Case Information
*1 Filed 1/23/20 by Clerk of Supreme Court IN THE SUPR EME COURT STATE OF NORTH DAKOTA 2020 ND 22
PHI Financial Services, Inc. Plaintiff and Appellee
v. Johnston Law Office, P.C., Defendant and Appellant
and Choice Financial Group, Defendant
аnd N.Starr, LLC, Lee Finstad, and Jeff Trosen, Garnishees and Appellants No. 20180330
Appeal from the District Court of Grand Forks County, Northeast Central Judicial District, the Honorable Steven E. McCullough, Judge.
and
Johnston Law Office, P.C.,
a North Dakota professional corporation, Plaintiff and Appellant
v.
Jon Brakke, an attorney at law,
and Vogel Law Firm, Ltd., a North Dakota
professional corporation, and PHI Financial
Services, Inc., an Iowa corporation, Defendants and Appellees No. 20190001
Appeal from the District Court of Cass County, East Central Judicial District, the Honorable Lonnie Olson, Judge.
AFFIRMED.
Opinion of the Court by Crothers, Justice.
Joseph A. Wetch (argued) and Ian McLean (on brief), Fargo, ND, for plaintiff and appellee PHI Financial Services, Inc.
DeWayne A. Johnston (argued) and David C. Thompson (appeared), Grand Forks, ND, for defendant and appellant Johnston Law Office, P.C.
Drew J. Hushka (argued) and Jon R. Brakke (on brief), Fargo, ND, for defendants and appellees Jon Brakke and Vogel Law Firm, Ltd.
PHI Financial Services v. Johnston Law Office, et al.
Nos. 20180330 and 20190001
Crothers, Justice.
[¶1] In these consolidated appeals, garnishees N.Starr, LLC; Lee Finstad; and Jeff Trosen appeal from a Grand Fоrks County district court order dismissing their counterclaims in a garnishment proceeding, and Johnston Law Office, P.C. (“Johnston Law”) appeals from a Cass County district court order dismissing its action. Both orders dismissed their respective claims in each case against PHI Financial Services, Inc. (“PHI”) and Jon Brakke and the Vogel Law Firm, Ltd. (collectively, “Vogel Law”). We affirm the orders.
I Our decisions set forth the history of this litigation and related cases.
See Johnston Law Office, P.C. v. Brakke
,
Vogel Law and PHI in March 2018, asserting claims for abuse of process, tortious interference with a business relationship, and conversion. Johnston Law also asserted a claim against PHI for vicarious liability. Vogel Law and PHI moved to dismiss the complaint. In a December 2018 order, the Cass County court granted Vogel Law and PHI’s motion to dismiss, holding Johnston Law failеd to allege any claim upon which relief can be granted.
II Our standard for reviewing a decision dismissing a complaint under
N.D.R.Civ.P. 12(b)(6) for failure to state a claim is well established:
“A motion to dismiss a complaint under N.D.R.Civ.P. 12(b)([6]) tests the legal sufficiency of the statement of the claim presented in the complaint. Under N.D.R.Civ.P. 12(b)([6]), a complaint should not be dismissed unless it is disclosed with certainty the impossibility of proving a claim upon which relief can be granted. On appeal, the comрlaint must be construed in the light most favorable to the plaintiff, taking as true the well-pleaded allegations in the complaint.”
In re Estate of Dionne
,
III Johnston Law argues both district courts erred in dismissing its claims
fоr abuse of process for failure to state a claim because both misinterpreted *5 N.D.C.C. § 32-09.1-04, which requires ten days’ notice before a garnishee summons may be issued. [1] Generally, an “[a]buse of process occurs when a person uses a legal
process, whether criminal or civil, against another primarily to accomplish a
purpose for which it is not designed.”
Riemers v. Hill
,
“Some definite act or threat not authorized by the process, or aimed at an objective not legitimate in the use of the process, is required; and there is no liability where the defendant has done nothing more than carry out the process to its authorized conclusion, even though with bad intentions. The improper purpose usually takes the form of coercion to obtain a collateral advantage, not properly involved in the proceeding itself, such as the surrender of property or the payment of money, by the use of the process as a threat or a club. There is, in other words, a form of extortion, and it is what is done in the course of negotiation, *6 rather than the issuance or any formal use of the process itself, which constitutes the tort.”
Jordet , at ¶ 20 (quoting Stoner , at 751). Johnston Law argues the district courts erred in dismissing the abuse-
of-process claims by misinterpreting N.D.C.C. § 32-09.1-04, requiring ten days’ notice before a garnishee summons may be issued. They assert that the defendants’ failure to serve the ten-day notice before issuing the garnishee summons rendered the garnishment void. They contend this establishes their claim for abuse of process. Johnston Law’s issue therefore requires us to construe N.D.C.C. § 32-09.1-04 to ascertain whether a ten-day notice before issuing a garnishee summons was required. We have discussed our rules for statutory interpretation:
“Interpretation of a statute is a question of law fully
reviewable on appeal. Our primary goal in statutory construction
is to ascertain the intent of the legislature, and we first look to the
plain language of the statute and give each word of the statute its
ordinary meaning. When the wording of a statute is clear and free
of all ambiguity, the letter of it is not to be disregarded under the
pretext of pursuing its spirit. If, however, the statute is ambiguous
or if adherence to the strict letter of the statute would lead to an
аbsurd or ludicrous result, a court may resort to extrinsic aids,
such as legislative history, to interpret the statute. A statute is
ambiguous if it is susceptible to meanings that are different, but
rational. We presume the legislature did not intend an absurd or
ludicrous result or unjust consequences, and we construe statutes
in a practical manner, giving consideration to the context of the
statutes and the purpose for which they were enacted.”
State v. G.C.H.
,
“At least ten days before the issuance of any garnishee summons against the earnings of any person , the creditor shall serve upon the debtor a notice that a garnishee summons may be issued. . . . Failure to serve the notice renders any subsequent garnishment void.”
(Emphasis addеd.) This section requires ten days’ notice when the “earnings” of a “person” are to be garnished. A “person” includes a corporation. N.D.C.C. § 32-09.1-01(4). Section 32-09.1-01(3), N.D.C.C., defines “earnings”:
“‘Earnings’ means compensation paid or payable for personal services, whether denominated as wages, salary, commission, bonus, or otherwise , and includes periodic payments pursuant to a pension or retirement program. ‘Earnings’ does not include social security benеfits or veterans’ disability pension benefits, except when the benefits are subject to garnishment to enforce any order for the support of a dependent child. ‘Earnings’ includes military retirement pay.”
(Emphasis added.) Although this definition is broad, the term “earnings” does
not include “business profits.”
Friedt v. Moseanko
,
N.D.C.C. § 32-09.1-01(4), the fees that its clients would pay as “compensation” to Johnston Law are not wages, salаry, commission, or bonus. We have relied on the principle of ejusdem generis to interpret statutory language:
“Under the principle of ejusdem generis , general words following particular and specific words are not given their natural and ordinary sense, standing alone, but are confined to persons and things of the same kind or genus as those enumerated. In applying the rule of ejusdem generis , we must keep in mind the admonition that our primary purpose is always to carry out the intent of the legislature. The rule accomplishes the purpose of *8 giving effect to both the particular and the general words, by treating the particular words as indicating the class, and the general words as extending the provisions of the statute to everything embraced in that class, though not specifically named by the particular words.”
City of W. Fargo v. Williams
, 2019 ND 161, ¶ 15, 930 N.W.2d 102 (quoting
Olson v. Job Serv. N.D.
,
useful act pеrformed on behalf of another by an individual personally. In this sense, a personal service is an economic service involving either the intellectual or manual personal effort of an individual, as opposed to the salable product of the person’s skill.” Black’s Law Dictionary 1327 (10th ed. 2014). “Service” is defined as “[l]abor performed in the interest or under the direction of others; specif., the performance of some useful act or series of acts for the benеfit of another, usu. for a fee <goods and services>. In this sense, service denotes an intangible commodity in the form of human effort, such as labor, skill, or advice.” Black’s Law Dictionary 1576 (10th ed. 2014). Both meanings focus on the individual’s efforts or acts for another, rather than a separate entity’s provision of an individual’s services. In both the Grand Forks and Cass County cases, the district courts
distinguished the fees a client pays to a law firm, which properly may be
characterized as “business profits,” from an amount a law firm might pay to a
lawyer, whiсh would be an example of “earnings.” A clients’ payment to a law
firm could include things such as work performed by firm staff, costs incurred
or advanced, and other firm overhead. We therefore conclude fees paid to a
law firm are more accurately described as “business profits” rather than
“compensation” paid or payable for “personal services.”
This conclusion comports with what we have said in the context of an
attornеy’s liability when practicing in a professional corporation. In
In re
Estate of Amundson
,
“This is not to say that an attorney practicing in a
professional corporation is liable for any and all obligations of the
corporation. Such a requirement would surely eliminate one of the
many advantages of forming a professional organization in the
first instance.
See, e.g., Schnapp, Hochberg & Sommers v. Nislow
,
declined to extend Amundson’s holding that an attorney may be held personally liable under a judgmеnt against an attorney’s professional corporation. In Nusviken , no attorney-client relationship existed between the individual attorney and the judgment creditors. Id. at ¶ 16. We declined to extend Amundson to an attorney’s improper or unethical actions toward parties who were not clients, and we modified the judgment to relieve the attorney of personal liability. Id . Under N.D.C.C. § 32-09.1-01(3), a client’s payments to an attorney’s
professional corporation is not “compensation” paid or рayable for “personal services.” Because fees paid or payable to Johnston Law are not “earnings” under the statute, as a matter of law the ten-day notice was not required under N.D.C.C. § 32-09.1-04 before issuing the garnishee summons.
[¶18] Without a “willful improper act” alleged to support their claim for abuse
of process,
see Jordet
,
IV Johnston Law argues it stated a claim for tortious interference with thе
attorney-client business relationship between Johnston Law and the law firm’s
clients when they were “improperly served” with garnishment summonses.
In
Trade ‘N Post, L.L.C. v. World Duty Free Ams., Inc.
, 2001 ND 116,
¶ 36,
“(1) the existence of a valid business relationship or expectancy; (2) knowledge by the interferer of the relationship or expectancy; (3) an independently tortious or otherwise unlawful act of interference by the interferer; (4) proof that the interference caused the harm sustained; and (5) actual damages to the party whose relationship or expectancy was disrupted.”
See also Serv. Oil, Inc. v. Gjestvang
,
interference with business relationship because its clients were improperly served with a void garnishment. Johnston Law further argues that Vogel Law’s serving the garnishment summonses on its clients constituted an improper, unauthorized ex parte direct communication with Johnston Law’s individual clients in violation of N.D.R. Prof. Conduct 4.2 and that the garnishment documents purport to subvert the attorney-client relationship between Johnston Law and its clients. While Johnston Law contends that the Cass County district court erred
in dismissing its claim for tortious interference with a business relationship, the gravamen of its complaint is the alleged improper, tortious, or unlawful act of serving a “void” garnishment summonses on the garnishee clients. We have held, however, that there was no violation of the notice requirement and that the subsequent garnishment was not void under N.D.C.C. § 32-09.1-04(1). We therefore conclude the complaint does not allege a viable tortious or otherwise unlawful act of interference. Johnston Law’s attempt to rely on N.D.R. Prof. Conduct 4.2 to establish
a tortious or unlawful act of interference also is unavailing. Rule 4.2, N.D.R.Prof. Conduct, provides:
“In representing a client, a lawyer shall not communicate about the subject of the representation with a person the lawyer knows to be represented by another lawyer in the matter, unless the lawyer has the consent of the other lawyer or is authorized to do so by law or a court order.” Here, serious doubt exists that a statutorily required summons is a
“communication.”
See Wilkerson v. Brown
,
V Johnston Law argues it stated a claim for conversion against the
defendants. Generally, “[w]hether a conversion has been committed is a finding of
fact.”
Jordet
,
“A claim for conversion requires proof of ‘a tortious detention or destruction of personal property, or a wrongful exercise of dominion or control over the property inconsistent with or in defiance of the rights of the owner.’ Doeden v. Stubstad , 2008 ND 165, ¶ 9,755 N.W.2d 859 (quoting Buri v. Ramsey ,2005 ND 65 , ¶ 14,693 N.W.2d 619 ); see Ritter, Laber and Assocs., Inc. v. Koch Oil, Inc. , 2004 ND 117, ¶ 11, 680 N.W.2d 634; Paxton v. Wiebe ,1998 ND 169 , ¶ 28,584 N.W.2d 72 . ‘The gist of a conversion is not in acquiring the complainant’s property, but in wrongfully depriving him of it, whether temporarily or permanently, and it is of little relevance that the converter received no benefit from such deprivation.’ Paxton , at ¶ 28 (citations and quotation marks omitted). Conversion does not require bad intent on the converter’s part; rather only an intent to control or interfere with the owner’s rights to use to an actionable degree. See Buri , at ¶ 14; Paxton , at ¶ 28.”
See also Nelson v. Mattson
,
[¶28] Johnston Law argues that it sufficiently stated a claim for conversion because the defendants improperly used garnishment to exercise dominion, control, or to temporarily or permanently interfere with Johnston Law’s contract rights to property with its garnishee clients and with its lender United Valley Bank. Johnston Law broаdly asserts that, to the extent fees owed by a client to
Johnston Law were retainers, the garnishment “if effectuated” would constitute conversion of its clients’ funds, since the fees would not have yet been earned. Johnston Law also asserts United Valley Bank possessed a perfected security interest superior to PHI’s judgment execution rights in any fees. Johnston Law argues Vogel Law’s use of garnishment in this manner caused the defendants to be liable for conversion and that it adequately stated claims for damages in its complaint. Here, the Cass County district court stated it was unclear whether
conversion was pled as a separate tort claim or simply as an improper act for the claims of tortious interference with business relationship or abuse of process. In either event, the court concluded Johnston Law failed to allege any facts that the defendants actually exercised dominion оr control over or deprived Johnston Law of any property, either temporarily or permanently. The court explained there was no factual allegations that any of Johnston Law’s funds were held or transferred as a result of the issuance of the garnishee summonses. We agree. Under North Dakota law garnishment is allowed to collect on a
judgment. See N.D.C.C. § 32-09.1-02. Johnston Law’s complaint against the defendants fails to allege facts showing that any of its funds were hеld or transferred as a result of the issuance of the garnishee summonses. Even if Johnston Law alleged facts that Vogel Law and PHI received garnished fees, as previously discussed the garnishment itself was not tortious or unlawful. To the extent Johnson Law asserts facts were alleged to establish a conversion claim by the defendants’ alleged wrongfully interfering with its bank’s security rights in any fees, those property rights belong to the bank rather than Johnston Law.
[¶32] On the basis of our review, we cannot discern a potential for proof to support Johnston Law’s claim for conversion. Therefore, the district court did not err in dismissing its claim under N.D.R.Civ.P. 12(b)(6).
VI Johnston Law argues as a separate issue that the Cass County district
court failed to apply the proper standard in dismissing its complaint for failure
to state a claim. Johnston Law asserts the court “[t]hroughout its decision”
erroneously demanded “proof,” effectively construing the complaint against
Johnston Law. Johnston Law further contends the defendants failed to
demonstrate the impossibility of it proving a claim upon which relief can be
granted or that is beyond a doubt that it can prove no set of facts in support of
its claim which would entitle it to relief.
See McColl Farms, LLC v. Pflaum
,
N.D.R.Civ.P. 12(b)(6), the district court concluded several times that the record
was devoid of proof of harm or damages. The court also stated no affidavit was
filеd to provide evidence of the legal sufficiency of the unlawful interference
with business claim. This analysis is inappropriate under the rule.
Nevertheless, our review of the district court’s decision under N.D.R.Civ.P.
12(b)(6) is de novo,
see Estate of Nelson
,
dismissing the claims under N.D.R.Civ.P. 12(b)(6). We conclude the argument that the district court applied an improper standard in dismissing the complaint does not merit reversal of the court’s order dismissing its claims.
VII
[¶36] We have considered the parties’ other arguments on appeal but consider them to be either unnecessary to our decision or without merit. The orders are affirmed. Daniel J. Crothers, Acting C.J.
Carol Ronning Kapsner, S.J.
Gerald W. VandeWalle
Jerod E. Tufte
William A. Neumann, S.J. The Honorable William A. Neumann, S.J., sitting in place of Jensen,
C.J., disqualified. The Honorable Carol R. Kapsner, S.J., sitting in place of McEvers, J.,
disqualified.
[1] In its complaint Johnston Law relies on Blair v. Maxbass Sec. Bank ,44 N.D. 12 , 17,176 N.W. 98 , 100 (1919), and claims PHI may be held liable for an abuse of process for Vogel Law’s acts in serving garnishment summonses on Johnston Law’s clients, alleging that PHI ratified Vogel Law’s acts by not reputing or stopping the acts once PHI had knowledge of them. Johnston Law, however, has not raised any issue on appeal regarding PHI’s vicarious liability. We therefore decline to address it. See Bearce v. Yellowstone Energy Dev., LLC ,2019 ND 89 , ¶ 29,924 N.W.2d 791 (failing to adequately brief and provide supporting argument on an issue waives it on appeal).