Court Opinion

ID: 2794609
Source: CourtListenerOpinion
Date Created: 2015-04-17 17:02:12.708849+00
Date Added: 2024-06-11T11:16:48.157078
License: Public Domain

Filed 4/17/15

                            CERTIFIED FOR PUBLICATION

          IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                          FOURTH APPELLATE DISTRICT

                                    DIVISION TWO

LAWRENCE PASTERNACK,

        Plaintiff and Appellant,                     E057790

v.                                                   (Super.Ct.No. INC1205224)

THOMAS B. McCULLOUGH, JR. et al.,                    OPINION

        Defendants and Respondents.

        APPEAL from the Superior Court of Riverside County. Harold W. Hopp, Judge.

Affirmed.

        Hatton, Petrie & Stackler, Gregory M. Hatton, Arthur R. Petrie II, and John A.

McMahon for Plaintiff and Appellant.

        Lewis Brisbois Bisgaard & Smith, Roy G. Weatherup and Bartley L. Becker for

Defendants and Respondents.

                                             1
                                  I. INTRODUCTION

       Plaintiff and appellant Lawrence Pasternack appeals from an order granting the

special motion to strike (Code Civ. Proc., § 425.16)1 his present complaint for malicious

prosecution against an attorney and his law firm, defendants and respondents Thomas B.

McCullough, Jr. and Thomas B. McCullough, Jr., A Professional Corporation (the

McCullough defendants). We affirm.

       The parties agree the complaint is based on protected speech and petitioning

activity. (§ 425.16, subd. (e); Jarrow Formulas, Inc. v. LaMarche (2003) 31 Cal. 4th 728,

734-735 [litigation is protected speech and petitioning activity].) They dispute whether

the underlying action was terminated in favor of Pasternack (Babb v. Superior Court

(1971) 3 Cal. 3d 841, 845 [“It is hornbook law that the plaintiff in a malicious prosecution

action must plead and prove that the prior judicial proceeding of which he complains

terminated in his favor”]), and thus whether Pasternack met his burden of stating and

substantiating the favorable termination element of his malicious prosecution claim.

       The court concluded, and we agree, that Pasternack did not and could not prove

the favorable termination element of his malicious prosecution claim. When Pasternack

filed his malicious prosecution complaint, and when the special motion to strike was

heard, he was still pursuing a cross-complaint in the underlying action against some of

       1 All further statutory references are to the Code of Civil Procedure unless
otherwise indicated.

                                             2
the same defendants he claimed maliciously filed the complaint in the underlying action.

Thus, Pasternack’s malicious prosecution complaint was premature, as a matter of law.

                                  II. BACKGROUND

A. The Underlying Action (Riverside County Superior Court (RCSC) Case No.

INC065760)

      In October 2006, Pasternack agreed to purchase a luxury custom home in Palm

Desert from Vision West Investments, LLC (VWI), a developer, for $7.065 million.

Easton Builders Corporation (Easton), a general contractor, built the home for VWI.

Curtis Dunham and David McFarland, both licensed contractors, were the sole owners of

VWI, and Dunham was the sole owner of Easton. The purchase and sale agreement

required VWI to build an additional bedroom on one side of the home for $65,000 of the

$7.065 million purchase price. At the close of escrow on November 9, 2006, Pasternack

paid VWI $7 million for the home; $65,000 was to be retained in escrow pending

completion of the additional bedroom. VWI hired Easton to build the bedroom, and VWI

claimed the bedroom was completed “in a satisfactory and workmanlike manner” in

February 2007.

      Within weeks after the escrow closed in November 2006, Pasternack complained

to Dunham and McFarland “about minor defects becoming apparent in the house” and

asked that VWI repair the defects. VWI sent a construction crew to the property, but the

crew did not make the necessary repairs. After the crew left, Pasternack discovered that

tools were missing from his garage and valuable wine was missing from his wine room.

                                            3
He told VWI not to return to his property and he would hire his own contractors to make

the necessary repairs. By March 2007, Pasternack hired contractors, engineers, and

surveyors who identified “significant additional construction defects” in the home along

with “multiple encroachments” of the home onto adjoining lots and “into setbacks

required by law.”

      Pasternack was rarely in the home between November 2006 and March 2007, and

during that time spent only two nights there. In February 2007, Southern California Gas

Company sent a bill to Easton, at the home, for $3,600.42. The bill, due in March 2007,

was extraordinarily high—around 20 times the baseline amount—apparently because an

uncapped gas line installed by Easton allowed gas to leak outdoors in the pool and spa

area. Meanwhile, the escrow company, Sundance Escrow, did not release the $65,000

sum to VWI for the bedroom addition.

      On March 20, 2007, McCullough, representing VWI and Easton, filed suit against

Pasternack and Sundance Escrow in the underlying action, RCSC case No. INC065760.

In the first and second causes of action, VWI sued Pasternack for breach of the purchase

agreement and account stated. In a third cause of action, Easton sued Pasternack for

“money had and received” to collect $3,600.42 for the gas bill Easton paid, allegedly on

behalf of Pasternack. In a fourth cause of action, VWI sued Sundance Escrow for

breaching the escrow agreement by refusing to release the $65,000 sum to VWI for the

bedroom addition. In the same action, Pasternack cross-complained against VWI for

beach of the purchase and sale agreement and rescission. In a separate action (RCSC

                                            4
case No. INC10009154), Pasternack sued Easton and others for fraudulently concealing

construction defects in the home, but the separate action was later consolidated with the

underlying action.

       In January 2009, VWI dismissed its causes of action against Pasternack and

Sundance Escrow, leaving Easton’s third cause of action for the $3,600.42 gas bill

pending against Pasternack on the complaint in the underlying action.2 In March 2012,

Easton’s $3,600.42 collection claim was bifurcated from Pasternack’s cross-complaint,

tried separately to the court, and adjudicated in favor of Pasternack. No judgment was

entered in favor of Pasternack on the collection claim, because Pasternack’s cross-

complaint against Easton was still pending.3

       2  On January 14, 2009, shortly after VWI dismissed its first, second, and fourth
causes of action in the underlying action, Pasternack sued VWI for malicious prosecution
in Los Angeles County Superior Court case No. BC405635, alleging VWI’s claims
against Pasternack in the underlying action were filed maliciously and without probable
cause. In an unpublished decision in Los Angeles County Superior Court case No.
BC405635, Pasternack v. Vision West Investments, LLC (Sept. 16, 2010, B217188) ___
Cal.App.4th ___ [2010 Cal.App. Lexis 8264], the Second District Court of Appeal,
Division Five, affirmed an order denying VWI’s special motion to strike Pasternack’s
malicious prosecution complaint against VWI, finding Pasternack met his burden of
stating and substantiating each element of his malicious prosecution claim against VWI.
The Los Angeles County malicious prosecution case was later transferred to Riverside
County and became RCSC case No. INC1201882.)

       3    In a March 14, 2012, minute order, the trial court in the underlying action wrote:
“Because there remain causes of action between Lawrence Pasternack and [Easton] set
for trial . . . a final judgment between the Pasternacks and Easton cannot be entered at this
time—therefore this order adjudicating [Easton’s] third cause of action in favor of the
Pasternacks shall be carried into and shall become part of any final judgment
subsequently entered in this case.”

                                               5
B. Pasternack’s Present Malicious Prosecution Complaint

       In July 2012, with his cross-complaint against Easton pending in the underlying

action, Pasternack sued Easton, Dunham, and the McCullough defendants in the present

action for malicious prosecution, alleging Easton’s $3,600.42 collection claim was filed

maliciously, without probable cause, and for the sole purpose of extracting a general

release of Pasternack’s (then unfiled but threatened) construction defect-related claims

against Easton and Dunham, among others. The McCullough defendants, represented by

one firm, and Easton and Dunham, represented by separate counsel, demurred to the

complaint and filed special motions to strike. The court granted Easton and Dunham’s

demurrer and, following a subsequent hearing, granted both special motions to strike and

denied the McCullough defendants’ demurrer as moot.4 The court thus dismissed

Pasternack’s present complaint for malicious prosecution.

       In granting the special motions to strike, the court ruled the malicious prosecution

complaint was based on protected speech and petitioning activity (§ 425.16, subds. (b)(1),

(e)), but was premature—notwithstanding the court’s interim order adjudicating Easton’s

collection claim in favor of Pasternack—because Pasternack’s cross-complaint against

Easton was pending when Pasternack filed his malicious prosecution complaint. Thus,

       4  Easton and Dunham were awarded $4,203 in attorney fees for prevailing on
their special motion to strike. (§ 425.26, subd. (c)(1).)

                                             6
the underlying action had not terminated in favor of Pasternack when he filed his

malicious prosecution complaint.5

      Pasternack appealed the trial court’s orders. While the appeals were pending,

Pasternack settled his cross-complaint against Easton in the underlying action along with

his malicious prosecution claims against Easton and Dunham in the present action,6 and

abandoned his appeal as to Easton and Dunham. On this appeal, Pasternack challenges

      5   In their demurrer and motion to strike, Easton and Dunham argued the present
malicious prosecution action was premature because it was filed when Pasternack’s
cross-complaint against Easton was still pending. As Pasternack points out, the
McCollough defendants did not raise this argument in their motion papers, but at the
hearing on the special motion to strike, counsel for the McCullough defendants reminded
the court that their motion was based on the pleadings and records on file, including
Easton and Dunham’s demurrer and special motion to strike, and asked the court to
consider the prematurity argument in ruling on the McCullough defendants’ special
motion to strike.

      6   On August 9, 2013, Pasternack filed a motion asking this court to take judicial
notice of court records in the underlying action, RCSC case No. INC065760. (Evid.
Code, §§ 452, subd. (d), 459.) The request is unopposed, we grant it, and take judicial
notice of the submitted records, namely, dismissals, with prejudice, filed on April 4,
2013, of Pasternack’s cross-complaint against Easton and separate cross-complaint
against Dunham; a March 12, 2013, minute order granting McFarland’s motion to sever a
cross-complaint by Easton, for purposes of trial, from other cross-complaints; a February
19, 2013, minute order granting Easton and Dunham’s motion for good faith settlement
of Pasternack’s cross-complaints against them; and Easton and Dunham’s underlying
motion for good faith settlement, filed on February 5, 2013. The motion for good faith
settlement indicates that Pasternack agreed to settle all of his claims against Easton and
Dunham in the underlying action, the consolidated action, and in RCSC case No.
INC1201882, formerly Los Angeles County Superior Court case No. BC405365, in
exchange for their payment to Pasternack of $2.25 million, plus 50 percent of all “future
net recoveries by Easton or its insurer against the remaining unsettled subcontractor
Cross-Defendants . . . .” Easton and Dunham also agreed to waive their $4,203 attorney
fee award for prevailing on their anti-SLAPP motion in the present case.

                                            7
the order striking his malicious prosecution complaint against the McCullough

defendants only.

                                     III. DISCUSSION

       A special motion to strike triggers a two-stage inquiry: “‘First, the court decides

whether the defendant has made a threshold showing that the challenged cause of action

is one arising from protected activity. The moving defendant’s burden is to demonstrate

that the act or acts of which the plaintiff complains were taken “in furtherance of the

[defendant]’s right of petition or free speech . . . .” (§ 425.16, subd. (b)(1).) [Second,]

[i]f the court finds such a showing has been made, it then determines whether the plaintiff

has demonstrated a probability of prevailing on the claim. . . .’ [Citations.]” (Drummond

v. Desmarais (2009) 176 Cal. App. 4th 439, 448-449 (Drummond).)

       “A plaintiff establishes the requisite probability of success by ‘“stat[ing] and

substantiat[ing] a legally sufficient claim.”’ [Citation.]” (Drummond, supra, 176

Cal.App.45th at p. 449.) “‘Put another way, the plaintiff “must demonstrate that the

complaint is both legally sufficient and supported by a sufficient prima facie showing of

facts to sustain a favorable judgment if the evidence submitted by the plaintiff is

credited.”’ [Citation.]” (Jarrow Formulas, Inc. v. LaMarche, supra, 31 Cal.4th at p. 741,

fn. omitted.) “‘In deciding the question of potential merit, the trial court considers the

pleadings and evidentiary submissions of both the plaintiff and the defendant [citation];

though the court does not weigh the credibility or comparative probative strength of

competing evidence, it should grant the motion if, as a matter of law, the defendant’s

                                              8
evidence supporting the motion defeats the plaintiff’s attempt to establish evidentiary

support for the claim.’ [Citation.]” (Id. at p. 741, fn. 10.)

       A complaint for malicious prosecution is necessarily based on protected speech

and petitioning activity. (Jarrow Formulas, Inc. v. LaMarche, supra, 31 Cal.4th at pp.

734-735 [a malicious prosecution action falls within purview of anti-SLAPP statute

because it arises from protected activity, i.e., the filing and prosecution of the underlying

lawsuit said to be malicious].) Here, the parties dispute only whether the underlying

action was terminated in favor of Pasternack, an essential element of Pasternack’s

malicious prosecution claim against the McCullough defendants. (Babb v. Superior

Court, supra, 3 Cal.3d at p. 845.) Thus, Pasternack and the McCullough defendants

dispute whether Pasternack met his burden on the second step of the anti-SLAPP inquiry

of stating and substantiating the favorable termination element of his malicious

prosecution claim against the McCullough defendants.

       A cause of action for malicious prosecution consists of “‘(a) the institution of an

action at the direction of the defendant . . . (b) without probable cause and (c) with

malice, (d) termination of the initial action favorably to the plaintiff . . . , and (e) resulting

damage.’ [Citations.]” (Drummond, supra, 176 Cal.App.4th at p. 449.) “Favorable

termination ‘is an essential element of the tort of malicious prosecution, and it is strictly

enforced.’ [Citation.]” (StaffPro, Inc. v. Elite Show Services, Inc. (2006) 136
Cal. App. 4th 1392, 1400.) “The termination must ‘“reflect on the merits,”’ and be such

that it ‘tended to indicate [the former defendant’s] innocence of or lack of responsibility

                                                9
for the alleged misconduct.’” (Drummond, supra, at p. 450.) Indeed, “‘[t]he requirement

of favorable termination confirms the plaintiff’s innocence, serves to forestall unfounded

claims and prevent inconsistent judgments, and facilitates proof of other elements of the

tort.’ [Citations.]” (Roger Cleveland Golf Co., Inc. v. Krane & Smith, APC (2014) 225
Cal. App. 4th 660, 673, italics added; Robbins v. Blecher (1997) 52 Cal. App. 4th 886, 892-

894.)

        Pasternack should be deemed to have satisfied the favorable termination element

of his malicious prosecution complaint against the McCullough defendants. He points

out that Easton’s $3,600.42 collection claim, upon which his complaint for malicious

prosecution is based, was severed from his cross-complaint against Easton, VWI, and

others, tried separately, and adjudicated in favor of Pasternack. But Pasternack cites no

authority, and we have found none, that allows a party to bring a malicious prosecution

action based on a single claim adjudicated in the party’s favor while the party pursues

related claims by way of a cross-complaint in the underlying action.

        “To determine whether a party has received a favorable termination, we consider

‘“the judgment as a whole in the prior action . . . .”’” (Siebel v. Mittlesteadt (2007) 41
Cal. 4th 735, 741; Casa Herrera, Inc. v. Beydoun (2004) 32 Cal. 4th 336, 342; Crowley v.

Katleman (1994) 8 Cal. 4th 666, 684-685; Jay v. Mahaffey (2013) 218 Cal. App. 4th 1522,

1530.) And “[w]here, as here, the action as a whole is still pending, it is of no

consequence whether a single cause of action has been determined in [the malicious

prosecution plaintiff’s] favor, as an action for malicious prosecution must await a

                                             10
favorable termination of the entire proceeding.” (Jenkins v. Pope (1990) 217 Cal. App. 3d
1292, 1299, italics added, fn. omitted; Rich v. Siegel (1970) 7 Cal. App. 3d 465, 469 [“[s]o

long as the action is still pending, there has been no favorable termination, and a

malicious prosecution suit will not lie.”].)

       As Pasternack points out, no case has squarely held that the favorable termination

element requires a judgment to be entered in favor of the malicious prosecution plaintiff

in the underlying action. (See, e.g., Robbins v. Blecher, supra, 52 Cal.App.4th at pp.

891-893 [voluntary dismissal supports favorable termination when the reasons for the

dismissal reflect adversely on the merit of the case].) But it is clear that “a cause of

action for malicious prosecution accrues upon entry of judgment in the underlying action

. . . .” (Roger Cleveland Golf Co., Inc. v. Krane & Smith, APC, supra, 225 Cal.App.4th

at pp. 667-668, italics added [addressing applicable limitations period for malicious

prosecution claim].) It is also clear that a malicious prosecution action will not lie, and is

deemed premature, while an appeal from the judgment in the underlying action is

pending. (Id. at p. 668; Drummond, supra, 176 Cal.App.4th at pp. 457-458 [“So long as

the appeal is pending, the plaintiff cannot truthfully allege a termination of the action,

and a malicious prosecution action is ‘premature.’”].)

       Further, we believe the weight of authority is firmly against allowing a party, such

as Pasternack, to commence a malicious prosecution action against any party, based on a

severed and favorably adjudicated claim, while the party pursues other claims in the

underlying action. (See, e.g., Babb v. Superior Court, supra, 3 Cal.3d at p. 846

                                               11
[defendant in civil action may not file a cross-complaint seeking a judgment declaring the

action is being maliciously prosecuted].) At the very least, allowing a party to pursue an

action for malicious prosecution while the party continues to pursue other claims in the

underlying action risks inconsistent judgments in the underlying and malicious

prosecution actions. As noted, “‘[t]he requirement of favorable termination confirms the

plaintiff’s innocence, serves to forestall unfounded claims and prevent inconsistent

judgments, and facilitates proof of other elements of the tort.’ [Citations.]” (Roger

Cleveland Golf Co., Inc. v. Krane & Smith, APC, supra, 225 Cal.App.4th at p. 673, italics

added.) These goals are best ensured by barring a complaint for malicious prosecution

based on one or more favorably adjudicated, allegedly malicious claims—so long as the

malicious prosecution plaintiff pursues other claims against the same party in the

underlying action.

       The present case illustrates another problem—one that is virtually certain to arise

if a malicious prosecution plaintiff were able to sue an opposing party’s attorney for

malicious prosecution while the attorney continues to represent the opposing party in the

underlying action. The need to defend against Pasternack’s malicious prosecution

complaint put the McCullough defendants and Easton in the unfavorable position of

appearing to have a conflict of interest—even if they honestly and reasonably believed

they had probable cause to pursue Easton’s collection claim. Based solely on the

appearance of having a conflict of interest with a client, many attorneys would conclude

the best course of action is to substitute out of the case in favor of new counsel, even if

                                             12
that means the client incurs substantial additional attorney fees and costs associated with

hiring new counsel. If this occurs, it means the malicious prosecution plaintiff has

obtained an unfair advantage over the opposing party—even if the malicious prosecution

claim lacks merit. There is no good purpose to be served in allowing a malicious

prosecution plaintiff to obtain such an advantage over an opposing party and its counsel.

To prevent this from occurring, a malicious prosecution plaintiff should be required to

simply wait until it obtains a favorable termination of the entire underlying action before

it may maintain a suit for malicious prosecution against an opposing party or their

counsel based on their prosecution of all or part of the underlying action.

       The question remains whether Pasternack’s complaint for malicious prosecution

should have been dismissed or stayed, based on its prematurity. As Pasternack points

out, when a malicious prosecution action is filed following the entry of a judgment in the

underlying action but is rendered premature by the filing of an appeal in the underlying

action, the proper remedy is to stay the now-premature malicious prosecution action, not

dismiss it. (Drummond, supra, 176 Cal.App.4th at p. 458, citing Feld v. Western Land &

Development Co. (1992) 2 Cal. App. 4th 1328, 1335-1336.) As Drummond recognized,

staying the malicious prosecution action rather than dismissing it, “is a sound approach”

because it “spares the plaintiff the hazards of correctly calculating the [statute of

limitations] tolling period . . . .” (Drummond, supra, at pp. 458-459.)

       The present case is different, however. Pasternack’s malicious prosecution

complaint was not rendered premature by the filing of an appeal in the underlying action;

                                              13
it was premature when it was filed and was still premature when all of the defendants’

special motions to strike were heard. The proper remedy here, we believe, is to affirm

the order dismissing Pasternack’s malicious prosecution complaint against the

McCullough defendants, the last remaining malicious prosecution defendants. For

whatever reason, Pasternack chose not to wait until his malicious prosecution claim had

accrued before filing and proceeding on his malicious prosecution complaint. He should

bear the consequences of that decision, whatever they may be or have been. We express

no opinion whether any complaint for malicious prosecution against the McCullough

defendants would be time-barred.

                                   IV. DISPOSITION

       The order granting the special motion to strike Pasternack’s malicious prosecution

complaint against the McCullough defendants and dismissing the complaint against the

McCullough defendants is affirmed. The McCullough defendants shall recover their

costs on appeal. (Cal. Rules of Court, rule 8.278(a).)

       CERTIFIED FOR PUBLICATION

                                                              KING
                                                                                          J.

We concur:

McKINSTER
                Acting P. J.

MILLER
                          J.

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