Toste Farm Corp. v. Hadbury, Inc.

• Court: Rhode Island Supreme Court
• Writing for the Court: WILLIAMS, Chief Justice.
• Citation: Toste Farm Corp. v. Hadbury, Inc., 798 A.2d 901 (R.I. 2002)
• Decision Date: 05 June 2002
• Docket Number: No. 2000-363-Appeal.,2000-363-Appeal.
• Parties: TOSTE FARM CORPORATION et al. v. HADBURY, INC. et al. Hadbury, Inc., et al. v. Peter F. Olberg et al.

798 A.2d 901

TOSTE FARM CORPORATION et al. v. HADBURY, INC. et al.

Hadbury, Inc., et al. v. Peter F. Olberg et al.

No. 2000-363-Appeal.

Supreme Court of Rhode Island.

June 5, 2002.

Present: WILLIAMS, C.J., LEDERBERG, BOURCIER, FLANDERS, and GOLDBERG, JJ.

John W. Ranucci, Joseph V. Cavanagh, Jr., Providence, for Plaintiff.

Matthew F. Medeiros, Providence, Fredrika H. Quinn-Little, for Defendant.

OPINION

WILLIAMS, Chief Justice.

The third-party plaintiffs, Richard N. Morash and Hadbury, Inc. (collectively referred to as Morash), appeal from an order of the Superior Court dismissing their complaint against two attorneys and a law firm. Morash alleged that Peter F. Olberg (Olberg) and Eric Shaw (Shaw), on behalf of the law firm of Battle-Fowler, LLP (Battle-Fowler) (collectively referred to as third-party defendants), engaged in a variety of tortious acts toward them in the course of rendering advice to a client, Morash's former business partner Carl Acebes (Acebes). Morash also alleged that although the third-party defendants no longer represented Acebes in the instant litigation,¹ they continued to direct and finance Acebes's pursuit of Morash in exchange for Acebes's agreement not to pursue a legal malpractice claim against them. After careful consideration of the trial justice's disposition of the third-party complaint below, we conclude that she erred by prematurely dismissing count 3, a cause of action under the doctrine of maintenance. The facts pertinent to this appeal are as follows.

I Facts and Travel

In June 1991, Morash executed a purchase and sales agreement for a 417-acre farm in Tiverton and Little Compton, Rhode Island. Morash intended to develop the property, and therefore, he listed the property for sale. At the same time, Acebes was looking to acquire land in the Tiverton and Little Compton area. He learned that Morash had acquired the Toste Farm property (Toste Farm) and decided to contact Morash about a potential sale. After meeting with Morash, Acebes learned that Morash was unwilling to sell the entire parcel but that Morash was interested in developing the land. Acebes proposed a joint venture, whereby they would jointly acquire and develop Toste Farm.

Negotiations began in September 1991. By October 1991, Morash began to question Acebes's true intentions about the future of the partnership. Morash suspected that Acebes would eventually seek to gain control of Toste Farm for his own purposes, rather than continue to effectuate the original goals of the partnership. Specifically, Morash was suspicious of Acebes's proposed provision for an auction process in which one of the partners may elect to retire from the partnership and seek to gain control of the partnership through an auction. At this point, Acebes had local Rhode Island counsel preparing the draft agreement. He decided to turn the draft over to the New York law firm of Battle-Fowler to assist him in finalizing the partnership agreement.

Allegedly, Olberg was responsible for ensuring that the agreement gave Acebes the flexibility he desired, in the event he wished to take control of the property. When Morash's attorney received Olberg's revised draft, Morash objected to its terms and sought to terminate the negotiations. Acebes contacted Morash, and they agreed to continue negotiations. By November 1991, the agreement was finalized.

However, eight months later, Acebes notified Morash that he intended to retire from the partnership and take advantage of an auction provision in the agreement that would force Morash to bid against Acebes for sole ownership of the property. The auction was scheduled for September 1992. One day before the auction, Olberg and Acebes met to prepare an auction bidding strategy. Morash alleges that at the meeting, Olberg realized that he had made a mistake in drafting the auction provision and that Acebes now had reason to pursue a malpractice claim against him. Despite his negligence, Olberg allegedly advised Acebes to pursue a bidding strategy unauthorized by the agreement.

At the auction, when Acebes attempted to pursue his strategy, Morash objected. Eventually, Morash was the highest bidder, which permitted him to elect to continue the partnership under the agreement. Because Morash elected to continue the partnership, Acebes's only remaining option was to request reimbursement of his financial contribution to the partnership. Olberg then allegedly advised Acebes to initiate baseless litigation against Morash to persuade Morash to sell his partnership interest. According to Morash, third-party defendants figured that the litigation would eventually wear Morash down and force him to reach a settlement with Acebes. The third-party defendants hoped that if Acebes was satisfied, he would not pursue a malpractice claim against them. To encourage Acebes, third-party defendants offered to finance the litigation, although they were not the counsel of record for the Rhode Island lawsuits.

After two procedurally defective lawsuits failed to succeed in the United States District Court for the District of Rhode Island, Acebes filed a declaratory judgment action in Superior Court against Morash, asking the trial justice to determine his rights under the partnership. Morash answered the complaint and filed a third-party complaint against third-party defendants. The third-party complaint alleged that third-party defendants (1) tortiously interfered with the partnership agreement by knowingly and willfully advising Acebes to adhere to an auction bidding strategy unsupported by the agreement, (2) committed abuse of process and malicious prosecution by fostering litigation against Morash, (3) were liable for common law maintenance, (4) were liable for slander of title, and (5) were liable for indemnity and contribution.

In February 2000, Acebes and Morash entered into a settlement agreement resolving the declaratory judgment action. The third-party defendants filed a motion to dismiss the remaining third-party complaint pursuant to Rule 12(b)(6) of the Superior Court Rules of Civil Procedure, arguing that Morash could not prevail on his claims under any set of facts.

The trial justice agreed and granted third-party defendants' motion to dismiss. Morash timely appealed.²

II Motion to Dismiss

"[T]he sole function of a motion to dismiss is to test the sufficiency of the complaint." Rhode Island Employment Security Alliance, Local 401, S.E.I.U., AFL-CIO v. State Department of Employment and Training, 788 A.2d 465, 467 (R.I.2002) (quoting Rhode Island Affiliate, ACLU v. Bernasconi, 557 A.2d 1232; 1232 (R.I.1989)). "The standard for granting a motion to dismiss is a difficult one for the movant to meet." Pellegrino v. Rhode Island Ethics Commission, 788 A.2d 1119, 1123 (R.I.2002). "When ruling on a Rule 12(b)(6) motion, the trial justice must look no further than the complaint, assume that all allegations in the complaint are true, and resolve any doubts in a [non-movant's] favor." Id. (quoting Bernasconi, 557 A.2d at 1232). "The motion may then only be granted if it `appears beyond a reasonable doubt that a [non-movant] would not be entitled to relief under any conceivable set of facts.'" Id. (quoting Estate of Sherman v. Almeida, 747 A.2d 470, 473 (R.I.2000)). "When this Court reviews a trial justice's granting of a Rule 12(b)(6) motion, we assume that the allegations contained in the complaint are true, and examine the facts in the light most favorable to the nonmoving party." Id.

A Maintenance

In count 3 of their third-party complaint, Morash alleges that third-party defendants committed "actionable maintenance" by funding and prompting Acebes's litigation against Morash. "As explained by the United States Supreme Court, `[p]ut simply, maintenance is helping another prosecute a suit; champerty is maintaining a suit in return for a financial interest in the outcome; and barratry is a continuing practice of maintenance or champerty.'" Osprey, Inc. v. Cabana Limited Partnership, 340 S.C. 367, 532 S.E.2d 269, 273 (2000) (quoting In re Primus, 436 U.S. 412, 424 n. 15, 98 S.Ct. 1893, 1900 n. 15, 56 L.Ed.2d 417, 429 n. 15 (1978)).

The modern trend among many courts is to abolish these causes of action because they have been supplanted by modern tort actions such as malicious prosecution and abuse of process, as well as the code of professional responsibility for attorneys. See Hardick v. Homol, 795 So. 2d 1107, 1110-11 (Fla.Dist.Ct.App.2001) (citing Alexander v. Unification Church of America, 634 F.2d 673, 678 (2nd Cir. 1980) (interpreting New York law); Security Underground Storage, Inc. v. Anderson, 347 F.2d 964, 969 (10th Cir.1965) (interpreting Kansas law); McCullar v. Credit Bureau Systems, Inc., 832 S.W.2d 886, 887 (Ky.1992); Tosi v. Jones, 115 Ohio App.3d 396, 685 N.E.2d 580, 583 ( 1996)); see also Saladini v. Righellis, 426 Mass. 231, 687 N.E.2d 1224, 1227 (1997) (citing Rice v. Farrell, 129 Conn. 362, 28 A.2d 7 (1942)).

In this jurisdiction, laws that existed at common law remain applicable in Rhode Island "except as [they have] been changed by local legislation or custom." Greater Providence Chamber of Commerce v. State, 657 A.2d 1038, 1042 (R.I.1995) (quoting City of Providence v. Comstock, 27 R.I. 537, 543, 65 A. 307, 308 (1906)). Specifically, G.L.1956 § 43-3-1 provides "In all cases in which provision is not made herein, the English statutes, introduced before the Declaration of Independence, which have continued to be practiced under as in force in this state, shall be deemed and taken as a part of the common law of this state and remain in force until otherwise specifically provided."

This Court has previously recognized the common law doctrines of maintenance and champerty. See Kelley v. Blanchard, 34 R.I. 57, 60-61, 82 A. 728, 729 (1912). In Kelley, this Court noted that "although nearly half a century has elapsed since [Martin v. Clarke, 8 R.I. 389 (1866), the opinion...