Michael O'Brien & O'Brien & Assocs., Inc. v. Behles

• Decision Date: 24 March 2020
• Docket Number: No. A-1-CA-36814,A-1-CA-37086 (consolidated for purpose of opinion),A-1-CA-36814
• Parties: Michael O'BRIEN and O'Brien and Associates, Inc., Plaintiffs-Appellants/Conditional Cross-Appellees, v. Jennie BEHLES; Behles Law Firm PC ; Behles Law Firm ; Ron Miller; Ron Miller CPA; Ron Miller CPA, PC; and Miller and Associates, CPA, PC, Defendants-Appellees/Conditional Cross-Appellants.
• Court: Court of Appeals of New Mexico

464 P.3d 1097

Michael O'BRIEN and O'Brien and Associates, Inc., Plaintiffs-Appellants/Conditional Cross-Appellees,

v.Jennie BEHLES; Behles Law Firm PC ; Behles Law Firm ; Ron Miller; Ron Miller CPA; Ron Miller CPA, PC; and Miller and Associates, CPA, PC, Defendants-Appellees/Conditional Cross-Appellants.

No. A-1-CA-36814

A-1-CA-37086 (consolidated for purpose of opinion)

Court of Appeals of New Mexico.

Filing Date: March 24, 2020

Law Offices of Daymon B. Ely, Daymon B. Ely, Albuquerque, NM, William G. Gilstrap, P.C., William G. Gilstrap, Albuquerque, NM, for Appellants.

Martin, Dugan & Martin, W.T. Martin, Jr., Carlsbad, NM, for Appellees Jennie Behles, Behles Law Firm, PC, and Behles Law Firm.

Modrall, Sperling, Roehl, Harris & Sisk, P.A., R.E. Thompson, Brian K. Nichols, Elizabeth A. Martinez, Albuquerque, NM, for Appellees Ron Miller, Ron Miller CPA, Ron Miller CPA, PC, and Miller and Associates, CPA, PC

OPINION

VANZI, Judge.

{1} Plaintiffs Michael O'Brien (O'Brien) and O'Brien and Associates, Inc. (OBA) appeal from the district court's order granting judgment as a matter of law in favor of Defendant Behles Law Firm, PC (Behles firm). Plaintiffs brought a malicious abuse of process claim against the Behles firm and others in connection with the litigation of a lien claim against OBA's property. Plaintiffs raise three arguments on appeal. First, Plaintiffs contend that the district court erred in holding that O'Brien, individually, lacked standing. Second, they argue that the district court erroneously granted judgment as a matter of law on OBA's malicious abuse of process claim. Finally, Plaintiffs seek reversal of the district court's award of costs to the Behles firm. The Behles firm argues, on conditional cross-appeal, that the district court erred (under the Rules of Evidence, and under principles of collateral estoppel) by admitting into evidence the findings of fact and conclusions of law resulting from the lien litigation.

{2} We affirm the district court's dismissal of O'Brien, individually, who was not a real party in interest. However, we reverse the district court's dismissal of OBA's malicious abuse of process claim. We hold as a matter of first impression that lack of probable cause to continue proceedings is a cognizable malicious abuse of process claim. Plaintiffs asserted such a claim in this case, and the district court erred in dismissing it. Among the district court's errors was its decision to give preclusive effect to all of the underlying findings of fact and conclusions of law and to admit these into evidence. We also reverse the award of costs to the Behles firm.

BACKGROUND

{3} To say that this litigation has been protracted would be an understatement. It has persisted over fourteen years, through two lawsuits, two trials, a mistrial, and two appeals. Numerous attorneys and judges have been involved in both proceedings. In the first lawsuit, some of the Defendants claimed to have a lien on real property owned by Plaintiff OBA. The lien claim was relatively complex and resulted in a lengthy trial, appeal, and a post-judgment motion. At each step, the claim was resolved in OBA's favor.

{4} In this (second) lawsuit, Plaintiffs claim that Defendants maliciously abused the proceedings in the first lawsuit. Complicating matters, it appears that Plaintiffs, Defendants, and the district court each have a different understanding of Plaintiffs’ malicious abuse of process claim. They also appear to ignore portions of the record and aspects of the law that do not conform to their understanding of the case. These divergent paths resulted in a combination of omissions and errors that has rendered our review circuitous and difficult. The briefing on appeal was, often, of little assistance. In order to assist the reader, we begin by explaining what happened in each lawsuit.¹ We then turn to the parties’ arguments.

I. The Lien Litigation

{5} The lien litigation concerned real estate known as the Orilla del Rio property, owned by OBA. On August 22, 2002, OBA entered into a contract for sale of an undescribed piece of realty to an entity called Del Rio Corporation (Del Rio), with Ron Green signing on behalf of Del Rio as its manager. Shelby Phillips III (Phillips) loaned Del Rio the funds for the $100,000 down payment on the contract. OBA and Green intended for Del Rio to develop the Orilla del Rio property, and Green was supposed to (but did not) prepare a final contract and set up an escrow account on behalf of the corporation for that purpose. Del Rio was in default under the contract by early 2003. Moreover, Green had not actually formed Del Rio when he signed the contract with OBA; according to Green, "Del Rio Corporation" was already in use by another business, so he formed an entity called Riverside Properties Corporation (Riverside) instead. Ostensibly, Riverside was created to fulfill the buyer's obligation under the August 22, 2002 contract. However, there was no written assignment of the contract to Riverside, and its certificate of incorporation was revoked by the State of New Mexico effective March 31, 2003, and never reinstated.

{6} Green, a former a client of the Behles and Miller firms, was indebted to them for unpaid professional fees for matters unrelated to the issues in the lien litigation. On July 2, 2004, the firms filed an action to foreclose on certain security interests purportedly conveyed to them by Green in consideration for his debt.² One of those was a "[c]ollateral assignment or security agreement" (security agreement) "covering an[ ] undivided one-half (½) interest in all of Riverside Properties Corporation's interest in assignment of the Molly Doolittle contract on real property and water rights." The underlying security agreement document, recorded in July 2003, was apparently signed by Phillips as President of Riverside, and indicated that it was conveying a one-half interest in "[a]ssignment of Molly Dolittle's [sic] contract on Real Estate properties," describing the Orilla Del Rio subdivision.³ Based on this security agreement and a disclaimer of interest from Riverside (also apparently signed by Phillips), and upon Green's consent, judgment was entered against Green and Riverside, in favor of the Behles and Miller firms. The firms recorded the transcript of judgment in Sierra County in October 2004. The firms claimed their lien on the Orilla del Rio property by way of the aforementioned security agreement and transcript of judgment.

{7} OBA filed suit in 2006, seeking to cancel the liens on the Orilla del Rio property, one of which was the lien claimed by Behles and Miller. Discovery progressed, and in May 2009, while cross-motions for summary judgment were pending, Phillips was deposed. He testified that the signatures of "Shelby Phillips III" on the security agreement and disclaimer of interest were not, in fact, his signatures. When asked if he had authorized Green to sign these documents, Phillips stated that he could not recall ever giving Green permission to sign on his behalf. OBA's counsel at the time, Douglas Baker, wrote a letter to Behles on May 15, 2009, asking that the Behles and Miller firms dismiss their lien claim, given the testimony of Phillips, together with the other evidence developed in discovery (showing, for instance, that Riverside's articles of incorporation were revoked prior to any purported conveyance to the Behles and Miller firms). Baker also indicated that, if the firms refused to dismiss the claims, he would consider filing a claim for malicious abuse of process. Behles responded that she did not believe Phillips’ testimony, and that she planned to conduct further investigation into Riverside's incorporation documents.

{8} Oral argument on the pending summary judgment motions was held on June 8, 2009. Phillips had not yet signed his deposition testimony, and the parties wished to depose Green (who had proved difficult to notice for deposition); accordingly, the parties sought further discovery. Recognizing that these issues would not be resolved before trial, which was scheduled to commence the next month, the district court denied the motions for summary judgment, citing in its brief order that "material facts remain in dispute." Although the record is unclear, it appears that Green was finally deposed approximately two weeks before the commencement of trial. Green apparently testified that he had in fact signed Phillips’ name to the articles of incorporation for Riverside, the security agreement, and the disclaimer of interest, but that Phillips had authorized Green to do so.

{9} On May 13, 2010, following a ten-day bench trial, the district court judge, Edmund Kase, III, entered findings of fact and conclusions of law in favor of OBA, concluding that the Behles and Miller firms did not have a valid lien against the Orilla del Rio property. Judge Kase found that the security agreement, disclaimer of interest, and Riverside articles of incorporation were forged documents. Judge Kase also concluded that the security agreement and disclaimer of interest were invalid, because a power of attorney is statutorily required for conveyances on behalf of another of interests in real property, see NMSA 1978, §§ 47-1-5 (1897), -7, (1901) -11 (1937), and there was no evidence that Phillips had granted such power to Green.

{10} Judge Kase stated that the transcript of judgment, having been obtained in part through the forged documents, did not create a judgment lien against the Orilla del Rio property. Moreover, Riverside had no equitable or other interest in the Orilla del Rio property. First, Riverside had not acquired Del Rio's interest in the August 22, 2002 contract. Among other things, there was no written assignment from Del Rio to Riverside, nor evidence of OBA's written consent (required under the contract) to any assignment of the purchaser's interest. Second, even if Riverside had acquired Del Rio's interest, Riverside's corporate status had...