Elawyers Elawyers
Washington| Change

SOLOMON v. U.S. BANK NATIONAL ASSN., E052462. (2011)

Court: Court of Appeals of California Number: incaco20111228048 Visitors: 5
Filed: Dec. 28, 2011
Latest Update: Dec. 28, 2011
Summary: NOT TO BE PUBLISHED IN OFFICIAL REPORTS OPINION CODRINGTON, J. I INTRODUCTION The present appeal involves a real estate developer adversely affected by the economic downturn of the last few years. Peter D. Solomon, an individual and the trustee of the Peter Solomon Revocable Trust ("Solomon"), 1 owned four large parcels of real property in Riverside County. In early 2007, the value of the Solomon properties began to decline. In November 2008, U.S. Bank declared Solomon in default and subse
More

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

OPINION

CODRINGTON, J.

I

INTRODUCTION

The present appeal involves a real estate developer adversely affected by the economic downturn of the last few years. Peter D. Solomon, an individual and the trustee of the Peter Solomon Revocable Trust ("Solomon"),1 owned four large parcels of real property in Riverside County. In early 2007, the value of the Solomon properties began to decline. In November 2008, U.S. Bank declared Solomon in default and subsequently began various proceedings to recover on Solomon's debt to the bank. U.S. Bank filed an action against Solomon and Solomon filed a cross-complaint.

Solomon appeals from a ruling by the trial court granting U.S. Bank's special anti-SLAPP motion to strike the first three causes of action of the Solomon cross-complaint for declaratory relief, wrongful foreclosure, and abuse of process. (Code Civ. Proc., §§ 425.16, 904.1, subd. (a)(13).)2 The trial court also granted U.S. Bank's motion for attorney's fees in the amount of $20,635. (§ 425.16, subd. (c).) At the same time, the court sustained without leave to amend the bank's demurrer to the first and second causes of action and overruled the demurrer to the third cause of action. The court denied the motion to strike and overruled the demurrer to the fourth and fifth causes of action for intentional interference with contract and prospective economic relations. The fourth and fifth causes of action remain viable.

Because the court sustained without leave to amend the demurrer to the first and second causes of action, the motion to strike seems largely redundant, except as to the third cause of action for abuse of process. (See Lin v. City of Pleasanton (2009) 176 Cal.App.4th 408, 426.) While recognizing that distinction, we affirm the trial court's ruling granting the motion to strike on all three causes of action, on the grounds Solomon cannot demonstrate a reasonable probability of success on his claims for declaratory relief, wrongful foreclosure, and abuse of process.

II

FACTUAL AND PROCEDURAL BACKGROUND

We derive the statement of the facts primarily from the cross-complaint and from the evidence submitted in support of and against the anti-SLAPP motion. Many of the operative facts are essentially undisputed except where noted.

A. The U.S. Bank Complaint

In July 2009, U.S. Bank filed a complaint against the Solomon defendants seeking recovery on an unsecured promissory note, evidencing a line of credit for $2.5 million, due October 1, 2008. U.S. Bank sought recovery of the principal sum of $2,489,000. Additionally, U.S. Bank sought recovery on a commercial guaranty executed by the Solomon trust.

Between September 2009 and January 2010, U.S. Bank sought and obtained a temporary protective order and a writ of attachment against various properties owned by Solomon.

B. Solomon's Cross-Complaint

In July 2010, Solomon filed a cross-complaint for wrongful foreclosure and other related causes of action. Solomon alleged that, between 2001 and 2008, U.S. Bank's predecessor, PFF Bank and Trust ("PFF Bank"), made eight loans, totaling $103,145,430, to Solomon for the purpose of developing four parcels of real property in Riverside County. The properties were the Versailles property, the Eagle property, the España property, and the Thousand Palms property. One of the eight loans was a facilitation loan in the original amount of $1.5 million, which included a wraparound guaranty by the trust, both dated October 17, 2007.

In 2007, the United States housing bubble created an economic crisis and the United States economy began to deteriorate. Solomon alleges that PFF Bank knew about the adverse effect the latter circumstances would have on developers, causing severe diminishment in the value of Solomon's properties. Nevertheless, PFF Bank refused to offer assistance to Solomon. Instead, PFF Bank insisted upon cross-collateralization of its loans to Solomon. PFF Bank took advantage of Solomon's dire economic situation to gain leverage and to force Solomon to comply with the conditions it demanded for lending. PFF also refused to cooperate in reducing the prices of the homes in Solomon's Versailles and España developments, while agreeing to reduce prices for Solomon's competitor, the neighboring Sandstone development. Solomon alleges that PFF Bank finally agreed to accept price reductions in May 2008 but then reneged on the agreement, while concealing its own inability to perform.

In November 2008, PFF Bank was placed in receivership and its assets sold to U.S. Bank. U.S. Bank proposed a "Global Workout" with Solomon but never cooperated in completing it. In November 2008, U.S. Bank declared Solomon was in default. In April 2009, U.S Bank ceased to have dealings with Solomon except through its lawyers.

In July 2009, U.S. Bank filed its complaint against Solomon for breach of contract and money damages involving the facilitation loan or line of credit. It also initiated attachment proceedings while filing notices of default on the Versailles property in August 2009 and the other properties in October 2009. Meanwhile, Solomon tried to sell the Versailles property in October 2009 but U.S. Bank responded by obtaining a temporary protective order prohibiting Solomon from transferring the Versailles property. The court granted U.S. Bank's writs of attachment in January 2010.

In February 2010, U.S. Bank completed nonjudicial foreclosure on part of the Versailles property and all of the other properties. In March 2010, the court granted U.S. Bank writs of attachment against the rest of the Versailles property (which Solomon had redeemed from foreclosure) and other properties owned by Solomon.3

The cross-complaint seeks declaratory relief that U.S. Bank violated the one-action rule under section 726 and waived its security interest in all the properties by obtaining temporary protective orders and writs of attachment. The cross-complaint also seeks damages for wrongful foreclosure and abuse of process. Finally, the cross-complaint asserts causes of action for interference with contract and with prospective economic relations.

C. The Anti-SLAPP Motion

U.S. Bank demurred to the cross-complaint. It also filed an anti-SLAPP motion to strike. In both the demurrer and the motion, U.S. Bank argued that Solomon could not counter-sue the bank based on the bank's efforts to recover on the unsecured line of credit or facilitation loan because the causes of action for declaratory relief and wrongful foreclosure were based on the untenable theory that the bank violated the one-action rule expressed in section 726. The one-action rule operates only with regard to a secured interest in real property, not an unsecured note and guaranty. U.S. Bank also argued the third cause of action for abuse of process, claiming wrongful attachment, was unfounded because the bank had legally sought an attachment to prevent the transfer of assets to protect its recovery on the unsecured loan and because the bank's actions were subject to the litigation privilege of Civil Code section 47. In connection with the anti-SLAPP motion, U.S. Bank further argued that, because its complaint and the attachment proceedings were all constitutionally protected activities, Solomon could not demonstrate a probability of prevailing on the merits.

In opposition to the motion to strike, Solomon argued the subject loan was secured by real property and the attachment was excessive and used for the improper purpose of thwarting the sale of the Versailles property so the bank could accomplish a nonjudicial foreclosure of the property in February 2010. As such, Solomon contended he could demonstrate the probability of success on all his claims for declaratory relief, wrongful foreclosure, and abuse of process.

In its reply, U.S Bank again asserted that the subject loan was unsecured. Furthermore, in connection with the various bank loans, Solomon had expressly waived any defense based on the one-action rule of section 726. The bank disputed the attachment was excessive and repeated its reliance on the litigation privilege.

At the hearing on the anti-SLAPP motion, the court held that "US Bank did not violate the one action rule when it sought to attach real property assets based upon an unsecured note. [¶] Even though the real property was security for other loan agreements, the bank was entitled to pursue its foreclosure remedy and actions based upon secured loans and entitled to attach the defendants' assets based upon unsecured loan agreements. [¶]. . . The one action rule is inapplicable where a loan is unsecured by real property. [¶] Additionally, the defendant repeatedly waived any benefit under the one action rule by executing waivers in connection with the loan agreements secured by the real property."

The court granted the motion to strike the first, second, and third causes of action for declaratory relief, wrongful foreclosure, and abuse of process and denied the motion as to the fourth and fifth causes of action for intentional interference with contract and prospective economic relations. (§ 425.16.) The court granted U.S. Bank attorney's fees of $20,635. (§ 425.16, subd. (c).) The court also sustained without leave to amend the bank's demurrer to the first and second causes of action and overruled the demurrer to the third, fourth, and fifth causes of action.

III

ANALYSIS

A. Overview of Section 425.16

Under section 425.16, "[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 . . . shall be subject to a special motion to strike, . . ." (§ 425.16, subd. (b)(1).) "A SLAPP suit-a strategic lawsuit against public participation-seeks to chill or punish a party's exercise of constitutional rights to free speech and to petition the government for redress of grievances. (Briggs v. Eden Council for Hope & Opportunity (1999) 19 Cal.4th 1106, 1109, fn. 1.) The Legislature enacted Code of Civil Procedure section 425.16-known as the anti-SLAPP statute-to provide a procedural remedy to dispose of lawsuits that are brought to chill the valid exercise of constitutional rights. (Lafayette Morehouse, Inc. v. Chronicle Publishing Co. (1995) 37 Cal.App.4th 855, 865.)" (Rusheen v. Cohen (2006) 37 Cal.4th 1048, 1055-1056; Flatley v. Mauro (2006) 39 Cal.4th 299, 311-312.) The purpose of the statute is to prevent the chilling of the valid exercise of these rights through "abuse of the judicial process" and, to this end, is to "be construed broadly." (§ 425.16, subd. (a); Flatley, at pp. 312-313.)

The anti-SLAPP statute establishes a two-step procedure whereby the trial court evaluates the merits of a plaintiff's cause of action, using a summary-judgment-like procedure, at an early stage of the litigation. (Flatley v. Mauro, supra, 39 Cal.4th at p. 312.) First, the defendant is required to show that the cause of action arises from protected activity, i.e., activity by the defendant in furtherance of his constitutional right of petition or free speech. (§ 425.16, subd. (b)(1); Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 67.)

"`A cause of action "arising from" defendant's litigation activity may appropriately be the subject of a section 425.16 motion to strike.' (Church of Scientology v. Wollersheim (1996) 42 Cal.App.4th 628, 648, disapproved on other grounds in Equilon Enterprises v. Consumer Cause, Inc., supra, 29 Cal.4th at p. 68, fn. 5.) `Any act' includes communicative conduct such as the filing, funding, and prosecution of a civil action. (Ludwig v. Superior Court (1995) 37 Cal.App.4th 8, 17-19.) This includes qualifying acts committed by attorneys in representing clients in litigation. (See, e.g., Chavez v. Mendoza (2001) 94 Cal.App.4th 1083, 1086; Dowling v. Zimmerman (2001) 85 Cal.App.4th 1400, 1418-1420.)" (Rusheen v. Cohen, supra, 37 Cal.4th at p. 1056.) Additionally, the absolute litigation privilege of Civil Code section 47, subdivision (b), for "judicial" or "official" communications helps define the meaning of protected activity under section 425.16. (Briggs v. Eden Council for Hope & Opportunity, supra, 19 Cal.4th at pp. 1115-1116.)

If the trial court determines that the defendant has met his initial burden, the burden shifts to the plaintiff to demonstrate a reasonable probability of prevailing on the merits of his cause of action. (Equilon Enterprises v. Consumer Cause, Inc., supra, 29 Cal.4th at p. 67; Gilbert v. Sykes (2007) 147 Cal.App.4th 13, 22; § 425.16, subd. (b)(1).) "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.]" (Wilson v. Parker, Covert & Chidester (2002) 28 Cal.4th 811, 821.)

The role of the trial court is not to weigh the credibility or comparative strength of the parties' evidence. (Wilson v. Parker, Covert & Chidester, supra, 28 Cal.4th at p. 821.) The court determines whether the defendant's evidence defeats the plaintiff's prima facie showing as a matter of law. (Ibid.; Colt v. Freedom Communications, Inc. (2003) 109 Cal.App.4th 1551, 1557.)

We independently review orders granting or denying a motion to strike under section 425.16. (Flatley v. Mauro, supra, 39 Cal.4th at p. 325; Gilbert v. Sykes, supra, 147 Cal.App.4th at p. 22.) Only causes of action that satisfy both prongs of the anti-SLAPP statute, i.e., that arise from protected speech or petitioning activity and that lack even minimal merit are subject to being stricken under the anti-SLAPP statute. (Navellier v. Sletten (2002) 29 Cal.4th 82, 89.)

B. Protected Activity

As is to be expected, the parties disagree about whether U.S. Bank engaged in protected activity when it sued Solomon, filed attachment proceedings, and foreclosed nonjudicially on Solomon's four properties.

In Solomon's declaratory relief cause of action, he alleges the subject promissory note and guaranty are secured by the four properties and that U.S. Bank, by its actions in seeking an attachment, violated section 726 and waived its security interest in the properties and its right to recover on its loans to Solomon. In his cause of action for wrongful foreclosure, Solomon alleged similarly that, by proceeding with nonjudicial foreclosures of the properties, U.S. Bank again violated section 726 and waived its security interest. Finally, in his claim for abuse of process, Solomon argues that U.S. Bank violated section 484.090, in part by seeking excessive attachments when its loans were already secured by real property with a value greater than the bank's legitimate claims, and in part because the purpose of that attachment was to prevent Solomon from selling the Versailles property before U.S. Bank could foreclose nonjudicially on the property.

In evaluating the first prong of the anti-SLAPP analysis, we can state unequivocally that all of Solomon's causes of action arise from U.S. Bank's protected activity in furtherance of its constitutional right of petition. Litigation-including filing a complaint and seeking an attachment-is privileged activity under both Civil Code section 47 and protected under 425.16: "Both section 425.16 and Civil Code section 47 are construed broadly, to protect the right of litigants to `"the utmost freedom of access to the courts without [the] fear of being harassed subsequently by derivative tort actions."' (Rubin v. Green (1993) 4 Cal.4th 1187, 1194; see § 425.16, subd. (a); Briggs, supra, 19 Cal.4th at p. 1119.) Thus, it has been established for well over a century that a communication is absolutely immune from any tort liability if it has `"some relation"' to judicial proceedings. (Rubin v. Green, supra, 4 Cal.4th at p. 1193.)" (Healy v. Tuscany Hills Landscape & Recreation Corp. (2006) 137 Cal.App.4th 1, 5 [Fourth Dist., Div. Two].)

For the foregoing reasons, the appellate courts have approved granting anti-SLAPP motions against similar causes of action in cases like Rusheen, supra, involving an abuse of process claim based on activities pertaining to enforcement of judgment, and Salma v. Capon (2008) 161 Cal.App.4th 1275, 1281, 1285-1287, 1296, involving claims for declaratory relief, quiet title, and conversion.

Solomon attempts to distinguish his claims by repeatedly maintaining they were not "triggered by any communicative act or judicial redress sought by the Bank," which instead "used the [attachment] process to facilitate a non-judicial foreclosure. That wrongful act was not sanctioned nor related to the judicial process. . . . [¶] Solomon's claims are based principally on the overreaching conduct (rather than communications) of the Bank . . . . [t]he Bank cannot claim that its non-judicial foreclosure was an act in furtherance of the writ of attachment. The two are wholly unrelated, except the Bank could not have achieved the non-judicial[] foreclosure absent the writ of attachment." In other words, Solomon characterizes all his causes of action as variants on a claim for wrongful nonjudicial foreclosure, which he asserts cannot be the subject of an anti-SLAPP motion.

If this were a simple claim for wrongful nonjudicial foreclosure, we might agree that the anti-SLAPP statute would not apply, relying on this court's opinion in Garretson v. Post (2007) 156 Cal.App.4th 1508, 1515, 1524-1525 [Fourth Dist., Div. Two], holding that the act of noticing a nonjudicial foreclosure sale does not qualify as a protected activity under the anti-SLAPP statute. But a fair reading of Solomon's three causes of action demonstrates that the foundation of all his claims is that U.S. Bank manipulated the procedures for obtaining a writ of attachment, which is unquestionably protected litigation activity. As Solomon expressly acknowledges: "[T]he Bank could not have achieved the non-judicial[] foreclosure absent the writ of attachment." Solomon emphasizes this point in its reply brief when he insists, the principal thrust of the cross-complaint is that "the Bank used the writ of attachment process and the excessive attachment improperly to foreclose on the Versailles property.4

The applicability of the anti-SLAPP statute is determined by the "principal thrust or gravamen" of the claim. (Martinez v. Metabolife Internat., Inc. (2003) 113 Cal.App.4th 181, 188; Dyer v. Childress (2007) 147 Cal.App.4th 1273, 1279.) In each of the three causes of action, Solomon challenges U.S. Bank's use of attachment proceedings. Where causes of action allege both protected and unprotected activity, all the causes of action must be stricken. (Fox Searchlight Pictures, Inc. v. Paladino (2001) 89 Cal.App.4th 294, 308; Rusheen v. Cohen, supra, 37 Cal.4th at pp. 1064-1065; Salma v. Capon, supra, 161 Cal.App.3d at pp. 1287-1288.) In conclusion, we hold that Solomon's three causes of action all arise from U.S. Bank's protected activity and are subject to the anti-SLAPP motion.

C. Reasonable Probability of Prevailing on the Merits

To prevail under the second prong of the anti-SLAPP case, Solomon must demonstrate that the cross-complaint is legally sufficient and he has a reasonable probability of prevailing on the merits. (Wilson v. Parker, Covert & Chidester, supra, 28 Cal.4th at p. 821; Equilon Enterprises v. Consumer Cause, Inc., supra, 29 Cal.4th at p. 67.) Solomon cannot meet his burden because he cannot establish that the loan and guarantee at issue are secured. As the trial court recognized, on its face the Business Loan Agreement dated October 17, 2007, is not secured by any deeds of trust. Instead, the security for the loan was the guaranty by the Solomon trust. There is no reasonable probability that Solomon will prevail on the merits of his claims because his fundamental premise—that U.S. Bank had a security interest in the subject properties under the promissory note and guaranty—is unfounded.

Solomon argues that because the promissory note was used in connection with other secured loans between Solomon and PFF Bank, it was transformed into a secured loan. But Solomon presents no evidence that there are deeds of trust, securing an interest in real property for the subject loan. There is simply no evidence and no legal authority for his novel position. We recognize a line of cases relied upon by Solomon holds that where the trustor under a deed of trust and the guarantor of the same obligation are in effect the same person or entity, the guarantor cannot waive the anti-deficiency protections available to the trustor under section 726. (Cadle Co. II v. Harvey (2000) 83 Cal.App.4th 927, 933, citing Torrey Pines Bank v. Hoffman (1991) 231 Cal.App.3d 308, 320, and River Bank America v. Diller (1995) 38 Cal.App.4th 1400, 1420.) The present circumstances are distinguishable because the business loan agreement was not a deed of trust and the guaranty pertains to the business loan agreement, not to any of the deeds of trust between Solomon and U.S. Bank's predecessor, PFF Bank. Because the subject loan was unsecured, there can be no viable causes of action arising from U.S. Bank's attachment proceedings or the subsequent nonjudicial foreclosure of the Versailles property, which was security for a different loan.

Additionally, independently of the anti-SLAPP issue, the abuse of process claim is barred by the litigation privilege. (Civ. Code, § 47; Merlet v. Rizzo (1998) 64 Cal.App.4th 53, 65-66; Rusheen v. Cohen, supra, 37 Cal.4th at pp. 1064-1065; Pimentel v. Houk (1951) 101 Cal.App.2d 884, 887.) To the extent Solomon relies on the one action rule (which only applies to secured obligations) to support any of his causes of action, Solomon waived the benefits of section 726 in the guaranty. (Bank of America, N.A. v. Stonehaven Manor, LLC (2010) 186 Cal.App.4th 719, 725, distinguishing Shin v. Superior Court (1994) 26 Cal.App.4th 542.) Solomon cannot show he has a reasonable probability of prevailing on the merits.

IV

DISPOSITION

In summary, Solomon's causes of action for declaratory relief, wrongful foreclosure, and abuse of process arise out of U.S. Bank's protected litigation activity. Solomon cannot demonstrate that he has a reasonable probability of succeeding on the merits. Based on our independent review, we affirm the trial court's order granting U.S. Bank's special anti-SLAPP motion to strike. We affirm the trial court's discretionary award of reasonable attorney's fees.

As the prevailing party on appeal, U.S. Bank shall recover its attorney's fees and costs.

McKinster, Acting P.J. and Miller, J., concurs.

FootNotes


1. When it is significant, we will distinguish between Solomon, the individual, and the trust.
2. All further statutory references are to the Code of Civil Procedure unless stated otherwise.
3. In light of our final conclusions, we deem Solomon's arguments about excessive attachment to be superfluous.
4. A substantial portion of Solomon's reply brief simply repeats verbatim the opening brief.
Source:  Leagle

Can't find what you're looking for?

Post a free question on our public forum.
Ask a Question
Search for lawyers by practice areas.
Find a Lawyer