City of New Haven v. Reichhart

• Decision Date: 07 June 2001
• Docket Number: No. 90S02-0101-CV-35.,90S02-0101-CV-35.
• Citation: 748 N.E.2d 374
• Parties: CITY OF NEW HAVEN, Appellant (Petitioner Below), v. Penny (Bradtmueller) REICHHART and Chemical Waste Management of Indiana, L.L.C., Appellees (Respondent Below).
• Court: Indiana Supreme Court

748 N.E.2d 374

CITY OF NEW HAVEN, Appellant (Petitioner Below), v. Penny (Bradtmueller) REICHHART and Chemical Waste Management of Indiana, L.L.C., Appellees (Respondent Below).

No. 90S02-0101-CV-35.

Supreme Court of Indiana.

June 7, 2001.

James P. Fenton, Alan VerPlanck, Cathleen M. Shrader, Fort Wayne, IN, Attorneys for Appellant.

Mark E. GiaQuinta, Robert W. Eherenman, Fort Wayne, IN, Attorneys for Appellees.

ON PETITION FOR TRANSFER

BOEHM, Justice.

Penny Reichhart is an employee of Chemical Waste Management of Indiana (CWMI) and a resident taxpayer of the City of New Haven. She sued to challenge New Haven's attempt to annex CWMI's facility and New Haven counterclaimed for malicious prosecution. One element of New Haven's malicious prosecution claim is that Reichhart's suit was brought without "probable cause." We hold that lack of probable cause is not satisfied simply because a citizen initiates a taxpayer challenge financed by her employer, and that Reichhart had probable cause to bring her suit.

Factual and Procedural Background

On November 26, 1991, New Haven passed a municipal ordinance to annex land on which CWMI operated a hazardous waste disposal facility. Two weeks later, Penny Reichhart, an employee of CWMI and a resident of New Haven, filed a "Citizen Taxpayer Challenge" pursuant to the Indiana Declaratory Judgment Act.¹ Reichhart alleged that the annexation ordinance was enacted in violation of Indiana's Open Door law. The trial court immediately issued a temporary restraining order against the annexation.

Reichhart's lawsuit was financed by her employer, CWMI. In response to the restraining order, New Haven withdrew the annexation ordinance and filed a counterclaim against Reichhart and a third party complaint against CWMI, alleging that Reichhart's lawsuit, financed by CWMI, constituted an abuse of process. The trial court denied Reichhart's and CWMI's joint motion for summary judgment on the counterclaim. That order was certified for interlocutory appeal and the Court of Appeals reversed, holding that Reichhart and CWMI were entitled to summary judgment on the abuse of process claim. Reichhart v. City of New Haven, 674 N.E.2d 27, 34 (Ind.Ct.App.1996) (Reichhart I).

While the interlocutory appeal was pending in the Court of Appeals, New Haven amended its counterclaim and third-party complaint to add a count of malicious prosecution. After the Court of Appeals ruled, Reichhart and CWMI moved to dismiss the malicious prosecution claim on three grounds. First, they argued that taxpayer petitions such as Reichhart's are "absolutely privileged" and a governmental entity cannot maintain an action for malicious prosecution in response to them. Second, they contended that the Court of Appeals opinion in Reichhart I constituted the law of the case and barred New Haven's action for malicious prosecution. Third, they argued that a governmental entity is precluded from seeking an award of punitive damages.

In February 1999, the trial court granted Reichhart's and CWMI's motion to dismiss but did not specify its reasons. New Haven appealed that decision. The Court of Appeals affirmed the trial court, holding that although the action was not barred by the law of the case doctrine, the First Amendment protects a citizen's right to petition the government without regard to the citizen's motivation. Because Reichhart, as a taxpayer, was a qualified petitioner with a legitimate claim against a governmental entity, New Haven was barred from pursuing a malicious prosecution claim against her and CWMI. City of New Haven v. Reichhart, 729 N.E.2d 600, 606-07 (Ind.Ct.App.2000) (Reichhart II).

We granted transfer in order to clarify Indiana law regarding the nature and extent of a taxpayer's privilege to pursue a challenge against a governmental entity without risking a malicious prosecution claim.

Standard of Review

It is well settled that a complaint may not be dismissed for failure to state a claim upon which relief can be granted unless it is clear on the face of the complaint that the complaining party is not entitled to relief. McQueen v. Fayette County Sch. Corp., 711 N.E.2d 62, 65 (Ind. Ct.App.1999). We view the pleadings in the light most favorable to the nonmoving party and draw every reasonable inference in favor of that party. Borgman v. Aikens, 681 N.E.2d 213, 216 (Ind.Ct.App. 1997). When reviewing a motion to dismiss for failure to state a claim, this court accepts as true the facts alleged in the complaint. We will affirm a successful Trial Rule 12(B)(6) motion when a complaint states a set of facts, which, even if true, would not support the relief requested in that complaint. We will affirm the trial court's ruling if it is sustainable on any basis found in the record. Minks v. Pina, 709 N.E.2d 379, 381 (Ind.Ct.App. 1999).

I. Malicious Prosecution

The Court of Appeals explored two possible justifications for the trial court's judgment in Reichhart II. After concluding that the "law of the case" doctrine did not dispose of the issue, the Court of Appeals analyzed Reichhart's right of petition under the First Amendment as a bar to New Haven's claim. Reichhart II, 729 N.E.2d at 605. We believe the first question presented by this appeal is whether a claim of malicious prosecution is sustainable on these facts without regard to the potential implications of the First Amendment. It is "the duty of the court not to enter upon the consideration of a constitutional question where the court can perceive another ground on which it may properly rest its decision." Bayh v. Sonnenburg, 573 N.E.2d 398, 402 (Ind.1991) (quoting Applegate v. State ex rel. Bowling, 158 Ind. 119, 124, 63 N.E. 16, 18 (1902)). Whether a citizen who pursues a taxpayer challenge is vulnerable to a common law malicious prosecution claim is one of first impression in Indiana. Indeed, that issue has been before any state or federal court on only a handful of occasions. City of Long Beach v. Bozek, 33 Cal.3d 727, 190 Cal.Rptr. 918, 661 P.2d 1072 (1983); Zeller v. Consolini, 59 Conn. App. 545, 758 A.2d 376 (2000), Cate v. Oldham, 450 So.2d 224, 226 (Fla.1984). Given the dearth of cases in Indiana and elsewhere, the common law doctrine of malicious prosecution has not been thoroughly examined in the context of taxpayer challenges.

The essence of malicious prosecution rests on the notion that the plaintiff—in this case, New Haven—has been improperly subjected to legal process. Ziobron v. Crawford, 667 N.E.2d 202, 208 (Ind.Ct.App.1996). There are four elements of a malicious prosecution claim: (1) the defendant (Reichhart and/or CWMI) instituted or caused to be instituted an action against the plaintiff (New Haven); (2) the defendant acted with malice in doing so; (3) the defendant had no probable cause to institute the action; and (4) the original action was terminated in the plaintiff's favor. Trotter v. Indiana Waste Sys., 632 N.E.2d 1159, 1164 (Ind.Ct.App. 1994). It is clear that the first and fourth elements are satisfied in the present case: Reichhart instituted the taxpayer challenge against New Haven and her claim was dismissed with prejudice by the trial court.²

In Reichhart I, the Court of Appeals addressed the "improper process" element of New Haven's abuse of process claim against Reichhart. The Court of Appeals concluded that Reichhart's taxpayer challenge was "procedurally and substantively proper" and was "authorized by statute and thus legitimate."³Reichhart I, 674 N.E.2d at 32. Reichhart argues that this finding establishes that she had "probable cause" to file the suit and, therefore, that the malicious prosecution claim also falls. But as the Court of Appeals correctly pointed out in Reichhart II, the probable cause element of malicious prosecution is not identical to the improper process element of abuse of process. The test of an improper process is whether the legal steps were procedurally and substantively proper under the circumstances. Reichhart I, 674 N.E.2d at 32. In contrast, probable cause exists "when a reasonably intelligent and prudent person would be induced to act as did the person who is charged with the burden of having probable cause." Maynard v. 84 Lumber Co., 657 N.E.2d 406, 409 (Ind.Ct.App. 1995). Given the differences between the definitions of the two elements, the Court of Appeals concluded that it "could not insinuate probable cause" into its first ruling. Reichhart II, 729 N.E.2d at 604.

We agree that the ruling in Reichhart I was not dispositive of New Haven's malicious prosecution claim. That does not mean, however, that the trial court could not find, as a matter of law, that Reichhart had probable cause to file a taxpayer challenge. Reichhart's taxpayer challenge alleged that New Haven's proposed annexation "has caused or threatens to cause a waste of public funds" and "will cause or contribute to serious financial and other burdens to the city." The Court of Appeals has noted on a number of occasions that declaratory judgment proceedings brought by city taxpayers are appropriate when the city common council's actions:

are clearly or patently illegal, or where the council acts without jurisdiction over the subject matter, or where there is an unmistakable abuse of discretion in the council's decision to annex, or where wastage of public funds is present or imminent and is something more than the furnishing of the normal services and facilities attendant legal annexation.

Prock v. Town of Danville, 655 N.E.2d 553, 557 (Ind.Ct.App.1995) (citing Matter of the North I Annexation Area to City of Fort Wayne, 652 N.E.2d 878, 879 (Ind.Ct. App.1995), and Montagano v. City of Elkhart 149 Ind.App. 283, 290-92, 271 N.E.2d 475, 480 (1971)).

In Count I of her lawsuit, Reichhart alleged that New Haven's consideration of the annexation ordinance violated the Indiana Open Door statute. In response, the trial court granted a temporary restraining order and New Haven voluntarily withdrew...