ATTORNEYS FOR APPELLANT
James P. Fenton
Alan VerPlanck
Fort Wayne, Indiana
Cathleen M. Shrader
Fort Wayne, Indiana
ATTORNEYS FOR APPELLEES
Mark E. GiaQuinta
Robert W. Eherenman
Fort Wayne, Indiana
__________________________________________________________________
IN THE
SUPREME COURT OF INDIANA
__________________________________________________________________
CITY OF NEW HAVEN, )
)
Appellant (Petitioner Below), )
) Indiana Supreme Court
v. ) Cause No. 90S02-0101-CV-35
)
PENNY (BRADTMUELLER) ) Indiana Court of Appeals
REICHHART and CHEMICAL ) Cause No. 90A02-9904-CV-247
WASTE MANAGEMENT OF )
INDIANA, L.L.C., )
)
Appellees (Respondent Below). )
__________________________________________________________________
APPEAL FROM THE WELLS CIRCUIT COURT
The Honorable David L. Hanselman, Sr., Judge
Cause No. 90C01-9202-CP-25
__________________________________________________________________
ON PETITION FOR TRANSFER
__________________________________________________________________
June 7, 2001
BOEHM, Justice.
Penny Reichhart is an employee of Chemical Waste Management of
Indiana (CWMI) and a resident taxpayer of the City of New Haven. She sued
to challenge New Haven’s attempt to annex CWMI’s facility and New Haven
counterclaimed for malicious prosecution. One element of New Haven’s
malicious prosecution claim is that Reichhart’s suit was brought without
“probable cause.” We hold that lack of probable cause is not satisfied
simply because a citizen initiates a taxpayer challenge financed by her
employer, and that Reichhart had probable cause to bring her suit.
Factual and Procedural Background
On November 26, 1991, New Haven passed a municipal ordinance to annex
land on which CWMI operated a hazardous waste disposal facility. Two weeks
later, Penny Reichhart, an employee of CWMI and a resident of New Haven,
filed a “Citizen Taxpayer Challenge” pursuant to the Indiana Declaratory
Judgment Act.[1] Reichhart alleged that the annexation ordinance was
enacted in violation of Indiana’s Open Door law. The trial court
immediately issued a temporary restraining order against the annexation.
Reichhart’s lawsuit was financed by her employer, CWMI. In response
to the restraining order, New Haven withdrew the annexation ordinance and
filed a counterclaim against Reichhart and a third party complaint against
CWMI, alleging that Reichhart’s lawsuit, financed by CWMI, constituted an
abuse of process. The trial court denied Reichhart’s and CWMI’s joint
motion for summary judgment on the counterclaim. That order was certified
for interlocutory appeal and the Court of Appeals reversed, holding that
Reichhart and CWMI were entitled to summary judgment on the abuse of
process claim. Reichhart v. City of New Haven, 674 N.E.2d 27, 34 (Ind. Ct.
App. 1996) (Reichhart I).
While the interlocutory appeal was pending in the Court of Appeals,
New Haven amended its counterclaim and third-party complaint to add a count
of malicious prosecution. After the Court of Appeals ruled, Reichhart and
CWMI moved to dismiss the malicious prosecution claim on three grounds.
First, they argued that taxpayer petitions such as Reichhart’s are
“absolutely privileged” and a governmental entity cannot maintain an action
for malicious prosecution in response to them. Second, they contended that
the Court of Appeals opinion in Reichhart I constituted the law of the case
and barred New Haven’s action for malicious prosecution. Third, they
argued that a governmental entity is precluded from seeking an award of
punitive damages.
In February 1999, the trial court granted Reichhart’s and CWMI’s
motion to dismiss but did not specify its reasons. New Haven appealed that
decision. The Court of Appeals affirmed the trial court, holding that
although the action was not barred by the law of the case doctrine, the
First Amendment protects a citizen’s right to petition the government
without regard to the citizen’s motivation. Because Reichhart, as a
taxpayer, was a qualified petitioner with a legitimate claim against a
governmental entity, New Haven was barred from pursuing a malicious
prosecution claim against her and CWMI. City of New Haven v. Reichhart,
729 N.E.2d 600, 606-07 (Ind. Ct. App. 2000) (Reichhart II).
We granted transfer in order to clarify Indiana law regarding the
nature and extent of a taxpayer’s privilege to pursue a challenge against a
governmental entity without risking a malicious prosecution claim.
Standard of Review
It is well settled that a complaint may not be dismissed for failure
to state a claim upon which relief can be granted unless it is clear on the
face of the complaint that the complaining party is not entitled to relief.
McQueen v. Fayette County Sch. Corp., 711 N.E.2d 62, 65 (Ind. Ct. App.
1999). We view the pleadings in the light most favorable to the nonmoving
party and draw every reasonable inference in favor of that party. Borgman
v. Aikens, 681 N.E.2d 213, 216 (Ind. Ct. App. 1997). When reviewing a
motion to dismiss for failure to state a claim, this court accepts as true
the facts alleged in the complaint. We will affirm a successful Trial Rule
12(B)(6) motion when a complaint states a set of facts, which, even if
true, would not support the relief requested in that complaint. We will
affirm the trial court’s ruling if it is sustainable on any basis found in
the record. Minks v. Pina, 709 N.E.2d 379, 381 (Ind. Ct. App. 1999).
I. Malicious Prosecution
The Court of Appeals explored two possible justifications for the
trial court’s judgment in Reichhart II. After concluding that the “law of
the case” doctrine did not dispose of the issue, the Court of Appeals
analyzed Reichhart’s right of petition under the First Amendment as a bar
to New Haven’s claim. Reichhart II, 729 N.E.2d at 605. We believe the
first question presented by this appeal is whether a claim of malicious
prosecution is sustainable on these facts without regard to the potential
implications of the First Amendment. It is “the duty of the court not to
enter upon the consideration of a constitutional question where the court
can perceive another ground on which it may properly rest its decision.”
Bayh v. Sonnenburg, 573 N.E.2d 398, 402 (Ind. 1991) (quoting Applegate v.
State ex rel. Bowling, 158 Ind. 119, 124, 63 N.E. 16, 18 (1901)). Whether
a citizen who pursues a taxpayer challenge is vulnerable to a common law
malicious prosecution claim is one of first impression in Indiana. Indeed,
that issue has been before any state or federal court on only a handful of
occasions. City of Long Beach v. Bozek, 661 P.2d 1072 (Cal. 1983); Zeller
v. Consolini, 758 A.2d 376 (Conn. App. Ct. 2000), Cate v. Oldham, 450 So.2d
224, 226 (Fla. 1984). Given the dearth of cases in Indiana and elsewhere,
the common law doctrine of malicious prosecution has not been thoroughly
examined in the context of taxpayer challenges.
The essence of malicious prosecution rests on the notion that the
plaintiff—in this case, New Haven—has been improperly subjected to legal
process. Ziobron v. Crawford, 667 N.E.2d 202, 208 (Ind. Ct. App. 1996).
There are four elements of a malicious prosecution claim: (1) the defendant
(Reichhart and/or CWMI) instituted or caused to be instituted an action
against the plaintiff (New Haven); (2) the defendant acted with malice in
doing so; (3) the defendant had no probable cause to institute the action;
and (4) the original action was terminated in the plaintiff’s favor.
Trotter v. Indiana Waste Sys., 632 N.E.2d 1159, 1164 (Ind. Ct. App. 1994).
It is clear that the first and fourth elements are satisfied in the present
case: Reichhart instituted the taxpayer challenge against New Haven and her
claim was dismissed with prejudice by the trial court.[2]
In Reichhart I, the Court of Appeals addressed the “improper process”
element of New Haven’s abuse of process claim against Reichhart. The Court
of Appeals concluded that Reichhart’s taxpayer challenge was “procedurally
and substantively proper” and was “authorized by statute and thus
legitimate.”[3] Reichhart I, 674 N.E.2d at 32. Reichhart argues that this
finding establishes that she had “probable cause” to file the suit and,
therefore, that the malicious prosecution claim also falls. But as the
Court of Appeals correctly pointed out in Reichhart II, the probable cause
element of malicious prosecution is not identical to the improper process
element of abuse of process. The test of an improper process is whether
the legal steps were procedurally and substantively proper under the
circumstances. Reichhart I, 674 N.E.2d at 32. In contrast, probable cause
exists “when a reasonably intelligent and prudent person would be induced
to act as did the person who is charged with the burden of having probable
cause.” Maynard v. 84 Lumber Co., 657 N.E.2d 406, 409 (Ind. Ct. App.
1995). Given the differences between the definitions of the two elements,
the Court of Appeals concluded that it “could not insinuate probable cause”
into its first ruling. Reichhart II, 729 N.E.2d at 604.
We agree that the ruling in Reichhart I was not dispositive of New
Haven’s malicious prosecution claim. That does not mean, however, that the
trial court could not find, as a matter of law, that Reichhart had probable
cause to file a taxpayer challenge. Reichhart’s taxpayer challenge alleged
that New Haven’s proposed annexation “has caused or threatens to cause a
waste of public funds” and “will cause or contribute to serious financial
and other burdens to the city.” The Court of Appeals has noted on a number
of occasions that declaratory judgment proceeding brought by city taxpayers
are appropriate when the city common council’s actions:
are clearly or patently illegal, or where the council acts without
jurisdiction over the subject matter, or where there is an
unmistakable abuse of discretion in the council’s decision to annex,
or where wastage of public funds is present or imminent and is
something more than the furnishing of the normal services and
facilities attendant legal annexation.
Prock v. Town of Danville, 655 N.E.2d 553, 557 (Ind. Ct. App. 1995) (citing
Matter of the North I Annexation Area to City of Fort Wayne, 652 N.E.2d
878, 879 (Ind. Ct. App. 1995) and Montagano v. City of Elkhart 149 Ind.
App. 283, 290-92, 271 N.E.2d 475, 480 (1971).
In Count I of her lawsuit, Reichhart alleged that New Haven’s
consideration of the annexation ordinance violated the Indiana Open Door
statute. In response, the trial court granted a temporary restraining
order and New Haven voluntarily withdrew the ordinance. In a memorandum of
law to the trial court, New Haven seemed to concede that it had violated
the statute, and pronounced that “[t]he ordinance will be re-introduced in
strict conformity with the terms of the Court’s Order and in compliance
with the substantive portions of the Open Door laws.” The Court of Appeals
properly concluded that New Haven’s violation of the Open Door law in its
initial consideration of the annexation ordinance meant that the city
common council “lacked jurisdiction to act on the ordinance, and wastage
was certain to occur.” Reichhart II, 729 N.E.2d at 607. We therefore
agree with the Court of Appeals that Reichhart’s claim was “legitimate.”
The related but different issue of Reichhart’s probable cause to initiate
her challenge was not addressed by Reichhart I. However, we conclude that
the same undisputed facts demonstrate that a reasonably intelligent and
prudent person in Reichhart’s place could believe that New Haven was guilty
of the charges laid out in her taxpayer challenge. This constitutes
probable cause for purposes of New Haven’s claim of malicious prosecution,
and requires its dismissal as a matter of law.
II. Right of Petition
Because we have determined that Reichhart had probable cause to file
her lawsuit, and therefore New Haven’s malicious prosecution claim was
properly dismissed by the trial court, we need not address whether the
First Amendment right to petition the government precludes a malicious
prosecution action based on an attempt to exercise a statutory right to
challenge the validity of a governmental action. Ind.Code § 34-14-1-2
(1998)[4]; United Mine Workers, Dist. 12 v. Illinois Bar Ass’n, 389 U.S.
217, 222 (1967) (“[T]he rights to assemble peaceably and to petition for
redress of grievances are among the most precious of liberties safeguarded
by the Bill of Rights.”)
We do, however, disagree with New Haven that the Court of Appeals
opinion was as expansive as New Haven claims. Noting that this was a
question of first impression in Indiana, the Court of Appeals turned to
United States Supreme Court cases which considered immunity from malicious
prosecution charges in the context of the Sherman Anti-Trust Act and the
National Labor Relations Act. In those arenas, the Court of Appeals noted,
“it is settled that the First Amendment protects a citizen’s right of
petition regardless of intent.” Reichhart II, 729 N.E.2d at 606. Applying
the same principle, the court held that: “where, as here, a qualified
petitioner brings a legitimate claim against a governmental entity in the
manner prescribed by law, that entity is prohibited from pursuing a
malicious prosecution claim against the petitioner regardless of her
motivation in bringing the petition.” Id.
On appeal, New Haven contends that:
the ruling of the Court of Appeals means that any person may sue any
state, county, or municipal entity, or any public school corporation
or state university in Indiana, with an evil and malicious purpose and
without probable cause, so long as there is “standing” and there
appears to be no abuse of process.
In effect, New Haven argues that Reichhart II nullifies the common law of
malicious prosecution with respect to Indiana governmental entities,
collapses the torts of malicious prosecution and abuse of process and,
under the First Amendment, nullifies various state statutes and court
rules.
New Haven’s view of the Court of Appeals opinion appears to stem from
footnote 10 of the opinion:
We do not agree with Reichhart’s broad assertion that she had an
“absolute privilege” to maintain a taxpayer challenge without risking
a malicious prosecution claim. It is more accurate to say that her
taxpayer challenge was privileged because she was a qualified
petitioner who brought her claim against the City in the manner
prescribed by law.
Id. at 607. As New Haven points out, this footnote does not specify that
the claim must be “legitimate.” Yet the opinion takes care to establish
that Reichhart’s claim was “legitimate”[5] and makes it clear that she was
entitled to immunity from the malicious prosecution action because she had
both “standing and grounds” to bring the taxpayer’s challenge. Id. New
Haven asserts that the words “in the manner prescribed by law” mean “a mere
procedural hurdle” and will therefore open the door for a flood of
frivolous, malevolent taxpayer challenges sheltered from malicious
prosecution actions. We do not believe this accurately captures the
holding of the Court of Appeals. Instead, we think it is clear that the
court found a limited immunity from malicious prosecution actions for
qualified citizens who bring legitimate taxpayer challenges against a
governmental entity in compliance with all relevant statutes and court
rules. The Court of Appeals took the view that the motivation of the
taxpayer bringing the challenge is irrelevant as long as the claim is
legitimate. We do not address the constitutional issue other than to
observe that the Court of Appeals opinion is not as expansive as New Haven
claims.
Conclusion
The Court of Appeals affirmed the trial court through an
interpretation of federal constitutional law. We reach the same result
under common law. It is well settled that malice alone is not enough to
justify a charge of malicious prosecution—the claim must also lack
“probable cause.” As explained in Part I, Reichhart had the requisite
“probable cause” to bring her action against New Haven. The judgment of
the trial court is affirmed.
SHEPARD, C.J., and DICKSON, SULLIVAN, and RUCKER, JJ., concur.
-----------------------
[1] In 1991, the Indiana Declaratory Judgment Act was codified at Indiana
Code section 34-4-10. It has since been moved to Indiana Code section 34-
14-1-2. The statute provides, in part, that a taxpayer may challenge the
validity of any municipal ordinance and “obtain a declaration of rights,
status, or other legal relations thereunder.”
[2] Reichhart’s lawsuit consisted of two claims: that New Haven violated
the Open Door law and a taxpayer challenge to the ordinance itself. After
the temporary restraining order was granted in response to the first claim
and New Haven voluntarily rescinded its ordinance, Reichhart moved to
dismiss her taxpayer challenge without prejudice but the trial court
dismissed it with prejudice.
[3] “It is undisputed that, by virtue of her status as a taxpaying property
owner in New Haven, Reichhart was entitled to file a taxpayer’s action and
to initiate proceedings to force compliance with the Open Door Law and city
regulations.” Reichhart II, 729 N.E.2d at 604.
[4] Section 2 of the Uniform Declaratory Judgment Act provides:
Any person interested under a deed, will, written contract, or other
writings constituting a contract, or whose rights, status, or other legal
relations are affected by a statute, municipal ordinance, contract, or
franchise, may have determined any question of construction or validity
arising under the instrument, statute, ordinance, contract, or franchise
and obtain a declaration of rights, status, or other legal relations
thereunder.
[5] Reichhart’s original complaint alleged that the proposed annexation
“has caused or threatens to cause a waste of public funds and that it “is
clearly and patently illegal and represents a clear abuse of discretion.”
The action of the common council of a city to annex land must be considered
a proper subject of a taxpayer suit if wastage of public funds is evident
or certain to occur as a result of annexation. Reichhart II, 729 N.E.2d at
607, (quoting Montagano v. City of Elkhart, 149 Ind. App. 283, 290-92, 271
N.E.2d 475, 480 (1971)). The Court of Appeals concluded that because the
New Haven Common Council failed to conform to the Open Door Law when it
enacted the annexation ordinance, it lacked jurisdiction to act on the
ordinance and wastage was certain to occur. Thus, Reichhart’s claim
against New Haven was “legitimate” and, regardless of her motivation, she
was protected from a malicious prosecution action. Reichhart II.
City of New Haven v. Reichhart
Combined Opinion