Opinion
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
Appeal from an order of the Superior Court of Orange County, Super. Ct. No. 06CC13026 Derek W. Hunt, Judge.
Law Office of Jeanne Collachia and Jeanne Collachia for Defendant and Appellant.
Law Offices of Douglas T. Richardson and Douglas T. Richardson for Plaintiffs and Respondents.
OPINION
MOORE, J.
Josefina Soto, as trustee of the Josefina Soto Revocable Living Trust (Soto), and John G. Kenny, as trustee of the John G. Kenny Trust (Kenny), who were the prevailing plaintiffs and cross-defendants in a quiet title action, brought a subsequent malicious prosecution action against Hildegard Merrill, both individually and as trustee of the Hildegard Merrill Trust (Merrill), who had been one of the defendants and cross-complainants in the first action. In the second action, the malicious prosecution action, Merrill filed an anti-SLAPP motion, pursuant to Code of Civil Procedure section 425.16. The motion was denied. Merrill appeals.
The full names of Josefina Soto, John G. Kenny and Hildegard Merrill shall be used hereinafter whenever the context requires a description of the individuals in capacities other than the ones specified above.
In opposition to the anti-SLAPP motion, Soto and Kenny relied almost exclusively on the findings of fact contained in the statement of decision in the quiet title action, and focused only on the outcome of the first lawsuit. They did not address whether Merrill had probable cause to file her cross-complaint, inasmuch as they did not address whether all reasonable lawyers would agree that Merrill’s cross-complaint totally lacked merit. (Jarrow Formulas, Inc. v. LaMarche (2003) 31 Cal.4th 728, 743, fn. 13.) In addition, in support of her motion, Merrill filed a declaration in which she stated that she had filed the cross-complaint in good faith on the advice of counsel. Soto and Kenny did not attack the credibility of her declaration or state why it was deficient to trigger a complete defense to a malicious prosecution action. (See Sosinsky v. Grant (1992) 6 Cal.App.4th 1548, 1556.) Soto and Kenny did not meet their burden to show that they had a probability of prevailing on their malicious prosecution claim. We reverse.
I
FACTS
A. Underlying Real Estate Transactions:
Lyon Communities, Inc. (Lyon) conveyed certain residential real property, located in Aliso Viejo, California, to Josefina Soto, as to an undivided 75 percent interest, and to Veronica Ortal, as to an undivided 25 percent interest, as tenants in common. The grant deed from Lyon was recorded in the official records of the Orange County, California recorder on December 31, 1991, as instrument No. 91-719632.
As stated in her declaration in support of the anti-SLAPP motion, Teresita Maria Ortal (Ortal), the daughter of Josefina Soto and the mother of Veronica Ortal, claimed that the property was in reality hers. She asserted that she was the one who had deposited the good faith money and had opened the escrow to purchase the property from Lyon. Ortal also claimed to have provided all funds for the purchase. She asserted that because she was involved in certain litigation, and was also in the middle of divorce proceedings, her attorney had advised her not to take title in her own name. Consequently, she said, she directed the escrow company to put the property in the names of her mother and daughter instead.
Ortal insisted that all parties agreed that her mother and daughter were taking title in name only, having agreed to hold it for her benefit. According to Ortal, in 1994, 1996, and 1998, Josefina Soto filed preliminary change of ownership reports wherein she recited that the property in actuality belonged Ortal and would be returned to her on demand. Ortal resided in the property until evicted pursuant to an unlawful detainer judgment Soto and Kenny obtained in December 2003.
Whatever the true nature of the original arrangement, after the initial purchase, various family members deeded certain interests in the property amongst themselves and others, creating a spider web of deeds. One of the deeds that Josefina Soto executed, and that was recorded on October 14, 1998 in the official records of the Orange County, California recorder as instrument No. 19980694591, purported to convey an interest the property to John Kenny as trustee of an undesignated trust.
Between August 20, 2002 and February 10, 2004, at least 15 grant deeds and two deeds of trust were recorded against the property. The grant deeds included one from Ortal, as grantor, to Hildegard Merrill, as grantee, recorded on February 10, 2004 in the official records of the Orange County, California recorder as instrument No. 2004000104142. The deeds of trust included one made by Hildegard Merrill, as trustor, in favor of Windsor Investments Inc. as trustee of the Hunt Trust dated January 21, 2004, as beneficiary, recorded on February 10, 2004 in the official records of the Orange County, California recorder as instrument No. 2004000104143. The deed of trust recited that it was made to secure a promissory note in the amount of $145,000 made by Hildegard Merrill and payable to Windsor Investments Inc. as trustee of the Hunt Trust.
B. Quiet Title Action:
In April 2004, Soto filed a quiet title complaint against Ortal, Merrill, and certain others. (Soto v. Ortal (Super. Ct. Orange County, 2005, No. 02CC15156).) Hildegard Merrill filed a cross-complaint against Ortal, John G. Kenny, individually and as trustee of the John G. Kenny Trust, and Josefina Soto, individually and as trustee of three trusts, i.e., the Josefina Soto Revocable Living Trust, the Soto Family Trust, and the Josefina R. Soto Trust. The cross-complaint also asserted a quiet title cause of action, in addition to a breach of contract cause of action against Josefina Soto, and certain other causes of action.
In April 2005, the court entered judgment in favor of Soto and Kenny, and against Hilde gard Merrill and others. It held that Soto and Kenny were the owners of the property in question, each as to an undivided one-half interest as tenants in common, and that Hilde gard Merrill had no interest in the property. As part of the judgment, the court ordered the cancellation of 15 grant deeds and two deeds of trust affecting the property, including the deed of trust given by Hilde gard Merrill as trustor.
In its statement of decision, the court said: “Defendant and Cross-Complainant Hildegard Merrill seeks the protections afforded her as a bona fide purchaser of the property . . . . The elements of a bona fide purchaser are payment of value, in good faith and without actual or constructive notice of another’s rights. She fails on all three. A self-proclaimed sophisticated real estate broker, Ms. Merrill had actual/constructive notice of the disputed title prior to her purchase. The act of recording creates a conclusive presumption that a subsequent purchaser has constructive notice of the contents of the previously recorded documents. . . .” It also said, “Plaintiff recorded several grant deeds highlighting the alleged fraudulent grant deeds to Teresita M. Ortal without authorization to change ownership. . . . Ms. Merrill was presented with a set of facts that should have put a reasonable person on inquiry, (further inquiry something Ms. Merrill elected not to do despite ample opportunity) including the disproportionate price for the house, conversations she had learning the seller was in dire need to sell and documents she reviewed prior to purchase, are all strong evidence of notice of a defective title. . . . Ms. Merrill likewise made no actual payment of value for the house. A review of the documents evidenced . . . that she gave no consideration at the time of purchase. The subsequent payments made on the loan were long after she was ‘aware’ of the quiet title action. Hildegard Merrill is not a bona fide purchaser of the property.”
We have already noted that, at the time of the purchase from Ortal, Hildegard Merrill executed a deed of trust securing a $145,000 promissory note. However, this does not evidence a cash outlay at closing. With regard to any payments that were not financed, Merrill represented in her trial brief that, on July 26, 2004, she paid $21,911.06 to save the property from foreclosure. In her declaration in support of her anti-SLAPP motion, she stated that she paid the money to World Savings. Interestingly, in her declaration in support of the anti-SLAPP motion, Ortal implied that Merrill was obliged to liquidate some of her other real estate holdings following close of escrow and pay an additional $55,000 towards the purchase price of the property.
In addition, the court stated: “Defendants invoke the doctrine of unclean hands claiming that Josefina Soto and John G. Kenny’s conduct violated conscience, good faith and as such should be barred from relief. The equitable defense of unclean hands is not unlimited. The Court must consider material facts affecting the [equities] between the parties. Contrary to Defendants’ assertion, the Court finds that it is the hands of Teresita Ortal . . . and Hildegard Merrill that require a good scrubbing.”
C. Malicious Prosecution Action:
In December 2006, Soto and Kenny filed a complaint for damages for malicious prosecution against Merrill. They claimed that when Merrill filed her cross-complaint in the quiet title action, she had no good faith belief that she had any interest in the property. They also asserted that Merrill acted maliciously and filed the cross-complaint for the purpose of hindering, delaying, and defrauding them from the use of the property.
Merrill filed an anti-SLAPP motion, pursuant to Code of Civil Procedure section 425.16. The court denied the motion. Merrill appeals.
II
DISCUSSION
A. Standard of Review:
“We review the trial court’s determination de novo, much like the standard for determining a motion for nonsuit or directed verdict. [Citation.]” (Slaney v. Ranger Ins. Co. (2004) 115 Cal.App.4th 306, 318.)
B. Code of Civil Procedure Section 425.16:
Code of Civil Procedure section 425.16, subdivision (b)(1) provides: “A cause of action against a person arising from any act of that person in furtherance of the person’s right of petition or free speech under the United States or 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.” A motion under this provision is commonly known as an “anti-SLAPP” motion. (Jarrow Formulas, Inc. v. LaMarche, supra, 31 Cal.4th at pp. 732-733.)
C. Anti-SLAPP Motion Analysis:
“Resolution 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. The moving defendant’s burden is to demonstrate that the act or acts of which the plaintiff complains were taken “in furtherance of the [defendant]’s right of petition or free speech under the United States or California Constitution in connection with a public issue,” as defined in the statute. (§ 425.16, subd. (b)(1).) If the court finds such a showing has been made, it then determines whether the plaintiff has demonstrated a probability of prevailing on the claim.’ [Citation.]” (Jarrow Formulas, Inc. v. LaMarche, supra, 31 Cal.4th at p. 733.)
(1) First step – cause of action arising from protected activity
The Supreme Court in Jarrow Formulas, Inc. v. LaMarche, supra, 31 Cal.4th 728, at pages 733-734 stated, with respect to the first prong of the analysis under Code of Civil Procedure section 425.16, “on the basis of the statute’s plain language . . . a defendant moving specially to strike a cause of action arising from a statement or writing made in connection with an issue under consideration in a legally authorized official proceeding need not separately demonstrate that the statement or writing concerns an issue of public significance. [Citation.]” The Jarrow court upheld the appellate court’s conclusion that a malicious prosecution action “falls within the ambit of a ‘cause of action against a person arising from any act . . . in furtherance of the person’s right of petition’ (§ 425.16, subd. (b)(1)), as statutorily defined.” (Id. at p. 734.) Simply put, “malicious prosecution causes of action fall within the purview of the anti-SLAPP statute. [Citations.]” (Id. at p. 735.)
Thus, as Merrill maintains, she met her burden to show that the challenged cause of action arose from protected activity. (Jarrow Formulas, Inc. v. LaMarche, supra, 31 Cal.4th at p. 733.) Having met that burden, the burden then shifted to Soto and Kenny to show a probability of prevailing on their malicious prosecution claim. (Ibid.)
(2) Second step – probability of prevailing
(a) required showing
“We turn to the second step: whether [the plaintiff] presented evidence sufficient to ‘establish[ ] that there is a probability that [he] will prevail on the claim.’
(§ 425.16, subd. (b)(1).) In ‘making [that] determination, the court shall consider the pleadings, and supporting and opposing affidavits stating the facts upon which the liability or defense is based.’ (§ 425.16, subd. (b)(2); [citation].) The evidence submitted by the plaintiff must be admissible [citation], and, if credited at trial, must support a judgment in his favor. [Citations.] Significantly, the trial court cannot and does not weigh the moving party’s evidence against the opposing party’s evidence, but addresses the factual and legal issues as in a motion for summary judgment. [Citation.] If the opposing party fails to make the requisite showing, the motion must be granted. [Citation.]” (Slaney v. Ranger Ins. Co., supra, 115 Cal.App.4th at p. 318.)
In the case before us, Soto and Kenny filed a malicious prosecution claim. Therefore, we must look at the elements of a malicious prosecution claim in order to determine whether they have established a probability of prevailing. “The three primary elements necessary to establish liability for the claim of malicious prosecution are that a prior claim initiated by the [defendant] was: ‘(1) pursued to a legal termination favorable to the plaintiff . . .; (2) brought without probable cause; and (3) initiated with malice. [Citations.]’ [Citation.]” (Slaney v. Ranger Ins. Co., supra, 115 Cal.App.4th at p. 318.)
(b) legal termination favorable to Soto and Kenny
Merrill filed a prior claim, in the form of a cross-complaint in the quiet title action. A cross-complaint may provide the basis of a malicious prosecution claim. (Bertero v. National General Corp. (1974) 13 Cal.3d 43.) Soto and Kenny showed that judgment had been entered in their favor and against Merrill on Merrill’s cross-complaint, as well as on the complaint. Therefore, Soto and Kenny, in satisfaction of the first element of a malicious prosecution claim (Slaney v. Ranger Ins. Co., supra, 115 Cal.App.4th at p. 318), demonstrated that Merrill’s prior claim was pursued to a legal termination favorable to them.
(c) probable cause
We now look at the second element of the malicious prosecution claim—Merrill’s probable cause for filing the cross-complaint in the quiet title action. (Slaney v. Ranger Ins. Co., supra, 115 Cal.App.4th at p. 318.) Merrill asserts that Soto and Kenny failed to present evidence sufficient to establish that she lacked probable cause to file her cross-complaint.
In the cross-complaint, Merrill asserted that Soto had agreed that she would hold title to the property for the benefit of Ortal, such title to be conveyed to Ortal on her request. She also claimed that Soto had repeatedly acknowledged the arrangement and Ortal’s true ownership of the property in statements contained in preliminary change of ownership reports filed in 1994, 1996 and 1998.
The text of the cross-complaint recites that true and correct copies of the three preliminary change of ownership reports are attached as exhibit 6. However, the copy of the cross-complaint contained in the record on appeal has no exhibits attached.
In her trial brief, Merrill asserted that Ortal had: “1. Provided all funds for original purchase down payment and upgrades and improvements in 1991 in the approximate amount of $168,755.00; [¶] 2. Directed by and though the original escrow that tile be held in the name of her mother . . . and her daughter, Veronica Ortal; [¶] 3. Made or provided all funds for mortgage, taxes, upkeep and maintenance, continuously since 1991 until her default eviction in 2004, in the approximate amount of $445,500,00; [¶] 4. Saved the PROPERTY from foreclosure by providing funds on three occasions in the approximate amount of $17,250.00; [¶] 5. Provided funds for additional improvements from 1992 to 2003 in the approximate amount of $16,000.00; [and] [¶] 6. Lived continuously at the PROPERTY from 1991 until her default eviction in 2004, and exercised all powers of ownership thereof, including the direction of original and continuing upgrades and improvements to the PROPERTY.”
Merrill asserted that Ortal had equitable rights to the property. She also asserted that she claimed rights through Ortal, as her grantee, and that she did not need to be a bona fide purchaser in order to prevail.
In the anti-SLAPP motion, Merrill again described the purported contract whereby Soto agreed to hold title for Ortal. In support of her characterization of facts, Merrill presented the declarations of both Ortal and herself. Merrill argued that, given the claims of Ortal and herself as Ortal’s grantee, Soto and Kenny could not establish that her cross-complaint was filed without probable cause. She cited Vanzant v. Daimler Chrysler Corp. (2002) 96 Cal.App.4th 1283 for the proposition: “Probable cause exists unless all reasonable lawyers would agree the action is totally and completely devoid of merit. [Citation.]” (Id. at p. 1289, disapproved on another ground in Zamos v. Stroud (2004) 32 Cal.4th 958, 973.)
In their opposition to the anti-SLAPP motion, Soto and Kenny insisted that Merrill filed her cross-complaint without probable cause. They presented the declaration of their attorney, to which copies of certain deeds and other documents were attached as exhibits. In addition, Soto and Kenny requested that the trial court take judicial notice of the statement of decision in the quiet title action, wherein the court found that Merrill was not a bona fide purchaser for value and that she had notice of information that should have prompted her to inquire about title defects. Even though Merrill had asserted at trial that she did not need to be a bona fide purchaser for value in order to pursue her claims as Ortal’s grantee, Soto and Kenny did not address this issue in their opposition. Instead, they focused their argument almost exclusively on the findings of fact contained in the statement of decision, and presented no evidence to directly rebut Ortal’s claims to an equitable interest in the property.
In their opposition, Soto and Kenny did not articulate any res judicata or collateral estoppel arguments. Merrill admits that the quiet title ruling against Ortal and herself is res judicata. However, she says that the doctrine of collateral estoppel does not apply. While mentioning the doctrine, Merrill says there is no reason to address it, since Soto and Kenny did not raise it in the trial court. On appeal, Soto and Kenny now say the doctrine applies. However, it is unnecessary for us to resolve the issue in order to resolve this case.
As the court stated in Mix v. Sodd (1981) 126 Cal.App.3d 386, 390: “[They] . . . cited no case, and no such case was found, which states that being a bona fide purchaser is a prerequisite to maintaining a suit to quiet title. In the cases raised in this appeal where a subsequent taker’s quiet title action was sustained, the purchaser was a bona fide purchaser. This is not to say, however, that being a bona fide purchaser is a prerequisite to maintaining such a suit.”
“‘[A] bona fide purchaser for value who acquires his interest in real property without notice of another’s asserted rights in the property takes the property free of such unknown rights. [Citations.]’ [Citations.]” (Melendrez v. D & I Investment, Inc. (2005) 127 Cal.App.4th 1238, 1251.) Because the court in the quiet title action found that Merrill was not a bona fide purchaser, but rather had constructive notice of the recorded deeds upon which Soto and Kenny relied to establish their title, she could not take free of the effect of those deeds. Just because Merrill had constructive notice of the deeds, however, this does not mean that she was barred from asserting any rights, including equitable rights, that Ortal may have had to assert relative to title to the property. It also does not mean that Merrill could not have had a good faith belief that Ortal did indeed have equitable rights to assert against Soto and Kenny, such as those predicated upon a constructive trust.
Soto and Kenny contend that, by raising historical facts in her motion and providing Ortal’s declaration, Merrill is trying to relitigate the underlying case, and they emphasize that the court in the quiet title action already found Ortal to be lacking in credibility. However, the fact that the court ultimately found Ortal to be lacking in credibility does not mean that Merrill could not have found her to be credible or that Merrill’s attorney could not have found a tenable legal theory on which Ortal potentially could have prevailed against Soto and Kenny.
“‘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[s] no probable cause.’ [Citations.]” (Jarrow Formulas, Inc. v. LaMarche, supra, 31 Cal.4th at p. 743, fn. 13.)
Here, Soto and Kenny completely failed to address whether all reasonable lawyers would agree that Merrill’s cross-complaint, based upon the purported agreement between Soto and Ortal, was totally lacking in merit. They only fixated on the outcome of the litigation.
In their opposition, Soto and Kenny also failed to address Merrill’s second point with respect to probable cause as expressed in her motion. Merrill, citing Sosinsky v. Grant, supra, 6 Cal.App.4th 1548, claimed that she filed the cross-complaint on the advice of counsel and that this was sufficient to establish probable cause for the filing. In her declaration in support of her motion, Merrill stated that she had acted in good faith on the advice of counsel in filing the cross-complaint, and that her lawyer had opined that Josefina Soto did not have a sound claim to the property. She further said that her attorney had explained to her that the mere fact that a person’s name is stated on a deed is not necessarily determinative of title.
As stated in Sosinsky v. Grant, supra, 6 Cal.App.4th 1548, “‘Probable cause may be established by the defendants in a malicious institution proceeding when they prove that they have in good faith consulted a lawyer, have stated all the facts to him, have been advised by the lawyer that they have a good cause of action and have honestly acted upon the advice of the lawyer.’ [Citations.]” (Id. at p. 1556.)
While they did not address Merrill’s argument with respect to advice of counsel in their opposition to her motion, they do so on appeal. However, they neither take issue with the rule stated in Sosinsky v. Grant, supra, 6 Cal.App.4th 1548, nor contend Merrill’s declaration regarding consultation with her attorney was deficient to obtain the protections of the rule. Rather, they say that, given the findings of fact contained in the statement of decision in the quiet title action, they have established that their malicious prosecution claim has at least minimal merit and have thus defeated the anti-SLAPP motion.
Their reasoning is flawed. The statement of decision in the quiet title action did not contain any finding that Soto and Kenny had demonstrated a probability of prevailing on a malicious prosecution claim. The findings only established Merrill’s ultimate lack of success in the quiet title action.
(d) malice
Turning to the third element of a malicious prosecution claim, as stated in Slaney v. Ranger Ins. Co., supra, 115 Cal.App.4th 306, Merrill also argues that Soto and Kenny have failed provide any evidence that she acted with malice in filing her cross-complaint. However, inasmuch as Soto and Kenny have failed to demonstrate that they have a probability of prevailing with respect to establishing the second element of a malicious prosecution claim, we need not address the third element.
(3) Conclusion
Merrill met her burden to show that a malicious prosecution action may be subject to an anti-SLAPP motion. The burden then shifted to Soto and Kenny to show that they had a probability of prevailing on their malicious prosecution claim. While they were able to demonstrate a probability of prevailing in establishing the first element of a malicious prosecution claim, i.e., that the first lawsuit terminated in their favor, they were unable to demonstrate a probability of prevailing in showing that Merrill lacked probable cause to file her cross-complaint in the quiet title action. Therefore, Soto and Kenny failed to demonstrate a probability of prevailing on their malicious prosecution claim. The court erred in denying the anti-SLAPP motion.
III
DISPOSITION
The order is reversed. Merrill shall recover her costs on appeal.
We concur: BEDSWORTH, ACTING P. J. O’LEARY, J.