Millennium Equity Holdings v. Mahlowitz

• Decision Date: 28 October 2008
• Docket Number: No. 07-P-531.,07-P-531.
• Citation: 73 Mass. App. Ct. 29,895 N.E.2d 495
• Court: Appeals Court of Massachusetts
• Parties: MILLENNIUM EQUITY HOLDINGS, LLC, & others<SMALL><SUP>1</SUP></SMALL> v. Edward M. MAHLOWITZ.

895 N.E.2d 495

73 Mass. App. Ct. 29

MILLENNIUM EQUITY HOLDINGS, LLC, & others¹ v. Edward M. MAHLOWITZ.

No. 07-P-531.

Appeals Court of Massachusetts, Suffolk.

Argued March 19, 2008.

Decided October 28, 2008.

David L. Kelston for Millennium Equity Holdings, LLC, & another.

Max D. Stern, Boston, for David Rabinovitz.

Edward M. Mahlowitz, Belmont (John L Mason, Jr., with him), pro se.

Robert S. Sinsheimer, Boston, pro se.

Isaac H. Peres, Boston, pro se.

Present: CYPHER, ARMSTRONG, & MILLS, JJ.

MILLS, J.

Millennium Equity Holdings, LLC (Millennium), and two of its three members, David Rabinovitz and Joseph P. Zoppo, commenced an action against defendant Edward M. Mahlowitz alleging abuse of process.² The gravamen of the plaintiffs' complaint was that Mahlowitz, acting as the attorney for Rabinovitz's wife in their divorce case, had improperly obtained and recorded an attachment on Millennium's property, an office building in the Brighton section of Boston, thereby derailing a scheduled sale that resulted in Millennium's bankruptcy and eventual sale of the building at a reduced price. Mahlowitz counterclaimed for abuse of process and malicious prosecution by the plaintiffs in bringing their abuse of process complaint against him.³

After a jury-waived trial, a Superior Court judge found and ruled in Mahlowitz's favor on the plaintiffs' abuse of process claim.⁴ As to Mahlowitz's counterclaims,⁵ the judge found that the plaintiffs had abused process and prosecuted their complaint maliciously, entitling Mahlowitz to damages for injuries to his business, to his financial status, and from his feelings of distress, as well as attorney's fees on those counts.⁶ The judge awarded Mahlowitz damages of $400,000 and attorney's fees in excess of $150,000, stating that "[t]hese fees are also awarded pursuant to G.L. c. 231, § 6F." The plaintiffs appealed.⁷

1. Background.⁸ In April, 2002, Debra Abrams (then Debra Rabinovitz), represented by Mahlowitz, filed a divorce complaint against her husband, David Rabinovitz. At the same time, Millennium, a Delaware limited liability company, held title to an office building on Washington Street in Brighton. Its appraised value was approximately $1,500,000, and the equitable interests in Millennium were apportioned between Rabinovitz, Zoppo, and a third principal, Edward Stevenson, in disproportionate shares.

In February, 2002, the principals had voted to sell the building at the urging of their institutional mortgagee (lender). A short time later the lender, insisting on a sale, instructed Millennium to accept an offer by Fargo Street Associates, Inc. (Fargo), in the amount of $1.65 million. By the time the purchase and sale agreement was signed on November 8, 2002, relations among the three principals had deteriorated significantly and there were lawsuits or threats of lawsuits among all of them. They all wanted, however, to sell the building to Fargo. The agreement called for a closing by the first week in December, 2002, with a standard extension provision, and required title to be "good and clear, fee simple, both of record and in fact, and marketable . . ., free from all liens, encumbrances, easements and restrictions."

In the meanwhile, the divorce case was contentious. When Abrams learned that Millennium had obtained a buyer for the building, she informed Mahlowitz, who, on December 3, 2002, filed an ex parte motion with the Probate and Family Court to attach "all the right, title and interest of [Rabinovitz] in the real estate located at 480 Washington Street, Brighton, . . . title in the name of Millennium Equity Holdings, LLC, . . . up to the amount of $500,000."⁹ The motion was allowed the same day, after an exchange between the judge and Mahlowitz, which is set forth in the margin.¹⁰ The attachment was recorded in the registry of deeds on December 4, 2002.

During the weeks preceding December 3, 2002, Attorney Peter R. Fenn, an experienced real estate attorney, was managing the transaction between his client, Millennium, and Fargo, in anticipation of a closing. There had been numerous complications as well as serious time deadlines. On December 3, 2002, Fargo's attorney sent Fenn a letter confirming the closing for December 10, 2002. On December 5, 2002, Fargo's attorney sent Fenn another letter confirming the same. On December 4, 2002, between the receipt of these two letters, Fenn received a facsimile transmission from Mahlowitz informing Fenn that the attachment had been recorded. Fenn believed that the attachment would, without question, prevent the sale from going forward. On December 4, 2002, after Fenn received the facsimile, he telephoned and spoke with Mahlowitz, informing him of the closing date and that the attachment would prevent the sale. Fenn requested that Mahlowitz remove the attachment, but Mahlowitz refused. On December 5, 2002, Fenn followed up with a letter to Mahlowitz, sent by facsimile transmission, explaining that if the sale of the property were stopped, the lender would likely foreclose. Fenn demanded that Mahlowitz voluntarily discharge the real estate attachment, and stated that he instead could attach the proceeds due Rabinovitz from the sale. Thus, Fenn did attempt to communicate with Mahlowitz, by telephone and letter, regarding the sale and the concern that the attachment would prevent it. Mahlowitz never responded to Fenn's letter and did not take steps to modify the attachment or to secure the proceeds of the sale without interfering with the sale itself.¹¹

On December 5, 2002, Rabinovitz communicated with bankruptcy counsel Herbert S. Weinberg and made a decision that a petition be filed in the Federal Bankruptcy Court on behalf of Millennium. On December 9, 2002, after the preparation of that petition, Weinberg sent a facsimile letter to Mahlowitz also demanding that Mahlowitz voluntarily discharge the attachment or else a bankruptcy proceeding would be filed on behalf of Millennium.¹² Apparently due to a filing error with the first petition, Weinberg filed a second bankruptcy petition on behalf of Millennium. After the lender had scheduled a foreclosure auction, Fargo, the original buyer, eventually purchased the property from the bankruptcy trustee for about $200,000 less than the earlier contract price.

Here, the judge ultimately found that the plaintiffs had abused process and that Mahlowitz had established the elements on his counterclaim for malicious prosecution. Among the plaintiffs' arguments on appeal, which persuade us to reverse the judgment as to the defendant's counterclaims, are (1) on the malicious prosecution claim, there was no valid finding of a lack of probable cause; (2) on the abuse of process claim, the judge's finding that the ulterior motive of eliminating Mahlowitz from the divorce case was the primary purpose for filing and prosecuting the lawsuit is not supported; and (3) the judge mistakenly excluded critical admissible evidence.

2. Applicable law. (a) Abuse of process. The elements of the common-law tort of abuse of process are "(1) `process' was used; (2) for an ulterior or illegitimate purpose; (3) resulting in damage." Gutierrez v. Massachusetts Bay Transp. Authy., 437 Mass. 396, 407, 772 N.E.2d 552 (2002), S.C., 442 Mass. 1041, 817 N.E.2d 738 (2004), quoting from Datacomm Interface, Inc. v. Computerworld, Inc., 396 Mass. 760, 775-776, 489 N.E.2d 185 (1986). "For there to be an abuse of process, `it must appear that the process was used to accomplish some ulterior purpose for which it was not designed or intended, or which was not the legitimate purpose of the particular process employed.'" SMS Financial V, LLC v. Conti, 68 Mass.App. Ct. 738, 747, 865 N.E.2d 1142 (2007), quoting from Ladd v. Polidoro, 424 Mass. 196, 198, 675 N.E.2d 382 (1997).

"When process is employed for the purpose for which the law intends its use, no abuse of process occurs even though the person using the process may have an improper motive in addition to his lawful intention." Vahlsing v. Commercial Union Ins. Co., 928 F.2d 486, 490 (1st Cir. 1991). See Restatement (Second) of Torts § 682 comment b, at 475 (1977) ("no action for abuse of process when the process is used for the purpose for which it is intended, but there is an incidental motive of spite or an ulterior purpose of benefit to the defendant").

(b) Malicious prosecution. "To prevail on a claim for malicious prosecution, a plaintiff must establish that he was damaged because the defendant commenced the original action without probable cause and with malice, and that the original action terminated in his favor." Chervin v. Travelers Ins. Co., 448 Mass. 95, 103, 858 N.E.2d 746 (2006), citing Hubbard v. Beatty & Hyde, Inc., 343 Mass. 258, 261, 178 N.E.2d 485 (1961). To establish probable cause, "[a]ll that is necessary, where civil proceedings are involved, is that the `claimant reasonably believe that there is a chance that his claim may be held valid upon adjudication.'" Id. at 262, 858 N.E.2d 746 (citation omitted). "We examine `the information known to [the defendant] "at the time [he] instituted the complaint rather than . . . what may turn out later to have been the actual state of things."'" Chervin v. Travelers Ins. Co., supra at 104, 858 N.E.2d 746, quoting from Carroll v. Gillespie, 14 Mass.App.Ct. 12, 19, 436 N.E.2d 431 (1982). The lack of probable cause "must be affirmatively proved, and may not be inferred from the existence of malice." Chervin v. Travelers Ins. Co., supra at 104, 858 N.E.2d 746, quoting from Higgins v. Pratt, 316 Mass. 700, 709, 56 N.E.2d 595 (1944).

(c) Standard of review. When an appeal is taken from a nonjury trial, we review the findings of the trial judge for compliance with Mass.R.Civ.P. 52(a), as amended, 423 Mass. 1402 (1996). A trial judge must "find the facts specifically and state separately [the] conclusions of law thereon." Rapp v. Barry, 398 Mass. 1004, 1004, 496 N.E.2d 636 (1986), quoting from Mass.R.Civ.P....