Arnold v. Glickman & Glickman

Filed 4/3/07 Arnold v. Glickman & Glickman CA2/7

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION SEVEN

APPEAL from an order of the Superior Court of Los Angeles County. Andria K. Richey, Judge. Affirmed.

Glickman & Glickman, Steven C. Glickman, for Defendants and Appellants Glickman & Glickman and Steven C. Glickman.

Law Offices of Jeffrey B. Bohrer, Jeffrey B. Bohrer for Plaintiff and Respondent Dannel Arnold.

___________________________

Glickman & Glickman, a law corporation, and Steven C. Glickman, an individual (collectively Glickman), appeal from the trial courts denial of its Code of Civil Procedure section 425.16 special motion to strike[1]plaintiff Dannel Arnolds complaint for malicious prosecution. Glickman contends that Arnold failed to establish he would prevail on his claims because he did not establish lack of probable cause and that the underlying action was pursued with malice. We affirm.

FACTUAL BACKGROUND AND PROCEDURAL HISTORY

1. The Underlying Action.

In early 2002, Arnold saw a for sale sign on a vacant lot located at 3880 Coldwater Canyon in Los Angeles. Arnold called the brokers listed on the sign, Weintraub, Casey & Zurkow (WCZ), and spoke to Al Weintraub, WCZs principal. Al Weintraub told him to contact Murray Weintraub, his brother, because Murray was more knowledgeable about the property.[2] Subsequently, Arnold retained Murray Weintraub as his agent.

On April 11, 2002, Arnold submitted a written offer of $525,000 and made a deposit of $17,250 into escrow. The sellers and Arnold executed a Vacant Land Purchase Agreement and Joint Escrow Instructions (Real Estate Purchase Agreement).

During escrow, Arnold had questions concerning the Weintraubs representations about the utility easements on the property. The parties agreed to an extension of the escrow to permit Arnold to confirm the state of the property. The amendment to the escrow instructions dated May 10, 2002 providing for such extension also stated that all contingencies were removed, although Arnold contended that he did not realize the amendment also provided for the removal of all contingencies, believing the document was only an extension of the closing date.

On May 15, 2002, the day escrow was scheduled to close, Arnold cancelled the sale. The Weintraubs informed him that he had waived all contingencies and was obligated to proceed with the sale. The seller invoked the liquidated damages clause, and after mediation, Arnold forfeited $16,000 of his deposit to the sellers.

Thereafter, on June 18, 2002, the Weintraubs, represented by defendant Glickman, instituted an action for payment of their lost commission in the amount of $34,500, alleging theories of breach of contract and open book account (the underlying action).

On October 23, 2002, Arnold filed a cross-complaint in the underlying action against WCZ, Murray Weintraub, Al Weintraub, and the sellers, alleging claims for rescission, fraud, breach of fiduciary duty, indemnity, conspiracy, professional negligence, and unfair business practices.

a. Arnolds Summary Judgment Motion.

On November 7, 2003, Arnold filed a motion for summary judgment on the first amended complaint, arguing that he was not obligated under the contract to pay any commission to Weintraub. Arnold relied on the following language from the Real Estate Purchase Agreement for his contention that Weintraubs sole remedy was the deposit:

32. BROKER COMPENSATION FROM BUYER. At the close of escrow, Buyer agrees to pay compensation for services as follows: None. [] . . . [] 34. BROKER COMPENSATION FROM SELLER: [] A. Upon close of escrow, Seller agrees to pay compensation for services as follows: $17,250.00 to Weintraub, Casey & Zurkow, Inc., Broker, and $17,250.00 to Murray Weintraub, Broker. [] B. If escrow does not close, compensation in [paragraph] 34A is payable: (ii) when and if Seller collects from Buyer, by suit or otherwise, if completion of sale is prevented by default of Buyer and then in an amount equal to one-half of the damages recovered. . . .

Pursuant to paragraph 34B, Arnold argued that Weintraubs only remedy was one-half of the $16,000 the sellers recovered in the mediation, or $8,000. Arnold also argued that contractual language at paragraph 33 of the sales agreement, providing that If this offer is accepted and buyer subsequently defaults, Buyer may be responsible for payment of Brokers compensation was not a promise to pay a commission.

Weintraubs opposition to the summary judgment argued that paragraph 34B provided a non-exclusive remedy. They contended they could sue the buyer directly to recover their full commission based upon a theory of breach of implied promise, relying upon Chan v. Tsang (1991) 1 Cal.App.4th 1578 (Chan) and Herman v. Savage (1936) 17 Cal.App.2d 238 (Herman). Weintraubs papers noted that this theory of recovery [implied contract] has also been described in third party beneficiary terms, but did not separately brief the third-party beneficiary issue.

At the February 4, 2004 hearing, Weintraub no longer relied upon the implied contract theory because it was limited, as a matter of law, to cases where the buyer had retained the broker to find property for him, a situation not present here. Instead, Weintraub referenced the Miller & Starr treatise regarding the ability of a third-party beneficiary to enforce the promise to pay the commission. Weintraub further relied on dicta in Herman for the proposition that where the buyer repudiates the transaction without legal justification, the broker can collect the commission from the buyer.

The trial court granted Arnolds summary judgment motion, finding Herman and Chan inapposite. The court found that paragraphs 33 through 35 of the Real Estate Purchase Agreement provided a complete defense to Weintraubs claims.

b. Trial on the Cross-Complaint.

On May 25, 2004, a bench trial on the cross-complaint commenced. Arnold obtained judgment only against Murray Weintraub on the claims for breach of fiduciary duty and professional negligence, and was awarded damages in the amount of the deposit. No appeal from this judgment was taken.

2. The Malicious Prosecution Action and Glickmans Special Motion to Strike.

On June 13, 2005, Arnold commenced this action against Weintraub and Glickman for malicious prosecution, abuse of process, intentional infliction of emotional distress, professional negligence, and negligent infliction of emotional distress. Arnold alleged that Weintraub and Glickman knew at all times they had no basis to maintain the lawsuit, and persisted in maintaining the lawsuit even after being informed by Arnolds counsel that no legal basis for the action existed. Further, Weintraub and Glickman maintained the action for the purpose of harassing, annoying, and vexing Arnold, and for the purpose of forcing him to expend monies to defend himself and to consummate the transaction.

Al Weintraub and CZW filed a cross-complaint for malicious prosecution against Arnold and his attorney Jeffrey Bohrer based upon Arnolds failure to recover against them on his cross-complaint.[3]

On August 3, 2005, Glickman filed a special motion to strike Arnolds complaint pursuant to section 425.16.[4]Glickman argued that Arnold could not show Glickman lacked probable cause to bring an action for brokers fees or that the action was prosecuted with malice. In support of its probable cause argument, Glickman argued that Weintraub was entitled to fees under a third party beneficiary theory because the broker could recover the commission from a defaulting buyer by enforcing the promise to pay the commission in the agreement. Steven Glickman stated in his declaration in support of the motion that in responding to the motion for summary judgment, he reviewed materials from the California Association of Realtors (the entity responsible for the form agreements used), the Miller & Starr treatise California Real Estate and conducted more formal research. Steven Glickman contended he had no prior contact with Arnold, and bore him no ill will.

Arnold opposed the motion, contending that the contractual provisions of the Real Estate Purchase Agreement precluded any brokerage commissions for breach of the agreement. Moreover, he asserted that in June 2002, Jeffrey Bohrer had explained to Glickman why the Weintraubs had no claim for a commission under paragraphs 32 and 34 of the Real Estate Purchase Agreement. In response, Glickman told Bohrer that it did not matter what Bohrer would prove at trial, or who was right or wrong, but to get to trial Arnold would have to spend $25,000 to $50,000 and still would not know what the outcome would be. Further, malice could be shown because Arnold informed Glickman the Weintraubs had no case; in turn, Glickman advised Arnold it would cost more to litigate than to settle, and that Arnold should just buy the property.

At the hearing on the special motion to strike, Arnold argued that under third-party beneficiary theory, the broker was subject to the terms of the contract, and the Real Estate Purchase Agreement did not provide for the payment of any commission. Glickman relied on the provisions of paragraph 33 that if the buyer repudiated the contract without good cause, the buyer could be responsible for the brokers commission. Glickman argued there was probable cause based upon Miller & Starr, and admitted that although he may have misread Herman, that did not create malice.

After reviewing the parties supplemental briefing on the issue of malice, the trial court denied Glickmans special motion to strike as to the malicious prosecution claim, and granted it with respect to the other causes of action. The trial court found that even if there was probable cause at the outset of the litigation, Glickman no longer had probable cause once Arnolds counsel made Glickman aware that the law did not support Glickmans interpretation of the contract. The court further found Glickmans argument that it could recover on a third-party beneficiary theory unsupported because the Real Estate Purchase Contract contained no promise by the buyer to pay any commission, and paragraph 33 did not support such a promise. With respect to malice, the trial court concluded the evidence was slim, but could support an inference that the main reason for the suit was to force a settlement. Therefore, the trial court found Arnold had made a showing sufficient to permit the case to proceed.

DISCUSSION

I. STANDARD OF REVIEW.

In evaluating a special motion to strike, the trial court first determines whether the defendant has made a threshold showing that the challenged cause of action arises from protected activity. ( 425.16, subd. (b)(1); Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 67.) If the trial court finds the defendant has made the threshold showing, it determines then whether the plaintiff has demonstrated a probability of prevailing on the claim. (Rusheen v. Cohen (2006) 37 Cal.4th 1048, 1056.) In order to establish a probability of prevailing on the claim, the plaintiff responding to a special motion to strike must state and substantiate the claim by demonstrating 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. (Wilson v. Parker, Covert & Chidester (2002) 28 Cal.4th 811, 821.) In considering whether plaintiff has shown merit to the pleading, the court considers the evidentiary submissions of both parties, but does not weigh the evidence. ( 425.16, subd. (b)(2); Wilson v. Parker, Covert & Chidester, supra, 28 Cal.4th at p. 821.)

II. ARNOLDHAS DEMONSTRATED A REASONABLE PROBABILITY OF PREVAILING ON THE MERITS.

To establish a malicious prosecution claim, the plaintiff must show the prior action was (1) brought by the defendant and resulted in a favorable termination for the plaintiff; (2) initiated or continued without probable cause; and (3) initiated with malice. (Zamos v. Stroud (2004) 32 Cal.4th 958, 965.)

A. Glickmans Reliance On a Third-Party Beneficiary Theory Was Not Objectively Tenable Due to the Lack of Any Express Promise to Pay in the Real Estate Purchase Agreement.

Whether probable cause exists in the commencement or maintenance of a lawsuit is evaluated under an objective standard. Probable cause will be found where any reasonable attorney would have thought the claim tenable. (Sheldon Appel Co. v. Albert & Oliker (1989) 47 Cal.3d 863, 878, 886.) The reasonable attorney standard of probable cause recognizes 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 . . . . (Id. at p. 885.) Only those actions that any reasonable attorney would agree [are] totally and completely without merit may form the basis for a malicious prosecution suit. (Wilson v. Parker, Covert & Chidester, supra, 28 Cal.4th at p. 817.) The adequacy of the attorneys research is not relevant to the probable cause determination. (Sheldon Appel v. Albert & Oliker, supra, 47 Cal.3d at p. 883.)

Under third party beneficiary law, a non-party to the contract may nonetheless recover under the contract if he or she can establish that the contracting parties intended to benefit the unnamed party and the agreement reflects that intent. (Harper v. Wausau Ins. Co. (1997) 56 Cal.App.4th 1079, 1087.) The third-party beneficiary can obtain no greater rights under the contract than the parties to the contract. (Marina Tenants Assn. v. Deauville Marina Development Co. (1986) 181 Cal.App.3d 122, 132.) When [a] plaintiff seeks to secure benefits under a contract as to which he is a third-party beneficiary, he must take that contract as he finds it. (Ibid.)

The party claiming to be a third-party beneficiary bears the burden of proving that the contracting parties actually promised the performance which the third-party beneficiary seeks. This question remains largely a matter of interpreting the written contract. (Garcia v. Truck Ins. Exchange (1984) 36 Cal.3d 426, 436.) In making that determination, the court reads the contract as a whole in light of the circumstances under which the parties made it. (Neverkovec v. Fredericks (1999) 74 Cal.App.4th 337, 348-349.) The fact that . . . the contract, if carried out to its terms, would inure to the third partys benefit[,] is insufficient to entitle him or her to demand enforcement. [Citations.] However broad may be the terms of a contract, it extends only to those things concerning which it appears that the parties intended to contract. [Citations.] (Id. at p. 349.)

Here, no reasonable interpretation of the contractual language supports the conclusion paragraph 33 is a separate, enforceable covenant that the buyer will directly pay the brokers commission upon buyers default. Nowhere does the Real Estate Purchase Agreement contain an express agreement that the buyer would pay the brokers commission upon buyers default or in any other circumstance. The only paragraph referring to the buyers obligation to pay a commission is paragraph 33 which provides that [i]f this offer is accepted and Buyer subsequently defaults, Buyer may be responsible for payment of Brokers compensation. This language, containing the word may, is not a covenant to pay a commission. However, read together with the other provisions of the Real Estate Purchase Agreement, including the liquidated damages clause under which the deposit is forfeited, this paragraph advises the buyer that, although under paragraph 32 it is not liable for the commission, in light of the provisions of paragraph 34B (commission payable when and if seller collects from buyer), the buyer might be liable to seller for a portion of any commission the seller is obligated to pay upon buyers default.

B. Arnold Has Made a Sufficient Showing on the Issue of Malice to Survive Glickmans Special Motion to Strike.

The element of malice is determined under a subjective test, and is a question of fact to be determined by the jury. Malice cannot be shown solely by an absence of probable cause, but factors establishing malice include the defendants subjective belief in the validity of the claim and in the case of an attorney, the extent of the attorneys research and investigation. Malice also consists of ill-will and hostility, and exists where the prior lawsuit was instituted primarily for an improper purpose. (Paulus v. Bob Lynch Ford, Inc. (2006) 139 Cal.App.4th 659, 675.) Typically since it is rare that there will be a smoking gun admission of improper motive malice is established by circumstantial evidence and inferences drawn from the evidence. (Ibid.)

Here, there was evidence that Glickmans research was inadequate because he failed to thoroughly research third-party beneficiary law, and instead relied on dicta in cases addressing another theory of liability. In addition, there is evidence his motive in prosecuting the action was improper because he commenced the action to force a settlement or a consummation of the sale, as demonstrated by his discussions with Arnolds counsel.

DISPOSITION

The order of the superior court is affirmed. Respondent is to recover his costs on appeal.

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

ZELON, J.

We concur:

JOHNSON, Acting P. J.

WOODS, J.

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[1] All statutory references herein, unless otherwise noted, are to the Code of Civil Procedure. Section 425.16 is known as the anti-SLAPP statute and motions brought pursuant to section 425.16 are often referred to as anti-SLAPP motions. (Scott v. Metabolife Internat., Inc. (2004) 115 Cal.App.4th 404, 407, fn.1.)

[2] We refer herein to Weintraub, Casey & Zurkow, Al Weintraub, and Murray Weintraub collectively as Weintraub.

[3] On December 26, 2005, the trial court granted Arnold and Bohrers special motion to strike this cross-complaint.

[4] Weintraub, represented by new counsel, filed its own special motion to strike. The trial court granted the motion, and it is not at issue in this appeal.