Nature of the Case
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Facts
Three of D's clients sold a 42-unit apartment building to P. P represented that it would do a 'first-class' job of converting the building into condominiums and selling the units, The clients ultimately agreed to sell the building for $2,750,000 cash plus '47% of the excess, if any, of gross sales receipts to P of the condominium units over 3,750,000 dollars.' The escrow agreement contained a clause providing that all terms of the sale agreement which were to be performed by P but which were incapable of performance before the close of escrow would survive the close of escrow and would be binding on P and its 'successors or assigns,' but neither the sale agreement nor the escrow agreement contained any provision expressly declaring that the property was to constitute security for P's obligations. Almost immediately after the close, it was discovered that P was offering to sell the entire building in bulk for $4 million. The clients feared that such a sale would deprive it of its anticipated share of the profits attributable to the sale of the apartments as individual units rather than as a single piece of property. D filed a complaint against P, seeking a declaration of rights under the sales contract and the imposition of an equitable lien on the property in question. D recorded a notice of lis pendens on the property on behalf of the clients. P filed a motion to expunge the notice of lis pendens. The trial court granted the motion and expunged the lis pendens; the court declined to impose attorneys' fees. The clients sought a writ of mandate to vacate the expungement order, but the Court of Appeal denied the writ petition and the Supreme Court of California denied a petition for hearing. Prior to expungement, P abandoned its plan to make a bulk sale of the apartment building and began to sell individual condominium units, incurring extra interest costs because of the cloud on the title resulting from the lis pendens. On December 4, 1979, P exceeded the $3,750,000 but had not paid any of the excess to the clients. P filed a new action seeking damages for breach of contract. P filed a cross-complaint seeking damages for malicious prosecution. The contract action went to trial and the clients obtained a judgment of over $720,000. The court then tried the malicious prosecution cause. The court permitted an attorney called by P to testify as an expert witness on the question of the legal tenability of the prior action. The court also submitted the probable cause issue to the jury. The jury found in favor of P on the malicious prosecution action and awarded it $82,000 in compensatory damages and $1 million in punitive damages. D appealed and the Court of Appeal found that the governing authorities did not support the clients' assertion of a lien and an unreasonably deficient research of the applicable law can indeed lead to a finding of no probable cause, that the trial court had properly admitted expert testimony on the probable cause issue, and that the trial court had properly left the probable cause issue to the jury under the instruction it had given. P appealed.
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