Aranson v. Schroeder

• Decision Date: 31 October 1995
• Docket Number: Nos. 93-519,93-527 and 93-564,s. 93-519
• Citation: 140 N.H. 359,671 A.2d 1023
• Parties: , 64 USLW 2347 Mark and Kathy ARANSON v. Robert H. SCHROEDER and another.
• Court: New Hampshire Supreme Court

Page 1023

671 A.2d 1023

140 N.H. 359, 64 USLW 2347

Mark and Kathy ARANSON v. Robert H. SCHROEDER and another.

Nos. 93-519, 93-527 and 93-564.

Supreme Court of New Hampshire.

Oct. 31, 1995.

As Modified on Denial of Rehearing

and Denial of Reconsideration March 7, 1996.

Sheehan, Phinney, Bass & Green, P.A., Manchester (Edward A. Haffer, on the brief and orally, and Daniel J. Lynch, on the brief), for the plaintiffs.

Nelson, Kinder, Mosseau, & Gordon, P.C., Manchester (Peter G. Beeson, on the brief and orally, and Robert M. Daniszewski on the brief), for the defendants.

BATCHELDER, Justice.

The Superior Court (O'Neil, J.) has transferred, without ruling, the following three questions of law:

A. Does a cause of action exist against a person who allegedly created false material evidence while acting as defense counsel in a previous case and, after withdrawing as counsel, allegedly gave false testimony advancing such evidence?

B. If so, what are the elements of such a new cause of action?

C. Does such cause of action also exist against such counsel's firm?

In addition, the trial court transferred two questions of law with ruling:

D. Did the Superior Court err in ruling that defendants are collaterally estopped from litigating the issue of the reasonableness of plaintiffs' attorneys' fees in the underlying case?

E. Did the Superior Court err in ordering plaintiffs to produce attorney-client and work product materials?

We address each question in turn.

For purposes of this opinion only, we will assume the underlying facts to be as follows: On March 18, 1988, at a real estate closing at defendant Robert Schroeder's office, the plaintiffs, Mark and Kathy Aranson, acquired title to a condominium unit in Conway from the Woodland Road Realty Trust. Approximately eight months later, the Town of Conway (the town) brought suit against the trust, the trustees, and the plaintiffs on the theory that the condominium unit had been sold without a certificate of occupancy as required by local ordinance.

Schroeder and his law firm initially represented the trust and the trustees in the town's suit. The plaintiffs, however, obtained independent counsel and brought a counterclaim against the trust and the trustees, seeking, among other things, to rescind the purchase of the unit under the terms of the condominium statute, RSA chapter 356-B (1984 & Supp.1994), and to recover treble damages under the Consumer Protection Act, RSA chapter 358-A (1984 & Supp.1994). The plaintiffs' counterclaim was severed from the action brought by the town.

The town prevailed in its action against the trust, the trustees, and the plaintiffs. The plaintiffs, however, prevailed at a jury-waived trial in Superior Court (Temple, J.) on the counterclaim. They were awarded rescissionary relief, consequential damages of $172,339.06, and attorney's reasonable fees, determined in a subsequent hearing in Superior Court (Mohl, J.) to be $53,042.75 plus $3,851.85 in disbursements. The trust and the trustees appealed the award against them, and we summarily affirmed by order dated July 5, 1991. Although the plaintiffs have pursued their New Hampshire judgment in the Massachusetts courts where the trustees reside, they have not collected a farthing.

The plaintiffs in this new action ask us to recognize a cause of action for the tort of malicious defense, define its elements, and determine whether an attorney's law firm is also subject to liability. In effect they seek an aspect of tort reform, the recognition at common law of a remedy where heretofore none has existed. The success of the plaintiffs' action depends upon what took place at the real estate closing and the subsequent actions taken by Schroeder in his role as counsel for the trust and the trustees in defense of the counterclaim. In this regard, the Superior Court (Temple, J.) found:

Crucial to determining most of this case are the facts surrounding the closing that took place March 18, 1988. Sometime before that date, plaintiff Mark Aranson had called the Town offices relative to whether there were any problems in buying the unit from the defendants and he was advised that there [were] not. According to defendant John Thompson, the occupancy permit was discussed at the closing, stating that Mr. Aranson had said that the permit was all set and that he had checked with the building inspector. Mr. and Mrs. Aranson, as well as the selling agent of the defendants, deny that any discussion concerning the permit, or the call Mr. Aranson made to the building inspectors's office, took place at the closing. A memorandum concerning this alleged discussion was prepared by Attorney Robert Schroeder, who represented the financing bank at the closing in his office. Attorney Schroeder had no independent recollection of this conversation. The memo's reference to the presence of defendant Richard Sokolow at the closing, which did not occur, and the fact that the existence of the memo was made known only subsequent to pleadings being filed by the plaintiffs, causes the Court to find that this undated memo was likely prepared after consultation between the defendants and Attorney Schroeder subsequent to the defendants learning of the plaintiffs' position and claims.

The Court accepts the plaintiffs' contentions that the discussion concerning the permit and telephone call did not take place at the closing. Further, the Court finds that the plaintiffs did not know of the occupancy permit requirement until they were informed of such when suit was brought by the Town of Conway.

The evidence shows that the plaintiffs Aranson did not know at the closing that no certificate of occupancy existed for the unit and that the plaintiffs Aranson did rely upon the representations made by the defendants relative to the unit purchased that all approvals had been obtained, that construction was complete with stated warranty. Testimony proved that the unit would not have been purchased had the plaintiffs known of the lack of certificate and building deficiencies causing the Town to withhold the certificate.

(Emphasis added.)

The essence of the plaintiffs' argument is captured in three sentences in their brief:

The cause of action [malicious defense] ... is essentially the mirror image of § 674 of the Restatement (2d) of Torts, and would do for false defenses what § 674 already does for false claims: provide a remedy. The present state of the law--condemning false evidence from the plaintiff's side but arguably tolerating it from the defendant's side--is one-sided and unfair. Both forms of misconduct should be treated the same; both should be condemned, and made the subject of damages.

In Rockhouse Mountain Property Owners Association, Inc. v. Town of Conway, 127 N.H. 593, 503 A.2d 1385 (1986), we were likewise asked to recognize a new cause of action. Rockhouse is helpful in giving guidance for the task at hand:

As in any case in which we are asked to recognize a new cause of action, it is a question of policy whether it would be wise to provide the relief that the plaintiffs seek. Reaching an answer to this question requires two quite separate steps, for we must determine whether the interest that the plaintiffs assert should receive any legal recognition and, if so, whether the relief that the plaintiffs request would be an appropriate way to recognize it.

Id. at 597-98, 503 A.2d at 1387-88 (citation omitted).

In deciding this question, we keep in mind that the New Hampshire Constitution provides:

Every subject of this state is entitled to a certain remedy, by having recourse to the laws, for all injuries he may receive in his person, property, or character; to obtain right and justice freely, without being obliged to purchase it; completely, and without any denial; promptly, and without delay; conformably to the laws.

N.H. CONST. pt. 1, art. 14.

The analytical predicate to any consideration of the transferred questions must be a determination that the relief sought is not obtainable by other existing legal remedies. The plaintiffs seek consequential and special damages, costs, interest, attorney's fees, and enhanced compensatory damages--the same damages to which they would have been entitled in a successful suit for malicious prosecution. See Restatement (Second) of Torts § 681 (1977).

The plaintiffs characterize their action as a variant of the tort of malicious prosecution, see Hogan v. Robert H. Irwin Motors, Inc., 121 N.H. 737, 739, 433 A.2d 1322, 1324 (1981), which originated in the misuse of the criminal process and has been adopted to redress malicious civil prosecution as well, see Kolka v. Jones, 71 N.W. 558, 559 (N.D.1897). In the civil arena, wrongs of this sort are frequently presented as abuse of process actions. See, e.g., Long v. Long, 136 N.H. 25, 30, 611 A.2d 620, 623 (1992). Although separate and distinct, malicious prosecution and abuse of process "have the common element of an improper purpose in the use of legal process, and there are many cases in which they overlap and either will lie." W. Keeton et al., Prosser and Keeton on the Law of Torts 898 (5th ed. 1984).

Absent a remedy for malicious defense, the plaintiffs have, on the facts before us, only a claim that sanctions be imposed by the trial court based upon the use of false evidence by the defendants. See, e.g., Harkeem v. Adams, 117 N.H. 687, 690-91, 377 A.2d 617, 619 (1977). In appropriate circumstances, there may be ample reason to extend the reach of the sanctions to counsel who engages in the fostering of an unfounded defense or pursues a defense for an improper purpose. Van Patten & Willard, The Limits of Advocacy: A Proposal for the Tort of Malicious Defense in Civil Litigation,35 Hastings L.J. 891, 926 (1984) (citing cases). The difference between the adoption of the tort of malicious defense and the existing power of courts to levy sanctions is the nature and extent of the damages recoverable by the aggrieved part...