Opinion
2d Civil No. B227795 Super. Ct. No. 1342912
10-04-2011
SUZANNE F. McNEELEY et al., Plaintiffs and Respondents, v. ALLEN LAW CORPORATION et al., Defendants and Appellants.
Lewis Brisbois Bisgaard & Smith, LLP, Roy G. Weathercup, Bartley L. Becker and Jennifer R. Weathercup for Defendants and Appellants. Reicker, Pfau, Pyle & McRoy, LLP, Alan A. Blakeboro, Diana Jessup Lee and Robert B. Forouzandeh for Plaintiffs and Respondents.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
(Santa Barbara County)
Appellants are a law firm and the law firm's attorneys who loaned $230,000 to a relative who served as trustee of a family trust. The loan was secured by real property in the trust estate. The trustee was replaced by respondents as successor cotrustees. Before being replaced, the former trustee sold the real property. Respondents filed an ex parte application for a temporary restraining order to prevent the distribution of the proceeds of sale. Appellants opposed the application on behalf of themselves and the former trustee. The trial court declined to issue a restraining order and a portion of the proceeds from sale of the trust property was distributed to appellants in repayment of the loan.
The successor trustees filed a lawsuit against the attorneys seeking to recover proceeds of sale distributed to the attorneys, alleging among other things, breach of trust. The attorneys filed a special motion to strike the complaint as a strategic lawsuit against public participation (SLAPP) suit under Code of Civil Procedure section 425.16. Appellants contend that the successor trustee's lawsuit arose from protected litigation activity--their representation of themselves and the former trustee in the proceeding to enjoin distribution of proceeds from the sale of trust assets. Like the trial court, we conclude that, at most, the court appearance was incidental to the successor trustees' lawsuit. The allegations of the complaint turn on appellants' involvement with the former trustee in the management of her mother's trust and the use of trust assets for the former trustee's personal benefit.
All statutory references are to the Code of Civil Procedure unless stated otherwise.
Facts and Procedural History
In 2001, Ralph and Georgia Judy established the Judy Family Trust for Georgia's benefit. Following the death of Ralph Judy in July 2002, the Judy Family Trust funded two subtrusts. The Figueroa Trust was funded by an income-producing, four-unit rental property located on Figueroa Street in Santa Barbara (the Figueroa property). The Capistrano Trust was funded by Georgia's residence on Calle Capistrano in Santa Barbara (the Capistrano property). The primary purpose of both subtrusts was to provide for Georgia's living expenses and medical care.
The statement of facts is based on the allegations of the complaint in the underlying lawsuit and the declarations of the parties in support of and opposition to the motion to strike.
We refer to Georgia Judy by her first name for clarity. No disrespect is intended.
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At the time the subtrusts were funded, Mary Dutcher, one of Georgia's daughters, was the sole trustee of the Judy Family Trust. For a time, Dutcher and Georgia were cotrustees of the subtrusts. Georgia resigned as trustee in January 2005, and Dutcher became the sole trustee of the subtrusts.
Appellants James Allen and Sean Allen are father and son and are attorneys in appellant Allen Law Corporation. Dutcher is Sean Allen's mother-in-law. In 2007 and 2008, Dutcher borrowed a total of $230,000 from the Allen Family Trust, of which James Allen is the trustee. These loans were secured by trust deeds on the Figueroa property. Dutcher used most, if not all, of the loan proceeds for her personal benefit. She failed to provide adequately for Georgia's care and failed to make timely mortgage payments on the Capistrano property resulting in initiation of foreclosure proceedings.
On February 13, 2009, Georgia executed an amendment to the Capistrano Trust replacing Dutcher as sole trustee with respondents Suzanne F. McNeeley and Jacqueline Quinn, as cotrustees. Dutcher remained sole trustee of the Figueroa Trust until she was removed on December 1, 2009, and replaced by McNeeley and Quinn. On February 19, 2009, Kathleen A. Judy, Georgia's other daughter, filed a petition to appoint McNeeley and Quinn as co-conservators over Georgia's person and estate. The petition was approved by the court on April 10, 2009, despite Dutcher's opposition. In addition, the court ordered Dutcher to submit a full written accounting to the court for each subtrust on or before July 3, 2009.
The Figueroa Property was sold in July 2009. On June 27, 2009, McNeeley and Quinn filed an ex parte application for issuance of a temporary restraining order to prohibit Dutcher from distributing proceeds from the then-pending sale of the Figueroa property, and distributing the funds to pay off the loans from the Allen Family Trust. The Allen law firm and Sean Allen represented Dutcher in these proceedings. James Allen appeared as attorney for the Allen Family Trust. None of the appellants advised Dutcher with respect to her role in conducting the financial affairs of the trusts, and they did not charge and were not paid for their services representing Dutcher. By the time the Allen law firm undertook Dutcher's representation, most, if not all, of the money loaned to Dutcher by the Allen Family Trust in 2007 and 2008 had been spent.
On July 6, 2009, the court entered an order for the proceeds of the sale of the Figueroa property to be distributed to satisfy the loans from the Allen Family Trust. Subsequently, James Allen was repaid the loans made to Dutcher pursuant to this court order.
On April 8, 2010, McNeeley and Quinn in their capacities as co-conservators of Georgia's person and estate, and as cotrustees of the Judy Family Trust, the Figueroa Trust, and the Capistrano Trust, filed a complaint against appellants, Dutcher, and several other parties alleging 11 causes of action: Appellants were named in causes of action alleging (1) Financial Elder Abuse, (2) Breach of Trust, (3) Recovery of Trust Property, (4) Accounting of Trust Property, (5) Redress for Breach of Trust, Probate Code section 17200, (6) Redress for Breach of Trust, Probate Code section 16420, (7) Professional Malpractice, (8) Conversion, (9) Unjust Enrichment, and (10) Constructive Trust.
Appellants filed a special motion to strike pursuant to section 425.16. They asserted that the complaint arose from their acts in furtherance of their constitutional rights of petition and speech -- their appearance and representation of themselves and Dutcher in the ex parte proceeding filed by McNeeley and Quinn to enjoin distribution of proceeds from sale of the Figueroa property. In response, McNeeley and Quinn argued that the causes of action asserted in the complaint were not subject to the special motion to strike because they did not arise out of appellants' right of free speech or petition, but rather from appellants' involvement in wrongfully depleting the assets of the trust. The trial court agreed and denied the motion concluding that the allegations in the complaint regarding the ex parte proceeding did not form the basis of any cause of action. According to the trial court, "If these allegations were removed from the Complaint, no right of action would be lost and no claim of damage would be otherwise unavailable. . . . [¶] . . . The ex parte application for a TRO did not suddenly change the character of plaintiffs' causes of action from those arising out of a breach of trust into causes arising out of moving defendants' petitioning activity." This appeal followed.
DISCUSSION
Standard of Review
An appellate court reviews de novo the trial court's ruling on a section 425.16 motion to strike. (Martinez v. Metabolife Intern., Inc. (2003) 113 Cal.App.4th 181, 186.)
The Statute
The anti-SLAPP statute 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 or 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).)
The statute was enacted to prevent and deter lawsuits that chill the valid exercise of the constitutional rights of freedom of speech and petition for the redress of grievances and provides "an efficient procedural mechanism to obtain an early and inexpensive dismissal of nonmeritorious claims" arising from the exercise of those constitutional rights. (Martinez v. Metabolife Intern., Inc., supra, 113 Cal.App.4th at p. 186.)
An anti-SLAPP motion requires the trial 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. (Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 67.) Second, "[i]f the court finds such a showing has been made, it then determines whether the plaintiff has demonstrated a probability of prevailing on the claim." (Ibid.) In making that determination, the court shall "consider the pleadings, and supporting and opposing affidavits stating the facts upon which the liability or defense is based." (§ 426.16, subd. (b)(2).) "[W]e neither 'weigh credibility [nor] compare the weight of the evidence. Rather, [we] accept as true evidence favorable to plaintiff [citation] and evaluate the defendant's evidence only to determine if it has defeated that submitted by the plaintiff as a matter of law.' [Citation.]" (Soukup v. Law Offices of Herbert Hafif (2006) 39 Cal.4th 260, 269, fn. 3; Hylton v. Frank E. Rogozienski, Inc. (2009) 177 Cal.App.4th 1264, 1267, fn. 2.)
The Complaint Must "Arise From" Protected Activity
Protected speech or petitioning activity must be the activity that "gives rise to [defendant's] asserted liability . . . ." (Navellier v. Sletten (2002) 29 Cal.4th 82, 92.) "[T]he statutory phrase 'cause of action . . . arising from' means simply that the defendant's act underlying the plaintiff's cause of action must itself have been an act in furtherance of the right of petition or free speech. [Citation.]" (City of Cotati v. Cashman (2002) 29 Cal.4th 69, 78.) "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, supra, at p. 92.)
Thus, we look to the nature of the dispute to be resolved by the plaintiff's lawsuit, and analyze whether that "dispute, and not any protected activity, is 'the gravamen or principal thrust' of the action. [Citation.]" (In re Episcopal Church Cases (2009) 45 Cal.4th 467, 477-478.) "If liability is not based on protected activity, the cause of action does not target the protected activity and is therefore not subject to the SLAPP statute. [Citations.]" (Haight Ashbury Free Clinics, Inc. v. Happening House Ventures (2010) 184 Cal.App.4th 1539, 1550.)
When causes of action contain allegations of both protected and unprotected conduct, they are considered to be mixed causes of action. "[W]here a cause of action alleges both protected and unprotected activity, the cause of action will be subject to section 425.16 unless the protected conduct is 'merely incidental' to the unprotected conduct . . . . [Citations.]" (Mann v. Quality Old Time Service, Inc. (2004) 120 Cal.App.4th 90, 103.)
The Complaint Does Not Arise From Protected Activity
Appellants contend the trial court erred in denying their motion to strike because the gravamen of all the causes of action against them in the complaint was the loss of loan proceeds which were paid pursuant to court order, and they obtained repayment of the loans by exercising their constitutional right of petition.
Appellants correctly assert that litigation is protected activity subject to section 425.16. (See Drummond v. Desmarais (2009) 176 Cal.App.4th 439, 444 ["Litigation is activity protected by the speech and petition clauses"].) Appellants, however, are not insulated because respondents' claims do not arise from such activity. The fact that a claim involves litigation does not automatically bring it within the protection of section 425.16. Rather, the claim must arise from the protected activity to merit anti-SLAPP protection. (City of Cotati v. Cashman, supra, 29 Cal.4th at pp.76-77.) We "'examine the principal thrust or gravamen of a plaintiff's cause of action to determine whether the anti-SLAPP statute applies' . . . . [Citation.] We assess the principal thrust by identifying '[t]he alleged wrongful and injury-producing conduct . . . that provides the foundation for the claim.'" (Hylton v. Frank E. Rogozienski, Inc., supra, 177 Cal.App.4th at p. 1272.)
Here, the trial court determined that "[t]he litigation conduct [appellants] assert is central to [respondents'] causes of action was not initiated by the [appellants]. Instead, [respondents] sought an order to prevent further distribution of trust property. In that same ex parte application, [respondents] asserted fundamentally the same breaches of trust as set forth in the Complaint. The ex parte application for a TRO did not suddenly change the character of [respondents'] causes of action from those arising out of a breach of trust into causes of action arising out of [appellants'] petitioning activity." We agree.
After independently reviewing the record, we conclude that the harm complained of is Dutcher's alleged breach of trust by, among other things, misappropriating funds from the Figueroa Trust for her personal use. (See, e.g., Peregrine Funding, Inc. v. Sheppard Mullin Richter & Hampton LLP (2005) 133 Cal.App.4th 658, 671 [courts "need to examine the specific acts of wrongdoing" alleged in the complaint to determine whether they constitute protected activity].) In the cause of action for financial elder abuse, the complaint alleges that appellants authorized, encouraged and condoned Dutcher's conduct. The breach of trust cause of action alleges that appellants advised Dutcher that her conduct was proper. The cause of action for recovery of trust property contains allegations that appellants knew the proceeds of the sale were the property of the Figueroa Trust. The causes of action for accounting and violation of Probate Code section 16420 alleges appellants disposed of trust property for their own benefit. The cause of action based on Probate Code section 17200 alleges that appellants collected trust property and advised Dutcher that her conduct was proper. The cause of action for professional malpractice alleges appellants were aware that the loan was for Dutcher's personal benefit. The conversion cause of action alleges appellants were unjustly enriched by retention of trust property. The constructive trust cause of action alleges appellants wrongfully are holding trust property.
A fair reading of the pleadings shows that the underlying lawsuit is not based on appellants' court appearance and defense of the ex parte application. Rather, the thrust of the complaint is that the estate was harmed because of appellants' complicity in Dutcher's perpetration of a fraud on the estate. The gravamen of the complaint relates to the purported fraudulent activity that preceded appellants' appearance at the hearing on the restraining order application. The allegations concerning that appearance were collateral to the main focus of the lawsuit. (See In re Episcopal Church Cases, supra, 45 Cal.4th at p. 478 ["fact that protected activity may lurk in the background - and may explain why the rift between the parties arose in the first place - does not transform" this involuntary dissolution action "into a SLAPP suit"].) There is nothing constitutionally protected about conspiring to defraud a trust. As the protected conduct alleged in the complaint is incidental to the unprotected conduct alleged, the trial court properly determined that the law firm did not meet its burden of establishing that the section 425.16 applied to the complaint.
Seltzer v. Barnes (2010) 182 Cal.App.4th 953 and Peregrine Funding, Inc. v. Sheppard Mullin Richter & Hampton LLP, supra, 133 Cal.App.4th 181, relied on by appellants, are factually inapposite. In Seltzer, the court held a complaint alleging that an attorney conspired to deprive his client of insurance coverage in negotiating the settlement of a lawsuit was based on protected activity. In Peregrine Funding, the court held that a lawsuit based on a law firm's representation of a corporation before the Securities and Exchange Commission alleged protected activity.
More on point, as the trial court noted, is Freeman v. Schack (2007) 154 Cal.App.4th 719, where the court held that a complaint alleging that an attorney represented conflicting interests did not arise from protected petitioning activity but from the lawyer's "undertaking to represent a party with interests adverse to plaintiffs, in violation of the duty of loyalty he assertedly owed . . . ." (Id. at p. 732; see also, Coretronic Corp. v. Cozen O'Connor (2011) 192 Cal.App.4th 1381 [complaint alleging law firm's dual representation of clients with conflicting interests did not arise from protected litigation - related activity]; and see, California Back Specialists Medical Group v. Rand (2008) 160 Cal.App.4th 1032, 1037 ["Not all attorney conduct in connection with litigation, or in the course of representing clients, is protected by section 425.16." Relying on a trio of similar cases, we concluded that the complaint was based on an underlying controversy between private parties about the validity and satisfaction of the medical liens. These issues were never under consideration in any court or official proceedings until the medical group filed the complaint]; Benasra v. Mitchell Silberberg & Knupp, LLP (2004) 123 Cal.App.4th 1179 [action against attorney for breach of duty of loyalty arising from representation of clients with conflicting interests not subject to the anti-SLAPP statute]; Moore v. Shaw (2004) 116 Cal.App.4th 182 [action against estate planning attorney for participation in breach of trust not subject to anti-SLAPP motion].)
In this case, the trial court correctly concluded that the trustees' claims did not arise from any action in furtherance of appellants' right to petition or right to free speech. Because the trustees' complaint did not arise from protected activity, we need not consider their probability of prevailing on the merits. (Navellier v. Sletten, supra, 29 Cal.4th at p. 88.)
The order is affirmed. Respondents shall recover costs on appeal.
NOT TO BE PUBLISHED.
PERREN, J. We concur:
GILBERT, P.J.
COFFEE, J.
Denise De Bellefeuille, Judge
Superior Court County of Santa Barbara
Lewis Brisbois Bisgaard & Smith, LLP, Roy G. Weathercup, Bartley L. Becker and Jennifer R. Weathercup for Defendants and Appellants.
Reicker, Pfau, Pyle & McRoy, LLP, Alan A. Blakeboro, Diana Jessup Lee and Robert B. Forouzandeh for Plaintiffs and Respondents.