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Pivotal 650 California St., LLC v. Manteca Stadium Park

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA THIRD APPELLATE DISTRICT (San Joaquin)


May 10, 2011

PIVOTAL 650 CALIFORNIA ST., LLC, CROSS-COMPLAINANT AND RESPONDENT,
v.
MANTECA STADIUM PARK, L.P., ET AL., CROSS-DEFENDANTS AND APPELLANTS.

(Super. Ct. No. 39-2009-00203963-CU-BC-STK)

The opinion of the court was delivered by: Nicholson , J.

Pivotal 650 California St. v. Manteca Stadium Park

CA3

NOT TO BE PUBLISHED

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

Cross-defendants Manteca Stadium Park, L.P., and others (collectively, Manteca) filed an anti-SLAPP motion, pursuant to Code of Civil Procedure section 425.16, to strike the cross-complaint of Pivotal 650 California St, LLC (Pivotal), as to several causes of action.*fn1 The trial court denied the motion, finding that the causes of action did not arise from Manteca's filing of the original complaint against Pivotal.

We conclude the trial court erred. The challenged causes of action arose from Manteca's filing of its complaint against Pivotal, which is a petitioning activity protected by section 425.16, the anti-SLAPP statute. Furthermore, Pivotal failed to establish that it had a probability of prevailing on the challenged causes of action. Therefore, the trial court should have granted the anti-SLAPP motion.

ANTI-SLAPP MOTIONS

Section 425.16, subdivision (b)(1) provides: "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 under the United States Constitution or the California Constitution in connection with a public issue shall be subject to a special motion to strike, unless the court determines that the plaintiff has established that there is a probability that the plaintiff will prevail on the claim." "As used in [section 425.16], 'act in furtherance of a person's right of petition or free speech under the United States or California Constitution in connection with a public issue' includes: (1) any written or oral statement or writing made before a legislative, executive, or judicial proceeding, or any other official proceeding authorized by law . . . ." (§ 425.16, subd. (e).)

"Section 425.16, subdivision (b)(1) requires the court to engage in a two-step process. First, the court decides whether the defendant has made a threshold showing that the challenged cause of action is one arising from protected activity. The moving defendant's burden is to demonstrate that the act or acts of which the plaintiff complains were taken 'in furtherance of the [defendant]'s right of petition or free speech under the United States or California Constitution in connection with a public issue,' as defined in the statute. (§ 425.16, subd. (b)(1).) If the court finds such a showing has been made, it then determines whether the plaintiff has demonstrated a probability of prevailing on the claim. Under section 425.16, subdivision (b)(2), the trial court in making these determinations considers 'the pleadings, and supporting and opposing affidavits stating the facts upon which the liability or defense is based.'" (Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 67.)

We review an order denying an anti-SLAPP motion de novo. (Flatley v. Mauro (2006) 39 Cal.4th 299, 325-326.)

BACKGROUND

In 2007, Manteca and Pivotal negotiated a series of contracts concerning Manteca's 20-acre retail development called Stadium Park. Jeffrey Allen negotiated on behalf of Manteca, and Andrew Cohn on behalf of Pivotal. On December 3, 2007, Manteca and Pivotal entered into three contracts concerning Stadium Park: the land contract, the ground lease, and the buildings contract. Pursuant to the land contract, Pivotal purchased the Stadium Park land from Manteca, and, with the ground lease, Pivotal leased the land back to Manteca. The buildings contract provided for the sale of the Stadium Park buildings to Pivotal for more than $30,000,000. It contained a clause providing for $10,000 in liquidated damages against Pivotal in the event escrow failed to close because of Pivotal's default.

After the parties failed to close escrow on the buildings contract, Manteca filed a complaint against Pivotal, seeking specific performance, monetary damages, and declaratory relief. Pivotal responded with a cross-complaint alleging 10 causes of action: (1) fraud (seeking rescission), (2) another fraud cause of action (seeking monetary damages), (3) aiding and abetting fraud, (4) negligent misrepresentation, (5) unfair competition based on fraud, (6) unilateral mistake, (7) mutual mistake, (8) breach of contract, (9) breach of the implied covenant of good faith and fair dealing, and (10) unjust enrichment. Pivotal alleged that the parties agreed that the $10,000 in liquidated damages would be the extent of Pivotal's risk in the transaction and that Manteca committed fraud by entering into that agreement while intending to seek more in damages in the event of a Pivotal breach.

Manteca filed an anti-SLAPP motion challenging eight of the 10 causes of action in Pivotal's cross-complaint -- the first five causes of action and the last cause of action, which allege misrepresentation (collectively, the fraud causes of action), and the eighth and ninth causes of action, which allege a breach of contract (collectively, the breach of contract causes of action). Manteca did not challenge the sixth (unilateral mistake) and seventh (mutual mistake) causes of action.

Pivotal opposed the anti-SLAPP motion and filed the declaration of Andrew Cohn to establish Pivotal's probability of prevailing on the merits. The trial court denied the anti-SLAPP motion based on its finding that, under the first prong of the anti-SLAPP statute, Manteca failed to establish that the challenged causes of action arose from Manteca's protected activity of filing the complaint. The court therefore did not reach the second prong, concerning whether Pivotal established a probability of prevailing on the merits.

Manteca also filed a demurrer to Pivotal's cross-complaint, which the trial court overruled.

Manteca appeals the trial court's order denying the anti-SLAPP motion. (Code Civ. Proc., § 425.16, subd. (i).)

DISCUSSION

I

Arising from Protected Activity

We first turn to the question of whether the trial court properly found that the anti-SLAPP statute does not apply to the challenged causes of action because the asserted liability did not arise from the filing of Manteca's complaint. We conclude the trial court erred.

In determining whether the challenged cause of action is one arising from a protected activity, the "court must . . . focus on the substance of the plaintiff's lawsuit" (Peregrine Funding, Inc. v. Sheppard Mullin Richter & Hampton LLP (2005) 133 Cal.App.4th 658, 669-670) and determine "whether the plaintiff's cause of action itself was based on an act in furtherance of the defendant's right of petition or free speech [citations]" (City of Cotati v. Cashman (2002) 29 Cal.4th 69, 78 (City of Cotati), original italics.) "The anti-SLAPP statute's definitional focus is not the form of the plaintiff's cause of action but, rather, the defendant's activity that gives rise to his or her asserted liability -- and whether that activity constitutes protected speech or petitioning." (Navellier v. Sletten (2002) 29 Cal.4th 82, 92 (Navellier I), original italics.)

"Where . . . a cause of action is based on both protected activity and unprotected activity, it is subject to section 425.16 '"unless the protected conduct is 'merely incidental' to the unprotected conduct."' [Citations.]" (Haight Ashbury Free Clinics, Inc. v. Happening House Ventures (2010) 184 Cal.App.4th 1539, 1551.)

Here, contrary to the trial court's ruling, the challenged causes of action arose from Manteca's filing of the complaint, a protected activity. We reach this conclusion because Manteca's filing of the complaint provides an element of each challenged cause of action and is not merely incidental to the cause of action. Examination of the challenged causes of action bears this out.

The fraud causes of action are based on the same alleged fraud: Manteca represented to Pivotal that Pivotal was not obligated to purchase the buildings even after purchasing the land and that the Pivotal's risk was limited to $30,300,000 for purchase of the land (under the land contract), plus $10,000 in earnest money for the purchase of the buildings. Manteca intended that Pivotal would rely on the representations and knew that Pivotal would not enter into the agreements without the representations. Pivotal reasonably relied on Manteca's representations when entering into the contracts and paying for the land. Manteca's representations were false. In alleging this last element, Pivotal stated: "By authorizing the filing of the Complaint and by . . . appearing in court in support of the allegations of the Complaint, it is clear that [Manteca], at the time [it] made the representations, knew they were false and intended that [Pivotal] rely on those false representations."

This allegation establishes that Pivotal's fraud causes of action are based, at least in part, on Manteca's protected activity of petitioning the court for redress. If Manteca had not filed its complaint, there would have been no basis for an allegation of fraud because there would be no detrimental effect caused by the alleged fraud. (See Mosier v. Southern Cal. Physicians Ins. Exchange (1998) 63 Cal.App.4th 1022, 1045 [damage an element of fraud cause of action].) The filing of the complaint gave rise to the asserted liability. (Navellier I, supra, 29 Cal.4th at p. 92.) Manteca's petitioning activity is not merely incidental to the fraud causes of action because Manteca's filing of the complaint was a substantial, even indispensable, part of Pivotal's claim that Manteca is liable for fraud.

Despite the showing that the challenged fraud causes of action arose from protected activity, Pivotal opposes this conclusion by calling attention to the Supreme Court's decision in Navellier. That case, however, does not support Pivotal's position.

Navellier I involved an anti-SLAPP motion against a fraud cause of action. In a prior federal action, the defendant had signed a release. However, when the plaintiff filed an amended complaint, the defendant filed a counterclaim asserting that the release could not be enforced. In response to the counterclaim asserting the release could not be enforced, the plaintiff filed a complaint in the state court alleging that the defendant committed fraud by signing the release without intending to be bound by it. (Navellier I, supra, 29 Cal.4th at pp. 85-87.) The trial court denied the defendant's anti-SLAPP motion, but the Supreme Court reversed. It concluded that the defendant was being sued because of the counterclaim he filed in the federal action. The state action was therefore "squarely within the ambit of the anti-SLAPP statute's 'arising from' prong. (§ 425.16, subd. (b)(1).)" (Nevallier I, supra, at p. 90, fn. omitted.)

The facts of Nevallier I are different from the facts of this case because, in Nevallier I, the initial act done with fraudulent intent was done within negotiations concerning a pending case. Here, there was no case pending when Manteca, allegedly with fraudulent intent, induced Pivotal to agree to the contract with Manteca. Pivotal directs our attention to this difference and asks us to conclude that, because the facts of Nevallier I are different from the facts of this case, the anti-SLAPP statute does not apply here. To the contrary, the anti-SLAPP statute applies because Pivotal's assertion that Manteca is liable for fraud is based not only on the alleged fraudulent inducement but also the filing of the complaint as the source of damage to Pivotal. Nevallier I does not foreclose the possibility that the anti-SLAPP statute could apply even if the allegedly fraudulent act, itself, was not a protected activity.

The contract causes of action also qualify under the anti-SLAPP statute's "arising from" prong because Pivotal alleges that Manteca breached the contract by filing the complaint. The contract causes of action allege that Pivotal and Manteca entered into a contract for construction of the buildings with the agreement that, if Pivotal chose not to purchase the buildings, Manteca would be entitled only to retain the $10,000 earnest money deposit as liquidated damages. Concerning breach of the contract, the cross-complaint alleges: "By filing the Complaint seeking to collect monetary damages or compel Pivotal's specific performance in contravention of [the liquidated damages clause] and the intended agreement of the parties, Manteca breached the [contract]."

The breach of contract causes of action are based on Manteca's protected petitioning activity because the alleged breach is the filing of Manteca's complaint. The act constituting the alleged breach, a protected activity, is not merely incidental to the formation of the contract, a non-protected activity. It is an independent element of the cause of action. Therefore, these causes of action also fall squarely within the activities that the anti-SLAPP statute intends to protect.

Pivotal cites another Supreme Court decision, City of Cotati, in an attempt to show that the challenged causes of action do not qualify for anti-SLAPP-statute treatment under the "arising from" prong. In that case, the court noted that "the mere fact an action was filed after protected activity took place does not mean it arose from that activity." (City of Cotati, supra, 29 Cal.4th at pp. 76-77.) The court reasoned that, if it were so, it "would in effect render all cross-actions potential SLAPP's." (Id. at p. 77.)

In City of Cotati, the city and some of the city's property owners had a dispute concerning whether a rent-control ordinance was constitutional. The owners sued the city in federal court, seeking declaratory relief on the question. Later, the city sued the owners in state court, also seeking declaratory relief on the question but in what the city perceived to be a more favorable forum. The owners brought an anti-SLAPP motion against the city in the state court action, and the trial court granted the motion. (City of Cotati, supra, 29 Cal.4th at pp. 71-73.) After the Court of Appeal reversed, the Supreme Court granted review and concluded that the city's state court action did not qualify for treatment under the anti-SLAPP statute's "arising from" prong. Although the city's state action was filed after the owners filed the federal action, a protected activity, the city's action did not arise from the owners' protected activity. (Id. at pp. 76-80.)

This case is different, and distinguishable, from City of Cotati because Pivotal's cross-complaint not only came after Manteca's protected activity -- the filing of the complaint -- but also arose from it in that the challenged causes of action alleged liability based on Manteca's protected activity. This latter circumstance was absent in City of Cotati.

The trial court's conclusion in this case that the anti-SLAPP statute does not apply is untenable. The court based its decision on its conclusion that "[t]he challenged causes of action arise from alleged breach of contract and fraud claims[,] not from the filing of the Complaint in this litigation." To the contrary, the alleged fraud and breach of contract arise, at least in part, from the protected activity of filing the complaint. Therefore, even though the trial court did not consider the second prong of the anti-SLAPP inquiry, whether Pivotal has shown a probability of prevailing on the merits, we must do so to determine whether the anti-SLAPP motion was properly denied.

II

Probability of Prevailing on Merits

Even though Manteca made the threshold showing that Pivotal's action arises from Manteca's protected petitioning activity, Pivotal may still defeat the anti-SLAPP motion by establishing a probability of prevailing on the causes of action. (Nevallier I, supra, 29 Cal.4th at p. 95.) However, before we determine whether Pivotal has shown a probability of prevailing on the merits, we consider Pivotal's argument that we must remand to the trial court because the trial court did not rule on the probability-of-prevailing prong. We conclude that we need not do so. Our review is de novo; therefore, we consider that same pleadings and evidence the court would have considered, without deference to the trial court's conclusion. (Flatley v. Mauro, supra, 39 Cal.4th at pp. 325-326.) Accordingly, we need not remand but can decide, in the first instance, whether Pivotal has shown a probability of prevailing on the merits.

Concerning Pivotal's showing on its probability of prevailing on the merits, we conclude that the litigation privilege precludes success on the fraud causes of action. As for the contract causes of action, Pivotal also failed to show a probability of prevailing. While the parties disagree concerning whether the litigation privilege applies to the contract causes of action (see Nevallier v. Sletten (2003) 106 Cal.App.4th 763, 773-774 (Nevallier II) [litigation privilege inapplicable to breach of contract cause of action]; contra, Feldman v. 1100 Park Lane Associates (2008) 160 Cal.App.4th 1467, 1497), we need not resolve the dispute because Pivotal's contract causes of action fail for other reasons.

To demonstrate a probability of prevailing on the merits, Pivotal must "'"'state[] and substantiate[] a legally sufficient claim.'" [Citations.] 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.] In deciding the question of potential merit, the trial court considers the pleadings and evidentiary submissions of both the plaintiff and the defendant (§ 425.16, subd. (b)(2)); though the court does not weigh the credibility or comparative probative strength of competing evidence, it should grant the motion if, as a matter of law, the defendant's evidence supporting the motion defeats the plaintiff's attempt to establish evidentiary support for the claim.' [Citation.] Thus, [a plaintiff's] burden as to the second prong of the anti-SLAPP test is akin to that of a party opposing a motion for summary judgment. [Citation.]" (Navellier II, supra, 106 Cal.App.4th at p. 768, italics omitted.)

A. Fraud Causes of Action

Manteca contends that Pivotal cannot demonstrate a probability of prevailing on the merits of the fraud causes of action because the alleged fraud damages were caused by Manteca's filing of the complaint, which was an action protected by the litigation privilege. We agree.

"The litigation privilege is . . . relevant to the second step in the anti-SLAPP analysis in that it may present a substantive defense a plaintiff must overcome to demonstrate a probability of prevailing. [Citations.]" (Flatley v. Mauro, supra, 39 Cal.4th at p. 323.) The litigation privilege precludes liability arising from a publication or broadcast made in a judicial proceeding or other official proceeding. (Civ. Code, § 47, subd. (b).) "'The usual formulation is that the privilege applies to any communication (1) made in judicial or quasi-judicial proceedings; (2) by litigants or other participants authorized by law; (3) to achieve the objects of the litigation; and (4) that [has] some connection or logical relation to the action.' [Citation.] The privilege 'is not limited to statements made during a trial or other proceedings, but may extend to steps taken prior thereto, or afterwards.' [Citation.]" (Action Apartment Assn., Inc. v. City of Santa Monica (2007) 41 Cal.4th 1232, 1241.) The litigation privilege is interpreted broadly in order to further its principal purpose of affording litigants and witnesses the utmost freedom of access to the courts without fear of harassment in derivative tort actions. (Ibid.) The privilege is absolute and applies regardless of malice. (Ibid.)

Here, Pivotal fails to overcome the substantive defense, based on the litigation privilege, available to Manteca on the fraud causes of action. Nevallier II is dispositive. That decision was the result of the Supreme Court's remand of the case, in Nevallier I, with directions to consider whether the plaintiff had demonstrated a probability of prevailing on the merits. (Nevallier I, supra, 29 Cal.4th at p. 95.) The Court of Appeal, in Nevallier II, concluded that the litigation privilege applied to the plaintiff's fraud cause of action because "the damages from the fraud were caused by the counterclaims' assertion. . . . Since the fraud claim is predicated, at least in part, on privileged counterclaims and, as has been noted, the privilege bars all tort causes of action other than malicious prosecution [citations], plaintiffs cannot prevail on the fraud claim . . . ." (Nevallier II, supra, 106 Cal.App.4th at p. 772.)

The same is true here. Pivotal alleges that its damages from Manteca's fraud were caused by Manteca's filing of the complaint. Because Manteca's filing of the complaint is protected by the litigation privilege, Pivotal cannot prevail on the merits of the fraud causes of action and the anti-SLAPP motion should have been granted as to those causes of action.

Pivotal attempts to distinguish Nevallier II by arguing that its fraud causes of action were not based on Manteca's filing of the complaint but instead on Manteca's earlier fraudulent misrepresentations. This attempt, however, does not account for the necessity of showing damages to establish a fraud cause of action (see Conroy v. Regents of University of California (2009) 45 Cal.4th 1244, 1255 [resulting damage as an element of fraud cause of action]) and is therefore unavailing.

B. Contract Causes of Action

Attempting to demonstrate minimal merit in its contracts causes of action, Pivotal asserts that Manteca agreed to a condition that Pivotal's risk would be limited to $10,000 in liquidated damages if Pivotal failed to purchase the buildings and that Manteca breached that agreement by filing the complaint seeking additional damages. Pivotal's attempt to demonstrate minimal merit fails because there is no evidence to support Pivotal's assertion that Manteca breached the liquidated damages provision of the contract by filing the complaint.

Pivotal claims that its burden to show minimal merit -- that it has a probability of prevailing on the merits -- does not require a showing as to each element of the causes of action. That is incorrect. Pivotal's burden is similar to the movant's burden in a summary judgment, non-suit, or directed verdict motion, which motions examine each element of a cause of action. (See ComputerXpress, Inc. v. Jackson (2001) 93 Cal.App.4th 993, 1010.) The burden includes a prima facie showing of facts that would support judgment in Pivotal's favor.*fn2 (Ibid.)

In its cross-complaint, supported by its filing of the declaration of Andrew Cohn, Pivotal alleges that Manteca agreed to be limited to $10,000 in liquidated damages. The cross-complaint states that Pivotal and Manteca agreed in section 13.1 of the buildings contract that, in the words of the cross-complaint, "Manteca's remedy for Pivotal's failure to perform under the Buildings Contract would be to terminate the contract and retain Pivotal's earnest money as liquidated damages." The cross-complaint continues: "By filing the Complaint seeking to collect monetary damages or compel Pivotal's specific performance in contravention of Section 13.1 and the intended agreement of the parties, Manteca breached the Buildings Contract."

Section 13.1 states, in pertinent part: "[Pivotal] and [Manteca] hereby agree that [Manteca] may, in the event the close of escrow fails to occur due to a [Pivotal] default, terminate this agreement by written notice to [Pivotal] and escrow holder, cancel the escrow and receive the deposit as liquidated damages . . . ." (Unnecessary capitalization omitted.) In his declaration, Pivotal's Cohn stated that he understood section 13.1 to mean that Pivotal's liability, in the event of default, would be limited to $10,000 in liquidated damages.

Pivotal claims that Manteca breached this provision by seeking a remedy other than $10,000 in liquidated damages. To the contrary, Pivotal provides no authority for the proposition that a party breaches the liquidated damages provision of a contract simply by seeking recovery in an amount greater than the liquidated damages stated in the contract. Furthermore, the buildings contract was an integrated contract;*fn3 therefore, it represented the entire agreement of the parties on the matter and parol evidence is incompetent to add a further provision prohibiting a lawsuit. (§ 1856, subd. (a).) We express no opinion concerning whether Manteca is entitled to damages in an amount greater than the liquidated damages stated in the contract. However, simply filing the complaint was not a breach of contract under the provision indicated by Pivotal. Accordingly, the breach of contract causes of action are without merit.

Because we conclude that the filing of the complaint did not breach the contract between Pivotal and Manteca, we need not consider Manteca's additional assertions that Pivotal cannot assert a breach of contract because it failed to establish that (1) it had performed its obligations under the contract and (2) it had suffered damages attributable to Manteca's breach.

DISPOSITION

The order is reversed and remanded with directions to grant Manteca's anti-SLAPP motion. Manteca is awarded its costs on appeal. (Cal. Rules of Court, rule 8.278, subd. (a)(1), (2).)

We concur: BLEASE , Acting P. J. HULL , J.


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