This appeal is brought by Plaintiffs-Appellants Ann Sue Isobe (Isobe) and Glenn Nobuki Murakami (Murakami) (collectively Plaintiffs-Appellants) challenging the rulings by the Circuit Court of the First Circuit (circuit court)
Following its rulings in favor of Hochberg, the circuit court granted Hochberg's motion pursuant to Rule 54(b) of the Hawai`i Rules of Civil Procedure (HRCP) for certification and entry of final judgment on the claims asserted against him.
In this appeal, Plaintiffs-Appellants Isobe and Murakami assert the following points of error:
(1) The circuit court erred by misconstruing the opinion of the Hawai`i Supreme Court in 808 Development, LLC v. Murakami, 111 Haw. 349, 141 P.3d 996 (2006) and holding that Plaintiffs-Appellants were precluded from pursuing claims against attorney Hochberg for slander of title, abuse of process, or malicious prosecution for initiating and litigating a mechanic's lien application that was later dismissed.
(2) the circuit court erred in applying a litigation privilege to the filing of expunged notices of pendency of action (NOPAs), thus barring the slander of title, abuse of process, and malicious prosecution claims against Hochberg based on the alleged filing of those NOPAs.
(3) the circuit court committed reversible error:
For the reasons set forth below, we hold that: (1) claim preclusion and issue preclusion do not apply to bar the claims asserted against Hochberg; (2) an absolute litigation privilege applies to provide immunity for Hochberg from the slander of title claim; (3) no litigation privilege applies for the abuse of process and malicious prosecution claims; (4) the allegations in the First Amended Complaint do not support a claim for abuse of process and thus dismissal of that claim is warranted; and (5) as to the malicious prosecution claim, dismissal and summary judgment are appropriate as to certain aspects of that claim, but not in its entirety.
The claims against Hochberg stem from: his representation of Michael David Sakatani (Sakatani) and Christine Marie Sakatani (collectively, the Sakatanis) and 808 Development LLC (808 Development) in Hogg v. Murakami, et al., Civil No. 03-1-1712 (Foreclosure Action); and his representation of 808 Development in 808 Development LLC v. Murakami, et al., M.L. No. 04-1-0002 (Mechanic's Lien Action). Plaintiffs-Appellants Isobe and Murakami were adverse parties to Hochberg's clients in both the Foreclosure Action and the Mechanic's Lien Action.
Plaintiffs-Appellants' original Complaint based their claims against Hochberg on allegations that: (1) Hochberg filed the Mechanic's Lien Action on behalf of 808 Development and engaged in various acts of misconduct in the course of that litigation; and (2) Hochberg aided and abetted 808 Development's improper filing of two NOPAs (also referred to as lis pendens), one in the Foreclosure Action (First NOPA) and one while the Mechanic's Lien Action was on appeal (Second NOPA), both of which were later expunged.
In their First Amended Complaint,
In their original Complaint, Plaintiffs-Appellants lay out their alleged dispute with Hochberg's clients, the Sakatanis and 808 Development, as well as their claims against Hochberg and Kristy Shin Wells (Wells).
The Complaint alleges that 808 Development lost its contractor's license on September 30, 2002, and that thereafter:
(Emphasis added).
With regard to the Mechanic's Lien Action, the Complaint alleges that: 808 Development filed that action on January 16, 2004 based on a construction agreement, claiming a statutory lien in the amount of $1,830,500 less payments made; a hearing was continued at the insistence of 808 Development, with Hochberg arguing he needed more time to look for documentation although he was unable to provide any documentation of detailed construction invoices or to prove that 808 Development had complied with written lien disclosure requirements under Hawaii Revised Statutes (HRS) § 444-25.5 (Supp. 2003); and at a hearing on March 2, 2004, the circuit court granted a motion dismissing the Mechanics Lien Action because 808 Development had not complied with the written lien disclosure requirements mandated by HRS § 444-25.5 and Hiraga v. Baldonado, 96 Haw. 365, 31 P.3d 222 (App. 2001).
With regard to the Foreclosure Action, the Complaint asserts that action was initiated against Isobe and Murakami by three mortgage holders from whom they had borrowed money to acquire and construct their residence — Jim Hogg, Joseph E. Spadaro, and John Nelson Spadaro — who were suing because construction on the residence had been delayed and abandoned by 808 Development after losing its contractor's license, causing most of those mortgages to mature unpaid. The Complaint alleges that, in addition to the application for the mechanic's lien, 808 Development and the Sakatanis asserted claims against Isobe and Murakami in the Foreclosure Action on January 5, 2004 for the "identical $1,830,500.00 worth of construction claims[.]" Moreover, the Complaint alleges, 808 Development filed a NOPA on January 16, 2004, the First NOPA, thus complicating the Plaintiffs-Appellants' attempts to resolve the foreclosure case by refinancing.
The Complaint alleges that Plaintiffs-Appellants retired the mortgage debt owed to Jim Hogg and while working out settlement terms with Joseph E. Spadaro and John Nelson Spadaro to terminate the Foreclosure Action, pay off another debt, and completely refinance the mortgages on their residence, Plaintiff-Appellants filed a motion seeking to expunge 808 Development's NOPA "which was otherwise blocking all already signed settlements." According to the Complaint, at a hearing on October 12, 2004, the court indicated it saw no basis for 808 Development's NOPA, but gave Hochberg additional requested time to submit supplemental papers, and that thereafter "Hochberg had to concede that he had erroneously claimed that 808 [Development] had a right to file [the NOPA.]" Hochberg allegedly made the identical claims in defending the NOPA that he had made in defense of 808 Development's mechanic's lien application.
The Complaint alleges that on October 28, 2004, after a judgment was signed dismissing the Mechanic's Lien Action, the circuit court in the Foreclosure Action ordered the First NOPA immediately expunged. However, it is alleged that approximately four hours after the circuit court's oral ruling expunging the First NOPA in the Foreclosure Action, 808 Development filed an identical NOPA (the Second NOPA) on the same day in the Hawai`i Supreme Court, where an appeal had been taken in the Mechanic's Lien Action. The Complaint alleges that the Second NOPA forced further protracted litigation in the Foreclosure Action, where Plaintiffs-Appellants had allegedly entered into final written settlement agreements within the past two weeks with Joseph E. Spadaro and John Nelson Spadaro, which was allegedly known by the Sakatanis and Hochberg. The Complaint alleges that, although the Hawai`i Supreme Court eventually ordered the Second NOPA expunged, the delay resulted in a foreclosure decree in favor of John Spadaro such that Plaintiffs-Appellants had to purchase the property at the foreclosure sale and, moreover, Plaintiffs-Appellants had to enter new and further settlement arrangements with Joseph E. Spadaro to prevent him from similarly foreclosing.
The Complaint also alleges that thereafter, Plaintiffs-Appellants Isobe and Murakami prevailed in the appeal that had been taken by 808 Development in the Mechanic's Lien Action, as set forth in the supreme court's opinion in 808 Development.
The Complaint alleges Plaintiffs-Appellants' efforts to refinance were further blocked by the $700,000 mortgage recorded by the Sakatanis. Plaintiffs-Appellants thus allege they filed a petition in Land Court to expunge the mortgage, which was still pending.
The Complaint alleges that, as of the time the Complaint was filed, the validity of the $700,000 mortgage remained unadjudicated and that proceedings in the Foreclosure Action remained pending.
As a result of the alleged acts of, inter alia, Hochberg, the Plaintiffs-Appellants alleged various damages since the filing of the Foreclosure Action and the Mechanic's Lien Action.
The First Amended Complaint added one paragraph containing forty subparagraphs of various and repetitive allegations, all specific to Hochberg. This complaint added specific allegations that Hochberg acted with malice, with certain intentional purposes and ulterior motives, and with the intent and ulterior motive of causing substantial financial damage and injury to Plaintiffs-Appellants unrelated to the merits of his clients' cases. The First Amended Complaint further specified Hochberg's alleged actions related to the Foreclosure Action and the Mechanic's Lien Action.
Plaintiffs-Appellants Isobe and Murakami filed their Complaint on October 30, 2006.
On December 7, 2006, Hochberg filed a Motion to Dismiss the Complaint, asserting that all claims against him should be dismissed. Plaintiffs-Appellants opposed the motion to dismiss and a hearing was held on January 3, 2007. The morning of the hearing, Plaintiffs-Appellants filed their First Amended Complaint. At the hearing, the circuit court orally granted the motion to dismiss in part, explaining that it would not grant dismissal to the extent the claims arose from the filing of the two NOPAs. On February 13, 2007, the circuit court entered its written order. As to each of the three causes of action asserted against Hochberg, the circuit court granted partial dismissal:
On February 7, 2007, Hochberg filed a motion for summary judgment on the remaining claims against him, which he framed as the causes of action for slander of title, abuse of process, and malicious prosecution arising from the filing of the two NOPAs. The circuit court granted the motion in its entirety. With respect to the remaining aspects of the slander of title and abuse of process claims, the circuit court granted summary judgment for Hochberg based on its determination that a litigation privilege precluded those claims. With respect to the remaining aspects of the malicious prosecution claim, the circuit court held that Hochberg's declaration in support of the summary judgment motion was the only evidence as to why the NOPAs were filed and therefore there were no genuine issues of material fact as to the required element of malice.
On April 26, 2007, the circuit court entered its written order granting Hochberg's motion for summary judgment.
On December 27, 2007, the Amended Final Judgment was entered as to the claims against Hochberg.
On January 7, 2008, Plaintiffs-Appellants timely appealed from the Amended Final Judgment.
We review the circuit court's ruling on the motion to dismiss de novo. Kamaka v. Goodsill Anderson Quinn & Stifel, 111 Haw. 92, 104, 176 P.3d 91, 103 (2008).
Kahala Royal Corp. v. Goodsill Anderson Quinn & Stifel, 113 Haw. 251, 266, 151 P.3d 732, 747 (2007).
We review a circuit court's grant of summary judgment de novo. Id. (citation omitted).
Id. (quoting Price v. AIG Hawai`i Ins. Co., 107 Haw. 106, 110, 111 P.3d 1, 5 (2005)).
In granting Hochberg's motion to dismiss in part, the circuit court dismissed all three of the asserted claims to the extent that they arose out of the mechanic's lien application and the proceedings in the Mechanic's Lien Action (except the filing of the Second NOPA). The circuit court based its ruling on "claim preclusion, res judicata and/or collateral estoppel" given the supreme court's opinion in the Mechanic's Lien Action, 808 Development. In that prior litigation, Plaintiffs-Appellants' motion for sanctions under HRCP Rule 11 had been rejected.
Considering their point of error and the arguments they point to having made in the circuit court, Plaintiffs-Appellants essentially take issue with the partial dismissal of their claims based on the doctrines of "claim preclusion, res judicata and/or collateral estoppel." We agree with Plaintiffs-Appellants that dismissal of their claims on these grounds was not proper.
As expressed by the Hawai`i Supreme Court:
It is well-settled in our jurisdiction that
Exotics Hawai`i-Kona, Inc. v. E.I. Dupont De Nemours & Co., 104 Haw. 358, 364-65, 90 P.3d 250, 256-57 (2004) (brackets in original, footnote omitted).
Claim preclusion "prohibits a party from relitigating a previously adjudicated cause of action." Bremer v. Weeks, 104 Haw. 43, 53, 85 P.3d 150, 160 (2004) (emphasis added) (citation and internal quotation marks omitted). On the other hand, "[i]ssue preclusion applies to a subsequent suit between the parties or their privies on a different cause of action and prevents the parties or their privies from relitigating any issue that was actually litigated and finally decided in the earlier action." Id. at 54, 85 P.3d at 161 (citation and internal quotation marks omitted).
In the instant action, the circuit court relied upon both claim preclusion and issue preclusion in its partial grant of dismissal. We conclude, however, that neither doctrine applies given the claims and issues that were litigated and decided in the Mechanic's Lien Action and the claims asserted against Hochberg in this case.
The party asserting claim preclusion has the "burden of establishing that (1) there was a final judgment on the merits, (2) both parties are the same or in privity with the parties in the original suit, and (3) the claim decided in the original suit is identical with the one presented in the action in question." Id. at 54, 85 P.3d at 161.
Hochberg's motion to dismiss asserted that because the supreme court had rejected Isobe and Murakami's request for sanctions under HRCP Rule 11 in 808 Development, the claims against him in this case for slander of title, abuse of process, and malicious prosecution were precluded.
In 808 Development, the supreme court addressed Isobe and Murakami's contention under HRCP Rule 11 that "808 Development's lien application was frivolous, wholly lacking in any factual or legal support." 111 Hawai`i at 364, 141 P.3d at 1011 (internal quotation marks and brackets omitted). In that case, the circuit court denied Isobe and Murakami's request for Rule 11 sanctions on the grounds that 808 Development had argued for a good faith extension of the law. Id. at 353, 141 P.3d at 1000. The supreme court, in turn, held that the circuit court had not erred in denying the Rule 11 motion. Id. at 365, 141 P.3d at 1012.
Claim preclusion does not apply to bar Plaintiffs-Appellants Isobe and Murakami's claims against Hochberg in the instant case. First, the motion for sanctions under HRCP Rule 11 was not a "claim" for which there was a "judgment on the merits." C.f., Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 396 (1990) ("[T]he imposition of a Rule 11 sanction is not a judgment on the merits of an action. Rather, it requires the determination of a collateral issue: whether the attorney has abused the judicial process, and, if so, what sanction would be appropriate."); Cohen v. Lupo, 927 F.2d 363, 365 (8th Cir. 1991) ("Rule 11 sanctions must be sought by motion in a pending case; there can be no independent cause of action instituted for Rule 11 sanctions.") (citation omitted); Robinson v. Eng, 148 F.R.D. 635, 640 (D. Neb. 1993).
Second, even if an HRCP Rule 11 motion could be construed as a "claim," the claims asserted in this case are not "identical" with the HRCP Rule 11 motion that was litigated in the Mechanic's Lien Action. The differences are underscored by comparing the elements for the claims asserted in this case with the requirements for HRCP Rule 11 sanctions.
Slander of title has been discussed in prior Hawai`i appellate opinions, but not yet formally adopted. We now recognize it as a common law tort in Hawai`i and adopt the following generally recognized elements to establish a claim for slander of title:
50 Am. Jur. 2d Libel and Slander § 530 (2006); C.f. B & B Inv. Grp. v. Gitler, 581 N.W.2d 17, 20 (Mich. Ct. App. 1998) ("To establish slander of title at common law, a plaintiff must show falsity, malice, and special damages, i.e., that the defendant maliciously published false statements that disparaged a plaintiff's right in property, causing special damages.") (citations omitted); Kensington Dev. Corp. v. Israel, 407 N.W.2d 269, 272 (Wis. Ct. App. 1987).
With regard to a cause of action for abuse of process, there are two essential elements: "(1) an ulterior purpose and (2) a wilful act in the use of the process which is not proper in the regular conduct of the proceeding." Young v. Allstate Ins. Co., 119 Haw. 403, 412, 198 P.3d 666, 675 (2008) (citation omitted).
With regard to a cause of action for malicious prosecution, there are three essential elements: "(1) that the prior proceedings were terminated in the plaintiffs' favor, (2) that the prior proceedings were initiated without probable cause, and (3) that the prior proceedings were initiated with malice." Myers v. Cohen, 67 Haw. 389, 391, 688 P.2d 1145, 1148 (1984) (citations omitted).
On the other hand, the supreme court considered Isobe and Murakami's assertions under HRCP Rule 11
Moreover, because HRCP Rule 11 is patterned after and substantially similar to Federal Rules of Civil Procedure (FRCP) Rule 11, we are guided by authorities addressing and interpreting FRCP Rule 11. See Gap v. Puna Geothermal Venture, 106 Haw. 325, 341, 104 P.3d 912, 928 (2004). The Advisory Committee Notes for the 1993 amendments to FRCP Rule 11 state that "Rule 11 is not the exclusive source for control of improper presentation of claims, defenses, or contentions[,]" and further expressly advises that "Rule 11 does not preclude a party from initiating an independent action for malicious prosecution or abuse of process." Fed. R. Civ. P. 11, Advisory Committee Notes (1993 Amendments)(emphasis added). On January 1, 2000, HRCP Rule 11 was amended to incorporate, in almost identical language, the 1993 amendments to FRCP Rule 11.
Like its federal counterpart, HRCP Rule 11 serves a purpose that is distinct from the tort claims asserted in this case. The Advisory Committee Notes for the 1993 amendments to FRCP Rule 11 also state that "the purpose of Rule 11 sanctions is to deter rather than to compensate[.]" Id.; see also Canalez v. Bob's Appliance Serv. Ctr., Inc., 89 Haw. 292, 303, 972 P.2d 295, 306 (1999). Courts from other jurisdictions have generally concluded that FRCP Rule 11, or similar rules, are not a substitute for tort claims like malicious prosecution. See Bus. Guides v. Chromatic Commc'ns. Enters., 498 U.S. 533, 553 (1991) (rejecting the argument "that [FRCP] Rule 11 creates a federal common law of malicious prosecution" and stating that "[t]he main objective of the Rule is not to reward parties who are victimized by litigation; it is to deter baseless filings and curb abuses."); Plus Intern., Inc. v. Pace, 689 So.2d 160, 162 (Ala. Civ. App. 1996) (an award or denial of sanctions under a statute similar to FRCP Rule 11 did not have claim preclusion effect in subsequent malicious prosecution action); Gordon v. Marrone, 590 N.Y.S.2d 649, 654-55 (N.Y. Sup. Ct. 1992), aff'd, 616 N.Y.S.2d 98 (N.Y. App. Div. 1994) (holding that a court rule similar to FRCP Rule 11 does not obviate or replace the common law tort of malicious prosecution, noting the differences in the purpose and the relief afforded under each).
Therefore, the rejection of Plaintiffs-Appellants' HRCP Rule 11 motion in the Mechanic's Lien Action does not bar, under the doctrine of claim preclusion, the claims asserted herein for slander of title, abuse of process, and malicious prosecution.
The party asserting issue preclusion must establish that:
Bremer, 104 Hawai`i at 54, 85 P. 3d at 161 (emphasis added) (citation omitted) (brackets in original). The parties raise no dispute regarding the last three requirements. However, they disagree as to the first requirement, that is, whether the HRCP Rule 11 issues decided by the supreme court in the Mechanic's Lien Action can be construed as identical to issues required to prove slander of title, abuse of process, and malicious prosecution.
As to the slander of title and malicious prosecution claims, Hochberg argues that the supreme court's ruling on the HRCP Rule 11 motion — upholding the determination that 808 Development made a good faith argument for the extension of the law and that 808 Development's actions in the Mechanics Lien Action were not frivolous — "precludes a finding of malice" which is a required element for these claims. As to the abuse of process claim, Hochberg contends that there can be no finding that there was a misuse of process given the supreme court's ruling and thus that claim must fail as well. Hochberg therefore argues that all three claims were properly dismissed to the extent that they arise from the mechanic's lien application and the proceedings in the Mechanic's Lien Action,
In the Mechanic's Lien Action, Isobe and Murakami argued that 808 Development's lien application was frivolous because:
808 Dev., 111 Hawai`i at 364, 141 P.3d at 1011 (brackets in original).
The supreme court rejected these arguments and explained the basis for its ruling as follows:
Id. at 365, 141 P.3d at 1012. Thus, the supreme court based its decision on fairly narrow and particular grounds.
Although some of the factual assertions underlying Plaintiffs-Appellants' prior HRCP Rule 11 motion are also made to support their claims in this case, the issues decided for the HRCP Rule 11 motion are not identical to the issue of malice for purposes of the slander of title or malicious prosecution claims.
The malice element for slander of title has been described as follows:
50 Am. Jur. 2d Libel and Slander § 531 (2006) (internal footnotes omitted). The issues decided by the supreme court for the HRCP Rule 11 motion did not involve any allegation of slanderous or disparaging statements made with malice, and thus the issues decided for the Rule 11 motion are far from identical to the issue of malice for the slander of title claim in this case.
With regard to the malice element for a malicious prosecution claim, the Hawai`i Supreme Court has explained as follows:
Young, 119 Hawai`i at 419, 198 P. 3d at 682 (brackets omitted) . Although perhaps a closer call, again, the issues litigated and decided relative to the HRCP Rule 11 motion in the Mechanic's Lien Action are not identical to the malice element for the malicious prosecution claim in this case. The allegations in the First Amended Complaint regarding the Mechanic's Lien Action are broader than the issues considered and decided for the HRCP Rule 11 motion. Moreover, although one potential basis for an HRCP Rule 11 motion could be that a pleading, written motion, or other paper signed by an attorney was "presented for any improper purpose," see HRCP Rule 11(b)(1), that issue was not addressed or decided in 808 Development.
In Myers, the plaintiff brought a malicious prosecution claim against an attorney who had filed a counterclaim against the plaintiff in a prior lawsuit. In support of his malicious prosecution claim, the plaintiff pointed to an order in the prior lawsuit granting attorney's fees and finding that the counterclaim was "completely frivolous and totally unsupported by the facts and the law[.]" 67 Haw. at 392, 688 P.2d at 1148.
We thus conclude that the prior ruling in the Mechanic's Lien Action — that 808 Development argued for a good faith extension of the law and its arguments were not frivolous under HRCP Rule 11 — can be evidence on the issue of malice for the malicious prosecution claim, but the prior ruling is not necessarily identical to or singularly dispositive of the malice issue.
With regard to the abuse of process claim, we likewise conclude that issue preclusion does not bar that claim in this case. As previously noted, the elements required for an abuse of process claim are: "(1) an ulterior purpose and (2) a wilful act in the use of the process which is not proper in the regular conduct of the proceeding." Young, 119 Hawai`i at 412, 198 P.3d at 675 (citations omitted). For the first element, ulterior purpose, the question is whether the defendant used legal process "primarily" for a purpose that was not legitimate. Id. at 413-14, 198 P.3d at 676-77. For the second element, willful act, the Hawai`i Supreme Court has explained that:
Id. at 414, 198 P.3d at 677 (citing Prosser and Keeton on Torts § 121, at 898 (5th ed., W. Page Keeton et al. eds., 1984)). Further, "the plaintiff must prove a `willful act' distinct from the use of process per se." Id. at 416, 198 P.3d at 679. None of these issues were litigated or decided for purposes of the HRCP Rule 11 motion in the Mechanic's Lien Action.
Based on the above, we conclude that it was error for the circuit court to rely on the doctrines of claim preclusion or issue preclusion as the basis to dismiss, in part, the claims of slander of title, abuse of process and malicious prosecution.
As discussed below, however, dismissal as to some of these claims was proper on other grounds. "[W]here the circuit court's decision is correct, its conclusion will not be disturbed on the ground that it gave the wrong reason for its ruling." Reyes v. Kuboyama, 76 Haw. 137, 140, 870 P.2d 1281, 1284 (1994); see also Strouss v. Simmons, 66 Haw. 32, 40, 657 P.2d 1004, 1010 (1982) ("An appellate court may affirm a judgment of the lower court on any ground in the record which supports affirmance."); McCarthy v. Yempuku, 5 Haw.App. 45, 52, 678 P.2d 11, 16 (1984).
In its April 26, 2007 order, the circuit court granted summary judgment for Hochberg as to all remaining claims asserted in the First Amended Complaint. Hochberg had argued that a litigation privilege precluded certain claims against him in this case. As explained during the hearing on the motion, the circuit court held that a litigation privilege applied to the claims against Hochberg for slander of title and abuse of process.
Because we concluded above that claim preclusion and issue preclusion do not bar any part of the claims asserted, we will consider Hochberg's assertion of a litigation privilege as it applies to the full extent of the claims asserted against him in the First Amended Complaint.
Plaintiffs-Appellants contend on appeal that there is no litigation privilege in Hawai`i barring claims against an attorney for slander of title, abuse of process, or malicious prosecution. They focus their argument on multiple cases from other jurisdictions and the core of their argument is that the privilege recognized in Albertson v. Raboff, 295 P.2d 405, 409 (Cal. 1956) has been abandoned or abrogated by California statute and subsequent cases.
In turn, Hochberg argues on appeal that this court should apply the litigation privileges previously recognized in Hawai`i in Matsuura v. E.I. du Font de Nemours & Co., 102 Haw. 149, 73 P.3d 687 (2003), and Kahala Royal, 113 Haw. 251, 151 P.3d 732.
Hawai`i has its own line of cases relevant to the issues on appeal, and we therefore need not rely on Albertson and its progeny. Hawaii's appellate courts have already delineated certain contours of the litigation privilege when claims are asserted against an attorney. Considering these authorities and their logical extension, we conclude that an absolute litigation privilege applies with respect to the slander of title claim, but that no litigation privilege applies to the claims for abuse of process and malicious prosecution.
"Hawai`i courts have applied an absolute litigation privilege in defamation actions for words and writings that are material and pertinent to judicial proceedings." Matsuura, 102 Hawai`i at 154, 73 P.3d at 692 (citations omitted) (emphasis added). Moreover, it has been recognized that the privilege adopted in Hawai`i is consistent with the privilege as set forth in Restatement (Second) of Torts § 586 (1977). McCarthy, 5 Haw. App. at 48-49, 678 P.2d at 14-15.
Restatement (Second) of Torts § 586 states:
In McCarthy, this court further explained the policy reasons and the requirements for the privilege to apply:
5 Haw. App. at 48-49, 678 P.2d at 14. (internal citations omitted).
It does not appear that Hawaii's appellate courts have previously considered whether to apply this absolute litigation privilege to a claim for slander of title. However, it is generally recognized that the absolute litigation privilege should be extended to apply to a slander of title claim. The Restatement (Second) of Torts references slander of title as one type of a claim for "injurious falsehood." See Restatement (Second) of Torts §§ 623A and 624. In turn, Restatement (Second) of Torts § 635 extends the absolute litigation privilege to injurious falsehood claims, stating "[t]he rules on absolute privilege to publish defamatory matter stated in §§ 583 to 592A apply to the publication of an injurious falsehood." Restatement (Second) of Torts § 635. See also Bennett v. McKibben, 915 P.2d 400, 404-05 (Okla. Civ. App. 1995) (holding that the absolute litigation privilege provided to attorneys in Restatement (Second) of Torts § 586 applies to slander of title actions as well); Conservative Club of Wash. v. Finkelstein, 738 F.Supp. 6, 13 (D.D.C. 1990).
We therefore hold, as a matter of first impression, that the absolute litigation privilege as recognized in Matsuura and McCarthy applies to claims for slander of title. In this case, the claim for slander of title against Hochberg in the First Amended Complaint is based on the filing of the two NOPAs. Considering the requirements for application of the absolute litigation privilege set out in McCarthy, the privilege applies here. That is, the NOPAs were filed in the course of judicial proceedings and were related to those proceedings. See McCarthy, 5 Haw. App. at 48-49, 678 P.2d at 14. Thus, the judgment in favor of Hochberg on the slander of title claim was proper.
As discussed infra, although Plaintiffs-Appellants cannot pursue a cause of action for slander of title arising from the filing of the NOPAs in this case, the conduct of filing the NOPAs may still be relevant to other claims to which a privilege does not apply.
In Kahala Royal, the Hawai`i Supreme Court held that a litigation privilege applied to preclude claims of intentional interference with contractual relations (IICR) and intentional interference with prospective economic advantage (IIPEA) against attorneys who had represented parties adverse to the plaintiff in prior arbitration-related proceedings. 113 Hawai`i at 266-73, 151 P.3d at 747-54. The plaintiffs in Kahala Royal argued that attorneys should not be immune under a litigation privilege when claims of intentional torts are asserted against them, but the supreme court did not agree. The court instead focused on whether the allegations against the attorneys met certain criteria for the litigation privilege to apply.
As an initial matter, Kahala Royal dispensed with the notion that a litigation privilege could only apply to communications made during litigation. Discussing Clark v. Druckman, 624 S.E.2d 864 (W.Va. 2005),
After further analyzing Clark and a number of cases from other jurisdictions, the Hawai`i Supreme Court in Kahala Royal concluded that a litigation privilege applied in that case because: the complaints failed to allege that the defendant-lawyers were acting outside the scope of their lawyer-client relationship; the complaints failed to set forth factual allegations from which actual malice could reasonably be said to exist, such that there was "no allegations that indicate that the Lawyers possessed a desire to harm which is independent of the desire to protect their clients"; and the complaints were "devoid of any allegations that the Lawyers acted for personal gain or with ill-will towards [the plaintiffs]." 113 Hawai`i at 271, 151 P.3d at 752 (internal quotation marks and original brackets omitted).
Importantly for purposes of this case, however, the Kahala Royal court appears to have carved out certain claims from the litigation privilege recognized in that case, including claims for malicious prosecution and abuse of process. After quoting a part of Clark that explained that the litigation privilege did not bar liability of an attorney in all circumstances, the Hawai`i Supreme Court noted this court's statement that "an attorney may be liable for malicious prosecution if he acts for an improper purpose" and that "an attorney may also be sued and held personally liable if he maliciously participates in [an] abuse of process[.]" 113 Hawai`i at 269, 151 P.3d at 750 (emphasis added) (quoting Myers v. Cohen, 5 Haw.App. 232, 236, 243, 687 P.2d 6, 11, 14-15 (1984), overruled on other grounds by Myers, 67 Haw. 389, 688 P.2d 1145).
The Hawai`i Supreme Court's reliance on Clark is of further note because although Clark held that "the litigation privilege is generally applicable to bar a civil litigant's claim for civil damages against an opposing party's attorney if the alleged act of the attorney occurs in the course of the attorney's representation of an opposing party and is conduct related to the civil action," 624 S.E.2d at 871, Clark also held that "the litigation privilege does not apply to claims of malicious prosecution and fraud." Id. at 872 (emphasis added).
With regard to a claim for abuse of process, other courts generally have held that a litigation privilege does not apply to provide immunity for an attorney. See Mozzochi v. Beck, 529 A.2d 171 (Conn. 1987); Peerman v. Sidicane, 605 S.W.2d 242, 245 (Tenn. Ct. App. 1980); see also 1 Am. Jur. 2d Abuse of Process § 21 (2005) ("The absolute privilege that protects attorneys from liability for defamation occurring in the course of a judicial proceeding does not provide an attorney with an absolute defense to liability for abuse of process.").
We therefore hold that the litigation privilege recognized in Kahala Royal does not apply to provide immunity for the abuse of process and malicious prosecution claims in this case.
Given our holdings above that claim preclusion and issue preclusion do not bar the abuse of process claim in this case, and that the litigation privilege recognized in Kahala Royal does not extend to provide immunity against the abuse of process claim, we now consider whether Plaintiffs-Appellants have asserted allegations sufficient to support such a claim. Hochberg points to the Hawai`i Supreme Court's decision in Young, where the court declined to accept the lack-of-justification standard to establish an abuse of process claim. See 119 Hawai`i at 416, 198 P.3d at 679. We agree that, in light of the decision in Young, Plaintiffs-Appellants have failed to allege a cognizable claim for abuse of process.
In Young, the Hawai`i Supreme Court analyzed the underlying requirements for meeting the two elements for an abuse of process claim, which are: "(1) an ulterior purpose and (2) a wilful act in the use of the process which is not proper in the regular conduct of the proceeding." Id. at 412, 198 P.3d at 675. Having concluded that the allegations in that case were sufficient to meet the first element, the court then considered the second element. In this part of its analysis, the court refused to follow cases from other jurisdictions which "have essentially held that using process itself will constitute the requisite willful act where a party's use of procedures is `not justified or used for legitimate or reasonably justifiable purposes of advancing [his] interests.'" Id. at 415, 198 P.3d at 678.
Id. (internal citations, quotation marks, and footnote omitted). In short, the court rejected the idea that an abuse of process claim could be a short-cut to avoid the "dispositional element" required for a malicious prosecution claim. The court concluded: "We therefore decline to follow the lack-of-justification standard and instead hold that, in order to establish an abuse of process claim, the plaintiff must prove a `willful act' distinct from the use of process per se." Id. at 416, 198 P.3d at 679 (some emphasis added).
Applying Young to the instant case, we conclude that the allegations in the First Amended Complaint fail to assert a willful act distinct from the use of process. Instead, the allegations contend in numerous and varied ways that Hochberg lacked justification for his use of process in the Mechanic's Lien Action and the Foreclosure Action. Given the holding in Young, such lack-of-justification allegations do not suffice to support an abuse of process claim. Dismissal of the claim is warranted and thus, for these reasons, the judgment in favor of Hochberg on the abuse of process claim was proper.
As discussed above, claim preclusion and issue preclusion do not bar the malicious prosecution claim, and the litigation privilege set out in Kahala Royal does not provide immunity from a malicious prosecution claim. We thus consider whether Plaintiffs-Appellants have asserted allegations in their First Amended Complaint sufficient to state a cause of action for malicious prosecution. To the extent they have, we review the circuit court's grant of summary judgment related to this claim.
As stated earlier, to establish a claim for malicious prosecution, the required elements are: "(1) that the prior proceedings were terminated in the plaintiffs' favor, (2) that the prior proceedings were initiated without probable cause, and (3) that the prior proceedings were initiated with malice." Myers, 67 Haw. at 391, 688 P.2d at 1148 (citations omitted).
Given the first required element, that the prior proceedings were terminated in Plaintiffs-Appellants' favor, the malicious prosecution claim was properly dismissed on the pleadings as to all allegations related to the Foreclosure Action, except for the filing of the First NOPA.
By its own terms, the First Amended Complaint asserted that the Foreclosure Action was still pending in the circuit court and that parts of the claims therein were to be decided in binding arbitration. Therefore, the claims in the Foreclosure Action were still being litigated when Plaintiffs-Appellants initiated this case and their claim for malicious prosecution could not be maintained without those proceedings having first been terminated in their favor.
As to the First NOPA, however, the First Amended Complaint alleged that the NOPA had been filed in the Foreclosure Action and had been expunged after hearings before the circuit court. Although the main proceedings in the Foreclosure Action were not yet terminated, we conclude that the First NOPA resulted in a type of ancillary proceeding that may support a subsequent malicious prosecution action, so long as the NOPA filing was terminated in favor of the party who later files the malicious prosecution claim. In other words, regardless of the outcome of the prior main proceeding, the alleged termination of this prior ancillary proceeding in favor of Plaintiffs-Appellants can support their malicious prosecution claim in this case.
In addressing the malicious prosecution cause of action, the Hawai`i Supreme Court has noted its reliance on Prosser, Law of Torts § 120 at 850-56 (4th ed. 1971). See Myers, 67 Haw. at 391, 688 P.2d at 1148. An updated version of this treatise provides:
Prosser and Keeton, Law of Torts § 120 at 892 (5th ed. 1984) (emphasis added). Similarly, Restatement (Second) of Torts § 674, which addresses liability for the wrongful use of civil proceedings, is in accord that an ancillary proceeding can be the underlying basis for a malicious prosecution claim. Comment f to Restatement (Second) of Torts § 674, provides:
The Hawai`i Supreme Court's analysis in S. Utsunomiya Enterprises v. Moomuku Country Club, 75 Haw. 480, 866 P.2d 951 (1994) provides further support that a lis pendens or NOPA filing can create ancillary proceedings. There, the Hawai`i Supreme Court set forth the limited purposes for which a lis pendens could be filed under HRS § 634-51 (1985).
In the instant case, Plaintiffs-Appellants alleged that Hochberg had aided and abetted in the filing of the First NOPA (which related to their residence), that Hochberg had opposed expungement of the NOPA but later conceded that 808 Development did not have a right to file it, and that the NOPA was later expunged. These allegations are sufficient to meet the first element of the malicious prosecution claim, i.e. that the prior ancillary proceeding involving the filing of the First NOPA was terminated in favor of Plaintiffs-Appellants.
Further, the First Amended Complaint contains sufficient allegations regarding the other two required elements: that the prior proceedings were initiated without probable cause; and that the prior proceedings were initiated with malice.
Therefore, dismissal on the pleadings for the malicious prosecution claim was not proper with respect to the ancillary proceeding involving the filing of the First NOPA, but was proper with regard to all other allegations pertaining to the Foreclosure Action.
Although dismissal on the pleadings is not warranted, based on evidence adduced by Hochberg, the circuit court properly granted summary judgment on the malicious prosecution claim related to the First NOPA.
The circuit court granted summary judgment to Hochberg on the malicious prosecution claim to the extent it was based on the filing of both NOPAs. The circuit court's oral ruling indicated it focused on the malice element and determined that Hochberg's uncontested declaration established that there were no genuine issues of material fact that precluded judgment in his favor. For the following reasons, we agree as to the First NOPA that summary judgment was appropriate on the malicious prosecution claim.
In support of his motion for summary judgment, Hochberg submitted his declaration which attested, among other things, that: at the time the First NOPA was filed, Sakatani held the original of the promissory note and Hochberg had a bona fide belief that his clients had a right to foreclose on the property; and 808 Development and the Sakatanis had prayed for foreclosure on the subject property.
Plaintiffs-Appellants failed to submit any admissible evidence in opposition to Hochberg's motion for summary judgment.
The circuit court thus properly granted summary judgment for Hochberg on the malicious prosecution claim with respect to the filing of the First NOPA.
No portion of the malicious prosecution claim remains related to the Foreclosure Action.
The First Amended Complaint alleges that the Mechanic's Lien Action, which was ultimately resolved by the supreme court's opinion in 808 Development, was terminated in favor of Plaintiffs-Appellants. Similarly, the First Amended Complaint also alleges that the Second NOPA was expunged by the supreme court. Hence, Plaintiffs-Appellants have asserted sufficient allegations to meet the first element of the malicious prosecution claim. Moreover, the First Amended Complaint contains sufficient allegations to support the remaining two elements as well. Therefore, dismissal on the pleadings is not warranted for the malicious prosecution claim to the extent the allegations involve the Mechanic's Lien Action.
The circuit court granted summary judgment on the malicious prosecution claim to the extent it arose from the filing of the Second NOPA, concluding there were no genuine issues of material fact on the malice element. However, in his declaration, Hochberg does not address the basis for the filing of the Second NOPA. Instead, he attests that he never intended to file the Second NOPA and he attached as Exhibit D a copy of the Second NOPA showing he did not file it. Plaintiffs-Appellants challenged the admissibility of Exhibit D and the circuit court did not consider the exhibit in its ruling.
Because Exhibit D is crucial as to whether summary judgment was warranted related to the Second NOPA, we consider Hochberg's request pursuant to Hawai`i Rules of Evidence (HRE) 201 that this court take judicial notice of the Second NOPA filed in the Mechanic's Lien Action. HRE 201 provides, in relevant part:
HRE 201. "Courts have generally recognized that they may, in appropriate circumstances, take notice of proceedings in other courts, both within and without their judicial system, if those proceedings have a direct relation to the matter at issue." Roxas v. Marcos, 89 Haw. 91, 110 n.9, 969 P.2d 1209, 1228 n.9 (1998) (quoting Sapp v. Wong, 3 Haw.App. 509, 512 n.3, 654 P.2d 883, 885-86 n.3 (1982)) (brackets and other citations omitted). Moreover, we need not take judicial notice as to the truth of any facts asserted within the Second NOPA. See State v. Kotis, 91 Haw. 319, 341-42, 984 P.2d 78, 100-01 (1999). Rather, the pertinent information contained in the Second NOPA is whether Hochberg appears as counsel on the document.
Because of its direct relation and relevance to an issue before this court, we agree to take judicial notice of the Second NOPA that was filed on October 28, 2004 in the Hawai`i Supreme Court in the Mechanic's Lien Action, 808 Development LLC v. Murakami, Appeal No. 26610. In particular, we take judicial notice that Hochberg's name does not appear as counsel for the filing party, 808 Development, or as the signing attorney.
Hochberg's uncontested declaration states that "a second Notice of Pendency of Action was not going to be filed as 808 was relying on the foreclosure action as a vehicle through which a mechanics lien would be foreclosed in the event the Hawaii Supreme Court reversed [the circuit court in the Mechanic's Lien Action]." Based on this evidence and the judicially noticed fact that Hochberg was not the counsel who filed the Second NOPA, he is entitled to summary judgment on the malicious prosecution claim as it relates to the filing of the Second NOPA.
Hochberg's summary judgment motion and the circuit court's summary judgment ruling were limited to the claims as they arose from the filing of the two NOPAs. All other aspects of the claims in the original complaint had previously been dismissed on grounds of claim preclusion or issue preclusion, which we have determined above do not apply. Therefore, except with regard to the Second NOPA, summary judgment was not requested or considered regarding the allegations pertaining to the Mechanic's Lien Action.
In light of the above, except with respect to the filing of the Second NOPA, the malicious prosecution claim remains to the extent it arises from allegations pertaining to the Mechanic's Lien Action.
On the slander of title claim, Hochberg is entitled to dismissal pursuant to the litigation privilege recognized in Matsuura and McCarthy.
On the abuse of process claim, Hochberg is entitled to dismissal because pursuant to Young, the allegations in the First Amended Complaint fail to state a claim for abuse of process.
On the malicious prosecution claim: Hochberg is entitled to dismissal on the pleadings as to all allegations involving the Foreclosure Action, except as to the First NOPA; based on Hochberg's uncontested declaration, summary judgment was proper as to the First NOPA; and because Hochberg did not file the Second NOPA, summary judgment was also proper as to the Second NOPA. The only claim that remains is the malicious prosecution claim to the extent it arises from allegations related to the Mechanic's Lien Action, but excluding matters pertaining to the Second NOPA.
We therefore vacate the judgment in favor of Hochberg on the malicious prosecution claim to the extent that claim arises from allegations related to the Mechanic's Lien Action, other than matters pertaining to the Second NOPA.
In all other respects we affirm the judgment in favor of Hochberg.
As to the Mechanic's Lien Action, the First Amended Complaint added allegations, inter alia that Hochberg instigated and prosecuted the Mechanic's Lien Action with full knowledge that he was making false representations by: alleging the Sakatani parties were entitled to a mechanic's lien, knowing the legal requirements were not met and as an afterthought claiming he was seeking to modify existing law; and misrepresenting that an unnamed attorney had copies of certain records which he needed more time to obtain. The First Amended Complaint also added allegations that Hochberg instigated and prosecuted the NOPA in the Mechanic's Lien Action knowing he was making false representations that the Sakatani parties were entitled to file the NOPA.
Finally, the First Amended Complaint also added allegations that Hochberg knowingly made representations in the Land Court action "pertaining to where a certain $300,000 was deposited" that were contradictory to representations made in the Foreclosure Action and the Mechanic's Lien Action.
111 Hawai`i at 364, 141 P.3d at 1011 (emphasis in original). In its quote of the rule, the supreme court emphasized its focus on section (b)(2) as the alleged basis for sanctions.
The court also noted, however, that "the fact a communication may be absolutely privileged for the purposes of a defamation action does not prevent its being an element of an action for malicious prosecution in a proper case." Id. at 410 (emphasis added). The court held that the complaint in that case stated a cause of action for malicious prosecution and thus reversed the trial court's judgment of dismissal.
102 Hawai`i at 155, 73 P.3d at 693.
