Opinion
NOT TO BE PUBLISHED
Appeals from orders of the Superior Court of Orange County, No. 30-2009-00117620, Francisco F. Firmat, Judge; and Elizabeth Grace, Temporary Judge (pursuant to Cal. Const., art. VI, § 21).
Law Offices of James P. Wohl, James P. Wohl; and Robert S. Gerstein for Plaintiffs and Appellants.
Waxler Carner Brodsky, Barry Z. Brodsky and Jodi L. Girten for Defendants and Respondents Thomas E. Elenbaas and Law Offices of Thomas E. Elenbaas.
Sedgwick, Detert, Moran & Arnold, Gregory Halliday, Charles N. Hargraves and Frederick Hayes for Defendants and Respondents Mark Von Esch and Von Esch & Von Esch.
OPINION
IKOLA, J.
We reiterate a concern for malicious prosecution plaintiffs in the anti-SLAPP age. To survive the inevitable anti-SLAPP motion to strike a malicious prosecution complaint, the plaintiffs need to have admissible evidence, without the benefit of discovery, showing the other side actually knew the underlying action was legally untenable. We wonder how often this kind of evidence is readily available.
See Code Civil Procedure section 425.16. All further statutory references are to the Code of Civil Procedure.
None was offered here. Plaintiffs presented insufficient evidence of a lack of probable cause or malice to defend their malicious prosecution complaint against the defendants’ anti-SLAPP motions. We affirm orders granting those motions.
FACTS
The Underlying Action
Defendants Mark Von Esch and his law firm, Von Esch & Von Esch (collectively, Von Esch), represented Shawn Bennett (client). On client’s behalf, Von Esch sued parties including plaintiffs Jim Arnold (Arnold) and Integrated Waste Management, Inc. (IWM).
In the initial complaint, client alleged he co-owned a company (FRS) with his brother, but his brother had taken control of it and diverted its assets to companies including IWM. Client asserted a cause of action for constructive trust, alleging that his brother had diverted funds from FRS to purchase real property to which Arnold “agreed to hold legal title... for the benefit of [FRS]” and which he held “in trust for the Benefit of [client and FRS].” The real property comprised three parcels of “Parcel Map 12387.” Yet Arnold refused to convey the property to client. Client also asserted a cause of action for accounting, seeking to determine the amount of diverted funds. The court sustained Arnold’s and IWM’s demurrer with leave to amend.
Von Esch filed for client a verified first amended complaint (FAC). Client asserted a new cause of action for quiet title against Arnold. As before, client alleged Arnold refused to convey to client the same three parcels of real property to which Arnold held legal title in trust for client and FRS. Client re-asserted the accounting cause of action against IWM. Arnold’s and IWM’s demurrer to the FAC was sustained with leave to amend.
Finally, Von Esch filed for client a verified second amended complaint (SAC). Client re-asserted the quiet title cause of action and most of the supporting allegations. But the SAC also contained new allegations. Client alleged “Arnold agreed to execute a quitclaim deed transferring a portion of the... property to [client] and thereafter delivered said deed to [client].” Client further alleged, “The basis of [client’s] title is a certain quitclaim deed executed and delivered by [Arnold] to [client] and which transferred an undivided one-half interest in the property to [client] and the remaining one-half interest to [client’s brother]. Said deed was not recorded until earlier this year but was to include any after acquired property in the parcels set forth herein including the purchase agreement that previously were [sic] assigned to [Arnold] as well as various assignments of interest in said properties that were to be held in trust for the benefit of [client].” The SAC now identified seven disputed parcels of “Parcel Map 12387.” And the SAC attached a copy of a recorded quitclaim deed executed by Arnold in 1995 and recorded in 2006 in favor of client and his brother, but which identified different parcels — three parcels of “Parcel Map 12364.” Client also re-asserted the accounting cause of action in substantially unchanged allegations.
The court sustained Arnold’s and IWM’s demurrer to the quiet title and accounting causes of action asserted in the SAC without leave to amend. It entered judgment for Arnold and IWM.
Defendants Thomas E. Elenbaas and Law Offices of Thomas E. Elenbaas (collectively, Elenbaas) represented client in the ensuing appeal. The Court of Appeal affirmed the judgment. (Bennett v. Integrated Waste Management (Jan. 14, 2008, E042053) [nonpub. opn.].) On the quiet title cause of action, the court held, “This court may properly disregard [client’s] claim of ownership interest via an agreement and quitclaim deed (which [client] further alleged was recorded in early 2006, a copy of which recorded deed he failed to attach to his action) because it is inconsistent with [client’s] prior claims in the original complaint and the verified first amended complaint.” (Ibid.) On the accounting cause of action, it held, “[client] is not in a fiduciary relationship with IWM. Absent such relationship, he is not entitled to seek an accounting from IWM. We have not found, nor has [client] provided, any authority to the contrary.” (Ibid., fn. omitted.)
The Malicious Prosecution Action
Plaintiffs sued client, Von Esch, and Elenbaas for malicious prosecution. In a verified complaint, they alleged client and Von Esch maliciously prosecuted the trial court litigation. They further alleged client and Elenbaas maliciously prosecuted the appeal.
Elenbaas filed an anti-SLAPP motion to strike the complaint. He filed a supporting declaration in which he stated he “honestly believed” client “had or could plead legally tenable claims against IWM for accounting and against Arnold for quiet title....” He further stated that before he substituted in as client’s counsel, he “had not met Mr. Arnold, or anyone [he] knew to be associated with IWM and did not harbor any ill-will or malicious thoughts toward” them.
In opposition, plaintiffs offered evidence to show Elenbaas knew the quiet title cause of action lacked probable cause. In a 1998 deposition in another case involving client and Arnold, client admitted “Arnold owns two or three parcels on Monte Street....” A 1999 confidential settlement agreement in that case stated Arnold “is the record title holder of three parcels of real property in the Monte Avenue cul-de-sac....” In 2007 bankruptcy court filings that Elenbaas prepared for client, client admitted the quiet title cause of action against Arnold was directed inadvertently at the wrong properties — client thought the complaints specified properties at 2230 Riverside Avenue and 120 W. Monte Avenue, Rialto.
Plaintiff offered other evidence to show Elenbaas knew the accounting cause of action lacked probable cause. In the 1998 deposition, client admitted he was not a shareholder of IWM. In the opposition to the demurrer and the subsequent hearing, Von Esch conceded client was not an IWM shareholder and could not state a cause of action for accounting. And in the opening brief on appeal, Elenbaas conceded client was not an IWM shareholder.
The court (Hon. Elizabeth Grace) granted Elenbaas’s motion. It found: “As to the cause of action for accounting, plaintiffs argue that defendant lacked probable cause to bring the appeal, as there is no law which allows an accounting in the absence of a fiduciary relationship. However, if the Third Appellate District can find otherwise (Teselle v. McLoughlin (2009) 173 Cal.App.4th 156 [(Teselle)]), then defendants do not lack probable cause in making the same argument to the Fourth Appellate District. As to the cause of action for quiet title, plaintiffs do not present evidence that these defendants ever saw the deposition transcript or settlement agreement which plaintiffs contend show a lack of probable cause. Furthermore... plaintiffs have not presented any evidence that these defendants [acted] with malice.... plaintiffs must present additional evidence to support the element of malice. Reliance on an inference of malice [from the evidence offered to show a lack of probable cause] is insufficient to meet plaintiffs’ burden on the instant motion.”
That same day, Von Esch filed a similar anti-SLAPP motion. Plaintiffs opposed the motion with now-familiar evidence. They asserted the 1998 deposition, the 1999 settlement agreement, Von Esch’s purported concessions, and the purported contradictions among the complaints showed Von Esch knew or should have known client had no basis for quieting title to property owned by Arnold or obtaining an accounting of IWM. Plaintiffs contended malice was shown by Von Esch’s “deliberate disregard of the underlying facts and his willingness to prosecute the action to further [client’s] campaign to vex and annoy Arnold....”
The court (Hon. Francisco F. Firmat) granted Von Esch’s motion. It found: “Plaintiffs have failed to present competent evidence that they [have a probability of prevailing on their claims]. Plaintiffs’ assertions as to the Quiet Title action fail to connect the various documents and fail to state what documents Von Esch had in his possession. And Plaintiffs have failed to show evidence of malice and have failed to show hostility or ill-will so that the court could infer malice. While Plaintiffs assert that [Von Esch] should have reviewed certain information, there is no evidence to what exact information [Von Esch] had access.”
DISCUSSION
The anti-SLAPP statute provides, “A cause of action against a person arising from any act of that person in furtherance of the person’s right of petition or free speech under the United States Constitution or California Constitution in connection with a public issue shall be subject to a special motion to strike....” (§ 425.16, subd. (b)(1).) An order granting an anti-SLAPP motion is appealable and subject to independent review. (Daniels v. Robbins (2010) 182 Cal.App.4th 204, 214, fn. 4 (Daniels).)
To prevail on their anti-SLAPP motions, Von Esch and Elenbaas bear the initial burden of establishing the complaint “is based on [their] protected free speech or petitioning activity.” (Navellier v. Sletten (2002) 29 Cal.4th 82, 89 (Navellier).) They easily did so here. “By definition, a malicious prosecution suit alleges that the defendant committed a tort by filing a lawsuit.” (Jarrow Formulas, Inc. v. LaMarche (2003) 31 Cal.4th 728, 735; accord Daniels, supra, 182 Cal.App.4th at p. 215.)
The burden then shifts to plaintiffs to “establish[] that there is a probability that [they] will prevail on the claim.” (§ 425.16, subd. (b)(1).) To do so, plaintiffs must show “‘“that the complaint is both legally sufficient and supported by a sufficient prima facie showing of facts to sustain a favorable judgment if the evidence submitted by the plaintiff is credited.”’” (Navellier, supra, 29 Cal.4th at p. 89.) “In assessing the probability of prevailing, a court looks to the evidence that would be presented at trial, similar to reviewing a motion for summary judgment; a plaintiff cannot simply rely on its pleadings, even if verified, but must adduce competent, admissible evidence.” (Roberts v. Los Angeles County Bar Assn. (2003) 105 Cal.App.4th 604, 613-614.) The court accepts “all admissible evidence [from plaintiffs] as true and indulg[es] in every reasonable inference to be drawn from that evidence.” (Nagel v. Twin Laboratories, Inc. (2003) 109 Cal.App.4th 39, 52.)
Plaintiffs Failed to Show a Probability of Prevailing
Here, plaintiffs bear the burden of presenting admissible evidence supporting a prima facie showing of malicious prosecution. They had to show (1) the underlying action was terminated in their favor on the merits, (2) Von Esch and Elenbaas maintained it without probable cause, and (3) Von Esch and Elenbaas did so with malice. (See Zamos v. Stroud (2004) 32 Cal.4th 958, 965, 973 (Zamos); see also Daniels, supra, 182 Cal.App.4th at p. 226.) The underlying action was undoubtedly terminated in plaintiffs’ favor — the court of appeal affirmed judgment for them. It was also terminated on the merits, despite Von Esch’s protests the demurrer was sustained and affirmed on purely “technical or procedural bases.”
The remaining issues are whether plaintiffs offered sufficient evidence Von Esch and Elenbaas maintained the underlying quiet title and accounting causes of action without probable cause and with malice.
“[T]he probable cause element calls on the trial court to make an objective determination of the ‘reasonableness’ of the defendant’s conduct, i.e., to determine whether, on the basis of the facts known to the defendant, the institution of the prior action was legally tenable. The resolution of that question of law calls for the application of an objective standard to the facts on which the defendant acted.” (Sheldon Appel Co. v. Albert & Oliker (1989) 47 Cal.3d 863, 878.) “Only those actions that any reasonable attorney would agree are totally and completely without merit may form the basis for a malicious prosecution suit.” (Zamos, supra, 32 Cal.4th at p. 970.) And until proven false, “a lawyer ‘is entitled to reply on information provided by the client.’” (Daniels, supra, 182 Cal.App.4th at p. 223.)
“‘[T]he “malice” element... relates to the subjective intent or purpose with which the defendant acted in initiating the prior action. [Citation.] The motive of the defendant must have been something other than that of... the satisfaction in a civil action of some personal or financial purpose. [Citation.] The plaintiff must plead and prove actual ill will or some improper ulterior motive.’” (Daniels, supra, 182 Cal.App.4th at p. 224.) A client’s ill will cannot be imputed to the lawyer. (Id. at p. 225.) And the mere “lack of probable cause in the underlying action, by itself, is insufficient to show malice.” (Ibid.) There must be something more — some “affirmative evidence of malice on the part of the attorneys....” (Id. at p. 227, fn. 7.) That “[a]dditional proof of malice can consist of evidence a party knowingly brings an action without probable cause.” (Id. at p. 226.) But that knowledge cannot be inferred from the bare inability to uncover supporting evidence. (Id. at p. 227.)
Our independent review reveals plaintiffs failed to offer sufficient evidence to show a probability of prevailing on their malicious prosecution claims.
First, plaintiffs failed to show Von Esch or Elenbaas lacked probable cause to maintain the accounting cause of action, at trial or on appeal. They offered evidence client conceded he was not a IWM shareholder, and thus lacked the fiduciary relationship needed to warrant an accounting. But as the Teselle court noted, “a fiduciary relationship between the parties is not required to state a cause of action for accounting. All that is required is that some relationship exists that requires an accounting. [Citation.] The right to an accounting can arise from the possession by the defendant of money or property which, because of the defendant’s relationship with the plaintiff, the defendant is obliged to surrender.” (Teselle, supra, 173 Cal.App.4th at pp. 179-180.) Client alleged he co-owned FRS 50/50 with his brother, but his brother diverted FRS assets to his alter ego, IWM. Plaintiffs offered no evidence disproving these allegations, and failed to show “any reasonable attorney would agree” the alleged relationship could not support an accounting. (Zamos, supra, 32 Cal.4th at p. 970.)
Plaintiffs misplace their reliance upon Von Esch’s purported judicial admissions. Von Esch conceded only that client could not allege a fiduciary relationship with IWM.
We do not hold this relationship is sufficient to warrant an accounting as a matter of law. We conclude only that a reasonable attorney may think so. And contrary to plaintiffs’ claim, the accounting that client sought is different from a forbidden “outside reverse piercing” of the corporate veil. (See Postal Instant Press, Inc. v. Kaswa Corp. (2008) 162 Cal.App.4th 1510, 1523-1524.) Client was seeking to determine the amount of funds wrongfully diverted to IWM. Client was not seeking to reach IWM’s corporate assets to satisfy a claim against its shareholders. (Ibid.)
Second, plaintiffs failed to show Von Esch lacked probable cause to maintain the quiet title cause of action. Von Esch was “‘entitled to rely on’” client’s sworn statements in the SAC that Arnold took legal title to the properties on behalf of and in trust for client, and delivered an unrecorded quitclaim deed to client. (Daniels, supra, 182 Cal.App.4th at p. 223.) The courts in the underlying action exercised their discretion to ignore the new allegations about the quitclaim deed as inconsistent with the prior complaints, but we cannot say any reasonable attorney would have done the same. Client never alleged in the prior complaints that Arnold had not executed a quitclaim deed. Similarly, client’s deposition and the settlement agreement acknowledging Arnold’s legal title to certain properties are not logically inconsistent with the assertion of a quiet title claim based on competing equitable title or through the only-recently recorded quitclaim deed.
Although equitable title owners generally cannot maintain quiet title actions against legal title holders, exceptions exist when legal title is obtained through fraud, coercion, or breach of fiduciary duty. (Warren v. Merrill (2006) 143 Cal.App.4th 96, 113-114.) Client alleged he obtained equitable title when FRS funds were wrongfully diverted to purchase the properties.
Even if Von Esch lacked probable cause to assert the quiet title cause of action, plaintiffs offered no evidence he did so with malice. Nothing in the record fairly suggests Von Esch acted out of “‘actual ill will or some improper ulterior motive.’” (Daniels, supra, 182 Cal.App.4th at p. 224.) Client’s purported ill will cannot be imputed to Von Esch. (Id. at p. 225.) The strongest evidence against Von Esch is client’s representations to the bankruptcy court that Von Esch identified the wrong properties in the SAC. But even here, plaintiffs offer no evidence to show this was anything other than an honest drafting mistake. Plaintiffs do not show Von Esch knew he was naming the wrong properties. And plaintiffs offer no persuasive authority that malice is inferable from a mere scrivener’s error.
Similarly, plaintiffs offer insufficient evidence Elenbaas acted with malice in maintaining the appeal on the quiet title cause of action. Again, there is no evidence of actual ill will or ulterior purpose, and the strongest evidence is client’s representations to the bankruptcy court. This evidence is arguably more damning against Elenbaas because he drafted the bankruptcy court filings in August 2007, before he drafted the reply brief in the appeal. Plaintiffs conclude Elenbaas knew the quiet title action lacked probable cause, but maintained the appeal anyway. But client confirmed in the bankruptcy court filings that he intended to quiet title to other properties that were purchased with funds wrongly diverted from FRS, but to which Arnold held legal title.
At most, this discovery required Elenbaas to make a choice. He could try to raise the issue in his reply brief on appeal, asking for leave to amend to identify the correct properties. He could abandon the appeal on the quiet title cause of action. Or he could maintain the appeal on the grounds already briefed — namely, that the SAC sufficiently stated a cause of action. The first option was dubious — the new issue was “‘doubly waived.’” (Ortiz v. Lyon Management Group, Inc. (2007) 157 Cal.App.4th 604, 623, fn. 15.) The second option required Elenbaas to sacrifice the quiet title cause of action, even though client had confirmed his grounds to quiet title to property held by Arnold. The third option was all that remained. Even if Elenbaas knew client ultimately could not quiet title to the properties identified in the SAC, he states in his declaration he “honestly believed” the quiet title cause of action “had either been sufficiently pled and/or could be amended to overcome demurrer.” It is not malicious for Elenbaas to prefer client’s interests over plaintiffs’ and stand by a claim he “honestly believed” was sufficient on its face and which could be amended to address the correct properties. Plaintiffs offer insufficient contrary evidence to show any probability of proving malice.
DISPOSITION
The judgment is affirmed. Defendants shall recover their costs on appeal.
WE CONCUR: BEDSWORTH, ACTING P. J., ARONSON, J.