Phi Fin. Servs., Inc. v. Johnston Law Office, P.C.

• Decision Date: 23 January 2020
• Docket Number: No. 20190001,No. 20180330,20180330
• Parties: PHI FINANCIAL SERVICES, INC., Plaintiff and Appellee v. JOHNSTON LAW OFFICE, P.C., Defendant and Appellant and Choice Financial Group, Defendant and N.Starr, LLC, Lee Finstad, and Jeff Trosen, Garnishees and Appellants Johnston Law Office, P.C., a North Dakota professional corporation, Plaintiff and Appellant v. Jon Brakke, an attorney at law, and Vogel Law Firm, Ltd., a North Dakota professional corporation, and PHI Financial Services, Inc., an Iowa corporation, Defendants and Appellees
• Court: North Dakota Supreme Court

937 N.W.2d 885

PHI FINANCIAL SERVICES, INC., Plaintiff and Appellee

v.JOHNSTON LAW OFFICE, P.C., Defendant and AppellantandChoice Financial Group, Defendant

and

N.Starr, LLC, Lee Finstad, and Jeff Trosen, Garnishees and Appellants

Johnston Law Office, P.C., a North Dakota professional corporation, Plaintiff and Appellant

v.Jon Brakke, an attorney at law, and Vogel Law Firm, Ltd., a North Dakota professional corporation, and PHI Financial Services, Inc., an Iowa corporation, Defendants and Appellees

No. 20180330

No. 20190001

Supreme Court of North Dakota.

Filed January 23, 2020

Joseph A. Wetch (argued) and Ian McLean (on brief), Fargo, ND, for plaintiff and appellee PHI Financial Services, Inc.

DeWayne A. Johnston (argued) and David C. Thompson (appeared), Grand Forks, ND, for defendant and appellant Johnston Law Office, P.C.

Drew J. Hushka (argued) and Jon R. Brakke (on brief), Fargo, ND, for defendants and appellees Jon Brakke and Vogel Law Firm, Ltd.

Crothers, Justice.

[¶1] In these consolidated appeals, garnishees N.Starr, LLC; Lee Finstad; and Jeff Trosen appeal from a Grand Forks County district court order dismissing their counterclaims in a garnishment proceeding, and Johnston Law Office, P.C. ("Johnston Law") appeals from a Cass County district court order dismissing its action. Both orders dismissed their respective claims in each case against PHI Financial Services, Inc. ("PHI") and Jon Brakke and the Vogel Law Firm, Ltd. (collectively, "Vogel Law"). We affirm the orders.

I

[¶2] Our decisions set forth the history of this litigation and related cases. See Johnston Law Office, P.C. v. Brakke , 2018 ND 247, 919 N.W.2d 733 ; PHI Fin. Servs., Inc. v. Johnston Law Office, P.C. , 2016 ND 20, 874 N.W.2d 910 ; PHI Fin. Servs., Inc. v. Johnston Law Office, P.C. , 2016 ND 114, 881 N.W.2d 216. These cases contain relevant factual background, which we will not repeat here except as necessary to resolve the issues raised in this appeal.

[¶3] In the Grand Forks County case, Vogel Law represented PHI in an action against Johnston Law to recover damages for a fraudulent transfer. In 2015 the district court entered a judgment against Johnston Law for approximately $167,000. PHI began post-judgment collection efforts, which included serving garnishment summonses. In December 2017, PHI, through its counsel Vogel Law, served garnishee summonses on N.Starr, Finstad, and Trosen.

[¶4] In March 2018, garnishees N.Starr, Finstad, and Trosen brought counterclaims in the garnishment proceedings, asserting claims of abuse of process and vicarious liability. Vogel Law and PHI moved the district court to dismiss the garnishees’ counterclaims. In a July 2018 order, the Grand Forks district court dismissed the counterclaims, holding the garnishees failed to allege any claim upon which relief can be granted. The garnishees appealed the order dismissing their counterclaims.

[¶5] In the Cass County case, Johnston Law commenced an action against Vogel Law and PHI in March 2018, asserting claims for abuse of process, tortious interference with a business relationship, and conversion. Johnston Law also asserted a claim against PHI for vicarious liability. Vogel Law and PHI moved to dismiss the complaint. In a December 2018 order, the Cass County court granted Vogel Law and PHI’s motion to dismiss, holding Johnston Law failed to allege any claim upon which relief can be granted.

II

[¶6] Our standard for reviewing a decision dismissing a complaint under N.D.R.Civ.P. 12(b)(6) for failure to state a claim is well established:

"A motion to dismiss a complaint under N.D.R.Civ.P. 12(b) ( [6] ) tests the legal sufficiency of the statement of the claim presented in the complaint. Under N.D.R.Civ.P. 12(b) ( [6] ), a complaint should not be dismissed unless it is disclosed with certainty the impossibility of proving a claim upon which relief can be granted. On appeal, the complaint must be construed in the light most favorable to the plaintiff, taking as true the well-pleaded allegations in the complaint."

In re Estate of Dionne , 2013 ND 40, ¶ 11, 827 N.W.2d 555 (internal quotation marks and citations omitted). The district court’s decision granting a dismissal for failure to state a claim upon which relief can be granted under N.D.R.Civ.P. 12(b)(6) will be affirmed "if we cannot ‘discern a potential for proof to support it.’ " Id. (quoting Hale v. State , 2012 ND 148, ¶ 13, 818 N.W.2d 684 ); see also Vandall v. Trinity Hosps. , 2004 ND 47, ¶ 5, 676 N.W.2d 88 ; Towne v. Dinius , 1997 ND 125, ¶ 7, 565 N.W.2d 762. Our review of the court’s decision under N.D.R.Civ.P. 12(b)(6) is de novo. In re Estate of Nelson , 2015 ND 122, ¶ 5, 863 N.W.2d 521.

III

[¶7] Johnston Law argues both district courts erred in dismissing its claims for abuse of process for failure to state a claim because both misinterpreted N.D.C.C. § 32-09.1-04, which requires ten days’ notice before a garnishee summons may be issued.¹

[¶8] Generally, an "[a]buse of process occurs when a person uses a legal process, whether criminal or civil, against another primarily to accomplish a purpose for which it is not designed." Riemers v. Hill , 2016 ND 137, ¶ 22, 881 N.W.2d 624 (quoting Jordet v. Jordet , 2015 ND 76, ¶ 20, 861 N.W.2d 147 ). "The two essential elements of an abuse-of-process claim are: (1) an ulterior purpose; and (2) a willful act in the use of the process not proper in the regular conduct of the proceeding."

Riemers , at ¶ 22. "In cases involving abuse-of-process claims, our decisions require some overt act akin to extortion or attempting to obtain a collateral advantage beyond the issuance of the formal use of process." Id. (citing Jordet , at ¶ 20 ; Wachter v. Gratech Co., Ltd. , 2000 ND 62, ¶¶ 33-34, 608 N.W.2d 279 ; Kummer v. City of Fargo , 516 N.W.2d 294, 297-99 (N.D. 1994) ; Volk v. Wisconsin Mortg. Assurance Co. , 474 N.W.2d 40, 43-44 (N.D. 1991) ; Stoner v. Nash Finch, Inc. , 446 N.W.2d 747, 751-52 (N.D. 1989) ). We also said an abuse of process requires more than the formal use of process itself:

"Some definite act or threat not authorized by the process, or aimed at an objective not legitimate in the use of the process, is required; and there is no liability where the defendant has done nothing more than carry out the process to its authorized conclusion, even though with bad intentions. The improper purpose usually takes the form of coercion to obtain a collateral advantage, not properly involved in the proceeding itself, such as the surrender of property or the payment of money, by the use of the process as a threat or a club. There is, in other words, a form of extortion, and it is what is done in the course of negotiation, rather than the issuance or any formal use of the process itself, which constitutes the tort."

Jordet , at ¶ 20 (quoting Stoner, at 751 ).

[¶9] Johnston Law argues the district courts erred in dismissing the abuse-of-process claims by misinterpreting N.D.C.C. § 32-09.1-04, requiring ten days’ notice before a garnishee summons may be issued. They assert that the defendants’ failure to serve the ten-day notice before issuing the garnishee summons rendered the garnishment void. They contend this establishes their claim for abuse of process. Johnston Law’s issue therefore requires us to construe N.D.C.C. § 32-09.1-04 to ascertain whether a ten-day notice before issuing a garnishee summons was required.

[¶10] We have discussed our rules for statutory interpretation:

"Interpretation of a statute is a question of law fully reviewable on appeal. Our primary goal in statutory construction is to ascertain the intent of the legislature, and we first look to the plain language of the statute and give each word of the statute its ordinary meaning. When the wording of a statute is clear and free of all ambiguity, the letter of it is not to be disregarded under the pretext of pursuing its spirit. If, however, the statute is ambiguous or if adherence to the strict letter of the statute would lead to an absurd or ludicrous result, a court may resort to extrinsic aids, such as legislative history, to interpret the statute. A statute is ambiguous if it is susceptible to meanings that are different, but rational. We presume the legislature did not intend an absurd or ludicrous result or unjust consequences, and we construe statutes in a practical manner, giving consideration to the context of the statutes and the purpose for which they were enacted."

State v. G.C.H. , 2019 ND 256, ¶ 13, 934 N.W.2d 857 (quoting State v. Brown , 2009 ND 150, ¶ 15, 771 N.W.2d 267 ). "Statutes relating to the same subject matter shall be construed together and should be harmonized, if possible, to give meaningful effect to each, without rendering one or the other useless." G.C.H. , at ¶ 13 (quoting Brown , at ¶ 15 ). Additionally, we have said "[a] dictionary may provide a reliable starting point in determining the meaning of a word not previously defined." Wilkens v. Westby , 2019 ND 186, ¶ 8, 931 N.W.2d 229.

[¶11] Section 32-09.1-04(1), N.D.C.C., states in relevant part:

"At least ten days before the issuance of any garnishee summons against the earnings of any person , the creditor shall serve upon the debtor a notice that a garnishee summons may be issued.... Failure to serve the notice renders any subsequent garnishment void."

(Emphasis added.) This section requires ten days’ notice when the "earnings" of a "person" are to be garnished. A "person" includes a corporation. N.D.C.C. § 32-09.1-01(4). Section 32-09.1-01(3), N.D.C.C., defines "earnings":

" ‘Earnings’ means compensation paid or payable for personal services, whether denominated as wages, salary, commission, bonus, or otherwise , and includes periodic payments pursuant to a pension or retirement program. ‘Earnings’ does not include social security benefits or veterans’ disability pension benefits, except when the benefits are subject to garnishment to enforce any order for the support of a dependent child. ‘Earnings’ includes

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