Court Opinion

ID: 6323587
Source: CourtListenerOpinion
Date Created: 2022-03-15 22:06:51.15432+00
Date Added: 2024-06-11T09:21:39.482343
License: Public Domain

03/15/2022

                                            DA 21-0207
                                                                                            Case Number: DA 21-0207

              IN THE SUPREME COURT OF THE STATE OF MONTANA
                                            2022 MT 53N

DAVID McCAULEY, an individual, LEADERS WITHOUT LIMITS, INC.,
a Wyoming Corporation, and PERKINS FAMILY HOLDINGS, LLC, a Montana
Limited Liability Company,

               Plaintiffs and Appellants,

         v.

CROWLEY FLECK, PLLP, a Montana Professional limited liability partnership,
GRANT S. SNELL, an individual, SCOTT D. HAGEL, an individual,
CHASE D. GIACOMO, an individual, and DOES 1-10,

               Defendants and Appellees.

APPEAL FROM:           District Court of the Eleventh Judicial District,
                       In and For the County of Flathead, Cause No. DV-2019-918
                       Honorable Dan Wilson, Presiding Judge

COUNSEL OF RECORD:

                For Appellants:

                       Quentin Rhoades, Rhoades Siefert & Erickson PLLC, Missoula, Montana

                For Appellees:

                       Mikel Moore, Eric Brooks, Moore, Cockrell, Goicoechea & Johnson, P.C.,
                       Kalispell, Montana

                                                    Submitted on Briefs: February 9, 2022

                                                               Decided: March 15, 2022

Filed:

                                  c ir-641.—if
                       __________________________________________
                                         Clerk
Justice Jim Rice delivered the Opinion of the Court.

¶1     Pursuant to Section I, Paragraph 3(c), Montana Supreme Court Internal Operating

Rules, this case is decided by memorandum opinion and shall not be cited and does not

serve as precedent. Its case title, cause number, and disposition shall be included in this

Court’s quarterly list of noncitable cases published in the Pacific Reporter and Montana

Reports.

¶2     David McCauley, Leaders Without Limits, Inc., and Perkins Family Holdings, LLC,

(hereinafter “McCauley” unless otherwise specified)1 appeal the Eleventh Judicial District

Court’s grant of summary judgment in favor of Crowley Fleck, PLLP, Grant S. Snell, Scott

D. Hagel, and Chase D. Giacomo (hereinafter “Crowley” unless otherwise specified),

holding that McCauley’s malicious prosecution and intentional infliction of emotional

distress (IIED) claims against these Defendants fail as a matter of law. We affirm.

¶3     The underlying action spawning McCauley’s claims arose from a transaction

between McCauley and Samuel and Joyce Perkins (the “Perkinses”), an elderly married

couple living in Kalispell, concerning Perkinses’ property, which included their residence

and a 21-acre parcel of land. In 2014, McCauley mass-mailed letters to property owners

in the Flathead area expressing his interest in purchasing their property. In response, the

Perkinses contacted McCauley, despite their property being encumbered by a reverse

1
  McCauley notes that Appellees’ briefing sometimes conflates David McCauley and Perkins
Family Holdings, LLC, despite the District Court never piercing the corporate veil. While
McCauley’s point is understood, the distinctions between McCauley and the various corporate
entities related to McCauley herein are not necessary to our resolution of the appeal.

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mortgage they had entered a few years prior. McCauley met with them and solicited their

involvement in a complex sales transaction of their property. Including a letter of intent,

the transaction documents were more than 70 pages in length and were largely drafted by

McCauley himself. The transaction can safely be described as extremely favorable to him.

¶4      While this transaction’s legality is not before the Court here, a discussion of its terms

is necessary. Some of the transaction’s more remarkable provisions included:

      A residential buy-sell form agreement wherein McCauley agreed to purchase the

        Perkinses’ property for $400,000. No appraisal in the record evidences this value;

        the property had been valued at $500,000 by the reverse mortgage lender a few years

        earlier. McCauley agreed to pay $2,000 in earnest money, $10,000 more at closing,

        and $388,000 through different financing prongs. Perkinses were obligated to pay

        all closing costs. Multiple addenda attached to the agreement superseded many of

        its provisions, rendering them void or misleading as initially stated.

      Title to the property would be, and was, transferred to an entity named Perkins

        Family Holdings, LLC, which was created by another McCauley-affiliated entity

        for the sole purpose of holding title to the property. Despite the use of their name,

        the Perkinses had no affiliation with this LLC. The justification for the existence of

        Perkins Family Holdings, LLC was to obfuscate the title owner of the property to

        avoid detection of the transfer and the potential implication of the reverse

        mortgage’s due-on-sale clause.

                                                3
     The bulk of Perkinses’ theoretical proceeds from the sale was via a note that

       provided for payment of $74,255.24 to them ten years after the sale, in 2025. This

       amount earned interest at a below-market fixed rate of 3% per annum, which was

       non-compounding. The Perkinses would have been in their 90s at the time of

       payment.

     The Perkinses each signed a document appointing McCauley (the individual) as

       their attorney-in-fact regarding the property. The substance the power-of-attorney

       documents is set forth in a single sentence approximately 450 words in length,

       which effectively granted McCauley full control of the property.2

     A “rent back” agreement required the Perkinses to remain on the property for 36

       months, which was consistent with a term of the reverse mortgage, paying $425 per

       month in rent. After the initial 3-year period, Perkinses rent would increase to

       $1,425 per month on a month-to-month basis. Perkinses’ rent obligation for the first

       year was deducted from their proceeds at closing.

     Insurance on the property was to remain in the Perkinses’ name, but in the event of

       an insurable loss, the insurance proceeds would be paid to McCauley. Perkinses

       remain obligated for utilities.

2
  A question raised by these documents is why it would be necessary for a buyer to be appointed
attorney-in-fact for property passing to it upon closing. Presumably, this would provide authority
for McCauley to take actions regarding the property in the name of the Perkinses to further the
scheme of avoiding detection of the transaction.

                                                4
      The transaction documents prohibited all parties, including the escrow agent, who

        would be so instructed, from informing the reverse mortgage lender of the

        transaction for the purpose of avoiding triggering the mortgage’s due-on-sale clause.

      The documents were generally written in a meandering, longwinded manner, and

        include numerous legal terms of art used incorrectly or only partially correctly.

¶5      Summarizing the transaction, after closing costs and other deductions, Perkinses

received $5,095.07 at closing from the agreement’s $12,000 “up front” money. McCauley

obtained title and “rented back” the property to the Perkinses for $425 per month for a

mandatory 36-month period. After 36 months, the rental agreement converted into a

month-to-month agreement at the rate of at least $1,425 per month. McCauley was

required to make payments on the underlying reverse mortgage in the amount of $1,368.22

per month, but not until three years after the closing, allowing interest to accrue on that

principal obligation. Ten years after closing, in late 2025, McCauley was obligated to pay

off the reverse mortgage’s balance and pay the note representing Perkinses’ equity interest

in the property, in the amount of $74,255.24, plus interest.

¶6      In February 2018, three years after closing, McCauley increased the Perkinses’ rent

to $1,435 per month pursuant to the transaction. Also in February 2018, the reverse

mortgage lender learned of the title transfer and invoked the mortgage’s due on sale clause.

To satisfy the reverse mortgage obligation, McCauley, as he testified, intended to sell the

property. In late February, McCauley notified Perkinses that their tenancy would terminate

                                              5
at the end of March. The Perkinses were also withholding rent, and in early March 2018,

McCauley commenced eviction proceedings.

¶7     The Perkinses, now facing a possible foreclosure from the reverse mortgage lender

and eviction from their home, consulted the Defendants, who agreed to represent the

Perkinses pro bono. In response to the eviction proceeding, Crowley filed a First Amended

Verified Answer to Complaint, Affirmative Defenses, Counterclaims, and Demand for

Jury Trial (Counterclaim) against McCauley asserting claims for declaratory relief,

negligence/breach of fiduciary duty, negligent misrepresentation, fraud, constructive fraud,

deceit, fraudulent inducement, recission of contract, violation of the Montana Consumer

Protection Act, violation of the Montana Mortgage Act, and to pierce the corporate veil.

¶8     After extensive litigation, the parties entered a settlement, under which McCauley

and the Perkinses mutually released all claims against each other; McCauley agreed to pay

the Perkinses $13,000, concurrently upon settlement; the Perkinses agreed to vacate the

property and release McCauley’s obligation under the promissory note for the 2025

payment of $74,255; and each party paid/bore their own attorney fees. The mutual release

of claims specifically provided that McCauley reserved all claims against Crowley. The

District Court approved the settlement and dismissed the action with prejudice.

¶9     In September 2019, McCauley filed this action against Crowley.             The First

Amended Complaint alleged: Count 1, Defamation; Count 2, Tortious Interference;

Count 3, Abuse of Process; Count 4, Malicious Prosecution; Count 5, Intentional Infliction

of Emotional Distress; and Count 6, Negligent Infliction of Emotional Distress. Crowley

                                             6
moved for summary judgment, and McCauley subsequently abandoned his defamation,

abuse of process, and negligent infliction of emotional distress claims. The District Court

entered an order granting summary judgment (Summary Judgment Order) in Crowley’s

favor “on all of [McCauley’s] claims in the First Amended Complaint.” McCauley appeals

from the Summary Judgment Order as it pertains to the malicious prosecution and IIED

claims.3

¶10    We review a district court’s grant or denial of summary judgment de novo. Crane

Creek Ranch v. Cresap, 2004 MT 351, ¶ 8, 324 Mont. 366, 103 P.3d 535 (citation omitted).

“Summary judgment is appropriate when ‘there is no genuine issue as to any material fact

and that the movant is entitled to judgment as a matter of law.’” Nat’l Indem. Co. v. State,

2021 MT 300, ¶ 21, 406 Mont. 288, 499 P.3d 516 (citing M. R. Civ. P. 56(c)(3)). We

therefore review only the “‘pleadings, depositions, answers to interrogatories, admissions

on file, and affidavits’ to determine if there is a material issue of fact and whether the

moving party is entitled to judgment as a matter of law.” Depositors Ins. Co. v. Sandidge,

2022 MT 33, ¶ 5, 407 Mont. 385, ___ P.3d ___ (quoting Andersen v. Schenk, 2009 MT

399, ¶ 2, 353 Mont. 424, 220 P.3d 675). “We draw all reasonable inferences from the

evidence offered in favor of the party opposing summary judgment; but ‘conclusory

statements, speculative assertions, and mere denials are insufficient to defeat a motion for

3
 McCauley does not address the District Court’s tortious interference analysis and therefore we
do not address it herein.

                                              7
summary judgment.’” B.Y.O.B., Inc. v. State, 2021 MT 191, ¶ 12, 405 Mont. 88, 493 P.3d

318 (quoting Sullivan v. Cherewick, 2017 MT 38, ¶ 9, 386 Mont. 350, 391 P.3d 62).

¶11    McCauley argues the District Court erred in granting summary judgment on the

malicious prosecution and IIED claims by applying the wrong standard. McCauley

contends the District Court required him to produce facts clearly establishing his positions,

rather than merely demonstrating the evidence on material facts was sufficiently disputed

to create a jury issue that barred summary judgment.

¶12    The elements of a malicious prosecution claim are:

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

       (2) the defendant was responsible for instigating, prosecuting, or continuing
           such proceeding;

       (3) there was lack of probable cause for the defendant’s acts;

       (4) the defendant was actuated by malice;

       (5) the judicial proceeding terminated favorably for plaintiff; and

       (6) the plaintiff suffered damage.

Plouffe v. Mont. Dep’t of Pub. Health & Human Servs., 2002 MT 64, ¶ 16, 309 Mont. 184,

45 P.3d 10 (citations omitted). “If one of these elements is not proven by prima facie

evidence, judgment as a matter of law may be entered for the defendant.” Plouffe, ¶ 16

(citing Orser v. State, 178 Mont. 126, 135, 582 P.2d 1227, 1232 (1978)).

¶13    “A malicious prosecution begins in malice, without probable cause to believe the

action can succeed, and finally ends in failure.” Plouffe, ¶ 16 (citation omitted). The

                                             8
District Court concluded that McCauley failed to establish prima facie evidence of both

lack of probable cause and favorable termination of the underlying judicial proceeding.

Because we conclude the District Court correctly determined that probable cause existed

for the underlying action, we affirm on that basis alone.

¶14    In the context of malicious prosecution, “an individual has probable cause to bring

civil litigation when they have a reasonable belief in the existence of facts upon which the

claim is based, and reasonably believe that those facts give rise to a valid claim.” Spoja v.

White, 2014 MT 9, ¶ 12, 373 Mont. 269, 317 P.3d 153 (citing Hughes v. Lynch, 2007 MT

177, ¶ 16, 338 Mont. 214, 164 P.3d 913; Plouffe, ¶¶ 18-19). “Probable cause is determined

under an objective standard on the basis of the facts known to the party initiating the legal

action . . . the issue must be submitted to the jury for resolution when direct and

circumstantial evidence related to the defendant’s knowledge is susceptible to different

conclusions by reasonable persons.” Plouffe, ¶ 18 (citation omitted). Probable cause

becomes a question of law, however, when based on the totality of the circumstances, “no

evidentiary conflict exists and the uncontroverted evidence admits only one conclusion.”

Plouffe, ¶¶ 18-19 (citations omitted).

¶15    The District Court concluded that Crowley had probable cause to file the

above-referenced claims based upon the information it possessed at the time of filing. The

court reasoned it was undisputed that, by the time the claims were filed, Crowley had met

with the Perkinses several times, learning about their interactions with McCauley; learned

that the transaction with McCauley had triggered a mortgage foreclosure by the reverse

                                             9
mortgage holder; reviewed the transaction documents and eviction filings possessed by the

Perkinses; preliminarily investigated McCauley and his other dealings; conducted

substantial legal research regarding possible claims arising from the transaction; and

obtained the Perkinses’ verification of the Counterclaim’s contents. It is undisputed that

Perkinses recounted to Crowley, to the best of their ability, the details of their transaction

with McCauley, in addition to providing Crowley with the transaction documents, but that

they were unable to articulate the precise terms of the transaction beyond their general

understanding. As described above, the documents themselves demonstrate a complex

transaction that, at the very least, was steeply tilted in McCauley’s favor. Stripped to its

essence, the transaction: 1) questionably valued Perkinses’ interest in the property;

2) transferred title to McCauley for approximately $5,000 at closing; 3) required Perkinses

to pay rent for the property, starting at $425 per month for three years and then increasing

to $1,425 per month; 4) appointed McCauley attorney-in-fact to take actions related to the

property in Perkinses’ name; 5) concealed the transaction from Perkinses’ mortgage holder

in violation of that mortgage; 6) delayed payment of Perkinses’ equity interest for ten years

at a below-market interest rate, scheduling the payment when Perkinses were in their 90s.

In contrast, under the reverse mortgage, Perkinses could have kept title to their property,

stayed in the property without a mandatory payment obligation, and avoided payment until

they sold or moved from the property. The $1,425 monthly payments, had Perkinses paid

them, would have exceeded the $74,255 payoff of their interest by 2025. The transaction

crashed when the efforts to conceal it from the reverse mortgage company failed.

                                             10
¶16   We conclude the undisputed evidence demonstrates a reasonable belief, known by

Crowley at the time of filing the clams, that the Perkinses’ were induced into this

transaction through fraud or misrepresentation, and that the content of the transaction

constituted fraud, a breach of consumer protections, a violation of other duties, or was

otherwise unlawful. All of the counterclaims Crowley filed are related to the facts known

to it and represent valid claims against McCauley. Thus, as a matter of law, Crowley had

probable cause to file the claims. See Spoja, ¶¶ 12-13.

¶17   McCauley argues the District Court improperly weighed the Perkinses’ deposition

testimony in Crowley’s favor, particularly regarding six representations McCauley made

to the Perkinses in order to secure their signing of the transaction documents. McCauley

also points to excerpts from the Perkinses’ depositions wherein they cannot specify the

falsehoods McCauley allegedly made to them regarding the transaction, and where Samuel

Perkins cannot recall seeing or signing the Counterclaim at the time he verified it.

McCauley contends that a jury could find from these excerpts that Crowley never reviewed

the counterclaims with the Perkinses and had them “sign a verification of a set of

misrepresentations [they] never knew about or believed in.” Thus, a jury could also find

that Crowley lacked the necessary probable cause to allege the misrepresentations it

attributed to McCauley in the Counterclaim.

¶18   The excerpt from Joyce Perkins’ deposition is a single page and, as such, the context

of the questioning from which it is excerpted is unknown. Joyce apparently represented,

however, that at the time of her deposition she could not recall anything McCauley said

                                            11
during the transaction that was untrue. Likewise, McCauley points to an excerpt from

Samuel Perkins’ deposition in which he struggles to remember what the misrepresentations

alleged in the Counterclaim were, and simply stated that, “there’s a lot of

misrepresentation, but I don’t have those things on the tip of my tongue.”

¶19    After reviewing the deposition transcripts, we disagree with McCauley’s argument.

In establishing whether probable cause existed, the issue is whether at the time of filing the

complaint the defendant had a reasonable belief in facts that would cause a reasonable

person to file suit. Spoja, ¶ 13. Even viewing this testimony in the light most favorable to

McCauley, it merely establishes the Perkinses could not recall or explain at the time of

their deposition the specific falsehoods alleged in the Counterclaim. That may have

weakened their case, but it does not support a conclusion that they did not have one. And

we must remember that the Perkinses are not the defendants in this action—the claim is

made against Crowley, regarding what Crowley understood at the time it filed the

Counterclaim. Spoja, ¶ 15. McCauley’s position—that because the elderly Perkinses

could not remember specific misrepresentations during a years-later deposition, Crowley

did not have a reasonable basis to believe in the facts underlying the Counterclaim at the

time it was filed—constitutes speculation, rather than direct evidence disputing what

Crowley knew. While evidence is reviewed on summary judgment in the light most

favorable to the non-moving party, summary judgment cannot be defeated by speculation

alone. B.Y.O.B., Inc., ¶ 12. Probable cause becomes a question of law when, based on the

                                             12
totality of the circumstances, “no evidentiary conflict exists and the uncontroverted

evidence admits only one conclusion.” Plouffe, ¶¶ 18-19 (citations omitted).4

¶20    Finally, McCauley challenges the District Court’s granting of summary judgment

in Crowley’s favor on his IIED claim. A stand-alone IIED claim can be maintained only

upon a showing that the plaintiff “suffered ‘serious’ or ‘severe’ emotional distress as the

reasonably foreseeable consequence of the defendant’s act or omission.” Puryer v. HSBC

Bank USA, Nat’l Ass’n, 2018 MT 124, ¶ 38, 391 Mont. 361, 419 P.3d 105 (quoting Sacco

v. High Country Indep. Press, 271 Mont. 209, 237, 896 P.2d 411, 428 (1995)). But a

privileged action, such as exercising a legal right, cannot become the basis for an IIED

claim. Judd v. Burlington N. & Santa Fe Ry., 2008 MT 181, ¶ 31, 343 Mont. 416, 186 P.3d

214 (citation omitted). McCauley’s arguments that he suffered serious or severe emotional

distress stem from his allegations that Crowley lacked probable cause to file its

counterclaims. Because we affirm the District Court’s conclusion that McCauley has not

established a claim for malicious prosecution, McCauley’s IIED claim likewise fails

because Crowley was pursuing its legal rights in a permissible way. See Judd, ¶¶ 30-31

(citations omitted).

4
  McCauley also argues that an excerpt of Samuel’s deposition evidences that Crowley did not
read or discuss the Counterclaim with him before having him sign it. Even if that assertion is true,
it does not undermine what Crowley knew at the time the Counterclaim was filed. Spoja, ¶ 15.
Rather than raise an issue as to probable cause, the potential questions raised by the testimony go
to Crowley’s duty to its client and standards of care, not to malicious prosecution, except, again,
by speculation. See Spoja, ¶ 15.

                                                13
¶21    We have determined to decide this case pursuant to Section I, Paragraph 3(c) of our

Internal Operating Rules, which provides for memorandum opinions. This appeal presents

no constitutional issues, no issues of first impression, and does not establish new precedent

or modify existing precedent. The District Court correctly granted summary judgment in

Crowley’s favor.

¶22    Affirmed.

                                                  /S/ JIM RICE

We concur:

/S/ MIKE McGRATH
/S/ JAMES JEREMIAH SHEA
/S/ INGRID GUSTAFSON
/S/ DIRK M. SANDEFUR

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