Opinion
A150140
12-18-2017
PRAXIS CAPITAL, LLC, Plaintiff and Respondent, v. THOMAS P. KELLY III, Defendant and Appellant.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Sonoma County Super. Ct. No. SCV-259420)
Before us is an appeal from the denial of a special motion to strike a complaint as a Strategic Lawsuit Against Public Participation (SLAPP). (Code Civ. Proc., § 425.16.) The purchaser of real property at a foreclosure sale brought this action for malicious prosecution and abuse of process based on allegations that the foreclosed homeowner and his attorney, appellant Thomas P. Kelly III, wrongly prosecuted an action to set aside the sale. The trial court denied Kelly's anti-SLAPP motion, finding that the purchaser carried its burden of establishing a probability of success on the complaint. We disagree and shall reverse the order and remand with directions to strike the complaint.
All further section references are to the Code of Civil Procedure, except as noted. --------
Statement of Facts
In the underlying litigation, a homeowner sought to set aside a foreclosure sale and filed a lis pendens on the disputed property. (Inoue v. GMAC Mortgage, LLC (Dec. 18, 2015, A141322) [nonpub. opn.].) The homeowner alleged the sale was invalid because the lender wrongly refused his tender of payment to cure the default and reinstate the loan. (Ibid.) The trial court denied a summary judgment motion brought by the purchaser of the property. The court found there were triable issues of fact as to whether the homeowner's tender of payment was sufficient to cure the default and that if the lender "improperly refused [the homeowner's] tender, the foreclosure sale is invalid and may be set aside, even if the purchaser is an innocent third party." Additional evidence was presented at a later bench trial, after which the court concluded that the tender was properly refused as untimely and insufficient in amount. (Ibid.)
Respondent Praxis Capital, LLC (Praxis) is the successor in interest to the purchaser of the property. Praxis initiated this action against the homeowner and Kelly, the homeowner's attorney, alleging the prior action constituted malicious prosecution and abuse of process. Kelly filed a special motion to strike the complaint under section 425.16. The parties did not dispute that the claims arise from protected activity but the court denied the motion, observing: "Defendant filed and pursued a meritless case that stretched on for over five years, causing unreasonable delays and harm to a bona fide purchaser. Defendant pursued this action without probable cause and with malice." Kelly has timely appealed.
Discussion
Section 425.16, the anti-SLAPP statute, was enacted "to provide for the early dismissal of unmeritorious claims filed to interfere with the valid exercise of the constitutional rights of freedom of speech and petition for the redress of grievances." (Club Members for an Honest Election v. Sierra Club (2008) 45 Cal.4th 309, 315.) "Such a motion requires a two-step process. First, the defendant must make a prima facie showing that the 'cause[s] of action . . . aris[e] from' the defendant's actions 'in furtherance of that [defendant's] right of . . . free speech . . . in connection with a public issue.' (§ 425.16, subd. (b)(1).) If a defendant meets this threshold showing, the plaintiff must establish 'a probability that the plaintiff will prevail on the claim[s].' " (45 Cal.4th at pp. 315-316.)
Praxis acknowledges that Kelly met his step one burden. The only issue is whether Praxis met its step two burden of demonstrating a probability of prevailing on its claims for malicious prosecution and abuse of process.
"To establish liability for the tort of malicious prosecution, a plaintiff must demonstrate, among other things, that the defendant previously caused the commencement or continuation of an action against the plaintiff that was not supported by probable cause." (Parrish v. Latham & Watkins (2017) 3 Cal.5th 767, 771 (Parrish).) "[T]he existence of probable cause is a question of law to be determined as an objective matter." (Id. at p. 776.) " '[T]he 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,' as opposed to whether the litigant subjectively believed the claim was tenable. [Citation.] A claim is unsupported by probable cause only if ' " 'any reasonable attorney would agree [that it is] totally and completely without merit.' " ' [Citations.] 'This rather lenient standard for bringing a civil action reflects "the important public policy of avoiding the chilling of novel or debatable legal claims." ' [Citation.] The standard safeguards the right of both attorneys and their clients ' " 'to present issues that are arguably correct, even if it is extremely unlikely that they will win.' " ' " (Ibid.)
"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 a 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.' " (Parrish, supra, 3 Cal.5th at pp. 776-777.)
Here, denial of the purchaser's summary judgment motion in the underlying litigation establishes that the homeowner and his attorney had probable cause to bring the action. The purchaser's ultimate success at trial does not alter this fact. "[W]hether an interim ruling is 'subsequently reversed by [a] trial or appellate court" has no bearing on the probable cause inquiry." (Parrish, supra, 3 Cal.5th at p. 778.) The trial court's ruling in the purchaser's favor "does not vitiate the trial court's earlier finding that [the] suit had some arguable merit." (Ibid.)
Praxis concedes that denial of a defense motion for summary judgment "normally establishes probable cause." It argues the normal rule does not apply here because summary judgment was denied when its predecessor "lacked evidence" that the homeowner's tender was insufficient, which is "readily distinguishable" from Parrish "in which the court considered the evidence on both sides and necessarily concluded there was a triable issue of material fact." However, like Parrish, the trial court here denied summary judgment after considering the evidence submitted by both parties and finding triable issues of material fact. The trial proceedings reinforce the appropriateness of that conclusion. On the summary judgment motion, there was uncontradicted evidence that the homeowner tendered $15,626.06 to the lender to cure the default and that Praxis's predecessor "provided no authority or evidence" that the tender "was insufficient to reinstate the loan." The sufficiency of the tender remained contested through trial and was resolved only after a close examination of conflicting evidence. Ultimately, the trial court determined that the tender was several hundred dollars short of the required amount and untimely because the homeowner could not prove that his check, mailed on August 31, 2010, was received by the deadline of September 3, 2010. (Inoue v. GMAC Mortgage, LLC (Dec. 18, 2015, A141322) [nonpub. opn.].) Nothing in the facts presented here detracts from the general rule that denial of a defense summary judgment motion establishes the case was supported by probable cause.
Moreover, the denial of summary judgment was not the only pretrial ruling in plaintiff's favor. The court also denied the home buyer's motion to expunge the notice of lis pendens that had been filed, and overruled a demurrer to the claims that went to trial. Both rulings provide further indication that there was a good faith basis for the claims.
Praxis argues that the underlying action, even if initially supported by probable cause, was no longer tenable after the homeowner lost at trial. Although pursuing an appeal based on frivolous contentions may constitute malicious prosecution, there is no evidence here of malicious continuation of the underlying litigation. Losing at trial did not render it objectively unreasonable for the homeowner to continue litigating the action. As noted previously, the trial presented conflicting evidence on close questions of fact and law. The appeal raised colorable claims of trial court error that were extensively examined in an 11-page appellate opinion by Division Four of this court. (Inoue v. GMAC Mortgage, LLC (Dec. 18, 2015, No. A141322 [nonpub. opn.].) The appeal was deemed sufficiently meritorious that each side was ordered to bear its own costs incurred on appeal.
Praxis has also failed to demonstrate a probability of prevailing on its claim for abuse of process. It alleges Kelly misused the judicial process by refusing to release the lis pendens after trial. Publications made in the course of a judicial proceeding are absolutely privileged. (Civ. Code, § 47, subd. (b)(2).) "The purposes of section 47, subdivision (b), are to afford litigants and witnesses free access to the courts without fear of being harassed subsequently by derivative tort actions, to encourage open channels of communication and zealous advocacy, to promote complete and truthful testimony, to give finality to judgments, and to avoid unending litigation." (Rusheen v. Cohen (2006) 37 Cal.4th 1048, 1063.) A notice of lis pendens is a privileged publication in the course of judicial proceedings. (Albertson v. Raboff (1956) 46 Cal.2d 375, 379-381.) An absolute privilege applies where the notice of lis pendens identifies a specific action "previously filed" with the trial court and shows that the previously filed action affects "the title or right of possession of real property." (Civ. Code, § 47, subd. (b)(4).) The notice here unquestionably met these standards.
Praxis argues that filing the lis pendens "was designed to obtain an unjustifiable collateral advantage of extracting a settlement or persuading" the purchaser to let the homeowner reacquire the house. But "it is now well established that the litigation privilege applies without regard to 'motives, morals, ethics or intent.' " (Banchard v. DIRECTV, Inc. (2004) 123 Cal.App.4th 903, 922.) The litigation privilege precludes Praxis's claim for abuse of process.
Disposition
The November 29, 2016 order denying the anti-SLAPP motion is reversed. The matter is remanded to the trial court with directions to grant the motion and to award Kelly his attorney fees and costs. (§ 425.16, subd. (c)(1).) Kelly shall recover costs incurred on appeal upon timely application in the trial court. (Cal. Rules of Court, rule 8.278.)
/s/_________
Pollak, J. We concur: /s/_________
McGuiness, P.J. /s/_________
Jenkins, J.