Court Opinion

ID: 9890864
Source: CourtListenerOpinion
Date Created: 2023-10-16 17:04:46.388165+00
Date Added: 2024-06-11T13:36:24.288363
License: Public Domain

Filed 10/16/23 Aguila v. Pico Rivera First Mortgage Investors CA6
     NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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has not been certified for publication or ordered published for purposes of rule 8.1115.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 SIX

HENRY AGUILA,                                                  2d Civ. No. B323391
                                                           (Super. Ct. No. 22CV00464)
     Plaintiff and Appellant,                                (Santa Barbara County)

v.

PICO RIVERA FIRST
MORTGAGE INVESTORS, LP
et al.,

     Defendants and Respondents.

      This is an appeal from the grant of a special motion to
strike pursuant to Code of Civil Procedure section 425.161 (anti-
SLAPP [strategic lawsuit against public participation] motion).
      An underlying action arose from a foreclosure by defendant
Pico Rivera First Mortgage Investors, LP (First Mortgage) on
property owned by plaintiff Henry Aguila. That action ended
with a settlement. In the instant action, Aguila’s complaint

         1 All statutory references are to the Code of Civil Procedure

unless otherwise indicated.
alleges defendants First Mortgage, and others, breached a release
and covenant not to sue in the settlement agreement by making a
motion in a bankruptcy proceeding. The bankruptcy proceeding
is not related to the causes of action settled by agreement in the
underlying lawsuit. Moreover, the damages alleged in the
complaint arose from the claimed loss of a 50-year lease that
Aguila granted to himself years after he lost the property to First
Mortgage’s foreclosure. First Mortgage responded to the
complaint with an anti-SLAPP motion. The trial court granted
the motion. Aguila’s appeal, like his complaint, is an exercise in
delusional thinking. We affirm.
                               FACTS
       Thee Aguila, Inc. (TAI) owned real property in Pico Rivera,
California (the Pico Rivera property). Aguila is the sole owner of
TAI. The Pico Rivera property had been leased for use as a
nightclub and restaurant. In 2015, the Drug Enforcement
Agency seized the liquor license because the tenant was using the
Pico Rivera property to launder money for a Mexican drug cartel.
The business’s conditional use permit (CUP) was revoked and the
business was shut down. The Department of Alcoholic Beverage
Control refused to issue a new liquor license until the city issued
a new CUP. Aguila began work to obtain a new CUP.
                        Loan and Foreclosure
       In July 2015, TAI obtained a loan of $5.7 million from First
Mortgage. The loan was secured by a trust deed that
encumbered the Pico Rivera property. Aguila personally
guaranteed the loan in writing.
       Guinevere Malley is an attorney who represented TAI and
Aguila from time to time on various matters. In May 2017,
Aguila, as president of TAI, executed a note for $2 million made

                                2
payable to Malley. The note was secured by a trust deed (Malley
trust deed) that also encumbered the Pico Rivera property. The
Malley trust deed was made returnable to TAI, not Malley, after
it was recorded. Aguila claimed that the note was to compensate
Malley for past legal services and legal services to be rendered in
the future. At the time the note and Malley trust deed were
made, Malley was in bankruptcy proceedings under Chapter 13 of
the Bankruptcy Code. (11 U.S.C. § 1301 et seq.)
       TAI failed to make payments on the First Mortgage loan,
and First Mortgage began foreclosure proceedings in August
2017. Aguila obtained a new liquor license on December 4, 2017.
       On December 6, 2017, a non-judicial foreclosure sale was
conducted, and First Mortgage became the Pico Rivera property’s
owner. Aguila attended the sale, but did not mention Malley’s
bankruptcy, although he was aware of the bankruptcy at the
time.
                        Underlying Litigation
       In October 2018, First Mortgage filed an action against
Aguila for breach of his personal guarantee of the loan. Aguila, a
former attorney, answered and filed a cross-complaint against
First Mortgage, its principal Carl Lindros, and numerous others.
The cross-complaint was based on an alleged oral contract
between First Mortgage and Aguila to allow Aguila a reasonable
time period to fulfill his financial obligations, arrange for the sale
of the Pico Rivera property, and keep the net proceeds. Malley
represented TAI in portions of the underlying litigation.
         Aguila Claims First Mortgage’s Foreclosure is Void
       In February 2020, the parties settled the lawsuit, but
Aguila initially refused to enter into a formal settlement
agreement. As the parties were attempting to finalize the

                                  3
agreement, Aguila suggested that First Mortgage’s foreclosure on
the Pico Rivera property may have been invalid. Aguila posited
that the foreclosure violated the automatic stay in Malley’s
bankruptcy because the foreclosure extinguished the Malley trust
deed. The Malley trust deed had not been listed on any schedule
in her bankruptcy, no accounts receivable were listed, and First
Mortgage had no notice of Malley’s bankruptcy.
       Aguila claimed in a declaration that on June 1, 2020, years
after the foreclosure sale, he entered into a lease with TAI giving
him the right to possession of the Pico Rivera property for 50
years.
                    Motion for Retroactive Relief
       In October 2020, First Mortgage filed a motion in
bankruptcy court for retroactive annulment of the bankruptcy
stay. The annulment would retroactively validate the foreclosure
of the First Mortgage trust deed encumbering the Pico Rivera
property. The motion was based on First Mortgage’s lack of
notice of Malley’s bankruptcy. First Mortgage had sent notice of
the foreclosure to Malley as the junior lienholder, but she did not
advise First Mortgage of the bankruptcy or raise an objection to
the foreclosure. In addition, there was no evidence of any
consideration given for the note. Aguila claimed that the note
was for attorney fees owed but the bankruptcy schedules
reflected no such receivables. It was unclear whether Malley
even knew the note and Malley trust deed existed at the time the
trust deed was recorded.
                       Settlement Agreement
       In November 2020, while First Mortgage’s bankruptcy
court motion was pending, the parties executed a formal
settlement agreement regarding the underlying action. Under

                                 4
the agreement, a judgment would be entered against Aguila in
the amount of $3,867,113.84. The complaint and cross-complaint
would be dismissed.
          The settlement agreement also contained mutual releases
and covenants not to sue as follows:
          “General Release of Known and Unknown Claims. [¶] . . .
With the exception of the obligations imposed under this
Agreement, [First Mortgage], Mortgage Co. of Santa Barbara,
Inc., . . . and Henry Aquila, [TAI], . . . individually and
collectively, for themselves and their respective officers,
. . . hereby mutually release each other, individually and
collectively, and each other's respective officers, . . . attorneys,
. . . , from any and all claims, causes of action, rights, obligations,
debts, liabilities, accounts, liens, damages, losses and expenses of
any kind and nature whatsoever, whether known or unknown [¶]
. . . [¶]
          “Covenant Not to Sue. [¶] The Mortgage Parties and the
Aguila Parties, individually and collectively, for themselves and
their respective officers, . . . attorneys, . . . agree that they will
not make, assert or maintain against the other or the other’s
respective officers, . . . attorneys, . . . any claim, demand, action,
suit or proceeding arising out of or in connection with the matters
respectively released herein.” (Italics added.)
                  Motion for Retroactive Relief Resumed
          After the parties executed the settlement agreement, First
Mortgage resumed its motion to retroactively annul the stay in
Malley’s bankruptcy. Aguila, TAI, and Malley did not object.
The bankruptcy court granted the motion, finding that Malley’s
bankruptcy petition was part of a scheme to hinder, delay, or

                                  5
defraud creditors. The court ruled that First Mortgage’s
foreclosure did not violate the automatic stay.
       In December 2020, TAI moved for reconsideration. In
support of TAI’s motion, Malley declared that she was aware of
the execution of the note and Malley trust deed at around the
time Aguila created them but had not received any payments
under the note.
       The bankruptcy court denied TAI’s motion on the ground
that TAI lacked standing because it had no interest in the
bankruptcy estate that would benefit if the annulment order
were reversed. The court also found that even if TAI had
standing, it failed to show that the court erred in granting First
Mortgage’s annulment motion. TAI also failed to show that First
Mortgage had notice of Malley’s bankruptcy. Finally, the court
found that Aguila’s testimony was not credible.
       TAI appealed the denial of its motion for reconsideration to
the bankruptcy panel of the Ninth Circuit Court of Appeals. The
Ninth Circuit concluded TAI had no standing because, among
other reasons, TAI is a nonparty to the bankruptcy that sought to
use the debtor’s automatic stay as a shield against the foreclosure
of the Pico Rivera property.
                           Instant Action
       In March 2021, Aguila brought the instant action against
First Mortgage, Mortgage Co. of Santa Barbara, Inc., and Andrew
Fuller (hereafter collectively First Mortgage), in propria persona.2

      2 Mortgage Co. of Santa Barbara, Inc. is the general

partner of First Mortgage. Andrew Fuller is the president and
chief executive officer of Mortgage Co. of Santa Barbara, and
executor of the estate of Carl Lindros, a principal in First
Mortgage, who died in 2019.

                                 6
The gravamen of the complaint is that First Mortgage breached
the covenant not to sue in the settlement agreement by its motion
for retroactive annulment of the bankruptcy stay in Malley’s
bankruptcy. Aguila’s theory of liability is that the covenant not
to sue in the settlement agreement covered officers and attorneys
of the parties, and Malley was an officer and attorney of TAI.
The complaint stated causes of action for breach of contract,
breach of the covenant of good faith and fair dealing, interference
with prospective economic advantage based on the termination of
Aguila’s 50-year lease, and intentional infliction of emotional
distress.
                         Anti-SLAPP Motion
       First Mortgage responded to the complaint with an anti-
SLAPP motion. First Mortgage alleged that Aguila’s action arose
from the exercise of his right to petition under the United States
and California Constitutions. First Mortgage also alleged that
Aguila cannot demonstrate that he has a reasonable probability
of prevailing. Malley’s bankruptcy is unrelated to any cause of
action encompassed by the settlement agreement.
                              Opposition
       Aguila submitted an affidavit in opposition to the motion.
Aguila declared in part: “In negotiating and executing the
Settlement Agreement, which included my stipulation to have a
$3,867,113.84 judgment entered against me personally, it was
vitally important to me to have the release provisions of Section 2
and the covenant not to sue provisions of Section 3 included
therein, as written, because, as a former attorney, I was mindful
and knowledgeable that the purported 2017 non-judicial
foreclosure sale of the [Pico Rivera] Property by Defendant [First
Mortgage] was void because it violated the automatic stay

                                7
provisions of the Bankruptcy Code, which was automatically
instituted when Ms. Malley filed for Chapter 13 bankruptcy in
2015 and remained in place through the 2017 purported trustee’s
sale and through the date of the execution of the Settlement
Agreement. I was aware that the Settlement Agreement
provisions, as written, would prohibit Defendants from
maintaining their motion for retroactive relief from bankruptcy
stay that they had filed in the bankruptcy case of Ms. Malley on
November 10, 2020 in order to attempt to retroactively validate
the sale.”
      Malley also resubmitted an affidavit in opposition to the
motion. She declared that: she was employed as legal counsel for
TAI and had been an officer of TAI; TAI owed her a substantial
amount of fees at the time of the foreclosure sale and still owes
her a substantial amount of fees; she was aware of the note and
Malley trust deed “around the time they were undertaken”; TAI
has not made any payments under the note and still owes her $2
million; and her bankruptcy was filed in good faith to cure
arrears in secured debt on a property in Downey, property
distinct from the Pico Rivera property, which was subject to
foreclosure.
      Aguila submitted a supplemental affidavit in which he
recounted his claim of an oral agreement with First Mortgage.
According to Aguila, First Mortgage orally agreed to give him at
least 12 months after First Mortgage obtained title to the Pico
Rivera property by foreclosure to either cure the debt or find a
buyer. Aguila attached a copy of his deposition given prior to the
execution of the settlement agreement in which he claimed to be
the present owner of the Pico Rivera property because the

                                8
foreclosure sale is void due to the violation of the automatic stay
in Malley’s bankruptcy.
                                Ruling
      The trial court granted First Mortgage’s anti-SLAPP
motion. In its statement of decision the court summarized
Aguila’s plan: “Aguila apparently believed he could either (a)
ultimately unwind the foreclosure sale because it had been
conducted in violation of Malley’s bankruptcy stay, reacquire the
[Pico Rivera] property, and operate it as a nightclub for the 50-
year lease term, or, alternatively (b) permit [First Mortgage] to
obtain retroactive relief from the stay, thereby validating the
nonjudicial foreclosure sale, and thereafter sue [First Mortgage]
for everything he believed he had lost in not being able to unwind
the foreclosure sale and reacquire the [Pico Rivera] property.”
      The trial court concluded that Aguila failed to show a
reasonable probability of prevailing. In making the settlement
agreement, the parties did not mutually intend the release and
covenant not to sue clauses to encompass the motion in Malley’s
bankruptcy. The evidence shows only Aguila’s unilateral
undisclosed intention. In addition, the court concluded that
Aguila cannot show damages because he has no standing to
challenge the bankruptcy court’s order approving the
foreclosure.3
                            DISCUSSION
                        I. Anti-SLAPP Motion
      Section 425.16, subdivision (b)(1), 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 Constitution or the

      3 Aguila was declared a vexatious litigant on July 5, 2023.

                                9
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.”
       To resolve an anti-SLAPP motion, the trial court engages in
a two-step inquiry. First, the court decides whether the
defendant has made a threshold showing that the challenged
cause of action arises from a protected activity. (City of Santa
Monica v. Stewart (2005) 126 Cal.App.4th 43, 71.) The moving
party has the burden of showing that the challenged cause of
action arises from a protected activity. (Ibid.) Second, if the
moving party has carried that burden, the court must decide
whether the opposing party has demonstrated a probability of
prevailing on the challenged cause of action. (Ibid.) In reviewing
the opposing party’s evidence, the court does not weigh it;
instead, the court determines whether the opposing party has
made a prima facia showing of facts necessary to establish its
claim. (Paulus v. Bob Lynch Ford, Inc. (2006) 139 Cal.App.4th
659, 673.) “The trial court’s ruling on both issues are reviewed de
novo.” (City of Santa Monica, at p. 71.)
                          II. Protected Activity
       Section 425.16, subdivision (e), provides that a protected
activity includes “any written or oral statement or writing made
before a . . . judicial proceeding, or any other official proceeding
authorized by law.” First Mortgage’s motion in bankruptcy court
qualifies as a protected activity. (See Rusheen v. Cohen (2006) 37
Cal.4th 1048, 1056 [conduct such as filing, funding, and
prosecution of a civil action is litigation activity protected for
purpose of anti-SLAPP motion].)

                                10
                    III. Probability of Prevailing
                    (a) Contract Cause of Action
       The release and covenant not to sue clauses in the
settlement agreement are very similar to standard clauses of
their type. The question here is whether they encompass First
Mortgage’s motion in Malley’s bankruptcy case. The answer is
no.
       Aguila relies on the broad language of the release in the
settlement agreement covering claims “of any kind and nature
whatsoever, whether known or unknown.” But the broad
language in a settlement agreement is not by itself determinative
of its scope.
       A settlement agreement may be explained by reference to
the circumstances under which it was made, and the matter to
which it relates. (Olson v. Doe (2022) 12 Cal.5th 669, 682.)
However broad the terms of the agreement may be, it extends
only to those things concerning which it appears the parties
intended to contract. (Ibid. [clause in which parties agreed not to
disparage each other interpreted not to apply to lawsuit brought
by one of the parties against the other].)
       Here the settlement agreement was made to settle a
number of cases relating to an alleged oral agreement to allow
TAI at least 12 months after First Mortgage’s foreclosure on the
Pico Rivera property to either cure the debt or find a buyer. The
settlement had nothing to do with Malley’s bankruptcy. Malley
declared she filed for bankruptcy to cure arrears in debts secured
by her property in Downey. The matters to which the settlement
relates are the cases being settled therein. It would be absurd to
interpret the settlement agreement as encompassing an

                                11
unrelated bankruptcy proceeding concerning a property in
Downey.
       Moreover, Aguila’s interpretation of the settlement
agreement is based on deception. Aguila manufactured a note
and trust deed in favor of Malley. Nowhere is that asset reflected
in Malley’s bankruptcy filings. Although Aguila attended the
foreclosure sale and Malley had notice, neither advised First
Mortgage of Malley’s bankruptcy prior to the foreclosure. The
only reasonable conclusion is that Aguila intentionally created
the circumstance that allowed him to claim the foreclosure –
although conducted by First Mortgage in good faith – was void.
Aguila then, by his own admission, entered into the settlement
agreement with the undisclosed intention of holding First
Mortgage liable if it attempted to remedy the problem that
Aguila himself maliciously created.
       Aguila now wants us to interpret the settlement agreement
in ways that assist his bad faith. We decline to do so. According
to Aguila, the settlement agreement leaves First Mortgage either
with a void deed or liable to Aguila for breach of the settlement
agreement. No reasonable person in First Mortgage’s position
would intend to enter into such an agreement. In light of all the
circumstances, Aguila’s interpretation of the settlement
agreement is quite simply bizarre.
       Aguila’s reliance on Belasco v. Wells (2015) 234 Cal.App.4th
409 (Belasco) is misplaced. There plaintiff purchased a newly
constructed home directly from the builder. Thereafter plaintiff
complained of construction defects. In 2006, the parties entered
into a written settlement agreement in which plaintiff agreed to
release all known and unknown construction defects in the home
in exchange for $25,000. In 2012, plaintiff brought an action

                                12
against the builder alleging defects in the home’s roof. The trial
court granted the builder summary judgment based on the 2006
settlement agreement which contained the release of known and
unknown claims. In affirming the judgment, the Court of Appeal
rejected the plaintiff’s contention that the 2006 settlement
agreement does not include a defective roof because that defect
was not specifically mentioned in the agreement. The court held
that waivers of unknown claims are enforceable. (Id. at p. 423.)
      In Belasco, supra, 234 Cal.App.4th 409, the settlement
agreement released claims for unknown construction defects in a
particular house. Plaintiff’s claim was for an unknown
construction defect in that particular house. Belasco is easily
distinguishable. The defendant in Belasco did not claim
construction defects in a particular house also encompassed a
motion in an unrelated bankruptcy. Nor were there any facts in
Belasco showing that the release in the settlement agreement
was the product of deception and bad faith.
      Aguila claims that in determining that he failed to show a
probability of prevailing, the trial court improperly weighed the
evidence. But the evidence leads to only one reasonable
conclusion: Aguila has no possibility of prevailing; there is no
need to weigh the evidence.
      Moreover, Aguila’s entire claim for damages is based on the
theory that he has standing to assert the automatic stay in
Malley’s bankruptcy. Both the bankruptcy court and the Ninth
Circuit bankruptcy panel concluded that Aguila had no such
standing. Aguila claims without citation to authority that he
could succeed in a quiet title action in superior court. The claim
is pure fantasy. Quite apart from the problem of res judicata, no
superior court would conclude Aguila has standing in the face of

                               13
the bankruptcy court and the Ninth Circuit bankruptcy panel’s
determination.
                    (b) Remaining Causes of Action
       Aguila’s cause of action against First Mortgage for breach
of the covenant of good faith and fair dealing demonstrates that
irony is not dead. Although there is no evidence of bad faith on
the part of First Mortgage, there is overwhelming evidence of bad
faith on Aguila’s part. In any event, a cause of action for breach
of the covenant of good faith and fair dealing requires a showing
of breach of contract. (Habitat Trust for Wildlife, Inc. v. City of
Rancho Cucamonga (2009) 175 Cal.App.4th 1306, 1344.) Here
there was no breach of contract.
       Aguila’s cause of action for loss of prospective economic
advantage is based on the 50-year lease he granted to himself
long after First Mortgage foreclosed on the Pico Rivera property.
Aguila can derive from the lease no economic advantage because
the bankruptcy court retroactively approved the foreclosure. The
bankruptcy court and the Ninth Circuit bankruptcy panel ruled
that Aguila has no standing to challenge the approval. Aguila’s
assertion that he could prevail in a superior court action to quiet
title in spite of the bankruptcy court’s and the Ninth Circuit
bankruptcy panel’s rulings is baseless.
       Finally, Aguila’s cause of action for intentional infliction of
emotional distress is also based on the loss of his 50-year lease.
The cause of action requires a showing that the defendant’s
conduct was so outrageous as to exceed all bounds of decency.
(Potter v. Firestone Tire & Rubber Co. (1993) 6 Cal.4th 965, 1001.)
Aguila has failed to show First Mortgage did anything wrong.

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                       DISPOSITION
     The judgment is affirmed. Costs are awarded to
respondents.
     NOT TO BE PUBLISHED.

                                  GILBERT, P. J.

     We concur:

           YEGAN, J.

           CODY, J.

                             15
                   Colleen K. Sterne, Judge

            Superior Court County of Santa Barbara

                ______________________________

      The Tym Firm and Ronald D. Tym for Plaintiff and
Appellant.
      Law Office of Eric A. Woosley and Eric A. Woosley for
Defendants and Respondents Pico Rivera First Mortgage
Investors, LP and Mortgage Co. of Santa Barbara, Inc.
      Reicker, Pfau, Pyle & Mcroy and Robert B. Forouzandeh for
Defendant and Respondent Andrew Fuller.