Source: https://caselaw.findlaw.com/ca-court-of-appeal/1446287.html
Timestamp: 2019-04-24 20:55:51+00:00

Document:
MANHATTAN LOFT, LLC, Plaintiff and Appellant, v. MERCURY LIQUORS, INC., et al., Defendants and Respondents.
Leonard, Dicker & Schreiber, Richard C. Leonard and Steven A. Schuman, Beverly Hills, for Plaintiff and Appellant. Bingham McCutchen, Bruce A. Friedman, Roland Tellis, and Heather L. Ristau, Santa Monica, for Defendants and Respondents.
This appeal arises out of a storied real estate transaction. Plaintiff and appellant Manhattan Loft, LLC (appellant) purchased certain real property from Sixth & Spring, LLC, subject to an existing lease for a portion of the basement and first floor to Mercury Liquors, Inc. (Mercury). A dispute arose, prompting those with an interest in the lease 1 to commence two arbitration proceedings against appellant. In connection with the arbitration proceedings, the client respondents, through their counsel, respondents Alschuler Grossman Stein & Kahan and Bingham McCutchen (collectively the attorney respondents), recorded two notices of pending actions against the subject property.
Following the client respondents' favorable arbitration award, appellant filed suit against respondents for slander of title, claiming that they erred in filing the notices of pending action. Respondents filed a special motion to strike appellant's complaint pursuant to Code of Civil Procedure section 425.16,2 California's anti-SLAPP statute.3 The trial court granted respondents' motion, and appellant appeals, presenting us with the following legal question: Can a party to a pending arbitration record a notice of pendency of action without first filing a civil action in Superior Court?
We conclude that the answer is no. Looking to the plain language of title 4.5 of the Code of Civil Procedure, a lis pendens may only be filed when an action in a court of law is pending. Because no such action was pending at the time respondents filed the two lis pendens, they improperly recorded the notices of pendency of action. Respondents' concomitant arguments are unconvincing. Accordingly, we reverse the order of the trial court; respondents' anti-SLAPP motion should have been denied.
Appellant is the owner of a 14-story building located at 215 West Sixth Street in downtown Los Angeles (the building). Appellant purchased the building from Sixth & Spring, LLC, pursuant to a purchase agreement and subject to an existing lease for a portion of the basement and first floor (the bar space) to Mercury. The purchase agreement and lease granted certain rights to Arnold Greenspan, as Trustee of the Andrew Meieran Family Trust (Greenspan), including easements over existing means of egress and certain access to the bar space.
As part of the purchase agreement, appellant agreed to transfer title to the bar space to Greenspan when appellant completed its condominium conversion of the building.
The purchase agreement also contains an arbitration clause.
According to Greenspan, after sale of the building closed, appellant engaged in conduct that denied him the easements and rights of possession under the purchase agreement and lease. Thus, on August 14, 2006, he served a demand for arbitration on appellant and its manager, Barry Shy (Shy), alleging “[b]reaches of a non-residential real estate agreement including failure to perform required improvements, failure to provide use of space as set forth in the agreement, destruction of property, and failure to pay reimbursements for loss of space involving real property located at 215 W. 6th Street, Los Angeles, CA 90014.” Greenspan sought (1) to enforce various easements, (2) to add a claim by Sixth & Spring, LLC to rescind the purchase agreement, and (3) monetary damages.
While the arbitration was pending, on or about January 10, 2007, respondents recorded a lis pendens against the building. The lis pendens provides “that [an] arbitration proceeding was commenced on December 8, 2006, in [Judicial Arbitration and Mediation Services (JAMS) ]” and that “[t]his arbitration proceeding is now pending before [JAMS].” The lis pendens also indicates that the “arbitration proceeding alleges a real property claim affecting” the building.
On November 5, 2007, the arbitrator issued a final award in favor of Greenspan, finding that he had “met his burden of persuasion in this breach of contract dispute.” Greenspan was awarded money damages in the amount “of $1,394,600 for property damage or loss, plus lost profits in the amount of $1,428,137, plus lost business value in the amount of $10,727,785.” Greenspan also was awarded attorney fees in the amount of $977,287.88 and a permanent injunction restricting appellant's entry into the bar space.
Thereafter, on January 15, 2008, the trial court (Hon. Richard L. Fruin) corrected and confirmed the arbitration award, and then entered judgment. Specifically, the trial court “excise[d]” the damage award for lost profits and lost business value; monetary damages were reduced to $1,394,600 for property damage, $977,287.88 for attorney fees and costs, and a permanent injunction as set forth in the final arbitration award.
“In response to the ․ petition to confirm the [arbitration] award, [appellant and Shy] contended that [Greenspan] had no standing to pursue a claim for lost profits and lost business value․ The Los Angeles Superior Court, Judge Fruin presiding, accepted this argument and ruled in [appellant and Shy's] favor by correcting the award to eliminate the sums awarded by the Arbitrator for lost profits and lost business value and entering judgment for property damage only. [Greenspan] disputes that result and will appeal that judgment. However, if the judgment is affirmed on the basis that [an entity other than Greenspan] holds the right to claim lost profits and lost business value, then [Greenspan's] entitlement to pursue a claim for lost profits against [appellant and Shy] will have been conclusively determined as against [appellant and Shy]. This Demand seeks to preserve, against any defense of the statute of limitations or laches, whatever right [Greenspan] may ultimately be determined to have to assert those claims against [appellant and Shy].” The second arbitration demand also seeks rescission of the purchase agreement.
Appellant asserts that it asked respondents to remove the lis pendens, but they refused to do so.
In response, the attorney respondents filed a special motion to strike as a SLAPP suit the first cause of action for slander of title. First, they argued that appellant's slander of title claim arose from the protected activity of recording notices of lis pendens. Second, they asserted that appellant could not establish a probability of prevailing because (1) the recordation of the lis pendens was absolutely privileged, and (2) no damages could have resulted from the recordation of the notices of lis pendens.
On or about April 2, 2008, the client respondents filed a notice of joinder in the attorney respondents' anti-SLAPP motion.
Appellant opposed the anti-SLAPP motion. It set forth the following arguments: (1) the recording of the two lis pendens did not constitute protected activity; (2) the recording of the lis pendens was not absolutely privileged because respondents did not file an action in court, and a lis pendens may not be filed in connection with a pending arbitration; (3) the lis pendens were improper because they did not assert real property claims; and (4) appellant did suffer substantial damages.
After entertaining oral argument, the trial court granted respondents' anti-SLAPP motion.
We first consider whether appellant's slander of title cause of action arises from protected activity.
Appellant urges us to conclude that the filings of the two lis pendens here did not arise out of protected activity because they did not bear “some relationship to the pending arbitration.” We disagree. The arbitration proceedings involved claims that affected title to and rights of possession of the building. The first demand for arbitration describes the nature of the dispute as “[b]reaches of a non-residential real estate agreement including failure to perform required improvements, failure to provide use of space as set forth in the agreement, destruction of property, and failure to pay reimbursements for loss of space involving real property.” And, as Greenspan explains in his arbitration brief, appellant allegedly caused “great property damage and loss” to the leased space in the building, including appellant's alleged denial of certain easement rights. Likewise, the second demand for arbitration involves real property claims, which appellant concedes by only challenging the first demand for arbitration. Because respondents sought to enforce and protect their rights in the building via the lis pendens, certainly the lis pendens bore a relationship to the arbitration proceedings.
Paul v. Friedman (2002) 95 Cal.App.4th 853, 117 Cal.Rptr.2d 82 is readily distinguishable. In that case, the “lawsuit alleged [that the defendant] conducted a harassing investigation that extended far beyond the scope of the issues subject to arbitration.” (Id. at p. 866, 117 Cal.Rptr.2d 82.) “Fairly read, the complaint [alleged that the plaintiff] was injured by acts of [the defendant] that had no connection to the issues under review in the arbitration.” (Ibid.) In contrast, as set forth above, the lis pendens notices here had a direct connection to the arbitration proceedings.
We adopt the same statutory construction and embrace the same policy considerations as our sister court in The Formula Inc. v. Superior Court, supra, 168 Cal.App.4th 1455, 86 Cal.Rptr.3d 341. Certainly, “[o]ne of the objects or purposes of the lis pendens statutes is to advance the interests of litigant claimants. This is manifest because the statutes continue the policy of protection the common law afforded such litigants, provided they record notice pursuant to its terms.” (Id. at p. 1462, 86 Cal.Rptr.3d 341.) However, as our Supreme Court has recognized, that was not the original object of the lis pendens statutes. (Kirkeby v. Superior Court, supra, 33 Cal.4th at p. 651, 15 Cal.Rptr.3d 805, 93 P.3d 395 [lis pendens statutes were designed to give notice to third parties and not to aid plaintiffs in pursuing claims].) For this reason, “ ‘[t]he history of the lis pendens legislation indicates a legislative intent to restrict rather than broaden the application of the remedy.’ [Citation.] Our courts have followed suit by restricting rather than broadening the application of a lis pendens.” (Kirkeby v. Superior Court, supra, at p. 651, 15 Cal.Rptr.3d 805, 93 P.3d 395.) As we must apply a narrow interpretation of the lis pendens statutes, we cannot expand the definition of the word “action” to include arbitration proceedings.
Moreover, we cannot ignore the fact that one purpose of the lis pendens statutory scheme is to protect property owners. (See, e.g., The Formula Inc. v. Superior Court, supra, 168 Cal.App.4th at p. 1464, 86 Cal.Rptr.3d 341.) Specifically, section 405.30 allows a property owner to “apply to the court in which the action is pending to expunge the notice.” (§ 405.30.) In an arbitration proceeding, however, there is no “court in which the action is pending.” In fact, in the two arbitral forums here, there is no procedure that allows for an arbitrator to expunge a lis pendens, thereby denying appellant any relief or protection.
Similarly, citing section 1281.8, subdivision (b), respondents assert that “a party could challenge a lis pendens by commencing a special proceeding in the superior court ․ for a provisional remedy in connection with the arbitration.” However, that argument overlooks the definition of “ ‘provisional remedy,’ ” as set forth in subdivision (a) of that statute. A “ ‘provisional remedy’ ” only includes “[a]ttachments and temporary protective orders,” “[w]rits of possession,” “[p]reliminary injunctions and temporary restraining orders,” and “[r]eceivers.” (§ 1281.8, subd. (a)(1)-(4).) While a lis pendens may be a “provisional remedy” (see, e.g., BGJ Associates v. Superior Court (1999) 75 Cal.App.4th 952, 967, 89 Cal.Rptr.2d 693), it is not mentioned in this statute. And, even if we were to ignore the specific limiting language of the statute, respondents' argument would still fail. The provisional remedies envisioned by section 1281.8 are of the kind “designed to enable the plaintiff in a civil action to protect against dissipation of property by the defendant during the pendency of the action, with consequent loss of the benefits of a judgment.” (6 Witkin, Cal. Procedure (5th ed. 2008) Provisional Remedies, § 1, p. 25.) Under the principle of ejusdem generis (literally, “of the same kind”) (Nygard, Inc. v. Uusi-Kerttula (2008) 159 Cal.App.4th 1027, 1045, 72 Cal.Rptr.3d 210), the statute does not anticipate or allow for the expungement of a lis pendens.
Significantly, by prohibiting the filing of a lis pendens based upon an arbitration proceeding, we are not denying the availability of a lis pendens to a party to arbitration. Section 1298.5 provides, in relevant part: “Any party to an action who proceeds to record a notice of pending action ․ shall not thereby waive any right of arbitration which that person may have pursuant to a written agreement to arbitrate, nor any right to petition the court to compel arbitration pursuant to Section 1281.2, if, in filing an action to record that notice, the party at the same time presents to the court an application that the action be stayed pending the arbitration of any dispute which is claimed to be arbitrable and which is relevant to the action.” (§ 1298.5.) In other words, the statute contemplates the following: A party to an arbitration agreement (such as the client respondents here) may file an action in court to support the recording of a lis pendens. Simultaneously, the party may file an application to stay the litigation pending arbitration. By utilizing such a procedure, all parties' interests, vis-à-vis the lis pendens statutes 4 and the right to arbitration, are protected.
Civil Code section 880.260 does indicate that “action” includes “arbitration proceeding,” ostensibly suggesting that if a party with an interest in real property initiates an arbitration proceeding, then it may also properly file a notice of pendency of that arbitration proceeding. (Civ.Code, § 880.260.) However, we cannot agree with respondents that this statute overrides the numerous Code of Civil Procedure sections identified above that do not allow an arbitration proceeding to support the recording of a lis pendens. Rather, at best, Civil Code section 880.260 conflicts with the numerous Code of Civil Procedure sections set forth above.
With these principles in mind, we cannot adopt respondents' position on appeal. The purpose of the MRTA was to free up property; unlike title 4.5 of the Code of Civil Procedure, it was not enacted to address and balance the needs of prospective purchasers, property owners, and claimants. Under these circumstances, to the extent Civil Code section 880.260 conflicts with the statutes defining “action” and setting forth the requirements for the recording of a lis pendens, we must defer to the statutes within the Code of Civil Procedure.
For these reasons, we conclude that the word “action” within title 4.5 of the Code of Civil Procedure, which governs the recording of lis pendens, does not include arbitration proceedings. If our conclusion is problematic, “it is up to the Legislature-and not this court-to change the law” (Kirkeby v. Superior Court, supra, 33 Cal.4th at p. 651, 15 Cal.Rptr.3d 805, 93 P.3d 395) and add arbitration as an appropriate action that supports the recording of a lis pendens.
It follows that we are not persuaded by respondents' reliance upon the litigation privilege. (Civ.Code, § 47, subd. (b)(4).) Civil Code section 47, subdivision (b)(4) only provides protection if the lis pendens “identifies an action previously filed with a court of competent jurisdiction which affects the title or right of possession of real property, as authorized or required by law.” (Civ.Code, § 47, subd. (b)(4); see also Salma v. Capon, supra, 161 Cal.App.4th at p. 1285, 74 Cal.Rptr.3d 873 [the filing of the notice of lis pendens in superior court constituted protected activity within the litigation privilege].) Here, respondents' lis pendens did not “identif[y] an action previously filed with a court of competent jurisdiction.” (Civ.Code, § 47, subd. (b)(4).) As such, the litigation privilege does not apply. And, while “statements made in the course of a private contractual arbitration proceeding are protected by the litigation privilege” (Moore v. Conliffe, supra, 7 Cal.4th at p. 658, 29 Cal.Rptr.2d 152, 871 P.2d 204), respondents' two lis pendens were not simply statements made in the arbitration proceedings.
“Pecuniary loss” is an essential element of a slander of title cause of action. (See, e.g., 5 Witkin, Summary of Cal. Law (10th ed.2005) Torts, § 646, p. 953.) According to respondents, no damages resulted from the recordation of the lis pendens because the condominium units are not ready to be sold and have not been offered for sale; neither the final public report (as required by Bus. & Prof.Code, § 11018.12) or certificate of occupancy (L.A.Mun.Code, § 91.109.1) has been issued.
The order granting respondents' anti-SLAPP motion is reversed. The cause is remanded to the trial court with directions to enter and new and different order denying the motion. Appellant is entitled to costs on appeal.
1. Along with Mercury, these parties include Sixth & Spring, LLC, Arnold Greenspan, individually and in his capacity as Trustee of the Andrew Meieran Family Trust, and Andrew Meieran. All of these parties collectively are referred to as the client respondents.
2. All further statutory references are to the Code of Civil Procedure unless otherwise indicated.
4. Notably, if the word “action” were interpreted to include “arbitration,” as respondents argue, this statute would be rendered meaningless.
We concur: DOI TODD, Acting P.J., and CHAVEZ, J.

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