Opinion
G044409
08-31-2011
EXECUTIVE ESCROW COMPANY, Plaintiff and Appellant, v. EARL COLEMAN et al., Defendants and Respondents.
The Clinebell Law Firm, Donald R. Clinebell; Law Offices of Gary E. Shoffner and Gary E. Shoffner for Plaintiff and Appellant. Miller Johnson Law, Jon B. Miller and Scott A. Johnson 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NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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. 30-2010-00354469)
OPINION
Appeal from a judgment of the Superior Court of Orange County, Charles Margines, Judge. Affirmed.
The Clinebell Law Firm, Donald R. Clinebell; Law Offices of Gary E. Shoffner and Gary E. Shoffner for Plaintiff and Appellant.
Miller Johnson Law, Jon B. Miller and Scott A. Johnson for Defendants and Respondents.
Plaintiff Executive Escrow Company (Executive Escrow) appeals an order striking its malicious prosecution complaint as a SLAPP suit against defendants Earl Coleman, Leonard Pinkowski, Mark Coleman, Patricia Coleman, Steve C. Jones, Judy Affonso-Jones, Raymond Pellegrino, Earl Colman as Trustee of the Coleman Family Trust, and Coleman-Marshall, Inc. (collectively the Coleman Investors).
"SLAPP is an acronym for 'strategic lawsuits against public participation.' [Citation.] A special motion to strike a SLAPP action, codified in Code of Civil Procedure section 425.16, provides a procedural remedy to gain an early dismissal of a lawsuit or a cause of action that qualifies as a SLAPP. [Citation.]" (Slaney v. Ranger Ins. Co. (2004) 115 Cal.App.4th 306, 309, fn. 1.)
In the earlier action, the Coleman Investors sued Executive Escrow to recover the money they lost when a real estate investment turned out to be a Ponzi scheme. The Coleman Investors alleged Executive Escrow failed to record trust deeds the Ponzi scheme operator provided as security for their investments. Following a bench trial, the trial court entered judgment for Executive Escrow on all causes of action based on the finding Executive Escrow had no duty to record the trust deeds because the Coleman Investors failed to establish any contractual or other relationship with Executive Escrow.
In this action, the trial court granted the Coleman Investors' anti-SLAPP motion because Executive Escrow failed to establish it had a probability of prevailing on its malicious prosecution claim. Executive Escrow contends the trial court erred because the Coleman Investors knew they had no relationship with Executive Escrow that required it to record the trust deeds, but nonetheless pursued the prior action against Executive Escrow. We affirm the trial court's order because Executive Escrow failed to present sufficient evidence showing the Coleman Investors lacked probable cause for pursing their earlier action against Executive Escrow.
I
FACTS AND PROCEDURAL HISTORY
High Park Investment Group (High Park) operated a real estate investment business in which it purchased, renovated, and resold distressed residential properties. High Park promised potential investors significant returns on their investments and offered as security second trust deeds on each investment property.
The Coleman Investors learned about High Park's business and invested in some of its projects. High Park offered the Coleman Investors the opportunity to invest in a property High Park planned to buy in Malibu, California. As with all its projects, High Park promised to secure the Coleman Investors' investments with second trust deeds recorded on the Malibu property when High Park's purchase closed. The Coleman Investors agreed to invest in the Malibu property.
The Coleman Investors individually agreed to invest the following amounts: (a) Raymond Pellegrino $125,000; (b) Steve Jones and Judy Affonso-Jones $75,000; (c) Leonard Pinkowski $75,000; (d) Coleman Family Trust $50,000; (e) Mark and Patricia Coleman $50,000; and (f) Coleman-Marshall, Inc. $25,000. In addition to the money he invested on behalf of the Coleman Family Trust and Coleman-Marshall, Inc., Earl Coleman later invested $100,000 in his own name. Executive Escrow does not differentiate between these individual investments and therefore we will treat them collectively.
High Park informed the Coleman Investors it hired Executive Escrow as its escrow agent on the Malibu property purchase and that Damon Kuntz was the escrow officer responsible for the transaction. After learning this information, Coleman Investors Steve Jones and Raymond Pellegrino together phoned Kuntz to discuss the escrow. They told Kuntz they would send Executive Escrow cashier's checks for their investment in High Park's Malibu property, High Park would send Executive Escrow trust deeds naming them as beneficiaries, and Executive Escrow would record those trust deeds in second position when escrow closed. Kuntz acknowledged these instructions.
Pellegrino confirmed his understanding of the conversation by sending Kuntz a fax stating, "This is an instruction to have my $125,000 note and deed of trust made as follows[:] The beneficiary will be (Raymond F. Pellegrino DB Plan)." Coleman Investor Earl Coleman also phoned Executive Escrow to discuss the escrow and directed Executive Escrow to record second trust deeds naming him, the Coleman Family Trust, and Coleman-Marshall, Inc., as beneficiaries when escrow closed. Kuntz again acknowledged these instructions.
The day after these phone conversations, the Coleman Investors each received a package from High Park containing (1) a signed "'Trust Deed Participants Agreement'" stating the terms of their investments with High Park, including High Park's promise to secure each investment with a second trust deed, and (2) copies of the second trust deeds Executive Escrow would record when escrow closed.
A few days later, the Coleman Investors each sent cashier's checks for their respective investments to Executive Escrow by overnight mail. Executive Escrow cashed the checks from the Coleman Investors and escrow closed on High Park's purchase of the Malibu property.
On a later date, Earl Coleman paid his separate $100,000 investment directly to High Park, not Executive Escrow.
Several months later, the Coleman Investors learned the United States Securities and Exchange Commission froze High Park's assets and charged its owner with operating a Ponzi scheme. High Park thereafter filed for bankruptcy and its owner pleaded guilty to wire fraud charges.
The Coleman Investors also learned Executive Escrow never recorded their second trust deeds on the Malibu property. Instead, approximately three months after escrow closed, High Park recorded a single trust deed on the Malibu property identifying the Coleman Investors and other High Park creditors as beneficiaries. Before High Park recorded that trust deed, however, other High Park creditors recorded liens on the Malibu property. The creditors foreclosed on these superior liens, leaving the Coleman Investors without any security for their investments and no meaningful recourse against High Park.
The Coleman Investors consulted with Attorney Bruce Douthit to determine whether they had any available remedies to recover the money they lost in their investments. After meeting with the Coleman Investors, Douthit advised them Executive Escrow mishandled the escrow on the Malibu property and they should sue Executive Escrow for their damages.
Following Douthit's advice, the Coleman Investors sued Executive Escrow for failing to record their second trust deeds on the Malibu property. The complaint Douthit drafted alleged the following causes of action: (1) negligent misrepresentation; (2) money had and received; (3) breach of oral escrow contract; (4) breach of implied escrow contract; (5) breach of fiduciary duty in handling escrow contracts; (6) breach of the covenant of good faith and fair dealing; (7) breach of oral bailment undertaking; (8) promissory estoppel — estoppel to deny existence of escrow contract; and (9) financial elder abuse.
As drafted by Douthit, the complaint in this action named as plaintiffs all Coleman Investors except the Coleman Family Trust and Coleman-Marshall, Inc. Douthit later advised these two entities to file a separate lawsuit against Executive Escrow because he omitted them from the original action. They followed Douthit's advice and filed a separate action alleging the same facts and causes of action.
Following a bench trial, the trial court entered judgment in Executive Escrow's favor on all causes of action. The trial court found the Coleman Investors were not parties to the escrow instructions for High Park's purchase of the Malibu property, and the Coleman Investors failed to establish any contractual or other relationship with Executive Escrow that would have obligated Executive Escrow to record the second trust deeds. The trial court acknowledged the Coleman Investors presented credible circumstantial evidence showing Executive Escrow received copies of the second trust deeds, but Executive Escrow also presented credible evidence showing it did not receive the second trust deeds. The trial court resolved this conflict in Executive Escrow's favor because the written escrow instructions for High Park's purchase did not mention the second trust deeds. The trial court concluded High Park assured the Coleman Investors it would direct Executive Escrow to record the second trust deeds, but never followed through on its promise.
After the trial court entered judgment for Executive Escrow, the Coleman Family Trust and Coleman-Marshall, Inc., followed Douthit's advice and voluntarily dismissed their separate action against Executive Escrow because it sought identical relief based on the same facts.
Executive Escrow filed the current malicious prosecution action against the Coleman Investors to recover the attorney fees and other damages it suffered in defending the prior action. The Coleman Investors responded by filing a special motion to strike under the anti-SLAPP statute. The trial court granted the motion based on Executive Escrow's failure to meet its burden to establish a probability of prevailing on its claim. Specifically, the trial court found Executive Escrow failed to establish the probable cause element for its malicious prosecution claim. The trial court entered an order striking Executive Escrow's complaint and Executive Escrow timely appealed.
II
DISCUSSION
A. The Anti-SLAPP Statute
The anti-SLAPP statute authorizes a special motion to strike any cause of action arising from the exercise of petition or free speech rights: "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 the California Constitution in connection with a public issue shall be subject to a special motion to strike, unless the court determines that the plaintiff has established that there is a probability that the plaintiff will prevail on the claim." (Code of Civ. Proc. § 425.16, subd. (b)(1).)
Analysis of an anti-SLAPP motion "requires the court to engage in a two-step process. First, the court decides whether the defendant has made a threshold showing that the challenged cause of action is one arising from protected activity." (Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 67 (Equilon).)"'A defendant meets this burden by demonstrating that the act underlying the plaintiff's cause fits one of the categories spelled out in section 425.16, subdivision (e) . . . .' [Citations.]" (City of Cotati v. Cashman (2002) 29 Cal.4th 69, 78.) Second, if the court finds the defendant met this burden, "it then determines whether the plaintiff has demonstrated a probability of prevailing on the claim." (Equilon, at p. 67.)
Section 425.16, subdivision (e), defines the categories of protected activities as follows: "As used in this section, 'act in furtherance of a person's right of petition or free speech under the United States or California Constitution in connection with a public issue' includes: (1) any written or oral statement or writing made before a legislative, executive, or judicial proceeding, or any other official proceeding authorized by law, (2) any written or oral statement or writing made in connection with an issue under consideration or review by a legislative, executive, or judicial body, or any other official proceeding authorized by law, (3) any written or oral statement or writing made in a place open to the public or a public forum in connection with an issue of public interest, or (4) any other conduct in furtherance of the exercise of the constitutional right of petition or the constitutional right of free speech in connection with a public issue or an issue of public interest."
"To establish a probability of prevailing, the plaintiff 'must demonstrate 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.' [Citations.] . . . The plaintiff need only establish that his or her claim has 'minimal merit' [citation] to avoid being stricken as a SLAPP. [Citations.]" (Soukup v. Law Offices of Herbert Hafif (2006) 39 Cal.4th 260, 291 (Soukup).)
The plaintiff must present admissible evidence to meet this burden. (Wilcox v. Superior Court (1994) 27 Cal.App.4th 809, 823, disapproved on other grounds in Equilon, supra, 29 Cal.4th at p. 68, fn. 5.) "[D]eclarations that lack foundation or personal knowledge, or that are argumentative, speculative, impermissible opinion, hearsay, or conclusory are to be disregarded." (Gilbert v. Sykes (2007) 147 Cal.App.4th 13, 26 (Gilbert).)
"When assessing the plaintiff's showing, the court must also consider evidence that the defendant presents. [Citation.] The court does not, however, weigh that evidence against the plaintiff's, in terms of either credibility or persuasiveness. Rather, the defendant's evidence is considered with a view toward whether it defeats the plaintiff's showing as a matter of law, such as by establishing a defense or the absence of a necessary element." (1-800 Contacts, Inc. v. Steinberg (2003) 107 Cal.App.4th 568, 585.)
We review a trial court's order granting or denying an anti-SLAPP motion de novo. (Nguyen-Lam v. Cao (2009) 171 Cal.App.4th 858, 866.) B. Executive Escrow Failed to Establish a Probability of Prevailing on Its Malicious Prosecution Claim
Executive Escrow sued the Coleman Investors on a single cause of action for malicious prosecution. The parties agree that a malicious prosecution claim arises from protected activity and therefore is subject to the anti-SLAPP statute. (Daniels v. Robbins (2010) 182 Cal.App.4th 204, 215 (Daniels) ["The plain language of the anti-SLAPP statute dictates that every claim of malicious prosecution is a cause of action arising from protected activity because every such claim necessarily depends upon written and oral statements in a prior judicial proceeding"].) Accordingly, the sole issued presented is whether Executive Escrow met its burden to establish a probability of prevailing against the Coleman Investors.
"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." (Soukup, supra, 39 Cal.4th at p. 292.) "'"Malicious prosecution is a disfavored action. [Citations.] . . ."' '[T]he elements of the [malicious prosecution] tort have historically been carefully circumscribed so that litigants with potentially valid claims will not be deterred from bringing their claims to court by the prospect of a subsequent malicious prosecution claim.' [Citation.]" (Daniels, supra, 182 Cal.App.4th at p. 216.)
The Coleman Investors concede Executive Escrow achieved a favorable termination in the underlying action based on the trial court's judgment. The parties' dispute focuses on the element requiring Executive Escrow to show the Coleman Investors lacked probable cause for bringing the earlier action.
"[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, original italics (Sheldon Appel).) "'A litigant will lack probable cause for his action either if he relies upon facts which he has no reasonable cause to believe to be true, or if he seeks recovery upon a legal theory which is untenable under the facts known to him.' [Citation.]" (Soukup, supra, 39 Cal.4th at p. 292.)
What facts the defendant knew when he or she filed the underlying action is a question of fact for the jury; whether those facts establish probable cause is a question of law for the court. (Sheldon Appel, supra, 47 Cal.3d at p. 877.) "When the prior action was objectively reasonable, the malicious prosecution defendant is entitled to prevail regardless of his or her subjective intent. '. . . If the court determines that there was probable cause to institute the prior action, the malicious prosecution action fails, whether or not there is evidence that the prior suit was maliciously motivated. [Citations.]' [Citation.]" (Sangster v. Paetkau (1998) 68 Cal.App.4th 151, 164 (Sangster).)
"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, original italics (Roberts).)"Attorneys and litigants . . . '"have a right to present issues that are arguably correct, even if it is extremely unlikely that they will win . . . ."' [Citation.]" (Wilson v. Parker, Covert & Chidester (2002) 28 Cal.4th 811, 817 superseded by statute on another point as stated in Hutton v. Hafif (2007) 150 Cal.App.4th 527, 547.)
To establish the Coleman Investors lacked probable cause, Executive Escrow focuses on just one of the nine causes of action the Coleman Investors pursued in the underlying litigation. Although Executive Escrow's opening brief did not concede this narrow focus, its reply brief leaves no doubt: "Executive [Escrow] contends that the oral escrow contract claims lacked probable cause and has not undertaken on appeal to demonstrate that other claims pursued by the Coleman [Investors] were similarly untenable." A plaintiff may properly prevail on a malicious prosecution claim by showing just one of several claims in the underlying action lacked probable cause. (Soukup, supra, 39 Cal.4th at p. 293; Bertero v. National General Corp. (1974) 13 Cal.3d 43, 57, fn. 5 ["an action for malicious prosecution lies when but one of alternate theories of recovery is maliciously asserted"].)
Executive Escrow contends the Coleman Investors lacked probable cause on the claim for breach of oral escrow instructions because they knowingly made false allegations to support that claim. Executive Escrow contends the Coleman Investors falsely alleged in their complaint that they had an in-person meeting with Kuntz where (1) the Coleman Investor each delivered to Kuntz a cashier's check for their investment in the Malibu property; (2) Kuntz gave the Coleman Investors trust deeds from High Park granting them security interests in the Malibu property; (3) the Coleman Investors each immediately tendered the trust deeds back to Kuntz for recording when escrow closed; and (4) Kuntz promised to record the trust deeds when escrow closed and also to hold the Coleman Investors' funds in escrow until High Park needed them to renovate the Malibu property.
The Coleman Investors contend Executive Escrow waived this challenge to their breach of oral escrow claim because Executive Escrow failed to raise it below. Because we conclude Executive Escrow failed to establish the Coleman Investors lacked probable cause for the breach of oral escrow claim, we need not reach this waiver argument.
According to Executive Escrow, the Coleman Investors knew these allegations were false because the alleged meeting with Kuntz never happened. To support this allegation, Executive Escrow relies on declarations and deposition testimony by the Coleman Investors stating they sent their cashier's checks to Kuntz by overnight mail. Based on these statements, Executive Escrow leaps to the following conclusions: (1) the meeting described in the Coleman Investors' complaint never occurred; (2) Executive Escrow and the Coleman Investors never formed an oral escrow contract; and (3) the Coleman Investors lacked probable cause for their breach of oral escrow claim.
The evidence, however, does not support the conclusions Executive Escrow draws. The fact the Coleman Investors sent their cashier's checks by overnight mail establishes they did not meet with Kuntz when they delivered their checks. That fact, however, does not establish the Coleman Investors never met with Kuntz, they had no oral escrow contract with Executive Escrow, or they lacked probable cause to assert their claim for breaching oral escrow instructions. The facts regarding how the Coleman Investors delivered their checks to Kuntz, and the inferences reasonably drawn from those facts, fall short of showing the Coleman Investors lied. To defeat the anti-SLAPP motion, Executive Escrow had to make a "'prima facie showing of facts to sustain a favorable judgment'" in its favor. (Soukup, supra, 39 Cal.4th at p. 291.)
Executive Escrow relies on an inappropriately narrow reading of the Coleman Investors' underlying complaint to justify its challenge to the breach of oral escrow claim. "[I]n assessing the tenability of the action which was brought the complaint must be construed liberally in favor of the pleader rather than restrictively in favor of the malicious prosecution plaintiff." (Leonardini v. Shell Oil Co. (1989) 216 Cal.App.3d 547, 571.) Liberally construed, the Coleman Investors' complaint did not limit their breach of oral escrow claim to a contract formed during the alleged in-person meeting. The complaint did not specifically allege the parties entered into the oral escrow contract at that meeting. Instead, it merely alleged they held a meeting and formed an oral contract. No allegation stated when, where, or how the parties formed the contract.
The Coleman Investors presented sufficient evidence of other oral communications with Kuntz to show an attorney reasonably would have believed they had a tenable claim for breach of oral escrow. The Coleman Investors submitted declarations showing three members of their group had telephone conversations with Kuntz about the escrow for High Park's purchase of the Malibu property. During those conversations, the three Coleman Investors explained to Kuntz that they would send Executive Escrow cashier's checks for their investment in High Park's Malibu property purchase, High Park would send Executive Escrow trust deeds naming all Coleman Investors as beneficiaries, and Executive Escrow would record those trust deeds in second position when the escrow closed. The declarations state that Kuntz acknowledged these instructions and one Coleman Investor sent Kuntz a fax confirming the conversation. Consistent with these conversations, the Coleman Investors each sent Kuntz cashier's checks made payable to Executive Escrow that Executive Escrow cashed and used to close escrow on High Park's purchase of the Malibu property.
Executive Escrow does not respond to these facts, but rather focuses on the underlying complaint's allegation that the Coleman Investors had an in-person meeting with Kuntz. In considering the Coleman Investors' evidence, we do not weigh any conflicting evidence and we accept as true any admissible evidence Executive Escrow offered. (Soukup, supra, 39 Cal.4th at p. 291.) When the dust settles, however, the record shows Executive Escrow failed to offer evidence on whether Kuntz made any oral promises to the Coleman Investors or had any conversations with them.
Moreover, whether the Coleman Investors knowingly included false allegations in their complaint is irrelevant to the probable cause element as long as other facts establish an objectively reasonable basis for their breach of oral escrow claim. (Sangster, supra, 68 Cal.App.4th at p. 167 [dispute on whether cross-complainant fabricated some facts alleged in the underlying cross-complaint did not defeat summary judgment on a later malicious prosecution claim because other undisputed facts established an objectively reasonable basis for the cross-complaint].) As explained above, other facts establish an objectively reasonable basis for the Coleman Investors' breach of oral escrow claim and therefore they did not lack probable cause to assert it. (Id. at p. 164 ["When the prior action was objectively reasonable, the malicious prosecution defendant is entitled to prevail regardless of his or her subjective intent"].)
The fact the trial court in the underlying action found the Coleman Investors failed to establish "a contractual relationship of any kind" also does not establish the Coleman Investors lacked probable cause. "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." (Roberts, supra, 76 Cal.App.4th at p. 382, original italics.)
Executive Escrow contends that a declaration by its president establishes the Coleman Investors knew they had no contract with Executive Escrow. The president's declaration offers the bare conclusion Executive Escrow never had a contract with the Coleman Investors and Earl Coleman admitted this to the president during a phone conversation. The president's conclusory declaration, however, fails to meet Executive Escrow's burden. (Gilbert, supra, 147 Cal.App.4th at p. 26 ["declarations that lack foundation or personal knowledge, or that are argumentative, speculative, impermissible opinion, hearsay, or conclusory are to be disregarded"].)
Nothing in the evidence shows that the president had any involvement in the underlying transaction or escrow. The Coleman Investors declare they dealt with Kuntz and therefore the president's conclusory declaration cannot establish Kuntz did not enter into an oral contract with the Coleman Investors. Moreover, without a description of Earl Coleman's alleged admissions to the president, her conclusion he conceded the Coleman Investors had no contract does not constitute prima facie evidence the Coleman Investors lacked probable cause. For example, it is unclear whether Earl Coleman referred to a written or oral contract or whether he spoke for himself or all the Coleman Investors. The evidence the Coleman Investors offered showed three different Investors had phone conversations with Kuntz about recording the second trust deeds.
Finally, Executive Escrow argues that Coleman Investors Jones and Pellegrino knew they had no contract with Executive Escrow because they are "real estate licensees." Executive Escrow, however, cites no authority to support this conclusion and provides no explanation how the status of these two investors as "real estate licensees" establishes the Coleman Investors lacked probable cause.
Our conclusion Executive Escrow failed to present sufficient evidence to make a prima facie showing the Coleman Investors lacked probable cause for their claim Executive Escrow breached an oral escrow eliminates the need to address the parties' contentions regarding the malice element and the Coleman Investors' advice of counsel defense.
III
DISPOSITION
The judgment is affirmed. The Coleman Investors shall recover their costs on appeal.
ARONSON, J. WE CONCUR: RYLAARSDAM, ACTING P. J. MOORE, J.