LAWRENCE PASTERNACK v. VISION WEST INVESTMENTS LLC

Reset A A Font size: Print

Court of Appeal, Second District, California.

LAWRENCE PASTERNACK, Plaintiff and Respondent, v. VISION WEST INVESTMENTS, LLC, Defendant and Appellant.

B217188

Decided: September 16, 2010

Law Offices of Thomas B. McCullough, Jr., and Thomas B. McCullough, Jr., for Defendant and Appellant. Hatton, Petrie & Stackler and Arthur R. Petrie, II, for Plaintiff and Respondent.

Opinion received for posting 10/20/10

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

I. INTRODUCTION

Defendant, Vision West Investments, LLC, appeals from the order denying its Code of Civil Procedure 1 section 425.16 special motion to strike the malicious prosecution complaint of plaintiff, Lawrence Pasternack.   We conclude plaintiff's evidence that defendant maliciously filed the underlying Riverside County action without probable cause has minimal merit.   Thus, we affirm the order denying defendant's special motion to strike.

II. THE COMPLAINT

On January 15, 2009, plaintiff filed his malicious prosecution complaint against defendants:  Curtis Dunham;  David McFarland;  Thomas B. McCullough;  Jr., Mr. McCollough's professional corporation;  and Douglas S. Fabian.   On March 20, 2007, defendant sued plaintiff in Riverside County Superior Court for contract breach and an account stated.   Mr. McCollough and his professional corporation represented defendant.   The complaint in the underlying Riverside County case alleged plaintiff owed defendant $65,000.   According to the complaint in the underlying Riverside County action, plaintiff failed to pay $65,000 for the addition of a bedroom to an improved parcel of real property.   The allegation that plaintiff owed defendant $65,000 was untrue.

According to the complaint in this case, pursuant to a “Residential Purchase Agreement,” defendant agreed to sell an improved piece of real property to plaintiff for $7.065 million.   Of that sum, $65,000 was allocated to pay for a bedroom addition.   After escrow was opened, plaintiff deposited the entire $7.065 million plus an additional sum for foreseeable expenses.   According to the complaint in this case, “Following close of escrow, $65,000 was retained in the escrow account until [defendant] presented the escrow company with certain documentation described in the escrow agreement, together with a demand for payment.”   Defendant never provided the required documentation.   On March 15, 2007, the “escrow company” wrote defendant outlining the documentation required to obtain the $65,000.   Instead of providing the documentation, on March 20, 2007, defendant filed the underlying Riverside County action.   At the time the underlying Riverside County action was filed, defendant and the codefendants knew plaintiff had fully complied with his obligations under the real estate sales agreement and the escrow instructions.

On January 8, 2009, Mr. Dunham and Mr. McFarland, defendant's owners, were deposed.   Mr. McCullough and his firm represented the two deponents.   Both deponents admitted they approved the filing of the underlying Riverside County action.   Further, both deponents admitted they were unaware of any “contractual or other obligations” plaintiff had failed to fulfill.   The deposition was terminated when Mr. McCullough instructed Mr. McFarland to walk out.   The next day, January 9, 2009, Mr. McCullough filed a voluntary dismissal request of the underlying Riverside County action as to all claims against plaintiff.

The underlying Riverside County action was filed and maintained without probable cause.   Defendant and the codefendants always knew or had access to evidence that demonstrated any delay in the payment of the $65,000 was due to their failure to comply with their contractual obligations.   Plaintiff was not responsible for the delay in the payment of the $65,000.   Plaintiff alleged the foregoing demonstrated:  defendant and the codefendants acted with malice;  defendant and the codefendants knew plaintiff only intended to “hold [the new residence] for a short term” while he had another home built;  the house was riddled with defects and it encroached on three other parcels which rendered it unsalable;  defendants knew plaintiff was unaware of the defects;  he complained about the defects and defendant was unwilling to remedy them;  and the underlying Riverside County action was instituted with the hope that plaintiff would settle rather than pursue a compulsory cross-complaint.   As a result, plaintiff alleged he was entitled to:  attorney fees and costs incurred in the underlying Riverside County action;  damages for emotional distress, impaired reputation and lost time;  punitive damages;  costs of suit;  and attorney fees incurred in the present lawsuit.

III. EVIDENCE

A. Defendant's Evidence1. Relevant contractual language

On October 10, 2006, defendant agreed to sell a residence in Palm Desert to plaintiff who was to pay $7.065 million.   Plaintiff was obligated to pay $7 million for the residence.   Pursuant to the escrow instructions, the remaining $65,000 was to be retained by Sundance Escrow pending the design and completion of an additional unfurnished bedroom and bathroom.   The counteroffer, which was accepted by plaintiff, states:  “After closing, [defendant] shall proceed as quickly as possible to construct to completion the Additional Bedroom in accordance with the design plan for the Additional Bedroom approved by [plaintiff].   Upon completion of the framing portion of the Additional Bedroom forty percent (40%) of the Escrowed Amount shall be released to [defendant].   Within five (5) days of receipt of a Certificate of Occupancy for the Additional Bedroom issued by the City of Palm Desert, [defendant] and [plaintiff] shall do a walk-through of the Additional Bedroom to confirm completion of the Additional Bedroom according to the design plan approved by [plaintiff].   Upon confirmation of the completion the balance of the Escrowed Amount shall be released to [defendant].”

An addendum to the counteroffer states:  “The parties ․ agree that gas meter will not be installed prior to the close of escrow.   Inasmuch as [plaintiff] desires [defendant] to construct the Additional Bedroom as soon as possible, installation of the gas meter will delay the process by approximately two weeks.   Also, the gas lines at the site of the Additional Bedroom will be required to be moved with the construction of the Additional Bedroom;  were a gas meter to be installed[,] the Gas Company Utility would be involved in the ․ reinstallation of the gas line.  [Defendant] agrees to be responsible for the installation, metering and operation of the gas line and all appliances and systems running on gas at the time of completion and Certificate of Occupancy of the Additional Bedroom.   Gas meter shall be installed prior to completion of addition but no later than 3 weeks after close of escrow.  [¶] The inspector selected by [plaintiff] for the purposes of identifying corrective items on the Residence shall return at the completion of the Additional Bedroom and will identify corrective items, if any, to be completed by [defendant] on the Additional Bedroom, including the verification that the gas line and meter to the Residence has been installed and that all appliances and systems running on gas are fully operational.”

The escrow instructions state in part:  “Purchase price will include the cost of construction for completion of an additional unfurnished bedroom and bathroom as described and discussed [by plaintiff] and [defendant].   The location and design shall be as described in the preliminary drawing given to [plaintiff] by [defendant].   The finishes and materials to be included but not limited to are counters, fixtures, cabinetry, etc. shall be of equal quality and design as the existing bedroom/bathrooms in the house.   The final design and drawing will be provided by [defendant] and approved by [plaintiff].   The design and approval process will commence immediately and [plaintiff] will release to [defendant] $25,000 non-refundable upon Acceptance to commence the design process.   The commencement of construction will be after closing of escrow.  [¶] [Plaintiff] will conduct a walk-through/inspection and if any punch list or corrective items are found will provide [defendant] a list of those items.  [Defendant] will close escrow within 7 days of verification of corrective items being completed.”

Dated November 1, 2006, the sale escrow instructions state in part:  “From funds accruing to the undersigned [defendant] at the close of escrow, Escrow Holder is to hold the sum of $65,000.00 for the purposes of [defendant's] design and completed construction of an additional bedroom to subject property as approved by [plaintiff] outside of escrow.   All construction shall be after the close of this escrow.   Upon completion of the framing portion of the additional structure the parties will deposit with Escrow Holder a copy of the job card signed off by the City of Palm Desert and approved by [plaintiff] and [defendant].   Upon receipt of same Escrow Holder is instructed to release the sum of $26,000.00 of the funds withheld to [defendant].   Upon the completion of the additional structure [defendant] will obtain a Certificate of Occupancy, a copy of which shall be delivered to Escrow Holder along with an original Notice of Completion for recording in Riverside County Records.  [Plaintiff] will deposit written confirmation of acceptance of the structure and authorization of release of remaining funds to [defendant].”

2. Other evidence

a. the complaint in the underlying Riverside County litigation

On March 20, 2007, defendant and Easton Builders sued plaintiff, Lynette Pasternack and Sundance Escrow for breach of the sales and escrow agreements and common counts.   The causes of action brought by defendant against plaintiff and Ms. Pasternack were:  breach of the sales agreement (first);  account stated (second);  and breach of the escrow instructions (fourth).   The third cause of action was filed by Easton Builders against plaintiff and Ms. Pasternack.   Before an answer was filed, the parties participated in mediation as required by the sales agreement.   On May 21, 2007, before the answer and cross-complaint were filed, plaintiff's attorney served deposition notices for defendant, Easton Builders Corp., Sundance Escrow, and Bighorn Properties, Inc. On May 29, 2007, Mr. McCollough, on behalf of defendant, filed a protective order motion.   On June 6, 2007, plaintiff secured a court-ordered extension of time to file his answer and cross-complaint.   On August 9, 2007, Mr. McCullough filed an answer to plaintiff's cross-complaint and a cross-complaint against Easton Builders.   On October 2, 2007, Easton Builders filed an answer and cross-complaint against various subcontractors.   On May 21, 2008, the lawsuit was declared to be complex litigation but the case management order was not approved until December 22, 2008.   Before the case management order was in place, plaintiff served defendant's counsel with special interrogatories and production demands.   Most of the requests involved the Pasternacks' construction defect claims.   On October 18, 2007, plaintiff filed a motion to disqualify Mr. McCollough as defendant's counsel.   After a monetary sanctions request was filed, plaintiff's disqualification motion was withdrawn as were two motions to compel further responses.

b. Evidence concerning the payment of the $65,000

On March 14, 2007, Mr. McFarland, on behalf of defendant, demanded that Charlyne Young, the owner of Sundance Escrow, pay the $65,000 as his company had complied with its obligations.   On March 15, 2007, Ms. Young wrote to Mr. McFarland and Mr. Dunham and indicated she needed:  plaintiff's approval to release the $65,000;  a copy of the occupancy permit;  a completion notice;  and plaintiff's acceptance of the structure.   Further, Ms. Young wrote:  “Upon receipt of your request for the first $26,000.00 draw we requested such an approval from the [plaintiff].   To date, we have not received same.”   On December 20, 2007, Mr. McCullough sent a letter to plaintiff's attorney, Arthur R. Petrie II, which stated in part:  “I have spoken with [Ms.] Young at Sundance, and she informed me that even though your clients have agreed to release the funds, Sundance cannot do so unless they have the Pasternack[s'] original signatures on the release.  [¶] Accordingly, please send the original signatures to Sundance as soon as possible, so that we can take care of this matter before the end of the year.”   On December 26, 2007, plaintiff signed new amended escrow instructions authorizing release of the $65,000.   On January 9, 2009, a voluntary dismissal request was filed which dismissed the first, second and fourth causes of action defendant was pursuing against plaintiff and Ms. Pasternack.   Defendant's counsel, Mr. McCullough, declared why he filed the dismissal request in the underlying Riverside County action:  “At this point, from my perspective the litigation was basically dormant.   Any continuation of the litigation was on the part of [p]laintiff, who was continuing to bring [defendant] before the Discovery Referee․  The only issue remaining for [defendant] was whether [p]laintiff was going to sign a release of liability in its favor.”

B. Plaintiff's Evidence

1. Overview

A significant amount, but not all, of the evidence relied upon by plaintiff was the same as that utilized by defendant.   That evidence will not be repeated here.

2. The answer, cross-complaint and other filings in the underlying Riverside County action

The Pasternacks' answer to the complaint in the underlying Riverside County case alleged 20 affirmative defenses:  the complaint did not state a cause of action;  equitable estoppel;  waiver;  mitigation of damages;  defendant caused all of its damages;  laches;  the relief sought is inequitable;  unclean hands;  statute of frauds;  any recovery would unjustly enrich defendant;  statute of limitations;  comparative negligence;  mistake of law;  defendant's fraud;  failure of consideration;  the contract should be rescinded;  accord;  the contract was unconscionable;  and no contract existed between the parties.

The Pasternacks' cross-complaint in the underlying Riverside County case alleged six causes of action.   In October 2006, the Pasternacks owned a home and vacant lot in Bighorn, a gated community in Palm Desert, California.   In making their purchases, the Pasternacks relied on the services of Bighorn Properties and its agent, Jacquie Burns.   In October 2006, Ms. Pasternack indicated she wanted something bigger than their current residence.   Ms. Burns showed the Pasternacks the partially completed residence constructed by defendant.   Ms. Burns urged the Pasternacks to move quickly if they wished to purchase the home.   The Pasternacks entered into the agreement to purchase the home which included the following salient features:  there was to be a one-year builder's warranty;  all material defects were to be disclosed to the Pasternacks;  the parties were to mediate any dispute;  so long as there was compliance with the mediation requirements, the prevailing parties were to recover their attorney fees;  and the purchase was to include the construction of an additional bedroom and bathroom.   Further, the sales agreement provided:  work on the additional bedroom and bathroom was to proceed as soon as possible;  within five days after the occupancy certificate for the additional bedroom and bathroom was issued, there was to be a walk-though inspection;  and upon confirmation of the completion of the bedroom and bathroom, the $65,000 was to be released to defendant.   An addendum to the sales agreement stated that there would be a two-week delay in the completion of the additional bedroom and defendant agreed to install a gas line and have operating appliances running at the time of the issuance of the occupancy certificate.   Mr. Dunham and Mr. McFarland represented the additional bedroom would be completed by Christmas 2006 and any defects would be promptly corrected.   The escrow instructions provided two preconditions to payment of the $65,000-the approval of a ‘ “job card’ ” by the City of Palm Desert and the issuance of an occupancy certificate.   Escrow closed on the residence on November 9, 2006.   Upon moving in, the Pasternacks noticed there were defects which defendant promised to fix but never did.   Nor was the bedroom completed by Christmas, thereby “cheating” the Pasternacks out of an entire season in Palm Desert.   Workers admitted to the premises stole the Pasternacks' property including expensive tools and wine.

The Pasternacks' first cause of action in the underlying Riverside County cross-complaint was for violation of Civil Code sections 896 and 897 construction standards including water issues relating to:  doors;  windows;  roofs;  decks;  foundation systems;  landscaping;  stucco;  retaining walls;  plumbing;  and waterproofing.   Additionally there were structural, soil, fire protection, and electrical issues.   The second cause of action sought rescission based on fraud, mistake of fact and failure of consideration premised on these allegations:  defendant represented the home was nearly completed;  defendant stated the home would comply with the standards expected of a $7.065 million property and by law and would be completed in time to be enjoyed in the 2006-2007 season;  and these representations were false.   The remaining causes of action were for:  fraud (third);  money had and received (fourth);  contract breach (fifth);  and negligence (sixth).   The Pasternacks sought:  compensatory damages in an amount of not less than $500,000 or $7.065 million;  the costs of repairing the residence;  rescission;  special damages;  exemplary damages;  costs of suit;  interest;  and reasonable attorney fees.   On February 3, 2009, plaintiff filed a nine-page preliminary defect report and cost of correction analysis in the underlying Riverside County action.   Plaintiff estimated the cost of repair was $1,803,165.

3. Declarations and documents

Chris Ciremele, a licensed land surveyor, declared that part of the residence was outside the metes and bounds of the lot sold by defendant to plaintiff.   John McMahon filed a declaration containing many documents pertinent to the residence.   Mr. Dunham and Mr. McFarland were listed in the Secretary of State's limited liability corporation information statement as managers of defendant.   They were listed as members in defendant's operating agreement.

Additionally, plaintiff filed a declaration.   Plaintiff was told by Mr. McFarland and Mr. Dunham the residence was built to the highest industry standards.   Plaintiff was never told that the 6,000 foot square foot home he intended to purchase “spilled over” into three adjoining parcels.   Moreover, he was never told the house was built in only eight months which would be a ‘ “red flag’ ” for defective construction.   Plaintiff intended to sell the residence.   But due to the absence of marketable title and the defective construction, the house could not readily be resold.   According to plaintiff, he requested repairs be made and defendant failed to make them.   Rather, “defendant” sent a construction crew which stole plaintiff's tools and wine.   Eventually, in late 2007, plaintiff agreed to release the $65,000 as an accommodation to Sundance Escrow.   The sole purpose in agreeing to do so was to extricate the escrow company which plaintiff believed was innocent of wrongdoing.   In terms of a release, plaintiff declared:  “[A]fter suing me in March 2007, [defendant] has bargained for a general release of all claims that I have or may have, now or in the future, against [defendant].   Due to the results of the professional investigation described above, I remain in no position to consider such a release until such time I am made whole․”  An exchange of e-mails indicate that beginning in November 26, 2006, plaintiff began to complain about the defects in the residence.

Plaintiff produced a copy of the City of Palm Desert inspection record.   The final inspection occurred on October 6, 2006, prior to the close of escrow.   This document does not relate to the additional bedroom and bathroom at issue in this case.   The estimated escrow closing date was November 20, 2006.   But the escrow closed on November 9, 2006.

On February 22, 2007, Ms. Young sent a conditional waiver and release for $26,000 document to plaintiff.   Also enclosed was an invoice for $26,000 for completion of framing which had signature lines for the Pasternacks.   On October 31, 2007, plaintiff signed amended escrow instructions which permitted payment of the $65,000 upon delivery of various documentation.   On December 26, 2007, defendant was paid the $65,000 by the escrow company.   Further, plaintiff produced a preliminary list of defects in the residence as of January 29, 2009 and anticipated costs of repair.   The list was lodged in the underlying Riverside County lawsuit pursuant to the case management order.   The list identified 155 separate defects and estimated repairs totaled $1,803,165.   According to Gregory M. Hatton, plaintiff's counsel, the Pasternacks had paid “well in excess” of $25,000 in legal fees and costs in the underlying Riverside County action.

4. Deposition testimony and the cessation of Mr. McFarland's deposition in the underlying Riverside County action

Mr. McFarland testified at his January 8, 2009 deposition concerning the various documents.   The purchase agreement was executed by both Mr. McFarland and Mr. Dunham;  the two members of defendant.   Mr. McFarland testified that the job card was the document signed by the City of Palm Desert when a construction project was completed.   Mr. McFarland was unsure when the job card for the bedroom and bathroom addition was completed.   Mr. McFarland identified the sale escrow instructions.

On February 22, 2007, Mr. Dunham requested that the Pasternacks approve a $26,000 payment for completion of the framing.   The request included the additional language, “Job card is waived.”   Mr. McFarland was unable to explain why it was anticipated the Pasternacks would waive their right to documentation the framing work on the additional bedroom and bathroom was completed.   Mr. McFarland made the decision to file the underlying lawsuit five days after Ms. Young's March 15, 2007 letter.   Ms. Young's March 15, 2007 letter states in part:  “[W]e must have the Buyer's approval prior to any payment.  [¶] Upon receipt of your request for the first $26,000.00 draw we requested such an approval from the Buyer.   To date, we have not received same.  [¶] Prior to release of all funds and in accordance with the same escrow instructions we ․ need a copy of the city issued Certificate of Occupancy, an original Notice of Completion ․ and, again, the Buyer's acceptance of the structure․”

At his deposition, Mr. McFarland admitted the $65,000 was in escrow.   Mr. McFarland also admitted the only thing he needed to do was supply the documents requested by Ms. Young and listed in the escrow instructions.   Under the escrow instructions, defendant had to provide the documents to the escrow company.   Mr. McFarland was unaware whether anybody had requested the documents from plaintiff.   The following occurred during Mr. McFarland's deposition:  “Q. [B]etween the time that you sued the Pasternacks in March 2007 and the time you cashed this check in December 2007, was there anything that the Pasternacks needed to do so that escrow could release the check?  [¶] A. Anything the Pasternacks need to do?  [¶] Q. Yeah. [¶] A. I don't think so.”

Shortly thereafter, Mr. McFarland was asked whether he was authorized to appear at the deposition on defendant's behalf.   The deposition notice required defendant to produce an officer, director, managing agent, employee or agent who was most qualified to testify on subjects such as:  formation of the contract and escrow instructions;  breach of any obligation under the contract and escrow instructions;  and payment of moneys.   The following occurred:  “Q․  [T]he deposition notice requires [defendant] ․ to produce an individual who is the most knowledgeable regarding the formation of the contract we've just been discussing.   You are that person?  [¶] Mr. McCullough:  We're going to object to this.”   The Pasternacks' attorney then discussed telephoning the discovery referee.   The following transpired:  “Mr. McCullough:  Do whatever you want to do.   I'm instructing him not to answer.   [¶] Mr. Hatton:  Go ahead and call him.   I'll keep the deposition going.  [¶] Mr. McCullough:  I think we'll terminate the deposition and then we'll call Judge Lachs at a convenient time for everybody.”   Within one minute, Mr. McCullough announced the deposition was being terminated.

Ms. Young, the owner of Sundance Escrow, was deposed in the underlying Riverside County lawsuit on October 29, 2007.   Ms. Young identified the escrow file.   Ms. Young testified she never received a job card, a completion notice, or an occupancy certificate for the additional bedroom and bathroom.   As of October 29, 2007, she was not waiting for any documents from the Pasternacks to release the $65,000.   Plaintiff had written her indicating once the documents listed in the escrow instructions were provided to her, she could proceed to release the $65,000.   On October 22, 2007, plaintiff wrote Ms. Young:  “I am still awaiting your receipt of the certificate of occupancy and job card for the addition ․ as required in the escrow instructions.   As explained in our prior telephone conversations, as soon as you confirm that you have these documents, Sundance may release the $65,000 to [defendant].”

IV. DISCUSSION

A. Special Motion To Strike And Malicious Prosecution Jurisprudence

Under section 425.16, any cause of action against a person “arising from any act ․ in furtherance of the ․ right of petition or free speech ․” in connection with a public issue must be stricken unless the courts finds a “probability” that the plaintiff will prevail on whatever claim is involved. (§ 425.16, subd. (b)(1);  Dowling v. Zimmerman (2001) 85 Cal.App.4th 1400, 1415;  Dove Audio, Inc. v. Rosenfeld, Meyer & Susman (1996) 47 Cal.App.4th 777, 783.)   When a special motion to strike is filed, the trial court must consider two components.   First, the moving party has the initial burden of establishing a prima facie case that the plaintiff's cause of action arose out of the defendant's actions in the furtherance of the rights of petition or free speech. (§ 425.16, subd. (b)(1);  Flatley v. Mauro (2006) 39 Cal.4th 299, 314;  Rusheen v. Cohen (2006) 37 Cal.4th 1048, 1056.)   In this case, the parties do not dispute plaintiff's malicious prosecution claim arises from defendant's exercise of petitioning related conduct.  (Jarrow Formulas, Inc. v. LaMarche (2003) 31 Cal.4th 728, 733 [attorney in malicious prosecution case could pursue § 425.16 motion];  Daniels v. Robbins (2010) 182 Cal.App.4th 204, 215 [“claim of malicious prosecution is a cause of action arising from protected activity”].)

Second, once the defendant establishes the operative complaint's claims arise out of the exercise of petition or free expression rights, the burden shifts to the plaintiff.   The plaintiff must then establish a probability that he or she will prevail on the merits. (§ 425.16, subd. (b)(1);  Flatley v. Mauro, supra, 39 Cal.4th at p. 314;  Rusheen v. Cohen, supra, 37 Cal.4th at p. 1056.)   Our Supreme Court has defined the probability of prevailing burden as follows:  “ ‘[T]he plaintiff “must demonstrate that the complaint is both legally sufficient and supported by a sufficient prima facie showing of the facts to sustain a favorable judgment if the evidence submitted by plaintiff is credited.” ’  (Wilson v. Parker, Covert & Chidester (2002) 28 Cal.4th 811, 821, quoting Matson v. Dvorak (1995) 40 Cal.App.4th 539, 548.)”   (Navellier v. Sletten (2002) 29 Cal.4th 82, 88-89.)   In reviewing the trial court's order, we use our independent judgment to determine whether plaintiff met his burden of establishing a probability of prevailing on his claim.   (Monterey Plaza Hotel v. Hotel Employees & Restaurant Employees (1999) 69 Cal.App.4th 1057, 1064;  Church of Scientology v. Wollersheim (1996) 42 Cal.App.4th 628, 653, disapproved on another point in Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 68, fn. 5.) But as explained by our Supreme Court, we do not weigh the competing evidence:  “ ‘[T]he 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 evidence supporting the motion defeats the plaintiff's attempt to establish evidentiary support for the claim.’  (Wilson v. Parker, Covert & Chidester, supra, 28 Cal.4th at p. 821.)   In making this assessment it is ‘the court's responsibility ․ to accept as true the evidence favorable to the plaintiff․’  (HMS Capital, Inc. v. Lawyers Title Co. [ (2004) ] 118 Cal.App.4th [204,] 212.)   The plaintiff need only establish that his or her claim has ‘minimal merit’ (Navellier v. Sletten, supra, 29 Cal.4th at p. 89) to avoid being stricken․”  (Soukup v. Law Offices of Herbert Hafif (2006) 39 Cal.4th 260, 291, original italics.)   Our Supreme Court has described the plaintiff's probability of prevailing obligation:  “[Code of Civil Procedure section 425.16] requires only ‘a minimum level of legal sufficiency and triability[.]’  (Linder v. Thrifty Oil Co. (2000) 23 Cal.4th 429, 438, fn. 5.)” (Jarrow Formulas, Inc. v. LaMarche, supra, 31 Cal.4th at p. 738.)

A malicious prosecution claim requires proof a prior action:  was commenced or pursued by or at the direction of defendant and was terminated in plaintiff's favor;  lacked probable cause when filed or pursued;  and was initiated with malice.  (Siebel v. Mittlesteadt (2007) 41 Cal.4th 735, 740;  Casa Herrera, Inc. v. Beydoun (2004) 32 Cal.4th 336, 341;  Sheldon Appel Co. v. Albert & Oliker (1989) 47 Cal.3d 863, 871-872.)   The probable cause element is a question of law for the court to determine.  (Zamos v. Stroud (2004) 32 Cal.4th 958, 971;  Wilson v. Parker, Covert & Chidester, supra, 28 Cal.4th at p. 817.)   A probable cause determination, as to whether prosecution of the lawsuit was legally tenable, is made under an objective standard of reasonableness based on the known facts.  (Zamos v. Stroud, supra, 32 Cal.4th at p. 971;  Sheldon Appel Co. v. Albert & Oliker, supra, 47 Cal.3d at p. 878.)   Our Supreme Court has explained:  “The test applied to determine whether a claim is tenable is ‘whether any reasonable attorney would have thought the claim tenable.’  [Citation.]”  (Zamos v. Stroud, supra, 32 Cal.4th at p. 971;  Sheldon Appel Co. v. Albert & Oliker, supra, 47 Cal.3d at p. 878.)

B. There Is A Triable Controversy As To Whether The Underlying Riverside County Complaint Was Maliciously Filed Without Probable Cause

There was evidence that the November 1, 2006 sale escrow instructions required defendant to build an additional bedroom.   The additional bedroom and bathroom would cost $65,000 and be built as quickly as possible in accord with agreed to design specifications in the preliminary drawings given to plaintiff by defendant's employees.   In the addendum to the purchase agreement, the parties acknowledged that installation of the gas meter would be delayed because of the construction of the additional bedroom and bathroom.   Construction of the additional bedroom and bathroom was to commence after the close of escrow.

Upon completion of the framing portion of the additional bedroom and bathroom, 40 percent of the $65,000 was to be released by Ms. Young of Sundance Escrow to defendant.   Once the occupancy certificate for the additional bedroom was issued by the of City of Palm Desert, an employee of defendant and Mr. Pasternack were to conduct a walk-though to confirm completion of the extra work according to the design plan approved by Mr. Pasternack.   Upon confirmation of the completion of the extra bedroom and bathroom according to the design plan approved by Mr. Pasternack, the balance of the $65,000 was to be paid by Ms. Young of Sundance Escrow to defendant.

The November 1, 2006 sale escrow instructions provide that once the framing portion of the additional bedroom and bathroom was completed, defendant was obligated to provide Ms. Young a copy of the job card signed off by the City of Palm Desert.   Further, Ms. Young was to be given an approval by Mr. Pasternack and an employee of defendant.   Once the City of Palm Desert job card and approval were given to Ms. Young, she was to release $26,000 to defendant.   Once the additional bedroom and bathroom were completed, defendant was then obligated to provide to Ms. Young the occupancy certificate and a completion notice suitable for recording.   Plaintiff was then to give Ms. Young written confirmation of acceptance of the additional bedroom and authorization to release the balance of the remaining funds to defendant.   In other words, before the initial $26,000 could be paid to defendant, Ms. Young had to be provided with a job card signed off by the City of Palm Desert and approved by plaintiff and an employee of defendant.   Further, before the remaining $39,000 could be paid, Ms. Young had to be provided with:  the occupancy certificate;  a completion notice suitable for recording;  and plaintiff's written confirmation of acceptance of the additional bedroom and bathroom and authorization to release the balance of the remaining funds to defendant.

The escrow closed on November 9, 2006.   On February 22, 2007, Ms. Young forwarded a conditional waiver and release for $26,000 document to the Pasternacks.   Above the signature lines were the words, “Job card is waived.”   Ms. Young never received a City of Palm Desert issued job card for the framing.   Without the job card (or a waiver of the condition), Ms. Young could not release the $26,000 for the framing.   Further, in order to release the remainder of the $65,000, defendant was obligated to provide Ms. Young with an occupancy certificate and a notice of completion.   Ms. Young had never received either document.   Also, she was never given the document reflecting the Pasternacks' acceptance of the additional bedroom and bathroom.

Despite the fact the job card for the framing was never provided to Ms. Young nor were the occupancy certificate and notice of completion, on March 14, 2007, Mr. McFarland, on defendant's behalf, demanded payment of the $65,000.   Ms. Young responded on March 15, 2007 that no acceptance had been received from the Pasternacks nor had she been provided with the occupancy certificate and the notice of completion.   Five days later, on March 20, 2007, defendant sued plaintiff because it had not received the $65,000.   There is minimal merit to plaintiff's theory the underlying Riverside County suit was filed or pursued without probable cause.   There is evidence none of the documents necessary to release the $65,000 were provided to Ms. Young by defendant:  the job card;  the occupancy certificate;  and the completion notice.  (Zamos v. Stroud, supra, 32 Cal.4th at p. 971;  Sheldon Appel Co. v. Albert & Oliker, supra, 47 Cal.3d at p. 878.)

Further, there has been a showing that plaintiff's theory that defendant acted maliciously has minimal merit.   The fact none of the condition precedents to payment of the $65,000 had occurred and the frivolous nature of the underlying Riverside County suit, may be considered in determining whether defendant acted with malice.  (Soukup v. Law Offices of Herbert Hafif, supra, 39 Cal.4th at p. 292;  Paulus v. Bob Lynch Ford, Inc. (2006) 139 Cal.App.4th 659, 675.)   Further, before the underlying Riverside County action was filed:  plaintiff had noticed significant construction defects in the residence;  defendant had been advised of the defects;  and defendant refused to repair them.   On December 26, 2007, plaintiff signed new amended escrow instructions authorizing the release of the $65,000.   Pursuant to plaintiff's instructions, the $65,000 check was issued on December 26, 2007.

On January 8, 2009, Mr. McFarland's deposition was taken as the person most knowledgeable about the contracts.   Mr. McFarland refused to answer relevant questions and walked out of his deposition.   Before walking out, Mr. McFarland was unable to identify any violation of any contractual obligation owed by plaintiff to defendant.   The day after Mr. McFarland refused to answer pertinent questions at his deposition before walking out, on January 9, 2009, a voluntary dismissal request was filed as to the first, second and fourth causes of action defendant was pursuing against the Pasternacks.   The stated justification for the delay in filing the dismissal request is that defendant sought to negotiate a release.   A trier of fact could reasonably conclude that the sought after release was unrelated to the merits of defendant's contract breach and common count claims.   And the trier of fact could find the refusal to file a dismissal request until after Mr. McFarland's abortive deposition was the use of a meritless cause of action to gain leverage in the construction defect issues raised in the Pasternacks' cross-complaint.   This too can support an inference of malice.  (Albertson v. Raboff (1956) 46 Cal.2d 375, 383;  Sierra Club Foundation v. Graham (1999) 72 Cal.App.4th 1135, 1156-1157.)   Thus, there is a sufficient prima facie showing of facts to sustain a favorable judgment if the evidence submitted by plaintiff is credited.

Finally, there is no merit to defendants' contention the dismissal of defendant's complaint in the underlying complaint in the Riverside County action was not a favorable termination for malicious prosecution purposes.   There is an inference the dismissal resulted from the devastating admissions made by Mr. McFarland at his deposition.   Thus, there is sufficient evidence to support a favorable termination finding by the trier of fact.  (Sycamore Ridge Apartments LLC v. Naumann (2007) 157 Cal.App.4th 1385, 1399;  Chauncey v. Niems (1986) 182 Cal.App.3d 967, 978.)

V. DISPOSITION

The order denying the special motion to strike is affirmed.   Plaintiff, Lawrence Pasternack, shall recover his costs incurred on appeal from defendant, Vision West Investments, LLC.

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

We concur:

FERNS, J.*

FOOTNOTES

FN1. Unless otherwise stated, all statutory references are to the Code of Civil Procedure..  FN1. Unless otherwise stated, all statutory references are to the Code of Civil Procedure.

FOOTNOTE.  FN*.  Judge of the Los Angeles Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.

Copied to clipboard