Appeal by plaintiff from order entered 24 February 2003 by
Judge Mark E. Klass in Cabarrus County Superior Court. Heard in
the Court of Appeals 3 March 2004.
Black, Rogers, Ruth, Grossman & Hastings, P.L.L.C., by Randell
F. Hastings, for the plaintiff-appellant.
H. Morris Caddell, Jr., for defendants-appellees.
MARTIN, Chief Judge.
Plaintiff R. Bradley Smith, Jr., filed this action seeking
compensatory and punitive damages from defendants W. Edgar Pallman,
Jr. and Diann Lee Pallman upon allegations of defendants' abuse of
process. Plaintiff, who is the former husband of Diann Pallman,
alleged that defendants Diann Pallman and her father, Edgar
Pallman, conspired for Edgar Pallman to initiate a foreclosure
against plaintiff and Diann Pallman in order to achieve the
ulterior purpose of gaining an unfair advantage in an equitabledistribution proceeding which was pending between plaintiff and
Diann Pallman. Defendants filed answers to the complaint in which
they denied the material allegations of the complaint and moved to
dismiss on grounds that (1) the complaint failed to state a claim
upon which relief could be granted; (2) the trial court lacked
subject matter jurisdiction; (3) the claim was barred by res
judicata and equitable estoppel; and (4) the claim was barred by
plaintiff's failure to assert affirmative defenses and/or
compulsory counterclaims in a previous action. Defendants also
sought sanctions pursuant to N.C. Gen. Stat. § 1A-1, Rule 11.
In support of her motion to dismiss, defendant Diann Pallman
filed a transcript of testimony taken at the parties' equitable
distribution trial, as well as certain exhibits introduced at that
trial. In opposition to the motion, plaintiff filed an affidavit
to which he attached various pleadings and other documents filed in
the equitable distribution and foreclosure proceedings. The
pleading in the present case, and the materials filed in support of
and in opposition to defendants' motions to dismiss, disclose that
on 13 January 1999, Diann Pallman filed an action in Mecklenburg
County against plaintiff in which she sought spousal support,
equitable distribution of their marital property, an interim
allocation of marital property, and child custody and support.
Plaintiff filed a counterclaim seeking equitable distribution ofthe couple's property and joint custody of their two children. On
7 April 1999, defendant Edgar Pallman filed a proceeding seeking
foreclosure of a deed of trust on the couple's marital residence,
which secured a note which they had made to him. Subsequently, on
22 November 1999, Edgar Pallman caused the foreclosure proceeding
to be dismissed. In the equitable distribution proceeding,
plaintiff contended that defendant Diann Pallman's actions in
relation to the foreclosure proceeding should be considered as a
factor supporting an unequal distribution of the marital property
in his favor. On 16 August 2000, the Mecklenburg County District
Court entered a judgment in the equitable distribution proceeding,
ordering an equal distribution of the marital property, as well as
an order for child support. The district court specifically found,
after considering plaintiff's contentions of misconduct in
procuring the institution of the foreclosure action, that such
contentions and the evidence supporting them did not justify an
unequal division of the marital property in his favor.
The trial court granted defendants' motions to dismiss the
present action, but denied their motions for sanctions. Plaintiff
appeals from that portion of the order granting defendants' motions
to dismiss, and defendants appeal from that portion of the order
denying their motions for sanctions.
________________________
I.
Plaintiff presents arguments in support of each of his six
assignments of error contending that the trial court erred when it
granted defendants' motion to dismiss his complaint.
Since the court considered matters outside of the pleadings in
determining whether to dismiss the action pursuant to Rule
12(b)(6), the motion to dismiss was converted into a motion for
summary judgment. N.C. Gen. Stat. § 1A-1, Rule 12(b) (2003).
“[T]he standard of review on appeal from summary judgment is
whether there is any genuine issue of material fact and whether the
moving party is entitled to a judgment as a matter of law.”
Bruce-Terminex Co. v. Zurich Ins. Co., 130 N.C. App. 729, 733, 504
S.E.2d 574, 577 (1998); N.C. Gen. Stat. § 1A-1, Rule 56(c) (2003).
The record is viewed in the light most favorable to the nonmoving
party.
Id.
Plaintiff argues that his complaint was sufficient to state a
claim upon which relief could be granted, raised genuine issues of
material fact, and that there was no affirmative defense which
would bar his claim. We agree.
In
Hewes v. Wolfe, 74 N.C. App. 610, 614, 330 S.E.2d 16, 19
(1985), this Court stated:
In order to state a claim for the tort of
abuse of process, plaintiffs must sufficiently
allege (1) an ulterior motive, and (2) an actin the use of the legal process not proper in
the regular prosecution of the proceeding.
The ulterior motive requirement is satisfied
when the plaintiff alleges that the prior
action was initiated by the defendant or used
by him to achieve a purpose not within the
intended scope of the process used. The act
requirement is satisfied when the plaintiff
alleges that during the course of the prior
proceeding, the defendant committed some
wilful act whereby he sought to use the
proceeding as a vehicle to gain advantage of
the plaintiff in respect to some collateral
matter.
Id. (Citations omitted).
In his complaint, plaintiff alleged that defendants conspired
to institute a foreclosure proceeding “for the ulterior purpose of
achieving a collateral purpose not within the normal scope of said
process in an attempt to gain advantage for defendant Diann Lee
Pallman in her domestic action pending against the plaintiff herein
. . . .” Plaintiff's complaint further alleged, “Following the
filing and institution of said foreclosure proceedings, the
defendants thereafter undertook actions in furtherance of the
foregoing purposes by using said foreclosure proceeding in an
effort to obtain leverage and an advantage on behalf of defendant
Diann Lee Pallman in her pending domestic action . . . .” These
allegations are sufficient to satisfy both the ulterior motive and
the act requirement needed to allege a claim for the tort of abuse
of process. In support of their motions to dismiss, defendants filed
various evidentiary materials to support the contentions contained
in their answers admitting that defendant W. Edgar Pallman had
instituted a foreclosure action against plaintiff and defendant
Diann L. Pallman, but denying that they had conspired to file the
foreclosure action for an impermissible ulterior motive or had
committed any acts after the filing of the foreclosure action to
further an impermissible ulterior motive. In opposition, plaintiff
filed an affidavit and attachments which, when viewed in the light
most favorable to him, could support a finding that defendants
caused the foreclosure proceeding to be filed to achieve an
advantage in the domestic case. Suffice it to say that the
pleadings and evidentiary materials disclose the existence of
genuine issues of material fact. Thus, summary judgment can be
upheld only if one or more of the affirmative defenses asserted by
defendants would bar plaintiff's claim as a matter of law.
In their motions to dismiss, defendants argued that
plaintiff's claim was barred by equitable estoppel,
res judicata,
and collateral estoppel. Equitable estoppel occurs when a person
“induces another to believe that certain facts exist, and such
other person rightfully relies and acts upon that belief to his
detriment.”
Thompson v. Soles, 299 N.C. 484, 487, 263 S.E.2d 599,
602 (1980). In
Parker v. Thompson-Arthur Paving Co., 100 N.C. App.367, 396 S.E.2d 626 (1990), this Court stated:
The essential elements of estoppel are (1)
conduct on the part of the party sought to be
estopped which amounts to a false
representation or concealment of material
facts; (2) the intention that such conduct
will be acted on by the other party; and (3)
knowledge, actual or constructive, of the real
facts.
Id. at 370, 396 S.E.2d at 628-9.
The record does not contain any evidence showing, nor does the
defendants' brief allege, that plaintiff engaged in conduct which
amounted to a false representation or concealment of a material
fact. Thus, we reject defendants' argument that plaintiff's claim
is barred by equitable estoppel.
Under the doctrine of collateral estoppel, “a final judgment
on the merits prevents relitigation of issues actually litigated
and necessary to the outcome of the prior action in a later suit
involving a different cause of action between the parties or their
privies.”
Thomas M. McInnis & Assoc., Inc. v. Hall, 318 N.C. 421,
428, 349 S.E.2d 552, 557 (1986). For collateral estoppel to apply,
defendants must show the following:
(1) the earlier action resulted in a final judgment on
the merits, (2) the issue in question is identical to an
issue actually litigated in the earlier suit, (3) the
judgment on the earlier issue was necessary to that case
and (4) both parties are either identical to or in
privity with a party or the parties from the prior suit.
Bee Tree Missionary Baptist Church v. McNeil, 153 N.C. App. 797,
799, 570 S.E.2d 781, 783 (2002). The burden is on defendants to
show “with clarity and certainty what was determined by the prior
judgment.”
Burgess v. First Union Nat. Bank of North Carolina, 150
N.C. App. 67, 75, 563 S.E.2d 14, 20 (2002) (internal quotations
omitted).
Defendants argue that the issue of whether they misused the
legal process for an ulterior motive was actually litigated in the
equitable distribution action, and thus, the district court's
resolution of that issue controls the outcome in this case. In the
equitable distribution proceeding, plaintiff contended that
defendant Diann Pallman's alleged abuse of process regarding the
foreclosure proceeding warranted an unequal distribution of the
marital estate in his favor. The district court made the following
ruling regarding plaintiff's argument:
After considering the [plaintiff's
contentions], the Court does not find these
contentions or the evidence supporting them to
merit or justify an unequal distribution or to
overcome the legal presumption in favor of an
equal distribution.
Defendants argue that this ruling is sufficient to constitute
an actual ruling on the merits regarding whether defendants
committed the tort of abuse of process and thus, should bar re-
litigation of that issue. We disagree. A ruling that plaintiff's allegations of abuse of process by
defendants do not merit or justify an unequal distribution in an
equitable distribution proceeding is not the equivalent of a ruling
that defendants did not commit the tort. Several factors must be
considered and weighed before a court may determine whether an
equal distribution of a marital estate is equitable, and thus, such
a ruling cannot be utilized to establish a determination on one of
many issues that must be considered by the trial court in an
equitable distribution proceeding. Accordingly, defendants did not
meet their burden to show with “clarity and certainty” that the
equitable distribution action actually determined the issue of
whether defendants committed the tort of abuse of process.
Burgess, 150 N.C. App. at 75, 563 S.E.2d at 20.
Finally, under
res judicata, “a final judgment on the merits
in a prior action will prevent a second suit based on the same
cause of action between the same parties or those in privity with
them.”
McInnis, 318 N.C. at 428, 349 S.E.2d at 556. The three
elements of
res judicata are: “(1) a final judgment on the merits
in an earlier lawsuit; (2) identity of the cause of action in the
prior suit and the later suit; and (3) an identity of the parties
or their privies in both suits.”
Culler v. Hamlett, 148 N.C. App.
389, 392, 559 S.E.2d 192, 194 (2002) (citations omitted).
Defendants argue that the cause of action in the present suitis identical to that in the equitable distribution proceeding. In
the prior proceeding, the claim related to the equitable
distribution of marital property, which required the court to
consider the equity of an equal division of the property. In the
current proceeding, the claim relates to whether defendants misused
the legal process. These claims are not identical and thus,
defendants claim of
res judicata is without merit.
Defendants also moved to dismiss the abuse of process action
on the grounds that the claim should have been raised in the
foreclosure proceedings as an affirmative defense or was a
compulsory counterclaim to a prior action. We disagree.
An affirmative defense is “[a] defense which introduces new
matter in an attempt to avoid [a claim], regardless of the truth or
falsity of the allegations in the [claim]. . . .”
Roberts v.
Heffner, 51 N.C. App. 646, 649, 277 S.E.2d 446, 448 (1981). The
claim for abuse of process would not allow plaintiff to avoid the
foreclosure claim. Rather, if proven, it would compensate
plaintiff for the misuse of the foreclosure proceeding to obtain an
improper or unlawful result.
See Melton v. Rickman, 225 N.C. 700,
703, 36 S.E.2d 276, 278 (1945). Thus, abuse of process is not an
affirmative defense to the foreclosure proceeding.
Next, defendants argue the abuse of process claim was a
compulsory counterclaim to the prior foreclosure and equitabledistribution proceedings. According to Rule 13(a) of the North
Carolina Rules of Civil Procedure:
(a) Compulsory counterclaims. -
A pleading shall state as a counterclaim any claim which
at the time of serving the pleading the pleader has
against any opposing party, if it arises out of the
transaction or occurrence that is the subject matter of
the opposing party's claim and does not require for its
adjudication the presence of third parties of whom the
court cannot acquire jurisdiction.
N.C. Gen. Stat. § 1A-1, Rule 13(a) (2003).
Plaintiff's abuse of process claim did not arise out of the
same transaction or occurrence as the foreclosure or equitable
distribution claims. In the foreclosure claim, defendant W. Edgar
Pallman, Jr. sought repayment of indebtedness secured by a Deed of
Trust. In the equitable distribution proceeding, defendant Diann
Pallman sought spousal support, equitable distribution, and child
custody and support. In the abuse of process proceeding, plaintiff
alleges defendants, with ulterior motives, committed acts with
respect to the foreclosure proceeding to gain an advantage over
plaintiff in the equitable distribution proceeding. These claims,
which have an alleged connection via the abuse of process claim,
nonetheless, arose from separate and distinct transactions or
occurrences.
See Hewes v. Wolfe, 74 N.C. App. 610, 618-19, 330
S.E. 2d 16, 22 (1985) (holding that an abuse of process claim did
not arise out of the same transaction or occurrence as theproceeding claimed to be abusive). Thus, plaintiff was not
required to file his abuse of process claim as a compulsory
counterclaim to either of these prior actions.
Defendants have not met their burden of showing that there are
no genuine issues of material fact and that they are entitled to
judgment as a matter of law. The order dismissing plaintiff's
complaint is accordingly reversed, and this case is remanded to the
trial court for such further proceedings as may be required.
II.