Ukoha v. REGR CA2/1

Filed 5/18/16 Ukoha v. REGR CA2/1
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
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 This opinion has not been certified for publication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.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION ONE
IFEOMA UKOHA, B258417
Plaintiff and Appellant, (Los Angeles County
Super. Ct. No. BC482976)
v.
REGR, LLC,
Defendant and Respondent.
APPEAL from an order of the Superior Court of Los Angeles County, Ruth Ann
Kwan, Judge. Reversed.
Herbert Wiggins and Herbert N. Wiggins for Plaintiff and Appellant.
Payman Taheri, Michael Shemtoub for Defendant and Respondent.
___________________________________
Plaintiff Ifeoma Ukoha alleges four causes of action to the effect that defendant
wrongfully foreclosed on her property. Defendant moved to strike the complaint
pursuant to Code of Civil Procedure section 425.16, the anti-SLAPP statute, arguing it
arose from defendant’s allegedly fraudulent conduct during a pre-foreclosure bankruptcy
auction, which was a judicial proceeding within the meaning of the statute.1 The trial
court granted the motion, finding the gravamen of the complaint was protected activity.
We conclude the gravamen of the lawsuit was the foreclosure, not the bankruptcy
auction. Therefore, anti-SLAPP protection is unavailable to defendant. Accordingly, we
reverse.
BACKGROUND
We take the facts from the second amended complaint, accepting them as true for
purposes of this appeal. Nothing in this opinion should be construed as a resolution of a
disputed issue of fact or as a determination that any fact is undisputed.
A. Real Estate Transactions and Bankruptcy
3904 Gibraltar Avenue Trust owned a 17-unit apartment building located at 3904
Gibraltar Avenue in Los Angeles. The trustee was either Savvy Real Estate, Inc.,
(Savvy) or Trustee Properties, LLC (TPLLC). David Behrend was the owner and
executive officer of both entities. The property was encumbered by a $1.1 million
promissory note for a loan made by Velocity Commercial Capital Bank (Velocity Bank)
to TPLLC at 6.5 percent interest, secured by a deed of trust in favor of the bank. The
deed of trust gave Velocity Bank the right to sell the property in case TPLLC defaulted
on the loan. The note and deed of trust were recorded on September 30, 2005.
Two days before the first note and trust deed were recorded, on September 28,
2005, 3904 Gibraltar Avenue Trust sold the property for $1.85 million to plaintiff, who
made a $500,000 down payment and executed a second promissory note, for $1.35
1
Unspecified statutory references are to the Code of Civil Procedure. SLAPP is
an acronym for strategic lawsuit against public participation. (City of Cotati v.
Cashman (2002) 29 Cal. 4th 69, 71-72 & fn. 1 (City of Cotati).)
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million with a 6.625 percent interest rate, in favor of 3904 Gibraltar Avenue Trust,
secured by a second deed of trust.
The second promissory note stated the principal amount due on the note included
the principal balance owed to Velocity Bank on the first note. The second note also
stated that Behrend would make payments on the first note from payments received from
plaintiff on the second note. However, Behrend informed plaintiff he owned or
controlled Velocity Bank, and she would be the senior lienholder.
On March 25, 2010, Behrend filed for Chapter 7 bankruptcy reorganization in the
United States Bankruptcy Court for the Central District of California.
Behrend then caused the trustee of 3904 Gibraltar Avenue Trust to assign the
second note and deed of trust to himself in his personal capacity, making them part of his
bankruptcy estate.
At some point the bankruptcy trustee converted Behrend’s Chapter 7 bankruptcy
reorganization to a Chapter 11 liquidation, and in September 2011 moved in the
bankruptcy court for authorization to sell at auction the estate’s interest in the second note
and trust deed, with a minimum purchase price of $6,000.
Behrend, Savvy, TPLLC and 3904 Gibraltar Avenue Trust colluded with a real
estate investor, REGR, LLC, to manipulate the bankruptcy auction sales price, exclude
plaintiff from bidding, and purchase the note and trust deed for $6,000. On November
14, 2011, REGR purchased the note and trust deed at the auction for $6,000.
At some point Behrend also caused TPLLC to default on the first promissory note.
On January 23, 2012, REGR served and recorded a notice of default and election
to sell under the second trust deed, falsely alleging plaintiff was in default on the second
note in the amount of $341,793.88, when she actually had a credit of more than $200,000.
The property was thereafter sold to a third party.
B. Plaintiff’s Complaint
Plaintiff sued REGR. After several rounds of law and motion practice, including
one appeal, the second amended complaint is operative. In it, plaintiff alleges causes of
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action for breach of contract, unfair business practices, slander of title, and unjust
enrichment, and seeks an accounting and declaratory relief.
1. Breach of Contract
In her first cause of action, plaintiff alleges REGR breached the second trust deed
by failing to credit plaintiff for all payments she had made or to make an accounting
before attempting to foreclose on the second note.
2. Unfair Business Practice and Unjust Enrichment
In her second and fifth causes of action, plaintiff alleges REGR’s collusion with
Behrend to fix the bid price of the second note and trust deed at the bankruptcy auction,
breach of contract, failure to credit payments she had made, and institution of foreclosure
proceedings when she was not in default violated federal law and constituted unfair
business practices within the meaning of Business and Professions Code section 17200 et
seq.
3. Slander to Title
In her third cause of action, plaintiff alleges REGR’s wrongful foreclosure was
predicated on false, disparaging statements about the state of title.2
4. Accounting and Declaratory Relief
Based on the above allegations, plaintiff seeks declaratory relief and accounting
captioning these remedies as separate causes of action. No new substantive allegations
are made, but plaintiff alleges REGR owes her fiduciary duties under the “fraudulent
conveyance doctrine.”
C. Special Motion to Strike
On April 24, 2014, REGR demurred to the second amended complaint and moved
to have portions of it stricken. It also specially moved to strike the complaint pursuant to
section 425.16, arguing it was “nothing but a collateral attack on the validity of the sale
conducted by the United States Bankruptcy Court,” and all causes of action arose from
REGR’s “activities in furtherance of its constitutional right to free speech and its acts in
2
We express no opinion as to the adequacy of plaintiff’s allegations. Plaintiff also
alleges two further “causes of action,” for accounting and declaratory relief.
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relation to judicial proceedings.” REGR argued that because its purchase of the second
note occurred as part of bankruptcy proceedings, plaintiff’s allegations of wrongful
foreclosure on the note constituted “an attack on the entirety of the Bankruptcy laws of
this Nation.” “Purchasing property at a judicially conducted sale is an act that is
undeniably an act that is protected by [Code of Civil Procedure] §425.16,” REGR argued,
so “preparing for another judicial proceeding, namely a judicial [sic: nonjudicial]
foreclosure, is also an act that is undoubtedly protected.”
The trial court agreed, finding the complaint contained two main allegations: (1)
The foreclosure was improper because REGR failed to credit plaintiff’s payments on the
second note; and (2) “Defendant did not have authority to serve and record the notice of
default and notice of bankruptcy auction because Defendant’s acquisition of said
documents and commercial property was fraudulent.”3 The court found plaintiff alleged
in the complaint that REGR colluded with Behrend, Savvy, TPLLC and 3904 Gibraltar
Avenue Trust “to manipulate the auction price at the bankruptcy auction to artificially set
the price under fair market value and to guarantee that Defendant was the winning bidder
at the auction.” Therefore, the court found, plaintiff’s complaint “focuses on Defendant’s
alleged participation in bankruptcy and the purchase of Note Two and Deed of Trust Two
at the bankruptcy auction based upon the fraudulent and collusive agreement between
Defendant and his successors-in-interest. Thus, the gravamen of Plaintiff’s causes of
action herein is that Defendant obtained title to the property by fraudulently participating
in the bankruptcy proceeding in purchasing Note Two and Deed of Trust Two at the
bankruptcy auction for a discounted price (i.e. ‘for pennies on the dollar’).” “Without the
improper purchase of the second note and second deed of trust, there could be no
serving/recording of a notice of default/notice of bankruptcy auction. One begets the
other. Defendant would not have any standing to serve/record any notice of default or
any notice of bankruptcy auction. As such, the protected activity is germane and not
incidental to the unprotected activity.” The court held that “[b]ecause the improper
3
It is unclear why the trial court believed REGR served and recorded the trustee’s
notice of bankruptcy auction. That notice was served by the bankruptcy trustee.
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purchase at the bankruptcy proceeding is non-incidental protected conduct, Plaintiff’s
causes of action arise out of protected activity.” It then found plaintiff failed to establish
a probability of prevailing in the action, and therefore granted REGR’s motion and later
awarded REGR attorney fees.
Plaintiff appeals only from the order granting the anti-SLAPP motion.
DISCUSSION
A. Legal Principles and Standard of Review
Section 425.16 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.”
(§ 425.16, subd. (b)(1).) “‘[A]ct in furtherance of a person’s right of petition or free
speech’ . . . 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, (2) any written or oral statement or writing made in connection with an issue
under consideration or review by a legislative, executive, or judicial body, or any other
official proceeding authorized by law . . . .” (Id., subd. (e).) Section 425.16 is to be
construed broadly. (Id., subd. (a).) A cause of action arising from the defendant’s
litigation activity may be subject to a special motion to strike. (Rusheen v. Cohen (2006)
37 Cal. 4th 1048, 1056.)
We review the trial court’s ruling de novo (Grewal v. Jammu (2011) 191
Cal. App. 4th 977, 988), using a two-prong approach (Equilon Enterprises v. Consumer
Cause, Inc. (2002) 29 Cal. 4th 53, 67). We determine first whether the moving party has
made a threshold showing that the challenged cause of action arises from protected
activity. (Navallier v. Sletten, supra, 29 Cal.4th at p. 88.) If the moving party meets this
burden, we determine whether the opposing party has established a probability of
prevailing on the claim. (Ibid.) “Only a cause of action that satisfies both prongs of the
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anti-SLAPP statute—i.e., that arises from protected speech or petitioning and lacks even
minimal merit—is a SLAPP, subject to being stricken under the statute.” (Id. at p. 89.)
Simply because a lawsuit was filed after protected activity occurred does not mean
the action arose from the protected activity. (City of Alhambra v. D’Ausilio (2011) 193
Cal. App. 4th 1301, 1307.) In determining whether the threshold “arising from”
requirement is met, we look for “the principal thrust or gravamen of plaintiff’s cause of
action.” (Martinez v. Metabolife Internat., Inc. (2003) 113 Cal. App. 4th 181, 188.)
“Although a party’s litigation-related activities constitute ‘act[s] in furtherance of a
person’s right of petition or free speech,’ it does not follow that any claims associated
with those activities are subject to the anti-SLAPP statute. To qualify for anti-SLAPP
protection, the moving party must demonstrate the claim ‘arises from’ those activities. A
claim ‘arises from’ an act when the act ‘“‘forms the basis for the plaintiff’s cause of
action’ . . . .”’ [Citation.] ‘[T]he “arising from” requirement is not always easily met.’
[Citation.] A cause of action may be ‘triggered by’ or associated with a protected act, but
it does not necessarily mean the cause of action arises from that act.” (Kolar v. Donahue,
McIntosh & Hammerton (2006) 145 Cal. App. 4th 1532, 1537.) Thus, 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.” (Navallier v. Sletten, supra, 29
Cal.4th at p. 92.)
B. The Gravamen of Plaintiff’s Complaint was the Foreclosure
Plaintiff argues none of her causes of action arose from protected activity. We
agree.
Preliminarily, we wish to clear up an apparent misconception. The parties and the
trial court apparently believe that bidding in a bankruptcy auction constitutes protected
activity for purposes of the anti-SLAPP statute. It does not. (Blackburn v. Brady (2004)
116 Cal. App. 4th 670 [allegedly fraudulent bid at a public auction is not protected because
a public sale is not an “official proceeding” within the meaning of the anti-SLAPP
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statute, but rather a “ministerial event” that does not “concern an issue under review or
determine some disputed matter as contemplated under the anti-SLAPP law”].)
In any event, none of plaintiff’s complaint depends on REGR’s conduct during the
bankruptcy sale. In her cause of action for breach of contract, plaintiff alleges REGR
breached the second trust deed by failing to credit her for all payments she had made and
by failing to make an accounting before attempting to foreclose on the second note. In
her causes of action for unfair business practice and unjust enrichment, plaintiff alleges
REGR’s (1) collusion with Behrend to fix the bid price of the second note and trust deed
at the bankruptcy auction, (2) breach of contract, (3) failure to credit payments she had
made, and (4) institution of foreclosure proceedings when she was not in default violated
federal law. In her cause of action for slander of title, plaintiff alleges REGR’s wrongful
foreclosure was predicated on false, disparaging statements about the state of title.
Thus, with one exception, each of these causes of action is predicated on REGR’s
conduct during foreclosure, after the bankruptcy auction. The one exception is that
plaintiff alleges REGR’s collusion with Behrend to fix the bid price of the second note
and trust deed at the bankruptcy auction also constituted an unfair business practice. But
because this is the only reference to that act in her operative allegations, and because she
gives no explanation in the cause of action how this injured her, the allegation is not the
principal thrust of the cause of action.
REGR argues plaintiff’s repeated mention of the bankruptcy auction in the
complaint means the auction forms the gravamen of the complaint. We disagree.
Although in the “Parties” and “General Allegations” sections of the complaint plaintiff
goes on and on about the bankruptcy auction, in her actual causes of action she barely
mentions it. In the one cause of action that does mention the auction, REGR’s conduct is
just one of four acts alleged to constitute an unfair business practice. The only other
mention occurs obliquely in plaintiff’s prayers for declaratory relief and an accounting,
where she alleges that under the “fraudulent conveyance doctrine,” REGR owes fiduciary
duties to her. We assume plaintiff means that because REGR obtained the second note
and trust deed by defrauding the bankruptcy trustee, it holds them in constructive trust for
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her and owes her the duties a trustee would owe a beneficiary. Plaintiff does not explain
what difference such heightened duties would make during an accounting.
We conclude the trial court incorrectly found plaintiff’s causes of action arose
from protected activity. REGR’s anti-SLAPP motion therefore should have been denied.
We need not determine whether a probability exists that plaintiff will prevail on her
causes of action. Nor will we address plaintiff’s arguments that the anti-SLAPP motion
was barred by res judicata, that REGR should have been denied attorney fees (REGR
concedes that a substantive reversal will nullify the attorney fee award), or that the trial
court was not impartial.
DISPOSITION
The clerk of the superior court is ordered to vacate its order granting defendant’s
special motion to strike and enter a new order denying the motion. Plaintiff is to recover
her costs on appeal.
NOT TO BE PUBLISHED.
CHANEY, J.
We concur:
ROTHSCHILD, P. J.
LUI, J.
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