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Filed 12/11/14 Harris v. Wachovia Mortgage CA4/2 

NOT TO BE PUBLISHED IN OFFICIAL REPORTS 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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. 

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA 

FOURTH APPELLATE DISTRICT 

DIVISION TWO 

STEPHEN HARRIS et al., 

 Plaintiffs and Appellants, 

v. 

WACHOVIA MORTGAGE, FSB, 

 Defendant and Respondent. 

 E056084 

 (Super.Ct.No. CIVSS811443) 

 OPINION 

 APPEAL from the Superior Court of San Bernardino County. Donald R. Alvarez, 

Judge. Affirmed. 

 Monique Harris for Plaintiffs and Appellants. 

 Anglin Flewelling Rasmussen Campbell & Trytten, Robert Collings Little and 

Robin C. Campbell for Defendant and Respondent. 

Plaintiffs Stephen and Ozelia Harris appeal a judgment dismissing their second 

amended complaint for breach of contract, misrepresentation and fraud, following the 

court’s grant of a special motion to strike, or anti-SLAPP motion (Code Civ. Proc., 
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§ 425.16),1 as to all three causes of action. The court’s ruling was based on its 

conclusion that all three causes of action were based on statements allegedly made by 

counsel for Wachovia during settlement negotiations. 

The issue arose as follows, as discussed in plaintiffs’ prior appeal. “In their first 

amended complaint, plaintiffs alleged that they entered into an agreement for home loan 

services with World Savings, Inc. Wachovia Mortgage, FSB (Wachovia) is the successor 

in interest to World Savings, Inc. Plaintiffs had two home loans through Wachovia, 

secured by a first and second deed of trust on their property in Fontana. During the 

pendency of the loans, Wachovia failed to apply payments made by plaintiffs to 

plaintiffs’ accounts, causing plaintiffs’ accounts to go into default. Wachovia falsely 

claimed that it did not receive plaintiffs’ payments and concealed the fact that it had 

received the payments and had credited them to its own account rather than to plaintiffs’ 

accounts.” (Harris v. Wachovia Mortgage, FSB (2010) 185 Cal.App.4th 1018, 1021 

(Harris I).) 

“On June 15, 2007, plaintiffs filed a complaint in the Superior Court of San 

Bernardino County for conversion and other causes of action. On February 26, 2008, 

plaintiffs and Wachovia entered into a written settlement agreement. In that agreement, 

Wachovia agreed to credit plaintiffs' first loan account with the disputed amount and to 

modify the loan agreement from bearing an adjustable interest rate to a fixed interest rate. 

[¶] Plaintiffs agreed to dismiss their complaint upon execution of the settlement 

 1 All further statutory citations refer to the Code of Civil Procedure unless another 

code is specified. 
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agreement and did so. However, Wachovia failed to bring plaintiffs’ loan account 

current and failed to modify the loan as agreed. Plaintiffs further alleged that Wachovia 

acted in bad faith in failing to comply with the terms of the settlement agreement and 

falsely represented that it would do so, with the intent to deceive plaintiffs and induce 

them to dismiss their prior action.” (Harris I, supra, 185 Cal.App.4th at pp. 1021-1022.) 

Plaintiffs filed a first amended complaint for breach of contract, breach of the 

implied covenant of good faith and fair dealing, and unfair business practices. The trial 

court sustained Wachovia’s demurrer without leave to amend. It held that all three 

causes of action were preempted by the federal Home Owners’ Loan Act, or HOLA. 

(12 U.S.C. § 1461 et seq.) “The court also held that the third cause of action, for unfair 

business practices, was impermissibly added to the first amended complaint without leave 

of court.” (Harris I, supra, 185 Cal.App.4th at p. 1021.) On appeal, we held that the 

demurrer was properly sustained as to the claims for breach of the covenant of good faith 

and fair dealing and unfair business practices for reasons unrelated to HOLA. (Harris I, 

at pp. 1022-1023.) However, we held that plaintiffs’ claim for breach of contract is not 

preempted by HOLA. We reversed the judgment as to that cause of action and remanded 

the cause for further proceedings. (Harris I, at pp. 1023-1026, 1027.) 

On remand, plaintiffs filed a second amended complaint, alleging breach of 

contract, fraud and misrepresentation. The complaint alleged that Wachovia, through its 

attorney, made false representations to plaintiffs with the intent to induce plaintiffs to 

enter into the settlement agreement and that Wachovia failed to perform its obligations 

under the settlement agreement. Plaintiffs alleged that their oral agreement, which was to 
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be memorialized in a written settlement agreement, included Wachovia’s agreement to 

apply a credit in the amount of $6,500 to plaintiffs’ first loan and bring both the first and 

second loans current. Both loans were then past due because of defendant’s failure to 

apply payments to plaintiffs’ account. Wachovia also agreed to change the monthly 

payment on plaintiffs’ first loan “to an amount less than” $2,700. 

Plaintiffs further alleged that upon their receipt of the written settlement 

agreement, Ozelia Harris contacted Wachovia’s attorney, Mark Flewelling, and that 

Flewelling assured her that Wachovia would apply a credit of $6,500 to the first loan, 

bring the first and second loans current, and change the monthly payment to an amount 

less than $2,700. They alleged that in justifiable reliance on Flewelling’s representations, 

which were made to induce them to enter into the written settlement agreement, they 

signed the written agreement.2 However, when plaintiffs received a statement on the 

their account a month after having executed the written settlement agreement, plaintiffs 

discovered that Wachovia failed to apply a credit of $6,500, failed to bring the first and 

second loans current, and did not reduce the monthly payment on the first loan to 

$2,562.27, as stated in the loan modification prepared pursuant to the written agreement. 

Thereafter, Wachovia continued to send them past due notices and threatened 

 2 This seems to imply that these terms were omitted from the written agreement. 

However, the written settlement agreement includes the provision that Wachovia will 

apply a credit in the amount of $6,500 to plaintiffs’ account, and the loan modification 

agreement which was executed pursuant to the settlement agreement also applies that 

credit. It also reduces plaintiffs’ monthly principal and interest payments to $2,562.27, 

effective with the payment due on March 15, 2008. Neither document contains any 

provision for bringing both accounts current, however. 
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foreclosure. In addition, Wachovia continued to charge plaintiffs accrued interest and 

late fees, despite its promise to bring both loans current. 

Incorporating those factual allegations into their cause of action for breach of 

contract, plaintiffs allege that although they dismissed their first lawsuit against 

Wachovia as agreed in the settlement agreement, Wachovia intentionally, willfully and 

maliciously breached the parties’ contract when it failed to apply the credit, failed to 

bring both loans current and failed to reduce the monthly payment on the first loan “to an 

amount less than $2,700.00.” They allege that after the settlement agreement was 

executed, Wachovia informed them that their monthly payment was $3,194.92.3 Based 

on the same factual allegations, which they incorporated by reference into their second 

and third causes of action, plaintiffs also alleged that Wachovia intentionally made false 

representations with knowledge of their falsity or with reckless disregard for the truth and 

with the intent to induce plaintiffs to enter into the written settlement agreement, and that 

plaintiffs did so in reasonable reliance on Wachovia’s representations. 

Wachovia filed a demurrer to the operative second amended complaint and a 

motion to strike portions of the operative second amended complaint, and then filed a 

special motion to strike, or anti-SLAPP motion, pursuant to section 425.16, arguing that 

 3 In support of its section 425.16 motion, Wachovia explained that plaintiffs’ 

postsettlement monthly payment for principal and interest was modified as agreed to 

$2,562.27, but that plaintiffs were also required by the terms of their original loan 

agreement to make a monthly payment into an escrow account for fire/hazard insurance 

and property taxes. That term of the agreement was not modified by the settlement 

agreement. Following the settlement agreement, the monthly escrow account payment 

was $632.65. 
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all three causes of action were based on representations made during negotiations to settle 

a lawsuit, in furtherance of Wachovia’s First Amendment right of petition. Plaintiffs 

responded that their breach of contract claim was based exclusively on Wachovia’s 

failure to perform under the written settlement agreement and was therefore not subject to 

section 425.16. After hearing argument, the court granted the motion and dismissed 

plaintiffs’ complaint. Judgment was entered for Wachovia. This appeal followed. 

LEGAL ANALYSIS 

THE TRIAL COURT PROPERLY GRANTED THE SPECIAL MOTION TO STRIKE 

Section 425.16 provides in pertinent part: “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).) 

Consideration of a section 425.16 motion to strike involves a two-step process. 

First, the defendant must show that the cause of action arises from protected activity, i.e., 

activity by the defendant in furtherance of his constitutional right of petition or free 

speech. If the trial court determines that the defendant has met his initial burden, the 

burden shifts to the plaintiff to demonstrate a reasonable probability of prevailing on the 

merits of his cause of action. (Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 

Cal.4th 53, 67 (Equilon).) Review of an order granting or denying a motion to strike 

under section 425.16 is de novo. (Flatley v. Mauro (2006) 39 Cal.4th 299, 325.) 
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As used in section 425.16, an “‘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 . . . any written or oral statement or writing made in connection with an 

issue under consideration or review by a legislative, executive, or judicial body.’” 

(§ 425.16, subd. (e)(2).) This includes communications made by parties or their 

representatives as part of negotiations for settlement of a lawsuit. (Navellier v. Sletten

(2002) 29 Cal.4th 82, 90 (Navellier) [“negotiation, execution, and repudiation” of a 

release are acts arising from the right of petition]; see also Seltzer v. Barnes (2010) 182 

Cal.App.4th 953, 963-964 and cases discussed therein.) Plaintiffs allege that false 

statements were made by Wachovia’s attorney, Mark Flewelling, in his effort to induce 

them to settle the lawsuit. Ergo, the statements were made in connection with litigation 

and fall within section 425.16. Accordingly, plaintiffs’ causes of action for fraud and 

misrepresentation, which are based entirely on Flewelling’s statements, unquestionably 

arise from protected petitioning activity. And, to the extent that plaintiffs’ complaint for 

breach of contract is based on Wachovia’s alleged breach of oral promises made by 

Flewelling, it arises from protected petitioning activity as well. 

Plaintiffs contend, however, that their fraud and misrepresentation causes of action 

are based solely on Wachovia’s failure to perform its obligations under the settlement 

agreement. This is nonsense. Their second amended complaint alleges that “Wachovia 

intentionally induced the Plaintiffs to enter into the settlement agreement by falsely 

representing to Plaintiffs” that it would perform the obligations contained in the written 

settlement agreement, specifically to apply a credit of $6,500 to their account, to bring 
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both loan accounts current and to reduce their monthly payments to $2,562.27 or an 

amount less than $2,700. Plaintiffs allege that but for these representations, they would 

not have entered into the settlement agreement and would not have dismissed their prior 

lawsuit. They allege that they did so in reasonable reliance on Wachovia’s intentionally 

false representations. Promises made to induce a party to enter into a settlement 

agreement are necessarily acts in furtherance of the right of petition. (See Navellier, 

supra, 29 Cal.4th at p. 90; Seltzer v. Barnes, supra, 182 Cal.App.4th at pp. 963-964.) 

Accordingly, the burden shifted to plaintiffs to demonstrate the probability that they 

would prevail on the fraud and misrepresentation claims. (Equilon, supra, 29 Cal.4th at 

p. 67.) 

Plaintiffs also contend that their claim for breach of contract is based solely on 

Wachovia’s failure to perform provisions of the written settlement agreement and that it 

does not depend on any statements made during settlement negotiations. They contend 

that the breach of contract claim therefore does not implicate Wachovia’s right to 

petition. They are correct that a breach of a settlement contract which does not implicate 

a party’s right to petition, such as, for example, Wachovia’s alleged failure to apply the 

$6,500 credit which is provided for in the settlement agreement, is not protected activity 

within the meaning of section 425.16 because it was not undertaken by Wachovia in 

furtherance of its right of petition or free speech; rather, it is merely a garden-variety 

breach of contract. (See Applied Business Software, Inc. v. Pacific Mortgage Exchange, 

Inc. (2008) 164 Cal.App.4th 1108, 1117-1118.) However, plaintiffs’ allegations are not 

limited to conduct which breached express provisions of the settlement agreement 
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without regard to statements made during the settlement process. Plaintiffs alleged in 

part (or appear to; their pleading is vague, whether intentionally or unintentionally) that 

some of Wachovia’s oral promises were not reduced to writing in the settlement 

agreement, but that Flewelling assured them that Wachovia would honor those promises 

and that promises which were not expressly stated in the written agreement are 

nevertheless implied. They now also assert that Flewelling’s alleged promises are 

admissible parol evidence as to the meaning of the written agreement. Accordingly, their 

breach of contract allegations depend in part on protected activity, i.e., Flewelling’s 

statements made during settlement negotiations. 

Where a cause of action is “mixed”—based upon both protected acts and 

unprotected acts, within the meaning of section 425.16—section 425.16 applies unless 

the protected acts are “merely incidental” or “collateral” to the unprotected conduct. 

(Peregrine Funding, Inc. v. Sheppard Mullin Richter & Hampton LLP (2005) 133 

Cal.App.4th 658, 672-673.) Here, the protected activity—the alleged oral promises made 

in furtherance of settlement of the lawsuit—is not merely incidental. Plaintiffs allege 

three breaches of the written contract. Two of them are express terms of the written 

contract: Wachovia’s failure to apply the $6,500 credit to their account and its failure to 

reduce their monthly payments to $2,562.27. However, neither the settlement agreement 

nor the loan modification agreement contains a provision for bringing both of plaintiffs’ 

loan accounts current. On the contrary, the written settlement agreement explicitly states 

that the $6,500 credit was to be applied to the first loan only. However, the complaint 

alleges that after plaintiffs received the written agreement, Ozelia Harris contacted 
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Flewelling and obtained his assurances that both loan accounts would be brought current, 

as well as his assurance that the monthly payment would be reduced to an amount less 

than $2,700. Plaintiffs now contend that the promise to bring both accounts current was 

implied in the written contract, based on Flewelling’s statements on which they relied in 

deciding to execute the settlement agreement. Flewelling’s statements are therefore 

essential to plaintiffs’ claim and are not merely incidental to the breach of contract as 

alleged by plaintiffs. Accordingly, because the cause of action depends in substantial 

part on protected activity which is not merely incidental to the unprotected activity, 

plaintiffs’ claim for breach of contract is subject to section 425.16. 

Section 425.16 does not bar a plaintiff from litigating an action that arises from the 

defendant’s free speech or petitioning activity, if it is supported by a sufficient prima 

facie showing of facts to sustain a favorable judgment if the plaintiff’s evidence is 

credited. (Navellier, supra, 29 Cal.4th at pp. 88-89, 93.) However, to meet its burden 

under section 425.16, the plaintiff must produce substantial evidence in support of the 

claim. (South Sutter, LLC v. LJ Sutter Partners, L.P. (2011) 193 Cal.App.4th 634, 670.) 

Plaintiffs produced no evidence below, and on appeal they assert, as they did below, that 

their burden to do so never arose because section 425.16 categorically does not apply to 
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either their fraud/misrepresentation claim or to their breach of contract claim. Because 

they did not meet their burden, the motion was properly granted.4

DISPOSITION 

The judgment is affirmed. Defendant Wachovia Mortgage, FSB, is awarded costs 

on appeal. 

NOT TO BE PUBLISHED IN OFFICIAL REPORTS 

McKINSTER 

 J. 

We concur: 

HOLLENHORST 

 Acting P. J. 

RICHLI 

 J.

 4 We note as well that the litigation privilege set forth in Civil Code section 47, 

subdivision (b), would also bar the fraud/misrepresentation claim. (See, e.g., Home Ins. 

Co. v. Zurich Ins. Co. (2002) 96 Cal.App.4th 17, 20-21, 23-24 [litigation privilege bars 

derivative tort claims based on allegedly fraudulent statements made during settlement 

negotiations].)