case, it appears that defendant's recovery for malicious prosecution should stand despite some irregularities in the District Court's findingsof fact. In findingsof factNo. 13, the court states that plaintiff did not have probable cause in filing "this" complaint. Thepertinent complaint can only be the one filed with the Board of Real Estate and, in fact, the evidence in the record

concerns only the previous complaint. The Board concluded that "no issue" existed and an index card was placed in its filenoting such. The conclusion had been reached after a special investigation had taken place and a board meeting had been held. (Finding of factNo. 10 concerns these facts.) Therefore,although the District Court incorrectlyrefers to the complaintbefore it, the record and other findingsclearly reveal that the proceeding instigatedwithout probable cause (forpurposes of the counterclaim)

was the one filed with the Board of Real Estate. Since defendant's counterclaimwas based on a proceeding that had terminated in his favor and the proceeding had been instigatedwithout probable cause, the District Court properly inferred malice from the circumstances and upheld the counterclaim. "Reliance upon the advice of counsel,provided it is given in good faith and isbased upon afull and fair statement of the facts by the client,may afford the latter a complete defense to an action for malicious prosecution. [Citing authority.] But it is an affirmativedefense. Itmay be shown under a general denial in the answer [citingcases], but the burden of establishin~ it is uDon the defendant." Masterson v. Pig'n Whistle ~br~oration (1958)

## , 161 ~.~.2d 323, 326 P.2d 918, 929. (Emphasisadded.) Only on appeal does plaintiff raise the contention that he relied

on the advice of his counsel. The defense was not presented nor proved to the District Court. Finding of factNo. 9 states: "That said WELLINGTON thereafter filed claim against the McGuires and Rushes in this Court in Cause No. 6306,and this Court takes judicial notice of said action and allmatters contained therein,and finds therefrom that the Plaintiff herein was making the same claims of failure to disclose that MORROW was the attorney for said WELLINGTON, and that this Court did, after trial,give judgment in favor of said WELLINGTON, and the Court further finds that in said Cause No. 6306 a dispute over distribution of money did exist between said McGuires and said Rushes. This Court did find in favor of said Rushes and that said matter has been settled." Plaintiff contends the District Court considered cause No. 6306 to be dispositive of the instant case. However, the finding of fact does not state that the complaintwas dismissed because a similar claimwas made in causeNo. 6306. The District Court dismissed the complaint because it believed defendant's testimony that he informed plaintiff that James H. Morrow was Wellington's attorney. Finding of factNo. 7 formed the basis of the dismissal: "Thatat the time of the original Receipt and Agreement to Sell and Purchase, the Plaintiff herein told the Defendant, as a licensed realtor and an employee of FirstNational Insurance Group of Ennis, Montana, that he wanted the final agreement to be drawn quickly, as his wife was ill and he wanted monies to build a new house; that the Defendant then informed Plaintiff that said J. H. Morrow was the attorney for said WELLINGTON, and that what he prepared would be acceptable toWELLINGTON; that the Defendant did then contact said MORROW to prepare the agreement." Defendant's testimony concerning his disclosure of JamesH. Morrow's status appears on page 89 of the transcript. "Where the evidence is conflicting,but substantial evidence appears in the record to support the judgment,the judgmentwill not be disturbed on appeal 

# .

# .." Jessen

### v. O'Daniel (1959), 136 Mont. 513,

In summary, causeNo. 6306was not relied on by the District Court to conclude that defendanthad disclosed James H. Morrow's status. Sufficient evidence exists in the record itself to support dismissal of the complaint. With respect to the issue of whether the administrative proceeding before the Board of Real Estate had terminated in defendant's favor, finding of factNo. 10 states as follows: "Thatthe Plaintiff herein did cause a sworn complaint to be filed against Defendantbefore the Montana Real Estate Commission on March 13, 1973,with details as set forth in his Complaint filed in this cause, and as testified by him in this cause and causeNo. 6306; that the Montana Real Estate Commission, through its Special Investigator,did make an investigation of the Company by inquiry of Mr. Rush and realtors and others in the area; that the records of the Montana Real Estate Commission reflect and that the investigationwas closed July 23, 1973,and the Complaintwas dismissed." Substantial evidence appears in the record to support that finding,and was thereforeproperly used by the District Court to conclude that defendantwas being maliciously prosecuted by plaintiff. Affirmed. \ ; F 3-

### * *-A.. ------,,--&-----I-------------*------ Hon. James. M. Salansky,District Judge, sitting in place of ~r.'~ustice ~ohn 

## 'c. Sheehy

# . We concur: 

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ustices