An unpublished opinion of the North Carolina Court of Appeals does not constitute controlling legal authority. Citation is disfavored, but may be permitted in accordance with the provisions of Rule 30(e)(3) of the North Carolina Rules of Appellate Proced ure.

NO. COA03-693


Filed: 1 June 2004


    v.                        Cabarrus County
                            No. 02 CVS 795

General Guardian, Bea Crimmel,

    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.


    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.
    Defendants appeal the trial court's decision to deny their motions for sanctions pursuant to N.C. Gen. Stat. § 1A-1, Rule 11 on grounds that plaintiff's claim was either frivolous, wholly without merit, or was asserted to harass defendants. In light of our decision reversing the order dismissing this action, we need not consider defendants' argument. The denials of defendants' motions for sanctions are affirmed.
    Affirmed in part, reversed in part, and remanded.
    Judges HUDSON and GEER concur.
    Report per Rule 30(e).

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