Brown v. Clay Hill Condo Homeowners Assn.

Filed 7/20/07 Brown v. Clay Hill Condo Homeowners Assn. CA1/4

NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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

FIRST APPELLATE DISTRICT

DIVISION FOUR

Homeowners sued a condominium homeowners association for mold contamination in their home allegedly caused by water leaks from common areas controlled by the association. The association moved to strike the action as a strategic lawsuit against public participation (SLAPP suit). (Code Civ. Proc.,  425.16 [all section references are to this code except as noted].) The motion was prompted by the homeowners allegations that the association promised to investigate and remediate mold after the homeowners were sued by a tenant for mold contamination, and while that litigation was ongoing. The association argued that those promises were protected acts in furtherance of its right of free speech because its promises to the homeowners were made in connection with an issue under consideration or review by a . . . judicial body. ( 425.16, subd. (e)(2).)

The trial court granted the motion to strike two of the homeowners three causes of action. The court dismissed causes of action for negligence and breach of fiduciary duty, and left intact a breach of contract claim. The homeowners appeal the partial dismissal, and the association cross-appeals to demand the dismissal of the remaining cause of action. We conclude that the homeowners causes of action are based on the associations alleged failure to remediate mold contamination and do not arise from the associations exercise of free speech rights. We therefore reverse the order to the extent that it struck two of the homeowners claims, and affirm the order in denying the motion to strike one of the claims.

I. facts[1]

Plaintiffs Linda L. Brown and Cynthia D. Brown are sisters and the owners of a condominium unit within a common interest development owned and maintained by defendant Clay Hill Condominium Homeowners Association (Clay Hill). The Browns rented their unit to Scott Dykes from 1991 to 2003. In November 2002, Dykes sued the Browns and a property management company for alleged mold contamination from water leaks. Dykes served his complaint upon the Browns in January 2003.

From January 2003 through mid-September 2003, Clay Hill told the Browns that it would investigate and remediate mold in their unit. Clay Hill hired a consultant to investigate water leaks and, in July 2003, approved repairs recommended by the consultant. However, on September 17, 2003, the Browns learned that Clay Hill intended to halt water leak repairs.

In October 2003, Dykes sued Clay Hill, substituting it as a Doe defendant. Dykes alleged that Clay Hill was negligent in allowing water intrusion into the unit he rented from the Browns. In June 2005, the Browns filed a cross-complaint against Clay Hill for breach of contract and other alleged wrongs. In July 2005, both the Browns and Clay Hill settled with Dykes. In connection with that settlement, the Browns agreed to dismiss their cross-complaint against Clay Hill, without prejudice to asserting their claims in a separate lawsuit. This lawsuit is that contemplated separate action.

The Browns filed this lawsuit on July 14, 2005. The original complaint alleged causes of action for breach of contract, negligence, breach of fiduciary duty, and fraud. The foundation of the lawsuit was Clay Hills alleged misconduct in allowing water intrusion into the Browns unit, resulting in mold contamination. The fraud causes of action, for intentional and negligent misrepresentation, alleged that Clay Hill made false promises from February 2004 to June 2005 that it would participate in a joint defense with the Browns against Dykess claims, which persuaded the Browns to forestall filing a cross-complaint in the Dykes lawsuit.

In August 2005, Clay Hill filed its first motion to strike a SLAPP (this appeal concerns the third motion). ( 425.16.) The first anti-SLAPP motion was directed to the fraud causes of action alone. Clay Hill argued that the fraud causes of action arose from acts in furtherance of its right of free speech, specifically, statements by Clay Hill to the Browns made in connection with an issue under consideration by a judicial body in the Dykes litigation when the parties were co-defendants. ( 425.16, subd. (e)(2).) The court granted Clay Hills first anti-SLAPP motion.

The Browns filed a first amended complaint that continued to assert fraud causes of action, with revised and expanded allegations. Clay Hill again moved to strike the fraud causes of action and, in January 2006, the court granted the motion and dismissed the intentional and negligent misrepresentation causes of action with prejudice. The court also sustained a demurrer to the first amended complaint on the ground that the Browns remaining causes of action were time-barred.[2] The court granted leave to amend to plead additional facts regarding the discovery rule.

The Browns filed their second amended complaint, which is the operative pleading, in February 2006. The Browns allege that their tenant Dykes began renting the condominium unit in 1991 but that they first learned of claims of mold contamination when Dykes served them with a complaint for damages in January 2003. The Browns aver that Clay Hills wrongful conduct, and their discovery of it, did not occur until September 2003, when Clay Hill refused to remediate mold caused by water leaks from the common areas.

Clay Hill filed a third anti-SLAPP motion in March 2006, along with a demurrer to the second amended complaint. On the motion to strike, Clay Hill claimed that all the causes of action asserted by the Brownsbreach of contract, breach of fiduciary duty, and negligenceare based on Clay Hills representations during the course of the tenants lawsuit against the Browns, and thus assertedly protected as the exercise of free speech. The trial court granted the motion to strike the breach of fiduciary duty and negligence causes of action, and denied the motion to strike the breach of contract cause of action. The court overruled the demurrer to the breach of contract cause of action, and found the demurrer moot as to the two causes of action it struck. The court did not explain how it distinguished among the causes of action in ruling on the motion to strike.

The parties appeal, and make no effort to defend the trial courts ruling distinguishing among the causes of action. Instead, the Browns argue that all causes of action should proceed, and Clay Hill argues that all causes of action should be stricken. We conclude that the Browns causes of action do not arise from Clay Hills exercise of free speech rights but from Clay Hills alleged failure to remediate mold contamination.

Ii. discussion

A. General principles

The anti-SLAPP statute provides: A cause of action against a person arising from any act of that person in furtherance of the persons right of petition or free speech under the United States or 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).) An act in furtherance of a persons right of petition or free speech includes 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. (Id., subd. (e).)

The anti-SLAPP statute was enacted to prevent and to deter lawsuits that chill the valid exercise of the constitutional rights of freedom of speech and petition for the redress of grievances, and provides an efficient procedural mechanism to obtain an early and inexpensive dismissal of nonmeritorious claims arising from the exercise of those constitutional rights. ( 425.16, subd. (a); Flatley v. Mauro (2006) 39 Cal.4th 299, 312; Martinez v. Metabolife Internat., Inc. (2003) 113 Cal.App.4th 181, 186.) An anti-SLAPP motion requires the trial court to engage in a two-step process. First, the court decides whether the defendant has made a threshold showing that the challenged cause of action is one arising from protected activity. (Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 67.) Second, [i]f the court finds such a showing has been made, it then determines whether the plaintiff has demonstrated a probability of prevailing on the claim. (Ibid.) Only a cause of action that satisfies both prongs of the anti-SLAPP statutei.e., that arises from protected speech or petitioning and lacks even minimal meritis a SLAPP, subject to being stricken under the statute. (Navellier v. Sletten (2002) 29 Cal.4th 82, 89, italics in original.) The trial courts determination of each step [of the process] is subject to de novo review on appeal. (Martinez, supra, at p. 186.)

B. The challenged cause of action must arise from protected activity

Only those causes of action arising from the defendants protected speech or petitioning activity are subject to a special motion to strike. ( 425.16, subd. (b)(1).) [T]he arising from requirement is not always easily met. (Equilon Enterprises v. Consumer Cause, Inc., supra, 29 Cal.4th at p. 66.) It is not enough that an action was filed after protected activity, or in response to protected activity, or even in retaliation for protected activity. (Ibid.; City of Cotati v. Cashman (2002) 29 Cal.4th 69, 76-78.) Instead, the defendants act underlying the plaintiffs cause of action must itself have been an act in furtherance of the right of petition or free speech. (City of Cotati, supra, at p. 78, italics in original.) [T]he critical point is whether the plaintiffs cause of action itself was based on an act in furtherance of the defendants right of petition or free speech. (Ibid., italics in original; Gallanis-Politis v. Medina (May 25, 2007, B187386) __ Cal.App.4th __, 2000 WL 1519783, p. 8.)

Several cases illustrate the point. In City of Cotati v. Cashman, a city sued mobile home park owners for declaratory relief concerning a contested rent control ordinance. (City of Cotati v. Cashman, supra, 29 Cal.4th at p. 72.) The trial court dismissed the state court action as a SLAPP because it was in response to the owners pending federal action challenging the ordinance, and was filed to gain a more favorable forum to litigate the constitutionality of the ordinance. (Id. at pp. 72-73.) The California Supreme Court reinstated the citys declaratory relief cause of action because the action did not arise from the owners federal suit but from a preexisting controversy over the ordinance. (Id. at pp. 79-80.) The court observed that the proper question in ruling on an anti-SLAPP motion is [w]hat activity or facts underlie the cause of action? (Id. at p. 79.) The basis for declaratory relief is the existence of an actual, present controversy. (Ibid.) While the owners federal suit informed the city of the existence of the controversy, the federal suit did not constitute the controversy. (Ibid.)

In Martinez v. Metabolife Internat., Inc., supra, 113 Cal.App.4th at pp. 186-191, the court held that a consumers claims for product liability, fraud, and other claims against a diet supplement manufacturer did not arise from the manufacturers statements on the labels and instructions accompanying the product. [I]t is the principal thrust or gravamen of the plaintiffs cause of action that determines whether the anti-SLAPP statute applies [citation], and when the allegations referring to arguably protected activity are only incidental to a cause of action based essentially on nonprotected activity, collateral allusions to protected activity should not subject the cause of action to the anti-SLAPP statute. (Id. at p. 188.) While some of the consumers causes of action, like fraud, require proof of the manufacturers statements concerning the product, the wrongful, injury-producing conduct . . . on which these claims are based focuses on and arises from the nature of the product and resulting physical injury: the manufacturer allegedly knew the product did not satisfy product warranties and was unsafe. (Id. at pp. 190-191.) The core conduct underlying the causes of action was thus outside the boundaries of conduct to which the anti-SLAPP statute applies. (Id. at p. 191.) The court concluded that a defendant in an ordinary private dispute cannot take advantage of the anti-SLAPP statute simply because the complaint contains some references to speech or petitioning activity by the defendant. (Id. at p. 188.)

In another consumers product liability and fraud action over the same dietary supplement product, a different court likewise concluded that the consumers causes of action were based upon the manufacturers act of manufacturing and selling an allegedly defective product. (Scott v. Metabolife Internat., Inc. (2004) 115 Cal.App.4th 404, 416.) The court acknowledged that the manufacturers speech in advertising and labeling its product was relevant to the causes of action but concluded that [t]his speech is not the gravamen or principal thrust of the complaint. (Ibid.) Even though these causes of action require proof of some speech, the core of these causes of action is that the product did not conform to the warranties and statements made by the manufacturer. (Id. at pp. 416-417.) The consumer did not seek redress from the manufacturer for its communicative conduct but for personal injuries from a defective product. To the extent that [the manufacturers] labels and advertising are relevant, they are merely means of demonstrating the product was defective because appropriate warnings were not issued with the product. In this sense, [the manufacturer] confuses the evidence necessary to establish its product was defective from the conduct that this lawsuit arises from. (Id. at pp. 417-418, fn. omitted.)

C. The causes of action here do not arise from protected activity

Clay Hill fails to meet its threshold burden of demonstrating that the Browns action is one arising from Clay Hills protected speech or petitioning. In deciding whether the initial arising from requirement is met, a court considers the pleadings, and supporting and opposing affidavits stating the facts upon which the liability or defense is based. (Navellier v. Sletten, supra 29 Cal.4th at p. 89, quoting  425.16, subd. (b).) The pleaded theories of liability are examined to determine whether the principal acts or omissions on which each cause of action is founded are independent of protected speech or petitioning activity. (Martinez v. Metabolife Internat., Inc., supra, 113 Cal.App.4th at p. 188; see Scott v. Metabolife Internat., Inc., supra, 115 Cal.App.4th at pp. 415-417 [examining elements and allegations of pleaded causes of action].)

Here, the Browns assert three causes of action, none of which seeks redress from Clay Hill for its communicative conduct. The basis for breach of contract is the existence of a contract, plaintiffs performance or excuse for nonperformance, defendants breach, and damages from the breach. (Acoustics, Inc. v. Trepte Constr. Co. (1971) 14 Cal.App.3d 887, 913.) The elements of a cause of action for breach of fiduciary duty are the existence of a fiduciary duty, the breach of that duty, and damage proximately caused by that breach. (Mosier v. Southern Cal. Physicians Ins. Exchange (1998) 63 Cal.App.4th 1022, 1044.) A negligence claim requires proof that the defendant had a legal duty to use due care, that duty was breached, and the injury was proximately caused by the breach of that duty. (Ladd v. County of San Mateo (1996) 12 Cal.4th 913, 917.)

In evaluating whether an action is a SLAPP, we must focus upon the substance or gravamen of the action. (City of Cotati v. Cashman, supra, 29 Cal.4th at p. 78; Martinez v. Metabolife Internat., Inc., supra, 113 Cal.App.4th at p. 188.) The substance of all three causes of action here is that Clay Hill had an obligation to prevent and remediate intrusive water damage from common areas under its control, and its breach of that obligation physically damaged the Browns condominium unit. We recognize that conduct alleged to constitute breach of contract may also come within constitutionally protected speech or petitioning. The anti-SLAPP statutes definitional focus is not the form of the plaintiffs cause of action but, rather, the defendants activity that gives rise to his or her asserted liabilityand whether that activity constitutes protected speech or petitioning. (Navellier v. Sletten, supra, 29 Cal.4th at p. 92, italics added.)

The activity alleged to have given rise to Clay Hills asserted liability is well summarized in the Browns complaint, which avers that [t]he gravamen of their claims is that, as they discovered for the first time in mid-September 2003, Clay Hill did not respond to the alleged leaks in a timely, appropriate, and expeditious manner in compliance with Clay Hills duties to them . . . .  While the Browns also allege that Clay Hill made statements during the tenant litigation that it would investigate and remediate mold contamination, those statements are not the injury-producing conduct. The principal acts or omissions constituting the alleged breach of obligation are not Clay Hills reassuring representations to the Browns. (Martinez v. Metabolife Internat., Inc., supra, 113 Cal.App.4th at p. 188.) Any injury suffered by the Browns is not founded on the fact that Clay Hill said it would investigate and remediate mold, but upon its conduct in failing to investigate and remediate mold.

As our Supreme Court has instructed, the defendants act underlying the plaintiffs cause of action must itself have been an act in furtherance of the right of petition or free speech. (City of Cotati v. Cashman, supra, 29 Cal.4th at p. 78, italics in original.) Protected speech or petitioning activity must be the activity that gives rise to [defendants] asserted liability. (Navellier v. Sletten, supra, 29 Cal.4th at p. 92.) Here, Clay Hills acts underlying the Browns causes of action are not its statements made to the Browns when the Brown were being sued by a tenant, but Clay Hills allegedly deficient performance of its obligation to maintain the condominium common areas. Clay Hills liability (if any) arises from its property management, not its exercise of free speech.

D. Clay Hills arguments are unavailing

In its briefing on appeal, Clay Hill fails to appreciate the importance of the requirement that any challenged cause of action must arise from protected activity. ( 425.16, subd. (b)(1).) Much of Clay Hills effort is misdirected to arguing that its statements during the prior litigation were protected speech, rather than demonstrating that the causes of action arise from protected speech. Thus, Clay Hill strives to persuade us that its nonparty statements to parties (the Browns) about pending litigation (the tenants lawsuit) is protected by the anti-SLAPP statute, which broadly defines an act in furtherance of a persons right of free speech to include any statement made in connection with an issue under consideration or review by a . . . judicial body. ( 425.16, subd. (e)(2).) Clay Hill argues that there was a close connection between its statements about investigating and remediating mold and the tenants lawsuit, which soon expanded to assert liability against Clay Hill. The critical issue presented by this case, however, is not whether Clay Hill engaged in protected activity. We will assume, for purposes of this appeal, that Clay Hills statements during the prior litigation constituted protected speech activity.[3]

The pertinent issue is whether Clay Hill has demonstrated that the causes of action now asserted by the Browns arise from that protected activity. In arguing that the causes of action arise from its statements during prior litigation, Clay Hill contends that the incorporation of allegations about those statements in each cause of action and a claim for punitive damages show that its protected speech is not incidental but a substantial basis for the claims. A complaints multiple references to a defendants speech activity does not prove that speech is the gravamen of the causes of action. Nor is protected activity the gravamen of the breach of fiduciary duty cause of action because the action includes a punitive damages claim referencing speech. The wrongful conduct in breach of a fiduciary duty is Clay Hills alleged failure to remediate mold contamination. Allegations that Clay Hill made empty promises about remediation efforts are means of proving breach and the extent of damages.

Finally, Clay Hill argues that its alleged promises to remediate mold contamination are a necessary part of the Browns causes of action because the Browns rely upon those promises to estop Clay Hill from invoking the statute of limitations. (See Leaseequip, Inc. v. Dapeer (2002) 103 Cal.App.4th 394, 403-404 [stating elements of equitable estoppel].) The Browns tenant discovered mold in the condominium unit in March 2002. The Browns were sued by their tenant in January 2003, and allege that Clay Hill promised from January to September 2003 to investigate and remediate mold. The Browns aver that they relied on those promises and did not discover their claims against Clay Hill until September 2003, when Clay Hill revoked its earlier promises to remedy the mold problem in the condominium unit. The Browns sued Clay Hill in July 2005. The Browns included allegations about Clay Hills January to September 2003 promises of mold remediation for the asserted purpose of estopping Clay Hill from invoking the statute of limitations.

While Clay Hill argues that the alleged remediation promises are necessary to the survival of each cause of action, the Browns rely upon the allegations principally for their negligence cause of action, which has the shortest limitations period. As revealed at the hearing on the motion to strike, the Browns believed that a two-year limitations period applied to their negligence cause of action, and that the claim was untimely because they learned about mold contamination in January 2003, when their tenant sued them, but did not file their complaint against Clay Hill until July 2005.

The Browns miscalculated the statute of limitations for negligence. The alleged misrepresentations from January to September 2003 are actually immaterial to application of the statute of limitations if the Browns did not know or suspect mold contamination before their tenant sued them in January 2003, as they allege. The applicable statute of limitation for breach of written contract and breach of fiduciary duty is four years. ( 337, subd. (1), 343; Stalberg v. Western Title Ins. Co. (1991) 230 Cal.App.3d 1223, 1230.) A negligence claim for damage to real property is governed by a three-year limitations period. ( 338, subd. (b); Angeles Chemical Co. v. Spencer & Jones (1996) 44 Cal.App.4th 112, 119.) The two-year limitations period relied upon by the Browns, and Clay Hill, is limited to negligence involving personal injury and wrongful death. ( 335.1.) Allegations that Clay Hill induced the Browns to rely upon promises of mold remediation from January and September 2003 are therefore unnecessary to overcome a statute of limitations bar on the pleadings.

In any event, a cause of action does not arise from acts in furtherance of free speech just because the plaintiffs allege misrepresentations to estop a statute of limitations defense. An anti-SLAPP motion addresses [a] cause of action, not individual allegations or theories supporting the cause of action. ( 425.16, subd. (b)(1).) For the anti-SLAPP statute to apply, protected speech or petitioning activity must be the activity that gives rise to [defendants] asserted liability. (Navellier v. Sletten, supra, 29 Cal.4th at p. 92.) Equitable estoppel is a subsidiary claim; it is not the basis for Clay Hills asserted liability.

Clay Hill has failed to demonstrate that the causes of action arise from speech or petitioning activity. In view of our conclusion that the Browns causes of action do not arise from protected activity, we need not reach the anti-SLAPP statutes secondary question whether the Browns established a probability of prevailing on their claims. (City of Cotati v. Cashman, supra, 29 Cal.4th at pp. 80-81.)

IiI. disposition

The order filed June 16, 2006, striking the first cause of action for negligence and second cause of action for breach of fiduciary duty from plaintiffs second amended complaint, and awarding defendant attorney fees and costs, is reversed. The order is affirmed to the extent it denied the motion to strike the third cause of action for breach of contract. The case is remanded to the trial court for consideration of the demurrer as to the first and second causes of action. Plaintiffs shall recover their costs incurred on appeal upon timely application in the trial court. (Cal. Rules of Court, rule 8.276.) Plaintiffs are not entitled to costs and attorney fees incurred on the motion in the trial court, as plaintiffs failed to demonstrate that the motion was frivolous or solely intended to cause unnecessary delay. (425.16, subd. (c).)

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Sepulveda, J.

We concur:

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Ruvolo, P.J.

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Reardon, J.

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[1] The summary of facts is based upon allegations in the pleadings, and supporting and opposing affidavits. ( 425.16, subd. (b)(2).) Objections were raised to certain declarations, and we have disregarded those declarations to the extent they assert legal conclusions or make factual statements without personal knowledge.

[2] The record contains few documents on the demurrer. Apparently, Clay Hills reliance on the statute of limitations bar was founded on the claim that water intrusion at the subject property dates back to 1991, and this action was not instituted until July 2005. The Dykes complaint contains allegations of damage in 1991 that was discovered in 2002, when the tenant had the property tested by an environmental contamination specialist.

[3] We reject, however, Clay Hills argument that their statements during the tenant litigation fall within the scope of the litigation privilege. (Civ. Code,  47, subd. (b)(2).) We recognize that it has been suggested that it would be  anomalous  to deny anti-SLAPP protection to conduct shielded by the litigation privilege. (Equilon Enterprises v. Consumer Cause, Inc., supra, 29 Cal.4th at pp. 64-65; but see Flatley v. Mauro, supra, 39 Cal.4th at pp. 320-325.) But Clay Hill was not a party or other participant in the tenant litigation at the time of the statements, and the record before us fails to establish any other basis for applying the privilege. (Silberg v. Anderson (1990) 50 Cal.3d 205, 212.)