Hewitt v. Rice
| Citation | 154 P.3d 408 |
| Decision Date | 19 March 2007 |
| Docket Number | No. 05SC81.,05SC81. |
| Parties | William W. HEWITT; and Valley Park Apartments, Inc., a Colorado corporation, Petitioners v. Thomas S. RICE; Brian R. Reynolds; and Senter, Goldfarb & Rice, a Colorado limited liability company, Respondents. |
| Court | Colorado Supreme Court |
William A. Cohan, P.C., William A. Cohan, San Diego, California, Attorneys for Petitioners.
Treece, Alfrey, Musat & Bosworth, P.C., Michael L. Hutchinson, Kathleen M. Byrne, Denver, Colorado, Attorneys for Respondents.
Montgomery Little & McGrew, P.C., Frederick B. Skillern, Greenwood Village, Colorado, Attorneys for Amicus Curiae Colorado Defense Lawyers Association.
The tort of malicious prosecution requires proof that the action allegedly maliciously prosecuted was terminated in favor of the moving party. An ex parte action, however, is exempt from the favorable termination requirement. In Thompson v. Maryland Casualty Co., 84 P.3d 496, 505 (Colo.2004), we left undecided the question whether a lis pendens filing comes within the ex parte exception to the favorable termination requirement. Affirming the court of appeals' decision in Hewitt v. Rice, 119 P.3d 541 (Colo.App.2004), we now decide that a lis pendens is not an ex parte action and is not exempt from the favorable termination requirement. We also decline to adopt a totality-of-the-circumstances test to determine whether the proceeding giving rise to the claim of malicious prosecution was favorably terminated when the parties entered a settlement. Favorable termination is a question of law requiring an action to be resolved on the merits in favor of the party claiming malicious prosecution.
The complicated history of the dispute underlying this case began fifteen years ago and includes three different appellate decisions. In 1991, the petitioner, William W. Hewitt ("Hewitt"), filed a lender liability action against Pitkin County Bank and Trust ("the Bank"), an entity that is not a party to this appeal. The case arose out of Hewitt's claim that the Bank had breached a construction loan agreement involving a home Hewitt was building. In response, the Bank asserted a counterclaim for attorneys' fees and costs. The trial court bifurcated the counterclaim into a separate proceeding. Senter Goldfarb & Rice, LLC ("the Firm"), one of the respondents in this case, is a law firm that represented the Bank in the action; one of its attorneys, Thomas S. Rice, also a respondent, managed the Bank litigation for the Firm.
The Bank obtained a judgment against Hewitt in the construction loan dispute, and the court of appeals affirmed the judgment in Hewitt v. Pitkin County Bank & Trust Co., 931 P.2d 456 (Colo.App.1995), cert. denied (Feb. 18, 1997). The Bank subsequently obtained a judgment against Hewitt in its bifurcated counterclaim for attorneys' fees and costs. On appeal, the court of appeals held in favor of the Bank and remanded the case to the trial court to determine additional fees and costs recoverable by the Bank. Hewitt v. Pitkin County Bank & Trust Co., No. 94 CA1274 (). Upon remand, the trial judge entered a total judgment against Hewitt for $84,164.55. Hewitt failed to pay the judgment.
In 1998, with the Firm and two of its attorneys, Thomas S. Rice and Brian R. Reynolds as counsel, the Bank sued Hewitt and his alleged alter ego, Valley Park Apartments, Inc. ("VPA"), to collect its judgment. The Bank argued that Hewitt had transferred real property to VPA in an effort to prevent the Bank from collecting its judgment against Hewitt. The Bank also asserted claims alleging that Hewitt violated the Colorado Uniform Fraudulent Transfer Act ("CUFTA") and that VPA was Hewitt's alter ego. The Bank sought attorneys' fees and costs. At the same time they filed the 1998 CUFTA claim, the Firm, Rice, and Reynolds prepared and recorded a notice of lis pendens against the real property held by VPA because it was the subject of the 1998 CUFTA claim. Hewitt and VPA counterclaimed against the Bank alleging slander of title, intentional interference with contractual relationship, abuse of process, and the filing of frivolous and groundless claims.
Approximately one year after the initiation of the Bank's 1998 CUFTA and alter ego claims, Hewitt paid in full the Bank's $84,164.55 judgment from the 1991 case. In response, the Bank released its notice of lis pendens filed in connection with the 1998 case and offered an unopposed motion to dismiss its 1998 CUFTA and alter ego claims. About one month later, the Firm, Rice, and Reynolds withdrew from representing the Bank. Shortly thereafter, the trial court granted the Bank's motion to dismiss, but preserved the Bank's claim for attorneys' fees and Hewitt and VPA's counterclaims.
More than two years later, Hewitt and VPA successfully added the Firm and Rice as defendants to their counterclaims against the Bank. However, within six months, the Bank paid Hewitt and VPA $950,000.00 to settle the counterclaims and to release the Bank from liability in any future claims. Thus, the only remaining claims were Hewitt and VPA's counterclaims against Rice and the Firm. The trial court granted summary judgment against Hewitt and VPA, holding that the counterclaims against the Firm and Rice were barred by the applicable statute of limitations. The trial court further entered judgment against Hewitt and VPA for $6,500 related to a pending motion to show cause, which the court determined to be frivolous and groundless.
About six months after the summary judgment order, despite their repeated losses in the 1991 and 1998 cases, Hewitt and VPA filed another suit in 2003 claiming malicious prosecution, and naming the Firm and two of its attorneys, Rice and Reynolds, as defendants. This is the case now before us on certiorari review. We will refer to the parties as Hewitt and the Firm unless the context otherwise requires. Hewitt's theory was that the Firm knew the assets belonged to VPA, not Hewitt personally, and that the Firm improperly pressured Hewitt to pay the judgment he owed the Bank by making VPA's property unmarketable. The malicious prosecution complaint was founded upon the Firm's preparation of the 1998 CUFTA claim and its accompanying lis pendens.
Approximately three months after Hewitt filed the 2003 malicious prosecution action, the trial court dismissed the action for failure to state a claim. The court concluded that favorable termination of the underlying proceeding was an essential element of a malicious prosecution claim. It also held that Hewitt's settlement with the Bank, which resolved both the Bank's claim for attorneys' fees and costs and Hewitt's counterclaims, did not constitute a favorable termination of the underlying proceeding with respect to the original 1998 CUFTA proceeding and the lis pendens. The trial court awarded the Firm attorneys' fees and costs. Hewitt appealed.
The court of appeals affirmed the trial court's reasoning that the Bank's voluntary dismissal of the 1998 CUFTA claim, Hewitt's payment of the original judgment, and the Bank's settlement did not constitute favorable termination of the proceedings. Hewitt v. Rice, 119 P.3d 541, 544 (Colo.App.2004). Additionally, the court of appeals refused to adopt a totality-of-the-circumstances test, noting that there existed no support for such a test in Colorado. Id.
We granted certiorari to consider the following two issues: first, whether Colorado malicious prosecution law should be modified to exclude the element of favorable resolution when the claim is based upon the wrongful filing of a lis pendens; second, whether Colorado should adopt a totality-of-the-circumstances test for determining if the proceeding giving rise to the claim of malicious prosecution was favorably terminated in a civil case. We reject both propositions.
Generally, to prevail on a claim for malicious prosecution, the following elements must be satisfied: (1) the defendant contributed to bringing a prior action against the plaintiff; (2) the prior action ended in favor of the plaintiff; (3) no probable cause; (4) malice; and (5) damages. Thompson, 84 P.3d at 503; see also CJI-Civ. 4th 17:1 (2007). In Thompson, we upheld the principle that "the filing of a notice of lis pendens may form the basis of a claim for malicious prosecution." Id. at 504 (citing Johnston v. Deidesheimer, 76 Colo. 559, 560, 232 P. 1113, 1114 (Colo.1925)). We have consistently held that where a lis pendens forms the basis of a malicious prosecution claim, the lis pendens action must be terminated in favor of the plaintiff. See id.; Westfield Dev. Co. v. Rifle Inv. Assoc., 786 P.2d 1112, 1118-19 (Colo. 1990); Lounder v. Jacobs, 119 Colo. 511, 514, 205 P.2d 236, 238 (Colo.1949). The requirement of favorable termination is important because the statute of limitations begins running at the point of favorable termination, and favorable termination is a substantive element of the plaintiff's claim for malicious prosecution. Dan B. Dobbs, The Law of Torts § 436 (2000). Thus, in Westfield, we observed that a "malicious prosecution claim that arises out of the main action may not usually be brought as a counterclaim since the main action has not yet terminated in favor of the counterclaimant." 786 P.2d at 1119 n. 4, cited in Thompson, 84 P.3d at 505. As we noted in Johnston, when a lis pendens forms the basis of a malicious prosecution action, "liability would attach for filing the notices [of lis pendens] for such damages, if any, as may have been sustained by reason of the filing." 76 Colo. at 561, 232 P. at 1114.
Hewitt argues that Colorado should adopt Restatement (Second) of Torts section 674, comment k (1977), which carves out an exception to the malicious prosecution element requiring...
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