No. 14585
I THE SUPREBE COURT O THE STATE O IWlTPANA
N F F
1979
RIcH?mD D. MSUIRE,
P l a i n t i f f and Appellant,
-VS-
JESS C. ARMITAGE,
Defendant and Respondent.
Appeal froan: D i s t r i c t Court of the Fifth Judicial D i s t r i c t ,
Honorable W. W. Lessley, Judge presiding.
Counsel of Record:
For Appellant:
T h n a s C. Honzel argued, Helena, Fbntana
For F&spndent:
~ r r u w ,Sedivy and Olson, B o z m , mntana
Thomas A. Olson argued, Bozeman, Fbntana
Suhnitted: June 12, 1979
Decided:
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Filed:
Honorable James M. Salansky, District Judge, sitting in place
of Mr. Justice Sheehy, delivered the Opinion of the Court.
Plaintiff appeals from the findings of fact, conclusions
of law and judgment entered by the District Court, Madison County,
dismissing plaintiff's complaint and awarding defendant general
damages, attorney fees, and costs on the grounds that the suit
had been maliciously prosecuted.
In August 1972, plaintiff, Richard McGuire, contacted
defendant, Jess Armitage, for the purpose of discussing the sale
of certain real property owned jointly by plaintiff, with his now
deceased wife and Keith and Leah Rush. Defendant, a licensed real
estate agent, orally agreed to list the property. Approximately
one month later, defendant located a possible buyer, a neighbor-
ing landowner named Herbert Wellington.
A buy-sell agreement was executed providing that the
McGuires would maintain possession of the house on the land until
April 15, 1973, if they needed a personal dwelling. The document
also provided that a final agreement would follow.
Plaintiff informed defendant that he wanted the final agree-
ment to be drawn quickly because his wife was ill and he wanted
money to build a new house. Defendant suggested that James H.
Morrow, an attorney in Bozeman, Montana, prepare the final agree-
ment. Plaintiff agreed, and a contract for deed was signed on
October 31, 1972.
Some months later, Wellington filed suit in District Court
to evict plaintiff from the land because plaintiff had remained
in the house in violation of the agreement. Wellington's attorney
in the matter was James H. Morrow. (The record of the action,
cause No. 6306, is appended to the District Court file.) In a
judgment entered April 3, 1974, the District Court ordered plain-
tiff to turn over possession of the dwelling house and surrounding
real property to Wellington.
In March 1973, plaintiff filed a written complaint
with the Montana Board of Real Estate alleging defendant had
failed to disclose that James H. Morrow was representing
Wellington at the time of the real estate transaction. Edmund
F. Sheehy, a special investigator for the Department of Li-
censing, Montana Real Estate Board, conducted an investigation of
the matter in Ennis, Montana, and the surrounding area. A report
was then filed by Sheehy with the secretary of the ~ o a r dof ~ e a l
Estate, Matt Brown. Brown, in turn, gave the information to the
Board and the complaint was dismissed. An index card in the
Board's file was marked "no issue", and dated July 23, indicating
that the case was closed. Plaintiff, however, was never notified
of the disposition of the case.
On June 14, 1977, plaintiff filed a complaint in ~istrict
Court, Madison County, alleging that defendant had failed to dis-
close James H. Morrow's status as Wellington's attorney, thereby
damaging plaintiff because certain terms had not been included in
the final agreement. The cause was tried by the District Court,
sitting without a jury, on May 11, 1978. On June 14, 1978, the
District Court entered findings of fact and conclusions of law.
The court found that defendant had disclosed to plaintiff that
James H. Morrow was Wellington's attorney and dismissed the com-
plaint. In response to defendant's counterclaim, the court found
that plaintiff did not have probable cause to file the complaint
and concluded that the suit had been maliciously prosecuted. It
was determined that defendant had suffered injury to his reputation,
health, business and credit. The District Court estimated that
an award of $1,000 would compensate defendant for the damages in-
curred. Judgment was entered August 11, 1978, directing plaintiff
to pay defendant's damages, attorney fees and costs. Plaintiff's
notice of appeal was filed on September 1, 1978.
Plaintiff frames the issues in the following manner:
1. Did the District Court err in denying plaintiff's
motion to dismiss defendant's counterclaim?
2. Was there sufficient evidence presented to support
finding of fact No. 10 that plaintiff's complaint with the Board
of Real Estate had been dismissed?
3. Was there sufficient evidence presented to support
finding of fact No. 13 that in filing the complaint in this case,
the plaintiff did not have probable cause?
4. Was there sufficient evidence presented to conclude
that defendant was entitled to have judgment against the plain-
tiff on his counterclaim?
5. Did the District Court err in using cause No. 6306
for concluding that plaintiff's complaint should be dismissed and
that defendant should have judgment on the counterclaim?
6. Did the District Court err in dismissing plaintiff's
complaint?
A malicious prosecution has been briefly defined as one
that is begun in malice, without probable cause to believe that
it can succeed, and that finally ends in failure. McIntosh v.
City and County of Denver (1936), 98 Colo. 403, 55 P.2d 1337.
The elements necessary to make out a prima facie case of
malicious prosecution were noted by this Court 65 years ago in
Stephens v. Conley (1914), 48 Mont. 352, 369, 138 P. 189, 193-194.
A plaintiff is required to allege and prove:
"(a) That a judicial proceeding was commenced and
prosecuted against him; (b) that the defendant was
responsible for instigating, prosecuting or continu-
ing such proceeding; (c) that there was want of prob-
able cause for defendant's act or acts; (d) that he
was actuated by malice; ( e ) that the proceeding
terminated favorably for plaintiff; and (f) that plain-
tiff suffered damage with the amount thereof,"
More recently, the same elements were set forth at 52
Am Jur 2d Malicious Prosecution, 56, p. 190, wherein it was noted
that the judicial proceeding complained of may be civil, criminal
administrative or disciplinary in nature.
In the case on appeal, the judicial proceeding which de-
fendant alleged was maliciously prosecuted was before an admin-
istrative board--the Montana Board of Real Estate. An action for
malicious prosecution may be founded upon the institution of a
proceeding before an administrative agency. This rule is in no
way dependent upon the type of judicial review which is allowed
after decision of the administrative agency involved. Hardy v.
Vial (1957), 48 Cal.2d 577, 311 P.2d 494; Restatement 2d, Torts,
8680; Anno. 143 A.L.R. 157.
Want of probable cause is the very gist of an action for
malicious prosecution. Wilson v. Gehring (1968), 152 Mont. 221,
448 P.2d 678; Noblett v. Bartsch (1903), 31 Wash. 24, 71 P. 551.
Although malice may be inferred from want of probable cause, Wendel
v. Metropolitan Life Ins. Co. (1928), 83 Mont. 252, 272 P. 245,
want of probable cause cannot be inferred from malice. Cornner v.
Hamilton (1922), 62 Mont. 239, 204 P. 489.
The requirement that the judicial proceeding has been term-
inated favorably to the plaintiff necessarily implies that an action
for malicious prosecution may not be asserted by way of a cross-
complaint or counterclaim in the original proceeding. Baker v.
Littman (1956), 138 Cal.App.2d 510, 292 P.2d 595. This Court in
Bollinger v. Jarrett (1965), 146 Mont. 355, 406 P.2d 834, relied
on Baker in refusing to overturn a summary judgment against a
counterclaim for malicious prosecution. However, the Court's opin-
ion unnecessarily narrows the rule:
"It is also contended that it was error for the
court to render summary judgment against appellant-
buyers' counterclaim. The basis of the counterclaim
was that the sellers' action wrongfully injured the
credit standing of the buyers. The only possible
grounds for such a claim are libel and malicious
prosecution, neither of which can be sustained here.
There is no libel because any publication made in a
judicial proceeding is privileged under R.C.M. 1947
864-208. And malicious prosecution founded on a civil
action is not the proper subject of a counterclaim
since it requires proof of termination of the former
proceeding in favor of the defendant therein. Baker
v. Littman, 138 Cal.App.2d 510, 292 P.2d 595; 54
C.J.S. Malicious Prosecution 854, p. 1021." (Em-
phasis added.) 146 Mont. at 360, 406 P.2d at 837.
A counterclaim for malicious prosecution would not be
premature if the claim is based on a previously terminated pro-
ceeding. 52 Am Jur 2d Malicious Prosecution, 814, p. 195. The
Bollinger case incorrectly states that malicious prosecution may
not be the subject of a counterclaim, without explaining that
the rule applies only where the counterclaim is made during the
original proceeding.
If the above-mentioned rules are applied to the instant
case, it appears that defendant's recovery for malicious prose-
cution should stand despite some irregularities in the District
Court's findings of fact. In findings of fact No. 13, the court
states that plaintiff did not have probable cause in filing "this"
complaint. The pertinent complaint can only be the one filed with
the Board of Real Estate and, in fact, the evidence in the record
concerns only the previous complaint. The Board concluded that
"no issue" existed and an index card was placed in its file noting
such. The conclusion had been reached after a special investiga-
tion had taken place and a board meeting had been held. (Finding
of fact No. 10 concerns these facts.) Therefore, although the
District Court incorrectly refers to the complaint before it, the
record and other findings clearly reveal that the proceeding in-
stigated without probable cause (for purposes of the counterclaim)
was the one filed with the Board of Real Estate.
Since defendant's counterclaim was based on a proceeding
that had terminated in his favor and the proceeding had been in-
stigated without probable cause, the District Court properly in-
ferred malice from the circumstances and upheld the counterclaim.
"Reliance upon the advice of counsel, provided
it is given in good faith and is based upon a
full and fair statement of the facts by the
client, may afford the latter a complete defense
to an action for malicious prosecution. [Citing
authority.] But it is an affirmative defense.
It may be shown under a general denial in the
answer [citing cases], but the burden of estab-
lishin~it is uDon the defendant." Masterson v.
Pig'n Whistle ~br~oration (1958), 161 ~ . ~ . 2 323,
d
326 P.2d 918, 929. (Emphasis added.)
Only on appeal does plaintiff raise the contention that he relied
on the advice of his counsel. The defense was not presented
nor proved to the District Court.
Finding of fact No. 9 states:
"That said WELLINGTON thereafter filed claim against
the McGuires and Rushes in this Court in Cause No.
6306, and this Court takes judicial notice of said
action and all matters contained therein, and finds
therefrom that the Plaintiff herein was making the
same claims of failure to disclose that MORROW was
the attorney for said WELLINGTON, and that this Court
did, after trial, give judgment in favor of said
WELLINGTON, and the Court further finds that in said
Cause No. 6306 a dispute over distribution of money
did exist between said McGuires and said Rushes.
This Court did find in favor of said Rushes and that
said matter has been settled."
Plaintiff contends the District Court considered cause
No. 6306 to be dispositive of the instant case. However, the
finding of fact does not state that the complaint was dismissed
because a similar claim was made in cause No. 6306. The District
Court dismissed the complaint because it believed defendant's
testimony that he informed plaintiff that James H. Morrow was
Wellington's attorney. Finding of fact No. 7 formed the basis of
the dismissal:
"That at the time of the original Receipt and Agree-
ment to Sell and Purchase, the Plaintiff herein
told the Defendant, as a licensed realtor and an
employee of First National Insurance Group of Ennis,
Montana, that he wanted the final agreement to be
drawn quickly, as his wife was ill and he wanted
monies to build a new house; that the Defendant then
informed Plaintiff that said J. H. Morrow was the
attorney for said WELLINGTON, and that what he pre-
pared would be acceptable to WELLINGTON; that the
Defendant did then contact said MORROW to prepare the
agreement."
Defendant's testimony concerning his disclosure of James
H. Morrow's status appears on page 89 of the transcript. "Where
the evidence is conflicting, but substantial evidence appears in
the record to support the judgment, the judgment will not be dis-
turbed on appeal . . ." Jessen v. O'Daniel (1959), 136 Mont. 513,
In summary, cause No. 6306 was not relied on by the Dis-
trict Court to conclude that defendant had disclosed James H.
Morrow's status. Sufficient evidence exists in the record itself
to support dismissal of the complaint.
With respect to the issue of whether the administrative
proceeding before the Board of Real Estate had terminated in de-
fendant's favor, finding of fact No. 10 states as follows:
"That the Plaintiff herein did cause a sworn complaint
to be filed against Defendant before the Montana Real
Estate Commission on March 13, 1973, with details as
set forth in his Complaint filed in this cause, and as
testified by him in this cause and cause No. 6306;
that the Montana Real Estate Commission, through its
Special Investigator, did make an investigation of the
Company by inquiry of Mr. Rush and realtors and others
in the area; that the records of the Montana Real Estate
Commission reflect and that the investigation was closed
July 23, 1973, and the Complaint was dismissed."
Substantial evidence appears in the record to support
that finding, and was therefore properly used by the District
Court to conclude that defendant was being maliciously prosecuted
by plaintiff.
Af firmed.
;
\ F 3- * *-A..
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Hon. James. M. Salansky, District
Judge, sitting in place of ~r.'~ustice
~ o h '. Sheehy
nc .
We concur:
&S>iiz
ustices