McCauley v. Crowley Fleck, PLLP

• Decision Date: 15 March 2022
• Docket Number: DA 21-0207
• Court: Montana Supreme Court
• Parties: 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.

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.

No. DA 21-0207

Supreme Court of Montana

March 15, 2022

Submitted on Briefs: February 9, 2022

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

For Appellants:

Quentin Rhoades, Rhoades Siefert & Erickson PLLC Missoula, Montana

For Appellees:

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

OPINION

JIM RICE, JUSTICE

¶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 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.

• 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.

• 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 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 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 2021MT 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, 2022MT 33, ¶ 5, 407 Mont. 385, __ P.3d __ (quoting Andersen v. Schenk, ...