Opinion
B316502
04-16-2024
BENZEEN, INC., Plaintiff and Appellant, v. JP MORGAN CHASE BANK, N.A., et al., Defendants and Respondents.
Law Offices of Roger N. Golden and Roger N. Golden for Plaintiff and Appellant. Parker Ibrahim & Berg, John M. Sorich and Mariel Gerlt-Ferraro for Defendant and Respondent JP Morgan Chase Bank, National Association. McCarthy & Holthus and Melissa Robbins Coutts for Defendant and Respondent McCarthy & Holthus, LLP.
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of Los Angeles County, Super. Ct. No. 19STCV07167 Michael Linfield, Judge. Vacated and remanded with directions.
Law Offices of Roger N. Golden and Roger N. Golden for Plaintiff and Appellant.
Parker Ibrahim & Berg, John M. Sorich and Mariel Gerlt-Ferraro for Defendant and Respondent JP Morgan Chase Bank, National Association.
McCarthy & Holthus and Melissa Robbins Coutts for Defendant and Respondent McCarthy & Holthus, LLP.
CURREY, P. J.
INTRODUCTION
This case arises out of an alleged wrongful foreclosure by defendant JP Morgan Chase Bank, National Association (Chase) on a home located in Studio City, California (the property) and previously owned by plaintiff Benzeen, Inc. (Benzeen). Benzeen sued Chase, seeking to set aside the foreclosure and regain title. After the superior court entered summary judgment in favor of Chase on the ground that the litigation privilege bars Benzeen's claims as a matter of law, Benzeen filed this appeal. We conclude the litigation privilege bars Benzeen's tort claims (first, second, and third causes of action), but not its equitable claims (fourth and fifth causes of action). Accordingly, we vacate the judgment and remand the matter for consideration of Chase's alternative grounds for summary judgment, which the trial court expressly declined to reach in light of its holding.
FACTUAL AND PROCEDURAL BACKGROUND
The following facts are undisputed. Benzeen purchased the property in 2010. The property was subject to Chase's preexisting loan secured by a deed of trust. Benzeen did not make any payments on Chase's loan after it obtained title.
In November 2017, Benzeen filed for bankruptcy under chapter 11 of the United States Bankruptcy Code, and listed a fee simple interest in the property on Schedule A subject to the debt secured by the deed of trust (the bankruptcy case).
In February 2018, Chase, by its counsel, McCarthy &Holthus, LLP (McCarthy), filed a motion seeking relief from the automatic stay in the bankruptcy case. It sought relief under 11 U.S.C. section 362(d)(1) and (d)(4) (section 362(d)(1) and section 362(d)(4), respectively), asserting the case was filed in bad faith, and as part of a scheme to delay, hinder or defraud Chase from foreclosing on the property. On March 29, 2018, the bankruptcy court granted the relief motion. The following month, on April 11, 2018, Benzeen filed an appeal from the relief order (the bankruptcy appeal).
During the pendency of the bankruptcy appeal, on May 31, 2018, Benzeen's appellate counsel, Michael Sment, called McCarthy's office. Because the attorney in McCarthy's office handling the matter was unavailable, Sment spoke with the attorney's administrative assistant. The administrative assistant relayed to Sment that Chase set a foreclosure date, but it would wait for the bankruptcy appeal to conclude before proceeding.
This oral statement is undisputed for purposes of the summary judgment motion only.
On July 18, 2018, Benzeen asked McCarthy about the status of the foreclosure sale, which was set for the following day. McCarthy informed Benzeen the foreclosure sale was still scheduled for the next day (July 19) at 9:00 a.m.
The trustee held the foreclosure sale on July 19, 2018, and Chase purchased the property for the full amount of the outstanding balance secured by the property.
In December 2018, the bankruptcy appellate panel for the Ninth Circuit (BAP) found the lower court's ruling based on section 362(d)(1) was moot because the foreclosure sale already occurred. The BAP further concluded, however, that the court's ruling based on section 362(d)(4) (i.e., filing the petition was part of a scheme to delay, hinder or defraud creditors) lacked sufficient findings to support its order and thus, remanded the case to the bankruptcy court.
Section 362(d)(1) provides: "On request of a party in interest and after notice and a hearing, the court shall grant relief from the stay provided under subsection (a) of this section, such as by terminating, annulling, modifying, or conditioning such stay- [¶] (1) for cause, including the lack of adequate protection of an interest in property of such party in interest[.]" (11 U.S.C. 362(d)(1).)
After remand, the bankruptcy court concluded that the relief Chase sought under section 362(d)(4) was now moot, but if it was not moot, the court would have granted it, in part, "in light of the blatant and unlawful fraudulent scheme to avoid foreclosure perpetrated by [Benzeen's principal]." Benzeen then dismissed the bankruptcy case.
In February 2019, Benzeen filed this lawsuit against Chase and McCarthy for: (1) intentional misrepresentation; (2) negligent misrepresentation; (3) wrongful foreclosure; (4) vacation and setting aside foreclosure sale; and (5) cancellation of trustee's deed upon sale. The first amended complaint (FAC) alleges Chase proceeded with the trustee's sale of the property during the pendency of the bankruptcy appeal despite Chase's counsel's administrative assistant's representation to the contrary, and Benzeen took no action to obtain a stay order from the BAP to prevent the sale of the property in reliance on the representation.
Chase then moved for summary judgment or, in the alternative, summary adjudication, on several grounds, including that Benzeen's claims are barred by the litigation privilege under Civil Code section 47, subdivision (b). Chase argued Benzeen's claims are premised on the statement made by McCarthy's administrative assistant, which was made to Benzeen's counsel, during and concerning the bankruptcy litigation, and in response to Benzeen's inquiries about the foreclosure sale. It further argued the statement was privileged under section 2924, subdivision (d)(2), which makes the performance of the foreclosure sale a privileged communication under section 47, subdivision (b). Benzeen opposed the motion, arguing in part that the litigation privilege does not apply because the administrative assistant's statement is inconsistent with the rationale of the privilege and it constitutes extrinsic fraud. It also argued section 2924, subdivision (d)(2) does not apply because the privilege only applies to the trustee who conducted the foreclosure sale, not Chase.
McCarthy filed a joinder in Chase's motion for summary judgment, which the trial court granted. On appeal, McCarthy joins in Chase's appellate briefs. All further undesignated statutory references are to the Civil Code.
Section 2924, subdivision (d)(2) provides: "All of the following shall constitute privileged communications pursuant to Section 47 . . . (2) Performance of the procedures set forth in this article [i.e. foreclosure sale]."
After a hearing, the trial court concluded "the litigation privilege bars [Benzeen's] claims against Chase as a matter of law." It therefore granted the summary judgment motion and entered judgment in favor of Chase and McCarthy. Benzeen appeals from the judgment.
DISCUSSION
A. Standard of Review
"A party is entitled to summary judgment only if there is no triable issue of material fact and the party is entitled to judgment as a matter of law. (Code Civ. Proc., § 437c, subd. (c).) A defendant moving for summary judgment must show that one or more elements of the plaintiff's cause of action cannot be established or that there is a complete defense. (Id., subd. (p)(2).) If the defendant meets this burden, the burden shifts to the plaintiff to present evidence creating a triable issue of material fact. (Ibid.) A triable issue of fact exists if the evidence would allow a reasonable trier of fact to find the fact in favor of the party opposing summary judgment. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850)
"We review the trial court's ruling on a summary judgment motion de novo, liberally construe the evidence in favor of the party opposing the motion, and resolve all doubts concerning the evidence in favor of the opponent. (Miller v. Department of Corrections (2005) 36 Cal.4th 446, 460.) We must affirm a summary judgment if it is correct on any of the grounds asserted in the trial court, regardless of the trial court's stated reasons." (Grebing v. 24 Hour Fitness USA, Inc. (2015) 234 Cal.App.4th 631, 636-637.)
B. The Section 47, Subdivision (b) Litigation Privilege Applies
It is undisputed that Benzeen was in default of Chase's loan, and Chase could foreclose on the property under its deed of trust. Benzeen's contention that Chase wrongfully foreclosed on the property is premised solely on McCarthy's administrative assistant's oral statement to Benzeen's counsel that Chase would wait for the bankruptcy appeal to conclude before proceeding with the foreclosure (the statement). A dispositive issue, therefore, is whether the statement is protected under the litigation privilege. For the reasons discussed below, we conclude it is.
The litigation privilege is defined in section 47, subdivision (b), and "precludes liability arising from a publication or broadcast made in a judicial proceeding or other official proceeding." (Fremont Reorganizing Corp. v. Faigin (2011) 198 Cal.App.4th 1153, 1172.) Under the "usual formation" of the privilege, it applies "to any communication (1) made in judicial or quasi-judicial proceedings; (2) by litigants or other participants authorized by law; (3) to achieve the objects of the litigation; and (4) that have some connection or logical relation to the action." (Silberg v. Anderson (1990) 50 Cal.3d 205, 212 (Silberg).) "To effect its purposes-access to the courts without fear of later harassment by derivative tort actions, encouraging open communication and zealous advocacy, promoting complete and truthful testimony, giving finality to judgments, and avoiding endless litigation-the litigation privilege is 'absolute and applies regardless of malice,' and '"'has been given broad application."' [Citation.]" (Bergstein v. Stroock & Stroock & Lavan LLP (2015) 236 Cal.App.4th 793, 814.) The communication need not be made for the purpose of promoting the "'interest of justice.'" (See Silberg, supra, at p. 218 [disapproving decisions employing the "'interest of justice'" test, noting that "endorsement of the 'interest of justice' requirement would be tantamount to the exclusion of all tortious publications from the privilege, because tortious conduct is invariably inimical to the 'interest of justice.' Thus, the exception would subsume the rule" (original italics)].)
Applying these principles, we conclude the undisputed facts demonstrate the statement underlying the claims in the FAC falls squarely within section 47, subdivision (b): the administrative assistant for Chase's counsel made the statement to Benzeen's counsel during and concerning the bankruptcy litigation, and in response to Benzeen's counsel's inquiries about the foreclosure sale.
Benzeen acknowledges the statement was made while the bankruptcy appeal was pending, but nevertheless contends the privilege does not apply because the statement "does not constitute the type of statement which the [l]itigation [p]rivilege was intended to protect." It argues the statement was not made "'to achieve the objects of the litigation'" and was "not made for the purpose of the ascertainment of truth." But these arguments are simply a variation of the argument that the communication was not made for the purpose of promoting the "'interest of justice,'" which, as noted above, our Supreme Court has rejected. (See Silberg, supra, 50 Cal.3d at p. 219.) As the trial court observed at the hearing on the motion, the statement was made to achieve the objects of the litigation (i.e., "to get the money for the property") because "it may be a strategy. It may be a bad strategy. It may be a tactic. I don't know. But it certainly seems to the court that this is part of the litigation. They're litigating over $3 million or something of that sort in terms of property." Because the statement was related to the bankruptcy proceedings concerning Benzeen's assets, we agree with the trial court that the statement satisfies the requirement that it be made to achieve the objects of the litigation. (See Silberg supra, 50 Cal.3d at pp. 219-220 ["The requirement that the communication be in furtherance of the objects of the litigation is, in essence, simply part of the requirement that the communication be connected with, or have some logical relation to, the action, i.e., that it not be extraneous to the action. A good example of an application of the principle is found in the cases holding that a statement made in a judicial proceeding is not privileged unless it has some reasonable relevancy to the subject matter of the action. [Citations.] The 'furtherance' requirement was never intended as a test of a participant's motives, morals, ethics or intent."].)
Moreover, Benzeen's argument that the statement "could never have been verified during the appeal because it was a misrepresentation of [Chase's] intent during the appeal as to which there was no 'truth ascertainment' mechanism available" strikes us as disingenuous. Although Benzeen claims there was no "discovery apparatus to uncover" the falsity of the statement based on the "unique procedural posture" of the bankruptcy case, it is undisputed that Benzeen never attempted to confirm the statement by, for example, sending an email to Chase's counsel confirming the administrative assistant's representation. Indeed, at the hearing on the motion, in response to the trial court's observation that Benzeen could "confirm the truth or the falsity of the statement immediately" by "just get[ting] it in writing" (i.e., email Chase's attorney after the phone call with the administrative assistant), Benzeen's counsel responded that he understood "the attorney who was instructed to do exactly that didn't do it." The attorney's alleged failure to verify the statement is not equivalent to an inability to do so.
Benzeen next contends the statement is not protected by the litigation privilege because the statement constitutes extrinsic fraud. "'[E]xtrinsic fraud' [refers to a] narrow doctrine permitting a collateral attack on a judgment that has been obtained by 'extrinsic fraud,' i.e., under circumstances in which 'the aggrieved party [has been] deliberately kept in ignorance of the action or proceeding, or in some other way fraudulently prevented from presenting his claim or defense.'" (Moore v. Conliffe (1994) 7 Cal.4th 634, 643, fn. 5.) Here, however, Benzeen does not present evidence to raise a triable issue of material fact that it was deliberately kept in ignorance of the foreclosure sale. As discussed above, it is undisputed Benzeen asked McCarthy about the status of the foreclosure sale the day before it was set to occur, and McCarthy informed Benzeen the sale was still scheduled for the following day. Moreover, Benzeen's tort causes of action are not a "collateral attack on a judgment[.]" (Ibid.) The narrow exception, therefore, is inapplicable.
Lastly, we reject Benzeen's contention, made for the first time on appeal, that section 47, subdivision (b) is inconsistent with section 2924g, subdivision (c)(1)(C) and thus, the litigation privilege does not bar its claims. (See People ex rel. Alzayat v. Hebb (2017) 18 Cal.App.5th 801, 807-808 (Alzayat) ["Like any statute, section 47(b) is subject to the rule of statutory construction that a particular provision prevails over a general one....[T]he litigation privilege does not bar an action filed under a more specific statute when application of the privilege would render the specific provision 'significantly or wholly inoperable'"].)
Section 2924g requires the trustee to postpone a foreclosure sale in several circumstances, including when the lender and borrower orally agree to a postponement. But section 2924g "does not speak to the enforceability [of the underlying] oral agreement between a lender and a borrower to postpone a sale[.]" (Jones v. Wachovia Bank (2014) 230 Cal.App.4th 935, 949, fn. 5 (Jones) [rejecting any suggestion that section 2924g undermines the applicability of the statute of frauds codified in section 1698].)Perhaps partly for that reason, the FAC is not premised on Chase's supposed breach of an agreement made under section 2924g. Rather, the FAC alleges, in part, causes of action for intentional and negligent misrepresentation based on an oral statement that Chase would delay the foreclosure proceedings despite allegedly having no intention to do so. Because this action was not "filed under a more specific statute" (i.e., section 2924g), we conclude application of section 47, subdivision (b) in this case does not render section 2924g "significantly or wholly inoperable." (Alzayat, supra, 18 Cal.App.5th at p. 808.)
"'[A] gratuitous oral promise to postpone a sale of property pursuant to the terms of a trust deed ordinarily would be unenforceable under section 1698.' That is because the oral promise had not been executed by the parties, as required by section 1698." (Jones, supra, 230 Cal.App.4th at pp. 943-944.)
C. The Litigation Privilege Does Not Bar the FAC's Equitable Causes of Action
Again, for the first time on appeal, Benzeen alternatively contends that even if section 47, subdivision (b) applies, the privilege bars only tort causes of action. Thus, it argues, the judgment should be reversed as to the FAC's fourth cause of action (to vacate and set aside foreclosure sale) and the fifth cause of action (for cancellation of trustee's deed upon sale). We agree.
Litigants "'"may raise for the first time on appeal a pure question of law [that] is presented by undisputed facts."'" (Dudley v. Department of Transportation (2001) 90 Cal.App.4th 255, 259.)
"[T]he litigation privilege operates to preclude liability for tort damages based on a publication or broadcast made in any judicial proceeding[.]" (Weeden v. Hoffman (2021) 70 Cal.App.5th 269, 289 (Weeden), italics added.) In concluding the litigation privilege does not bar a cause of action to quiet title, the court in Weeden explained: "[T]he law does not leave individuals who are negatively affected by the recording of an allegedly invalid judgment, or other questionable claim to an interest in their property, with no remedy. If [defendant] were correct that litigation privilege could be used to bar claims seeking declaratory relief-such as claims to quiet title-where a defendant has recorded a judgment of dubious validity, bona fide purchasers . . . would be left without any remedy to clear title to their property." (Id. at p. 292, original italics.)
Relying on Rubin v. Green (1993) 4 Cal.4th 1187 (Rubin), Chase argues the litigation privilege bars Benzeen's equitable claims because the privilege "'may not be circumvented by recasting the action'" and "the alleged violative conduct [here] is the statement." In Rubin, our Supreme Court held that claims brought by a co-owner of a mobile home park against a park resident and her attorney for soliciting other residents as clients in anticipated litigation against the co-owner, including a claim for injunctive relief under the unfair competition law, were barred by the litigation privilege. (Id. at p. 1204.) The court reasoned it would violate the principal purpose of the litigation privilege-to afford litigants utmost freedom of access to the courts-if the park owner were allowed to "'plead around'" the privilege by simply relabeling his common law suit for interference with contractual relations as a statutory suit for unfair competition. (Id. at pp. 1201-1203.) But Rubin is inapposite. The FAC's causes of action to vacate and set aside the foreclosure sale and cancel the trustee's deed upon sale are not simply a relabeling of the other causes of action. Rather, the tort causes of action seek damages for an alleged fraudulent statement, whereas the equitable causes of action seek to undo the foreclosure sale.
We reject Chase's attempt to distinguish Weeden on the ground that it makes "no reference to or opinion on the qualified privilege of [section 2924, subdivision (d)(2)]." Chase makes no reasoned argument in support of its apparent position that the privilege in section 2924, subdivision (b)(2), which incorporates section 47, subdivision (b), bars equitable claims even when those claims are not barred by section 47, subdivision (b).
D. Chase's Alternative Arguments in Support of Its Motion
In addition to the litigation privilege, Chase also moved for summary judgment or, in the alternative, summary adjudication based on several alternative grounds including unclean hands, statute of frauds, and that one or more elements of each of the causes of action cannot be established. The trial court did not reach these alternative grounds based on its holding that the litigation privilege bars Benzeen's claims as a matter of law. In light of our conclusion that the FAC's fourth and fifth causes of action are not barred by the litigation privilege, we remand the matter to the trial court for consideration of Chase's alternative grounds for summary judgment.
DISPOSITION
The judgment is vacated. The matter is remanded to the trial court for consideration of Chase's alternative grounds for summary judgment or, in the alternative, summary adjudication, which the trial court expressly declined to reach in light of its holding. We express no opinion regarding these issues. If the trial court determines those alternative grounds do not entitle Chase to judgment as a matter of law, the trial court is directed to enter a new order granting summary adjudication of Benzeen's tort causes of action: (1) first cause of action for intentional misrepresentation; (2) second cause of action for negligent misrepresentation; and (3) third cause of action for wrongful foreclosure. The parties are to bear their own costs on appeal.
We concur: COLLINS, J. MORI, J.