Schmidt v. Wyle

Filed 4/30/07 Schmidt v. Wyle CA1/3

NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION THREE

Plaintiff Joe Bob Schmidt appeals from an order under the anti-SLAPP (Strategic Lawsuit Against Public Participation) statute, Code of Civil Procedure[1] section 425.16, granting a special motion to strike filed by defendants Claude Wyle, the law firm of Choulous, Choulous & Wyle, and Gary Redenbacher. We conclude defendants established that Schmidts claims for abuse of process and malicious prosecution arise out of protected activity and that Schmidt failed to demonstrate a probability of prevailing on either of his claims. Accordingly, we affirm.

Factual and Procedural History

This appeal is the latest stage in a lengthy course of litigation which arose out of an automobile accident in 1995.[2] In the first action, Rick Payne sued Schmidt for injuries he sustained in the accident. (Payne v. Schmidt (Super. Ct. Contra Costa County, No. C-95-04254 (Payne I).) This action was settled in 1998 for the limits of Schmidts insurance policy. Prior to the settlement, Payne raised concerns that Schmidt might be concealing assets to avoid an excess judgment. The settlement was entered after Schmidt signed a declaration assuring Payne that he had no other assets. The settlement agreement released Schmidt and all other tortfeasors from  any and all claims . . . known or unknown . . . connected with or resulting from the accident.  In 1997, while Payne I was pending, Schmidt also filed a petition for bankruptcy under Chapter 7 of the Bankruptcy Act.

In 2000, Payne filed a second action against Schmidt for fraudulent transfer and concealment of assets alleging that because Schmidt knew there was a probability of a large judgment against him in Payne I, and to frustrate Paynes ability to collect on such a judgment, he transferred several pieces of real estate to others. (Payne v. Schmidt (Sup. Ct. Contra Costa County, No. C-00-01787 (Payne II).) After significant litigation, Payne II was settled and the complaint against Schmidt dismissed. While the case was pending, however, significant rulings were made. The trial court overruled a demurrer to Paynes fraud claims, which the Court of Appeal characterized as effectively ruling that neither Schmidts bankruptcy nor the settlement agreement precluded Payne from pursuing the action. (Payne v. Schmidt (Feb. 22, 2006, A109971, A110630) [nonpub. opn.], p. 2.) And in the bankruptcy proceedings, the federal district court observed that the evidence strongly suggested that Schmidts fraud had occurred post-petition, rather than pre-petition, so that the fraud claim would not have been discharged by the bankruptcy proceedings.[3] Defendants represented Payne in Payne II and in the bankruptcy proceedings.

On January 24, 2006, Schmidt filed the present action for malicious prosecution and abuse of process. As amended, the complaint alleges that defendants[4] filed Payne II without probable cause because all claims of Payne with respect to Schmidt were discharged in bankruptcy court in Aug., 1997 . . . and/or because all known and unknown claims of Payne against Schmidt including any for hiding assets were waived as part of the settlement in Aug., 1998 of the Payne I case. The complaint alleges further that defendants filed the complaint maliciously, intentionally, willfully, and with reckless disregard of the consequences . . . to wrongfully deprive plaintiff of his property acquired after the bankruptcy and/or benefits due him under the 1998 settlement agreement and that defendants did so for the improper purpose of obtain[ing] an advantage over Schmidt by forcing him to pay money to Payne even though no such money was due Payne.

Defendants filed a special motion to strike under the Anti-SLAPP statute which the trial court granted and awarded $7,000 in attorney fees to defendants as sanctions.[5] Schmidt filed a timely notice of appeal.

Discussion

Section 425.16, subdivision (b)(1), provides that A cause of action against a person arising from any act of that person in furtherance of the persons 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. Section 425.16 posits . . . a two-step process 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. [Citation] . . . If the court finds that such a showing has been made, it must then determine whether the plaintiff has demonstrated a probability of prevailing on the claim. (Navellier v. Sletten (2002) 29 Cal.4th 82, 88 (Navellier).) We independently review the trial courts order granting a special motion to strike under section 425.16. (Kajima Engineering & Construction, Inc. v. City of Los Angeles (2002) 95 Cal.App.4th 921, 929.)

1.                  Defendants satisfied their burden of showing that Schmidts claims for malicious prosecution and abuse of process arose out of protected activity.

When moving to strike a cause of action under the anti-SLAPP statute, a defendant must satisfy the initial burden of demonstrating that the targeted action arises from protected activity.[6] [T]he statutory phrase cause of action . . . arising from means simply that the defendants act underlying the plaintiff's cause of action must itself have been an act in furtherance of the right of petition or free speech. [Citation.] In the anti-SLAPP context, the critical point is whether the plaintiffs cause of action itself was based on an act in furtherance of the defendants right of petition or free speech. (City of Cotati v. Cashman (2002) 29 Cal.4th 69, 78; Navellier, supra, 29 Cal.4th at p. 89.) Under section 425.16, subdivision (e), an  act in furtherance of a persons right of petition or free speech under the United States or California Constitution in connection with a public issue includes . . . any written or oral statement or writing made before a legislative, executive, or judicial proceeding, or any other official proceeding authorized by law. In deciding whether the initial arising from requirement is met, a court considers the pleadings, and supporting and opposing affidavits stating the facts upon which the liability or defense is based. ( 425.16, subd. (b).) (Navellier, supra, 29 Cal.4th at p. 89.)

Schmidt contends that Paynes second lawsuit (Payne II) was NOT an exercise of his constitutional rights to free speech, and was NOT a petition for a redress of grievance. The only argument offered in support of this assertion, however, goes to the merits of his claimsî ºi.e. that Paynes claims were barred by the bankruptcy proceedings and by the settlement agreement so that the action was filed without probable cause. Implicit in this argument is the contention that the filing of a civil action without probable cause cannot be considered an act in furtherance of ones petition rights. We disagree. The filing of a complaint is protected activity regardless of its merit, even if the plaintiff is later subject to a malicious prosecution action. (See Jarrow Formulas, Inc. v. LaMarche (2003) 31 Cal.4th 728, 734.)

2.                  Schmidt has not established a probability of prevailing on his claims.

The more difficult question is whether Schmidt has established a probability of prevailing on his claims. [I]n order to establish the requisite probability of prevailing ( 425.16, subd. (b)(1)), the plaintiff need only have stated and substantiated a legally sufficient claim.  [Citations.] 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.   (Navellier, supra, 29 Cal.4th at pp. 88-89.)

In order to establish a cause of action for malicious prosecution of either a criminal or a civil proceeding, a plaintiff must demonstrate 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.  (Downey Venture v. LMI Ins. Co. (1998) 66 Cal.App.4th 478, 494.) Defendants contend that Schmidt cannot establish that they filed Payne II without probable cause.

In Wilson v. Parker, Covert & Chidester (2002) 28 Cal.4th 811, 817, the court reiterated that probable cause is determined objectively, i.e., without reference to whether the attorney bringing the prior action believed the case was tenable [citation], and that the standard of probable cause to bring a civil suit was equivalent to that for determining the frivolousness of an appeal [citation], i.e., probable cause exists if any reasonable attorney would have thought the claim tenable. The court explained further, 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.] Attorneys and litigants . . .  have a right to present issues that are arguably correct, even if it is extremely unlikely that they will win . . .  [Citation.] Only those actions that any reasonable attorney would agree [are] totally and completely without merit may form the basis for a malicious prosecution suit. (Ibid.)

Schmidt asserts that defendants lacked probable cause to file Payne II because Paynes fraud claims were obviously barred by Paynes bankruptcy and by the release contained in the 1998 settlement agreement, so that no reasonable attorney would have thought the claims were tenable. However, Paynes fraud claims were arguably beyond the scope of the release and not barred by the bankruptcy petition. (See Persson v. Smart Inventions, Inc. (2005) 125 Cal.App.4th 1141, 1154 [party fraudulently induced to enter contract cannot be deprived of option to affirm the contract and sue for fraud damages simply because contract contained mutual release of unknown claims]; Zimmerman, Rosenfeld, Gersh & Leeds LLP v. Larson (2005) 131 Cal.App.4th 1466, 1486 [ Chapter 7 discharge deals only with debts incurred prior to the filing of the petition ].)The rulings rejecting Schmidts efforts to terminate the litigation at an early stage cast grave doubt on the suggestion that Paynes claims were frivolous. (Bergman v. Drum (2005) 129 Cal.App.4th 11, 21-22 [where an interim determination in the underlying action has the effect of demonstrating that a suit is not totally and completely without merit, it will have the effect of establishing probable cause to bring the suit]; Roberts v. Sentry Life Insurance (1999) 76 Cal.App.4th 375, 384 [denial of defendant's summary judgment in an earlier case normally establishes there was probable cause to sue, thus barring a later malicious prosecution suit].) Schmidts argument that the rulings of the trial court and the federal district court were incorrect and his reassertion of the merits of his contentions miss the point. The question is not whether Payne failed to prevail, but whether his attorneys had a reasonable basis for pursuing his claims.(See Roberts v. Sentry Life Insurance, supra, 76 Cal.App.4th at p. 384-385 [denial of defendants motion for summary judgment was sufficient to establish probable cause, precluding suit by defendant for malicious prosecution after defendant prevailed at trial].) In light of the various trial and federal court rulings that supported Paynes position, and in the absence of any other evidence indicating that the claims were demonstrably unmeritorious, we agree with the trial court that Schmidt failed to make a prima facie showing that he would prevail on his claim for malicious prosecution.

Schmidt likewise failed to establish a probability of prevailing on his claim for abuse of process. The common law tort of abuse of process arises when one uses the courts process for a purpose other than that for which the process was designed. [Citations.] It has been interpreted broadly to encompass the entire range of procedures incident to litigation. [Citation.] [] [T]he essence of the tort [is] . . . misuse of the power of the court; it is an act done in the name of the court and under its authority for the purpose of perpetrating an injustice. [Citation.] To succeed in an action for abuse of process, a litigant must establish that the defendant (1) contemplated an ulterior motive in using the process, and (2) committed a willful act in the use of the process not proper in the regular conduct of the proceedings. (Rusheen v. Cohen (2006) 37 Cal.4th 1048, 1056-1057.) It is well established, however, that the mere filing of a civil complaint with an improper purpose will not support an action for abuse of process. (Oren Royal Oaks Venture v. Greenberg, Bernhard, Weiss & Karma, Inc. (1986) 42 Cal.3d 1157, 1169 [while a defendants act of improperly instituting or maintaining an action may, in an appropriate case, give rise to a cause of action for malicious prosecution, the mere filing or maintenance of a lawsuiteven for an improper purposeis not a proper basis for an abuse of process action].) Here, as noted above, the complaint alleged only that defendants filed Payne II for the improper purpose of obtain[ing] an advantage over Schmidt by forcing him to pay money to Payne even though no such money was due Payne. Schmidts claim is not cognizable as a cause of action for abuse of process and the trial court properly sustained the motion to strike this cause of action.

Disposition

The order granting defendants motions to strike is affirmed. Defendants are to recover their costs on appeal.

_________________________

Pollak, J.

We concur:

_________________________

Parrilli, Acting P. J.

_________________________

Siggins, J.

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[1] All statutory references are to the Code of Civil Procedure unless otherwise noted.

[2] Pursuant in part to Schmidts request, we take judicial notice of the records in the related appeals (A109971, A110630 & A112341).

[3] The record on appeal does not include all of the orders entered in the federal proceedings. However, in the opinion of the Court of Appeal in Payne II, the federal proceedings were described as follows: On March 12, Schmidt filed a motion in the federal bankruptcy court asking to reopen the bankruptcy proceedings so that he might seek an injunction against Payne for attempting to collect a debt Schmidt claimed had been discharged in bankruptcy. Schmidt also applied for a temporary restraining order to prevent the state court proceedings from going forward. On April 24, 2003, the bankruptcy court ruled that the bankruptcy proceedings discharged any claims Payne might have had against Schmidt arising out of the automobile accident. The court reasoned that the alleged fraud was pre-petition in that the relevant transactions could have been discovered by Payne and his attorneys, ruling that the resulting debt, if any, therefore had been discharged. The court held that Payne's state court action was subject to the bankruptcy court's discharge injunction. [] Payne appealed the bankruptcy court's rulings, obtaining a reversal from the federal district court on June 2, 2004. The district court found that the evidence strongly suggested that Schmidts alleged misrepresentations had occurred post-petition, rather than pre-petition, as the bankruptcy court had concluded. It found that the misrepresentations therefore might provide the basis for a fraud claim that would not have been discharged by the bankruptcy proceedings, and remanded the matter to the bankruptcy court for further proceedings.

[4] Rick Payne was also named as a defendant, but he is not a party to this appeal.

[5] In his opening brief Schmidt requests that the sanction order be reversed. He does not, however, support this request with proper argument or indicate on what basis the order should be reversed. Accordingly, we deem this argument abandoned. (In re Sade C. (1996) 13 Cal.4th 952, 994.)

[6] An independent showing that the issue is of public interest is not required when the conduct challenged comes within clauses (1) or (2) of section 425.16, subdivision (e), statements made in connection with, inter alia, judicial proceedings. (Briggs v. Eden Council for Hope & Opportunity (1999) 19 Cal.4th 1106, 1123.)