Zamos v. Stroud

• Decision Date: 19 April 2004
• Docket Number: No. S118032.,S118032.
• Citation: 87 P.3d 802,32 Cal.4th 958,12 Cal.Rptr.3d 54
• Parties: Jerome ZAMOS et al., Plaintiffs and Appellants, v. James T. STROUD et al., Defendants and Respondents.
• Court: California Supreme Court

12 Cal.Rptr.3d 54

87 P.3d 802

32 Cal.4th 958

Jerome ZAMOS et al., Plaintiffs and Appellants, v. James T. STROUD et al., Defendants and Respondents.

No. S118032.

Supreme Court of California.

April 19, 2004.

As Modified on Denial of Rehearing June 9, 2004.

Jerome Zamos, in pro. per., and for Plaintiffs and Appellants.

James T. Stroud, in pro per., and for Defendants and Respondents.

Milam & Larsen and Paul A. Larsen, Princeton, MN, for Association of California Insurance Companies as Amicus Curiae on behalf of Defendants and Respondents.

BROWN, J.

The question presented by this case is whether, assuming the other elements of the tort are established, an attorney may be held liable for malicious prosecution when he commences a lawsuit properly but then continue's to prosecute it after learning it is not supported by probable cause.¹ We conclude an attorney may be held liable for continuing to prosecute a lawsuit discovered to lack probable cause.

I. FACTUAL AND PROCEDURAL BACKGROUND²

The instant case for malicious prosecution is based upon a lawsuit (the fraud lawsuit) brought by Patricia Brookes (Brookes) — who is named as a defendant in this case but is not a party to this appeal — against [Jerome Zamos and Odion L. Okojie (collectively Zamos)]. Zamos had represented Brookes in another lawsuit (the foreclosure lawsuit) arising from the foreclosure on her house. Jerome Zamos and [ ] Okojie practiced law together. Jerome Zamos was the attorney who primarily represented Brookes in the foreclosure lawsuit, although Okojie made some appearances in that case.

After a jury trial of the foreclosure lawsuit, when it appeared that the jury was deadlocked, Brookes settled the lawsuit against some of the defendants in that case in exchange for $250,000 paid by those settling defendants as damages for emotional distress. Out of that $250,000, Zamos received $83,333.33 as a contingency fee, and Brookes received $166,666.67. As part of the settlement, Brookes expressly released all claims to her house. The terms of the settlement agreement were stated on the record before the court at two separate hearings. Brookes appeared by telephone at the first hearing, held on October 27, 1995, and appeared personally at the second hearing, held on October 30, 1995.

Almost two years later, in 1997, Brookes sued Zamos for fraud, among other claims, based upon certain alleged representations Zamos made to induce her to settle the foreclosure lawsuit. Brookes alleged that Jerome Zamos told her that (1) he would continue to represent her (to judgment) against the nonsettling defendants in the foreclosure lawsuit, (2) he would substitute into and represent Brookes in a malpractice lawsuit Brookes filed against her former attorneys (the malpractice lawsuit), (3) he would have her house returned to her, and (4) he would withdraw from representing her in the foreclosure lawsuit if Brookes did not accept the settlement. Brookes also alleged, among other things, that Mr. Zamos never intended to keep his first three promises and that Zamos withdrew from representing her against the nonsettling defendants, never substituted into the malpractice lawsuit, and never tried to have her house returned to her.

[James T. Stroud, Van T. Do, and their law firm, Stroud & Do (collectively Stroud)] represented Brookes in the fraud lawsuit. In October 1997, shortly after Brookes's fraud lawsuit was served on Odion Okojie, Zamos sent to Stroud reporter's transcripts of three hearings in the foreclosure lawsuit, which transcripts Zamos contended proved that Brookes's fraud claim had no merit. The first two hearings reflected in the transcripts were those held on October 27, 1995 and October 30, 1995, and the transcripts show that Brookes was told and agreed that she was releasing all claims to her house and that Zamos would not substitute into the malpractice lawsuit. The third hearing, held on January 29, 1996, was a hearing on Zamos's motion to be relieved as counsel in the foreclosure lawsuit. During that hearing, Jerome Zamos explained that he had submitted all of the paperwork necessary for entry of default against the nonsettling defendants, and the trial court explained to Brookes that Zamos would be relieved as counsel and that Brookes would be responsible for bringing the default to judgment. When the trial court asked Brookes whether "there [was] a problem" with relieving Zamos as counsel, Brookes responded, "No, not really." The transcript even shows that Brookes contended that Zamos was never her attorney of record, and she complained that Zamos forced her to come into court for the hearing; she asked the court, "Why couldn't he just send me whatever to be relieved of counsel?" A short time later, Brookes told the court, "I don't care if you sign him off or not. He's never been on."

After Stroud and Brookes refused to dismiss the fraud lawsuit against Zamos despite these transcripts, Zamos moved for summary judgment. In opposition to Zamos's motion for summary judgment, Stroud submitted a declaration signed by Brookes in which Brookes stated, among other things, that she agreed to settle the foreclosure lawsuit in reliance upon Zamos's promises to (1) continue representing her against the nonsettling defendants, (2) represent her in the malpractice lawsuit, and (3) have her house returned to her. The trial court questioned whether Brookes could establish that she was damaged as a result of Zamos's alleged fraud, but the court nonetheless denied Zamos's motion, although it did so "reluctantly," finding that Brookes's declaration raised a triable issue of fact regarding whether Zamos made the alleged promises.

Brookes's fraud lawsuit proceeded to trial before a judge who had not been the judge in any of the other proceedings in that case. Before the trial began, the trial judge informed the parties that he had read the transcripts of the three hearings discussed above in preparation for ruling on several motions. Based on the judge's understanding of Brookes's anticipated testimony, he warned Mr. Stroud several times that he needed to advise Brookes of her Fifth Amendment rights, and that he would notify the district attorney's office if Brookes's testimony at trial contradicted those transcripts because such testimony would be perjurious.

[Carl A.] Taylor and [Nancy M.] Peterson testified at the trial. Apparently (although the record is not entirely clear), Brookes was unable to testify due to health reasons, and Zamos had to put on the defense before the plaintiff's case-in-chief was completed. When Brookes failed to appear after all other witnesses had completed their testimony, Stroud asked for a continuance to allow her an additional opportunity to appear. The trial court denied Stroud's request and granted Zamos's motion for a nonsuit. In granting the motion, the court found that, even if Brookes testified in accordance with the offers of proof that had been made, "no reasonable jury would ever provide a judgment for [Brookes]." In addition, the court found that, based upon the transcripts of the hearings regarding the settlement of the foreclosure lawsuit, Brookes's settlement of that lawsuit "acts as a bar probably in the form of estoppel to [Brookes's fraud lawsuit]."

Following entry of judgment in the fraud lawsuit, Zamos filed the instant malicious prosecution action against Brookes, Stroud, Taylor, and Peterson. Zamos alleged on information and belief that Taylor encouraged Brookes to file the fraud lawsuit against Zamos and engaged Stroud to represent Brookes, and that Peterson urged Brookes to file the fraud lawsuit and gave false testimony to assist Brookes in prosecuting the lawsuit. Zamos also alleged that defendants prosecuted the fraud lawsuit to extort an unwarranted settlement by Zamos.

Stroud, Taylor, and Peterson filed a joint anti-SLAPP³ motion in which they argued that Zamos could not show a reasonable probability of success on the malicious prosecution claim. Stroud asserted that Zamos cannot show that the fraud lawsuit was brought without probable cause because Stroud's decision to file the action was based upon (1) Brookes's statements regarding Zamos's alleged promises; (2) corroboration by Peterson and, to a lesser degree, by Taylor; and (3) the timing of Zamos's alleged promises, Zamos's receipt of the contingency fee from the settlement, and Zamos's motion to be relieved as counsel in the foreclosure lawsuit. Taylor and Peterson asserted that Zamos [could not] hold them liable for malicious prosecution because their sole involvement with the fraud lawsuit was as witnesses, and thus they [were] protected by the litigation privilege.

In opposition to the anti-SLAPP motion, Zamos presented evidence that shortly after the fraud lawsuit was filed Stroud received the transcripts that Zamos contended gave notice to Stroud that the fraud lawsuit had no merit. Zamos also presented evidence that Taylor sought counsel to represent Brookes in the fraud lawsuit and gave assistance to Stroud during Peterson's deposition. (Taylor graduated from law school, although apparently he is not a licensed attorney.) Zamos contended that this evidence shows that Taylor was actively involved in maliciously prosecuting the fraud lawsuit. Finally, Zamos presented evidence that Peterson was not present or within hearing distance when Jerome Zamos spoke with Brookes about the settlement agreement in the foreclosure lawsuit, and therefore Peterson is liable for malicious prosecution because her assertion that she heard Mr. Zamos make the alleged promises at issue in the fraud lawsuit was demonstrably false.

The trial court granted the anti-SLAPP motion as to all of the moving parties. As to Stroud, the court found that Stroud had probable cause to bring the lawsuit based upon Brookes's representations that were corroborated by Taylor and Peterson. The court held that Taylor and Peterson were immune from liability under the ...