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Manhattan Loft, LLC v. Mercury Liquors

May 6, 2009; as modified May 18, 2009

MANHATTAN LOFT, LLC, PLAINTIFF AND APPELLANT,
v.
MERCURY LIQUORS, INC., ET AL., DEFENDANTS AND RESPONDENTS.



APPEAL from an order of the Superior Court of Los Angeles County. Mark V. Mooney, Judge. Reversed and remanded with directions. (Los Angeles County Super. Ct. No. BC386087).

The opinion of the court was delivered by: Ashmann-gerst, J.

CERTIFIED FOR PUBLICATION

This appeal arises out of a storied real estate transaction. Plaintiff and appellant Manhattan Loft, LLC (appellant) purchased certain real property from Sixth & Spring, LLC, subject to an existing lease for a portion of the basement and first floor to Mercury Liquors, Inc. (Mercury). A dispute arose, prompting those with an interest in the lease*fn1 to commence two arbitration proceedings against appellant. In connection with the arbitration proceedings, the client respondents, through their counsel, respondents Alschuler Grossman Stein & Kahan and Bingham McCutchen (collectively the attorney respondents), recorded two notices of pending actions against the subject property.

Following the client respondents' favorable arbitration award, appellant filed suit against respondents for slander of title, claiming that they erred in filing the notices of pending action. Respondents filed a special motion to strike appellant's complaint pursuant to Code of Civil Procedure section 425.16,*fn2 California's anti-SLAPP statute.*fn3 The trial court granted respondents' motion, and appellant appeals, presenting us with the following legal question: Can a party to a pending arbitration record a notice of pendency of action without first filing a civil action in Superior Court?

We conclude that the answer is no. Looking to the plain language of title 4.5 of the Code of Civil Procedure, a lis pendens may only be filed when an action in a court of law is pending. Because no such action was pending at the time respondents filed the two lis pendens, they improperly recorded the notices of pendency of action.

Respondents' concomitant arguments are unconvincing. Accordingly, we reverse the order of the trial court; respondents' anti-SLAPP motion should have been denied.

FACTUAL AND PROCEDURAL BACKGROUND

The Building

Appellant is the owner of a 14-story building located at 215 West Sixth Street in downtown Los Angeles (the building). Appellant purchased the building from Sixth & Spring, LLC, pursuant to a purchase agreement and subject to an existing lease for a portion of the basement and first floor (the bar space) to Mercury. The purchase agreement and lease granted certain rights to Arnold Greenspan, as Trustee of the Andrew Meieran Family Trust (Greenspan), including easements over existing means of egress and certain access to the bar space.

As part of the purchase agreement, appellant agreed to transfer title to the bar space to Greenspan when appellant completed its condominium conversion of the building.

The purchase agreement also contains an arbitration clause.

The First Arbitration and the First Lis Pendens

According to Greenspan, after sale of the building closed, appellant engaged in conduct that denied him the easements and rights of possession under the purchase agreement and lease. Thus, on August 14, 2006, he served a demand for arbitration on appellant and its manager, Barry Shy (Shy), alleging ―[b]reaches of a non-residential real estate agreement including failure to perform required improvements, failure to provide use of space as set forth in the agreement, destruction of property, and failure to pay reimbursements for loss of space involving real property located at 215 W. 6th Street, Los Angeles, CA 90014.‖ Greenspan sought (1) to enforce various easements, (2) to add a claim by Sixth & Spring, LLC to rescind the purchase agreement, and (3) monetary damages.

While the arbitration was pending, on or about January 10, 2007, respondents recorded a lis pendens against the building. The lis pendens provides ―that [an] arbitration proceeding was commenced on December 8, 2006, in [Judicial Arbitration and Mediation Services (JAMS)]‖ and that ―[t]his arbitration proceeding is now pending before [JAMS].‖ The lis pendens also indicates that the ―arbitration proceeding alleges a real property claim affecting‖ the building.

On November 5, 2007, the arbitrator issued a final award in favor of Greenspan, finding that he had ―met his burden of persuasion in this breach of contract dispute.‖ Greenspan was awarded money damages in the amount ―of $1,394,600 for property damage or loss, plus lost profits in the amount of $1,428,137, plus lost business value in the amount of $10,727,785.‖ Greenspan also was awarded attorney fees in the amount of $977,287.88 and a permanent injunction restricting appellant's entry into the bar space.

Thereafter, on January 15, 2008, the trial court (Hon. Richard L. Fruin) corrected and confirmed the arbitration award, and then entered judgment. Specifically, the trial court ―excise[d]‖ the damage award for lost profits and lost business value; monetary damages were reduced to $1,394,600 for property damage, $977,287.88 for attorney fees and costs, and a permanent injunction as set forth in the final arbitration award.

This judgment is the subject of a pending appeal and cross-appeal. (Greenspan v. Manhattan Loft, LLC, B205917.)

The Second Arbitration and the Second Lis Pendens

On January 25, 2008, Greenspan and others initiated a second arbitration against appellant and Shy. The demand explains that Greenspan ―pursued a claim for lost profits and lost business value as a result of [appellant and Shy's] breach of the Purchase Contract and related agreements.... The matter was submitted to arbitration before JAMS.... At the conclusion of the arbitration, the Arbitrator issued an award in [Greenspan's] favor for property damage or loss, plus lost profits and lost business value.‖

―In response to the... petition to confirm the [arbitration] award, [appellant and Shy] contended that [Greenspan] had no standing to pursue a claim for lost profits and lost business value.... The Los Angeles Superior Court, Judge Fruin presiding, accepted this argument and ruled in [appellant and Shy's] favor by correcting the award to eliminate the sums awarded by the Arbitrator for lost profits and lost business value and entering judgment for property damage only. [Greenspan] disputes that result and will appeal that judgment. However, if the judgment is affirmed on the basis that [an entity other than Greenspan] holds the right to claim lost profits and lost business value, then [Greenspan's] entitlement to pursue a claim for lost profits against [appellant and Shy] will have been conclusively determined as against [appellant and Shy]. This Demand seeks to preserve, against any defense of the statute of limitations or laches, whatever right [Greenspan] may ultimately be determined to have to assert those claims against [appellant and Shy].‖ The second arbitration demand also seeks rescission of the purchase agreement.

On January 31, 2008, respondents recorded a second lis pendens against the building. This lis pendens indicates that an ―arbitration proceeding was commenced on January 28, 2008, in the [American Arbitration Association]‖ and that ―[t]his arbitration proceeding is now pending before [that] tribunal.‖ It also provides that this ―arbitration proceeding alleges a real property claim affecting the [building].‖

Appellant's Complaint

On February 25, 2008, appellant filed its complaint in this action against respondents. According to the complaint, respondents wrongfully recorded the two lis pendens because ―[e]ach of the Claims refers to an arbitration proceeding rather than to a civil action. An arbitration proceeding is not an ‗action' within the meaning of Code of Civil Procedure sections 22, 47, 405.1, 405.2 and 405.4. Neither the Code of Civil Procedure, nor any other statute authorizes the filing of a ‗lis pendens' without reference to a pending action. Moreover, the filing of the Claims is expressly outside the scope of the litigation privilege as set forth in Civil Code Section ...


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