Opinion
C077122
07-25-2017
JUNEMARIE FRIEDRICH, Plaintiff and Respondent, v. DMITRIY ORMANZHI, Defendant and Appellant.
NOT TO BE PUBLISHED California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published,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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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. 34-2014-00158827-CU-NP-GDS)
In this malicious prosecution action, we reverse the trial court's denial of a special motion to strike under Code of Civil Procedure section 425.16, commonly known as an anti-SLAPP motion. Although plaintiff established a prima facie showing that defendant brought the underlying action without probable cause, she failed to show defendant filed or pursued the underlying action against her with malice.
FACTS
Underlying action
In 2010, Dmitriy Ormanzhi and Nataliya Fayek filed an action against "June Marie Friedrich, Owner, dba CarCo Automotive, a Minnesota Corporation." They alleged in their complaint that in 2008, Fayek retained Ormanzhi to purchase a salvaged truck she saw advertised on the Internet. Ormanzhi contacted CarCo Automotive, Inc., and arranged the sale. Fayek wired $32,302 to "Carco Automotive" to purchase the truck, and she had it towed from Washington to North Highlands. She stored the truck while awaiting receipt of the title documents.
The parties stipulated that the facts contained in a wire transfer order were true: Fayek transferred $32,302 to "Carco Automotive."
Ormanzhi and Fayek further alleged that after the truck arrived, Ormanzhi contacted "CarCo" numerous times to request the "pink slip" or the original sales slip. "CarCo" refused to provide these documents. It provided only a copy of a bill of sale documenting the purchase of the truck by CarCo Automotive, Inc. This bill of sale listed CarCo Automotive, Inc., as the purchaser, but the seller's name was redacted. The California Department of Motor Vehicles allegedly would not allow the truck to be registered based only on this bill of sale, as it did not show Fayek had legally purchased the truck. Fayek left the truck in storage.
Two years after purchasing the truck and still with no title to it, Ormanzhi and Fayek retained Julius Ortiz, a legal document assistant, to draft and file a complaint against "June Marie Friedrich, dba, CarCo Automotive," and to have the complaint served. As stated above, the filed complaint named as defendant "June Marie Friedrich, Owner, dba CarCo Automotive, a Minnesota Corporation." In the body of the complaint, Ormanzhi and Fayek alleged Friedrich was the owner of "Carco Automotive, Inc., a Minnesota Corporation."
Ormanzhi and Fayek alleged five causes of action: unfair business practices (Bus. & Prof. Code, § 17200), deceit, constructive fraud, intentional misrepresentation, and negligent misrepresentation. They sought compensatory damages, plus the cost of storing the truck and the loss of earnings.
Vacation of default against Friedrich
Ortiz arranged for the summons and the complaint to be served. Friedrich, however, was not served. The process server, in his Minnesota affidavit of service, stated he served "Carco Automotive, Inc." as a party by personally serving "Jeff Friedrich—co-owner." The Sacramento County Superior Court refused to accept the Minnesota affidavit and requested the server use the California Judicial Council form proof of service. The server filed a new proof of service using the correct Judicial Council form. He stated the defendant was "June Marie Friedrich, Carco Auto," and the party served was "Carco Automotive, Inc, Jeff Feiedrich [sic], Agent of Service & Co-Owner."
Ormanzhi filed a request for entry of default, naming defendant as "June Marie Friedrich, Owner, dba Carco Automotive, a MN Corp." The trial court returned the request to Ormanzhi because the defendant's name on the request for entry of default did not match the defendant's name on the summons, the complaint, and the proof of service.
Ormanzhi submitted another request for entry of default. In the caption, he named the defendant as "June Marie Driedrich [sic] dba Carco Automotive." However, he stated in the body of the request he sought default against "June Marie Friedrich, owner, dba Carco Automotive, a Minnesota Corporation." The proof of service stated the request was served on "June Marie Driedrich [sic], dba Carco Automotive" at the business address where the summons and complaint were served. Although this request did not match the name of the person served with the summons, the trial court filed the request and entered default.
The trial court subsequently entered a default judgment against "June Marie Driedrich [sic], dba Carco Automotive" in the amount of $518,595. The judgment amount was based on the cost of the truck, court costs, process server's fees, cost of storing the truck, and an estimated loss of income of $466,000 from the inability to use the truck since its purchase. The judgment was registered in Minnesota against "June Marie Friedrich, Doing Business as Carco Automotive."
Friedrich appeared specially and moved to vacate the judgment. She stated she had not been personally served, and the process server's proof of service alleged only the corporation had been served.
The trial court (De Alba, J.) granted the motion and vacated the judgment because Friedrich was never properly served. The court wrote: "The complaint designates 'June Marie Friedrich, owner, dba Carco Automotive, a Minnesota Corporation' as the only named defendant. The only proof of service filed in this case lists the 'party served' as 'Carco Automotive, Inc, Jeff Friedrich, Agent of Service & Co-Owner.' Item 6 on the proof of service states the person served was served on behalf of a corporation. [¶] Carco Automotive is not a named defendant in this case. Carco Automotive is the 'dba' designation of June Marie Friedrich, an individual defendant. A fictitious business name is not a separate entity. The ordinary sense of 'X, dba Y' is that individual defendant X is personally liable for the obligations of entity Y, not that Y is a named defendant in the case. See Pinkerton's Inc. v. Superior Court (1996) 49 CA4th 1342, 1347-1349 (internal citations omitted)."
Ormanzhi subsequently served Friedrich with the summons and the complaint. The proof of service states service was made upon "June Marie Friedrich, dba Carco Automotive." She was served at the same address where all other attempts at service had been made.
Ormanzhi objects to Friedrich's respondent's appendix, as it consists of documents filed in the underlying action, including the proof of service on Friedrich and Friedrich's answer, that were not filed with the trial court in the present action. We disagree with his objection, because the trial court granted judicial notice of the existence of the pleadings and docket in the underlying action.
Friedrich filed an answer, and the case proceeded to trial. There is no evidence that Ormanzhi amended the complaint to name CarCo Automotive, Inc., as a separate defendant.
Nonsuit
Ormanzhi and Fayek represented themselves at trial. On the eve of trial, Friedrich moved in limine to exclude evidence of her as a party to any contract with Ormanzhi. The trial court denied the motion.
In lieu of opening argument, Friedrich moved for nonsuit. The trial court (Perkins, J.) granted the motion against the causes of action for unfair business practices, constructive fraud, and intentional misrepresentation, but denied it against the remaining two causes of action for deceit and negligent misrepresentation.
Trial proceeded with live testimony, but Ormanzhi has not included a reporter's transcript of that testimony in the record.
After the presentation of Ormanzhi's case, Friedrich moved for nonsuit on the remaining two causes of action, and the trial court granted the motion. In its written judgment, the court stated: "It is a fundamental element of the law in all the states that corporations are separate entities and that employees of the corporations or owners of the corporation are not . . . liable for the debts of the corporation in a contract situation and normally not responsible for the debts of the corporation at all, unless there is some separate tort that has been committed, and there is no evidence of any tort at all by Ms. Friedrich.
"Judge De Alba noted in his ruling [vacating the default judgment] that only Ms. Friedrich, and not CarCo Automotive, a Minnesota corporation, was a party. It should have been obvious that the transaction involved CarCo, Inc., not Ms. Friedrich. There is simply no evidence in the record that would sustain a judgment against Ms. Friedrich. There is no showing at all that she did anything wrong. CarCo, Inc., has not been named as a party so the court has no jurisdiction to order any relief against CarCo Inc." The court granted judgment to Friedrich.
This action
In 2014, Friedrich filed this action for malicious prosecution against Ormanzhi, Fayek, and Ortiz. She alleged two causes of action: malicious prosecution in filing the underlying action, and malicious prosecution in continuing the action after the trial court granted her motion to vacate the default judgment.
Ormanzhi filed a special motion to strike the complaint under Code of Civil Procedure section 425.16 (an anti-SLAPP motion). At the time, Ormanzhi was in default, so the trial court dropped the motion from the calendar. After the trial court set aside the default, Ormanzhi re-noticed his anti-SLAPP motion.
The trial court denied the motion. There was no dispute Friedrich's action arose from protected activity. Thus, the only issue was whether Friedrich established a prima facie case of success on the merits. The court found she had. It ruled Friedrich established a prima face case that Ormanzhi lacked probable cause to initiate and pursue the three causes of action against which the underlying court had granted nonsuit at the beginning of the trial. From the evidence presented, the court inferred Ormanzhi was on notice that Friedrich may not have been a proper defendant when he filed his action, and he reasonably should have known she was not a proper defendant after Judge De Alba vacated the default judgment against her.
The court also ruled Friedrich established a prima facie case that Ormanzhi filed the underlying action with malice. He had no substantial grounds for believing Friedrich was individually liable.
Ormanzhi appeals, contending the trial court denied his anti-SLAPP motion in error. We agree.
DISCUSSION
I
Standard of Review
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.) Consequently, "the anti-SLAPP statute is to be construed broadly." (Padres L.P. v. Henderson (2003) 114 Cal.App.4th 495, 508.)
We review the trial court's ruling de novo. (Flatley v. Mauro (2006) 39 Cal.4th 299, 325.) We consider "the pleadings, and supporting and opposing affidavits stating the facts upon which the liability or defense is based." (§ 425.16, subd. (b)(2).) We do not weigh the evidence or determine its credibility. Instead, we accept Friedrich's evidence as true and evaluate Ormanzhi's evidence only to determine if it has defeated Friedrich's evidence as a matter of law. (See Soukup v. Law Offices of Herbert Hafif (2006) 39 Cal.4th 260, 269, fn. 3 (Soukup).)
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.) There is no dispute a malicious prosecution action arises from protected activity. (Jarrow Formulas, Inc. v. LaMarche (2003) 31 Cal.4th 728, 734-735.)
We turn to the second prong. The Supreme Court has "described this second step as a 'summary-judgment-like procedure.' " (Baral v. Schnitt (2016) 1 Cal.5th 376, 384.) At this step, "the burden shifts to the plaintiff to demonstrate that each challenged claim based on protected activity is legally sufficient and factually substantiated. The court, without resolving evidentiary conflicts, must determine whether the plaintiff's showing, if accepted by the trier of fact, would be sufficient to sustain a favorable judgment. If not, the claim is stricken. Allegations of protected activity supporting the stricken claim are eliminated from the complaint, unless they also support a distinct claim on which the plaintiff has shown a probability of prevailing." (Id. at p. 396.)
To establish a cause of action for malicious prosecution of a civil action, a plaintiff must plead and prove the underlying action (1) was commenced by or at the direction of the defendant and was pursued to a legal termination in plaintiff's favor; (2) was brought or continued without probable cause; and (3) was initiated or continued with malice. (Zamos v. Stroud (2004) 32 Cal.4th 958, 965-966.)
There is no dispute Ormanzhi commenced the underlying action and that it was pursued to a judgment in favor of Friedrich. Thus, we must determine whether Friedrich introduced sufficient evidence to establish a prima facie showing that Ormanzhi brought or continued the action without probable cause, and that he initiated or continued it with malice. We conclude Friedrich met her burden as to the element of probable cause, but she did not meet her burden as to the element of malice in bringing or continuing the underlying action.
II
Probable Cause
"The question of probable cause is 'whether, as an objective matter, the prior action was legally tenable or not.' (Sheldon Appel Co. v. Albert & Oliker [(1989)] 47 Cal.3d [863,] 868 [(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.' (Sangster v. Paetkau (1998) 68 Cal.App.4th 151, 164-165.) 'In a situation of complete absence of supporting evidence, it cannot be adjudged reasonable to prosecute a claim.' (Mabie v. Hyatt (1998) 61 Cal.App.4th 581, 597.)" (Soukup, supra, 39 Cal.4th at p. 292.)
Friedrich presented sufficient evidence to establish a prima facie case that Ormanzhi lacked probable cause to file the underlying causes of action for unfair business practices, constructive fraud, and intentional misrepresentation. She demonstrated he sought recovery upon a legal theory which was untenable under the facts known to him. Friedrich's evidence showed Ormanzhi purchased the truck from CarCo Automotive, Inc., and not from Friedrich individually. Yet Ormanzhi sued Friedrich individually and did not sue CarCo Automotive, Inc. He sued a party from whom he could not recover.
The trial court correctly stated its first denial of nonsuit on the causes of action for deceit and negligent misrepresentation established they were filed with probable cause for purposes of an anti-SLAPP motion, even when the final judgment was in favor of Friedrich. (Wilson v. Parker, Covert & Chidester (2002) 28 Cal.4th 811, 824, superseded by statute on another ground per Hutton v. Hafif (2007) 150 Cal.App.4th 527, 547.) Our analysis applies to the three causes of action against which the court granted nonsuit on Friedrich's first motion for nonsuit.
The documents memorializing the sale show Ormanzhi purchased the truck from CarCo Automotive, Inc. A sales invoice dated May 14, 2008, was on CarCo Automotive, Inc., letterhead. It noted the truck was sold as "Salvage Vehicle/Salvage Title Card" and "Sold AS IS - Bill of Sale Only." This invoice asked the parties to sign it, and stated that by doing so, each agreed to the invoice's terms. The invoice is signed by a "CarCo Representative."
Another document, a wire transfer confirmation, states the bank, by order of Fayek, transferred the purchase money to "Carco Automotive." The confirmation lists a transaction reference number, and that number matches a wire confirmation number written on the sales invoice.
In addition, when asked at his deposition if he purchased the truck from "CarCo, Inc.," Ormanzhi stated, "That's correct."
This evidence indicates Ormanzhi entered into a contractual relationship with CarCo Automotive, Inc., not Friedrich. This evidence is sufficient, for purposes of defeating an anti-SLAPP motion, to establish he did not have cause to sue Friedrich individually.
Ormanzhi argues he had cause to sue Friedrich because her name was listed on the sales invoice and was not crossed out as other names had been, because the named recipient of the wire transfer did not include the designation "Inc.," and because Minnesota records indicated Friedrich had registered the name "CarCo Automotive" in her name. From this evidence, he contends he could argue Friedrich commingled corporate property upon receiving the wire transfer and thus was liable.
Whether Ormanzhi could argue that theory is beside the point. To win his anti-SLAPP motion, he could overcome Friedrich's evidentiary showing only by introducing evidence that defeats her evidence as a matter of law. (Soukup, supra, 39 Cal.4th at p. 269, fn. 3.) His evidence does not establish probable cause as a matter of law. At best, it establishes an evidentiary conflict, and we do not resolve such conflicts on review of an anti-SLAPP ruling.
Ormanzhi also argues Friedrich was not sued in her individual capacity. He asserts it is impossible to determine from the complaint's caption who was sued and in what capacity. He contends the record suggests Friedrich was always being sued "in relation to the corporation that she is a shareholder of."
The caption is no model to emulate. But the caption reads Friedrich was sued either in her capacity as doing business in another name, or in her capacity as an owner of a corporation. In either event, she was sued in her individual capacity. If a plaintiff sues an individual as doing business in another name, generally the individual defendant is the party, as the named business has no existence apart from the individual. (See Providence Washington Ins. Co. v. Valley Forge Ins. Co. (1996) 42 Cal.App.4th 1194, 1199-1200.)
If a plaintiff sues an individual as an "owner" of a corporation, the individual defendant is the party. A corporation is a legal entity separate from its shareholders (Merco Constr. Engineers, Inc. v. Municipal Court (1978) 21 Cal.3d 724, 729), and the corporation and its shareholders are distinct parties in contracts made by each other. (Baker Divide Mining Co. v. Maxfield (1948) 83 Cal.App.2d 241, 248.)
Shareholders of a corporation may be personally liable for the corporation's torts "through application of the 'alter ego' doctrine (see, e.g., Associated Vendors[,] Inc. v. Oakland Meat Co. (1962) 210 Cal.App.2d 825, 836-837), or when the shareholder specifically directed or authorized the wrongful acts." (Wyatt v. Union Mortgage Co. (1979) 24 Cal.3d 773, 785.) Ormanzhi argued to the trial court his complaint alleged Friedrich was the alter ego of CarCo Automotive, Inc., but the trial court found he had not alleged or proven that claim. Ormanzhi does not raise that argument before us.
Friedrich introduced sufficient evidence to show Ormanzhi's possible cause of action could have been against CarCo Automotive, Inc., but he instead sued her personally and did so without probable cause. We turn next to the element of malice.
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. (Sheldon Appel, supra, 47 Cal.3d at p. 874.) 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. (5 Witkin, Summary of Cal. Law (9th ed. 1988) Torts, §§ 429, 450 at pp. 511, 534). The plaintiff must plead and prove actual ill will or some improper ulterior motive. (Ibid.) It may range anywhere from open hostility to indifference. (See, e.g., Bertero v. National General Corp. [(1974)] 13 Cal.3d [43,] 54 [attorney admitted filing suit because he ' "wanted to show the Appellate Court what a bastard Bertero was" '].)" (Downey Venture v. LMI Ins. Co. (1998) 66 Cal.App.4th 478, 494 (Downey Venture), original italics.)
The malicious prosecution plaintiff's evidence of malice "must include proof of either actual hostility or ill will on the part of the defendant or a subjective intent to deliberately misuse the legal system for personal gain or satisfaction at the expense of the wrongfully sued defendant. (See Albertson v. Raboff [(1956)] 46 Cal.2d [375,] 383 [superseded by statute as stated in La Jolla Group II v. Bruce (2012) 211 Cal.App.4th 461, 473].) In other words, in California, the commission of the tort of malicious prosecution requires a showing of an unsuccessful prosecution of a criminal or civil action, which any reasonable attorney would regard as totally and completely without merit (Sheldon Appel, supra, 47 Cal.3d at p. 885), for the intentionally wrongful purpose of injuring another person." (Downey Venture, supra, 66 Cal.App.4th at pp. 498-499.)
The court in Albertson v. Raboff, supra, 46 Cal.2d 375, quoting section 676 of the Restatement of Torts, stated, "It has been pointed out that the 'principal situations in which the civil proceedings are initiated for an improper purpose are those in which (1) the person initiating them does not believe that his claim may be held valid; (2) the proceedings are begun primarily because of hostility or ill will; (3) the proceedings are initiated solely for the purpose of depriving the person against whom they are initiated of a beneficial use of his property; [and] (4) the proceedings are initiated for the purpose of forcing a settlement which has no relation to the merits of the claim.' [Citation.]" (Albertson v. Raboff, supra, 46 Cal.2d at p. 383.)
The lack of probable cause is a factor to consider when determining whether the action was brought with malice, but it is not dispositive. "Merely because the prior action lacked legal tenability, as measured objectively . . . without more, would not logically or reasonably permit the inference that such lack of probable cause was accompanied by the actor's subjective malicious state of mind." (Downey Venture, supra, 66 Cal.App.4th at p. 498, citing Sheldon Appel Co., supra, 47 Cal.3d at pp. 885-886, original italics.)
Applying these rules, we conclude Friedrich failed to establish a prima facie showing of malice.
The trial court determined Friedrich established a prima facie case of malice by producing evidence that Ormanzhi was on notice that CarCo Automotive, Inc., was potentially a corporate entity when he filed the underlying action, but he sued Friedrich anyway. To reach this conclusion, the court relied upon exhibits attached to a declaration Julius Ortiz, Ormanzhi's legal document assistant, filed in the underlying action. Those exhibits consisted of (1) a letter Ortiz allegedly wrote to "CarCo, Inc.," prior to filing the complaint requesting title to the truck; (2) alleged Minnesota Secretary of State files obtained by Ortiz showing CarCo Automotive, Inc., is a business corporation; and (3) an alleged report by the Better Business Bureau on "CarCo Automotive, Inc.," stating, under "contact information," that Friedrich was the "principal" and owner and Jeffrey Friedrich was the customer contact and owner.
The trial court admitted Ortiz's declaration by judicial notice. When it did so, it stated it accepted only the fact of its existence and filing and not the truth of its contents. However, to rely upon the documents attached to the declaration as potentially giving notice to Ormanzhi that CarCo Automotive, Inc., was a corporate entity, the trial court had to assume the truth of Ortiz's declaration that he in fact sent the letter to "CarCo, Inc.," and obtained the information from the Minnesota Secretary of State and the Better Business Bureau. This assumption was beyond the trial court's authority under the exercise of judicial notice.
" 'What is meant by taking judicial notice of court records? There exists a mistaken notion that this 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. A court may take judicial notice of the existence of each document in a court file . . . .' " (Sosinsky v. Grant (1992) 6 Cal.App.4th 1548, 1564, quoting 2 Jefferson's Cal. Evidence Benchbook (2d ed. 1982) § 47.2, p. 1757, original italics [but rejecting Jefferson's assertion a court could take judicial notice of the truth of another court's factual findings]; Steed v. Department of Consumer Affairs (2012) 204 Cal.App.4th 112, 120-121.)
In Bach v. McNelis (1989) 207 Cal.App.3d 852, 864-865, this court held a trial court may not judicially notice the truth of assertions in declarations or affidavits filed in a companion case. That case concerned the use of those declarations to rule upon a demurrer. But the error occurred with the trial court "judicially noticing the contents of the affidavit for the truth of the matters asserted and then sustaining the demurrer on that ground." (Id. at p. 865.)
The same rule applies here. Although the trial court stated it was not accepting the truth of the documents attached to Ortiz's declaration, it could not conclude those documents put Ormanzhi on notice that CarCo Automotive, Inc., was a corporate entity without assuming Ortiz truthfully declared he obtained those documents. The mere fact the documents were filed in the underlying action does not establish Ortiz obtained them for purposes of this action, and they are not admissible for that purpose.
In her arguments before us, Friedrich relies upon the same evidence the trial court relied upon as evidence of malice. She also relies upon the sales agreement and the wire transfer confirmation, allegations contained in the underlying complaint and her complaint and answer, and the trial court's vacating the default judgment against her in the underlying action. None of these establish malice.
Allegations in pleadings do not constitute evidence of likelihood of success for purposes of an anti-SLAPP motion. (Hecimovich v. Encinal School Parent Teacher Organization (2012) 203 Cal.App.4th 450, 469.) The sales agreement and the wire transfer established a lack of probable cause, but the mere lack of probable cause does not establish malice. (Downey Venture, supra, 66 Cal.App.4th at p. 498.)
Friedrich thus contends we can infer malice from the underlying trial court's vacation of the default judgment against her. But nothing in that court's order establishes Ormanzhi acted with malice. The court vacated judgment simply because it had entered a default judgment against a person who had never been served. At that point, only CarCo Automotive, Inc., had been served. CarCo Automotive, Inc., was not a party to the action, and the court held that service on it did not constitute service on Friedrich. Nothing in the court's order put Ormanzhi on notice that Friedrich was not amenable to liability in this action.
Ormanzhi brought the underlying action because he had not received title to the truck he purchased. Nothing in the admissible evidence establishes he filed and pursued that action for the intentionally wrongful purpose of injuring Friedrich. Without such evidence of malice, Friedrich failed to establish she would likely succeed on the merits of her malicious prosecution complaint. As a result, the trial court should have granted Ormanzhi's anti-SLAPP motion.
DISPOSITION
The order denying Ormanzhi's special motion to strike the complaint under Code of Civil Procedure section 425.16 is reversed. We remand the matter to the trial court with directions to grant the special motion to strike and for any further proceedings consistent with this opinion.
The parties shall bear their own costs on appeal. (Cal. Rules of Court, rule 8.278(a)(5).)
NICHOLSON, J. We concur: RAYE, P. J. MAURO, J.