Opinion
NOT TO BE PUBLISHED.
Appeal from an order of the Superior Court of Orange County, No. 07CC02760, Hugh Michael Brenner, Judge.
Law Offices of Shawn A. McMillan, Shawn A. McMillan and J.I. McMillan for Defendants and Appellants.
Jolley & Jolley and Vernon C. Jolley for Plaintiff and Respondent.
OPINION
RYLAARSDAM, ACTING P. J.
Defendants The Seitz Family Partnership, L.P., James Seitz, Moree (Seitz) Hasty, and Kory Seitz (collectively Seitz) appeal from an order denying their special motion to strike the malicious prosecution complaint of plaintiff Cal-Nan Horizon Quest, Inc. (Cal-Nan) under Code of Civil Procedure section 425.16 (anti-SLAPP motion; all further statutory references are to this code unless otherwise stated). Seitz contends, among other things, that Cal-Nan did not show the probability of prevailing on the action or malice. We agree and reverse.
FACTS
Horizon Quest, LLC, and Cal-Nan Groups, Inc. together own the majority of Cal-Nan’s shares. Seitz owns shares in Horizon Quest; it owns no shares in Cal-Nan. Seitz filed a derivative action against Horizon Quest, Cal-Nan, and others arising out of alleged misappropriation of funds by Frank L. Jaksch, Sr., a director and officer of Cal-Nan.
The trial court sustained Cal-Nan’s demurrer without leave to amend to the causes of action against it on the grounds Seitz had no standing to sue Cal-Nan because Corporations Code section 800 requires that a party be a shareholder to file a derivative action and Seitz owned no shares in Cal-Nan. At Seitz’s request and pursuant to section 166.1, the court inserted the following language into the order: “No reported California decision has authorized this type of ‘double derivative’ action. . . . However, I believe the double derivative standing issue is a controlling question of law as to which there are substantial grounds for difference of opinion, appellate resolution of which may materially advance the conclusion of the litigation.”
Although the record does not contain a copy of the resulting judgment, Cal-Nan alleged the action was favorably terminated on the merits in its favor. Seitz assumes a favorable termination, and the court made reference to a judgment in the hearing on the anti-SLAPP motion.
Cal-Nan then filed the instant action for malicious prosecution, alleging Seitz knew or should have known it had no standing under Corporations Code section 800 because it did not own and had never owned shares of Cal-Nan. Thus, the complaint alleges, Seitz had no probable cause to file the action.
Seitz brought an anti-SLAPP motion, arguing that in filing the underlying complaint, despite Corporations Code section 800, it was relying on the so-called “double derivative” theory of recovery, allowed in a couple of sister states and purportedly supported by dicta in one California case. Cal-Nan filed points and authorities but no declaration in opposition. After argument the court denied the motion.
DISCUSSION
Section 425.16, subdivision (b)(1) provides that a cause of action arising from a constitutionally protected right of free speech may be stricken unless the plaintiff establishes the probability it will prevail on the claim. The court must engage in a two-step analysis under this section. First it must determine whether the defendant has met its burden to show “that the challenged cause of action is one arising from protected activity.” (Jarrow Formulas, Inc. v. LaMarche (2003) 31 Cal.4th 728, 733.) If so, the burden shifts to the plaintiff to show the likelihood of prevailing on the claim. (Ibid.)
Here, contrary to Cal-Nan’s claim, a complaint for malicious prosecution is an act “in furtherance of the . . . right of petition or free speech under the United States or California Constitution in connection with a public issue . . .” (§ 425.16, subd. (b)(1)), which is defined as including “any written or oral statement or writing made before a . . . judicial proceeding . . . .” (§ 425.16, subd. (e)(1)). In addition the Supreme Court has held that malicious prosecution suits fall within section 425.16, subdivision (b)(1). (Jarrow Formulas, Inc. v. LaMarche, supra, 31 Cal.4th at p. 734.) Thus there is no need for Seitz to show conduct or free speech “in connection with a public issue or an issue of public interest.” (§ 425.16, subd. (e)(4).)
The question, then, is whether Cal-Nan has demonstrated that the likelihood it will prevail on the merits of its malicious prosecution action. It was required to “‘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 [it] submitted . . . is credited.’ [Citations.]” (Wilson v. Parker, Covert & Chidester (2002) 28 Cal.4th 811, 821.) The court reviews both parties’ pleadings and evidentiary support (§ 425.16, subd. (b)(2)) but “does not weigh the credibility or comparative probative strength of competing evidence” and “should grant the motion if, as a matter of law, the defendant’s evidence supporting the motion defeats the plaintiff’s attempt to establish evidentiary support for the claim. [Citation.]” (Wilson v. Parker, Covert & Chidester, supra, 28 Cal.4th at p. 821, italics omitted.)
To succeed on a malicious prosecution claim, Cal-Nan must prove that the underlying action “‘(1) was commenced by or at the direction of [Seitz] and was pursued to a legal termination in [Cal-Nan’s] favor [citations]; (2) was brought without probable cause [citations]; and (3) was initiated with malice [citations].’ [Citation.]” (Crowley v. Katleman (1994) 8 Cal.4th 666, 676.) The issues in this case are whether Seitz had probable cause to bring the underlying action and whether it was filed with malice.
A party does not have probable cause if it advances a legal theory of recovery “which is untenable under the facts known to [it].” (Sangster v. Paetkau (1998) 68 Cal.App.4th 151, 164-165.) “In making its determination whether the prior action was legally tenable, the court must construe the allegations of the underlying complaint liberally in a light most favorable to the malicious prosecution defendant.” (Id. at p. 165.)
We independently review whether Cal-Nan has shown the probability of prevailing on its complaint (ComputerXpress, Inc. v. Jackson (2001) 93 Cal.App.4th 993, 999) and determine it has not done so. Probable cause is a question of law. The test is whether “‘any reasonable attorney would have thought the claim tenable.’ [Citation.]” (Wilson v. Parker, Covert & Chidester, supra, 28 Cal.4th at p. 817.) “Only those actions that “‘any reasonable attorney would agree [are] totally and completely without merit’” may form the basis for a malicious prosecution suit. [Citation.]” (Ibid.)
Cal-Nan relies on Corporations Code section 800 to support its claim Seitz had no probable cause. The statute provides: “No action may be instituted or maintained in right of any domestic or foreign corporation by any holder of shares or of voting trust certificates of the corporation unless . . . the following condition[] exist[s]: [¶] (1) The plaintiff alleges in the complaint that plaintiff was a shareholder, of record or beneficially, or the holder of voting trust certificates at the time of the transaction or any part thereof of which plaintiff complains or that plaintiff’s shares or voting trust certificates thereafter devolved upon plaintiff by operation of law from a holder who was a holder at the time of the transaction or any part thereof complained of . . . .” (Corp. Code, § 800, subd. (b).)
The parties agree that the current law in California does not recognize a double derivative action and Seitz admittedly owned no shares in Cal-Nan. But in sustaining the demurrer, the trial court found that “there are substantial grounds for difference of opinion” as to “the double derivative standing issue.” This is easily translated into a finding that reasonable attorneys could disagree as to whether a double derivative suit in the underlying action had some merit. Thus, the probable cause element was satisfied.
Cal-Nan put in no evidence to counter this finding, in fact offered no evidence at all. If Seitz had probable cause to file the underlying action, Cal-Nan could not show it was likely to prevail on the merits of its malicious prosecution suit.
Malice deals with “‘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.’ [Citations.]” (Soukup v. Law Offices of Herbert Hafif (2006) 39 Cal.4th 260, 292, italics omitted.)
Here, Cal-Nan claims Seitz had both ill will and an improper purpose in filing the underlying action. But, as with probable cause, these claims are unsupported by any evidence. As to both of these elements, then, Cal-Nan failed to show the probability that it would prevail on the merits. As such it could not defeat the anti-SLAPP motion, which should have been granted.
DISPOSITION
The order is reversed. Appellants are entitled to costs on appeal.
WE CONCUR: O’LEARY, J., MOORE, J.