Opinion
A151726 A152929
11-02-2018
CONRAD CARL WEISSENSEE, JR. et al., Plaintiffs and Appellants, v. CAROL ARGENTOS et al., Defendants and Respondents.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Marin County Super. Ct. No. CIV1700432)
Conrad Carl Weissensee, Jr., his wife Candice Curtis, and Mariner Homes (Mariner), a company affiliated with Weissensee, filed a complaint in Marin County against Ron Oznowicz and Carol Argentos. Oznowicz and Argentos filed a cross-complaint in which Argentos asserted 19 causes of action, and Oznowicz two (hereafter, the underlying lawsuit). The underlying lawsuit proceeded to a 13-day court trial. Following oral and written closing arguments, the trial court filed a 73-page statement of decision that in the main ruled for Weissensee, Curtis, and Mariner. The decision did, however, award two of the four properties in issue to Argentos and also awarded her over $134,000.
Weissensee, Curtis, and Mariner then moved for cost of proof sanctions, which the trial court granted in part and denied in part. Mariner also moved for prejudgment interest, which the trial court denied. Both sides filed appeals, Oznowicz and Argentos from the judgment, Mariner from the denial of prejudgment interest. We rejected both appeals in an unpublished opinion that affirmed the judgment in its entirety. (Weissensee v. Oznowicz (Jan. 12, 2017, A141852).)
Weissensee and Curtis (hereafter when referred to collectively, plaintiffs) then filed the lawsuit leading to the within appeal, a two-count complaint for malicious prosecution and abuse of process. This action was based on five of the causes of action Argentos had alleged in the underlying lawsuit, and named seven defendants: Argentos; two law firms that represented her (and Oznowicz); and four individual attorneys at those firms (when referred to collectively, defendants). Represented by three separate sets of attorneys, defendants filed three separate special motions to strike (anti-SLAPP motions). Ignoring the abuse of process claim and conceding that the malicious prosecution claim was within step one of the anti-SLAPP analysis, plaintiffs filed opposition to the motions, asserting that under step two of the anti-SLAPP analysis they met the burden of demonstrating a probability of prevailing on the merits of their malicious prosecution claim.
The trial court disagreed, and granted all three anti-SLAPP motions, concluding that plaintiffs could not show a probability of proving lack of probable cause or malice, two of the three required elements of malicious prosecution, later awarding defendants attorney fees. Our de novo review leads to the same conclusion as the trial court—indeed, also to the conclusion that plaintiffs could not show a probability of proving favorable termination, the other required element of malicious prosecution. We thus affirm, an affirmance that disposes of the consolidated appeal and plaintiffs' appeal from the order awarding attorney fees.
BACKGROUND
The Parties and the General Setting
As generally described in our unpublished opinion (see Weissensee v. Oznowicz, supra, A141852), Weissensee and Oznowicz met in 1980 or 1981 and thereafter worked together in numerous joint ventures in real estate development. The joint ventures were informally structured, with no written agreements, and generally worked as follows: Weissensee would find the land, locate and retain a general contractor to build the houses, manage the construction process pursuant to construction management agreements, and handle the regulatory and entitlement process. Oznowicz would provide the funding, with the money typically coming from the pension fund of his brother, Frank Oz, of which Oznowicz served as the trustee and a fiduciary.
Frank Oz is the co-director of the Muppets.
Over the many years, the relationship worked well, the joint ventures were successful, and all prospered. Without exception, the parties worked on a basis of trust and never had a written agreement. Weissensee and Oznowicz were not only joint venturers, they also had a close personal relationship, until they had a falling out over a project called Round Hill, the development of four lots on a property in Tiburon, a project that had been in the works for many years, and on which Weissensee had expended much time and money.
As to Argentos, Oznowicz had some relationship with her since the 1990s. Weissensee first met her in 2006, when she entered the picture in connection with the Round Hill project.
The Underlying Lawsuit
Weissensee, along with his wife, Curtis, as individuals and co-trustees of a trust, and Mariner, a corporation owned by Weissensee, filed a complaint, and then an amended complaint, naming Oznowicz and Argentos. It alleged nine causes of action and sought money damages for breaches of various obligations in connection with the joint venture, for money owed for construction of two homes, and for partition.
Argentos and Oznowicz filed an answer and also a cross-complaint, the pleading ultimately leading to the appeal here. Represented by Rutan & Tucker, LLP and Keegin Harrison Schoppert Smith & Karner, LLP, on March 30, 2012, Argentos and Oznowicz filed a "Verified Cross-Complaint For Damages and Equitable Relief." The cross-complaint alleged 21 causes of action, 19 of them on behalf of Argentos only, which 19 causes of action were alleged against the following cross-defendants: (1) Weissensee individually and as a trustee of The Curtis-Weissensee Family Trust; (2) Curtis, individually and as trustee of The Curtis-Weissensee Family Trust; (3) Mariner; and (4) Weissensee Properties. The cross-complaint sought money damages related to the construction of two homes, partition, specific performance, and declaratory relief determining the parties' respective rights and responsibilities regarding the property.
A 22nd cause of action was added at trial.
Weissensee, Curtis, and Mariner filed an answer to the cross-complaint that, as pertinent here, included that they "deny any legal obligation to pay" Argentos. And their answer ended with this prayer: that "Cross-Complainants take nothing by way of the Verified Cross-Complaint."
Distilled to its essence, the underlying lawsuit involved disputes arising from the joint venture to develop the property in Tiburon, and specifically four homes on that property, referred to at trial as lots 77, 79, 81, and 83. And as indicated, both sides asserted claims for money damages in connection with homes on the property, partition, and declaratory relief determining their respective rights and responsibilities.
The underlying lawsuit proceeded to a court trial before an experienced trial judge, the Honorable Paul M. Haakenson. Judge Haakenson heard 13 days of testimony, during which the parties introduced over 500 exhibits, comprising more than 13,000 pages of documentary evidence. He then heard closing argument, and after that allowed post-trial written argument as well. Following all that, Judge Haakenson filed a 73-page statement of decision—a decision that was comprehensive indeed. That decision began with 33 pages of findings of fact, followed by 37 pages of conclusions of law. The decision then ended with 16 paragraphs of orders that included: (1) dissolving the joint venture between Weissensee and Oznowicz; (2) ordering appointment of a referee to prepare deeds to the four lots consistent with his decision (with detailed instructions as to boundaries and easements); (3) ordering Argentos and Weissensee to execute the deeds; and (4) ordering Oznowicz to grant Weissensee and Mariner indemnity for any third party claims against them in any action relating to their conduct in connection with the lot 79 and 81 homes. The decision also ordered that: (1) Oznowicz pay Mariner $383,869.60 for breach of contract, and (2) Weissensee and Curtis, as trustees, pay Argentos a total of $134,076.39, comprised of $60,000 for the benefit of the easements conferred upon lot 83, $66,000 for the funds utilized from the lot 79 account for the benefit of lot 77, and $8,076.39 for the use of funds from the lot 81 account for the benefit of lot 83. In short, while Weissensee and Oznowicz might be said to be the big winners, Argentos also succeeded in part, Judge Haakenson deeding two of the four lots to her and awarding her $134,076.39 in damages.
In our unpublished opinion, we said that "we cannot set forth the facts here any better than Judge Haakenson did," and went on to quote from his decision for over 15 pages.
Weissensee, Curtis, and Mariner then moved for costs of proof sanctions under Code of Civil Procedure section 2033.420, subdivisions (a) and (b). Judge Haakenson granted them in part and denied them in part, as discussed in detail below. Mariner also moved for prejudgment interest, which Judge Haakenson denied. Both sides appealed, Oznowicz and Argentos from aspects of Judge Haakenson's decision, and Weissensee and Curtis from the order denying prejudgment interest. In an unpublished opinion on January 12, 2017, we rejected both appeals and affirmed.
The Second Lawsuit
On February 3, 2017, less than a month after our opinion, plaintiffs filed the complaint leading to the within appeal. The complaint alleged two causes of action, for (1) malicious prosecution, and (2) abuse of process, and named seven defendants: Argentos, Rutan & Tucker LLP, and three individuals at that firm, Scott Rogers, Kaveh Badiei, and Theodore Klaassen (collectively, Rutan), and Keegin Harrison, LLP, and an attorney there, Paul Smith (collectively, Keegin). The complaint did not name Oznowicz.
The complaint was based on only five of the causes of action alleged by Argentos in the cross-complaint. As plaintiffs describe it, "Specifically, and as germane here, Argentos brought claims for Breach of the Oral Construction Contract (8th); Breach of the Implied Covenant as to this Oral Contract (9th); Negligent Interference with the Loan, seeking loan damages, lost profits, and diminution of market value (10th); Fraud (14th); and Negligence (16th)." These were the causes of action allegedly maliciously prosecuted.
Though overlooked by plaintiffs, it bears noting that three of the five causes of action—the eighth, ninth, and tenth—were pursued by Argentos against Weissensee dba Mariner Homes, Inc. and Mariner—not Curtis. The fourth cause of action, the 14th, was asserted by Argentos against The Curtis-Weissensee Family Trust for intentional misrepresentation relating to a joint ownership agreement and representations regarding the construction of the homes. And the fifth cause of action, the 16th, was against Weissensee, the trustees of The Curtis-Weissensee Family Trust, and Mariner. None of the claims was asserted against Curtis as an individual.
In early April, defendants responded to the complaint with anti-SLAPP motions, specifically three separate motions on behalf of Argentos, Rutan, and Keegin. The motions were set for hearing on May 9, later to be continued to May 16.
On April 21 and 26, plaintiffs filed their oppositions, necessarily acknowledging that step one of the anti-SLAPP analysis was met, as both causes of action were based on protected activity. Plaintiffs' oppositions also essentially conceded the motion as to the abuse of process claim, making no argument on the point.
As to malicious prosecution, see, e.g., Daniels v. Robbins (2010) 182 Cal.App.4th 204, 215: "The plain language of the anti-SLAPP statute dictates that every claim of malicious prosecution is a cause of action arising from protected activity because every such claim necessarily depends upon written and oral statements in a prior judicial proceeding." As to abuse of process, see, e.g., Booker v. Rountree (2007) 155 Cal.App.4th 1366, 1370: "[I]t is hard to imagine an abuse of process claim that would not fall under the protection of the [anti-SLAPP] statute."
Defendants filed their replies, and on May 15 the trial court issued a lengthy, and comprehensive, tentative ruling granting the motions. The ruling expressly recognized that only step two of the anti-SLAPP inquiry was at issue, as "it [was] undisputed that the first step of the anti-SLAPP analysis [was] presumptively satisfied." The ruling then went on at length with a detailed analysis, finding that as to two of the elements of malicious prosecution, lack of probable cause and malice, "plaintiffs fail[ed] to meet their burden under the anti-SLAPP statute to demonstrate that the complaint [was] both legally sufficient and supported by a sufficient prima facie showing of facts to sustain a favorable judgment as against all defendants." The tentative ruling concluded with the observation that plaintiffs did not oppose the motion as to the abuse of process claim.
On May 16, the court heard oral argument, at the conclusion of which it affirmed its tentative ruling. On May 31, the court entered a single order granting the anti-SLAPP motions and dismissing the action, from which plaintiffs filed a timely appeal.
Defendants thereafter separately moved for attorney fees under the mandatory provisions of Code of Civil Procedure, section 425.16. By order of September 18, the trial court granted them in various amounts and entered judgments. Plaintiffs filed a second appeal from that order and the judgments, and the parties stipulated to consolidating the cases.
DISCUSSION
1. SLAPP Law and the Standard of Review
Subdivision (b)(1) of section 425.16 of the Code of Civil Procedure provides that "[a] cause of action against a person arising from any act of that person in furtherance of the person's right of petition or free speech under the United States Constitution or the California Constitution in connection with a public issue shall be subject to a special motion to strike, unless the court determines that the plaintiff has established that there is a probability that the plaintiff will prevail on the claim." Subdivision (e) of section 425.16 elaborates the four types of acts within the ambit of a SLAPP.
A two-step process is used for determining whether an action is a SLAPP. First, the court decides whether the defendant has made a threshold showing that the challenged cause of action is one arising from protected activity, that is, by demonstrating that the acts underlying the plaintiff's complaint fit one of the categories spelled out in Code of Civil Procedure section 425.16, subdivision (e). If the court finds that such a showing has been made, it must then determine the second step, whether the plaintiff has demonstrated a probability of prevailing on the claim. (Navellier v. Sletten (2002) 29 Cal.4th 82, 88.)
Here, plaintiffs conceded that their causes of action came within the first step of the anti-SLAPP analysis, so the parties' briefing, and the trial court's analysis, addressed only the second step in the SLAPP analysis. So will ours. And as to how we decide that step, we set forth the governing law in Grewal v. Jammu (2011) 191 Cal.App.4th 977, 989-990:
"We decide the second step of the anti-SLAPP analysis on consideration of 'the pleadings and supporting and opposing affidavits stating the facts upon which the liability or defense is based.' (§ 425.16, subd. (b).) Looking at those affidavits, '[w]e do not weigh credibility, nor do we evaluate the weight of the evidence. Instead, we accept as true all evidence favorable to the plaintiff and assess the defendant's evidence only to determine if it defeats the plaintiff's submission as a matter of law.' (Overstock.com, Inc. v. Gradient Analytics, Inc. (2007) 151 Cal.App.4th 688, 699-700.)
"That is the setting in which we determine whether plaintiff has met the required showing, a showing that is 'not high.' (Overstock.com, Inc. v. Gradient Analytics, Inc., supra, 151 Cal.App.4th at p. 699.) In the words of the Supreme Court, plaintiff needs to show only a 'minimum level of legal sufficiency and triability.' (Linder v. Thrifty Oil Co. (2000) 23 Cal.4th 429, 438, fn. 5.) In the words of other courts, plaintiff needs to show only a case of 'minimal merit.' (Peregrine Funding, Inc. v. Sheppard Mullin Richter & Hampton LLP (2005) 133 Cal.App.4th 658, 675, quoting Navellier v. Sletten, supra, 29 Cal.4th 82, 95, fn. 11.)
" . . . As the Supreme Court early on noted, the anti-SLAPP statute operates like a 'motion for summary judgment in "reverse." ' (College Hospital, Inc. v. Superior Court (1994) 8 Cal.4th 704, 719.) Or, as that court would later put it, 'Section 425.16 therefore establishes a procedure where the trial court evaluates the merits of the lawsuit using a summary-judgment-like procedure at an early stage of the litigation. [Citation.]' (Varian Medical Systems, Inc. v. Delfino [(2005)] 35 Cal.4th [180,] 192; accord, Taus v. Loftus (2007) 40 Cal.4th 683, 714.)
"Numerous Courts of Appeal have articulated the test in similar language. (See Tichinin v. City of Morgan Hill (2009) 177 Cal.App.4th 1049, 1062 ['a standard "similar to that employed in determining nonsuit, directed verdict or summary judgment motions" ']; Yu v. Signet Bank/Virginia (2002) 103 Cal.App.4th 298, 317 ['plaintiff's burden as to the second prong of the anti-SLAPP test is akin to that of a party opposing a motion for summary judgment']; Kyle v. Carmon (1999) 71 Cal.App.4th 901, 907 ['similar to the standard used in determining motions for nonsuit, directed verdict, or summary judgment'].)" (Grewal v. Jammu, supra, 191 Cal.App.4th at pp. 989-990.)
With those principles in mind, we turn to an analysis of whether plaintiffs established a probability that they will prevail on their claim for malicious prosecution, an analysis we make on de novo review. (Grewal v. Jammu, supra, 191 Cal.App.4th at p. 988.) And conclude they did not, failing to demonstrate a likelihood of prevailing on any, let alone all, of the elements of malicious prosecution.
2. The Law of Malicious Prosecution
"To establish a cause of action for the malicious prosecution of a civil proceeding, a plaintiff must plead and prove that the prior action (1) was commenced by or at the direction of the defendant and was pursued to a legal termination in his, plaintiff's, favor [citations]; (2) was brought without probable cause [citations]; and (3) was initiated with malice [citations]." (Bertero v. National General Corp. (1974) 13 Cal.3d 43, 50.)
Malicious prosecution, it is said, is a disfavored tort. As the Supreme Court has described, "The tort of malicious prosecution is disfavored 'both because of its "potential to impose an undue 'chilling effect' on the ordinary citizen's willingness to report criminal conduct or to bring a civil dispute to court" [citation] and because, as a means of deterring excessive and frivolous lawsuits, it has the disadvantage of constituting a new round of litigation itself [citation].' [Citation.] For these reasons, we have declined to extend the scope of the tort." (Zamos v. Stroud (2004) 32 Cal.4th 958, 966.)
Favorable Termination
Concerning the first element of a malicious prosecution claim, favorable termination, plaintiffs' opening brief says, "Favorable termination is not at issue here." The issue is not that simple.
All three defendants' briefs here argue that plaintiffs cannot demonstrate a likelihood of prevailing on favorable termination. Plaintiffs' reply brief contends defendants waived the issue, arguing essentially as follows: neither Argentos nor Rutan argued favorable termination in their briefing below, though admitting Keegin did; the tentative ruling did not address the issue; and defendants' counsel appeared at oral argument and supposedly conceded the point. Elaborating, plaintiffs first quote Rutan's attorney at oral argument, where he said this: "So I submit, your Honor, there is an absence of evidence to show that there was not probable cause to bring the case and to maintain the action. And there is a total absence of malice to establish the malice element of malicious prosecution. [¶] Favorable termination, we can concede, but there was probable cause to bring the action, and there was an absence of malice."
Plaintiffs then quote Keegin's lawyer, who, as noted—and as plaintiffs concede—argued lack of favorable termination in his anti-SLAPP motion. Despite that, plaintiffs assert that counsel for Keegin did "not revisit the point or contest the opposition brief, but rather argued that the firm filed with probable cause and without malice. [¶] After receiving the tentative, the Keegin lawyers attended argument. They were in court when the [Rutan] lawyer conceded favorable termination. Keegin counsel then stood up and addressed the Court, as follows: [¶] 'We're not disputing the outcome of the case. Clearly, it was a very strong victory for Mr. Hosie's clients, but that can't be the standard either. So I would submit on the tentative. I would also like to incorporate Mr. Hager's [Argentos's counsel] and Mr. Murphy's [Rutan counsel] remarks as well.' "
And so, plaintiffs conclude: "Based on this record, it is understandable why the Trial Court found that the Defendants did not dispute the favorable termination element: [Rutan] explicitly waived the issue, Keegin barely touched the point in its briefing and then joined in [Rutan's] waiver, and Argentos made no arguments against favorable termination at any time."
Maybe the trial court did not reach the issue. But that is not dispositive here, where our review is de novo. And while counsel may have said (or did not say) what they did, the issue was teed up in the briefing, at least that of Keegin. And it is teed up here. We thus conclude the issue is properly before us—and decide it favorably to defendants.
Crowley v. Katleman (1994) 8 Cal.4th 666 (Crowley) arose out of a case where a decedent's wife contested his will that left the bulk of the estate to his own attorney, a contest that asserted six separate grounds. The will contest terminated in favor of the attorney, and the will was admitted to probate. The attorney then brought a malicious prosecution action against the wife and her attorneys, alleging that defendants had acted without probable cause in asserting five of the six grounds in the will contest. The defendants demurred, asserting that probable cause existed for the sixth ground for contest, thus barring the malicious prosecution action. The trial court sustained the demurrer and dismissed the action. The Supreme Court reversed, "reaffirm[ing] the rule of Bertero [v. National General Corp., supra, 13 Cal.3d 43]" (Crowley, at p. 695), which held that a malicious prosecution claim may lie even if not all the causes of action in the underlying complaint lacked probable cause. (See Franklin Mint Co. v. Manatt, Phelps & Phillips, LLP (2010) 184 Cal.App.4th 313, 333 ["A claim for malicious prosecution need not be addressed to an entire lawsuit; it may . . . be based upon only some of the causes of action alleged in the underling lawsuit."].)
This principle undoubtedly underlays plaintiffs' malicious prosecution claim here, which alleged the malicious prosecution of only five of the 19 causes of action asserted by Argentos in her cross-complaint. So far so good for plaintiffs.
But Crowley went on, that principle " 'does not alter the rule there must first be a favorable termination of the entire action.' " (Crowley, supra, 8 Cal.4th at p. 686; accord, StaffPro, Inc. v. Elite Show Services, Inc. (2006) 136 Cal.App.4th 1392, 1407.)
The recent case of Lane v. Bell (2018) 20 Cal.App.5th 61 is persuasive. Lane arose out of a real estate dispute, with the Lanes suing Bell for breach of contract, negligent misrepresentation, breach of a promissory note, and quiet title. Bell cross-complained for breach of contract, violation of the implied covenant of good faith, elder abuse, fraud, intentional infliction of emotional distress, and declaratory relief/partition. The Lanes prevailed on most of Bell's cross-complaint, but Bell was successful on her claims for declaratory relief and partition. (Id. at p. 66.) The Lanes then sued Bell for malicious prosecution, and Bell obtained summary judgment based on the Lanes' inability to show favorable termination. The Court of Appeal affirmed, in this language: "To the contrary, the undisputed material facts showed the judgment granted some of the relief sought by Bell in her cross-complaint. On Bell's claim for declaratory relief/partition, the court determined (contrary to the Lanes' claims asserted in their complaint) that Bell did have an interest in the property and valued her gross share in the property at $177,500. The court thus granted her claim for partition with an order that the Lanes had the right to acquire her interest in the property upon payment to Bell of the net share of her interest in the property. Under these circumstances, the Lanes cannot demonstrate the favorable termination element because the single judgment on Bell's cross-complaint, while partially in the Lanes' favor, was also partially in favor of Bell." (Id. at p. 76, fn. omitted.)
As shown above, while the underlying action was resolved generally in favor of Weissensee and Curtis, Judge Haakenson did rule in Argentos's favor in several particulars, including in no fewer than four of the 16 paragraphs in the court's disposition, specifically ordering as follows:
"5. The deeds to lots 79 and 81 shall grant the property to Carol Argentos. [¶] . . . [¶]
"14. Weissensee and Curtis, as trustees of the trust are ordered to pay Carol Argentos $60,000 for the benefit of the easements conferred upon lot 83.
"15. Weissensee and Curtis, as trustee[s] of the trust are ordered to pay Carol Argentos $66,000 for the funds utilized from the lot 79 account for the benefit of lot 77.
"16. Weissensee and Curtis, as trustees of the trust, are ordered to pay Carol Argentos $8,076.39 for the use of funds from the lot 81 account for the benefit of lot 83."
In sum, the underlying action resulted in two of the four lots, 79 and 81, being deeded to Argentos, and her being awarded money damages totaling $134,076.39: $60,000 for the benefit of easements conferred on lot 83; $66,000 for funds taken from the lot 79 account for the benefit of lot 77; and $8,076.39 for funds taken from the lot 81 account for the benefit of lot 83.
Arguing the issue of favorable termination in their reply brief, plaintiffs assert that defendants' position makes "two mistakes: (1) the Weissensees prevailed on their partition claims, not Oz or Argentos; and (2) in no real way was Argentos a prevailing party on any of her cross-claims—she was simply a sham and a nominee for Oz." And plaintiffs go on, "Perhaps the central issue animating this litigation is whether the Weissensees' evidence establishes that Argentos was a sham developer, with fictitious loans, and simply pretended to be the principal with Oz as her agent. The Weissensees' evidence so establishes, at this anti-SLAPP stage; Argentos, accordingly, was not the principal here. She was always just a nominee for Oz, a complicit Charlie McCarthy, sitting on Oz'[s] knee."
Plaintiffs go on to argue how Judge Haakenson's rulings supposedly "corresponded to Weissensee's claim," and then assert as follows: "Most importantly, while Argentos was technically awarded the deeds and the amounts described above, the underlying Trial Court took pains to make clear that these rulings were in favor of 'Argentos' in name only and that Oz was the real owner and principal." Plaintiffs can attempt to spin the result here, but the fact remains that Judge Haakenson's ruling awarded Argentos two parcels of property and $134,076.39—this, against the background that plaintiffs' answer to the cross-complaint prayed that "Cross-Complainants take nothing." Simply, plaintiffs cannot show " 'a favorable termination of the entire action.' " (Crowley, supra, 8 Cal.4th at p. 686.)
Lack of Probable Cause
The second element of a malicious prosecution claim requires plaintiffs to show lack of probable cause. The trial court concluded plaintiffs failed to demonstrate a likelihood of prevailing on this element. We reach the same conclusion.
"[T]he existence or absence of probable cause has traditionally been viewed as a question of law to be determined by the court, rather than a question of fact for the jury. . . . [¶] [It] requires a sensitive evaluation of legal principles and precedents, a task generally beyond the ken of lay jurors." (Sheldon Appel Co. v. Albert & Oliker (1989) 47 Cal.3d 863, 875 (Sheldon Appel).) However, "When there is a dispute as to the state of the defendant's knowledge and the existence of probable cause turns on resolution of that dispute, . . . the jury must resolve the threshold question of the defendant's factual knowledge or belief. Thus, when . . . there is evidence that the defendant may have known that the factual allegations on which his action depended were untrue, the jury must determine what facts the defendant knew before the trial court can determine the legal question whether such facts constituted probable cause to institute the challenged proceeding." (Sheldon Appel, supra, at p. 881.) So, the Supreme Court concluded, "Whereas the malice element is directly concerned with the subjective mental state of the defendant in instituting the prior action, the probable cause element calls on the trial court to make an objective determination of the 'reasonableness' of the defendant's conduct, i.e., to determine whether, on the basis of the facts known to the defendant, the institution of the prior action was legally tenable." (Sheldon Appel, at p. 878.)
As our colleagues in Division Five confirmed, the " 'facts to be analyzed for probable cause are those known to the defendant [in the malicious prosecution action] at the time the underlying action was filed.' " (Walsh v. Bronson (1988) 200 Cal.App.3d 259, 264, quoting Williams v. Coombs (1986) 179 Cal.App.3d 626, 632, fn. 4.) And as specifically apt to Rutan and Keegin, the attorneys, they are entitled to rely on what their clients tell them and, of course, any documents in existence at the time. (See Hufstedler, Kaus & Ettinger v. Superior Court (1996) 42 Cal.App.4th 55, 63 [under objective test of Sheldon Appel, defendant attorney had probable cause to prosecute libel actions, despite subjective knowledge suggesting contrary]; see also Swat-Fame, Inc. v. Goldstein (2002) 101 Cal.App.4th 613, 624-625 [malicious prosecution action against attorney for instituting fraud action could not be maintained where complaint simply reflected what clients relayed to him]; Morrison v. Rudolph (2002) 103 Cal.App.4th 506, 512-513 [malicious prosecution action could not be maintained against attorney who, based on client's account of events, instituted underlying action tenable as routine claim of misrepresentation].)
In analyzing those facts, "probable cause to bring an action does not depend upon it being meritorious, as such, but upon it being arguably tenable, i.e., not so completely lacking in apparent merit that no reasonable attorney would have thought the claim tenable." (Wilson v. Parker, Covert & Chidester (2002) 28 Cal.4th 811, 824.) The reason, of course, is that " '[c]ounsel and their clients have a right to present issues that are arguably correct, even if it is extremely unlikely that they will win . . . .' " (Sheldon Appel, supra, 47 Cal.3d at p. 885.) "Zealous representation sometimes requires an attorney to go out on a limb, to be innovative and creative in fashioning theories of liability or defense. Accordingly, an attorney needs only a reasonable and honest belief in the viability of each theory and the evidence supporting that theory, not a conviction his client will prevail, to justify filing a claim or defense." (Grindle v. Lorbeer (1987) 196 Cal.App.3d 1461, 1467-1468.) In sum, probable cause exists unless the underlying claim was " 'totally and completely without merit.' " (Sheldon Appel, at p. 886; Wilson v. Parker, Covert & Chidester at p. 824; see generally Jarrow Formulas, Inc. v. LaMarche (2003) 31 Cal.4th 728, 743 ["[E]very case litigated to a conclusion has a losing party, but that does not mean the losing position was not arguably meritorious when it was pled."].)
Based on these, and related, concepts, various courts have described that the issue of probable cause is to be analyzed under a "low" or "lenient" standard as viewed from the standpoint of the malicious prosecution defendants. (See, for e.g., Wilson v. Parker, Covert & Chidester, supra, 28 Cal.4th at p. 817 ["This rather lenient standard for bringing a civil action reflects 'the important public policy of avoiding the chilling of novel or debatable legal claims.' "]; Plumley v. Mockett (2008) 164 Cal.App.4th 1031, 1047 ["Probable cause is a low threshold designed to protect a litigant's right to assert arguable legal claims even if the claims are extremely unlikely to succeed."]; Sangster v. Paetkau (1998) 68 Cal.App.4th 151, 164-165; Marijanovic v. Gray, York & Duffy (2006) 137 Cal.App.4th 1262, 1271.)
Applying those principles here leads to the conclusion that plaintiffs have not demonstrated a probability of prevailing on the element of probable cause.
We begin with a discussion of some documents here, documents that begin in mid-2005 when on June 30 Weissensee, Argentos, and Oznowicz executed a memorandum of understanding and letter of intent. Those documents were for the sale of the property from the Oznowicz pension plan to Weissensee for $1,280,000, and provided that if Weissensee could not purchase all four lots, Argentos was assigned the right to buy lots 79 and 81 for half the purchase price. Weissensee failed to purchase all four lots, and in June, 2006, the pension plan sold the property to Weissensee and Curtis (as trustees of the family trust) and Argentos, as tenants in common, in connection with which the participants executed a real estate purchase contract, a grant deed, and an interim joint ownership agreement. Plaintiffs and Argentos each paid the pension plan $660,000 for their 50 percent share. The deed was recorded in August 2006, conveying title to Weissensee, Curtis, and Argentos. Argentos executed loan documents in favor of Oznowicz in the amount of $1,750,000 for the purchase of half of the property and construction of homes on it, which loans had a four-year term at four percent interest and were secured by deeds of trust.
The relationship between the parties eventually deteriorated, both sides accusing the other of violating their many agreements, both formal and informal, regarding the development of the property. That led to the underlying lawsuit filed by plaintiffs, and the cross-complaint filed by Argentos (and Oznowicz)—a cross-complaint filed against the background of the documents described above, and, as witness the 13,000 pages of documentary evidence admitted before Judge Haakenson in the underlying lawsuit, many, many others.
In pursuit of their appeal, plaintiffs have filed a 66-page opening brief. Following its preliminaries and introduction, it has a 17-page "Statement of the Facts" set forth in 11 subsections. The first five subsections are entitled "Round Hill," "Who Was Carol Argentos?," "Oz Builds His Home at 79 Round Hill," "Oz Approves 81 to be Built as a Spec House," and "Round Hill Comes Off the Rails"—titles, it is apparent, that are argumentatively set forth to comport with plaintiffs' version of the facts.
In a section entitled "Appellants' Opening Brief Contains Multiple Misstatements of the Record," Rutan calls plaintiffs on their treatment of the record. Rutan goes on for four pages, discussing 10 specific items with book, chapter, and verse illustrations supporting the claim of misstatement. Plaintiffs' reply brief does not even respond to the criticism.
In the course of their "Statement of the Facts," plaintiffs devote some four pages to "The Argentos Deposition," describing (sometimes quoting) 14 specific pieces of testimony. The passage then ends with this: "Rutan & Tucker lead trial lawyer Klaassen defended this deposition. He heard Argentos' testimony. He heard Plaintiffs' counsel summarize that testimony as follows, with no cavil from the witness: [¶] 'So you lived with Ron and Sassa. You don't put a dime of your own money in the transaction. You borrow $4 and a half million on a promise and a signature. You have no real estate experience whatsoever. You miss important meetings. You've got five e-mails about the project in your entire e-mail archive. Ron spends a thousand-plus hours on the site making design decisions. And you're telling me that he's not the functional owner?' "
Plaintiffs then turn to "Oznowicz Deposition," and describe (sometimes quoting) 12 pieces of testimony. That section concludes with this: "Rutan & Tucker trial lawyer Klaassen defended this deposition. Senior Rutan & Tucker lawyer Rogers also attended. Both saw—indeed were handed copies—of every exhibit used. Klaassen instructed Oz not to answer 32 times."
Following a seven-page statement of the law, plaintiffs then argue for 17 pages that Argentos filed her loan and oral contract claims without probable cause and with malice. This is followed by 10 pages of argument that Rutan and Keegin prosecuted those claims without probable cause. We are not persuaded.
While plaintiffs' brief does not come right out and say it, their emphasis on what the attorneys "saw" and "heard" at deposition would appear to indicate that plaintiffs' claim against the attorneys is based on the principle espoused in Zamos v. Stroud, supra, 32 Cal.4th 958, which plaintiffs cite four times in their opening brief and discuss for some six pages in their reply. Zamos essentially deals with the continued maintenance of a case, not its filing.
The essence of plaintiffs' position is that "Argentos and Oz fabricated critically important facts and claims," that the "two had filed on facts they knew to be wrong, and pled causes of action they knew to be false." And so plaintiffs go on, they "[f]abricated" various pieces of evidence, summing up as follows: "So, why do these fabrications matter? Parties surely are entitled to dispute the evidence to advocate the position most advantageous to them. Isn't this all that happened here? [¶] It is not. If Oz and Argentos knowingly falsified evidence and testimony, then they perforce knowingly pled facts they knew to be untrue. If so, they went forward on loan and oral contract claims that they knew to be untrue. If the Weissensees' evidence is to be credited, as it must on an anti-SLAPP, then Argentos' claims were filed without probable cause and with malice. Put simply: there is robust evidence that Oz and Argentos were lying; if they were lying, they filed falsely; and if they filed falsely, then they filed without probable cause and with malice."
We do not understand this assertion against Oznowicz, as the five causes of action on which plaintiffs' malicious prosecution claim is based were not asserted by Oznowicz.
Then, plaintiffs argue that "The Evidence" was that "79 Was Not a 'Spec Home' and Was Oz's Personal Residence," going on to cite and discuss various emails and other testimony that, plaintiffs assert, supposedly demonstrated what plaintiffs claim it demonstrates. Maybe that evidence supports plaintiffs' one-sided reading of it. Maybe not. But the fundamental problem with plaintiffs' position is that it does not accurately—or fairly—discuss all that was in the record here supporting the claims made by Argentos. Not by a longshot.
As indicated, plaintiffs' fundamental assertion is that Argentos was a sham owner of the property. As they put it below, defendants knew or should have known that "Argentos' purported interest in the properties and purported damage were predicated on a fiction . . . and that Argentos' purported loans from Oz and Sassa Oz were not real," that Argentos "was not the owner or developer of the property at all. Instead, she served as a purely fictional straw-buyer for the real owner, [Oznowicz]."
To the contrary, there was much evidence, documentary evidence, showing that Argentos was an owner of the property; that Weissensee had in fact treated Argentos as his co-owner; and perhaps most importantly of all, that Weissensee was an active participant in the documents. This evidence included the following:
- The June 2005 memorandum of understanding and letter of intent signed by Argentos and Weissensee;
- The June 2006 real estate purchase contract, signed by Oznowicz, Argentos, and Weissensee;
- The interim joint ownership agreement executed by Argentos and Weissensee;
- Several grant deeds for the property executed by Argentos and Weissensee;
- A building permit application prepared by Weissensee—prepared no less under penalty of perjury—that identifies him and Argentos as the owners of the property.
Indeed, plaintiffs' own pleadings recognized the above, their complaint alleging that "ARGENTOS is the legal owner as a tenant in common of an undivided one-half (50%) of said property." And plaintiffs sued defendants, including Argentos, for breach of contract and promissory estoppel, alleging that, "In or about May 2009, Plaintiffs and Defendants entered into an oral agreement for resolution of the disputed easements." In short, plaintiffs' own pleadings admitted Argentos was a "legal owner" of the property, and alleged a breach of contract claim against her on that basis, contradicting any argument that she was not a real party in interest and had no legal standing to bring her related cross-claims.
Not only did plaintiffs plead as they did, their attorney continued to treat Argentos as an owner during trial. Thus, while examining Argentos, plaintiffs' counsel inquired about the cost of developing the property; Rutan's counsel objected on the ground it called for an expert conclusion; plaintiffs' counsel responded, "She's the owner, Your Honor."
Plaintiffs also assert here that two of Argentos's claims were manifestly unbelievable: (1) the alleged oral construction contract between Argentos and Weissensee; and (2) the allegedly "[i]maginary" loans between Oznowicz and Argentos. This is similar to plaintiffs' position below, which was described by the trial court as arguing "that the testimony was so 'preposterous' and improbable that the only conclusion one can draw is that their testimony was knowingly false." The argument was rejected by the trial court with this observation: "However, that Argentos' claims were improbable is not alone sufficient to establish that they were false. And since there has therefore been no showing of knowing falsehood, there was . . . no inference drawn of malice." Indeed.
As to the first item, in 2007, Weissensee ratified his oral construction contract with Argentos when he signed a consumer account application for a Wells Fargo Bank construction account for lot 79 (and later lot 81), listing both himself and Argentos as joint owners. And for years thereafter, Weissensee wrote thousands of dollars of checks from that joint account to pay construction invoices. Moreover, on behalf of Mariner, in 2009 and 2010 Weissensee submitted construction management fee statements for lots 79 and 81 to himself and Argentos as owners, to pay for construction of the homes.
In fact, Judge Haakenson awarded Argentos $74,076.39 against plaintiffs as trustees as compensation for Weissensee's taking funds from this joint account for the benefit of his own lots.
With regard to the so-called "[i]maginary" loans, there is no question Weissensee knew of the loans as he signed numerous checks out of Argentos's construction accounts for lots 79 and 81. Weissensee knew or should have known the money deposited in those accounts came from Oznowicz's loans to Argentos, because he had loan-related documents in his possession for years. Plaintiffs also argue that the loans are "[i]maginary" because they were not secured, glossing over the facts indicating this state of affairs was caused by Weissensee's own conduct. That is, the loans were intended to be secured by deeds of trust; in 2007 deeds of trust were executed and notarized for that purpose; and in late 2007 those deeds of trust were given to Weissensee for recording. However, he placed them in his safe deposit box and did not record them.
A final factor demonstrating that plaintiffs cannot show lack of probable cause is Judge Haakenson's ruling on plaintiffs' post-trial motion seeking cost of proof sanctions. As noted above, while Judge Haakenson granted such sanctions in part, he denied them on an issue significant here, specifically, Argentos's assertion that she was the real party in interest with respect to the property. As to this, Judge Haakenson ruled as follows: "The court denies the imposition of sanctions for costs of proof as to these matters. Here, Oznowicz and Argentos indeed denied that Oznowicz was the real party in interest with respect to claimed injuries. However, their denial, based at least in part on Argentos' name appearing on various deeds to the property was made with 'good reason.' Weissensee had executed deeds to Argentos. While the court ultimately found that Oznowicz was the real party in interest to those properties, Oznowicz' and Argentos' denial of that ultimate finding by the court does not warrant sanctions for cost of proof."
Plaintiffs represent that Judge Haakenson awarded Weissensee cost of proof sanctions, finding that "Oz and Argentos unreasonably denied that Oznowicz made design choices for the lot 79 home," and "unreasonably denied that the lot 79 home was intended to be his personal residence." (Italics added.) As to the second point, Judge Haakenson made no finding that Argentos unreasonably denied that Oznowicz intended to live in the home.
As to this, the recent Supreme Court case of Parrish v. Latham & Watkins (2017) 3 Cal.5th 767, 776-777 is instructive: "California courts have long embraced the so-called interim adverse judgment rule, under which 'a trial court judgment or verdict in favor of the plaintiff or prosecutor in the underlying case, unless obtained by means of fraud or perjury, establishes probable cause to bring the underlying action, even though the judgment or verdict is overturned on appeal or by later ruling of the trial court.' [Citation.] This rule reflects a recognition that '[c]laims that have succeeded at a hearing on the merits, even if that result is subsequently reversed by the trial or appellate court, are not so lacking in potential merit that a reasonable attorney or litigant would necessarily have recognized their frivolousness.' [Citation.] That is to say, if a claim succeeds at a hearing on the merits, then, unless that success has been procured by certain improper means, the claim cannot be 'totally and completely without merit.' [Citation.] Although the rule arose from cases that had been resolved after trial, the rule has also been applied to the 'denial of defense summary judgment motions, directed verdict motions, and similar efforts at pretrial termination of the underlying case.' "
While perhaps not a denial of summary judgment or directed verdict, Judge Haakenson's ruling here, that Argentos had " 'good reason' " for her denial, is significant—and significantly supportive of probable cause.
Malice
Malice, the third element of a malicious prosecution claim, focuses on the defendants' subjective intent in initiating the underlying action. (Sheldon Appel, supra, 47 Cal.3d at p. 874.) It " 'relates to the subjective intent or purpose with which the defendant acted.' " (Soukup v. Law Offices of Herbert Hafif (2006) 39 Cal.4th 260, 292.) To demonstrate a probability of success on this issue, therefore, plaintiffs must show "actual ill will or some improper ulterior motive." "[E]vidence [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." (Downey Venture v. LMI Ins. Co. (1998) 66 Cal.App.4th 478, 494, 498-499.)
In their anti-SLAPP motions, all defendants expressly testified they never harbored any hostility or ill will to plaintiffs. Thus, for example, Argentos said that her only motive in asserting her claims was to obtain a fair determination of the merits of their disputes, and that she genuinely and honestly believed that the facts supported her claims. The lawyers at both Rutan and Keegin testified similarly, that they had no actual hostility or ill will toward plaintiffs—indeed, that they had no prior relationship with plaintiffs, their only involvement being as counsel for Argentos and Oznowicz. The lawyers testified that their sole purpose in pursuing the claims in the cross-complaint was to vindicate their clients' rights in court; and that they reasonably and in good faith believed that the testimony and the documentary evidence established a good faith basis and probable cause to prosecute the claims.
In fact, Argentos testified to various things she did to assist or accommodate Weissensee on a number of occasions, including letting him store tools and materials in her garage, letting him and his workers park on her property, allowing his renters to use her garage, and watching over his property. She also sent an email to the City of Tiburon in support of his building project.
Against that background, plaintiffs' oppositions below took the fundamental position that malice was shown by the claimed lack of probable cause. Or, as their brief here puts it: "Malice, perforce." Not so.
While "lack of probable cause is a factor that may be considered in determining if the claim was prosecuted with malice [citation], . . . the lack of probable cause must be supplemented by other, additional evidence." (HMS Capital, Inc. v. Lawyers Title Co. (2004) 118 Cal.App.4th 204, 218; see also Sycamore Ridge Apartments LLC v. Naumann (2007) 157 Cal.App.4th 1385, 1409 ["the mere absence of probable cause, without more, 'is not sufficient to demonstrate malice' "].) Such additional evidence "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 person gain or satisfaction at the expense of the wrongfully sued defendant." (Downey Venture v. LMI Ins. Co., supra, 66 Cal.App.4th at pp. 498-499.) Plaintiffs supply no such evidence.
What plaintiffs say in reply is this: " 'While after Sheldon Appel a lack of probable cause, standing alone, does not support an inference of malice, malice may still be inferred when a party knowingly brings an action without probable cause.' (Swat-Fame, Inc. v. Goldstein[, supra,] 101 Cal.App.4th [at p.] 634, disapproved on other grounds by Zamos [v. Stroud,] supra, 32 Cal.4th 958 & Reid v. Google, Inc. (2010) 50 Cal.4th 512 (emphasis in original); see also Daniels [v. Robbins], supra, 182 Cal.App.4th at p. 226 ['[M]alice can be inferred when a party continues to prosecute an action after becoming aware that the action lacks probable cause']; Ross v. Kish (2006) 145 Cal.App.4th 188, 204.) The record contains ample evidence that the lawyer Respondents were aware their case rested on false allegations. Appellants have carried their minimal anti-SLAPP burden as to malice. [¶] More, malice may also be shown by evidence of indifference. (Medley [Capital Corp. v. Security National Guaranty, Inc. (2017)] 17 Cal.App.5th [33,] 49 ["[T]here is no evidence that Attorney Adams did anything to research the applicable facts . . . . This indicates a degree of indifference from which one could infer malice"].) Oddly, the lawyers prosecuting the Argentos claims admit that, even after seeing the contradictory emails and hearing the bizarrely contradictory testimony, they took no further investigation. . . . This is manifestly a 'see-no-evil' response. (See Sycamore Ridge Apartments, LLC v. Naumann[, supra,] 157 Cal.App.4th [at p.] 1408 ['From the evidence [plaintiff] presented, one could infer that the [lawyers and client] defendants were at best indifferent as to whether the claims alleged on [client]'s behalf had any basis in fact'].)"
While we said what we said in Medley Capital Corp. v. Security National Guaranty, Inc., supra, 17 Cal.App.5th at p. 49, the facts there included that the malicious prosecution defendants filed the underlying action directly in the face of facts demonstrating that there was no merit to their claim—and despite being warned against filing it. The facts here are a far cry. --------
We view such argument as more of the same approach manifest by plaintiffs' position on the probable cause issue, that is, myopically viewing the evidence favorably to them. Such approach is no more successful here.
Plaintiffs' other appeal (No. A152929) addresses the attorney fees award to defendants. And in it plaintiffs agree that "if the anti-SLAPP order is upheld, then appellants do not appeal the quantification of fees and costs." Enough said.
DISPOSITION
The orders and judgments are affirmed. Defendants shall recover their costs on appeal.
/s/_________
Richman, Acting P.J.
We concur:
/s/_________
Stewart, J.
/s/_________
Miller, J.