Wolfinger v. Cheche

• Decision Date: 09 December 2003
• Docket Number: No. 1 CA-CV 02-0421, No. 1 CA-CV 02-0422.
• Citation: 80 P.3d 783,206 Ariz. 504
• Parties: John and Maria WOLFINGER, husband and wife, Plaintiffs-Appellants, Brian Holohan, Attorney-Appellant, v. Pasquale R. CHECHE and Nancy Cheche, husband and wife; Pasquale R. Cheche, P.C., an Arizona professional corporation; Stanley and Barbara Lubin, husband and wife; The Law Offices of Stanley Lubin, P.C., an Arizona professional corporation, Defendants-Appellees.
• Court: Arizona Court of Appeals

80 P.3d 783

206 Ariz. 504

John and Maria WOLFINGER, husband and wife, Plaintiffs-Appellants, Brian Holohan, Attorney-Appellant, v. Pasquale R. CHECHE and Nancy Cheche, husband and wife; Pasquale R. Cheche, P.C., an Arizona professional corporation; Stanley and Barbara Lubin, husband and wife; The Law Offices of Stanley Lubin, P.C., an Arizona professional corporation, Defendants-Appellees.

Nos. -0421, -0422.

Court of Appeals of Arizona, Division 1, Department A.

December 9, 2003.

Hinshaw & Culbertson, by Brian Holohan, Phoenix, Attorneys for Plaintiffs-Appellants Wolfinger.

Gust Rosenfeld P.L.C., by Richard A. Segal, Phoenix, Attorneys for Plaintiffs-Appellants Holohan and Wolfinger.

Fennemore Craig, P.C., by Kenneth J. Sherk, Douglas C. Northup, Phoenix, Attorneys for Defendants-Appellees Lubin.

Junker, Shiaras & Harrington, by Michael P. Shiaras, Robert Mackenzie, Scottsdale, Attorneys for Defendants-Appellees Cheche.

OPINION

BARKER, Judge.

¶ 1 This is a complex wrongful institution of civil proceedings ("WICP") claim that draws on thirteen years of litigation between the parties or their clients. As part of this action, we establish that surviving a motion for summary judgment is not a per se bar to a WICP claim and that the subjective intent of the defendant to a WICP claim is irrelevant as long as the claim pursued was objectively reasonable.

I. Facts and Procedural Background

¶ 2 The thirteen-year history here involves three separate lawsuits. While a WICP claim is necessarily a case within a case, here, we extrapolate one level further. We have a WICP of a WICP, a case within a case within a case.

¶ 3 John and Maria Wolfinger ("Wolfinger") appeal from a summary judgment¹ entered against them on their WICP claim against Pasquale Cheche, his spouse, and Pasquale R. Cheche, P.C. ("Cheche"), and Stanley Lubin, his spouse, and The Law Offices of Stanley Lubin, P.C. ("Lubin").²

¶ 4 On appeal from a grant of summary judgment, we determine de novo whether any genuine dispute of material fact exists and whether the trial court correctly applied the law. Great Am. Mortgage, Inc. v. Statewide Ins. Co., 189 Ariz. 123, 124-25, 938 P.2d 1124, 1125-26 (App.1997) (citations omitted). We view the facts in the light most favorable to the party against whom summary judgment was granted. Estate of Hernandez v. Flavio, 187 Ariz. 506, 509, 930 P.2d 1309, 1312 (1997). Therefore, we view the facts in a light most favorable to Wolfinger.

¶ 5 In order to understand this matter, we must consider each of the three separate cases. This matter began when Wolfinger, the plaintiff-appellant here, added attorney Peter Strojnik as a defendant in a fraud and racketeering action in what we will term Case I.³ Strojnik had represented one of the defendants already joined in that fraud action. The second suit, Case II,⁴ is a WICP claim filed by Strojnik against Wolfinger. It is based on Strojnik's allegation that Wolfinger inappropriately brought him into Case I. Cheche and Lubin represented Strojnik in Case II.

¶ 6 Finally, Case III (the case now before this court) is a WICP claim by Wolfinger against Cheche and Lubin for pursuing a WICP claim against him in Case II. It is the summary judgment in favor of Cheche and Lubin in Case III that is directly at issue here. However, that summary judgment order in Case III is inextricably tied to the proceedings in Cases I and II. We discuss each of the cases in more detail below.

A. Case I: The Fraud Action

¶ 7 In September 1987, Fred and Elizabeth Wells ("the Wells") leased a 38,000 square foot warehouse from Wood Product Partners ("WPP") for their cabinet manufacturing business, Wood Enterprises. The lease, which covered a five-year term, included an option that allowed the Wells to purchase the warehouse from WPP at anytime. However, in 1989, WPP sought to sell the warehouse as a result of its "cash flow problems." At the same time, as a result of financial problems of their own (i.e. debts resulting from five separate collections lawsuits against them), the Wells agreed to sign a new lease with the new property owner, as long as the Wells received a $90,000 payment.

¶ 8 Shortly thereafter, Americal Properties, a potential buyer, sought to purchase the warehouse from WPP conditioned upon its approval of the Wells' financial condition. In addition, Americal Properties requested that the Wells promise to sign a new, longer term lease. However, ten days after the parties reached an initial agreement, Americal Properties backed out of the deal on the basis that "[t]he tenants [sic] financial statement does not meet our minimum requirement standards."

¶ 9 Following the loss of the first potential buyer, the Wells signed a new lease with WPP that made no reference to the $90,000 purchase option. This lease, however, was designed to take effect only on the sale of the property. In a letter written to the Wells discussing the details of the new lease, David Sellers, a representative of WPP⁵, indicated that no mention of the original lease should be made to potential buyers. He wrote:

To avoid raising any issues with the Buyer which may queer the deal, we suggest that all payments and references to the old lease remain outside of escrow. If necessary to ease your attorney's mind we are willing to sign any further documents between [the seller] and you which may be appropriate.

(Emphasis added.) This "queer the deal" letter was a centerpiece in Wolfinger's argument of fraud. Ultimately, according to the terms of the new lease, the Wells agreed to pay nearly twice as much rent ($1.3 million) as they owed on their old lease over a new seven-year period. However, they were to receive a $90,000 cash disbursement from the proceeds of the sale that would make the lease effective.

¶ 10 In early 1990, a second potential buyer, Kelman, made an offer to purchase the property from WPP. The parties signed a contract. An escrow account was opened at Lawyer's Title and was accompanied with an "Amendment to Escrow Instructions" which instructed the escrow office to disburse $90,000 to Strojnik's trust account. Similar to the first prospective purchaser, however, Kelman backed out of his agreement to purchase the warehouse once he learned of the Wells' financial condition.

¶ 11 In March 1990, Johnson Grove investigated whether it would purchase the warehouse from WPP. WPP suggested to Johnson Grove that "the Wells paid their rent `like clockwork'," that "the Wells' business was expanding," and that "the Wells had no financial or ownership interest in the building." The Wells confirmed the same to Johnson Grove in person during Johnson Grove's initial tours of the warehouse. Following Johnson Grove's agreement to purchase the property from WPP, an escrow account was opened with Fidelity National Title Agency of Arizona ("Fidelity") to consummate the transaction.

¶ 12 However, in April 1990, (1) to ensure that the Wells received their $90,000 payment from the sale of the warehouse and (2) (as alleged by Wolfinger in the legal proceedings) to keep the fact of the payment hidden from Johnson Grove, Strojnik and WPP agreed that the entire proceeds of the purchase money from Johnson Grove should be deposited into Strojnik's Arizona Bar Foundation Trust Account. Within one or two days following the close of escrow, Strojnik disbursed the $90,000 payment to the Wells and the balance of the sale proceeds to WPP. Strojnik made his payments to the Wells in ten separate $9,000 checks on the same date. The Wells then paid "several thousand dollars" of their $90,000 to Strojnik for the payment of their "outstanding, overdue bills."

¶ 13 Less than one month after Johnson Grove purchased the warehouse (around June 1, 1990), the Wells moved out of the warehouse for "health decisions affecting Mrs. Wells and by a set of other circumstances too numerous to narrate[.]" The Wells admitted their obligation to pay rent to Johnson Grove, but failed to make any payments. Thus, less than a month after purchasing a $1.6 million property, based on the presence of a long-term tenant, the new owners found themselves with a substantial investment, but no tenant.

¶ 14 In 1990, Johnson Grove hired the law firm with which Wolfinger was associated, Poli & Ball, to represent it in a breach of lease lawsuit against the Wells. Several months into the litigation, Johnson Grove and Wolfinger amended the complaint to add claims against Strojnik and his spouse ("Strojnik") for fraud and racketeering. Johnson Grove, through Wolfinger, settled its claims with the title company and the Wells, but not with Strojnik. In 1993, after three years, Johnson Grove allowed its claims against Strojnik to be dismissed for failure to prosecute. It is this dismissal that spawned Case II.

B. Case II: The WICP Against Wolfinger

¶ 15 In 1994, Strojnik retained attorney John Oberg to file a WICP claim against Wolfinger and Poli & Ball based on Case I. A year later, Michael Beale replaced Oberg as counsel due to the latter's conflict of interest. After another year, Beale withdrew and Cheche and Lubin became Strojnik's counsel.

¶ 16 Wolfinger moved for summary judgment, arguing that he had probable cause to add the claims against Strojnik in Case I and that the lawsuit did not terminate in Strojnik's favor. Judge Ruth Hilliard denied this motion. The court, through Judge Linda Akers, also denied Wolfinger's subsequent motion for summary judgment on Strojnik's punitive damages claim. The case went to trial in September 1997.

¶ 17 At the close of Strojnik's case-in-chief, Wolfinger moved for a directed verdict on the favorable termination issue and punitive damages. Judge Thomas Dunevant denied the motion as to favorable termination and granted it as to punitive damages. The trial court subsequently declared a mistrial based upon inappropriate testimony from a defense witness. Cheche and Lubin filed a motion to withdraw based upon a conflict of...