McCauley v. Crowley Fleck ( 2022 )

03/15/2022
DA 21-0207
Case Number: DA 21-0207
IN THE SUPREME COURT OF THE STATE OF MONTANA
2022 MT 53N
DAVID McCAULEY, an individual, LEADERS WITHOUT LIMITS, INC.,
a Wyoming Corporation, and PERKINS FAMILY HOLDINGS, LLC, a Montana
Limited Liability Company,
Plaintiffs and Appellants,
v.
CROWLEY FLECK, PLLP, a Montana Professional limited liability partnership,
GRANT S. SNELL, an individual, SCOTT D. HAGEL, an individual,
CHASE D. GIACOMO, an individual, and DOES 1-10,
Defendants and Appellees.
APPEAL FROM: District Court of the Eleventh Judicial District,
In and For the County of Flathead, Cause No. DV-2019-918
Honorable Dan Wilson, Presiding Judge
COUNSEL OF RECORD:
For Appellants:
Quentin Rhoades, Rhoades Siefert & Erickson PLLC, Missoula, Montana
For Appellees:
Mikel Moore, Eric Brooks, Moore, Cockrell, Goicoechea & Johnson, P.C.,
Kalispell, Montana
Submitted on Briefs: February 9, 2022
Decided: March 15, 2022
Filed:
c ir-641.—if
__________________________________________
Clerk
Justice Jim Rice delivered the Opinion of the Court.
¶1 Pursuant to Section I, Paragraph 3(c), Montana Supreme Court Internal Operating
Rules, this case is decided by memorandum opinion and shall not be cited and does not
serve as precedent. Its case title, cause number, and disposition shall be included in this
Court’s quarterly list of noncitable cases published in the Pacific Reporter and Montana
Reports.
¶2 David McCauley, Leaders Without Limits, Inc., and Perkins Family Holdings, LLC,
(hereinafter “McCauley” unless otherwise specified)1 appeal the Eleventh Judicial District
Court’s grant of summary judgment in favor of Crowley Fleck, PLLP, Grant S. Snell, Scott
D. Hagel, and Chase D. Giacomo (hereinafter “Crowley” unless otherwise specified),
holding that McCauley’s malicious prosecution and intentional infliction of emotional
distress (IIED) claims against these Defendants fail as a matter of law. We affirm.
¶3 The underlying action spawning McCauley’s claims arose from a transaction
between McCauley and Samuel and Joyce Perkins (the “Perkinses”), an elderly married
couple living in Kalispell, concerning Perkinses’ property, which included their residence
and a 21-acre parcel of land. In 2014, McCauley mass-mailed letters to property owners
in the Flathead area expressing his interest in purchasing their property. In response, the
Perkinses contacted McCauley, despite their property being encumbered by a reverse
1
McCauley notes that Appellees’ briefing sometimes conflates David McCauley and Perkins
Family Holdings, LLC, despite the District Court never piercing the corporate veil. While
McCauley’s point is understood, the distinctions between McCauley and the various corporate
entities related to McCauley herein are not necessary to our resolution of the appeal.
2
mortgage they had entered a few years prior. McCauley met with them and solicited their
involvement in a complex sales transaction of their property. Including a letter of intent,
the transaction documents were more than 70 pages in length and were largely drafted by
McCauley himself. The transaction can safely be described as extremely favorable to him.
¶4 While this transaction’s legality is not before the Court here, a discussion of its terms
is necessary. Some of the transaction’s more remarkable provisions included:
 A residential buy-sell form agreement wherein McCauley agreed to purchase the
Perkinses’ property for $400,000. No appraisal in the record evidences this value;
the property had been valued at $500,000 by the reverse mortgage lender a few years
earlier. McCauley agreed to pay $2,000 in earnest money, $10,000 more at closing,
and $388,000 through different financing prongs. Perkinses were obligated to pay
all closing costs. Multiple addenda attached to the agreement superseded many of
its provisions, rendering them void or misleading as initially stated.
 Title to the property would be, and was, transferred to an entity named Perkins
Family Holdings, LLC, which was created by another McCauley-affiliated entity
for the sole purpose of holding title to the property. Despite the use of their name,
the Perkinses had no affiliation with this LLC. The justification for the existence of
Perkins Family Holdings, LLC was to obfuscate the title owner of the property to
avoid detection of the transfer and the potential implication of the reverse
mortgage’s due-on-sale clause.
3
 The bulk of Perkinses’ theoretical proceeds from the sale was via a note that
provided for payment of $74,255.24 to them ten years after the sale, in 2025. This
amount earned interest at a below-market fixed rate of 3% per annum, which was
non-compounding. The Perkinses would have been in their 90s at the time of
payment.
 The Perkinses each signed a document appointing McCauley (the individual) as
their attorney-in-fact regarding the property. The substance the power-of-attorney
documents is set forth in a single sentence approximately 450 words in length,
which effectively granted McCauley full control of the property.2
 A “rent back” agreement required the Perkinses to remain on the property for 36
months, which was consistent with a term of the reverse mortgage, paying $425 per
month in rent. After the initial 3-year period, Perkinses rent would increase to
$1,425 per month on a month-to-month basis. Perkinses’ rent obligation for the first
year was deducted from their proceeds at closing.
 Insurance on the property was to remain in the Perkinses’ name, but in the event of
an insurable loss, the insurance proceeds would be paid to McCauley. Perkinses
remain obligated for utilities.
2
A question raised by these documents is why it would be necessary for a buyer to be appointed
attorney-in-fact for property passing to it upon closing. Presumably, this would provide authority
for McCauley to take actions regarding the property in the name of the Perkinses to further the
scheme of avoiding detection of the transaction.
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 The transaction documents prohibited all parties, including the escrow agent, who
would be so instructed, from informing the reverse mortgage lender of the
transaction for the purpose of avoiding triggering the mortgage’s due-on-sale clause.
 The documents were generally written in a meandering, longwinded manner, and
include numerous legal terms of art used incorrectly or only partially correctly.
¶5 Summarizing the transaction, after closing costs and other deductions, Perkinses
received $5,095.07 at closing from the agreement’s $12,000 “up front” money. McCauley
obtained title and “rented back” the property to the Perkinses for $425 per month for a
mandatory 36-month period. After 36 months, the rental agreement converted into a
month-to-month agreement at the rate of at least $1,425 per month. McCauley was
required to make payments on the underlying reverse mortgage in the amount of $1,368.22
per month, but not until three years after the closing, allowing interest to accrue on that
principal obligation. Ten years after closing, in late 2025, McCauley was obligated to pay
off the reverse mortgage’s balance and pay the note representing Perkinses’ equity interest
in the property, in the amount of $74,255.24, plus interest.
¶6 In February 2018, three years after closing, McCauley increased the Perkinses’ rent
to $1,435 per month pursuant to the transaction. Also in February 2018, the reverse
mortgage lender learned of the title transfer and invoked the mortgage’s due on sale clause.
To satisfy the reverse mortgage obligation, McCauley, as he testified, intended to sell the
property. In late February, McCauley notified Perkinses that their tenancy would terminate
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at the end of March. The Perkinses were also withholding rent, and in early March 2018,
McCauley commenced eviction proceedings.
¶7 The Perkinses, now facing a possible foreclosure from the reverse mortgage lender
and eviction from their home, consulted the Defendants, who agreed to represent the
Perkinses pro bono. In response to the eviction proceeding, Crowley filed a First Amended
Verified Answer to Complaint, Affirmative Defenses, Counterclaims, and Demand for
Jury Trial (Counterclaim) against McCauley asserting claims for declaratory relief,
negligence/breach of fiduciary duty, negligent misrepresentation, fraud, constructive fraud,
deceit, fraudulent inducement, recission of contract, violation of the Montana Consumer
Protection Act, violation of the Montana Mortgage Act, and to pierce the corporate veil.
¶8 After extensive litigation, the parties entered a settlement, under which McCauley
and the Perkinses mutually released all claims against each other; McCauley agreed to pay
the Perkinses $13,000, concurrently upon settlement; the Perkinses agreed to vacate the
property and release McCauley’s obligation under the promissory note for the 2025
payment of $74,255; and each party paid/bore their own attorney fees. The mutual release
of claims specifically provided that McCauley reserved all claims against Crowley. The
District Court approved the settlement and dismissed the action with prejudice.
¶9 In September 2019, McCauley filed this action against Crowley. The First
Amended Complaint alleged: Count 1, Defamation; Count 2, Tortious Interference;
Count 3, Abuse of Process; Count 4, Malicious Prosecution; Count 5, Intentional Infliction
of Emotional Distress; and Count 6, Negligent Infliction of Emotional Distress. Crowley
6
moved for summary judgment, and McCauley subsequently abandoned his defamation,
abuse of process, and negligent infliction of emotional distress claims. The District Court
entered an order granting summary judgment (Summary Judgment Order) in Crowley’s
favor “on all of [McCauley’s] claims in the First Amended Complaint.” McCauley appeals
from the Summary Judgment Order as it pertains to the malicious prosecution and IIED
claims.3
¶10 We review a district court’s grant or denial of summary judgment de novo. Crane
Creek Ranch v. Cresap, 2004 MT 351, ¶ 8, 324 Mont. 366, 103 P.3d 535 (citation omitted).
“Summary judgment is appropriate when ‘there is no genuine issue as to any material fact
and that the movant is entitled to judgment as a matter of law.’” Nat’l Indem. Co. v. State,
2021 MT 300, ¶ 21, 406 Mont. 288, 499 P.3d 516 (citing M. R. Civ. P. 56(c)(3)). We
therefore review only the “‘pleadings, depositions, answers to interrogatories, admissions
on file, and affidavits’ to determine if there is a material issue of fact and whether the
moving party is entitled to judgment as a matter of law.” Depositors Ins. Co. v. Sandidge,
2022 MT 33, ¶ 5, 407 Mont. 385, ___ P.3d ___ (quoting Andersen v. Schenk, 2009 MT
399, ¶ 2, 353 Mont. 424, 220 P.3d 675). “We draw all reasonable inferences from the
evidence offered in favor of the party opposing summary judgment; but ‘conclusory
statements, speculative assertions, and mere denials are insufficient to defeat a motion for
3
McCauley does not address the District Court’s tortious interference analysis and therefore we
do not address it herein.
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summary judgment.’” B.Y.O.B., Inc. v. State, 2021 MT 191, ¶ 12, 405 Mont. 88, 493 P.3d
318 (quoting Sullivan v. Cherewick, 2017 MT 38, ¶ 9, 386 Mont. 350, 391 P.3d 62).
¶11 McCauley argues the District Court erred in granting summary judgment on the
malicious prosecution and IIED claims by applying the wrong standard. McCauley
contends the District Court required him to produce facts clearly establishing his positions,
rather than merely demonstrating the evidence on material facts was sufficiently disputed
to create a jury issue that barred summary judgment.
¶12 The elements of a malicious prosecution claim are:
(1) a judicial proceeding was commenced and prosecuted against the
plaintiff;
(2) the defendant was responsible for instigating, prosecuting, or continuing
such proceeding;
(3) there was lack of probable cause for the defendant’s acts;
(4) the defendant was actuated by malice;
(5) the judicial proceeding terminated favorably for plaintiff; and
(6) the plaintiff suffered damage.
Plouffe v. Mont. Dep’t of Pub. Health & Human Servs., 2002 MT 64, ¶ 16, 309 Mont. 184,
45 P.3d 10 (citations omitted). “If one of these elements is not proven by prima facie
evidence, judgment as a matter of law may be entered for the defendant.” Plouffe, ¶ 16
(citing Orser v. State, 178 Mont. 126, 135, 582 P.2d 1227, 1232 (1978)).
¶13 “A malicious prosecution begins in malice, without probable cause to believe the
action can succeed, and finally ends in failure.” Plouffe, ¶ 16 (citation omitted). The
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District Court concluded that McCauley failed to establish prima facie evidence of both
lack of probable cause and favorable termination of the underlying judicial proceeding.
Because we conclude the District Court correctly determined that probable cause existed
for the underlying action, we affirm on that basis alone.
¶14 In the context of malicious prosecution, “an individual has probable cause to bring
civil litigation when they have a reasonable belief in the existence of facts upon which the
claim is based, and reasonably believe that those facts give rise to a valid claim.” Spoja v.
White, 2014 MT 9, ¶ 12, 373 Mont. 269, 317 P.3d 153 (citing Hughes v. Lynch, 2007 MT
177, ¶ 16, 338 Mont. 214, 164 P.3d 913; Plouffe, ¶¶ 18-19). “Probable cause is determined
under an objective standard on the basis of the facts known to the party initiating the legal
action . . . the issue must be submitted to the jury for resolution when direct and
circumstantial evidence related to the defendant’s knowledge is susceptible to different
conclusions by reasonable persons.” Plouffe, ¶ 18 (citation omitted). Probable cause
becomes a question of law, however, when based on the totality of the circumstances, “no
evidentiary conflict exists and the uncontroverted evidence admits only one conclusion.”
Plouffe, ¶¶ 18-19 (citations omitted).
¶15 The District Court concluded that Crowley had probable cause to file the
above-referenced claims based upon the information it possessed at the time of filing. The
court reasoned it was undisputed that, by the time the claims were filed, Crowley had met
with the Perkinses several times, learning about their interactions with McCauley; learned
that the transaction with McCauley had triggered a mortgage foreclosure by the reverse
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mortgage holder; reviewed the transaction documents and eviction filings possessed by the
Perkinses; preliminarily investigated McCauley and his other dealings; conducted
substantial legal research regarding possible claims arising from the transaction; and
obtained the Perkinses’ verification of the Counterclaim’s contents. It is undisputed that
Perkinses recounted to Crowley, to the best of their ability, the details of their transaction
with McCauley, in addition to providing Crowley with the transaction documents, but that
they were unable to articulate the precise terms of the transaction beyond their general
understanding. As described above, the documents themselves demonstrate a complex
transaction that, at the very least, was steeply tilted in McCauley’s favor. Stripped to its
essence, the transaction: 1) questionably valued Perkinses’ interest in the property;
2) transferred title to McCauley for approximately $5,000 at closing; 3) required Perkinses
to pay rent for the property, starting at $425 per month for three years and then increasing
to $1,425 per month; 4) appointed McCauley attorney-in-fact to take actions related to the
property in Perkinses’ name; 5) concealed the transaction from Perkinses’ mortgage holder
in violation of that mortgage; 6) delayed payment of Perkinses’ equity interest for ten years
at a below-market interest rate, scheduling the payment when Perkinses were in their 90s.
In contrast, under the reverse mortgage, Perkinses could have kept title to their property,
stayed in the property without a mandatory payment obligation, and avoided payment until
they sold or moved from the property. The $1,425 monthly payments, had Perkinses paid
them, would have exceeded the $74,255 payoff of their interest by 2025. The transaction
crashed when the efforts to conceal it from the reverse mortgage company failed.
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¶16 We conclude the undisputed evidence demonstrates a reasonable belief, known by
Crowley at the time of filing the clams, that the Perkinses’ were induced into this
transaction through fraud or misrepresentation, and that the content of the transaction
constituted fraud, a breach of consumer protections, a violation of other duties, or was
otherwise unlawful. All of the counterclaims Crowley filed are related to the facts known
to it and represent valid claims against McCauley. Thus, as a matter of law, Crowley had
probable cause to file the claims. See Spoja, ¶¶ 12-13.
¶17 McCauley argues the District Court improperly weighed the Perkinses’ deposition
testimony in Crowley’s favor, particularly regarding six representations McCauley made
to the Perkinses in order to secure their signing of the transaction documents. McCauley
also points to excerpts from the Perkinses’ depositions wherein they cannot specify the
falsehoods McCauley allegedly made to them regarding the transaction, and where Samuel
Perkins cannot recall seeing or signing the Counterclaim at the time he verified it.
McCauley contends that a jury could find from these excerpts that Crowley never reviewed
the counterclaims with the Perkinses and had them “sign a verification of a set of
misrepresentations [they] never knew about or believed in.” Thus, a jury could also find
that Crowley lacked the necessary probable cause to allege the misrepresentations it
attributed to McCauley in the Counterclaim.
¶18 The excerpt from Joyce Perkins’ deposition is a single page and, as such, the context
of the questioning from which it is excerpted is unknown. Joyce apparently represented,
however, that at the time of her deposition she could not recall anything McCauley said
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during the transaction that was untrue. Likewise, McCauley points to an excerpt from
Samuel Perkins’ deposition in which he struggles to remember what the misrepresentations
alleged in the Counterclaim were, and simply stated that, “there’s a lot of
misrepresentation, but I don’t have those things on the tip of my tongue.”
¶19 After reviewing the deposition transcripts, we disagree with McCauley’s argument.
In establishing whether probable cause existed, the issue is whether at the time of filing the
complaint the defendant had a reasonable belief in facts that would cause a reasonable
person to file suit. Spoja, ¶ 13. Even viewing this testimony in the light most favorable to
McCauley, it merely establishes the Perkinses could not recall or explain at the time of
their deposition the specific falsehoods alleged in the Counterclaim. That may have
weakened their case, but it does not support a conclusion that they did not have one. And
we must remember that the Perkinses are not the defendants in this action—the claim is
made against Crowley, regarding what Crowley understood at the time it filed the
Counterclaim. Spoja, ¶ 15. McCauley’s position—that because the elderly Perkinses
could not remember specific misrepresentations during a years-later deposition, Crowley
did not have a reasonable basis to believe in the facts underlying the Counterclaim at the
time it was filed—constitutes speculation, rather than direct evidence disputing what
Crowley knew. While evidence is reviewed on summary judgment in the light most
favorable to the non-moving party, summary judgment cannot be defeated by speculation
alone. B.Y.O.B., Inc., ¶ 12. Probable cause becomes a question of law when, based on the
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totality of the circumstances, “no evidentiary conflict exists and the uncontroverted
evidence admits only one conclusion.” Plouffe, ¶¶ 18-19 (citations omitted).4
¶20 Finally, McCauley challenges the District Court’s granting of summary judgment
in Crowley’s favor on his IIED claim. A stand-alone IIED claim can be maintained only
upon a showing that the plaintiff “suffered ‘serious’ or ‘severe’ emotional distress as the
reasonably foreseeable consequence of the defendant’s act or omission.” Puryer v. HSBC
Bank USA, Nat’l Ass’n, 2018 MT 124, ¶ 38, 391 Mont. 361, 419 P.3d 105 (quoting Sacco
v. High Country Indep. Press, 271 Mont. 209, 237, 896 P.2d 411, 428 (1995)). But a
privileged action, such as exercising a legal right, cannot become the basis for an IIED
claim. Judd v. Burlington N. & Santa Fe Ry., 2008 MT 181, ¶ 31, 343 Mont. 416, 186 P.3d
214 (citation omitted). McCauley’s arguments that he suffered serious or severe emotional
distress stem from his allegations that Crowley lacked probable cause to file its
counterclaims. Because we affirm the District Court’s conclusion that McCauley has not
established a claim for malicious prosecution, McCauley’s IIED claim likewise fails
because Crowley was pursuing its legal rights in a permissible way. See Judd, ¶¶ 30-31
(citations omitted).
4
McCauley also argues that an excerpt of Samuel’s deposition evidences that Crowley did not
read or discuss the Counterclaim with him before having him sign it. Even if that assertion is true,
it does not undermine what Crowley knew at the time the Counterclaim was filed. Spoja, ¶ 15.
Rather than raise an issue as to probable cause, the potential questions raised by the testimony go
to Crowley’s duty to its client and standards of care, not to malicious prosecution, except, again,
by speculation. See Spoja, ¶ 15.
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¶21 We have determined to decide this case pursuant to Section I, Paragraph 3(c) of our
Internal Operating Rules, which provides for memorandum opinions. This appeal presents
no constitutional issues, no issues of first impression, and does not establish new precedent
or modify existing precedent. The District Court correctly granted summary judgment in
Crowley’s favor.
¶22 Affirmed.
/S/ JIM RICE
We concur:
/S/ MIKE McGRATH
/S/ JAMES JEREMIAH SHEA
/S/ INGRID GUSTAFSON
/S/ DIRK M. SANDEFUR
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