Court Opinion

ID: 5139762
Source: CourtListenerOpinion
Date Created: 2021-12-22 19:02:26.480171+00
Date Added: 2024-06-11T08:24:19.594385
License: Public Domain

Filed 12/22/21 EEL Holdings v. LA Church CA4/1
                   NOT TO BE PUBLISHED IN OFFICIAL REPORTS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
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purposes of rule 8.1115.

                 COURT OF APPEAL, FOURTH APPELLATE DISTRICT

                                                       DIVISION ONE

                                              STATE OF CALIFORNIA

 EEL HOLDINGS, LLC et al.,                                                   D078726

            Cross-complainants and
            Respondents,
                                                                             (San Bernardino County
            v.                                                               Super. Ct. No. CIVDS1931444)

 LA CHURCH, LLC et al.,

            Cross-defendants and
            Appellants.

          APPEAL from an order of the Superior Court of San Bernardino
County, Lynn M. Poncin, Judge. Affirmed.
          Law Office of Richard Jacobs and Richard B. Jacobs for Cross-
defendants and Appellants.
          Shantar Law, Nicholas S. Shantar; Scheppach Bauer PC, Brian R.
Bauer; Law Office of Jeff Augustini and Jeff Augustini for Cross-
complainants and Respondents.

          In this appeal, cross-defendants Stephanie Smith and C. Martin Smith
(together, the Smiths) appeal from an order of the trial court denying their
motion to strike specified portions of the cross-complaint filed by cross-
complainants EEL Holdings, LLC (EEL), and Elliot Lewis (together,
EEL/Lewis). The court concluded that the challenged allegations were not a
“SLAPP” under Code of Civil Procedure section 425.16 (§ 425.16; at times the

anti-SLAPP statute).1
      The underlying dispute is between the parties to a lease (Lease) for
commercial premises in San Bernardino (Premises) and a personal guaranty
of the Lease (Guaranty). Following vandalism and fires at the Premises,
LA Church, LLC (LAC), as lessor, initiated the underlying action by suing
EEL and Lewis, as lessee and guarantor, respectively. In a cross-complaint,
EEL/Lewis alleged claims against the Smiths, LAC, and Industrial Partners
Group (IPG).
      As relevant to the issues in this appeal, the Smiths focus on the
following three, specific, allegations against them in EEL/Lewis’s cross-
complaint: The Smiths breached the Lease “by suing for negligence”;
the Smiths breached the Lease “by suing for loss of rent”; and the Smiths
breached the Guaranty “by suing under it without any grounds to do so.”
(Italics added.) Based on these allegations, the Smiths contend that the filing
of LAC’s complaint in this action is constitutionally protected activity for
purposes of applying the anti-SLAPP statute.
      Despite EEL/Lewis’s affirmative allegations in the cross-complaint that
the Smiths breached the contracts by the filing of the complaint, in

1      “ ‘SLAPP’ is an acronym for ‘strategic lawsuit against public
participation.’ ” (Baral v. Schnitt (2016) 1 Cal.5th 376, 381, fn. 1 (Baral).)
The anti-SLAPP statute sets forth the standards and the procedure for
striking “meritless claims arising from protected activity.” (Id. at p. 384,
italics omitted.)

                                        2
determining whether the challenged claims arise from constitutionally
protected activity, we must independently review the pleadings and evidence.
As we explain, in doing so here, EEL/Lewis do not seek relief—or otherwise
intend that the Smiths’ liability is—based on what the Smiths contend is the
constitutionally protected activity of the filing of LAC’s complaint in this
action. Thus, we will affirm the order denying the anti-SLAPP motion.

            I. FACTUAL AND PROCEDURAL BACKGROUND2
      In January 2019, LAC (as lessor) and EEL (as lessee), entered into a
commercial lease for specified property in San Bernardino (previously
identified as the Lease for the Premises). Approximately a month later,
Lewis (as guarantor) executed a guaranty of the Lease (previously identified
as the Guaranty).
      At no time has EEL occupied the Premises. After EEL took possession
of the Premises, there were incidents of vagrancy and trespassing; and in
August and October 2019, there were fires at the Premises. At that time,
LAC and EEL disagreed as to who was responsible for insurance and
whether the Lease had been terminated by a total destruction of the
Premises.
      Days after the second fire, LAC filed the underlying action. LAC
named EEL and Lewis as defendants, alleging the following four causes of
action: (1) breach of contracts (the Lease and the Guaranty); (2) breach of the

2     In making its determination whether a claim is subject to an
anti-SLAPP motion, “the court shall consider the pleadings, and supporting
and opposing affidavits stating the facts upon which the liability or defense is
based.” (§ 425.16, subd. (b)(2); see City of Cotati v. Cashman (2002) 29
Cal.4th 69, 79 (City of Cotati).) Thus, we base our factual summary on the
allegations in the complaint and cross-complaint and the evidence in support
of and in opposition to the anti-SLAPP motion.

                                        3
implied covenant of good faith and fair dealing in each of the contracts;
(3) negligence; and (4) destruction of property.
      EEL/Lewis filed a cross-complaint, naming the Smiths, LAC, and IPG
as cross-defendants. The cross-complaint asserts causes of action against “all
cross-defendants” for: (1) breach of contracts (the Lease and the Guaranty);
(2) breach of the implied covenant of good faith and fair dealing in each of the
contracts; and (3) declaratory relief with regard to the parties’ obligations
under the Lease and the Guaranty. (Capitalization and bolding omitted.) In
addition—and as particularly significant in this appeal—EEL/Lewis alleged

facts to support a claim that each of the Smiths was the alter ego of LAC.3
      The Smiths and others responded to the cross-complaint by filing a
demurrer and the anti-SLAPP motion that resulted in the order on appeal
(anti-SLAPP Order). With regard to the issues the Smiths raise on appeal, in

3     These allegations include, but are not limited to, the following: “LAC is
a shell company with no assets other than the Premises (which has [sic] been
destroyed per LAC’s own complaint), [and] has no other assets . . . .”;
“the Smiths are the true owners and operators of the Premises, and that
insurance on the Premises was held in the name of IPG and/or the Smiths
personally and that they stand to recoup fire insurance proceeds from the
destruction of the Pr[emises] and not LAC”; “LAC has no employees or
separate office or operations from IPG, which are both run as the personal
business enterprise of the Smiths”; EEL “was instructed to wire the [$33,000
security deposit for the Premises] to the ‘Stephanie Smith Irrevocable Income
Trust’ . . . and not to LAC”; “LAC and IPG share an address and it appears
both entities are controlled by the Smiths, so much so that they have
instructed that business income (rental income) from LAC (through IPG) be
deposited directly into a personal account held by the Smiths”; “the Smiths
were and are commingling funds, using the corporate form for both IPG and
LAC for their personal benefit and to evade creditors, and were directing
payments owed to LAC to be paid directly for their benefit to personal
accounts.”

                                        4
their anti-SLAPP motion, they sought to strike the following three “portions”
of the cross-complaint:
   • the Smiths “materially breached the Lease . . . by suing for negligence,
      which is not a basis for recovery under the Lease following a Premises
      Total Destruction”;
   • the Smiths “materially breached the Lease . . . by suing for loss of rent
      that it claims EEL refuses to pay, but which is expressly no[t] due
      under the terms of the Lease itself”; and
   • the Smiths “breached the Guarant[y] by suing under it without any
      grounds to do so, and after the termination of the Lease to which the
      Guarant[y] related and addressed.” (Italics added.)
According to the memorandum of points and authorities in support of the
motion, since each of these three claims is alleged to have arisen from the
filing of the complaint in the lawsuit, each is an act in furtherance of the
constitutional right to petition or free speech.
      EEL/Lewis opposed the anti-SLAPP motion by filing a memorandum of
points and authorities and declarations from Lewis and EEL/Lewis’s counsel.
Among other arguments, EEL/Lewis, through the following testimony from
their attorney, explained that they were not seeking any relief from any of
the cross-defendants based on LAC’s filing of the complaint:
         “Each of the challenged passages of the Cross-Complaint
         were [sic] intended to show the existence of an actual
         controversy between the parties over the interpretation of
         the Lease and the legal and financial ramifications of
         various salient Lese [sic] provisions following the October
         2019 fire. While some of the passages probably could have
         been drafted more clearly, it was not my intention, as set
         forth in the Prayer section of the Cross-Complaint, to seek
         any remedies or damages on behalf of [EEL/Lewis] based
         on the filing by LAC of its Complaint. Instead, the purpose
         of the challenged allegations was to show or support the

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         claims that LAC’s interpretation of the Lease was without
         merit, as evidenced in part by its inability to support its
         claims by citing any supporting references to actual Lease
         provisions in its Complaint.” (Italics added.)
With regard to the three specific portions of the cross-complaint that are at
issue in this appeal, counsel testified:
         “The gist or gravamen of the challenged portions . . . of the
         Cross-Complaint, particularly when the Cross-Complaint is
         read as a whole (including specific causes of action and
         requests for relief), also shows EEL did not intend to sue
         LAC simply for filing a complaint. . . . Again, these
         allegations centered on disputed contract positions, not on
         the filing itself of LAC’s Complaint. That also should be
         clear from the lack of any claim for damages or other relief
         for the filing of the Complaint, and EEL’s request, as
         damages, only for the return of its security deposit and the
         refund of a portion of its October 2019 rental payment.”
         (Italics added.)
      To put counsel’s testimony in context as to the relief being sought in
their cross-complaint, EEL/Lewis prayed only for “damages according to
proof, but in no event less than $42,570.” Based on the allegations in the
cross-complaint and the evidence in Lewis’s testimony, EEL/Lewis calculated
the amount of these damages based on: “the return of [EEL’s] $33,000
security deposit”; and “the return of at least a $9570 portion of its [$16,500
monthly] rent payment,” which covered the October 2019 time period after
the fire. Consistently, in their written opposition to the anti-SLAPP motion,
EEL/Lewis stressed “how [only] LAC had breached the [L]ease, why the
Lease was terminated, and significantly, why [the Smiths] and LAC were
alter egos.” (Sic; original italics and underscoring.)
      In reply to EEL/Lewis’s opposition, the Smiths initially noted that,
despite counsel’s testimony and EEL/Lewis’s arguments, the cause of action
for breach of contract in the cross-complaint “[wa]s asserted against ‘ALL

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CROSS-DEFENDANTS’ ”—which includes the Smiths. The Smiths
emphasized that, based on the allegations in EEL/Lewis’s cross-complaint
and the arguments in EEL/Lewis’s demurrer (that was heard at the same
time as the anti-SLAPP motion), EEL/Lewis “admit that they are seeking
breach of contract against [the Smiths] solely based on alter-ego.” (Sic.)
      Following oral argument, the trial court denied the Smiths’ anti-SLAPP
motion (previously identified as the anti-SLAPP Order). The court reasoned:
         “In the present case, portions of [EEL/Lewis’s] first cause of
         action do appear to be based upon protected activity as the
         cross-complaint alleges that the [Smiths] breached the
         [L]ease by suing [EEL/Lewis] for negligence and loss of
         rent. [¶] However, [EEL/Lewis’s] claim for relief is not
         based upon the protect[ed] activity. In the prayer for relief,
         [EEL/Lewis] seek the return of their $33,000 security
         deposit and the return of a prorated amount of their
         October 2019 rent of approximately $9,570 dollars for a
         total of $42,570.” (Italics added.)
      The Smiths timely appealed from the anti-SLAPP Order.4
                               II. DISCUSSION
      As we explain, the Smiths did not meet their burden of establishing
that the trial court erred in denying their anti-SLAPP motion.
A.    Law
      Section 425.16, subdivision (b)(1) provides in full: “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

4     LAC and IPG also appealed from the anti-SLAPP Order. Their appeals
have been dismissed.

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plaintiff has established that there is a probability that the plaintiff will
prevail on the claim.” For purposes of an application of the anti-SLAPP
statute, “ ‘complaint’ includes ‘cross-complaint.’ ” (§ 425.16, subd. (h).) The
anti-SLAPP statute “shall be construed broadly.” (§ 425.16, subd. (a).)
      We focus on the acts alleged to be protected activity, not the causes of
action asserted. “Analysis of an anti-SLAPP motion is not confined to
evaluating whether an entire cause of action, as pleaded by the
[complainant], arises from protected activity or has merit. Instead, courts
should analyze . . . each act or set of acts supplying a basis for relief, of which
there may be several in a single pleaded cause of action[,] . . . to determine
whether the acts are protected and, if so, whether the claim they give rise to
has the requisite degree of merit to survive the motion.” (Bonni v. St. Joseph
Health System (2021) 11 Cal.5th 995, 1010 (Bonni), italics added; see Baral,
supra, 1 Cal.5th at pp. 393-395.) As applicable in this appeal, the Smiths
contend that the same act—namely, LAC’s filing of the complaint in this
action—is the constitutionally protected activity for all three specific claims
at issue in their appeal.
      In applying the anti-SLAPP statute, a court generally is required to
engage in a two-step process. “First, the [moving party] must establish that
the challenged claim arises from activity protected by section 425.16.”
(Baral, supra, 1 Cal.5th at p. 384; accord, Bonni, supra, 11 Cal.5th at
p. 1009.) “If the [moving party] makes the required showing, the burden
shifts to the [opposing party] to demonstrate the merit of the claim by
establishing a probability of success.” (Baral, at p. 384; accord, Bonni, at
p. 1009.) “ ‘Only a cause of action that satisfies both prongs of the
anti-SLAPP statute—i.e., that arises from protected speech or petitioning
and lacks even minimal merit—is a SLAPP, subject to being stricken under

                                         8
the statute.’ ” (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811,
820 (Oasis West Realty).)
      We review de novo the denial of an anti-SLAPP motion. (Park v. Board
of Trustees of California State University (2017) 2 Cal.5th 1057, 1067 (Park).)
For purposes of our prong one analysis, “[w]e exercise independent judgment
in determining whether, based on our own review of the record, the
challenged claims arise from protected activity.” (Ibid.) In addition to the
pleadings, we must also consider evidence of the facts upon which the alleged

liability is based.5 (Ibid.; § 425.16, subd. (b)(2).) “We do not, however, weigh
the evidence, but accept [the opposing party’s] submissions as true and
consider only whether any contrary evidence from the [moving party]
establishes its entitlement to prevail as a matter of law.” (Park, at p. 1067.)
B.    Analysis
      1.    Prong One—Protected Speech or Petitioning Activity
      Section 425.16, subdivision (b)(1) protects a person’s constitutional
right of petition in connection with a public issue. Section 425.16,

subdivision (e) sets forth four categories of acts in furtherance of such right.6
Where, as here, the parties filing the anti-SLAPP motion contend that the

5      Although the caption on the anti-SLAPP motion indicates that
declarations were included as part of the motion, none is included (or referred
to elsewhere) in the record on appeal.

6     In part, section 425.16, subdivision (e) provides: “As used in this
section, ‘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: (1) any written or oral statement or writing made before a . . .
judicial proceeding . . . , (2) any written or oral statement or writing made
in connection with an issue under consideration or review by a . . . judicial
body . . . .”

                                        9
activity is constitutionally protected as a statement made in a judicial
proceeding or before a judicial body (§ 425.16, subd. (e)(1), (e)(2); see fn. 6,
ante), there is no requirement that the statement be made in connection with
a public issue. (Briggs v. Eden Council for Hope & Opportunity (1999) 19
Cal.4th 1106, 1116 (Briggs).)
      In the cross-complaint, EEL/Lewis allege that the Smiths breached the
contracts in a number of regards. In particular, as the Smiths contend, the
cross-complaint alleges that the Smiths, LAC, and IPG breached the Lease
and Guaranty by suing EEL/Lewis in this action.
      Our Supreme Court ruled almost 20 years ago: “A claim for relief filed
in . . . court indisputably is a ‘statement or writing made before a . . . judicial
proceeding’ ” for purposes of section 425.16’s prong one determination
whether a cause of action arises from protected activity. (Navellier v. Sletten
(2002) 29 Cal.4th 82, 90 (Navellier), citing § 425.16, subd. (e)(1).) That is
because “ ‘ “[t]he constitutional right to petition . . . includes the basic act of
filing litigation.” ’ ” (Briggs, supra, 19 Cal.4th at p. 1115; accord, Jay v.
Mahaffey (2013) 218 Cal.App.4th 1522, 1538 [“ ‘filing a lawsuit is an exercise
of a party’s constitutional right of petition’ ”].) For these reasons, the filing of
the complaint in this action is “protected activity” for purposes of the
anti-SLAPP motion. As our high court more recently explained, however, a
claim is not subject to being stricken under the anti-SLAPP statute simply
because it contests an action or decision that was arrived at following
constitutionally protected activity; rather, “a claim may be struck only if the
speech or petitioning activity itself is the wrong complained of[.]” (Park,
supra, 2 Cal.5th at p. 1060.)
      Thus, based exclusively on the allegations in the cross-complaint, the
challenged claims would be protected activity; but, we are not so limited. To

                                         10
the contrary, as we introduced ante, the anti-SLAPP statute and Supreme
Court authority require that, in determining whether the challenged claims
arise from protected activity, we must also consider “ ‘the pleadings, and
supporting and opposing affidavits stating the facts upon which the liability
. . . is based.’ ” (City of Cotati, supra, 29 Cal.4th at p. 79, quoting § 425.16,
subd. (b)(2).) As we explain, in doing so here, we have no difficulty agreeing
with the trial court that the anti-SLAPP statute does not apply to the claims

the Smiths are challenging in this appeal.7
      To better understand the pertinent allegations in the cross-complaint,
in their opposition to the anti-SLAPP motion, EEL/Lewis submitted
declarations from their trial attorney who drafted the cross-complaint and
from Lewis (on behalf of himself and EEL). They both testified that the only
relief being sought in the cross-complaint is the return of: the $33,000
security deposit paid under the Lease; and at least $9,570 of the $16,500
October rent paid (after the October 2019 fire) under the Lease. As evidenced
by the prayer of the cross-complaint, counsel explained that he never
intended to “seek any remedies or damages on behalf of [EEL/Lewis] based
on the filing by LAC of its Complaint.” Consistently, the prayer in the cross-

7      In addition to arguing we should adopt the trial court’s reasoning to
affirm, EEL/Lewis also suggests as an alternative ground that the Smiths
have no standing to bring an anti-SLAPP motion because they are not alleged
to have engaged in protected petitioning activity where only LAC filed the
complaint. The Smiths respond that they “stand in the shoes of [LAC]” and
“should have the same anti-SLAPP protection as [LAC].” (Initial
capitalization, bolding, and italics omitted.) Ultimately, we need not resolve
this question. Assuming arguendo that the Smiths (as alter egos of LAC)
could bring an anti-SLAPP motion based on allegedly protected activity by
LAC, as we explain, the claims in the cross-complaint do not actually arise
out of LAC’s protected activity.

                                         11
complaint seeks only the following relief: “damages according to proof, but in
no event less than $42,570”; “costs and reasonable attorneys’ fees”; and “other
or different relief as deemed necessary or appropriate by the Court.” In
addition, counsel testified that, with regard to the three specific claims at
issue in this appeal, “these allegations centered on disputed contract
positions, not on the filing itself of LAC’s Complaint.” (Italics added.)
      Based on this evidence, we readily agree with the trial court that the
three claims (or allegations) of the cross-complaint at issue in this appeal do
not “aris[e] from” the protected activity of LAC in filing the complaint in this
action. (§ 425.16, subd. (b)(1).)
      We are not persuaded by the Smiths’ argument to the contrary. They
assert that neither the allegations nor the claims at issue in this appeal—i.e.,
those relating to the three “portions” of the cross-complaint alleging a breach
of contract by the filing of the complaint in this action—are “ ‘incidental’ or
‘collateral.’ ” Emphasizing that these claims are premised exclusively on the
filing of the complaint, the Smiths distinguish this case from those which
recognize that “ ‘incidental’ or ‘collateral’ allegations in a complaint are not
subject to an anti-SLAPP [motion].” (Citing Baral, supra, 1 Cal.5th at p. 394
[“Assertions that are ‘merely incidental’ or ‘collateral’ are not subject to
section 425.16. [Citations.] Allegations of protected activity that merely
provide context, without supporting a claim for recovery, cannot be stricken
under the anti-SLAPP statute.”].) We do not disagree. However, this
argument does not take into consideration our reasoning above, which was
also the basis of the trial court’s ruling. Despite the loose language of the
challenged allegations, our review of the pleadings and evidence confirms
that EEL/Lewis did not seek relief—against either LAC or the Smiths—based

                                        12
on the constitutionally protected activity of the filing of LAC’s complaint in
this action.
      As we concluded ante, LAC’s filing of the complaint in this action is
protected activity under basic anti-SLAPP law. (§ 425.16, subd. (e)(1);
Navellier, supra, 29 Cal.4th at p. 90; Briggs, supra, 19 Cal.4th at p. 1115.)
However, as we also explained, we consider more than the mere allegations
in the claims to which the anti-SLAPP motion is directed; we also consider
the facts upon which the alleged liability is based, given the evidence in
support of and in opposition to the motion. (§ 425.16, subd. (b)(2); City of
Cotati, supra, 29 Cal.4th at p. 79.) Here, EEL/Lewis’s attorney also testified
that, as to both LAC and its alleged alter egos, the Smiths: “[T]hese
allegations [in the cross-complaint] centered on disputed contract positions,
not on the filing itself of LAC’s Complaint. That also should be clear from the
lack of any claim for damages or other relief for the filing of the Complaint,
and EEL’s request, as damages, only for the return of its security deposit and

the refund of a portion of its October 2019 rental payment.”8
      Thus, based on the evidence and arguments regarding the alleged
liability of LAC, for purposes of an application of the anti-SLAPP statute, the
trial court properly found that the three claims (or allegations) of the cross-
complaint at issue in this appeal do not “aris[e] from” the protected activity of
filing the complaint in this action. (§ 425.16, subd. (b)(1).) The claims

8      Leading up to those statements, counsel testified: In the allegations
that are at issue in this appeal with regard to the breach of the Lease, “the
point was that mere negligence was not sufficient grounds (even if true) for
LAC to recover under the Lease . . .”; and in the allegations that are at issue
in this appeal with regard to the breach of the Guaranty, “the intent was to
demonstrate that upon termination of the Lease following the fire, Lewis no
longer had any liability to LAC under the accompanying Guarant[y].”

                                       13
against LAC—and derivatively against the Smiths as LAC’s alleged alter
egos—arise solely from its alleged breach of the Lease and its alleged breach
of the Guaranty. Accordingly, in our de novo review, we conclude that
the Smiths did not meet their burden on appeal of establishing trial court
error as to prong one.
      2.    Prong Two—Merit of Claims
      Because, as we just concluded, the claims that the Smiths challenge are
not based on protected activity, the burden never shifted to EEL/Lewis to
demonstrate the potential merits of their claims. (Park, supra, 2 Cal.5th at
p. 1061; Baral, supra, 1 Cal.5th at p. 384.) For this reason, we do not reach
the issue whether EEL/Lewis established a probability of success on the
challenged claims. (Gotterba v. Travolta (2014) 228 Cal.App.4th 35, 43-44
[court need not discuss second prong if moving party fails to establish that
claims arise from protected activity].) By not reaching the second prong, we
express no view on the merits of the claims challenged by the Smiths (City of
Costa Mesa v. D’Alessio Investments, LLC (2013) 214 Cal.App.4th 358, 371) or
the Smiths’ potential defenses to these claims (Castleman v. Sagaser (2013)
216 Cal.App.4th 481, 496).

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                              III. DISPOSITION
      The anti-SLAPP Order is affirmed. EEL and Lewis are entitled to their
costs on appeal. (Cal. Rules of Court, rule 8.278(a)(2).)

                                                                 IRION, J.

WE CONCUR:

AARON, Acting P. J.

DATO, J.

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