Court Opinion

ID: 9953305
Source: CourtListenerOpinion
Date Created: 2024-03-21 20:02:42.718715+00
Date Added: 2024-06-11T14:45:58.028616
License: Public Domain

Filed 3/21/24 Ultimate Action v. Pacific City Bank CA2/4
            NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication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 FOUR

 ULTIMATE ACTION, LLC,                                                  B323803

           Plaintiff and Appellant,                                     (Los Angeles County
                                                                         Super. Ct. No. 21STCV26756)
           v.

 PACIFIC CITY BANK,

           Defendant and Respondent.

         APPEAL from an order of the Superior Court of Los Angeles County,
Gregory Keosian, Judge. Order affirmed; motion for sanctions denied.
         Wolf, Rifkin, Shapiro, Schulman & Rabkin, Eric Levinrad and Johnny
White for Plaintiff and Appellant.
         Meylan Davitt Jain Arevian & Kim, Vincent J. Davitt and Anita Jain
for Defendant and Respondent.
                              INTRODUCTION
      Here we hold that a cross-complaint filed in response to the plaintiff’s
complaint attacking the validity of a loan agreement does not fall within the
provisions of a strategic lawsuit against public participation (SLAPP). (Code
Civ. Proc., § 425.16.)1
      The majority shareholder in a company filed an individual and
derivative action attacking the validity of a loan agreement between the
company and a bank. The bank responded by filing a cross-complaint against
the majority shareholder and the company, seeking a judicial determination
of the validity of the agreement, or, alternatively, an equitable lien against
the company’s real property. The shareholder filed a special motion to strike
under our anti-SLAPP statute, arguing the bank’s causes of action all arose
from the shareholder’s protected activity of filing the derivative action. The
shareholder now appeals the trial court’s denial of its motion to strike the
bank’s cross-complaint. We affirm.

             FACTUAL AND PROCEDURAL BACKGROUND
A.    Ultimate Action’s Pleadings
      Plaintiff and appellant Ultimate Action, LLC (Ultimate Action) owns a
60 percent interest in 357 South Broadway, LLC (the Company). On July 21,
2021, Ultimate Action filed this action, individually and derivatively, on
behalf of the Company, naming respondent Pacific City Bank (the Bank) as a
defendant. Ultimate Action subsequently filed its operative first amended
complaint. In the first cause of action, Ultimate Action seeks to rescind a
2017 loan agreement between the Company and the Bank. Ultimate Action

1     All further statutory references are to the Code of Civil Procedure
unless otherwise stated
                                        2
alleges the Company’s minority shareholder orchestrated the loan agreement
without first obtaining the necessary shareholder approval to bind the
Company to the loan agreement. The complaint also asserts causes of action
for cancellation, avoidance of fraudulent transfer, and declaratory relief, all
stemming from the 2017 loan agreement. In its cause of action for
declaratory relief, Ultimate Action alleges, “A controversy has arisen between
Plaintiff and the Company, on the one hand, and Pacific City Bank, on the
other hand, as to whether a valid contract exists between Pacific City Bank
and the Company, and as to whether Pacific City Bank has a valid security
interest against the Company’s real estate.”2

B.       Pacific City Bank’s Cross-Complaint
         On March 30, 2022, the Bank filed a cross-complaint against Ultimate
Action and the Company. The cross-complaint alleges the Bank extended a
loan to the Company secured by a deed of trust encumbering real property
owned by the Company. The Bank claims the Company used the loan to pay
off then-existing liens on the real property owned by the Company. The
cross-complaint states that in July 2021, the Bank “learned of Ultimate
Action’s challenge to the validity and enforceability” of the loan and deed of
trust.
         The cross-complaint alleges three causes of action: (1) quiet title,
(2) declaratory relief, and (3) equitable lien by subrogation. In its cause of
action to quiet title, the Bank alleges that Ultimate Action, “purporting to act
derivatively in the Company’s shoes,” challenges the validity and
enforceability of the loan and deed of trust. The Bank seeks “to establish its

2     The complaint also asserts additional causes of action against other
parties which are not germane to Ultimate Action’s appeal.
                                           3
first position lien interest against the adverse claims of Cross-Defendants as
of July 27, 2017.”
      In its cause of action for declaratory relief, the Bank states, “An actual
controversy has arisen and exists between the Bank and Cross-Defendants,
and each of them, with respect to the rights, obligations and duties of the
parties.” The Bank contends its deed of trust is valid and enforceable, and
Ultimate Action and the Company both dispute the validity and
enforceability of the deed of trust.
      The Bank’s cause of action for equitable lien by subrogation is pled in
the alternative to the other causes of action. The Bank states that in the
event its deed of trust is found to be invalid or unenforceable, it seeks an
equitable lien against the Company’s real property “to secure payment to the
Bank of any and all amounts paid with the Bank’s loan proceeds which were
used to satisfy the Company’s preexisting debt.”
      In its prayer for relief, the Bank seeks: (1) a quiet title order stating the
Bank’s deed of trust is a first position lien; (2) a judicial declaration that its
deed of trust is valid and enforceable; or, alternatively, (3) an order that the
Bank is entitled to an equitable lien encumbering the property. The Bank
also seeks to recover its costs of suit, attorneys’ fees, and pre- and post-
judgment interest.

C.    Ultimate Action’s Anti-SLAPP Motion
      On June 1, 2022, Ultimate Action filed an anti-SLAPP motion to strike
the Bank’s cross-complaint under section 425.16. Ultimate Action sought to
strike the Bank’s cross-complaint in its entirety as against Ultimate Action.
Ultimate Action argued all of the Bank’s causes of action arose from Ultimate
Action’s decision to file the instant action challenging the validity of the

                                         4
Bank’s loan agreement with the Company. Ultimate Action claimed its filing
of the lawsuit is protected activity under section 425.16, subdivision (e).
Ultimate Action further argued the Bank could not establish a reasonable
probability of prevailing on the merits because Ultimate Action did not have
any direct ownership interest in the Company’s real property and thus was
“not a direct participant in the controversy described by the cross-complaint.”
      The Bank opposed Ultimate Action’s motion, arguing that its causes of
action did not arise from any protected activity undertaken by Ultimate
Action. The Bank also argued it could establish a probability of success on
the merits of its claims.
      On August 11, 2022, the trial court issued its ruling denying Ultimate
Action’s motion. The trial court found Ultimate Action failed to carry its
burden of establishing that the Bank’s causes of action arose from protected
activity under section 425.16. The trial court noted that to determine
whether a cause of action “arises from” protected activity, a court must
disregard the labeling of the claim and instead examine the principal thrust
or gravamen of the cause of action to determine if protected activity provides
the foundation for the claim.
      Relying on City of Cotati v. Cashman (2002) 29 Cal.4th 69 (Cotati) and
Copenbarger v. Morris Cerullo World Evangelism (2013) 215 Cal.App.4th
1237, the trial court distinguished between claims that “arise from” protected
activity and those that are merely “triggered by” protected activity. The
court determined “an anti-SLAPP motion will not lie merely for a lawsuit
triggered by protected activity, where the activity itself is only evidence of the
existence of an underlying controversy.” Turning to the allegations of the
Bank’s cross-complaint, the trial court noted the cross-complaint made
“incidental mention” of Ultimate Action’s derivative claims. The court

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nonetheless held that “While [Ultimate Action] has challenged the validity of
that interest in its complaint, [the Bank]’s claims are not based on any
alleged impropriety in [Ultimate Action]’s lawsuit, but merely seeks an
affirmative adjudication of that interest’s validity, much as was the case with
the municipal ordinance in City of Cotati.” The trial court found Ultimate
Action failed to carry its burden to demonstrate the Bank’s claims arose from
protected activity and denied the motion without reaching the question of
whether the Bank established a probability of success on the merits.

D.    Appeal
      Ultimate Action timely appealed the denial of its motion. On appeal,
Ultimate Action contends the trial court erred in finding the Bank’s causes of
action did not arise from protected activity.

                                 DISCUSSION
A.    Anti-SLAPP Procedure
      The “anti-SLAPP statute is designed to protect defendants from
meritless lawsuits that might chill the exercise of their rights to speak and
petition on matters of public concern.” (Wilson v. Cable News Network, Inc.
(2019) 7 Cal.5th 871, 883–884 (Wilson).) 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).) The anti-SLAPP statute itself provides that
its protections “shall be construed broadly.” (§ 425.16, subd. (a).)

                                        6
      In evaluating an anti-SLAPP motion to strike, courts conduct a two-
step analysis. First, the court decides whether a defendant has met its
“burden of establishing that the challenged allegations or claims ‘aris[e] from’
protected activity in which the defendant has engaged.” (Park v. Board of
Trustees of California State University (2017) 2 Cal.5th 1057, 1061 (Park).)
Second, if a defendant meets its burden on the threshold showing, the court
decides if the plaintiff “has established that there is a probability that the
plaintiff will prevail on the claim.” (§ 425.16, subd. (b)(1).)
      We review the trial court’s order denying the anti-SLAPP motion de
novo, applying the same two-step analysis. (Oasis West Realty, LLC v.
Goldman (2011) 51 Cal.4th 811, 820.) We independently review whether a
moving party has made a threshold showing that the challenged cause of
action arises from protected activity. (Grewal v. Jammu (2011) 191
Cal.App.4th 977, 988.)

B.    Prong One
      “At the first step of the analysis, the defendant must make two related
showings. Comparing its statements and conduct against the statute, it must
demonstrate activity qualifying for protection. (See § 425.16, subd. (e).) And
comparing that protected activity against the complaint, it must also
demonstrate that the activity supplies one or more elements of a plaintiff’s
claims.” (Wilson, supra, 7 Cal.5th at p. 887.) “At this stage, the question is
only whether a defendant has made out a prima facie case that activity
underlying a plaintiff’s claims is statutorily protected.” (Id. at p. 888.)

                                         7
      1.     The Gravamen Test
      Ultimate Action argues the trial court erred in applying the “gravamen
test” to determine whether the Bank’s causes of action arise from protected
activity. Ultimate Action contends the California Supreme Court’s opinions
in Baral v. Schnitt (2016) 1 Cal.5th 376 (Baral) and Bonni v. St. Joseph
Health System (2021) 11 Cal.5th 995 (Bonni) rendered the gravamen test
obsolete and improper. We disagree.
      In Baral, our Supreme Court resolved a conflict among California
Courts of Appeal regarding the application of anti-SLAPP motions targeting
“mixed” causes of action that included allegations of protected and non-
protected activities. (Baral, supra, 1 Cal.5th at pp. 381–382, 384–396.) The
Baral court did not address the “principal thrust” or “gravamen” analysis and
instead considered whether a “cause of action” in the anti-SLAPP context
should be defined in terms of the primary right theory. (Id. at p. 394.) The
court rejected this argument, finding “the primary right theory is notoriously
uncertain in application. . . . The theory is ill-suited to the anti-SLAPP
context, where the Legislature authorized a special motion to strike only
claims that arise from protected speech or petitioning activity.” (Id. at p.
395.) Instead, the Baral court determined the Legislature “had in mind
allegations of protected activity that are asserted as grounds for relief. The
targeted claim must amount to a ‘cause of action’ in the sense that it is
alleged to justify a remedy.” (Ibid.) The court thus concluded that an anti-
SLAPP motion, like a conventional motion to strike, may be used to attack
particular alleged acts giving rise to a claim for relief within a cause of action.
(Id. at p. 393.)
      In Bonni, the defendant moved to strike the plaintiff’s “retaliation
cause of action in its entirety.” (Bonni, supra, 11 Cal.5th at p. 1009.) The

                                        8
plaintiff argued that because the defendant’s motion was “aimed at the entire
cause of action,” the court did not have to employ the Baral approach and
could instead simply determine “whether the gravamen of the entire cause of
action was based on protected or unprotected activity.” (Id. at p. 1011.) The
Bonni court rejected this argument, noting the cause of action for retaliation
included “a nonexhaustive list of at least 19 distinct acts or courses of conduct
allegedly undertaken in retaliation.” (Id. at p. 1009.) The plaintiff’s
retaliation claim was thus a “mixed cause of action” which was governed by
Baral. (Id. at pp. 1010–1011.)
      In Bonni, our California Supreme Court rejected the same
interpretation of Baral put forth by Ultimate Action here. The Bonni court
expressly acknowledged the so-called “gravamen test” remained proper in
certain contexts even after Baral. “To be clear, we do not suggest that every
court that has continued to label its approach a gravamen test even after
Baral has erred. Some courts have invoked the term not in the way Bonni
suggests—to determine the essence or gist of a so-called mixed cause of
action—but instead to determine whether particular acts alleged within the
cause of action supply the elements of a claim [citation] or instead are
incidental background [citations]. This approach is consistent with Baral.”
(Id. at p. 1012.) Here, the trial court used a gravamen test to determine that
any reference to Ultimate Action’s derivative action in the Bank’s cross-
complaint was merely “incidental” and did not supply the elements of the
Bank’s claims.
      In its reply brief on appeal, Ultimate Action states, without analysis or
support, that all of the Bank’s causes of action are mixed causes of action
subject to Baral. This assertion was not raised below and was raised by
Ultimate Action for the first time in its reply on appeal. (In re Marriage of

                                       9
Nassimi (2016) 3 Cal.App.5th 667, 695 [“‘“theories not raised in the trial
court cannot be asserted for the first time on appeal”’”]; Bocanegra v.
Jakubowski (2015) 241 Cal.App.4th 848, 857 [“‘“a party is not permitted to
change its position on appeal and raise new issues not presented in the trial
court”’”]; American Drug Stores, Inc. v. Stroh (1992) 10 Cal.App.4th 1446,
1453 [“Points raised for the first time in a reply brief will ordinarily not be
considered, because such consideration would deprive the respondent of an
opportunity to counter the argument”].)
      Even if this argument were properly before us, it is contradicted by
Ultimate Action’s arguments below and its opening brief on appeal. Ultimate
Action has repeatedly argued that its filing of the instant action was the sole
basis for the Bank’s claims against it. For example, in its motion below,
Ultimate Action expressly claimed that “The claims pled by [the Bank] arise
exclusively from [Ultimate Action]’s protected act of filing litigation on behalf
of the Company, thereby satisfying the first prong of the anti-SLAPP
statute.” In its opening brief on appeal, Ultimate Action claims it was named
as a party to the Bank’s cross-complaint “solely because [it] filed a derivative
suit” on behalf of the Company. Ultimate Action also argues that it “finds
itself the target of a lawsuit for the sole reason that it sued respondent, which
makes the case a quintessential SLAPP suit.”
      Ultimate Action does not point to any non-protected activity that forms
the basis of the Bank’s causes of action. The Bank’s causes of action against
Ultimate Action are not mixed causes of action subject to the analysis
outlined in Baral or Bonni. The trial court thus did not err in looking to the
gravamen of the Bank’s claims to determine whether Ultimate Action’s filing
of this action supplied the elements of any of the Bank’s claims.

                                        10
      2.    Arising from Protected Activity
      “A claim arises from protected activity when that activity underlies or
forms the basis for the claim.” (Park, supra, 2 Cal.5th at p. 1062.) “The
defendant’s first-step burden is to identify the activity each challenged claim
rests on and demonstrate that that activity is protected by the anti-SLAPP
statute. A ‘claim may be struck only if the speech or petitioning activity itself
is the wrong complained of, and not just evidence of liability or a step leading
to some different act for which liability is asserted.’” (Wilson, supra, 7
Cal.5th at p. 884; accord, Park, at p. 1060.) “‘[T]he mere fact that an action
[or claim] was filed after protected activity took place does not mean the
action [or claim] arose from that activity for the purposes of the anti-SLAPP
statute.’” (Park, at p. 1063; see Rand Resources, LLC v. City of Carson (2019)
6 Cal.5th 610, 621 [“a claim does not ‘arise from’ protected activity simply
because it was filed after, or because of, protected activity, or when protected
activity merely provides evidentiary support or context for the claim”].) “To
determine whether a claim arises from protected activity, courts must
‘consider the elements of the challenged claim and what actions by the
defendant supply those elements and consequently form the basis for
liability.’” (Wilson, at p. 884; accord, Park, at p. 1063.)
      “As courts applying the anti-SLAPP statute have recognized, the
‘arising from’ requirement is not always easily met. [Citations.] The only
means specified in section 425.16 by which a moving defendant can satisfy
the requirement is to demonstrate that the defendant’s conduct by which
plaintiff claims to have been injured falls within one of the four categories
described in subdivision (e).” (Equilon Enterprises v. Consumer Cause, Inc.
(2002) 29 Cal.4th 53, 66.) As defined by statute, these four categories of
protected activity are: “(1) any written or oral statement or writing made

                                        11
before a legislative, executive, or judicial proceeding, or any other official
proceeding authorized by law, (2) any written or oral statement or writing
made in connection with an issue under consideration or review by a
legislative, executive, or judicial body, or any other official proceeding
authorized by law, (3) any written or oral statement or writing made in a
place open to the public or a public forum in connection with an issue of
public interest, or (4) any other conduct in furtherance of the exercise of the
constitutional right of petition or the constitutional right of free speech in
connection with a public issue or an issue of public interest.” (§ 425.16, subd.
(e)(1)–(4).)
      To carry its burden on the first prong, Ultimate Action alleges the
Bank’s claims against it all arise from protected activity in the form of
Ultimate Action’s filing of the instant lawsuit. We agree with the trial court
that Cotati is instructive here. In that case, a city adopted a mobilehome
park rent stabilization ordinance. (Cotati, supra, 29 Cal.4th at p. 72.)
Owners of mobilehome parks sued the city in federal court, claiming the
ordinance was invalid and unconstitutional. (Ibid.) The city then sued the
owners in state court, asserting a cause of action for declaratory relief based
on the dispute between the city and the owners over the validity and
constitutionality of the ordinance. (Ibid.) The owners filed an anti-SLAPP
motion to strike the city’s state court complaint, arguing it arose from their
filing of the federal action. (Id. at pp. 72–73.) The trial court granted the
motion, finding the city’s state court action arose from the owners’ filing of
the federal lawsuit. (Id. at p. 73.)
      The Court of Appeal reversed the trial court, and the California
Supreme Court affirmed the decision of the Court of Appeal. Our Supreme
Court noted, “the mere fact an action was filed after protected activity took

                                        12
place does not mean it arose from that activity.” (Cotati, supra, 29 Cal.4th at
pp. 76–77.) “The anti-SLAPP statute cannot be read to mean that ‘any claim
asserted in an action which arguably was filed in retaliation for the exercise
of speech or petition rights falls under section 425.16, whether or not the
claim is based on conduct in exercise of those rights.’ [Citations.]” (Id. at p.
77.) Instead, “the 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.”
(Id. at p. 78.)
      Turning to the facts before it, our Supreme Court noted it was
undisputed that the owners’ federal litigation “informed City of the existence
of an actual controversy justifying declaratory relief.” (Cotati, supra, 29
Cal.4th at p. 79.) Nonetheless, the Court held that the city’s state court
action did not arise from the federal litigation. “In this case, as the Court of
Appeal stated, a dispute exists between the parties over the constitutionality
of Cotati Ordinance No. 680. And just as Owners’ lawsuit itself was not the
actual controversy underlying Owners’ request for declaratory relief in
federal court, neither was that lawsuit the actual controversy underlying
City’s state court request for declaratory relief. Rather, the actual
controversy giving rise to both actions—the fundamental basis of each
request for declaratory relief—was the same underlying controversy
respecting City’s ordinance. City’s cause of action therefore was not one
arising from Owners’ federal suit. Accordingly, City’s action was not subject
to a special motion to strike.” (Id. at p. 80, fn. omitted.)
      We are presented with similar facts here. Ultimate Action filed an
individual and derivative complaint seeking declaratory relief in the form of a
judicial declaration that the loan agreement between the Bank and the

                                        13
Company is invalid. Ultimate Action’s own pleading alleges a “controversy
has arisen between [Ultimate Action] and the Company, on the one hand,
and [the Bank], on the other hand, as to whether a valid contract exists
between [the Bank] and the Company.” In the same way that the owners in
Cotati raised their dispute regarding the constitutionality of the ordinance in
a federal action, Ultimate Action raised a dispute regarding the enforceability
of the loan agreement by filing this action. The Bank responded by filing a
cross-complaint aimed at this same dispute between Ultimate Action, the
Company, and the Bank regarding the validity of the loan. As in Cotati, it is
the underlying dispute itself that gives rise to the Bank’s claims, not the
filing of this lawsuit.
      Ultimate Action’s attempts to distinguish Cotati are unpersuasive.
Ultimate Action inaccurately claims that Cotati applies “the inherently
subjective ‘gravamen’ test that Baral and Bonni discredited.” The court in
Cotati did not itself apply a gravamen test but rather merely stated that the
trial and appellate courts both recognized the subject matter of the city’s suit
was identical to that of the owners’ suit. “City has consistently taken the
position that the actual controversy with respect to which it seeks declaratory
relief is the same as the controversy with respect to which Owners earlier
sought declaratory relief in federal court . . . . And while the courts below
have drawn different conclusions from the fact, both have recognized that the
gravamen of City’s state court action is the same as that of Owners’ federal
court action.” (Cotati, supra, 29 Cal.4th at p. 79.) We also note Cotati did not
involve a mixed cause of action; rather, it concerned a cause of action for
declaratory relief that was alleged to arise solely from protected activity. As
set forth above, Bonni expressly recognized that courts may properly examine
the “gravamen” of a non-mixed cause of action in determining whether

                                       14
protected activity supplies the elements of a claim or is merely incidental to
it. (Bonni, supra, 11 Cal.5th at p. 1012.) In short, the holdings of Baral and
Bonni did not discredit, disapprove, or otherwise invalidate the holding or
reasoning of Cotati.
      Ultimate Action also argues Cotati is inapplicable because, in that case,
the owners’ federal lawsuit only informed the city of the existence of a
controversy justifying declaratory relief and did not itself constitute that
controversy. The same is true here. The Bank’s cross-complaint states that
it first learned of the existence of this dispute in July 2021, which is when
Ultimate Action filed this suit. The cross-complaint seeks to adjudicate the
same underlying dispute regarding the validity of the loan and not the act of
filing this lawsuit. As in Cotati, Ultimate Action’s filing of this action is
merely evidence of the existence of the dispute between the parties.
      Other courts have applied the reasoning of Cotati to analogous facts
and reached the same result. For example, in Gotterba v. Travolta (2014) 228
Cal.App.4th 35 (Gotterba) a dispute arose between an employer and a former
employee over a termination agreement which included a confidentiality
provision. (Id. at pp. 38–39.) When the plaintiff began making statements to
the press, the defendant’s counsel sent the plaintiff a letter alleging the
statements breached the termination agreement and threatening legal
action. (Id. at p. 38.) The plaintiff filed an action for declaratory relief
seeking a judicial determination of his rights and duties under the agreement
because the defendant threatened to take legal action against him based
upon alleged violations of the agreement. (Id. at p. 39.) The defendant filed
an anti-SLAPP motion to strike, arguing the plaintiff’s action arose from the
defendant’s protected activity of sending a prelitigation demand letter. (Id.

                                        15
at pp. 39–40.) The trial court denied the motion and the Court of Appeal
affirmed. (Id. at p. 40.)
      The Court of Appeal determined “that a communication preparatory to
or in anticipation of litigation” was protected activity under section 425.16,
subdivision (e)(2). (Gotterba, supra, 228 Cal.App.4th at p. 41.) However, the
court concluded that the plaintiff’s cause of action for declaratory relief did
not arise from that protected activity. “Although the prelitigation letters may
have triggered Gotterba’s complaint and may be evidence in support of the
complaint, they are not the basis of the complaint.” (Id. at p. 42.) The court
determined that protected activity did not supply the elements of the
plaintiff’s claim because “If the threats of litigation were removed from Atlo’s
demand letters, the same dispute would exist regarding the terms of the
termination agreement.” (Ibid.) “The complaint seeks declaratory relief
regarding the validity of the asserted termination agreements and not the
propriety of [the defendants’] demand letters. [¶] . . . 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 a [contract] dispute
into a SLAPP suit.’ [Citation.]” (Id. at pp. 41–42.) The court also noted the
plaintiff’s lawsuit did not seek to curtail the defendant’s right to send
demand letters. (Ibid.)
      The court in City of Alhambra v. D’Ausilio (2011) 193 Cal.App.4th 1301
(City of Alhambra) reached the same result. In that case, a former employee
of the City of Alhambra sued the city for civil rights violations and eventually
settled with the city. (Id. at pp. 1303–1304.) As part of the settlement, he
agreed that he would not represent or advocate for any city employees,
including members of the Alhambra Firefighter’s Association (AFA). (Ibid.)
A year after the settlement was signed, the city became aware that the

                                       16
former employee participated in an AFA meeting and advocated that the AFA
participate in a demonstration against the city. (Ibid.) He also personally
took part in a protest while wearing an AFA shirt. (Ibid.)
      In response, the city filed a lawsuit against him, claiming his actions
breached the settlement agreement. (City of Alhambra, supra, 193
Cal.App.4th at p. 1304.) The city’s complaint included a cause of action for
declaratory relief, seeking a judicial determination of the defendant’s
obligations under the settlement agreement. (Id. at p. 1305.) The defendant
filed an anti-SLAPP motion to strike the cause of action for declaratory relief.
The trial court denied the motion, finding the cause of action for declaratory
relief did not arise from the defendant’s protected activity. (Ibid.) The Court
of Appeal affirmed. In doing so, the court recognized the city’s lawsuit was
triggered by the defendant’s protected petitioning activities. (Id. at p. 1307.)
The court nonetheless concluded that the city’s “declaratory relief claim
arises from a contract dispute; it does not arise from actions taken by
appellant in furtherance of his constitutional rights.” (Id. at p. 1309.)
      The same result follows here. While it is undisputed that the Bank’s
cross-complaint was triggered by Ultimate Action’s filing of the instant
lawsuit, that does not establish that the Bank’s claims are based on Ultimate
Action’s petitioning activity. The Bank’s causes of action for quiet title and
declaratory relief stem from a dispute between Ultimate Action and the Bank
regarding the validity of the loan agreement between the Company and the
Bank. That Ultimate Action chose to communicate this disagreement by
filing a lawsuit does not mean the Bank’s claims are based on protected
activity. It is the existence of the dispute itself that forms the basis of the
Bank’s claims, not the forum or vehicle by which Ultimate Action
communicated that dispute to the Bank. If Ultimate Action simply called the

                                        17
Bank and informed it of this dispute by phone, there would be no question
that section 425.16 would not apply to the Bank’s claims. Ultimate Action’s
filing of the instant lawsuit is thus evidence in support of the Bank’s claims
for quiet title and declaratory relief, but it is not the basis of those claims.
      Ultimate Action has also made no showing that the filing of this action
supplies one or more elements of the Bank’s third cause of action for
equitable lien by subrogation. The doctrine of equitable subrogation “‘is
broad enough to include every instance in which one person, not acting as a
mere volunteer or intruder, pays a debt for which another is primarily liable,
and which in equity and good conscience should have been discharged by the
latter.’ [Citations.]” (Caito v. United California Bank (1978) 20 Cal.3d 694,
704.) The Bank’s third cause of action for equitable lien by subrogation stems
from the use of the Bank’s loan proceeds to satisfy the Company’s pre-
existing debts, not Ultimate Action’s filing of this action. This cause of action
does not seek damages against Ultimate Action or seek to impose liability
against Ultimate Action based on the filing of this lawsuit. Instead, it seeks
a lien against the Company’s real property to secure repayment of the loan
proceeds, which the Company accepted and used for its benefit. The fact that
this third cause of action was triggered by Ultimate Action’s filing of the
lawsuit does not establish that the cause of action arises from protected
activity.
      We find that Ultimate Action has failed to carry its burden to show the
challenged causes of action arise from protected activity. As Ultimate Action
has not satisfied the first prong of the anti-SLAPP analysis, we affirm the
trial court’s order denying Ultimate Action’s anti-SLAPP motion to strike
without reaching the question of whether the Bank has established a
probability of success on the merits of its claims.

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                              DISPOSITION
      The order denying Ultimate Action’s anti-SLAPP motion to strike is
affirmed. The Bank’s motion for sanctions is denied. The Bank is awarded
its costs on appeal.
      NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

                                         ZUKIN, J.

      We concur:

      CURREY, P. J.

      COLLINS, J.

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