Avista Development v. Aldrich CA4/1 (2016) · DecisionDepot
Avista Development v. Aldrich CA4/1
California Court of Appeal Mar 15, 2016 No. D069076Unpublished
Filed 3/15/16 Avista Development v. Aldrich CA4/1 NOT TO BE PUBLISHED IN OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
COURT OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION ONE
STATE OF CALIFORNIA
AVISTA DEVELOPMENT, LLC et al., D069076
Plaintiffs and Appellants,
v. (Super. Ct. No. CIVDS1204644)
MARK ALDRICH et al.,
Defendants and Appellants.
APPEALS from an order of the Superior Court of San Bernardino County, David
S. Cohn, Judge. Affirmed.
Dentons US, David Simonton, Joshua Kroot for Plaintiffs and Appellants.
Lester & Cantrell, Mark S. Lester, David Cantrell and Colin A. Northcutt for
Defendants and Appellants.
The parties appeal an order granting in part a special motion to strike under Code
of Civil Procedure section 425.16,1 the anti-SLAPP (strategic lawsuit against public
participation) statute. The operative second amended complaint (SAC) filed by plaintiffs
1 All further statutory references are to the Code of Civil Procedure unless otherwise specified.
Avista Development, LLC (Avista), United Strategies, Inc. (United), Brownfield Group,
LLC (Brownfield), Bruce Cash, and Carrie Cash (collectively, Plaintiffs), alleges five
causes of action: (1) conversion; (2) trespass to chattels; (3) trespass to land;
(4) nuisance; and (5) fraud. The trial court granted the anti-SLAPP motion filed by
defendants Mark Aldrich, Ted Dutton, Jo Dutton, and School Facility Advisors, Inc.
(collectively, Defendants) as to the fraud claim, and denied the motion as to all of the
other causes of action.
The parties dispute whether Plaintiffs' causes of action arise from protected
activities. Defendants contend that all of Plaintiffs' causes of action arise from
communications made at a judgment debtor examination, which constitutes protected
activity, and thus, that the entire SAC must be stricken under the anti-SLAPP statute.
Plaintiffs maintain that their claims arise from extrajudicial and noncommunicative acts
by Defendants that occurred after the judgment debtor examination, and that interfered
with Plaintiffs' use of their property. We conclude that the gravamen of the first through
fourth causes of action is not based on protected activity in furtherance of the Defendants'
rights of petition or free speech, but that the fifth cause of action, for fraud, does arise
from protected conduct, and Plaintiffs did not establish a likelihood of prevailing on the
fraud claim. Accordingly, we affirm the trial court's order.
2
FACTUAL AND PROCEDURAL BACKGROUND
A. Ted Dutton's judgment against the Cashes
Carrie Cash and Bruce Cash2 are the founders of United, Avista, and Brownfield,
three separate companies formed in 1998, 2003, and 2005, respectively. United is a
regulatory compliance business involving land use and environmental rights. Avista was
formed to develop 156 acres of real property that it owns, located near Redlands,
California. Brownfield was formed to sell real property located in Rialto, California.
The companies' operations are run from the same office in Redlands, where Carrie and
Bruce also maintain certain personal files and assets.
In 2002, following a bench trial over a disputed debt, Ted obtained a monetary
judgment against Bruce and Carrie, jointly and severally. The judgment awarded Ted
$200,000, prejudgment interest, and attorney fees and costs. The companies founded by
Bruce and Carrie are not named in Ted's judgment. During the litigation and afterward,
Ted was represented by an attorney, Aldrich.
B. Judgment debtor's examination and Defendants' post-examination conduct
On April 30, 2009, Aldrich took a judgment debtor's examination of Carrie in
order to identify the Cashes' assets and facilitate collection of the unpaid portion of Ted's
judgment. At the conclusion of the examination, Aldrich obtained an "Order for Delivery
of Property after Examination" (the Turnover Order) pursuant to section 708.205. The
Turnover Order required the "Judgment Debtor" (noted in one place as Carrie and in
2 For the purpose of clarity, we will refer to the individual Cashes and Duttons by their first names. 3
another as both Carrie and Bruce) to deliver certain assets to Ted to "be applied toward
the satisfaction of the judgment." The listed assets included three horses (one owned by
Carrie and two owned by Avista), 100 percent of the Cashes' membership interests in
Avista, 1,000 shares of stock in United, and the balance of United's bank account.
On the day of the judgment debtor examination, Aldrich allegedly misled Carrie
into believing that the Turnover Order allowed him to take direct possession of the listed
assets in satisfaction of Ted's judgment, without need for delivery of the assets to a
levying officer. Aldrich "misrepresented to Carrie Cash that she was legally obligated to
give documents, keys, passcodes, and other items and information," to Aldrich and Ted.
For example, Aldrich allegedly told Carrie that she was required to provide him with the
passcodes to United's and Avista's accounting software. Further, Aldrich directed Carrie
to call the bank where United's account was held so that Aldrich and Ted could close the
account that day and collect the cash. In each instance, the SAC alleges that Carrie
reasonably relied on Aldrich's profession and his position as a court officer, and complied
with his requests.
Later that same day, Aldrich sent someone to the Cashes' residence to take
possession of the three horses listed in the Turnover Order. Carrie did not know that the
person was Aldrich's agent and not a levying officer. According to the SAC, the manner
in which Defendants took possession of the horses violated the Turnover Order.
On May 1, 2009, Ted allegedly executed a deed transferring real property owned
by Avista to School Facility Advisors, Inc., a company under his and his wife Jo's
control. The SAC alleges that the Duttons had no authority to transfer Avista's property.
4
On May 3, 2009, the Cashes filed for bankruptcy, triggering an automatic stay of
any collection attempts (11 U.S.C. § 362), and notified Defendants that same day of the
bankruptcy filing. The SAC alleges that the Cashes still owned 100 percent of the shares
of United and 100 percent of Avista and Brownfield as of the date of the bankruptcy
filing.
In subsequent days and weeks, Defendants allegedly entered Plaintiffs' office and
interfered with Plaintiffs' use of their property. For instance, on May 4, 2009, Carrie
learned from an alarm company that Ted was attempting to change the locks to Plaintiffs'
office. On that date, Ted and his agent/employee allegedly entered the office without
Plaintiffs' consent and began a process of searching for and reviewing physical files,
faxing hundreds of pages of documents to Aldrich, and creating an inventory of Plaintiffs'
personal and real property. These activities are alleged to have continued over a period
of several weeks. During the same time period, Defendants are alleged to have
physically removed computers, documents, files, and personal property belonging to
Plaintiffs from the office.
On May 5, 2009, Plaintiffs' counsel sent an e-mail to Aldrich stating his clients'
position that Defendants were violating the automatic stay triggered by the Cashes'
bankruptcy petition (11 U.S.C. § 362). The next day, Bruce and his attorney alerted the
Redlands Police Department to Defendants' unauthorized entries into Plaintiffs' office,
and a police officer went to the office to investigate. Aldrich, who was physically present
in the office when the officer arrived, apparently justified his presence to the responding
police officer by pointing to the Turnover Order. The officer declined to interpret the
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Turnover Order, advised the parties to resolve the matter in civil court, and left the
premises. Over the next few days, Defendants allegedly arranged to have United's and
Avista's mail forwarded to new post office boxes, created false invoices, sent out
collection letters to United's clients, and successfully collected some money from those
clients. The SAC alleges that in mid-May, Ted and Aldrich closed Avista's bank account
and collected all of the funds from the account.
Plaintiffs allege that Defendants' actions resulted in damages to Plaintiffs,
including depriving Plaintiffs of the use of their property, reputational harm, canceled
business projects, and lost profits and opportunities.
C. Bankruptcy court proceedings
In early June 2009, a bankruptcy court found that the Turnover Order "did not
effectuate the transfer of title to, or ownership of, any assets from [Bruce and Carrie] to
[Ted]. Therefore, all assets listed in the Turnover Order became property of the
Bankruptcy Estate on the petition date." The bankruptcy court ordered Ted and his
agents to "immediately, and not conditioned upon entry of this Order, return possession
of the offices and assets of [United] and Avista including but not limited to, computer
servers and office keys to [Bruce and Carrie] . . . [who] shall possess the assets subject to
the Trustee's right to administer such assets." The bankruptcy court further ordered that
Ted and Aldrich deposit "all proceeds of the sale of the horses," "all other cash proceeds
of the assets listed in the Turnover Order," and "all other cash generated" from operating
United and Avista, into a trust account, and provide an accounting of funds to the
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bankruptcy trustee. Finally, the bankruptcy court ordered Ted and his agents to return
any and all of Plaintiffs' business records, including intellectual property.3
D. Superior court proceedings
Plaintiffs filed their complaint in this case in May 2012. Defendants filed an anti-
SLAPP motion, which was denied. In November 2013, Plaintiffs filed the SAC. In
moving to strike the SAC, Defendants requested judicial notice of Ted's 2002 judgment,
the Turnover Order, and several documents from the bankruptcy proceeding, such as
declarations filed by the Cashes in connection with obtaining the Bankruptcy Order.
Defendants also submitted a declaration from Aldrich, in which he confirms that he took
Carrie's judgment debtor examination. In the declaration, Aldrich states that Carrie
"voluntarily" agreed to turn over property, permit access, and transfer information, to him
and Ted. Aldrich's declaration also confirms that he was present in the Cashes' office in
May 2009 "to take inventory of the assets that had been surrendered voluntarily" and
during the Redlands Police Department encounter.
In opposing the anti-SLAPP motion, Plaintiffs submitted two declarations from
their counsel, deposition testimony from Defendants' agents, and Bruce's declaration.
Plaintiffs also requested judicial notice of several documents from the bankruptcy
proceeding, including Carrie's declaration and the Bankruptcy Order. The deposition
testimony, which was ruled admissible, tends to show that Ted and Aldrich were
physically present in Plaintiffs' office on several occasions in May 2009, that they hired
3 Hereinafter, we refer to the bankruptcy court's June 2009 order as the Bankruptcy Order. 7
an agent (Melinda) to search through and notate Plaintiffs' files, documents, and/or
information, and that they had been making efforts to assess the value of properties
owned by Plaintiffs.
With their reply brief, Defendants filed a number of objections to Plaintiffs'
request for judicial notice and evidence. Notably, Defendants argued that Carrie's
bankruptcy court declaration was inadmissible for the truth of the matters asserted therein
and that large portions of Bruce's declaration lacked foundation, personal knowledge, and
contained inadmissible hearsay. In an ex parte request, Plaintiffs sought to file a surreply
and to submit additional evidence, including a declaration from Carrie. The court
initially granted Plaintiffs' requests. Several days later, the court became aware that
defense counsel had not been provided notice of Plaintiffs' ex parte application. In a
hearing on the matter in which the court acknowledged that a "deprivation of due
process" had occurred, Defendants strongly objected to the court's considering additional
evidence that Plaintiffs could have presented earlier and/or that would cause further
delays. Concluding that Defendants had not been prejudiced, the court decided that it
would consider the surreply and accompanying evidence. However, the following day, at
the hearing on Defendants' anti-SLAPP motion, the court decided to strike the surreply
and any supplemental evidence. The court stated that the additional evidence was not
relevant in light of its intended ruling on the anti-SLAPP motion. The court's written
order also noted "procedural irregularities discussed at the hearing" as a reason for
striking the evidence.
8
The court denied Defendants' anti-SLAPP motion on the causes of action for
conversion, trespass to chattels/land, and nuisance, on the ground that the gravamen of
those causes of action is not what occurred at the debtor's exam but, rather, allegedly
unlawful self-help actions on the part of Defendants. In particular, the court noted that
Defendants "allegedly engaged in self-help measures that went far beyond the scope of
the [T]urnover [O]rder," and that they were allegedly "doing things that were not covered
by the Turnover Order at all," such as "going out and grabbing . . . stuff unilaterally." As
an analogy, the court explained that if a turnover order listed several cars, a judgment
creditor could not "[g]rab the door" and "throw the driver out," thereby taking possession
of the cars—such actions would be comparable to a "carjacking."
As to the fraud cause of action, after parsing out specific allegations that could
constitute fraud, the trial court found that any alleged misrepresentations by Aldrich were
made in connection with a judicial proceeding, i.e., Carrie's debtor exam. The court
further found that the litigation privilege, Civil Code section 47, subdivision (b), applied
to Aldrich's statements, and thus, that Plaintiffs could not prevail on their fraud cause of
action. Both Plaintiffs and Defendants timely appealed.4
DISCUSSION
A. The anti-SLAPP statute
"Review of an order granting or denying a motion to strike under section 425.16 is
4 The court also admitted Carrie's bankruptcy court declaration in evidence as a party admission offered by an opposing party, granted the parties' requests for judicial notice, and ruled on Defendants' evidentiary objections. To the extent necessary, Plaintiffs request that we reverse certain of the trial court's evidentiary rulings. 9
de novo." (Soukup v. Law Offices of Herbert Hafif (2006) 39 Cal.4th 260, 269, fn. 3.)
This court considers " 'the pleadings, and supporting and opposing affidavits . . . upon
which the liability or defense is based.' " (Ibid., citing § 425.16, subd. (b)(2).) The court
does not weigh or compare the evidence, but rather accepts as true the evidence favorable
to the plaintiff while evaluating the defendant's evidence " 'only to determine if it has
defeated that submitted by the plaintiff as a matter of law.' " (Ibid.)
A SLAPP suit is "a meritless suit 'filed primarily to chill the defendant's exercise
of First Amendment rights.' " (Paul v. Friedman (2002) 95 Cal.App.4th 853, 861,
quoting Wilcox v. Superior Court (1994) 27 Cal.App.4th 809, 815, fn. 2.) A court's
consideration of an anti-SLAPP motion involves a two-pronged analysis. (In re
Episcopal Church Cases (2009) 45 Cal.4th 467, 477.) " 'First, the court decides whether
the defendant has made a threshold showing that the challenged cause of action is one
162 Cal.App.4th 858, 868.) "In California, fraud must be pled specifically; general and
5 The pleadings and evidence submitted by Defendants do not establish Carrie's consent to Defendants' actions as a matter of law, and we do not resolve factual disputes on a section 425.16 motion. (Freeman v. Schack (2007) 154 Cal.App.4th 719, 733 ["[M]erits based arguments have no place in our threshold analysis of whether plaintiffs' causes of action arise from protected activity."].)
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conclusory allegations do not suffice." (Lazar v. Superior Court (1996) 12 Cal.4th 631,
645.)
The gravamen of Plaintiffs' fraud cause of action is alleged misrepresentations
made by Aldrich at the judgment debtor examination or after the exam had concluded
during a conversation with Carrie regarding what was required of her pursuant to the
Turnover Order. Any alleged nondisclosures of information by Aldrich pertaining to this
subject were communicative in nature and necessarily related to his affirmative
representations. (Rusheen, supra, 37 Cal.4th at p. 1062; see also Kupiec v. Am. Internat.
statements thus fall squarely within the plain language of the anti-SLAPP statute.
(Navellier v. Sletten (2002) 29 Cal.4th 82, 90.)
Plaintiffs contend that Defendants' acts of interference with Plaintiffs' property
rights that form the basis of the SAC's first through fourth causes of action similarly
provide the basis for their fraud claim, under a "concealment" theory. In addition to the
central allegation of Aldrich's false and misleading representations, the SAC alleges that
Defendants concealed or suppressed facts, such as their nonconsensual entry onto
Plaintiffs' property, their "intent to disregard the levying procedure required by the
turnover order," and their interferences with Plaintiffs' property. However, the SAC does
not sufficiently allege Defendants' duty to disclose their purportedly concealed actions or
Plaintiffs' justifiable reliance on the alleged concealments in light of information that was
known or available to them. Simply put, Defendants' alleged acts of conversion, trespass,
and/or nuisance do not provide a sufficient basis for Plaintiffs' claim of fraud.
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Because Defendants have demonstrated that the fraud cause of action meets the
anti-SLAPP statute's first prong, we turn to the second prong of the anti-SLAPP analysis,
Plaintiffs' likelihood of prevailing on the merits of that claim.
2. Second prong of anti-SLAPP analysis
Defendants offer several reasons why Plaintiffs cannot prevail on the merits of
their fraud cause of action; we need address only one, which, if applicable, warrants
dismissal of the fifth cause of action. Defendants argue that Plaintiffs' fraud cause of
action is barred by the litigation privilege, which applies to communications made in any
"judicial proceeding." (Civ. Code, § 47, subd. (b)(2).) We agree.
The principal purpose of the litigation privilege "is to afford litigants and
witnesses [citation] the utmost freedom of access to the courts without fear of being
harassed subsequently by derivative tort actions." (Silberg v. Anderson (1990) 50 Cal.3d
205, 213.) 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 have some connection or logical relation
to the action." (Id. at p. 212 [privilege can apply even when communication "is made
outside the courtroom and no function of the court or its officers is involved"].) For
purposes of applying the litigation privilege, courts have recognized that collection of a
judgment is a litigation objective. (O'Keefe v. Kompa (2000) 84 Cal.App.4th 130, 135.)
As noted above, Plaintiffs' fraud cause of action is based on Aldrich's
representations (or nondisclosures) at Carrie's judgment debtor exam. The litigation
privilege applies because Aldrich was communicating with Carrie about matters
16
connected or logically related to achieving the collection of a judgment through court
proceedings. (See §§ 708.110–708.205 [discussing judgment debtor examination
proceedings].) Plaintiffs have not sufficiently pleaded that Defendants' subsequent
conduct—alleged interferences with Plaintiffs' property interests—constitutes a
sufficient, independent basis for a cause of action for fraud. Accordingly, Plaintiffs have
not demonstrated a likelihood of prevailing on their fraud cause of action, and the trial
court properly struck that claim.6
DISPOSITION
The order is affirmed. Each party shall bear its own costs on appeal.
AARON, J.
WE CONCUR:
McINTYRE, Acting P. J.
O'ROURKE, J.
6 In light of our decision, we have no need to address the trial court's evidentiary rulings. 17
AI Brief
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Holding. The court held that the defendants' alleged acts of conversion, trespass, and nuisance did not arise from protected activity under the anti-SLAPP statute, but that the fraud claim was based on protected communicative conduct subject to the litigation privilege. Consequently, the court affirmed the trial court's order denying the motion to strike the non-fraud claims and granting it as to the fraud claim.
Issues
Whether the defendants' alleged acts of conversion, trespass, and nuisance arose from protected activity under Code of Civil Procedure section 425.16.
Whether the plaintiffs' fraud cause of action arose from protected activity under the anti-SLAPP statute.
Whether the litigation privilege barred the plaintiffs' fraud claim.
Disposition. Affirmed
Quotations verified verbatim against the opinion
“The gravamen of the first through fourth causes of action is not based on protected activity in furtherance of the Defendants' rights of petition or free speech, but that the fifth cause of action, for fraud, does arise from protected conduct”