BAKER v. BANK OF CALIFORNIA

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Court of Appeal, Fourth District, Division 2, California.

Elizabeth BAKER, et al., Plaintiffs and Appellants, v. BANK OF CALIFORNIA, N.A., Defendant and Respondent.

No. E008103.

Decided: May 23, 1991

Elizabeth Baker, in pro per. Kegel, Tobin, Hamrick & Truce and Greg W. Garrotto, Los Angeles, for defendant and respondent.

OPINION

Plaintiffs Elizabeth Baker and Beth A. Nicholas appeal from a judgment for defendant Bank of California following an order granting the Bank's motion for judgment on the pleadings.   Plaintiffs contend that the trial court “abused its discretion in making its determination based on new matter raised by the court without giving plaintiffs an opportunity to be heard, or to amend their complaint” and that the trial court erred in finding that plaintiffs had not stated a cause of action for abuse of process and/or interference with prospective advantage.

STANDARD OF REVIEW

“A motion for a judgment on the pleadings serves the same function as a general demurrer, i.e., the motion will be granted only if the pleadings, although uncertain or otherwise defective in form, fail to state a cause of action.  [Citations.]  In reviewing an order granting a motion for judgment on the pleadings, we accept as true all material allegations in plaintiff's complaint.  [Citations.]  The underlying merit of these allegations is, of course, ultimately subject to proof by competent and convincing evidence.   [Citations.]”  (Stockton Newspapers, Inc. v. Redevelopment Agency (1985) 171 Cal.App.3d 95, 99, 214 Cal.Rptr. 561;  see, generally 6 Witkin, Cal.Procedure (3d ed. 1985) Proceedings Without Trial, §§ 262–273, pp. 563–571;  Eisenberg, Horvitz & Weiner, Cal.Practice Guide (1990) Civil Appeals and Writs, § 8:148, p. 8–41.)

THE COMPLAINT

The complaint purports to state causes of action for abuse of process and interference with prospective advantage.

The alleged abuse of process is the wrongful maintenance of a prejudgment attachment by the defendant Bank.   Specifically, plaintiffs allege that the Bank lawfully obtained a prejudgment attachment on a home in Palm Springs owned by Roger and Patricia Farmer.   The home was in the process of being sold to plaintiffs.   Notice of the prejudgment attachment was served on the Farmers and the escrow company.

According to the complaint, the Bank was told that no excess funds would be available from the sale 1 but nevertheless it “willfully, maliciously, and improperly maintained the prejudgment attachment with the intent to obtain a collateral advantage, i.e., to coerce a settlement payment from other interested parties․”  The complaint also alleges that “BANK informed the escrow officer that there would be no closing because BANK would not provide a release unless it was paid the money it requested.”   Eventually, the Farmers filed bankruptcy, a second trust deed holder foreclosed on the property, and the Bank's lien was eliminated entirely.

The essence of the tort alleged was therefore the use of the attachment process for an improper purpose.  (See, generally, 5 Witkin, Summary of Cal. Law (9th ed. 1988) Torts, §§ 465–467, pp. 551–553.)   The sufficiency of these allegations to allege a cause of action is discussed below.

In a second cause of action, plaintiffs seek to recover for interference with prospective advantage.   Specifically, they allege that the Bank knew they had a valid contract to purchase the Farmer's home;  that the Bank intended to coerce a settlement payment from plaintiffs and others or to prevent performance of the contract;  that the contract was breached;  and that plaintiffs were damaged by the breach.   Plaintiffs allege damages of over $30,000.

The sufficiency of these allegations is discussed below.

THE HEARING ON THE MOTION FOR JUDGMENT ON THE PLEADINGS

 Plaintiffs' main contention on appeal is that the trial court erred by granting the motion for judgment on the pleadings on the grounds that the Bank's action was privileged under the circumstances.   The trial court did decide that the actions of the Bank were privileged, meaning that “the bank was acting within its legal rights in pursuing an end [sic] to enforcing a judgment.”   The first issue therefore is whether privilege was a proper ground for granting the motion for judgment on the pleadings.

Plaintiffs argue that the defense of privilege or justification, although raised as a defense in the answer, was not raised in the moving papers for the motion, and was not raised in the opposition to the motion.   They therefore argue that the issue of privilege or justification “had not been raised previously, except as an affirmative defense, had not been briefed, and Plaintiffs had neither warning that the issue would be raised, nor opportunity to present case law, and oral argument based thereon, in opposition to the argument and opinion advanced by the court.”

The trial court did not err in considering the privilege defense in ruling on the motion for judgment on the pleadings.   If the right to the privilege appears on the face of the complaint, it can be the basis for deciding the merits of the motion.2  The issue is the same as when the statute of limitations is pleaded as an affirmative defense.   If the allegations of the complaint are taken as true on demurrer and those allegations show that the statute has run, the trial court will properly grant the demurrer on that ground.  (See, generally, 5 Witkin, Cal.Procedure (3d ed. 1985) Pleading, § 912, pp. 349–350.)   The same is true for the defenses of laches, lack of standing, and res judicata.  (Id., at §§ 913–915, pp. 350–353.)

The motion for judgment on the pleadings put the issue of the sufficiency of the allegations of the complaint before the trial court, and it could decide if those allegations showed that the action was barred by a privilege.3  In doing so, it did not decide the issue on an unannounced ground, and did not deprive plaintiffs of any right to a hearing.

ABUSE OF PROCESS

 Plaintiffs next contend that the trial court erred in granting the Bank's motion for judgment on the pleadings because they stated a cause of action for abuse of process.

“The tort of abuse of process is committed by the misuse of process, such as attachment or injunction;  i.e., its use for a purpose other than that for which the process is designed.”  (5 Witkin, Summary of Cal. Law, supra, Torts, § 459, p. 547.)  “The most common writ giving rise to claims of abuse of process has been attachment.”  (Id., at § 465, p. 551.)   A writ of attachment must be used only for a proper purpose, i.e., to obtain security for an anticipated judgment, and any other use is an abuse of that process.4

“ ‘ “The improper purpose usually takes the form of coercion to obtain a collateral advantage, not properly involved in the proceeding itself, such as the surrender of property or the payment of money, by the use of the process as a threat or a club.   There is, in other words, a form of extortion, and it is what is done in the course of negotiation, rather than the issuance or any formal use of the process itself, which constitutes the tort.” ․’ ”  (Christensen v. Younger (1975) 47 Cal.App.3d 613, 618, 120 Cal.Rptr. 923;  Rest.2d Torts, § 682, com. b.)

Here plaintiffs concede that the writ was lawfully obtained by the defendant Bank for a prejudgment attachment of the proceeds from the sale of the dwelling.   As noted above, the gist of plaintiffs' complaint is that this lawful attachment became an abuse of process when (1) the Bank was given “proof” that the sellers had no equity in the property to attach 5 and (2) that the Bank nevertheless maintained the attachment for an unlawful purpose, i.e., “to coerce a settlement payment from other interested parties․”

Accepting these allegations as true, as we must, it is clear that plaintiffs have stated a cause of action for abuse of process, and that the trial court erred in granting the Bank's motion for judgment on the pleadings.

Defendant contends, however, that the trial court's action was proper because plaintiffs did not and could not state a cause of action for wrongful attachment under Code of Civil Procedure section 490.010.   While we agree with this strawman argument, it was not necessary for plaintiffs to meet the requirements of this statute to allege an abuse of process cause of action since Code of Civil Procedure section 490.060 provides that “Nothing in this chapter limits the right to recover for damages caused by an attachment or protective order on any common law theory of recovery.”

Defendant also relies on the initial lawfulness of the attachment, contending that “[t]he fact that the attachment may have been used in part to obtain a settlement from the owners of the property as well as those persons interested in the property, is also proper as the achievement of a settlement in a case is a proper legal end.”   Defendant relies primarily upon Pimentel v. Houk (1951) 101 Cal.App.2d 884, 226 P.2d 739.   In Pimentel, the creditor used the attachment process with an allegedly improper motive to destroy the debtor financially.   The court found that, regardless of motive, the process used was entirely regular, and no basis for abuse of process was shown.   Here, however, such a basis was shown by the allegations that the Farmers had no equity in the property.

While the achievement of a settlement is certainly a desirable end, the achievement of a coerced or extorted settlement is clearly not a desirable end.   Defendant overlooks the allegations of the complaint which must be taken as true at this stage of the litigation.

Defendant also attempts to distinguish Templeton Feed & Grain v. Ralston Purina Co. (1968) 69 Cal.2d 461, 72 Cal.Rptr. 344, 446 P.2d 152.   In that case, the court held that substantial evidence supported the jury's finding that defendant committed an abuse of process by seizing some 35,000 turkeys in a claim and delivery action against the Livingstons.   The court said “[t]he jury properly could have found that Ralston, in procuring the seizure, knew or should have known that it was not entitled to possession of the turkeys and that Ralston had seized the turkeys in order to force Templeton, the owner of the birds, to discharge Livingston's debt.”  (Id., at p. 466, 72 Cal.Rptr. 344, 446 P.2d 152.)   Since we must accept the allegations of the complaint here as true, Templeton is not distinguishable.   Plaintiffs here allege that the Bank refused to release the attachment lien after learning that the Farmers had no equity in the real property in order to compel the plaintiffs to pay all or part of the Farmer's debt to the Bank.6  If proven, this would be a wrongful use of the attachment process, and a sufficient basis for a finding of abuse of process.

INTERFERENCE WITH CONTRACTUAL RELATIONS

 Plaintiffs also contend that the trial court erred in granting the Bank's motion for judgment on the pleadings because they stated an action for intentional interference with contractual relations.7  They rely on Rosenfeld, Meyer & Susman v. Cohen (1983) 146 Cal.App.3d 200, 194 Cal.Rptr. 180.   That case states:  “The elements of a cause of action for intentional interference by a third person with a contractual relationship either by unlawful means or by means otherwise lawful when there is a lack of sufficient justification for such interference with prospective economic advantage are:  (1) The existence of a valid contract or relationship between the plaintiff and another party;  (2) the defendant's knowledge of the contract and the intent to induce a breach thereof or to disrupt the contractual relationship;  (3) intentional acts on the part of the defendant designed to induce a breach or disrupt the relationship;  (4) actual disruption of the contract or relationship as a result of the defendant's conduct;  and (5) damages resulting to the plaintiff proximately caused by the acts of the defendant.”  (Id., at p. 220, 194 Cal.Rptr. 180.)  “[T]o prevail on a cause of action for intentional interference with prospective economic advantage, plaintiff must plead and prove ‘intentional acts on the part of the defendant designed to disrupt the relationship.’ ”  (Seaman's Direct Buying Service, Inc. v. Standard Oil Co. (1984) 36 Cal.3d 752, 766, 206 Cal.Rptr. 354, 686 P.2d 1158.)

As noted above, the allegations here are that the Bank knew of the contractual relationship to sell the home, that the Bank improperly used the attachment process to coerce a settlement or to prevent performance of the contract, that the contract was breached and that plaintiffs were damaged.   In our view, these allegations are sufficient to state a cause of action for interference with prospective economic advantage because, taken as true, they show that the Bank's actions were unjustified and unprivileged.  (Lowell v. Mother's Cake & Cookie Co. (1978) 79 Cal.App.3d 13, 144 Cal.Rptr. 664.)

 The trial court based its decision on the grounds that the actions of the Bank were privileged because “the bank was acting within its legal rights in pursuing an end [sic] to enforcing a judgment.”   We believe the trial court erred because it failed to give proper weight to the complaint's allegations that the legal and proper use of the attachment process by the Bank became a wrongful use of the attachment process when the Bank learned that the seller had no equity in the property.   While the lawful use of the attachment process cannot give rise to a cause of action for interference with prospective economic advantage, the maintenance of the attachment lien after the Bank learned there was no equity in the property in order to coerce a settlement or payment from third parties was not a lawful use of the attachment process.8  “The subsequent misuse of the process, though properly obtained, constitutes the misconduct for which the liability is imposed [for abuse of process].”  (Rest.2d Torts, § 682, com. a.)

The allegations of the complaint were therefore sufficient to state the two causes of action.   At trial, plaintiffs will have to prove their allegations and the factual aspects of the privilege defense will be explored at that time.  (Cf. Boston v. Nelson (1991) 227 Cal.App.3d 1502, 278 Cal.Rptr. 386.)   While we agree with plaintiffs that the trial court erred in finding that the Bank's actions were privileged on the basis of the allegations in the complaint, the central factual and legal question at trial will be whether the Bank did misuse the attachment process for an improper purpose.   (Cf. Collins v. Vickter Manor, Inc. (1957) 47 Cal.2d 875, 883, 306 P.2d 783.)   We express no opinion on that issue, except to decide that the allegations of the complaint, taken as true, state causes of action for abuse of process and interference with contractual relations.   Accordingly, the trial court erred in granting the motion for judgment on the pleadings.

DISPOSITION

The judgment is reversed.

FOOTNOTES

1.   The sales price of the home was $100,000.   The amount owed to the Bank by the Farmers was $27,413.58 at the time of default.

2.   The converse is also true.   If the answer shows matters which would constitute a complete defense, those matters cannot be used to attack a complaint which is otherwise sufficient.  (Schwartz v. Schwartz (1946) 74 Cal.App.2d 711, 169 P.2d 688.)

3.   For a general discussion of the privilege defense in abuse of process actions see 5 Witkin, Summary of California Law, supra, Torts, section 470, pages 554–557.  (See, also, id., at §§ 504–509, pp. 591–597;  Abraham v. Lancaster Community Hospital (1990) 217 Cal.App.3d 796, 266 Cal.Rptr. 360.)

4.   The elements of the tort of abuse of process are as follows.   To recover for abuse of process, the plaintiff must show “1.   That the defendant used a legal process in a wrongful manner, not proper in the regular conduct of a proceeding, to accomplish a purpose for which it was not designed;  [¶] 2.   That the defendant acted with an ulterior motive;  [¶] 3.   That a willful act or threat was committed by defendant, not authorized by the process and not proper in the regular conduct of the proceedings;  [¶] 4.   That the plaintiff suffered damage, loss or harm;  [and] [¶] 5.   That such damage, loss or harm was the [proximate] [legal] result of such use of the legal process.”  (BAJI No. 7.72 (7th ed. 1986).)

5.   The underlying case file shows that Mr. Farmer had signed a commercial guarantee for a business loan.   In its collection action, the Bank lawfully attached the interests of Mr. Farmer in the subject real property, subject to any exemption claims.  (Code Civ.Proc., §§ 487.010, subd. (c)(1), 487.020, 487.025.)   If Mr. Farmer had no interest in the property, it was exempt from attachment.  (Code Civ.Proc., § 487.020, subd. (d).)  The complaint alleges that he had no such interest because of liens and other claims against the property.   The levy on property exempt from attachment is also a wrongful attachment under certain circumstances.  (Code Civ.Proc., § 490.010, subd. (c).)

6.   It is not clear from the record why the Farmers, as sellers of their home, or plaintiffs, as buyers, did not obtain a bond to eliminate the attachment lien.   Presumably, such a failure to mitigate will relate to the issue of damages at trial.

7.   The cause of action was for interference with prospective advantage.  “[T]he tort of interference with contract is merely a species of the broader tort of interference with prospective economic advantage.”   (Buckaloo v. Johnson (1975) 14 Cal.3d 815, 823, 122 Cal.Rptr. 745, 537 P.2d 865.)

8.   Similarly, malicious prosecution includes the maintenance or continuation of an action, whether or not it was properly commenced.   (BAJI Nos. 7.30, 7.31 & 7.32 (7th ed. 1986);  Lujan v. Gordon (1977) 70 Cal.App.3d 260, 138 Cal.Rptr. 654;  Rest.2d Torts, §§ 655, 674, com. c, 682.)

HOLLENHORST, Acting Presiding Justice.

TIMLIN and McDANIEL,* JJ., concur.