LANDAKER v. WARNER BROS INC (1997)

We hold the issuance of a writ of attachment after a contested hearing does not as a matter of law bar a subsequent action for malicious prosecution arising from the same claim.

Appellant Harold Landaker (“Landaker”) appeals from a judgment dismissing his causes of action against defendants/respondents for malicious prosecution, abuse of process and intentional infliction of emotional distress.   The causes of action for malicious prosecution and abuse of process were dismissed after the trial court sustained general demurrers to those causes without leave to amend.   The court later granted summary judgment against the remaining cause of action for intentional infliction of emotional distress.

We reverse with instructions.   With respect to the rulings on the demurrers, we reverse the dismissal of and reinstate Landaker's cause of action for malicious prosecution.   We instruct the court to permit Landaker to replead a cause of action for abuse of process (wrongful attachment).   On the summary judgment, we instruct the court to permit Landaker to maintain a cause of action for intentional infliction of mental distress, limited however, to any wrongful retention of his personal property by the corporate successors to Landaker's former employer.   We therefore affirm the grant of summary judgment in favor of the individual defendants/ respondents on the intentional infliction of mental distress claim.

PROCEDURAL BACKGROUND

A. The Prior Action.

Landaker's claims for malicious prosecution and abuse of process arise from an earlier action (the “prior action”) brought by The Burbank Studios (“TBS”) against Landaker and his son Alan Landaker in which TBS alleged that the Landakers, who were TBS employees, had received kickbacks from Hart Video, a TBS vendor.   TBS at the same time that it filed the action, September 14, 1989, terminated the Landakers from their TBS employments.   TBS in its complaint sought damages in the amount of the alleged kickbacks;  an injunction prohibiting the Landakers from misappropriating trade secrets belonging to TBS;  and an injunction against unfair competition by the Landakers.   The court through Commissioner Donald W. Pike issued right to attach orders and writs of attachment (the “attachment orders”) against the Landakers on October 20, 1989, finding that TBS “has established the probable validity of the [kickback] claim upon which the attachment is based.”   TBS recorded its attachment lien against real property owned by Alan Landaker, but, on May 14, 1990, pursuant to stipulation transferred the attachment lien to two real properties owned by appellant Harold Landaker.

A jury trial vindicated Landaker two years later.   The jury returned a special verdict finding in favor of both Landakers on TBS's kickback claim and in favor of appellant Harold Landaker on TBS's trade secret claim.   The jury found against Alan Landaker on the trade secret claim and assessed damages in the amount of $40,000 against Alan Landaker.   The trial court, in its memorandum of decision on the nonjury equitable issues, dismissed TBS's unfair competition claim;  denied TBS any recovery for attorneys' fees;  but granted a permanent injunction restraining Alan Landaker from using one of the six devices in which TBS had claimed proprietary trade secret protection.   The final judgment was entered on December 17, 1991.   The time for appeal from the judgment expired on February 21, 1992, and thirteen days later, on March 5, 1992, TBS filed a Notice of Release of Writ of Attachment with the Marshal's office.

B. The Present Action.

Landaker filed the present action on December 15, 1992 (the “present action”).   He joined as defendants TBS, a now dissolved joint venture;  Warner Bros. (“Warner”), Columbia Pictures (“Columbia”), CPT Holdings, Inc. (“CPT”) and Sony USA, Inc. (“Sony”), the successors to the TBS joint venture;  several former TBS employees, some of whom were later employed by Warner;  and several employees of Warner and Columbia (collectively, except for TBS, “respondents”).   Respondents were alleged to be co-conspirators in causing TBS to file and maintain the prior action and in intentionally causing emotional distress to Landaker.

Demurrers were sustained with leave to amend to Landaker's original complaint.   Landaker filed a first amended complaint on April 12, 1993, with causes of action for (1) malicious prosecution, (2) abuse of process and (3) intentional infliction of emotional distress.   Demurrers were sustained without leave to amend to the first cause of action (malicious prosecution) and to the second cause of action (abuse of process).   A demurrer was sustained with leave to amend to the third cause of action (intentional infliction of emotional distress).

Landaker filed a second amended complaint on August 31, 1993 pleading a single cause of action for intentional infliction of emotional distress.   After their demurrers were overruled, respondents filed answers.   The court granted respondents' several motions for summary judgment against the second amended complaint after a hearing on January 20, 1995 and thereafter entered judgment in respondents' favor.

Landaker filed a timely notice of appeal from the judgment dismissing the action including appeal from the court's earlier orders sustaining demurrers without leave to the causes of action for malicious prosecution and abuse of process.

DISCUSSION

I. Appellant's Claim for Malicious Prosecution Is Not Foreclosed by the Issuance of Attachment Orders in the Underlying Action.

The question presented is whether the trial court's issuance of attachment orders in the prior action collaterally established as a matter of law that probable cause existed for TBS's filing of the prior action notwithstanding that Landaker ultimately prevailed.

 Our task in reviewing a judgment of dismissal following the sustaining of a general demurrer is to determine whether the complaint states, or can be amended to state, a cause of action.   For that purpose the properly pleaded material factual allegations of the complaint are accepted as true.   “ ‘When [a demurrer] is sustained without leave to amend, we decide whether there is a reasonable possibility that the defect can be cured by amendment:  if it can be, the trial court has abused its discretion and we reverse;  if not, there has been no abuse of discretion and we affirm.’ ”  (Abraham v. Lancaster Community Hospital (1990) 217 Cal.App.3d 796, 809, 266 Cal.Rptr. 360, quoting from Carden v. Getzoff (1987) 190 Cal.App.3d 907, 912, 235 Cal.Rptr. 698 [citations omitted].)

 The elements which a plaintiff must plead and ultimately prove to establish a cause of action for malicious prosecution are that the prior action (1) was commenced by or at the direction of the defendant and was pursued to a legal conclusion in the plaintiff's favor, (2) was brought (or continued) without probable cause and (3) was initiated with malice.   (Bertero v. National General Corp. (1974) 13 Cal.3d 43-50, 118 Cal.Rptr. 184, 529 P.2d 608.)   This appeal involves the probable cause element.  “The probable cause element of a malicious prosecution action requires an objective determination of the ‘reasonableness' of the defendant's prior lawsuit, i.e., whether, on the basis of the facts known to the defendant, the institution of the prior action was legally tenable.”  (Leonardini v. Shell Oil Co. (1989) 216 Cal.App.3d 547, 567, 264 Cal.Rptr. 883;  Sheldon Appel Co. v. Albert & Oliker (1989) 47 Cal.3d 863, 868, 886, 254 Cal.Rptr. 336, 765 P.2d 498.)

Respondents attacked by general demurrer Landaker's pleading that TBS lacked probable cause to maintain the prior action.   Respondents to support their demurrer requested the court to take judicial notice pursuant to Evidence Code section 452, subdivision (d) of relevant pleadings from the prior action.   Landaker, although opposing the demurrer, joined in the request that the court take judicial notice of the prior action.   Altogether 373 pages from the public record of the prior action were placed before the court in support of or opposition to the demurrers, including:  the complaint, the writ applications, the declarations supporting or opposing the attachments, the right to attach orders and writs of attachment, the jury's special verdict and the court's memorandum of decision.

The court sustained demurrers without leave to amend to Landaker's causes of action for malicious prosecution and abuse of process.   The court did not recite in its minute order “the specific ground or grounds upon which the decision or order is based.”  (Code Civ. Proc., § 472d.)   The minute order reflects only that the court sustained the demurrers “on the grounds and for the reasons set forth in the papers.”

 It is evident, however, from the transcript of the demurrer hearing that the trial court in sustaining the demurrer relied upon (a) the declarations which parties had submitted to the commissioner at the attachment hearing in the prior action;  and (b) the attachment orders that the commissioner issued.   A right to attach order may be issued only upon a judicial finding that the claim has “probable validity.”  (Code Civ. Proc., § 484.090, subd. (a)(2).)  “A claim has ‘probable validity’ where it is more likely than not that the plaintiff will obtain a judgment against the defendant on that claim.”  (Id., § 481.190.)

Respondents on appeal argue this proposition:  since the commissioner in issuing the attachment orders determined that the kickback claim had “probable validity,” that finding should conclusively establish in the present action that TBS had “probable cause” to file the kickback claim, thus defeating Landaker's present malicious prosecution claim.   Secondarily, respondents argue, the declarations which TBS filed to obtain the attachment orders, which the trial court took judicial notice of in sustaining the demurrer, establish as a matter of law that TBS had probable cause to file the prior action.

We consider these arguments in reverse order.

A. A Demurrer Does Not Disclose the Facts Known to the Plaintiff in Filing the Prior Action and Therefore Does Not Permit a Court to Determine the Existence of Probable Cause.

 A determination of probable cause is an issue of law to be made by a court once any underlying factual issues are resolved.  (Sheldon Appel Co. v. Albert & Oliker, supra, 47 Cal.3d at pp. 878-879, 254 Cal.Rptr. 336, 765 P.2d 498.)   There must be a predicate inquiry, however, to identify facts known to or reasonably discoverable by the instigator of the prior action which are relevant to whether there was a good faith basis for the filing of the action.   That inquiry may raise triable issues of fact which must be resolved before a court may determine whether the filing of the underlying action was objectively reasonable.  (Sheldon Appel Co. v. Albert & Oliker, supra, 47 Cal.3d at pp. 878-881, 254 Cal.Rptr. 336, 765 P.2d 498;  Leonardini v. Shell Oil Co., supra, 216 Cal.App.3d at pp. 567-568, 264 Cal.Rptr. 883.)

 Because a demurrer assumes well-pleaded facts are true, a court in ruling on a demurrer which challenges the pleading of a malicious prosecution claim, cannot ordinarily determine whether the facts known or reasonably discoverable by the plaintiff in the prior action justified the filing of the action.   The court here granted the demurrer upon the assumption that the commissioner in issuing the attachment orders had determined that the facts known to or discoverable by TBS justified the filing of the action.   That was an unwarranted assumption as a court's issuance of an attachment order, like its ruling on any motion, is based upon facts which are presented to it by the parties.   The facts which were made known to the commissioner at the hearing may not have been all of the facts which were known to or reasonably discoverable by TBS before it initiated the prior action against the Landakers.

 Landaker alleges in his first amended complaint that TBS knew facts which were inconsistent with its application for a writ of attachment.

“29․ [W]hile conducting their investigation, evidence was presented to [TBS] and related defendants by and through the accounting firm retained by [TBS], that the financial records of the Landakers, including Plaintiff, did not substantiate the theory of kickbacks actively asserted in the lawsuit․  [S]aid Defendants ignored substantial evidence which established that Hart-related Defendants had been financially enriched ․ [in] approximately the sum of monies the Landakers were being wrongfully accused of receiving as kickbacks.”

Landaker alleges that TBS insufficiently investigated the kickback claim before it filed suit against him.   A reasonable investigation is required to show a party's probable cause for the filing of a lawsuit.  (Nicholson v. Lucas (1994) 21 Cal.App.4th 1657, 1665-1669, 26 Cal.Rptr.2d 778.)

The opposing parties' declarations which the commissioner considered were in conflict on the issue of whether the Landakers received kickbacks.   TBS submitted the declarations of Red Hart, the vendor's president, and his brother Jim Hart. Red Hart testified that he had made an agreement to pay rebates to the Landakers on invoices TBS paid to Hart Video and that for nine years thereafter he made monthly cash payments to Harold or Alan Landaker.   Hart's brother testified that, although he had never spoken to the Landakers about rebates nor made any payments to them, he had assisted his brother in calculating each month the amounts that Red Hart said he had to pay to the Landakers as kickbacks.   Giving verisimilitude to the tale, Red Hart attached several years of monthly schedules which he said he and his brother prepared to calculate the rebates due to the Landakers.   Each Landaker submitted a declaration denying he had ever received any money from Hart Video, Red Hart or Jim Hart. Harold Landaker attached to his declaration financial statements which Hart Video had recently submitted to TBS, in an effort to sell the business to TBS, and pointed out that the financial statements were inconsistent with Red Hart's declaration.   Hart had said that the kickback payments had been recorded in his company's accounts as “professional fees,” yet the professional fees expensed on the financial statements were substantially less than the supposed kickback payments.

These conflicts were not resolved at the attachment hearing.   Commissioner Pike, although recognizing that Red Hart admitted to participating in a fraud, said Hart's declaration had the “ring of truth” and issued the attachments.   The jury, however, after hearing the full story two years later, exonerated the Landakers on the kickback claim.

The declarations from the prior action which the trial court properly noticed were in conflict and, furthermore, did not address the extent of TBS's prefiling investigation of its kickback allegations.   The declarations, therefore, did not resolve factual disputes concerning TBS's factual knowledge.   There being a predicate factual conflict, the court in the present action could not rule as a matter of law whether TBS had probable cause for the filing of the prior action.   Respondents' demurrer, as a consequence, was improperly sustained.

B. Attachment Orders Are Not Determinations Reached After a Full Hearing on the Merits and Therefore Do Not Have Determinative Value in Subsequent Proceedings.

 Respondents' proposition-that the issuance of an attachment order after a contested hearing should be given conclusive effect in a subsequent action on the question of whether the attachment plaintiff had probable cause to file the prior action-has not been directly addressed in California cases.   The proposition even at first blush is doubtful, however, because there are many cases in which a defendant after prevailing in a prior action was permitted to maintain causes of action for malicious prosecution and/or abuse of process notwithstanding that (in fact, often because) an attachment order issued in the prior action.  (See, White Lighting Co. v. Wolfson (1968) 68 Cal.2d 336, 66 Cal.Rptr. 697, 438 P.2d 345.)

 Attachment orders, in common with other provisional remedies, are not final determinations on the merits.   Provisional remedies are not given determinative value even in actions where they are issued because the procedures pursuant to which they are issued do not provide the full protections afforded by procedural due process.  (Lucchesi v. Giannini & Uniack (1984) 158 Cal.App.3d 777, 205 Cal.Rptr. 62 [denial of summary judgment and nonsuit motions not determinative of the existence of probable cause];  Film Packages, Inc. v. Brandywine Film Productions, Ltd., (1987) 193 Cal.App.3d 824, 238 Cal.Rptr. 623 [denial of attachment does not bar subsequent application after discovery].)  Notably lacking in the usual provisional remedy hearings, as was the case in the attachment hearing here, are the right to cross-examine the opposing declarants and an opportunity to conduct investigation and discovery beforehand to make meaningful the right of cross-examination.  (Film Packages, Inc. v. Brandywine Film Productions, Ltd., supra, 193 Cal.App.3d at p. 827, fn. 3, 238 Cal.Rptr. 623,[“[I]t must be recognized that attachment proceedings are typically brought at an early stage of litigation, before any meaningful discovery has been conducted.”].)

In Lucchesi v. Giannini & Uniack, supra, 158 Cal.App.3d at page 777, 205 Cal.Rptr. 62, the court reversed a summary judgment which had been granted a defendant in a malicious prosecution action based upon the argument that an earlier court's denial of plaintiff's motion for summary judgment and later a nonsuit motion in the underlying action established as a matter of law that the defendant had probable cause to file the underlying action.   The Lucchesi court said:

“The critical question in determining probable cause, ․, is whether a trier of fact, after a fair adversary hearing, reached a determination on the merits against the defendant in the prior proceeding.” (Id. at page 787, 205 Cal.Rptr. 62.)

One court, relying on Code of Civil Procedure section 484.100-part of the attachment law-said “[a] court's determinations under the attachment law have no effect on the determination of any issues in the action, nor may the court's determinations regarding the attachment be given in evidence or referred to at trial.”  (Loeb & Loeb v. Beverly Glen Music, Inc. (1985) 166 Cal.App.3d 1110, 1117, 212 Cal.Rptr. 830.)  Section 484.100 reads:

“The court's determinations under this chapter shall have no effect on the determination of any issues in the action ․ nor shall they affect the rights of the plaintiff or defendant in any other action arising out of the same claim of the plaintiff or defendant.   The court's determinations under this chapter shall not be given in evidence nor referred to at the trial of any such action.”  (Emphasis added.)

Respondents notwithstanding section 484.100 argue that the court in the present action could properly rely on the issuance of the attachment order as determining that the attachment plaintiff had probable cause to file the prior action in which the attachment was issued.   Respondents focus on the phrase “the same claim,” and they assert that a malicious prosecution claim in the present action is not the “same” as TBS kickback claim in the prior action.   Respondents' argument is too narrow.   The statutory language prohibits reference to the attachment order in any other action between the same parties “arising out” of the same claim.   A malicious prosecution action as it arises because of the wrongful filing of the prior claim must be said to “arise out” of that claim.  Section 484.100, therefore, does apply in the present case.   While the present court may take judicial notice that an attachment issued in the prior action, the court may not rely upon that prior determination to affect the rights of the plaintiff in the malicious prosecution action.

Respondents' argument, furthermore, is undercut by the last section in chapter defining attachment procedures in the Code of Civil Procedure.   Section 490.060 provides:

“Nothing in this chapter limits the right to recover for damages caused by an attachment or protective order on any common law theory of recovery.”

Section 490.060 indicates even though the issuance of an attachment order denotes, on the facts then known to the court, the “probable validity” of the claim, that determination cannot be raised to defeat as a matter of law a subsequent claim for malicious prosecution or for wrongful attachment (abuse of process).

 Our conclusion is that the statutory scheme defining attachment proceedings does not permit the introduction of an attachment order in a subsequent action to affect the rights of the parties in that action.   Any declarations or other evidence which were submitted in support of the application for an attachment order are relevant and may be used to support a showing of the defendant's probable cause in filing the prior action or in seeking an attachment or other provisional remedy.   We hold only that any attachment order issued, and any comments which the court may have been made during the course of the attachment hearing, are not to be given conclusive effect in any subsequent proceeding as to whether there was probable cause for the filing of the action in which the attachment issued.

C. The Demurrer Did Not Address the Other Claims Which Landaker Alleged Were Maliciously Prosecuted in the Prior Action.

 The malicious prosecution claim was broader than TBS's kickback claim.   Landaker alleged that TBS's claims for trade secret theft and unfair competition, as alleged in the prior action, also lacked probable cause, were maliciously filed and terminated in his favor.   Even if TBS were found to have had probable cause for the filing of the kickback claim, it nonetheless could be liable for malicious prosecution if its other claims were filed or maintained without probable cause.  (Crowley v. Katleman (1994) 8 Cal.4th 666, 679, 34 Cal.Rptr.2d 386, 881 P.2d 1083.)   Respondents' demurrer did not indicate any deficiency in Landaker's pleading of a malicious prosecution claim based upon TBS's previous maintenance of the trade secret and unfair competition claims.   Neither claim relied upon TBS's kickback allegations.¹  As Landaker's allegations are accepted as true, respondents' demurrer should have been overruled to the extent that Landaker's malicious prosecution claim rested upon TBS's prior action against him for trade secret theft and unfair competition.

We express no opinion as to whether Landaker can prove that TBS maintained the prior action without probable cause, except to decide that, taking the allegations as true, he has stated a cause of action for malicious prosecution.   We therefore reverse the trial court's dismissal upon demurrer of the malicious prosecution claim.   We are obliged to reinstate Landaker's pleading of that claim notwithstanding that Landaker has cluttered his pleading by naming numerous defendants who seemingly had no connection with TBS's corporate decision to sue the Landakers.   Those defendants presumably shall be able to extricate themselves from the litigation through the filing of targeted motions for summary judgment.

II.-III***

DISPOSITION

For the reasons stated, we reverse the trial court's dismissal of Landaker's claims.   The trial court should reinstate Landaker's cause of action for malicious prosecution, as pleaded in the first amended complaint.   The trial court should grant 30 days' leave to Landaker to replead a cause of action for wrongful attachment (characterized as “abuse of process”) limited to his theory that the attachment placed on his real properties was issued in an action which was maliciously prosecuted.   The trial court should grant 30 days' leave to Landaker to replead a cause of action for intentional infliction of emotional distress limited to Landaker's claim that his personal property which TBS removed from his TBS office is wrongfully retained by one or more of the corporate parties who are signatories to The Burbank Studios Agreement dated as of November 16, 1989 effecting the dissolution of the TBS joint venture.   Each party to bear its own costs on this appeal.

FOOTNOTES

FOOTNOTE.  

1.   TBS for its trade secret claim alleged the Landakers and an entity controlled by them had misappropriated six devices in which TBS claimed a trade secret.   TBS on that claim sought injunctive relief, damages, a doubling of the damages under Civil Code section 3426.3, subdivisions (a)(b) and attorneys fees under Civil Code section 3426.4.   TBS further alleged that the Landakers intended to compete unfairly by (i) misappropriating TBS's trade secret and confidential information, (ii) disparaging TBS and its ability to continue to service its customers, (iii) causing TBS employees to resign to work for the Landakers in order to gain further access to TBS's trade secrets and confidential information and (iv) “using other unfair and illegal methods not presently known to TBS.”

FOOTNOTE.   See footnote *, ante.

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

LILLIE, P.J., and JOHNSON, J., concur.