Agnew v. Mangini
Filed 9/29/10 Agnew v. Mangini CA4/1
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COURT
OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION
ONE
STATE
OF CALIFORNIA
JEFFREY A. AGNEW,
Plaintiff and Appellant,
v.
MAURIZIO A. MANGINI et al.,
Defendants and Respondents.
D055124
(Super. Ct. No. 37-2008-00100280- CU-NP-EC)
APPEAL from
an order of the Superior Court
of San Diego
County, Eddie C. Sturgeon, Judge. Affirmed and remanded for an award of
attorney fees on appeal.
In this
malicious prosecution action, the trial court granted defendants' special motion to dismiss under the anti-SLAPP
(strategic lawsuit against public participation) statute (Code Civ. Proc.,
§ 426.16)[1]
based on plaintiff Jeffrey A. Agnew's inability to show a probability of
prevailing. Agnew contends the court
erred by finding his voluntary dismissal from the underlying action was not a
favorable termination within the meaning of malicious prosecution law. We affirm the order, as defendants'
undisputed evidence shows the dismissal was based solely on financial
considerations, and does not reflect the merits of the underlying action. Contrary to Agnew's assertion, he adduced no
evidence from which a jury could reasonably find favorable termination. Moreover, the question of favorable
termination is based on the court's view of the underlying judgment as a whole,
and Agnew challenges the merit of only one of three causes of action against
him in the underlying action. He claims
defendants realized the fraud cause of action lacked merit, but he ignores the
causes of action for breach of fiduciary duty and negligence. Given our holding, we are not required to
address the probable cause and malice elements of the malicious prosecution action.
FACTUAL AND
PROCEDURAL BACKGROUND
A.
In November 2005 attorneys
Maurizio A. Mangini and Irene E. Stewart, of the Mangini & Stewart firm
(collectively Mangini), filed a complaint (underlying action) on behalf of Ed
Bolen Painting Company, Inc. (Bolen Painting) against the Ramona Chamber of
Commerce and numerous current or former members of its board of directors,
including Agnew. The complaint included
contract-based causes of action against the Chamber of Commerce, a fraud cause
of action against all defendants, and a breach of fiduciary duty cause of
action against the individual defendants.
The
underlying action arises from the agreement of Bolen Painting's owner, Susan
Bolen, to sponsor the Chamber of Commerce's yearly golf tournament. The complaint alleged that in 2001 the then
president of the Chamber of Commerce, Dale Eiler, approached Bolen and offered
to change the name of the tournament to the "Ed Bolen [Bolen's late
husband] Memorial Golf Tournament," in exchange for donations from Bolen
Painting and its best efforts to collect donations from others.
The
complaint alleged that under the parties' written contract, the Chamber of
Commerce was obligated to deposit all donations into a separate scholarship
account. From the account, the Chamber
of Commerce was allowed to pay the costs of advertising and putting on the
tournament. Further, it could use up to
five percent of the account's net proceeds to pay for clerical expenses
associated with the tournament. The
Chamber of Commerce was required to award the remainder in scholarships to
Montecito and Ramona High School Seniors to assist them with upcoming college
expenses.
The
complaint also alleged the Chamber of Commerce breached the agreement by not
depositing all donations into the scholarship account, not providing full and
accurate accountings, and not using net proceeds for scholarships. Bolen Painting donated $5,000 annually
between 2001 and 2004, and it obtained donations from others of between $1,000
and $6,000 annually. In 2004, the
Chamber of Commerce allegedly awarded only a $1,000 scholarship to one student.
Agnew was a
board member during the 2001 through 2003 golf tournaments. As to the fraud cause of action, the
complaint alleged that under alter ego and agency theories the board members
were responsible for the alleged 2001 misrepresentations Eiler made to
Bolen. It also alleged that in
subsequent years the board members reaffirmed the misrepresentations "by
their words and actions, such as accepting Bolen Painting's annual $5,000 check
and advertising the golf tournament as the 'Ed Bolen Memorial Golf Tournament.'
" The breach of fiduciary duty
cause of action alleged the board members breached a duty to the Chamber of
Commerce by failing to comply with generally accepted accounting standards and
by concealing illegal expenditures.
The court
sustained defendants' demurrer to the fraud cause of action insofar as it
pertained to the alter ego theory. The
operative second amended complaint
(SAC) did not include an alter ego theory.
Further, the SAC's fraud cause of action deleted the allegation that the
board members, through Eiler, made misrepresentations to Bolen. Rather, the SAC's fraud cause of action
alleged that in 2001 the board members represented "via flyers [they]
reviewed and revised prior to distributing to many recipients" that the
Chamber of Commerce would use the net proceeds from donations to fund
scholarships. Further, the fraud cause
of action alleged that in subsequent years the board members "reaffirmed
these representations to . . . Bolen Painting by their words and actions, such
as accepting [its] $5,000 [annual] check and in sending to [it] advertisements
for the golf tournament which stated that 'One hundred percent of the proceeds
of this golf tournament are presented to [Ramona and Montecito High School
Seniors].[']" Further, during a
2003 meeting Agnew attended, the board of directors allegedly approved the
proposal that scholarship funds be used to pay for the Chamber of Commerce's
"public relations efforts."
The SAC's
breach of fiduciary duty count alleged the board members had a duty toward
than toward the Chamber of Commerce as alleged in the original complaint, and
they breached the duty "by failing to keep [the] donations in the trust
and failing to use [the funds] for which they were donated." The SAC also added a negligence cause of
action against the board members, which alleged they breached their duty to use
donations for charitable purposes and to "exercise reasonable care in the
keeping and oversight of the records."
Settlement conferences were held in September
and October 2006. On November 9, 2006, the Chamber of
Commerce and 17 of the board members agreed to pay Bolen Painting $55,000 in
settlement in exchange for a dismissal with prejudice and a release of all
claims. Four of the individual
defendants, including Agnew, refused to participate in the settlement. On November
29, 2006, Bolen Painting voluntarily dismissed Agnew from the
action without prejudice.
B.
In November 2008 Agnew sued
Mangini for malicious prosecution of the underlying action.[2] Mangini brought a special motion to strike
the complaint under the anti-SLAPP statute (§ 425.16), arguing the action
arose from protected activity and Agnew had no reasonable probability of
prevailing in the action.
As we
discuss below, to prevail in a malicious prosecution action the plaintiff must
show the underlying action, considered as a whole, terminated in his or her
favor, and the underlying action was brought without probable cause and with
malice. In opposing the anti-SLAPP
motion, Agnew specifically addressed only the fraud cause of action against him
in the underlying action.[3] He argued there was no evidence he had
anything to do with Eiler's alleged misrepresentations to Bolen, and there was
no ground to include him in a fraud claim based on theories of alter ego,
agency, ratification or reaffirmation.
He was particularly galled by the fraud allegations because he is a
practicing attorney. He noted he had
prevailed on demurrer on the alter ego fraud theory alleged in the original complaint.
The court
granted the anti-SLAPP motion without any explanation in either its tentative
ruling or final order. During the
hearing, however, the court indicated it found Agnew did not show the
underlying action terminated in his favor, and thus he had no reasonable probability
of prevailing in his malicious prosecution action. The court later granted Mangini's motion for
statutory attorney fees.
DISCUSSION
I
Anti-SLAPP Statute
In 1992 the
Legislature enacted section 426.16, known as the anti-SLAPP statute, to allow a
court to dismiss certain types of unmeritorious claims at an early stage in the
litigation. (Annette F. v. Sharon S. (2004)
119 Cal.App.4th 1146, 1159.) Section
425.16 provides: "A cause of action
against a person arising from any act of that person in furtherance of the
person's right of petition or free speech under the United
States Constitution 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."
(§ 425.16, subd. (b)(1).)
In deciding
an anti-SLAPP motion, the trial court must "engage in a two-step
process. First, the court decides
whether the defendant has made a threshold showing that the challenged cause of
action is one arising from protected activity. . . . If the court finds such a showing has been
made, it then determines whether the plaintiff has demonstrated a probability
of prevailing on the claim." (Equilon
Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 67.) Here, Agnew concedes his malicious
prosecution action is subject to anti-SLAPP scrutiny. (See Jarrow
Formulas, Inc. v. LaMarche (2003) 31 Cal.4th 728, 734-735.)
"[T]o
establish a probability of prevailing on the claim [citation], a plaintiff
responding to an anti-SLAPP motion must ' "state[] and substantiate[] 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.' [Citations.]
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 evidence
supporting the motion defeats the plaintiff's attempt to establish evidentiary
support for the claim." (
28 Cal.4th 811, 821.)
The court's
ruling on a special motion under section 425.16 is subject to our independent
review. (Annette F. v. Sharon S., supra, 119 Cal.App.4th at p.
1159.)
II
Element
A
To prevail
in a malicious prosecution action, the plaintiff must plead and prove "the
prior action (1) was initiated by or at the direction of the defendant and
legally terminated in the plaintiff's favor, (2) was brought without probable
cause, and (3) was initiated with malice."
(Siebel v. Mittlesteadt (2007)
41 Cal.4th 735, 740.) If any of these
elements is missing, a malicious prosecution action fails as a matter of
law. (Pender v. Radin (1994) 23 Cal.App.4th 1807, 1813-1814.)
"The
theory underlying the requirement of favorable termination is that it tends to
indicate the innocence of the accused, and coupled with the other elements of
lack of probable cause and malice, establishes the tort . . . [of malicious
prosecution]." (
150.) If the resolution of the
underlying litigation " ' "leaves some doubt as to the defendant's
innocence or liability[, it] is not a favorable termination, and bars that
party from bringing a malicious prosecution action against the underlying
plaintiff." ' " (
136 Cal.App.4th 1329, 1400.)
"It is
not essential to maintenance of an action for malicious prosecution that the
prior proceeding was favorably terminated following trial on the merits. However termination must reflect on the merits of the underlying action." (Lackner
v. LaCroix (1979) 25 Cal.3d 747, 750.)
"It is apparent 'favorable' termination does not occur merely
because a party complained against has prevailed in an underlying action. While the fact he has prevailed is an
ingredient of a favorable termination, such termination must further reflect on
his innocence of the alleged wrongful conduct.
If the termination does not relate to the merits--reflecting on neither
innocence of nor responsibility for the alleged misconduct--the termination is
not favorable in the sense it would support a subsequent action for malicious
prosecution." (Id. at p. 751, fn. omitted.)
The
voluntary dismissal of an action is commonly, but not always, a favorable termination
for purposes of malicious prosecution law.
(Villa v. Cole (1992) 4
Cal.App.4th 1327, 1335.) " '
"A termination [by dismissal] is favorable when it reflects 'the opinion
of someone, either the trial court or the
prosecuting party, that the action lacked merit or if pursued would result
in a decision in favor of the defendant." ' [Citation.]
. . . [¶] . . . The focus is not on the malicious
prosecution plaintiff's opinion of
his innocence, but on the opinion of
the dismissing party.' [Citation.] The test is whether or not the termination
tends to indicate the innocence of the defendant or simply involves technical,
procedural or other reasons that are not inconsistent with defendant's guilt.'
" (Contemporary Services Corporation v. Staff Pro Inc. (2007) 152
Cal.App.4th 1043, 1056-1057, some italics added; Robbins v. Blecher (1997) 52 Cal.App.4th 886, 893.)
When the
underlying action is voluntarily dismissed, " ' "the court examines
the record 'to see if the disposition reflects the opinion of the court or the
prosecuting party that the action would not succeed.' " [Citations.]' [Citation.] 'Should a conflict arise as to the
circumstances of the termination, the determination of the reasons underlying
the dismissal is a question of fact. [Citation.]'
" (Sycamore Ridge Apartments LLC v. Naumann (2007) 157 Cal.App.4th
1385, 1399 (Sycamore Ridge).)[4]
"To
determine 'whether there was a favorable termination,' we 'look at the judgment
as a whole in the prior action.' "
(Casa Herrera, Inc. v. Beydoun (2004)
32 Cal.4th 336, 341; Crowley v. Katleman (1994)
8 Cal.4th 666, 686.) "The Supreme
Court has . . . emphasized that although for purposes of determining probable
cause each theory asserted in a prior action must be separately considered,
separate consideration of prior theories of claims is not appropriate with
respect to the element of favorable termination: ' "[the] holding that a malicious
prosecution suit may be maintained where only one of the several claims in the
prior action lacked probable cause [citation] does not alter the rule there
must first be favorable termination of the entire
action." (Delany, supra, 42
Cal.App.4th at p. 829, citing Crowley v.
Katleman, supra, at p. 686.)
B
In support of the anti-SLAPP
motion, Mangini submitted evidence that its attorneys had confidence in the
merits of the claims against Agnew in the underlying action, but they
recommended that Bolen Painting dismiss him strictly for economic reasons. Bolen Painting recovered $55,000 in
settlement from the Chamber of Commerce and 17 board members, well more than
the $38,925 in compensatory damages it suffered; under a retainer agreement it
was paying attorney fees on an hourly basis, plus costs of litigation, it had
already incurred substantial fees and costs,[5] and it
would incur additional fees and costs in completing discovery and pursuing a
judgment against Agnew; the settlement amount would likely be offset against
any judgment it obtained against him; and any potential for obtaining punitive
damages against him was unknown. In
other words, even if Bolen Painting prevailed against Agnew at trial it may
have nothing to show for it but the expenditure of additional time and money.
In our
view, the voluntary dismissal of an underlying action does not reflect the
merits when undisputed evidence shows it was based on a sound financial
decision. As the court explained in
220 Cal.App.3d 337, 344-345 (Oprian): "It would be a sad day indeed if a
litigant and his or her attorney could not dismiss an action to avoid further
fees and costs, simply because they were fearful such a dismissal would result
in a malicious prosecution action. It is
common knowledge that costs of litigation, such as attorney's fees, costs of expert
witnesses, and other expenses, have become staggering. The law favors the resolution of
disputes. 'This policy would be
ill-served by a rule which would virtually compel the plaintiff to continue his
litigation in order to place himself in the best posture for defense of a
malicious prosecution action.' "
(See also Drummond v. Desmaris (2009)
176 Cal.App.4th 439, 456-457 [distinguishing Oprian and finding trier of fact could reject vague declaration
stating dismissal was for financial reasons "based upon its own contents
and surrounding circumstances," including pro per status of declarant and
appellate decision adversely affecting case].)[6]
Mangini's
evidence shifted the burden to Agnew to present evidence from which the trier
of fact could reasonably conclude his dismissal reflected the merits of the
underlying action. He did not, however,
meet his burden. Mangini's showing his
dismissal was motivated solely by economic factors was essentially
unopposed. Agnew's argument there was a
triable issue as to whether his dismissal reflected the merits of the
underlying action is conjectural rather than evidentiary.
For
instance, Agnew speculates the dismissal was not for economic reasons since the
$55,000 settlement did not satisfy Bolen Painting's litigation objectives of
obtaining punitive damages and attorney fees.
Even when a case has merit, however, the defendant's conduct or
financial status may not justify an award of punitive damages, and attorney
fees awards are generally subject to the court's broad discretion. The recovery of such items from Agnew was
questionable and foregoing a potential recovery in lieu of incurring additional
attorney fees and costs does not signify a belief in his innocence. The settlement would have included Agnew but for
his objection, and by dismissing him Bolen Painting was in the same situation
it would have been in had he joined in the settlement.
We also
disagree with Agnew's assertion the timing of his dismissal constitutes
Mangini's implicit concession the underlying action lacked merit. He was dismissed on November 29, 2006, about three weeks after Bolen
Painting and the other defendants entered into a settlement. Agnew asserts Bolen Painting was in a bad
position going into settlement discussions in September 2006 because there was
a defense summary judgment motion pending and its opposition was due on October
20, but it had not yet deposed Agnew or any of his co-defendants. The summary judgment motion is immaterial, however,
because the appellate record does not reveal the grounds for or merits of the
motion. It is the appellant's burden to
show error by an adequate record. (9 Witkin,
Cal. Procedure (5th ed. 2008) Appeal,
§ 628, p. 704.)
In any
event, Mangini submitted evidence showing the pending summary judgment motion
and state of discovery were not factors in Agnew's dismissal. The parties had engaged in written discovery,
some witnesses had been deposed, and Bolen Painting had successfully moved to
compel further discovery and for discovery sanctions from the defendants. The depositions of Agnew and others had been
noticed, but on August 24, 2006,
the parties mutually agreed to take all depositions off calendar pending the
outcome of settlement negotiations scheduled for September. Further, the court continued the hearing on
the summary judgment motion to allow Bolen Painting additional time to conduct
discovery and oppose the motion in the event there was no settlement. Moreover, on October 4, 2006, the court continued the trial from
November 13, 2006,
to March 2, 2007.
Additionally,
Agnew claimed in a declaration that he is factually innocent of fraud, but that
is immaterial in determining whether his dismissal reflects
merits of the underlying action.[7] Agnew also argues his success on demurrer on
the original complaint's alter ego theory of fraud, and the omission of the
alter ego theory from the SAC, indicates Mangini realized the fraud claim
lacked merit.[8] The demurrer, however, only addressed one
aspect of the fraud claim. Agnew ignores
that the fraud claim included other theories of fraud liability, such as the
board members' direct representations in flyers advertising golf tournaments
that one hundred percent of the donations would be given out in scholarships. Further, he ignores that the underlying
action included causes of action against him for negligence and breach of
fiduciary duty. He does not assert
Mangini recommended his dismissal as to other theories of fraud or as to the
counts for negligence or breach of fiduciary duty based on any perceived
innocence of Agnew.
As Agnew's
evidence raised no question of fact for a jury on the favorable termination
element of a malicious prosecution action, the court's ruling in Mangini's
favor on the anti-SLAPP motion was correct.
Given our holding, we are not required to discuss the elements of lack
of probable cause and malice.
III
Attorney Fees on Appeal
Mangini
requests statutory attorney fees on appeal.
(Code Civ. Proc., § 425.16, subdivision (c).) It is established that when a party is
entitled to attorney fees, they are available for services at trial and on
appeal. (Morcos v. Board of Retirement (1990) 51 Cal.3d 924, 927.) Mangini is the prevailing party on appeal,
and thus it is entitled to attorney fees.
"Although this court has the power to fix attorney fees on appeal,
the better practice is to have the trial court determine such fees." (Security
Pacific National Bank v. Adamo (1983) 142 Cal.App.3d 492, 498.)
DISPOSITION
The order
is affirmed, and the matter is remanded to the trial court for its
determination of an attorney fees award to Mangini for the appeal. Mangini is also entitled to costs on appeal.
McCONNELL, P. J.
WE CONCUR:
McINTYRE,
J.
IRION,
J.
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[1] Further statutory references are also
to the Code of Civil Procedure unless otherwise specified.
[2] The complaint also named Bolen
Painting and Bolen individually as defendants, but they are not involved in
this appeal.
