Opinion
G052729
02-28-2018
DAN W. BAER, Plaintiff and Appellant, v. DAVID H. TEDDER et al., Defendants and Respondents.
Enterprise Counsel Group, Benjamin P. Pugh and James S. Azadian for Plaintiff and Appellant. The Dressler Law Group and Thomas W. Dressler; Robert K. Kent for Defendants and Respondents.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. 30-2014-00746312) OPINION Appeal from a judgment of the Superior Court of Orange County, Gail Andrea Andler, Judge. Affirmed in part; Reversed in part and remanded. Enterprise Counsel Group, Benjamin P. Pugh and James S. Azadian for Plaintiff and Appellant. The Dressler Law Group and Thomas W. Dressler; Robert K. Kent for Defendants and Respondents.
In this appeal, we review the trial court's decision to grant two anti-SLAPP motions filed by five of the 11 defendants named in Dan W. Baer's malicious prosecution action. This task is somewhat complicated by the fact this is the seventh appeal to follow complex litigation that has spanned over two decades.
SLAPP is an acronym for "strategic lawsuits against public participation." (Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 57.)
The original complaint, filed in 1996, arises out of business dealings between Baer and an attorney, David H. Tedder, during the late 1980s and early 1990s. It began as an action filed by Tedder as general partner of a multitude of Nevada limited partnerships he created for clients as part of "asset protection" services he provided for those clients. Tedder sued on behalf of the limited partnerships to recover on loans they allegedly made to Baer's two corporations to acquire real estate owned by the corporations. Baer's corporations and Tedder cross-complained against each other seeking to determine their respective interests in the real estate and other business pursuits. After 10 years of litigation, the action evolved and new accusations were added alleging Baer, as a non-lawyer partner in Tedder's law firm, was liable for Tedder's breaches of fiduciary duties to the clients who funded the limited partnerships, and who claimed they had each lost millions of dollars entrusted to Tedder as a result of Tedder making self-interested loans of their money.
Although there were 19 named plaintiffs in the original complaint, by the end only seven (related to the three clients) remained. They include: Thomas H. Casey, Chapter 7 trustee for Banyan Limited Partnership (Banyan), Pear Tree Limited Partnership (Pear Tree), and Orange Blossom Limited Partnership (Orange Blossom) formed on behalf of Donald G. Grammer and his family (hereafter sometimes referred to collectively as the Grammer Limited Partnerships); CTM Limited Partners (CTM), Slevin Limited Partnership (Slevin), and Trails End Limited Partnership (Trails End), formed on behalf of Richard McGrath and his family (hereafter sometimes referred to collectively as the McGrath Limited Partnerships); and Birch International Investment Limited Partners (Birch), formed on behalf of Dan Schoenman.
The action was tried in four separate phases before different judges in the superior court. Baer personally prevailed in the first three phases of litigation, prompting Tedder's clients to change their strategy and formulate a completely new accusation against Baer. The trial court ruled this new accusation was time barred and also there was insufficient evidence to support it. In Banyan Limited Partnership et al. v. Baer et al. (Aug. 12, 2013, G045584) [nonpub. opn.] (Banyan 1), we affirmed the court's statute of limitations ruling and declined to consider the merits of the matter. After Baer prevailed in this final litigation assault, he filed an action for malicious prosecution against Tedder, Tedder's clients Donald G. Grammer (Grammer) and Richard McGrath (McGrath), and the attorneys who represented them (Dennis Hartmann (Hartmann), and Thomas W. Dressler (Dressler)). These parties will collectively be referred to as the Defendants, unless the context requires otherwise.
The Defendants filed their anti-Slapp motions on two grounds. First, Baer did not prevail on the merits in Phase 4 of the trial. Second, there was no evidence Defendants were motivated by ill will or malice towards Baer. The court granted the motions after determining Baer failed to meet his burden of proving the action was initiated with malice. The trial court explained it was appropriate to take judicial notice of court documents relating to the underlying litigation, but it could not consider any statements contained in those documents for the truth. And because Baer did not submit any other evidence, stipulated facts, or declarations establishing malice, he could not establish a probability of prevailing on the malicious prosecution claim.
Grammer, McGrath, Hartmann, and Dressler filed one anti-SLAPP motion and Tedder separately filed an anti-SLAPP motion. These parties filed a joint respondent's brief in this appeal. The briefing indicates Tedder's wife Rebecca is represented by the same appellate counsel as Tedder. And the jointly prepared respondent's brief asserts Baer filed his malicious prosecution action against both Tedder and his wife. However, we have reviewed the complaint and Rebecca was not named as a defendant and she was not part of Tedder's anti-SLAPP motion. She is not a proper party to this appeal.
In this appeal, Baer asserts the trial court misunderstood the scope of material subject to judicial notice when looking at court orders, opinions, and findings of fact. Alternatively, Baer argues the contents of the various court documents are admissible under the doctrine of adopted admissions. (Evid. Code, § 1221, all further statutory references are to the Evidence Code, unless otherwise indicated.) We conclude the court correctly applied the rule of judicial notice, but the matter must be reversed in part because Baer made a prima facie showing he was likely to prevail on the merits of his action based on other admissible evidence against Tedder, Grammer, McGrath, and Hartmann. We affirm the judgment with respect to Dressler because Baer failed to demonstrate a probability of prevailing on this particular claim.
FACTS
This complex litigation has already been the subject of two writ petitions and seven prior appeals in this court (Castlerock Limited Partnership et al. v. Baer et al. (Dec. 12, 2001, G026308) [nonpub. opn.] [affirming dismissal of multiple plaintiffs lacking capacity to sue]; Banyan Limited Partnership et al. v. Baer et al. (Feb. 7, 2007, G036089) [nonpub. opn.] [affirming appointment of a receiver]; Banyan I, supra, (G045584) [affirming final judgment]; Banyan Limited Partnership et al. v. Baer et al. (Aug. 12, 2013, G045797) [nonpub. opn.] (Banyan 2) [reversing postjudgment order for new trial on alter ego claims]; Banyan Limited Partnership et al. v. Baer et al. (Aug. 12, 2013, G046428) [nonpub. opn.] (Banyan 3) [affirming postjudgment order denying attorney fees related to the second phase of trial]; Banyan Limited Partnership et al. v. Baer et al. (Aug. 17, 2016, G051282) [nonpub. opn.] (Banyan 4) [affirming postjudgment orders regarding costs]; Southern California Sunbelt Developers, Inc. v. Banyan Limited Partnership (2017) 8 Cal.App.5th 910 [award of receivership fees]), not to mention the plethora of lawsuits throughout the nation in state courts and federal courts involving many of the entities and individuals connected to this action.
Banyan Limited Partnership et al. v. Superior Court (Dec. 29, 2011, G046154) [nonpub. order]; Baer v. Superior Court (Apr. 3, 2006, G036616) [nonpub. order].
On the court's own motion, we take judicial notice of our prior unpublished opinions. (§ 452, subd. (d); Cal. Rules of Court, rule 8.1115(b)(1).)
We incorporate by reference the summary of background facts and analysis from our opinions in Banyan 1, supra, G045584; Banyan 2, supra, G045797; Banyan 3, supra, G046428, and Banyan 4, supra, G051282, and will not repeat them. In this litigation, Phases 1 and 2 resolved the Grammer Limited Partnerships' claim Baer's two corporations owed them $1.1 million for unpaid loans. In Phase 3, the court determined Tedder had no interest in the real estate owned by Baer's corporations and he and Baer could not recover anything from the other. Phase 4 eliminated the breach of fiduciary duty and alter ego claims against Baer.
In the final judgment, the court ruled Baer was not liable on any cause of action in the original complaint. Two of his corporations were ordered to repay money owed on the loans to the Grammer Limited Partnerships. In postjudgment proceedings, the court denied each parties' requests for attorney fees (affirmed in Banyan 3, supra, G046428). The court determined certain parties on both sides of this multi-phase litigation were prevailing parties and apportioned costs accordingly (affirmed in Banyan 4, supra, G051282).
Baer filed a malicious prosecution action against Defendants and several others not parties to this appeal. In their anti-SLAPP motions, Defendants argued Baer could not meet his burden of showing a likelihood of prevailing on the merits for the following three reasons: (1) there was no favorable termination on the merits; (2) there had been no final termination of the case because of Baer's pending cross-claim against Tedder seeking indemnity; and (3) it can be inferred there was probable cause to maintain the action based on the trial court's rulings on summary judgment motions. In addition, Tedder argued Baer's factual allegations were insufficient to support a finding of malice. He maintained the primary purpose of the entire action was to facilitate recovery of the loans made to Baer's companies after Baer refused to provide accountings, security, and payments. Defendants requested the trial court take judicial notice of several court documents, reported trial testimony, and appellate court opinions.
In his opposition, Baer argued he obtained a favorable termination on the merits. He explained the trial court made a final judgment on the merits, the matter had been fully adjudicated, and the indemnity action had no relevance to its final resolution. Baer pointed to the contents of the Phase 4 statement of decision and the Banyan 1, supra, G045584, opinion as providing evidence he prevailed on the merits (in addition to the statute of limitations ruling).
Turning to the issue of probable cause, Baer noted the summary judgment rulings were not dispositive because they did not address the breach of fiduciary duty allegations resolved in Phase 4. He explained that when the motions were filed, the operative complaint presented a completely different breach of fiduciary duty theory. He maintained Defendants did not realize until after Phase 3 that "Tedder could not recover from Baer," causing them to "invent a new breach of fiduciary duty theory." The newly formulated theory was not based on proving Tedder's misconduct breached his duties to Defendants, but rather premised "on the technical argument of non-compliance with the requirements of Rules of Professional Conduct, [rule] 3-300 . . . generally prohibiting an attorney . . . from entering into any financial transaction with a client without the client's informed, written consent." Baer argued the "crux" of his malicious prosecution case was that during discovery after Phase 3 "Baer found that Tedder's law firm had in fact sought and obtained Rule 3-300 consents from" some of the investors.
In this opinion the Rules of Professional Conduct, rule 3-300 will be referred to as Rule 3-300.
Baer asked the trial court to take judicial notice of multiple documents and their replies to his opposition. Defendants did not object to Baer's request. However, Defendants argued the judicially noticed documents did not prove he obtained a favorable termination or the essential element of malice. They concluded Baer failed to meet his burden of proof because he did not submit a declaration or other evidence to support his claim.
The court's tentative ruling was to grant the anti-SLAPP motions. It concluded Baer successfully showed the malicious prosecution was one arising from protective activity, but he had not satisfied his burden of showing a probability of prevailing on the merits. The court indicated it took judicial notice of the trial court's statement of decision following Phase 4, the final judgment, and the appellate opinion affirming the judgment (Banyan 1, supra, G045584). It concluded the appellate court affirmed the statute of limitations ruling, not the merits of the claims litigated in Phase 4, and the ruling did not assist Baer's opposition to the anti-SLAPP motions. At the hearing, the court gave the parties additional time to submit supplemental briefs on the question of whether Baer had a favorable termination on the merits.
At the next hearing, the court considered supplemental briefing and the parties' arguments. It granted the anti-SLAPP motions on the grounds Baer failed to "establish[] with admissible evidence that the [underlying action] was initiated with malice." It explained the court took judicial notice of many documents but could "not properly consider any of the statements contained in the documents for the truth." It noted there were no stipulated facts and the submitted declarations fell "far short of meeting the burden of establishing the probability of prevailing on the malicious prosecution claim as to the malice element."
DISCUSSION
Under the anti-SLAPP statute, a cause of action arising from a defendant's act in furtherance of a constitutionally protected right of free speech may be stricken unless the plaintiff is likely to prevail on the merits. (Code Civ. Proc., § 425.16, subd. (b)(1).) The anti-SLAPP statute provides a "procedural remedy to dispose of lawsuits that are brought to chill the valid exercise of constitutional rights." (Rusheen v. Cohen (2006) 37 Cal.4th 1048, 1055-1056.) We review the trial court's ruling de novo. (Flatley v. Mauro (2006) 39 Cal.4th 299, 325.)
We evaluate an anti-SLAPP motion using a two-step process. (Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 67.) We first determine "whether the defendant has made a threshold showing that the challenged cause of action is one arising from protected activity." (Navellier v. Sletten (2002) 29 Cal.4th 82, 88 (Navellier).)
In this case, the parties do not dispute the first step was satisfied. "[E]very Court of Appeal that has addressed the question has concluded that malicious prosecution causes of action fall within the purview of the anti-SLAPP statute. [Citations.]" (Jarrow Formulas, Inc. v. LaMarche (2003) 31 Cal.4th 728, 735.)
The second step requires consideration of whether the plaintiff has demonstrated a probability of prevailing on the claim. (Navellier, supra, 29 Cal.4th at p. 88.) "To prevail on a malicious prosecution claim, the plaintiff must show that the prior action (1) was commenced by or at the direction of the defendant and was pursued to a legal termination favorable to the plaintiff; (2) was brought without probable cause; and (3) was initiated with malice. [Citation.]" (Soukup v. Law Offices of Herbert Hafif (2006) 39 Cal.4th 260, 292 (Soukup).)
"[A] plaintiff opposing an anti-SLAPP motion cannot rely on allegations in the complaint, but must set forth evidence that would be admissible at trial. [Citation.] Precisely because the statute (1) permits early intervention in lawsuits alleging unmeritorious causes of action that implicate free speech concerns, and (2) limits opportunity to conduct discovery, the plaintiff's burden of establishing a probability of prevailing is not high: We do not weigh credibility, nor do we evaluate the weight of the evidence. Instead, we accept as true all evidence favorable to the plaintiff and assess the defendant's evidence only to determine if it defeats the plaintiff's submission as a matter of law. [Citation.] Only a cause of action that lacks 'even minimal merit' constitutes a SLAPP. [Citation.]" (Overstock.com, Inc. v. Gradient Analytics, Inc. (2007) 151 Cal.App.4th 688, 699-700 (Overstock).)
I. Favorable Legal Termination
'"The theory underlying the requirement of favorable termination is that it tends to indicate the innocence of the accused, and coupled with the other elements of lack of probable cause and malice, establishes the tort [of malicious prosecution].' [Citation.] Thus, '[i]t is hornbook law that the plaintiff in a malicious prosecution action must plead and prove that the prior judicial proceeding of which he complains terminated in his favor.' [Citation.]" (Casa Herrera, Inc. v. Beydoun (2004) 32 Cal.4th 336, 341 (Casa Herrera).) "When prior proceedings are terminated by means other than a trial, the termination must reflect on the merits of the case and the malicious prosecution plaintiff's innocence of the misconduct alleged in the underlying lawsuit. [Citations.] (HMS Capital, Inc. v. Lawyers Title Co. (2004) 118 Cal.App.4th 204, 214.) But when a prior proceeding was favorably terminated following a trial on the merits, this fact qualifies as a prima facie showing the underlying case was terminated in the plaintiff's favor. (Ibid.)
Such was the case here. The court held a trial during Phase 4 to litigate the newly formulated cause of action for breach of fiduciary duty against Baer. (Banyan 1, supra, G045584.) At the end of the trial, the trial court prepared a statement of decision finding in favor of Baer for two reasons: (1) the action was barred by the applicable statute of limitations and (2) plaintiffs failed to carry their burden of proving their claim. (Ibid.) We affirmed the judgment after reviewing the former but not the latter ruling. (Ibid.) Later, we affirmed the trial court's determination Baer was the prevailing party entitled to costs. (Banyan 4, supra, G051282.) These facts are a prima facie showing the underlying trial was terminated in Baer's favor.
Defendants contend, however, the trial was not resolved in Baer's favor because this court's opinion marked the "final termination" of the case, and the written opinion addressed only the statute of limitations ruling. It is true that "a 'technical or procedural [termination] as distinguished from a substantive termination' is not favorable for purposes of a malicious prosecution claim. [Citation.]" (Casa Herrera, supra, 32 Cal.4th at p. 342 [examples include dismissals on statute of limitations grounds, following settlements, or laches].) Defendants argue this court's refusal to find for Baer on the merits is fatal to his malicious prosecution action. Nonsense.
If the matter had not been appealed, the trial court's judgment would be the "final termination" and clearly one based on the merits. We found no case law holding Baer's victory on the merits was eviscerated by our written opinion affirming the judgment on procedural grounds.
The cases cited by Defendants explain a trial court's judgment is binding under the principles of res judicata and collateral estoppel only on grounds addressed by an appellate court. (See Newport Beach Country Club, Inc. v. Founding Members of Newport Beach Country Club (2006) 140 Cal.App.4th 1120; Butcher v. Truck Ins. Exchange (2000) 77 Cal.App.4th 1442.) These were not malicious prosecution cases deciding whether a judgment favorably terminated on the merits.
Defendants fail to appreciate that in the context of this malicious prosecution action, the limited res judicata effect of our prior opinion has little relevance to our determination of whether the matter ended in a favorable termination on the merits. Simply stated, res judicata concerns the finality of a decision, not its actual merits.
For example, a stipulated judgment will certainly have a res judicata effect between those parties and will prevent further litigation of those claims. However, that same judgment will not necessarily reflect a "favorable termination" for purposes of later pursuing a malicious prosecution action. As noted earlier, the element of "favorable termination" is for the court to decide and requires "a termination reflecting on the merits of the action and the plaintiff's innocence of the misconduct alleged. [Citations.]" (Sierra Club Foundation v. Graham (1999) 72 Cal.App.4th 1135, 1149.) "If resolution of the underlying action leaves a residue of doubt about the plaintiff's innocence or liability, it is not a favorable termination sufficient to support a cause of action for malicious prosecution. [Citation.]" (Ibid.)
In addition, we conclude Defendants misread the holding of Ray v. First Federal Bank (1998) 61 Cal.App.4th 315 (Ray). They maintain this case supports their theory a trial court's statement of decision containing a favorable termination on the merits cannot be the basis for a malicious prosecution when the matter has been appealed. That is not the holding of the case.
In Ray, supra, 61 Cal.App.4th at page 317, a law firm brought a malicious prosecution action against a bank, after it successfully defended against the bank's legal malpractice action. The trial court granted summary judgment, finding the legal malpractice action was time barred, which is a procedural ground not bearing on the merits of the case. (Ibid.) However, the reviewing court affirmed the judgment on grounds the action lacked merit as a matter of law, which qualifies as a favorable termination on the merits of the case. (Id. at pp. 318-319.) The court stated the dispositive issue to be decided on appeal was whether "favorable termination of the malpractice case may and should be judged by reference to the appellate decision there, or whether the trial court's ruling governs the question." (Id. at p. 318, fn. omitted.) The court held, "[T]he appellate decision affirming summary judgment in the malpractice case both marked and constituted favorable termination of that case. Not only was the decision 'favorable,' . . . it also accomplished the final termination of the case. The malpractice case was not terminated until conclusion of the bank's appeal, and the affirmance of the judgment in favor of [the law firm] constituted a favorable termination on the merits." (Id. at pp. 318-319.)
The court explained a malicious prosecution action cannot be filed while an appeal in the underlying action is pending and undecided. (Ray, supra, 61 Cal.App.4th at p. 319.) The reason for this rule is that if the trial court's judgment on the merits should be reversed and remanded on appeal, it cannot be said the plaintiff obtained a favorable termination on the merits. (Ibid.) The Ray court did not say the appellate court affirmance on the merits superseded or replaced the trial court's procedural ruling. It simply held the appellate court ruling qualified as a favorable termination for purposes of a subsequent malicious prosecution action.
In the case before us, the trial court's judgment on the merits was not addressed in the appeal, and therefore, the trial court's statement of decision regarding the case's lack of merit governs the question of whether there was a favorable termination. As aptly explained in Padres L.P. v. Henderson (2003) 114 Cal.App.4th 495, 515, "Although Ray recognizes that an appellate decision reflecting on the merits of a plaintiff's claims may establish a favorable termination for purposes of a malicious prosecution action, it does not establish that the appellate decision reached solely on procedural grounds trumps a trial court's determination of the merits and requires a finding that there is no favorable termination. In fact, it is well established that a favorable termination exists when the decision relied upon 'reflects "the opinion of someone, either the trial court or the prosecuting party, that the action lacked merit or if pursued would result in a decision in favor of the defendant."' [Citation.] A trial court's determination of the merits of the plaintiff's claims adverse to the plaintiff meets this standard and we conclude that it is sufficient to constitute a favorable termination unless it is later rejected by an appellate court." We find it very telling that Defendants do not discuss the Padres decision in their respondents' brief, despite the fact it is discussed at length in the opening brief.
II. Probable Cause
The second element required to establish a claim for malicious prosecution is proof the prior action was commenced by or at the direction of Defendants, without probable cause. "A plaintiff has probable cause to bring a civil suit if his claim is legally tenable. This question is addressed objectively, without regard to the mental state of plaintiff or his attorney. [Citation.] The court determines as a question of law whether there was probable cause to bring the maliciously prosecuted suit. [Citation.] Probable cause is present unless any reasonable attorney would agree that the action is totally and completely without merit. [Citation.] This permissive standard for bringing suits, and corresponding high threshold for malicious prosecution claims, assures that litigants with potentially valid claims won't be deterred by threat of liability for malicious prosecution. [Citation.]" (Roberts v. Sentry Life Insurance (1999) 76 Cal.App.4th 375, 382 (Roberts).)
"Probable cause may be present even where a suit lacks merit. Favorable termination of the suit often establishes lack of merit, yet the plaintiff in a malicious prosecution action must separately show lack of probable cause. Reasonable lawyers can differ, some seeing as meritless suits which others believe have merit, and some seeing as totally and completely without merit suits which others see as only marginally meritless. Suits which all reasonable lawyers agree totally lack merit—that is, those which lack probable cause—are the least meritorious of all meritless suits. Only this subgroup of meritless suits present no probable cause. [Citation.]" (Roberts, supra, 76 Cal.App.4th at p. 382.)
Baer maintains the following evidence establishes the probable cause element: (1) Defendants changed the allegations supporting the breach of fiduciary duty claim after Phase 3 of litigation; (2) Defendants' new claim was based on Tedder's and Baer's failure to obtain Tedder's clients' informed consent before making self-interested transactions; (3) after discovery was reopened, Baer uncovered evidence proving Tedder's law firm obtained informed consent from two clients, including McGrath; (4) it was the firm's practice to obtain written consents from all clients; (5) it would be reasonable to infer Defendants destroyed their informed consent forms before pursuing their new theory of breach of fiduciary duty based on the lack of consent.
Although the trial court did not rule on whether these facts established lack of probable cause, we conclude Baer made a sufficient showing any reasonable attorney would agree the action completely lacked merit. Defendants' breach of fiduciary duty theory was premised on the theory Tedder made self-interested transactions with his client's money, and Baer was also liable because he was Tedder's partner. An essential element of this theory was Tedder's noncompliance with the requirements of Rule 3-300, which prohibits an attorney from entering into a financial transaction with his client without first obtaining his client's informed written consent. Consequently, if Tedder had obtained written informed consent forms before making self-interested transactions, and Defendants hid this evidence to pursue their claim, a reasonable attorney would not believe Defendants had legitimate grounds to proceed with this claim.
In his opposition to the anti-SLAPP motions, Baer alleged the trial court reopened discovery after Phase 3 of the trial and he fortuitously obtained evidence that Tedder's law firm obtained written informed consents from McGrath and another client (who was not a party to this action). Baer's attorney, Benjamin P. Pugh, filed a supporting declaration that discussed how the evidence was inadvertently uncovered. He attached to his declaration copies of the two signed informed consent documents along with their respective cover letters, signed by Ernst Robert Berends, Jr. Pugh declared he took Berends's deposition and attached a copy of the transcript. Berends said he worked as an attorney in Tedder's law firm and assisted Tedder in his dealings with Grammer, McGrath, Shoenman, and their various limited partnerships. Berends described the law firm's practice of making sure clients signed informed consent forms. He authenticated the newly discovered informed consent documents.
We agree with Baer's contention it can be reasonably inferred from the above that Tedder's firm's practice of obtaining informed consent from its clients occurred for all transactions at issue and Defendants fraudulently destroyed or withheld copies of their written consent to pursue their breach of fiduciary duty claim. In other words, Defendants litigated the claim knowing it lacked probable cause.
This inference is bolstered by additional admissible evidence attached to Pugh's declaration. He submitted an e-mail prepared by Hartmann that served to update the other defendants about involuntary bankruptcy proceedings involving Baer's corporations. Hartmann wrote, "Baer is hurting. [Grammer] told me that Baer recently approached his son [regarding] settling. . . . Further, Ed has told me that neither IBT nor SCSD have propounded any discovery in bankruptcy. That means Baer is running out of cash flow. As [Grammer] would say if he was writing this memo, 'Boy, it's time to hit that son o'bitch hard, and don't stop 'till' your knuckles are bleedn'.'" In addition, Baer submitted evidence the bankruptcy action ended with the court awarding attorney fees and costs, and assessing punitive damages, which are statutorily permitted when the petition was filed in bad faith. This judgment was affirmed by the United States District Court and the Ninth Circuit. Pursuant to Baer's request, the trial court could take judicial notice of the truth of the results rendered in these related court proceedings. (§ 452, subd. (d).)
Baer argues this procedural history, along with the newly discovered informed consent disclosures, strongly suggested Defendants knowingly conspired to file multiple frivolous actions against him at the same time to drain his resources and force a settlement. We agree. In light of all of the above, we conclude Baer satisfied his burden of establishing a probability Defendants pursued Phase 4 of the trial without probable cause, an element necessary to his malicious prosecution claim. As noted above, Baer's "burden of establishing a probability of prevailing is not high: We do not weigh credibility, nor do we evaluate the weight of the evidence. Instead, we accept as true all evidence favorable to the plaintiff and assess the defendant's evidence only to determine if it defeats the plaintiff's submission as a matter of law. [Citations.]" (Overstock, supra, 151 Cal.App.4th at pp. 699-700.)
We reject Defendants' contention their success defending against Baer's summary adjudication motion before Phase 4 effectively refuted any claim they had an improper purpose. Generally, because "summary judgment motions usually are heard only after full discovery develops the evidence relevant to the claim" a denial of the motion "is a sound indicator of probable cause." (Roberts v. Sentry Life Insurance (1999) 76 Cal.App.4th 375, 383-384.) However, in this case the summary judgment was heard before the trial court granted Baer's motion to reopen discovery, during which his attorney located copies of Tedder's law firm's informed consent documents. These are documents Defendants previously maintained did not exist. This discovery suggests Defendants engaged in fraudulent behavior, refuting any favorable presumption created by the interim summary judgment ruling.
III. Malice
The malice element of malicious prosecution "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 bringing a perceived guilty person to justice or 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. [Citation.] It may range anywhere from open hostility to indifference. [Citation.]" (Downey Venture v. LMI Ins. Co. (1998) 66 Cal.App.4th 478, 494.)
Baer sought to prove the malice element on these same facts supporting the element of probable cause plus a few additional factual allegations as follows: (1) the trial court's statement of decision following Phase 3 contained the factual finding Defendants had a history of document destruction concerning finances; (2) throughout the case Defendants resisted producing documents and were sanctioned for their misconduct; (3) Defendants had a history of falsely accusing Baer of wrongful conduct and submitting false declarations; (4) prior appellate opinions reflect Defendants' personal histories of misconduct and lack of credibility, which suggest their actions were motivated by malice; (5) Defendants' malice was shown through their decision to pursue a frivolous adversarial bankruptcy proceeding against Baer's corporations and the bankruptcy court assessed punitive damages against Defendants; (6) Baer was awarded attorney fees and costs in the bankruptcy proceedings; (7) Hartmann sent an e-mail to the other defendants during the bankruptcy proceeding urging them to keep up the pressure and force a settlement; and (8) the United States District Court and Ninth Circuit Court of Appeals affirmed the bankruptcy court's rulings and indicated Defendants misrepresented the record and Baer's involvement in Tedder's fraudulent schemes.
The trial court granted the anti-SLAPP motions because it concluded Baer's contentions of malice were based primarily on judicially noticed court records. The court concluded that while it was proper to take judicial notice of these documents, it could not take judicial notice of the truth of the factual findings stated in statements of decision or the prior appellate decisions related to this case. The court reasoned that without the judicially noticed evidence, Baer could not prove malice. On appeal, Baer maintains the court erred in refusing to consider the truth of matters contained in judicially noticed documents. Baer suggests this appeal gives our court the unique opportunity to clarify the inconsistent and confusing body of published case law on what it means to take judicial notice of court records.
We have endeavored to do so below and conclude the trial court correctly determined it could not consider factual statements contained in court records as having the same evidentiary value as established facts. However, we conclude there was other admissible evidence sufficient to show Tedder, Grammer, McGrath, and Hartmann were motivated by malice in formulating and pursuing Phase 4 of the trial, and therefore, Baer established he had a probability of prevailing in his malicious prosecution action against them. As we will explain, the same cannot be said about the evidence with respect to Dressler, and consequently, we affirm the portion of the judgment pertaining to him. A. Judicial Notice
"'Under the doctrine of judicial notice, certain matters are assumed to be indisputably true, and the introduction of evidence to prove them will not be required. Judicial notice is thus a substitute for formal proof. [Citation.]' [Citation.]" (Sosinsky v. Grant (1992) 6 Cal.App.4th 1548, 1564 (Sosinsky).)
Baer relied on the rule that the court may take judicial notice of any court record. (See § 452, subd. (d).) "This includes any orders, findings of facts and conclusions of law, and judgments within court records. [Citations.] However, while courts are free to take judicial notice of the existence of each document in a court file, including the truth of results reached, they may not take judicial notice of the truth of hearsay statements in decisions and court files. [Citation.]" (Lockley v. Law Office of Cantrell, Green, Pekich, Cruz & McCort (2001) 91 Cal.App.4th 875, 882 (Lockley), first italics in original, second italics added.)
The trial court determined that reliance on a request for judicial notice to prove disputed facts based on court records is improper because judicial notice, by definition, applies solely to undisputed facts. "[O]nly where the order or judgment establishes a fact for purposes of . . . res judicata or collateral estoppel, would the fact so determined be a proper subject of judicial notice." (Kilroy v. State of California (2004) 119 Cal.App.4th 140, 147; see also Rodgers v. Sargent Controls & Aerospace (2006) 136 Cal.App.4th 82, 90 [and cases cited therein].)
We find instructive Steed v. Department of Consumer Affairs (2012) 204 Cal.App.4th 112 (Steed). In that case, a veterinarian alleged various tort actions against the Veterinary Medical Board (the Board) arising from disciplinary proceedings. (Id. at p. 115.) The court granted the Board's anti-SLAPP motion. The veterinarian alleged she made a sufficient showing of a probability of success on the merits based on the evidence contained in five judicially noticed documents. (Id. at p. 118.) Specifically, there was a minute order in which the trial court determined the disciplinary proceedings before the Board were flawed. (Id. at p. 120.) The appellate court determined the veterinarian "misapprehend[ed] the effect of judicial notice." (Ibid.)
"Judicial notice is properly taken of the existence of a factual finding in another proceeding, but not of the truth of that finding. [Citations.] 'A court may take judicial notice of [another] court's action, but may not use it to prove the truth of the facts found and recited. [Citations.]' [Citation.] As our Supreme Court explained, judicial notice of findings of fact does not mean that those findings of fact are true; it means only that those findings of fact were made. [Citation.] '"[N]either a finding of fact made after a contested adversary hearing nor a finding of fact made after any other type of hearing can be indisputably deemed to have been a correct finding . . . ."' [Citation.]" (Steed, supra, 204 Cal.App.4th at pp. 120-121.)
The appellate court in Steed relied on another malicious prosecution case Sosinsky, supra, 6 Cal.App.4th 1548, as aptly explaining the effect of judicial notice. (Steed, supra, 204 Cal.App.4th at p. 121.) "There, the appellate court held, while the existence of any document in a court file may be judicially noticed, the truth of the matters asserted in those documents, including the factual findings of the judge who was sitting as the trier of fact, is not entitled to notice. [Citation.] Sosinsky explained, '"Under the doctrine of judicial notice, certain matters are assumed to be indisputably true, and the introduction of evidence to prove them will not be required."' [Citation.] Thus, the court reasoned, taking judicial notice of the truth of a judge's factual finding, even after a contested adversary hearing, is 'tantamount to taking judicial notice that the judge's factual finding must necessarily have been correct and that the judge is therefore infallible. We resist the temptation to do so.' [Citation.]" The Sosinsky court reasoned that '"[t]here exists a mistaken notion that [taking judicial notice of court records] means taking judicial notice of the existence of facts asserted in every document of a court file, including pleadings and affidavits. However, a court cannot take judicial notice of hearsay allegations as being true, just because they are part of a court record or file."' [Citation.] The Sosinsky court held that the trial court had 'properly refused to take judicial notice of the truth of any of the factual assertions appearing in the court documents from action No. 204488 which appellants presented to the court. Appellants, having presented no "facts" which the court could take judicial notice of the truth of, and having presented no evidence in opposition to the Grants' motion for summary judgment, were in essence opposing the Grants' motion with no evidentiary showing whatsoever.' [Citation.] In sum, a court may take judicial notice that a prior order was entered, but it may not take judicial notice of the truth of factual findings made therein. [Citation.]" (Id. at p. 121, fn. omitted.)
Applying this reasoning to the case before it, the Steed court determined that of the five judicially noticed documents the only one at issue was the trial court minute order. (Steed, supra, 204 Cal.App.4th at p. 122.) "According to the above described rules, the trial court properly took judicial notice of the existence of the minute order, i.e., of the fact that on June 12, 2009, the trial court issued a minute order granting Steed's petition for writ of mandate. [Citation.] The court simply could not take judicial notice of the truth of the factual findings and determinations on which that minute order is based; it could not accept those findings as true. [Citation.]" (Ibid.) Because the veterinarian presented no other "competent, admissible" facts showing malice in opposing the anti-SLAPP motion, the trial court's order granting the motion was affirmed.
Baer asserts there is legal authority holding it is proper to take judicial notice of the substance and truth of the facts stated in appellate opinions. Weiner v. Mitchell, Silberberg & Knupp (1980) 114 Cal.App.3d 39, 45, held the trial court could take judicial notice of pertinent facts stated in a Ninth Circuit Court of Appeals opinion and the judgment affirming plaintiff's conviction of securities fraud when ruling on a demurrer. It reasoned, "The facts stated in an appellate opinion appear to us to possess generally an assurance of accuracy and reliability . . . . We know from our own personal experience in the writing of appellate opinions that every effort is made to make the statement of facts therein a completely accurate reflection of the record in the particulars discussed. Accordingly, we hold that it was proper for the trial court and it is proper for us in evaluating the validity of defendants' general demurrers to plaintiff's second amended complaint to take appropriate judicial notice of both the pertinent facts stated in the appellate opinion and of the judgment" arising out of his employment.
Baer recognizes the court in Sosinsky rejected the holding of Weiner. Relying on a legal treatise, the court determined the Weiner court's analysis represented "'an erroneous concept of judicial notice and is clearly fallacious and indefensible. Judicial notice substitutes for formal proof only because the matters judicially noticed are not reasonably subject to dispute.' [Citation.]" (Sosinsky, supra, 6 Cal.App.4th at p. 1566; citing 2 Jefferson's California Evidence Benchbook (2d ed. 1982) § 47.2, p. 1757.)
Baer maintains that after Sosinsky was published our Supreme Court followed the Weiner holding in Crowley v. Katleman (1994) 8 Cal.4th 666, 672 (Crowley). This statement mischaracterizes the holding of the case. The Crowley court reviewed a judgment of dismissal following a sustained demurrer in a malicious prosecution action. (Crowley, supra, 8 Cal.4th at p. 671.) The issue to be decided was whether the malicious prosecution claim was viable, not the evidentiary value of judicially noticed documents. The court stated its "task" on appeal was to decide whether the complaint stated, or could be amended to state, a cause of action. (Id. at p. 672.) It announced that "for that purpose," the court would accept as true the properly pleaded material factual allegations and any other facts that could be "properly judicially noticed." (Ibid.)
In a footnote following this well-settled statement of the law, the court commented, "The summary that follows is based on the complaint and a probated will attached thereto as an exhibit, supplemented by certain court records in the underlying probate proceeding that the parties request us to judicially notice pursuant to section 459. We also incorporate certain facts recited in the published decision in an appeal from a portion of the probate proceeding (Estate of Katleman (1993) 13 Cal.App.4th 51), again, facts that we may judicially notice. (Weiner[, supra,] 114 Cal.App.3d [at pp.] 45-46].)" (Crowley, supra, 8 Cal.4th at p. 672, fn. 2.)
This footnote reflects what is often done by courts when there are consecutive appellate opinions. Rather than repeating the underlying facts, a reviewing court will "incorporate" facts from a related prior published opinion as part of its factual summary. In the Crowley case, the prior appellate opinion (Estate of Katleman (1993) 13 Cal.App.4th 51), discussed the probate matter that was the basis of the malicious prosecution. Our Supreme Court indicated it prepared a summary of facts based on many sources, including information incorporated from the prior appellate opinion that could also be judicially noticed. (Crowley, supra, 8 Cal.4th at p. 672, fn. 2.) The Crowley opinion did not clarify what "certain facts" were included in its factual summary that could also be "properly" judicially noticed. Baer argues this dictum in Crowley requires this court to accept as true the facts stated in the judicially noticed documents in deciding whether he has a probability of prevailing in his malicious prosecution claim. We do not believe the Crowley dictum, which did not consider this same issue, was meant to apply in this context.
A dictum of the Supreme Court "while not controlling authority, carries persuasive weight and should be followed where it demonstrates a thorough analysis of the issue or reflects compelling logic. [Citations.]" (Smith v. County of Los Angeles (1989) 214 Cal.App.3d 266, 297.) In contrast, "[W]e are not bound by dicta, particularly where it is unpersuasive and contrary to the overwhelming weight of precedent. In every case, it is necessary to read the language of an opinion in light of its facts and the issues raised, in order to determine which statements of law were necessary to the decision, and therefore binding precedent, and which were general observations unncessary to the decision. The latter are dicta, with no force as precedent. [Citations.]" (Fireman's Fund Ins. Co. v. Maryland Casualty Co. (1998) 65 Cal.App.4th 1279, 1301.) The Supreme Court's citation to the Weiner decision related to its preparation of a summary of the underlying facts and was unnecessary to the decision in that case. We conclude it was not binding as precedent on this court deciding the question of the evidentiary value of judicially noticed court documents.
We find persuasive the decision in Lockley, supra, 91 Cal.App.4th at p. 885. The court explained Weiner "appears to run counter to the well-established principle that courts may not take judicial notice of hearsay allegations. An appellate court's description of facts is merely the hearsay assertions of the justices who delivered the opinion. Hearsay statements within the opinion are inadmissible unless they fall within an exception to the hearsay rule. Under section 1280 . . . appellate opinions do come within the exception to the hearsay rule for official records. [Citation.] However, an official record is '[e]vidence of a writing made as a record of an act, condition, or event . . . offered . . . to prove the act, condition or event . . . .' (Ibid.) Thus, while an official record of an appellate opinion can be admitted to prove the truth of the facts asserted, the most it may prove is that the appellate opinion was delivered and that the court made orders, factual findings, judgments and conclusions of law. Stated another way, what is being noticed is the existence of the act, not that what is asserted in the act is true. [Citation.] The truth of any factual matters that might be deduced from official records is not the proper subject of judicial notice. [Citation.]" We agree with the Lockley court's opinion that Sosinky is a better reasoned decision than Weiner. The trial court takes judicial notice of a factual finding in a court document, but not the truth of that finding. B. Analysis
Applying these rules, we conclude Baer established a prima facie showing of malice based on admissible evidence as to four of the five defendants. As we discussed earlier, "Malice 'may range anywhere from open hostility to indifference.' [Citations.]" (Soukup, supra, 39 Cal.4th at p. 292.) While the mere absence of probable cause, without more, "is not sufficient to demonstrate malice" (Downey Venture v. LMI Ins. Co. (1998) 66 Cal.App.4th 478, 498-499, fn. 29), "'[m]alice may also be inferred from the facts establishing lack of probable cause.' [Citation.]" (Soukup, supra, 39 Cal.4th at p. 292.) "Since parties rarely admit an improper motive, malice is usually proven by circumstantial evidence and inferences drawn from the evidence. [Citations.]" (HMS Capital, Inc., supra, 118 Cal.App.4th at p. 218.)
The record clearly supports an inference that Tedder, Grammer, and McGrath brought the underlying case with malice. Baer introduced admissible circumstantial evidence suggesting documents were withheld or destroyed, actions particularly significant when viewed in the context of this lengthy and complex dispute. After litigating the matter for over a decade, Defendants determined they needed to create a new breach of fiduciary duty theory against Baer following Phase 3 because the trial court made unfavorable rulings about the relationship between Baer and Tedder. Specifically, the court concluded Tedder could not prevail on any cause of action against Baer, and because Grammer had an agreement with Tedder to share in his recovery against Baer, this ruling also meant a loss for Grammer. Thus, after more than 10 years of litigation, Defendants had reached a dead end with respect to recovering money from Baer personally. Their solution was to formulate a new theory of recovery, alleging Baer owed them the same fiduciary duty Tedder owed to clients receiving his asset protection services. Specifically, Defendants alleged Baer, as Tedder's partner, was vicariously liable for Tedder's violation of Rule 3-300.
Before this phase of the trial, the court reopened discovery and Baer stumbled across evidence the Rule 3-300 disclosures were given to Defendants before Tedder engaged in self-interested transactions, curing the alleged ethical violations. This discovery was important because Defendants made statements in their declarations that these Rule 3-300 disclosures did not exist. Thus, to summarize, after Defendants discovered their theory of recovery was no longer viable, they crafted a new theory based on a false factual premise. It can be inferred from the circumstantial evidence Defendants' subjective intent in pursuing the baseless underlying action was to "deliberately misuse the legal system for personal gain or satisfaction at the expense of the wrongfully sued defendant. [Citation.]" (Downey Venture v. LMI Ins. Co. (1998) 66 Cal.App.4th 478, 499.) Baer satisfied his minimal burden of showing Tedder, Grammer, and McGrath instituted proceeding in Phase 4 of litigation with improper ulterior motives.
We reject Defendants' argument suggesting Baer failed to raise an inference of malice because he did not submit his own declaration. As mentioned above, "malice is usually proven by circumstantial evidence and inferences drawn from the evidence." (HMS Capital, Inc., supra, 118 Cal.App.4th at p. 218.) As aptly stated by Baer, he would not have any direct personal knowledge of the subjective element of Defendants' malice.
The remaining question we must determine is whether the quantum of evidence was sufficient to establish a prima facie case against the two attorneys, Hartmann and Dressler. Turning first to Hartmann, we conclude there was sufficient admissible evidence of malice. We recognize Hartmann's declaration contained several statements suggesting he personally did not pursue the underlying action with an improper motive. He maintained he merely sought to vindicate his client's legal rights. In his declaration, he sought to minimize the evidentiary value of informed consent disclosures by questioning if they were legally adequate and by challenging Berends' credibility. Alternatively, Hartmann referred to a State Bar hearing initiated by one of Tedder's other clients (Dr. Yunus), which resulted in Tedder losing his license to practice law. He asserted those proceedings proved Tedder's law firm never obtained written consent disclosures from clients that conformed to Rule 3-300. While we may take judicial notice of those proceedings, we cannot accept the truth of the matters discussed in the State Bar's rulings. Hartmann's opinion that client written consents would likely have been produced at the State Bar proceeding if they existed was directly refuted by Baer's actual evidence Tedder's client, McGrath, received and signed an informed consent form.
We also recognize it would be improper to impute Grammer's, Tedder's, and McGrath's malice to their attorneys. (See Zeavin v. Lee (1982) 136 Cal.App.3d 766, 773 ["the attorney is not the insurer of his client's conduct, and the law wisely places no such burden on that party's attorney solely by reason of his client's conduct"].) However, noticeably absent from Hartmann's second declaration filed after Baer's opposition to this anti-SLAPP motion, is any mention of the e-mail he sent to the other Defendants during the involuntary bankruptcy proceedings. Baer discussed the e-mail at length in his opposition. We agree the e-mail represented circumstantial, but admissible, evidence of extreme hostility towards Baer, and Hartmann appeared to revel in the news Baer was suffering financial misfortune. Hartmann suggested it was time to hit Baer "harder" not because the action had merit, but because the additional expense would force a favorable settlement.
In addition, Baer submitted evidence Hartmann advised Grammer and McGrath to press forward with involuntary bankruptcy proceedings at the same time as the underlying action. The bankruptcy court dismissed the petition and awarded attorney fees and costs in addition to $65,000 in punitive damages. This result bolsters the reasonable inference created by Hartmann's e-mail that he colluded with the parties to initiate fraudulent lawsuits with the improper purpose of financially ruining Baer and to collect money through a coerced settlement. '"The malice element of the malicious prosecution tort . . . is not limited to actual hostility or ill will toward the plaintiff . . . [and] . . . can exist, for example, where the proceedings are initiated for the purpose of forcing a settlement which has no relation to the merits of the claim." (HMS Capital, supra, 118 Cal.App.4th at p. 218.)
After independently considering the pleadings and admissible evidence submitted by both sides, we conclude Baer made a sufficient prima facie showing of malice with respect to Hartmann. It is our responsibility "to accept as true the evidence favorable to the plaintiff . . . and evaluate the defendant's evidence only to determine if it has defeated that submitted by the plaintiff as a matter of law." (HMS Capital, Inc., supra, 118 Cal.App.4th at p. 212.) Baer met his burden of showing Hartmann and his clients acted with the subjective intent to deliberately misuse the legal system for personal gain and force a settlement at Baer's expense.
Turning to the claim against Dressler, we conclude Baer did not meet his burden of proof regarding the necessarily element of malice. Baer submitted evidence suggesting Hartmann and Dressler were of the same mind set with regards to litigation against Baer. To prove this theory, Baer attached to his opposition a copy of Hartmann's 2009 retainer agreement prepared for Tedder, McGrath, Grammer, and Schoenmann. Ironically, Hartmann's declaration offered some support for Baer's point. Hartmann outlined all the information both he and Dressler relied on in prosecuting the breach of fiduciary claim. Hartmann explained he associated Dressler as co-counsel, and Dressler was to be "equally responsible for . . . representation in the [l]itigation." Hartmann's declaration confirmed the two attorneys were in agreement on the course of action. However, Hartmann's opinion about Dressler cannot be confirmed because Dressler did not file his own declaration in support of the anti-SLAPP motion. In any event, we conclude there is no reason to infer co-counsel necessarily share the same malicious mindset. Dressler was not included in Hartmann's "hit that son o'bitch hard" e-mail to the clients. We found no other admissible evidence in the record suggesting Dressler assisted in litigating Phase 4 with actual ill will towards Baer or due to an improper ulterior motive. Accordingly, we affirm the judgment with respect to Dressler.
IV. Admission of Hearsay Evidence
In his opening brief, Baer argues hearsay evidence contained in the court records was admissible because Defendants did not make a proper objection. In addition, he asserts some of the hearsay statements contained in the judicially noticed court records were admissible as adoptive admissions under section 1221. However, Baer does not allege or include record references indicating the court considered and rejected these contentions. Therefore, it appears this argument is waived (Kim v. Sumitomo Bank (1993) 17 Cal.App.4th 974, 979), and in any event, we have ruled the judgment must be reversed based on admissible evidence and need not address this alternative theory raised on appeal.
V. Baer's Malicious Prosecution Claim Against DTG and Vine Street
In the respondent's brief, Defendants argue the malicious prosecution action is time-barred against DTG and Vine Street. Baer's malicious prosecution complaint identified these entities as limited partnerships Tedder created for two clients ("Mr. Brown" and Charles Givens), who are not represented by respondents' counsel in this appeal and who were not moving parties included in the anti-SLAPP motions. Defendants would have standing to cross-appeal on their own behalf as aggrieved parties, but they lack standing to argue there was error that affected a party who did not appeal. (See City of Riverside v. Horspool (2014) 223 Cal.App.4th 670, 678.) Moreover, because defendants did not cross-appeal from the trial court's order, the issue is forfeited. "As a general matter, '"a respondent who has not appealed from the judgment may not urge error on appeal."' [Citation.] 'To obtain affirmative relief by way of appeal, respondents must themselves file a notice of appeal and become cross-appellants.' [Citation.]" (Preserve Poway v. City of Poway (2016) 245 Cal.App.4th 560, 585.)
DISPOSITION
The judgment is affirmed in part, reversed in part, and remanded with directions to deny the anti-SLAPP motion with respect to Tedder, Grammer, McGrath, and Hartmann and for further proceedings. Respondents' request for judicial notice of two trial court orders is granted. (See § 452, subd. (d).) Appellant shall recover his costs on appeal from all respondents except Dressler.
O'LEARY, P. J. WE CONCUR: FYBEL, J. THOMPSON, J.