MORRIS CERULLO WORLD EVANGELISM v. NEWPORT HARBOR OFFICES & MARINA, LLC
G058836
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA FOURTH APPELLATE DISTRICT DIVISION THREE
Filed 8/18/21
CERTIFIED FOR PUBLICATION; (Super. Ct. No. 30-2019-01056982)
Appeal from an order of the Superior Court of Orange County, Thomas A. Delaney, Judge. Affirmed.
G10 Galuppo Law and Daniel T. Watts for Cross-complainant and Appellant.
Copenbarger & Associates, Paul D. Copenbarger and Elaine B. Alston for Cross-defendant and Respondent.
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INTRODUCTION
Morris Cerullo World Evangelism (MCWE) appeals from an order denying its special motion to strike, made pursuant to
The answer to the first question presented is no—an anti-SLAPP motion may not be directed to an affirmative defense. The reason appears on the face of the statute itself: Only a “cause of аction” asserted by a plaintiff, cross-complainant, or petitioner may be the subject of an anti-SLAPP motion. (
The answer to the second question presented is also no—an affirmative defense for setoff cannot constitute a cause of action or claim for relief subject to an anti-SLAPP motion. Setoff, as an affirmative defense, cannot give rise to affirmative relief. California Supreme Court authority holds that the affirmative defense of setoff may only be used defensively and does not permit recovery of the damages sought to be set off against the opposing party‘s recovery.
The trial court reached the very same conclusions and wisely denied MCWE‘s anti-SLAPP motion. We affirm.
FACTS
In 1963, John J. Jakosky and Katherine F. Jakosky, as lessors, and F. David Young, as lessee, entered into a 55-year ground lease (the Ground Lease) of unimproved real property (the Property) in Newport Beach. Improvements, including a multistory office building, an attached parking structure, and a marina (the Improvements), were constructed on the Property in 1987 by the lessee at the time. Under the terms of the Ground Lease, the lessee is the owner of any improvements constructed on the Property.
Sometime before December 2003, MCWE became the lessee under the Ground Lease. In January 2004, MCWE entered in a sub-ground lease of the Property (the Sublease) with NHOM for a term expiring in November 2018. Cross-defendant Paul D. Copenbarger is the member and manager of NHOM.
NHOM and Copenbarger have been litigating аgainst MCWE, and vice versa, since 2011, when NHOM filed a complaint against MCWE for breach
The Ground Lease terminated on December 1, 2018. On December 27, 2018, the Property, including the rights of the lessor, was transferred to Quay Works LLC (Quay Works), which is the current owner of the Property.
PROCEDURAL HISTORY
In 2019, Quay Works filed a complaint against MCWE for breach of the Ground Lease and waste. MCWE filed a cross-complaint against NHOM and Copenbarger for breach of sublease, breach of covenant of good faith and fair dealing,
and indemnity. The gist of the cross-complaint was that NHOM and Copenbarger were responsible for the condition of the Property.
NHOM and Copenbarger filed an answer to MCWE‘s cross-complaint. The 19th, 20th, and 21st affirmative defenses in that answer are relevant here: In those affirmative defenses, NHOM alleged a right to setoff.
In the 19th affirmative defense (Offset for Breach of Sublease), NHOM alleged, “by reason of MCWE‘s conduct and activities described herein, NHOM has the right of setoff should any amount of money be determined to be owed to MCWE or due to MCWE by way of damages.” The conduct аnd activities described in the next 18 pages of the answer were allegations lifted almost verbatim from NHOM‘s second amended complaint against MCWE. NHOM alleged it suffered damages from MCWE‘s breach of the Sublease, and those damages must be set off against any sums owed to MCWE.
In the 20th affirmative defense (Offset for Breach of Agreement re: Assignment), NHOM inсorporated the prior allegations and alleged MCWE breached a contract called “the Agreement Re: Assignment” of which NHOM was a third party beneficiary. NHOM alleged it sustained damages as a result of the Agreement re: Assignment, and those damages must be set off against any sums owed to MCWE.
In the 21st affirmative defense (Offset for Fraud/Misreprеsentation), NHOM incorporated the prior allegations and alleged MCWE had made representations about the condition of the Property and the Improvements, NHOM had relied on those representations, the representations were false and MCWE knew them to be false, and NHOM suffered damages as a result of the
MCWE demurred to the 19th, 20th, and 21st affirmative defenses of NHOM and Copenbarger‘s answer to the cross-complaint. MCWE also filed an anti-SLAPP motion to strike those affirmative defenses and, in the alternative, to strike
individual allegations within those affirmative defense that arose out of petitioning activity. MCWE argued, among other things, the 19th, 20th, and 21st affirmative defenses included allegations of protected activity that had been the subject of an earlier anti-SLAPP motion directed to NHOM‘s complaint. In Newport Harbor Offices & Marina, LLC v. Morris Cerullo World Evangelism (2018) 23 Cal.App.5th 28, we held the trial court erred by denying that earlier motion and remanded with directions to grant the motion in рart and deny it in part. In that opinion, we stated, “[w]e affirm in part because, among other things, the bulk of the paragraphs which were the subject of [MCWE]‘s anti-SLAPP motion do not arise out of protected activity.” (Id. at p. 34, italics added.)
The trial court sustained MCWE‘s demurrer to the 20th affirmative defense without leave to amend and overruled the demurrer to the 19th and 21st affirmative defenses. The court concluded the аnti-SLAPP motion was moot as to the 20th affirmative defense and denied the motion as to the 19th and 21st affirmative defenses. The court concluded an anti-SLAPP motion may not be directed to affirmative defenses. The court rejected MCWE‘s argument that the 19th and 21st affirmative defenses were a “‘cross-claim’ in disguise for the fundamental reason that ‘an affirmative defense by definition does not claim affirmative relief.‘”
MCWE timely appealed from the order denying its anti-SLAPP motion. Our standard of review is de novo. (Monster Energy Co. v. Schechter (2019) 7 Cal.5th 781, 788.)
DISCUSSION
I. An Anti-SLAPP Motion May Not Be Directed to an Affirmative Defense
An anti-SLAPP motion may not be directed to an answer, including affirmative defenses in the answer. The language of section 425.16 itself pеrmits no other conclusion.
“In a matter involving statutory interpretation, our fundamental task is to discern the Legislature‘s intent in order to effectuate the law‘s purpose. [Citations.] We approach this task by first examining the statute‘s words,
When enacting the anti-SLAPP statute, the Legislature found and declared “there has been a disturbing increase in lawsuits brought primarily to chill the valid exercise of the constitutional rights of freedom of speech and petition for the redress of grievances.” (
The Legislature‘s desire to curb SLAPP lawsuits—legal actions seeking relief—is demonstrated by the language of sections 425.16(b) and 425.16(h).
fact the determination had been made is admissible in evidence at any later рroceeding in the case. (Italics added.)
The statutory language is unambiguous and plainly states thаt only a cause of action asserted by a plaintiff, cross-complainant, or petitioner may be subject to an anti-SLAPP motion. An affirmative defense in the answer of a cross-defendant is not asserted by a plaintiff, cross-complainant, or petitioner, and, as we shall explain next, is not a cause of action.
In Baral v. Schnitt, supra, 1 Cal.5th at page 395, the Cаlifornia Supreme Court concluded that the term “cause of action” in
730, 746, fn. 12 (City of Stockton)), it follows logically that an affirmative defense cannot give rise to affirmative relief such as damages. A cause of action by definition asserts grounds for affirmative relief; therefore, an affirmative defense in an answer cannot be a cause of action subject to an anti-SLAPP motion.
The only mention in
II. NHOM‘s Affirmative Defenses Are Not, and Cannot Be, Causes of Action or Claims for Relief.
MCWE argues that NHOM‘s 19th, 20th, and 21st affirmative defenses are not affirmative defenses at all but disguised causes of action or claims for relief. That cannot be correct as a matter of law.
“Affirmative relief may not be claimed in the answer” (
NHOM‘s 19th, 20th, and 21st affirmative defenses assert the right of setoff, and sеtoff is an affirmative defense, not a cause of action. (City of Stockton, supra, 42 Cal.4th at p. 746.) The right to a setoff is based on the equitable principle that when parties in litigation hold cross-demands for money, one demand should be applied against the other and the plaintiff may recover the balance due, if any. (See Granberry v. Islay Investments (1995) 9 Cal.4th 738, 744.) Relief by way of a setoff is limited tо reducing or defeating a plaintiff‘s claim; a defendant may not obtain affirmative relief against a plaintiff based on the affirmative defense of setoff. (Construction Protective Services, Inc. v. TIG Specialty Ins. Co. (2002) 29 Cal.4th 189, 195 (Construction Protective Services).)
The affirmative defense of setoff is codified at
The California Supreme Court, in interpreting section 431.70, confirmed that setoff is an affirmative defense only: “We think the best reading of section 431.70 is that a setoff claim may only be used defensively, bеing in nature a defensive pleading asserting that the claim constituted prior payment for the amount sought in the plaintiffs complaint. Indeed, section 431.70 expressly refers to the setoff claim as ‘the defense of payment,’ . . . . One who has paid a liability in full or in part can allege that payment as a
defense to a cause of action, but in that case the defendant merely hopes to defeat the plaintiff‘s complaint. If, in addition, the defendant seeks affirmative relief in its favor (such as the recovery of damages), it must file a cross-complaint,
In other words, NHOM cannot by means of thе affirmative defense of setoff recover the compensatory and punitive damages it claims should be set off against any recovery by MCWE. NHOM can recover those damages only by means of a pleading, such as a complaint or cross-complaint, by which NHOM can obtain affirmative relief. As such, NHOM‘s 19th, 20th, and 21st affirmative defenses are not, and cannot be, causes of action or claims for relief subject to an anti-SLAPP motion.
At oral argument, counsel spent some time addressing whether NHOM‘s affirmative defenses for setoff properly allege that defense, in particular, whether NHOM may setoff damages it has not yet incurred and paid. We are not deсiding and make no comment on whether NHOM‘s affirmative defenses for setoff are legally viable and plead facts sufficient to constitute a defense. (See
however, is that setоff is an affirmative defense, not a claim for relief, and under no circumstances may NHOM recover affirmative relief against MCWE by means of the setoff defenses, no matter how they are pleaded.
In light of our answers to the two issues presented, we do not and need not address the parties’ lengthy arguments over whether MCWE met its burden of еstablishing the 19th, 20th, and 21st affirmative defenses arose out of protected activity and whether NHOM met its burden of establishing a probability of success.
The order denying MCWE‘s anti-SLAPP motion is affirmed. NHOM to recover costs on appeal.
FYBEL, J.
WE CONCUR:
O‘LEARY, P. J.
BEDSWORTH, J.