Opinion
NOT TO BE PUBLISHED
Appeal from an order of the Superior Court of Orange County Super. Ct. Nos. 03CC07834, 03CC10976 & 03CC11048, Dennis S. Choate, Judge.
Stephen A. Weaver, Law Offices of Edward H. Cummings and Edward H. Cummings for Plaintiffs and Appellants Ranbir S. Sahni and 3R Real Estate Corporation.
Law Offices of Edward H. Cummings and Edward H. Cummings for Plaintiffs and Appellants Genny R. Alberts and American Development Corporation.
David E. Rosenbaum, in pro. per., for Defendant and Respondent.
Stephan, Oringher, Richman & Theodora, Theodora, Oringher, Miller and Richman, Harry W.R. Chamberlain II, Brian P. Barrow and Robert M. Dato for Defendants and Respondents B. Casey Yim and Pivo, Halbreich, Cahill & Yim.
OPINION
SILLS, P. J.
Genny Alberts, American Development Corporation (ADC), Ranbir S. Sahni, and 3R Real Estate Corporation (collectively, “the Appellants”) filed complaints for malicious prosecution against David Rosenbaum, the attorney who initiated a cross-complaint against them on behalf of National Foundation for Housing, Inc. (NFH), and B. Casey Yim and his law firm, the attorneys who took over the representation of NFH from Rosenbaum and continued to prosecute the cross-complaint (collectively, “the Attorneys”). ADC and 3R obtained summary judgment on the cross-complaint, and Alberts and Sahni were dismissed. The malicious prosecution complaints, which were consolidated in the trial court, allege the cross-complaint was brought without probable cause and with malice because the cross-complainants “had no personal knowledge or belief” of facts supporting their action, they “failed to adequately investigate the factual and legal basis for their action but continued to maintain their action against [the Appellants] despite discovery establishing the lack of any factual basis for their action . . . .”
3R was previously incorporated as Fairview, Inc.
The Appellants also sued Richard Kennedy, NFH’s president, and Hank Etess, Rosenbaum’s law partner. Kennedy settled with the Appellants while the case was on appeal in this court. Etess was defaulted and this court affirmed the order refusing to set aside his default in Alberts v. Etess (Apr. 23, 2007, G035924 [nonpub.opn.]).
The Attorneys filed special motions to strike the complaints under the anti-SLAPP statute (Code Civ. Proc., § 425), claiming the Appellants could not demonstrate a likelihood of success on the malicious prosecution complaints. The trial court granted the motions and struck the complaints. The Appellants contend the trial court erroneously found there was probable cause to file the cross-complaint. After performing a de novo
review of the record, we find the Appellants have not made the necessary showing that the cross-complaint was filed and maintained with malice. Accordingly, we affirm.
FACTS
In 1991, Sahni was the general partner in two limited partnerships – NHF and American Foundation for Housing, Inc. (AFH) – that owned two government-subsidized senior citizen housing projects located in Colorado. The projects were known as Birchwood and Oakbrook (the Colorado Properties). Sahni was the sole shareholder of ADC, which managed the Colorado Properties. NFH, as general partner, and AFH formed two Colorado limited partnerships – Oakbrook Manor and Birchwood Manor – to purchase the projects through 100 percent bond financing. The A bonds were government guaranteed and secured by the real property, “similar to a conventional mortgage,” and were acquired by institutional lenders. Covering the balance of the purchase price were the B bonds, which were “non-recourse obligations secured only by 85% of the surplus cash the property generated. If the property is not efficiently managed, there may be no cash to make the monthly [interest] payments on the B bonds and the holders of such bonds will not receive any distributions.” The B bonds were issued to Sahni personally, who later assigned them to his relatives: Bobby Mehta, Sahni’s brother-in-law; Ingrid Sahni-Alberts, Sahni’s ex-wife and Alberts’s sister-in-law; and Pritam Sahni, Sahni’s brother.
For ease of identification, we refer to Ingrid Sahni-Alberts as “Ingrid” and Pritam Sahni as “Pritam.”
The bond underwriter issued an Official Statement for each project, which included disclosure statements. The purchasing partnerships were required to obtain appraisals on the Colorado Properties by an independent MAI appraiser acceptable to the purchasing partnerships, the underwriter and its counsel, and bond counsel. The lender under the A bonds also had an appraisal prepared.
In September 1999, Alberts became the president of ADC. Around that time, NFH decided to change management companies, and it retained a former ADC employee, Nancy Lee, to manage the Colorado Properties; it asked ADC to transfer all of NFH’s records and documents, including the records related to the Colorado Properties, to the new property management company. ADC refused.
In October 2000, ADC filed the underlying complaint against NFH seeking to collect money due on several promissory notes allegedly signed by NFH. NFH, through its attorney Rosenbaum, filed an answer and cross-complaint challenging the validity of the promissory notes in February 2001. NFH alleged that after the failure of a savings and loan of which Sahni was “a 96% owner,” Sahni sought to “conceal his identity and connection with real estate investments when dealing with . . . Government officials and private lenders by acquiring and financing property through corporate and other entities in which he was not listed as a stockholder, director or officer.” NFH denominated these entities the “Sahni Corporations” because he exercised “dominion and control” over their “day-to-day and overall operational and financial policies, investments, expenditures and distributions . . . as instrumentalities of his personal investment and other financial wishes.” NFH alleged the Sahni Corporations included ADC “and until some time between early 1997 and September 1999, NFH and [AFH].”
The cross-complaint alleged Sahni was the general partner of a number of limited partnerships that owned low income housing projects. ADC was the contract management agent for all these partnerships and, as such, controlled “the cash flow, banking, contracting, income distribution, tax preparation and all other aspects of financial management.” NFH owned interests in some of these partnerships, and ADC provided “necessary legal and financial advice, arranging for financing of debt, maintaining NFH’s books and records, performing accounting functions, and managing daily operations.” In July 1999, NFH terminated ADC as its management agent and asked ADC to ship all its books, files and records to the new agent. ADC refused to do
so. Concurrently, Sahni appointed Alberts as ADC’s new president. Based on these allegations, NFH contended that the promissory notes failed for lack of consideration and other defects, including forgery of the signature of NFH’s chief executive.
A few weeks later, in March 2001, Rosenbaum amended the cross-complaint to add new causes of action against Sahni, the Sahni Corporations, Mehta, Alberts, Pritam, and Ingrid. The amended cross-complaint alleged that Sahni had conspired with the Sahni Corporations and the other cross-defendants to defraud NFH in the sale of the B bonds and embezzle funds “from management fees that ADC received from HUD under federal assistance programs and from the assets and income of 22 limited partnerships in which NFH owns interests . . . .” The embezzlement was accomplished by Sahni exercising his control over ADC to cause its managers and employees to transfer its funds, including HUD management fees, to either the Sahni Corporations or Sahni’s creditors. The unlawful transfers were “made to corporations or other entities that appeared unconnected with Sahni on the surface”; the transfers were labeled as a “loan,’ ‘advance,’ or ‘repayment of loan’”; and “Sahni used his control over ADC . . . to assure that the [partnerships] never received information that would cause them to question or inquire into these matters.”
The amended cross-complaint further alleged that Sahni and the other cross-defendants decided to raise $14 million, to be used “to fund their investment plans and for Sahni to repay personal debts he owed to his brother and ex-wife.” Although the fair market value of the Colorado Properties was approximately $10 million, Sahni, Mehta and CIB Development (a Kansas corporation owned almost entirely by Pritam) fraudulently inflated their value and sold them to NFH. Based on the fraudulent representations, NFH paid in excess of $3.8 million at 12% interest on the tax-free cash-flow B bonds. Sahni convinced NFH that he was “its friend and mentor, and . . . an agent in whom NFH could repose trust and confidence in all financial matters.” NFH trusted Sahni’s advice, including the advisability of purchasing the Colorado Properties. Based on this trust and confidence in Sahni, NFH agreed to use ADC as its management agent and selected the same accounting firm that performed accounting and audit services for Sahni and the Sahni Corporations.
The amended cross-complaint stated causes of action for RICO violations, unfair competition, unfair practices, breach of fiduciary duty, imposition of constructive trust, rescission and restitution of the payments made on the B bonds, cancellation of the B bonds, rescission and cancellation of the promissory notes, money had and received, unjust enrichment, fraud, claim and delivery, and an accounting. In November 2001, Regal Development, one of the Sahni Corporations, obtained summary adjudication of the RICO causes of action and the fraud cause of action on statute of limitations grounds.
Also in November 2001, Rosenbaum withdrew as counsel for NFH, and Yim substituted in his place. NFH then dismissed the causes of action for RICO violations, unfair competition and unfair practices against all cross-defendants. On November 29, the Appellants filed motions for summary judgment on the cross-complaint. In January 2002, before the motions could be heard, NFH filed for Chapter 11 bankruptcy protection. NFH then dismissed the entire first amended cross-complaint against all cross-defendants without prejudice.
The Appellants asked the trial court to vacate the dismissals and rule on their pending motions for summary judgment. The dismissals were vacated as to 3R, ADC, and Sahni, but not Alberts. The trial court granted summary judgment in favor of ADC, finding all remaining causes of action were barred by the statute of limitations. The trial court also found NFH had no standing to sue because it was not a real party in interest, which constituted “a complete affirmative defense” for ADC. It found no fiduciary duty existed between ADC and NFH, there was no failure of consideration for the promissory notes, “nor were the Notes obtained through fraud, because NFH obtained the funds lent, and therefore there is no basis for rescission.” The trial court also found there was no misrepresentation by ADC to NFH, because “the Official Statement . . . disclosed all material facts, including the differing appraisals, and was received by NFH.” 3R was also granted summary judgment on statute of limitations grounds, lack of standing by NFH, and lack of fiduciary duty. The trial court denied Sahni’s motion for summary judgment and reinstated his dismissal without prejudice.
Alberts filed the first malicious prosecution complaint against Kennedy, Rosenbaum and Yim in June 2003. It was followed in September with a complaint by Sahni and 3R and a complaint by ADC. The three cases were consolidated by the trial court. Yim and Kennedy answered and filed anti-SLAPP motions to strike the complaints in December. Rosenbaum failed to answer; his default was entered in Alberts’s case in October 2003. On January 15, 2004, notwithstanding the entry of his default in Alberts’s case, Rosenbaum filed a “Notice of Joinder in Defendants’ Special Motion to Strike.” He attached his declaration explaining why he filed the underlying cross-complaint.
Rosenbaum stated, “In defending NFH, I gained significant insight into the business practices of Ranbir Sahni, the sole shareholder of ADC. I learned that Sahni had previously owned a failed savings and loan and that his business conduct had been expressly criticized by the United States Supreme Court. (See O’Melveny & Meyers v. [FDIC], 512 U.S. 79, 81 (1994).) I investigated the litigation that Sahni was involved in and learned that he had been successful in using numerous limited partnerships and other business entities to conceal his operations and business dealings from lenders and government agencies. [¶] Shortly after ADC filed suit against NFH, another Sahni-controlled entity, Fairview, Inc., sued NFH in [a federal] action . . . . I also represented NFH in that lawsuit and in preparing certain motion practice matters in that case, met DeEtta Cordova, a former employee of ADC. From Cordova, I learned significant additional information about Sahni’s background and business practices. Based on that, and additional information I learned from NFH’s president, Richard Kennedy, I began to suspect that NFH had been victimized by Sahni. Among other things, Richard Kennedy informed me that some months before the ADC and Fairview . . . suits, he had terminated ADC as the property management agent for NFH and had sought to obtain NFH’s books and records from ADC’s custody with increasing intensity since that time.”
Rosenbaum declared he “learned facts” revealing that Sahni used NFH’s name to conceal his involvement in a rent subsidy program in Illinois from government investigating agencies and suggesting that “Sahni had been siphoning assets and business supplies off of NFH and using them for other businesses he controlled.” Rosenbaum also “learned facts” leading him to believe Sahni misrepresented the fair market value of the Colorado Properties. “In my opinion, Sahni had used NFH in the Birchwood and Oakbrook deals as a dupe to fraudulently obtain money from the operation of government-subsidized housing projects for the elderly.” When Rosenbaum learned that Sahni and ADC refused to release NFH’s books and records, he was “further convinced of Sahni’s wrongdoing.” Rosenbaum believed the promissory notes which formed the basis of ADC’s complaint against NFH were “fraudulently concealed, or inaccurately characterized, or had been obtained through the connivance of a disloyal NFH agent before Kennedy’s entry into NFH management and included one or more items debited to NFH’s account without authorization by NFH.” He believed “the RICO claim was necessary because it was a component in extricating NFH from the inappropriate bond transactions involving Birchwood and Oakbrook.” Rosenbaum withdrew as NFH’s counsel because it could not pay his fees and the costs of the litigation, not because the cross-complaint lacked merit.
Yim’s anti-SLAPP motion included Kennedy’s declaration which had been submitted in opposition to the motions for summary judgment in the underlying cross-complaint. Kennedy stated Sahni made him president and “charter member” of NFH in 1996. Sahni told Kennedy “he maintained control over NFH because he (Sahni and/or his relatives) paid the salaries of [the president] and all expenses of NFH, which he did through his many related entities, limited partnerships and corporations, and by placing his relatives in key positions in those entities and/or by paying their salaries.” Sahni told Kennedy the purchase prices of the Colorado Properties were $4,277,473 for Oakbrook and $7,040,778 for Birchwood and that Sahni had “investigated, evaluated and determined that the foregoing purchases prices represented the true values of the properties at the time they were purchased by NFH . . . .” Sahni made other representations to Kennedy about his experience and knowledge and that of ADC in “handling many low income housing projects, receiving public financing through . . . HUD in general and that they were very familiar with the market and property values in these kinds of transactions in general.” Based on these representations, Kennedy and NFH “placed trust and confidence in Sahni’s and ADC’s representations that the value and equity in the Colorado properties at the time of the purchase were in fact as represented by Sahni and ADC, such that the B series bonds issued in connection with the transaction were fully supported by equity and value in the properties.”
Kennedy was not given any of the documentation related to the sale of the Colorado Properties, i.e., the Operating Statement, HUD loan evaluations, appraisals, etc. “From and after my assumption of responsibilities for NFH, I had no reason to doubt or question any aspect of the Colorado property transaction, or of the management of operations thereafter because, Sahni and ADC, and later Ingrid Sahni, continued to assure me that all aspects of the transaction and operations were appropriate; and failed to disclose any information or documents reflecting any discrepancy in the value of the properties. NFH relied on those assurances.”
NFH changed accountants in late 2000. In February 2001, the old accountants sent a letter to the new accountants “disclosing for the first time that the true value of the Oakbrook property was only $3,200,000 and not $4,300,000, represented to me and NFH previously.” NFH made further inquiries and discovered that the value of Birchwood was only $5,600,000, not $7,040,778. Kennedy claimed ADC and Sahni concealed the true value of the Colorado Properties because they refused to turn over NFH’s documents related to the purchase of the Colorado Properties and the ongoing management of the properties. Kennedy also declared the promissory notes “were conditioned upon the acquisition by NFH of the Tulsa, Oklahoma property transaction, which was also to be the consideration for the promissory notes. NFH did not acquire the Oklahoma properties; and transaction was transferred by Sahni and ADC to a third party. Thus, there was no consideration for the . . . promissory notes.”
Yim’s anti-SLAPP motion also included two declarations from DeEtta Cordova: The first had been submitted in support of NFH’s motion to dismiss in the federal action brought against it by Fairview; the second had been submitted in the underlying action in connection with discovery motions and in opposition to the Appellants’s motions for summary judgment. Cordova, an accountant, declared she was formerly employed by ADC and by “other entities owned by Ranbir Sahni” for over ten years, from February 1989 to September 1999. In the summer of 1999, ADC advised its employees and clients “that Ranbir Sahni had cancelled all of his property management contracts (approximately 14 plus limited partnerships), and would be transferring same to another property management company . . . .” Cordova was instructed to return all client documents to the clients. She assembled NFH’s documents and packed them in boxes. On September 23, 1999, Nancy Lee arrived to pick up the documents, but Alberts refused to allow the NFH documents to leave the premises.
Cordova declared after the settlement of the FDIC litigation, in December 1990, she became involved in “all tax work, acquisitions, financial statements and reports, analysis for all major transactions (purchase, sale, and refinancing), and cash flow matters.” She was responsible for “records maintained for all partnerships for which ADC acted as management agent, exclusive of property management functions.” She also “participated in strategy meetings with Mr. Sahni and others who assisted him in formulating decisions on investments, lending options, and ADC operations.” During 1991 and 1992, Sahni was unable to purchase “FDIC real estate owned properties” due to his “bad financial reputation at the FDIC over the failure of [American Diversified Savings Bank].” Sahni decided to use NFH and AFH to acquire properties, because “his name would not surface in any background checks or investigations of the stockholders, officers and directors of those corporations.”
Sahni did not control AFH and NFH by being a stockholder, officer or director. Rather, his control was because “(i) he had created and/or revived the existence of NFH and [AFH] to serve the above purpose, (ii) he had arranged and was continuing to arrange the financing for their acquisitions, (iii) he had appointed the chief executive officer, Ray Nayar, (iv) he had created the debt of NFH and AFH by transferring funds from several other corporations that Sahni also controlled, and (v) ADC, which he also controlled, acted as the management agent for all their properties. Mr. Sahni controlled ADC at first through his stock ownership and later through a consulting agreement with its new owner, Ingrid Sahni.”
Cordova explained that Sahni and Ingrid had been married, but divorced in the early 1980s. They shared custody of three children and kept in touch. Sahni owed Ingrid about $300,000 after the FDIC litigation, and in late 1993, he pledged his ADC stock as collateral for a promissory note to her. Right before Sahni filed bankruptcy, in 1995, he told Ingrid to foreclose on his ADC stock; he “assured Ingrid that he would continue in the same role that he had always played in ADC’s management.” They agreed Sahni could repurchase his stock for $1.00 after he paid the promissory note. Sahni did so sometime after 1999.
In October 1998, Kennedy asked Cordova to “conduct a special review of the financial records for the first nine months of 1998 of the limited partnerships that ADC managed. He asked that I determine the amount of cash that Mr. Sahni had caused ADC to draw and transfer from the funds of those limited partnerships for Mr. Sahni’s personal use.” Cordova did as she was asked, and determined Sahni had received $386,122 for his personal use. Shortly after Cordova provided Kennedy with that information, Sahni told her “it would be best if I did not give information to Mr. Kennedy, and to refer Kennedy to Sahni for all information.” Sahni then removed all records of the limited partnerships and the general partners from the ADC office “and cut off my access to those partnership records for the remainder of my tenure in ADC.”
In March 2001, the same month in which Robsenbaum filed the first amended cross-complaint, NFH hired Yim to file a writ proceeding against Sahni and Regal Development to gain access to NFH’s books and records related to other limited partnerships in which NFH was a co-managing partner and limited partner with Sahni and Regal. Yim’s declaration explained that his representation of NFH caused him to “communicate[] freely with Richard Kennedy, NFH’s president,” and learn the facts in Kennedy’s declaration. The discovery of the inflated values of the Colorado Properties, the refusal to provide access to documents, plus the information from Cordova in the Fairview case, caused NFH to think “that Sahni and his entities had been improperly diverting NFH’s funds (including government subsidies) for his own personal benefit.”
Yim substituted in as NFH’s counsel on the underlying cross-complaint in November 2001, after Rosenbaum withdrew. Rosenbaum shared his views and the results of his investigation into the merits of the cross-complaint with Yim. Yim explained, “When I substituted into the case, there were already a number of pending discovery motions, as well as a pending motion for summary judgment. In an effort to streamline NFH’s cross-complaint, and in the interests of judicial economy, NFH (upon my advice) dismissed its causes of action for RICO violations, unfair competition, and unfair practices against all cross-defendants. I did not recommend the dismissal of those causes of action because they lacked merit, but because I knew that RICO and unfair competition claims were difficult and expensive to prove. I believed that NFH could recover its full damages upon prevailing on the other causes of action in the cross-complaint without the expense associated with RICO and unfair competition claims.”
Yim moved for leave to file a second amended cross-complaint in December 2001, which included causes of action for fraud and concealment; breach of fiduciary duties; breach of contract; rescission, cancellation, and restitution; recovery of personal property (NFH’s books and records); conversion, and misappropriation. The motion was never heard. In January 2002, NFH filed for Chapter 11 bankruptcy protection because “Sahni and his entities had filed multiple actions against NFH in different courts and states that NFH simply could not afford to defend.” Yim believed all the litigation could be consolidated into a single bankruptcy proceeding and therefore dismissed the first amended cross-complaint without prejudice. “Although I firmly believed NFH’s cross-complaint was meritorious, NFH did not have sufficient resources to continue its prosecution.”
Yim believed there was probable cause to file the cross-complaint because of Sahni’s refusal to turn over NFH’s books and records, even in the face of a court order. “In my experience as a litigator, the refusal to produce documents indicates that those documents contain damaging information to the party refusing to produce them (there is a BAJI Jury instruction to a similar effect as well).”
In opposition to the anti-SLAPP motions, Alberts and ADC contended that there was no probable cause to file the cross-complaint for three reasons: (1) NFH was not the real party in interest and had no right to prosecute the fraud claims based on the claimed over-valuation of the Colorado Properties. NFH was only the general partner of the partnerships that purchased and owned the Colorado Properties; the property belongs to the partnership, not the general partner. (2) The statute of limitations had long expired on all of the causes of action in the cross-complaint before they were filed. Although Kennedy claimed delayed discovery, there are no facts to suggest his predecessor at NFH was not aware of all the financial details of the purchase of the Colorado Properties. (3) Alberts and ADC had nothing to do with the sale of the Colorado Properties. Alberts did not become president of ADC until 1999 and there is no evidence showing that ADC played any part in the sale.
Sahni and 3R opposed the anti-SLAPP motions by contending that Rosenbaum and NFH knew there was no probable cause to file the cross-complaint before the action was ever filed. They argued the accountant’s letter that Kennedy claims triggered his suspicions clearly “shows that the accountant was merely using a plausible number to illustrate how certain calculations might be done. Nowhere does the letter declare any value as the ‘true’ property value, nor does the accountant claim any expertise in valuation.” They further argued that ADC did not withhold NFH’s financial information because NFH received “annual financial breakdowns (as required and audited by HUD); and, Kennedy signed these financial statements certifying them as true and accurate.” They argue ADC, Sahni and Alberts were never B bondholders, so there could not have been any conflict of interest between them and NFH. Finally, they argue the claim that Sahni and his related entities took funds from other limited partnerships was unsupported because the information in Cordova’s declarations is not true. They point out the trial court ultimately found her declaration to be hearsay and “the allegations that money was taken were found false by the trial court . . . .” Furthermore, Sahni claims NFH lacked standing to bring the action because the claims belong to the limited partnerships, not the general partner.
Sahni uses a declaration from the accountant who wrote the letter as support for his contention. But this declaration was not before the trial court.
The hearing on the anti-SLAPP motions was set for January 29, 2004. ADC, Sahni and 3R filed requests to enter Rosenbaum’s default on January 22. The Appellants filed responses to Rosenbaum’s request for joinder, and Rosenbaum filed opposition to the entry of his default. On January 27, 2004, Rosenbaum’s defaults were entered in the Sahni, 3R and ADC cases. On January 29, the trial court granted Rosenbaum’s joinder in the anti-SLAPP motions; it “determine[d] the default of defendant David Rosenbaum moot at this point due to the defendant being allowed to file a motion for joinder . . . . Request to have default of defendant David Rosenbaum stricken granted.” The trial court also granted the anti-SLAPP motions, finding “there was probable cause to bring cross-action in underlying case. Malice is no longer before the Court.”
DISCUSSION
Rosenbaum’s joinder was properly granted.
Appellants argue Rosenbaum’s notice of joinder did not constitute an anti-SLAPP motion on his behalf because he did not request any relief on his own behalf. (Decker v. U.D. Registry, Inc. (2003) 105 Cal.App.4th 1382, 1391.) In Decker, this court affirmed the trial court’s denial of the anti-SLAPP motion because the motion was untimely; additionally, the court held a co-defendant who attempted to join the motion had no standing to appeal because he “did not file a motion seeking relief on his own behalf with a joinder . . . .” (Ibid.) The court pointed out that “[t]he joinder is not in the form of a motion and does not present any evidence or argument.” (Ibid.)
Standing to appeal is not an issue here because Rosenbaum is not appealing. As a respondent, he has standing to defend the trial court’s decision to grant the anti-SLAPP motion. Furthermore, while Rosenbaum did not expressly seek relief on his own behalf, he attached a detailed declaration explaining why relief should be granted as to him. Thus, no party was prejudiced by lack of notice as to Rosenbaum’s position. Under these circumstances, we would be exalting form over substance if we rejected his joinder because he failed to follow technical requirements.
Appellants also argue that Rosenbaum had no standing to appear because his default had been entered in all the actions. “‘A defendant against whom a default has been entered is out of court and is not entitled to take any further steps in the cause affecting plaintiff's right of action; he cannot thereafter, until such default is set aside in a proper proceeding, file pleadings or move for a new trial or demand notice of subsequent proceedings.’ [Citation.]” (Devlin v. Kearny Mesa AMC/Jeep/Renault, Inc. (1984) 155 Cal.App.3d 381, 385.)
The Appellants opposed the joinder and opposition to default filed by Rosenbaum; they not only filed written opposition but had an opportunity to be heard on the issue at oral argument. Thus, any objections based on an improper notice of motion have been waived. (Carlton v. Quint (2000) 77 Cal.App.4th 690, 697.) Although the Appellants pointed out that the default in the Alberts case had been entered several (but less than six) months before, the trial court clearly intended to set aside all the defaults against Rosenbaum. It found the defaults moot and specifically struck them, commenting, “I allowed him to . . . join this motion today. . . . He’s part and parcel of this ruling.”
The trial court was within its discretion to set aside the defaults and allow Rosenbaum to participate in the anti-SLAPP motions. In order to obtain default judgments against Rosenbaum, the Appellants would have to submit evidence showing a prima facie case of malicious prosecution to the court. (Johnson v. Stanhiser (1999) 72 Cal.App.4th 357, 361-362.) As we explain below, they have not done so.
The anti-SLAPP motions were properly granted.
“Code of Civil Procedure section 425.16, the anti-SLAPP statute, provides in relevant part: ‘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.’ ([Code Civ. Proc.,] § 425.16, subd. (b)(1).) Under this statute, the party moving to strike a cause of action has the initial burden to show that the cause of action ‘aris[es] from [an] act . . . in furtherance of the [moving party’s] right of petition or free speech.’ (Ibid.; Equilon [Enterprises, LLC v. Consumer Cause, Inc. (2002)] 29 Cal.4th [53,] 67 [citations].) Once that burden is met, the burden shifts to the opposing party to demonstrate the ‘probability that the plaintiff will prevail on the claim.’ (Code Civ. Proc., § 425.16, subd. (b)(1); Equilon, supra, 29 Cal.4th at p. 67 [citations].) ‘To satisfy this prong, the plaintiff must “state[] and substantiate[] a legally sufficient claim.” [Citation.] “Put another way, 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.’” [Citation.]’ (Jarrow Formulas, Inc. v. LaMarche (2003) 31 Cal.4th 728, 741, [citations] fn. omitted.)” (Zamos v. Stroud (2004) 32 Cal.4th 958, 964-965.)
There is no dispute that the malicious prosecution action arises from acts in furtherance of the Appellants’ right of free speech. The issue here is whether the Appellants can show their complaints for malicious prosecution have potential merit. “In deciding the question of potential merit, the trial court considers the pleadings and evidentiary submissions of both the plaintiff and the defendant (§ 425.16, subd. (b)(2)); though the court does not weigh the credibility or comparative probative strength of competing evidence, it 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 (2002) 28 Cal.4th 811, 821.) “The process the court uses in determining whether the plaintiff has shown a probability of prevailing on the merits is similar to the process used in determining motions for nonsuit, directed verdict or summary judgment. [Citations.]” (Ross v. Kish (2006) 145 Cal.App.4th 188, 197.) We review the moving and opposing papers de novo. (Matson v. Dvorak (1995) 40 Cal.App.4th 539, 548; Evans v. Unkow (1995) 38 Cal.App.4th 1490, 1496.)
A successful malicious prosecution claim must show that the underlying action was pursued to a legal termination in plaintiff’s favor, was brought without probable cause, and was initiated with malice. (Bertero v. National General Corp. (1974) 13 Cal.3d 43, 50.) Here, the trial court found the attorneys had probable cause to file the cross-complaint and did not focus on the elements of favorable termination and malice.
Probable cause is different from favorable termination. In other words, just because a claim ultimately fails does not mean it lacked probable cause at the outset. (Sheldon Appel Co. v. Albert & Oliker (1989) 47 Cal.3d 863, 886.) “Counsel and their clients have a right to present issues that are arguably correct, even if it is extremely unlikely that they will win.” (Id. at p. 885.) Probable cause exists if any reasonable attorney would have thought the claim tenable. “‘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.’ [Citation.]” (Jarrow Formulas, Inc. v. LaMarche, supra, 31 Cal.4th at p. 743.)
Thus, the lack of probable cause is an objective test, i.e., “whether, on the basis of the facts known to the defendant, the institution of the prior action was legally tenable.” (Sheldon Appel Co. v. Albert & Oliker, supra, 47 Cal.3d at p. 878.) The element of malice, however, is based on “the subjective intent or purpose with which the defendant acted in initiating the prior action . . . .” (Id. at p. 874.) A finding of malice must be supported by evidence of “actual hostility or ill will” or the institution of the prior lawsuit for an “improper ulterior motive.” (Downey Venture v. LMI Ins. Co. (1998) 66 Cal.App.4th 478, 494-495, 498.) A lack of probable cause, standing alone, is not sufficient to establish malicious intent. “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. In other words, the presence of malice must be established by other, additional evidence.” (Id. at p. 498; see also Jarrow Formulas, Inc. v. LaMarche, supra, 31 Cal.4th at p. 743.)
Appellants launch a multi-lateral attack on the trial court’s finding that there was probable cause to file the cross-complaint. But even if no reasonable attorney would have filed or maintained the action, the Appellants cannot succeed on their malicious prosecution action without an independent showing of malice. Although the trial court did not reach the element of malice when ruling on the anti-SLAPP motion, we review the record de novo to determine whether the Appellants have made a prima facie showing of malice. (Evans v. Unkow, supra, 38 Cal.App.4th at p. 1496.)
Appellants claim malice is shown by evidence that NFH was trying to “pressure the B bondholders into giving up their rights and claims for payments under the B bonds and . . . the cross-complaint was filed with the ulterior motive of accomplishing that result.” They point to correspondence dated February 28, 2001, from Ted Mason, an NFH employee, to the bondholders (Mehta, Ingrid and Pritam). Mason indicated NFH had questions about the bonds that surfaced when it looked into redeeming them. “It is my understanding that the bonds were initially issued to and held by Ranbir Sahni. It is also my understanding that the bonds were then assigned or otherwise transferred to each of you. [¶] Our information further indicates that Ranbir Sahni paid little or nothing for the bonds, and that the assignments or transfers to each of you were for little or no consideration.” Mason then outlined several issues that arose from the possibility that Sahni had not paid the face amount for the bonds: whether there was no liability for the bonds on the part of Birchwood Manor; whether Birchwood Manor should recover the interest it paid; and whether the interest should have been reported as ordinary income. Mason asked for documentation supporting the bondholders’ acquisition of the bonds.
A few weeks later, Mason faxed a message to Pritam Sahni referencing the cross-complaint in which he had been named as a defendant. Mason had sent him a copy but had not yet served him. Mason said, “I have tried on several occasions to contact you to discuss a resolution of interests for both parties concerning the B Bonds on Oakbrook and Birchwood. . . . [¶] If the lawsuit proceeds, with the B Bondholders as defendants, it will take several years to reach judgement [sic]. Whether National Foundation or Ranbir prevail [sic] in the action, I do not think it will be an outcome that you would prefer.”
This evidence falls short of making a prima facie case of malice. First, attempting pre-trial resolution of a dispute by pointing out the all-or-nothing aspect of a litigation result is not improper. Attempting to settle a case is “an inherent objective of litigation” (1 Mallen & Smith, Legal Malpractice (2007 ed.) § 6:22, p. 754) and is encouraged as a benefit to all parties. Second, any intent that may be inferred from NFH’s correspondence is not automatically transferred to the Attorneys. “[T]he law of malicious prosecution does not equate the attorney and the client. The attorney owes a duty to represent his or her client zealously; he or she does not have a duty of care toward the adversary. The client’s malice is not imputed to the attorney; rather, the liability of the attorney depends upon the attorney's own action of maliciously pursuing an objectively untenable claim. [Citation.]” (Rogers v. Peinado (2000) 85 Cal.App.4th 1, 7, disapproved on another ground, Brennan v. Tremco Inc. (2001) 25 Cal.4th 310, 317.) There is no evidence to support the inference that the Attorneys had a subjective malicious intent to injure the Appellants or use the legal system for an improper purpose when filing and maintaining the cross-complaint.
Furthermore, any perceived pressure to settle the cross-complaint was exerted on the B bondholders, who were not plaintiffs in the malicious prosecution actions. The malicious prosecution plaintiff must show the malice was directed at him or her to successfully prove the cause of action. (Camarena v. Sequoia Ins. Co. (1987) 190 Cal.App.3d 1089, 1098.)
The Appellants contend the record shows a lack of probable cause to file the cross-complaint and urge us to infer the Attorneys’ malice from the evidence they proffer to support that contention. While malice may be inferred from egregious behavior showing a lack of probable cause (see, e.g., Mattel, Inc. v. Luce, Forward, Hamilton & Scripps (2002) 99 Cal.App.4th 1179, 1191; Grindle v. Lorbeer (1987) 196 Cal.App.3d 1461, 1466), the inference is not warranted here. Although the Appellants were ultimately successful in proving that NFH lacked standing, the statute of limitations had run, and full disclosure prevented a finding of fraud, the Attorneys were not required to predict that result. They had information that Sahni controlled many entities without formal ownership or control, there were confusing and overlapping familial and personal relationships between Sahni and the persons who held formal control, Kennedy insisted he was deceived by Sahni, Sahni or his entities refused access to NFH books and records, and Sahni had a history of fraud and financial manipulation. As the trial court observed, “There is a lot of crossover here, isn’t there? Lot of crossover. . . .” The Appellants have the burden of showing a prima facie case of malice; they have not done so.
DISPOSITION
The order granting the anti-SLAPP motions and striking the consolidated malicious prosecution complaints is affirmed. Respondents are entitled to costs on appeal.
WE CONCUR: ARONSON, J., FYBEL, J.
Sahni and 3R request judicial notice of some of the records from the underlying action on the cross-complaint which they failed to include in the record before the trial court in this action. Specifically, they seek judicial notice of the motion for summary judgment by Regal Development Corporation, an affiliate of 3R, and its supporting documentation, which includes the Official Statements, the B bond documentation, the appraisals for the Colorado Properties, and audited financial statements and auditors’ reports for the Colorado Properties from 1991 through 1998; and portions of Kennedy’s deposition.
At Sahni’s request, the trial court took judicial notice of many of the records from the underlying action. But he failed to request judicial notice of the documents he now asks us to recognize. Ordinarily, a reviewing court will not take judicial notice of matters not before the trial court. (Vons Companies, Inc. v. Seabest Foods, Inc. (1996) 14 Cal.4th 434, 444; Brosterhous v. State Bar (1995) 12 Cal.4th 315, 325.) We see no reason to depart from this procedure here.