Gao v. Lu
Filed 12/17/12 Gao v. Lu CA2/7
California Rules of Court, rule 8.1115(a), prohibits courts
and parties from citing or relying on opinions not certified for publication or
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IN
THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND
APPELLATE DISTRICT
DIVISION
SEVEN
XIN GAO,
Plaintiff and Appellant,
v.
TONY M. LU,
Defendant and Respondent.
B238394
(Los Angeles
County
Super. Ct.
No. GC047450)
APPEAL from
a judgment of the Superior Court
of
County.
Jan A. Pluim, Judge.
Affirmed.
Xin Gao, in
pro. per., for Plaintiff and Appellant.
Tony M. Lu,
in pro. per., for Defendant and Respondent.
________________________
INTRODUCTION
This appeal arises from an action
for malicious prosecution by Appellant
Xin Gao against Respondent Tony Lu. Lu,
an attorney, represented Town House
Land (Miami)
Corporation (Town House) in an action for fraud that it filed against Gao. After Gao obtained a judgment of dismissal in
the underlying action, he sued Lu and Town House for malicious prosecution,
conspiracy, and abuse of process. In
response, Lu filed a special motion to strike under California Code of Civil
Procedure section 425.16, the anti-SLAPP statute.
strike. Because Gao did not make a prima
facie showing that Lu filed the fraud action against him without probable
cause, the trial court properly granted the special
A. Factual Summary
The background of this case involves four interrelated
lawsuits, the last of which is Gao’s malicious prosecution action against Lu
and the subject of the present appeal.
B. Original Lawsuit
On May 14, 2007, Lu represented Town House in a case alleging
multiple causes of action for breach of
contract, fraud, negligence, and restitution, against Deal to China (DTC)
and its principal, Gao. The case
concerned a joint venture agreement, under which DTC had allegedly promised to
secure a Standby Letter of Credit in the amount of $5,000,000 to help finance
Town House’s real estate ventures in China.
As collateral for the Letter, Town House executed a Deed of Trust (DTC
Deed of Trust) in the amount of $795,000 on real property located in Las
Vegas, NV (Nevada Property).
its face, the DTC Deed of Trust provides that the Nevada Property is security
for repayment of the $795,000 debt.
After some delay, Town House
contacted its bank in January 2007 to inquire about the status of the
Letter. On January 11, 2007, the bank informed Town House via fax
that it was rejecting the Letter because it had not been issued by a valid
banking institution.
DTC argued that it had performed
its contractual obligation to procure the Letter. Thus, upon Town House’s demand that DTC
release its lien on the Nevada Property, DTC refused to do so until it was paid
the $275,000 allegedly owed in commission.
The case
settled on September 14, 2007. Under the settlement agreement, DTC received
$150,000 and agreed to reduce its lien interest on the Nevada Property from
$795,000, the principal amount of the lien on record, to $350,000. On October
11, 2007, a Substitution of Trustee and Partial Release of Lien
Under Deed of Trust was recorded.
C. Nevada Lawsuit
On May 23, 2008, Excel Financial filed
an action against Town House, DTC, and other defendants; the complaint alleged
causes of action for equitable subrogation, temporary and permanent injunction,
negligent misrepresentation, and fraud.
The case involved a dispute over the priority of liens on the Nevada
Property. Lu represented Town House, as
well as its principal, Zhong Fang, in the action.
According to the complaint, Town
House obtained title to the Nevada Property for a purchase price of $1,150,000
on March 7, 2005. The complaint further alleged that Town House
had executed the DTC Deed of Trust in December, 2006. The DTC Deed of Trust, however, was not
recorded until February 9, 2007,
at 8:30 a.m. On that same day, Fang and Town House
acquired a loan in the amount of $675,000 from Excel. The Excel loan was secured by a Deed of Trust
against the Nevada Property, which was recorded on February 9, 2007, at 1:56
p.m. According to the
complaint, Fang and Town House represented that Excel’s Deed of Trust would
take a first deed of trust position against the Nevada Property.
According to statements made in
other pleadings, it appears that on February
19, 2008, DTC sold its lien interest of $350,000 to Glenview
Profit Sharing. A “Corporation
Assignment of Deed to Trust†reflecting the assignment of the DTC Deed of Trust
to Glenview was recorded on February 29, 2008. DTC also transferred a “Straight Note†dated December 7, 2006 and signed by Fang,
in the principal amount of $795,000 (Note).
The Note allegedly stated that Town House would pay interest at a yearly
rate of 12%. Thus, when Town House
defaulted on the loan, Glenview sought to foreclose on
the Nevada Property. On March 28, 2008, a Notice of Breach
and Default and Election to Sell Real Property Under Deed of Trust was recorded
against the Nevada Property on behalf of Glenview.
The trial court entered a judgment against all defendants
in the action on January 28, 2010. On April
26, 2010, Fang and Town House were dismissed from the suit. A final judgment in the amount of $410,000
was entered against DTC.
D. Underlying Lawsuit
On July 15, 2008, Town House filed
an action against Gao, alleging causes of action for fraud, cancellation of
instrument, slander of title, violation of Racketeer Influence and Corrupt
Organizations Act (RICO), 18 U.S.C. sections 1961-1968, violation of Business
and Professions Code section 17200 et seq., and seeking declaratory and
injunctive relief. Lu represented Town
House in the action.
The complaint
alleged that after the parties settled the original action, Gao, DTC, and other
defendants fabricated the Note and forged the signature of Fang to make the DTC
Deed of Trust “negotiable,†and then sold the Note to Glenview. Town House alleged that it had never executed
such a note in favor of DTC. On February
19, 2010, after the parties had conducted law and motion proceedings,
discovery, and mediation, Lu substituted out of the case. On June 10, 2010, Town House failed to appear
at the final status conference. As a
result, the trial court dismissed the action with prejudice, finding that Town
House had failed to prosecute the action without good cause.
E. Present Lawsuit
On May 27, 2011, Gao filed an
action for malicious prosecution,
conspiracy, and abuse of process against Lu, Fang, and Town House. In his complaint, Gao alleged that Lu
knowingly brought the underlying action for an improper purpose, namely to
avoid liability in the Nevada action and to “inflict[] maximum financial and
emotional distress†on Gao.
On August 29, 2011, Lu filed a
special motion to strike Gao’s complaint for malicious prosecution under
section 425.16. Lu asserted that Gao
could not demonstrate a probability of prevailing on the merits of his claims
because (1) the underlying fraud action had not terminated in Gao’s favor, (2)
Lu had probable cause to file a claim for fraud on behalf of Town House, and
(3) Lu did not initiate the fraud action with malice. Lu further contended that Gao’s malicious
prosecution action was actually the third lawsuit Gao had filed against
him. Additionally, Lu alleged that
during the pendency of the underlying action, Gao had “never complained†that
the suit was frivolous; nor had Gao requested a dismissal of the action.
On October 6, 2011, the trial court
heard Lu’s anti-SLAPP motion, and granted the special motion to strike. Specifically, the trial court ruled: “Plaintiff’s action arises from defendant’s
exercise of protected activity.
Plaintiff has failed to meet his burden of showing that he will probably
prevail on malicious prosecution, conspiracy, and abuse of process. Specifically, plaintiff has failed to offer
evidence that attorney Lu filed the underlying action without probable cause
and for an improper purpose. The
Complaint in the underlying action alleges and the Declaration by attorney Lu
states that plaintiff forged and fabricated a Promissory Note in the amount of
$350,000 which was later sold to Glenview Profit Sharing, LLC. In his Declaration, plaintiff fails to deny
that the Promissory Note was a forgery.â€
On October 21, 2011, Gao filed a
motion for reconsideration of the order granting Lu’s motion to strike. In his motion, Gao admitted that he had
failed to deny the allegations in his written opposition, but contended that,
in good faith, he believed that he had already denied Lu’s claims in the
pleadings he filed in the present action and the underlying action. On November 30, 2011, the trial court denied
Gao’s motion for reconsideration.
On December
29, 2011, Gao filed a timely notice of
appeal.
DISCUSSION
I.
Standard of Review
Section 425.16 provides for a
special motion to strike actions brought primarily to chill the valid exercise
of the constitutional rights of freedom of speech and petition. (See § 425.16, subd. (a).) The statute provides that: “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 the 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 ruling on an anti-SLAPP motion,
the trial court engages in a two-step process.
First, the court decides whether the defendant has made a threshold
showing that the acts at issue arose from protected
activity. (§ 425.16, subd. (b)(1);
Cal.App.4th 127, 135 (Summerfield).) If the court finds that such a showing has
been made, it then determines whether the plaintiff has demonstrated a
probability that he or she will prevail on the claim. (Ibid.)
“On appeal, we
independently review whether section 425.16 applies and whether the plaintiff
has a probability of prevailing on the merits.â€
(Summerfield,
Here, there is no dispute that the allegations of malicious prosecution,
conspiracy, and abuse of process in Gao’s complaint arise from constitutionally
protected activity and are subject to a special motion to strike under section
425.16. (See Navellier v. Sletten (2002) 29 Cal.4th 82, 89-90 [filing a
lawsuit].) Accordingly, the issue on
appeal is whether Gao met his burden of demonstrating a probability of
prevailing on the merits of his case against Lu.
II.
Probability of Prevailing on the Merits of the Action
‘“The term “probability [of prevailing]†in the anti-SLAPP
statute is synonymous with “reasonable probability.â€â€™â€ (§ 425.16, subd. (b)(2); Bleavins v. Demarest (2011) 196 Cal.App.4th 1533, 1541 (
of facts that would support a judgment in his or her favor. (Id.
at p. 1541.) For purposes of this
inquiry, the trial court looks at the pleadings and declarations, accepting as
true the evidence that favors the plaintiff and evaluating the defendant’s
evidence “‘“only to determine if it has defeated that submitted by the
plaintiff as a matter of law.†[Citation.]’†[Citations.] (Cole
v. Patricia A. Meyer & Associates, APC (2012) 206 Cal.App.4th 1095,
1105, citations (Cole).) However, “‘the court does not weigh the
evidence or make credibility determinations.
[Citation.]’†(
197.) In ruling on Lu’s special motion
to strike, the trial court stated that Gao failed to demonstrate a probability
of prevailing on his claims for malicious prosecution, conspiracy, and abuse of
process.
Malicious Prosecution
To prevail on a malicious
prosecution claim, a plaintiff must plead and prove that the prior lawsuit (1)
was commenced by or at the direction of the defendant and was pursued to a
legal termination favorable to the plaintiff, (2) was brought without probable
cause, and (3) was initiated with malice.
(Siebel v. Mittlesteadt (2007)
41 Cal.4th 735, 740.) The trial court
ruled that Gao did not meet his burden of proving the second and third elements
of the malicious prosecution claim. In
particular, the trial court noted that Gao failed to deny the allegations of
fraud in his declaration.
In ruling on the question of
probable cause, the court must decide whether the prior lawsuit was objectively
tenable based on the known facts and without regard to the adequacy of the
attorney’s investigation and legal research.
(Sheldon Appel Co. v. Albert &
Oliker (1989) 47 Cal.3d 863, 883 (Sheldon);
see Cole, supra, 206 Cal.App.4th at p. 1106 [Probable cause exists when
a lawsuit is based on facts reasonably believed to be true, and all asserted
theories are legally tenable under the known facts.]) The question is whether, as an objective
matter, any reasonable attorney would have thought the claim tenable. (Sheldon,
supra, 47 Cal.3d at p. 886.) “Only those actions that any reasonable
attorney would agree are totally and completely without merit may form the
basis for a malicious prosecution suit.â€
(Zamos v. Stroud (2004) 32
Cal.4th 958, 970.)
In his brief, Gao refers to several
alleged facts known to Lu, all of which appear to be irrelevant to the question
at hand. For example, Gao argues that Lu
was aware of the DTC Deed of Trust, which states on its face that the Nevada
Property is security for repayment of the $795,000 debt, “evidenced by one
promissory note of even date herewith.â€
Lu was also allegedly aware of the settlement terms, providing Gao a
$350,000 lien interest against the Nevada Property. According to Gao, this evidence indicates
that Lu should have known that Fang and Town House could have no claims against
Gao in relation to the assignment of his lien interest to Glenview. The underlying complaint, however, is focused
squarely on the allegation that Gao, DTC, and others had forged, or conspired
to forge, the Note to make the DTC Deed of Trust “negotiable†in their dealings
with Glenview. The complaint further
alleges that Town House had never executed such a promissory note in favor of
DTC. Thus, Gao’s argument is misplaced,
as he fails to discuss facts relevant to the allegations of fraud against him,
but instead focuses on the validity of his $350,000 lien, a lien not at issue
here.
In his
response, Lu presents the allegations of fraud in the underlying complaint,
which Gao did not controvert, or demonstrate that he could controvert with
admissible evidence. By way of
background, the complaint refers to the DTC Deed of Trust that was executed
prior to the settlement in the original action, as well as the eventual
settlement terms reached in that case. Paragraph 14 of the complaint alleges that
“some time after the settlement aforementioned, GAO, DEAL TO CHINA, LI,
SCHULJAK, and others conspired and fabricated a Straight Note, and forged the
signature of Zhong Fang, Plaintiff’s principal.
As part of the Straight Note, it is purported that Plaintiff would pay
interest at a yearly rate of 12.00%, plus other terms and penalties.†Paragraphs 15 and 16 further allege that DTC
and Gao fabricated the Note “in order to make the Deed of Trust negotiable,â€
and then “sold the Straight Note to Glenview.â€
Paragraph 17 refers to the eventual Notice of Breach and Default that
was recorded against the Nevada Property on behalf of Glenview. Gao’s failure to demonstrate that any of the
allegations were false left the court without any basis to determine the
complaint had been brought without probable cause.
Conspiracy and Abuse of Process
Gao argues that the trial erred because it failed to
address the conspiracy and abuse of process claims in its ruling on the special
motion to strike. The record, however,
indicates that the trial court determined:
“Plaintiff has failed to meet his burden of showing that he will
probably prevail on malicious prosecution, conspiracy, and abuse of
process.†In his brief, Gao also fails
to make any arguments or provide any authorities in support of his conspiracy
and abuse of process claims. The record
supports the trial court’s ruling that Gao failed to make a prima facie showing
of both claims.
Conspiracy allegation.
Civil conspiracy is not an
Equipment Corp. v. Litton Saudi Arabia Ltd. (1994) 7 Cal.4th 503,
510-511.) “Standing alone, a conspiracy
does no harm and engenders no tort liability.â€
(Id. at 511.) Thus, the conspiracy must be to commit some
other unlawful act or tort. (
A complaint seeking to impose liability on a defendant on the basis of
conspiracy must allege: (1) the
formation and operation of the conspiracy; (2) the wrongful act or acts done
pursuant thereto; and (3) the damage resulting.
(Ibid.)
In the present complaint, Gao’s
second cause of action for “Conspiracy to Commit Malicious Prosecution†names
all defendants and specifically incorporates all the allegations of the first
cause of action for malicious prosecution.
In essence, Gao relies on his allegations of malicious prosecution,
allegations as to which he failed to make a prima facie showing of supporting
facts. Without the malicious prosecution
cause of action, Gao’s conspiracy cause of action against Lu cannot
survive.
ii. Abuse of Process.
The tort of abuse of process
constitutes the use of a legal process against another to accomplish a purpose
for which it is not designed. (
40, 44.) To prevail on an abuse of
process claim, the plaintiff must allege and prove that (1) the defendant had
an ulterior motive in using the processes of court, and (2) the defendant acted
willfully in the use of the legal process for a purpose other than the one for
which it was designed. (
Bernhard, Weiss & Karma, Inc. (1986) 42 Cal.3d 1157, 1168 (
Gao’s third cause of action for
abuse of process is based on the general allegations of the first two causes of
action for malicious prosecution and conspiracy. The third cause of action, therefore, repeats
the allegation that Lu filed the underlying action on behalf of Town House for
an improper purpose—essentially to avoid liability in the Excel action. It also adds an additional paragraph alleging
that because Fang and/or Town House had suffered no damages as to their fraud
claims, they could have no valid claim against Gao.
The heart of Gao’s abuse of process
claim is based on the allegation that Lu misused the litigation process by
filing a frivolous lawsuit. As such, his
abuse of process claim fails because the act of filing a lawsuit does not
constitute an abuse of process, however motivated. As our Supreme Court has explained:
“The relevant California
authorities establish . . . that while a defendant’s act of improperly
instituting or maintaining an action may, in an appropriate case, give rise to
a cause for malicious prosecution, the mere filing or maintenance of a
lawsuit—even for an improper purpose—is not a proper basis for an abuse of
process action. [Citations.] ¶ The
rationale underlying these decisions is not difficult to ascertain. The elements of the common law
malicious-prosecution cause of action have evolved over time as an appropriate
accommodation between the freedom of an individual to seek redress in the
courts and the interest of a potential defendant in being free from unjustified
litigation. In order to avoid an
improper ’chilling‘ of the right to seek redress in court, the common law
provides that to prevail in a tort action for malicious prosecution a party
must demonstrate [favorable termination, lack of probable cause, and malice] .
. . . Because the lack-of-probable cause requirement in the malicious prosecution
tort plays a crucial role in protecting the right to seek judicial relief
[citation], we agree with the prior decisions which have concluded that this
element may not be circumvented through expansion of the abuse of process tort
to encompass the alleged improper filing of a lawsuit.†(Oren,
supra, 42 Cal.3d at pp.
1169-1170.)
For these
reasons, Gao failed to meet his burden of showing a probability of success on
the abuse of process cause of action.
DISPOSITION
The judgment is affirmed. Respondent shall recover his costs on appeal.
ZELON,
J.
We concur:
WOODS, Acting P. J. SEGAL, J.
name="_ftn1" title="">[1]
Participation.†(Jarrow Formulas, Inc. v. LaMarche (2003) 31 Cal.4th 728, 732, fn.
1.) Unless otherwise indicated, all
statutory references are to the Code of Civil Procedure.
name="_ftn2" title="">[2]
and related actions, contained in the record on appeal.
