Financial Corp. of America v. Wilburn

• Decision Date: 18 February 1987
• Citation: 189 Cal.App.3d 764,234 Cal.Rptr. 653
• Court: California Court of Appeals Court of Appeals
• Parties: FINANCIAL CORPORATION OF AMERICA, et al., Plaintiffs and Appellants, v. William K. WILBURN, Defendant and Respondent. H001010.

Page 653

234 Cal.Rptr. 653

189 Cal.App.3d 764

FINANCIAL CORPORATION OF AMERICA, et al., Plaintiffs and Appellants, v. William K. WILBURN, Defendant and Respondent.

H001010.

Court of Appeal, Sixth District, California.

Feb. 18, 1987.

Jeffer, Mangels & Butler, Robert E. Mangels, William F. Abrams, Patricia S. Brody, San Francisco, for plaintiffs and appellants.

William K. Wilburn, San Jose, for defendant and respondent.

AGLIANO, Presiding Justice.

I

Plaintiffs appeal from a judgment entered after defendant's general demurrer was sustained without leave to amend to their second amended complaint. At issue is the scope of the privilege afforded to publications and statements made by an attorney about an adversary prior to and in litigation.

We review a general demurrer under well-established principles. It presents the question of law whether the complaint, liberally construed, contains facts sufficient to entitle plaintiff to any relief. (B & P Development Corp. v. City of Saratoga (1986) 185 Cal.App.3d 949, 952-953, 959, 230 Cal.Rptr. 192.) "[W]e assume the truth of all material facts properly pleaded in the complaint unless they are contradicted by facts judicially noticed [citations], but no such credit is given to pleaded contentions or legal conclusions. [Citations.] Specific factual allegations modify and limit inconsistent general statements." (Id., at p. 953, 230 Cal.Rptr. 192.)

II

A. Procedure

Plaintiffs' original complaint was filed July 2, 1984. After demurrer was twice sustained with leave to amend, plaintiffs Financial Corporation of America and American Savings and Loan Association filed their second amended complaint on February 20, 1985. After a hearing on June 12, 1985, the court sustained the demurrer of defendant William Wilburn without leave to amend. Plaintiffs purport to appeal from the order entered on June 12 sustaining the demurrer and from the subsequent order of July 29 denying plaintiffs' motion for clarification or reconsideration of the June 12 order.

As defendant points out, an order sustaining a demurrer can only be reviewed on appeal from a subsequent judgment or order of dismissal and is not separately appealable. (Cornic v. Stewart (1918) 179 Cal. 242, 176 P. 164; Youngblood v. Board of Supervisors (1978) 22 Cal.3d 644, 651, 150 Cal.Rptr. 242, 586 P.2d 556.) An order denying reconsideration of such a nonappealable order is not itself appealable either. (Genis v. Krasne (1956) 47 Cal.2d 241, 249, 302 P.2d 289; I.J. Weinrot & Son, Inc. v. Jackson (1985) 40 Cal.3d 327, 331, 220 Cal.Rptr. 103, 708 P.2d 682.) The notice of appeal filed on August 7, 1985 does not refer to the judgment entered on July 9 sustaining defendant's demurrer. There is no indication this judgment was served on plaintiffs, however, nor was it brought to their attention by defendant in later opposing the motion for reconsideration. Though the notice of appeal refers to orders on different dates, we liberally construe it as from the judgment, when no one could have been misled that plaintiffs sought appellate review of the ruling on the demurrer, and the issues are fully briefed by both sides. (Cal.Rules of Court, rule 1(a); Collins v. City and Co. of S.F. (1952) 112 Cal.App.2d 719, 722-723, 247 P.2d 362; Vibert v. Berger (1966) 64 Cal.2d 65, 48 Cal.Rptr. 886, 410 P.2d 390.)

B. The Complaint

The second amended complaint seeks actual and punitive damages from William Wilburn, an attorney, based on his activities, summarized as follows (with the alleging paragraph cited): He has made false accusations against plaintiffs, charging them with narcotics trafficking, obstructing justice, bribery, and deceptive and dishonest loan, accounting and other business practices. (pp 6, 7.) He made these accusations in an action he filed on behalf of clients against plaintiffs and others, including certain of their officers, in United States District Court for the Northern District of California, Katen, et al. v. State Savings and Loan Association, et al. (No. C 84 20402 WAI) on June 22, 1984. (p 7.) The federal action purports to seek relief under the RICO, the Racketeer Influenced and Corrupt Organizations Act (18 U.S. 1961, et seq.; which provides in § 1964, subd. (c), for recovery of treble damages and attorney's fees) as well as other federal and state law causes of action. (p 7.) He also made these accusations before filing the federal action in March, April, May and June, 1984, (1) to "persons throughout Northern California," and (2) to plaintiffs' present and former employees, depositors, investors, and customers, from whom he sought confidential information. (p 6.)

Plaintiffs also complain defendant has threatened them with litigation, not only the federal action but other lawsuits, unless they make substantial payments to him. (p 14.) Plaintiffs also complain defendant filed and is maintaining the federal action. (pp 7, 10, 15, 19.)

Defendant engaged in these activities knowing the accusations were false, that they would receive attention from and be republished by the news media, ¹ and that they were damaging to plaintiffs by virtue of the nature of their businesses, namely plaintiff Financial Corporation of America being a publicly-traded corporation and the parent corporation of plaintiff American Savings and Loan Association (formerly State Savings and Loan), the largest savings and loan association in the country. (pp 10, 11, 12, 14.) The purpose behind all these activities is to have these accusations republished in the news media, to interfere with plaintiffs' existing and prospective business with depositors, investors, and customers, and to otherwise damage plaintiffs' businesses, and thereby to extort substantial money and property from plaintiffs as the price for ceasing. (pp 10, 13, 14, 19.) The sole purpose of filing the federal action is not to obtain the relief requested, but to shield these activities and future republications under the protective umbrella of privilege. (pp 15, 20.)

Plaintiffs' first cause of action is for intentional interference with economic advantage and the second is for abuse of process.

III

A. Scope and Limits of Privilege for Statements Made in Course of Judicial Proceedings

By statute an action for defamation cannot be predicated on certain privileged oral or written statements. "A privileged publication or broadcast is one made ... 2. In any ... (2) judicial proceeding...." (Civ.Code, § 47.) "[T]he obvious purpose of section 47 [is] to afford litigants the utmost freedom of access to the courts to secure and defend their rights without fear of being harassed by actions for defamation." (Albertson v. Raboff (1956) 46 Cal.2d 375, 380, 295 P.2d 405.)

Albertson established that this privilege was also a defense to a claim of disparagement of title. (Id., at pp. 378-379, 295 P.2d 405.) As more fully explained in Thornton v. Rhoden (1966) 245 Cal.App.2d 80, 99, 53 Cal.Rptr. 706: "The salutary purpose of the privilege should not be frustrated by putting a new label on the complaint." Privileged statements are similarly not actionable on theories of abuse of process Twyford v. Twyford (1976) 63 Cal.App.3d 916, 924-926, 134 Cal.Rptr. 145; see Thornton, supra, 245 Cal.App.2d at pp. 99-100, 53 Cal.Rptr. 706), interference with economic advantage (Brody v. Montalbano (1978) 87 Cal.App.3d 725, 738, 151 Cal.Rptr. 206, cert. den. 444 U.S. 844, 100 S.Ct. 87, 62 L.Ed.2d 57; Rosenthal v. Irell & Manella (1982) 135 Cal.App.3d 121, 128, 185 Cal.Rptr. 92), or a variety of other theories (see cases cited in Block v. Sacramento Clinical Labs, Inc. (1982) 131 Cal.App.3d 386, 391, 182 Cal.Rptr. 438). The only cause of action not subject to the privilege is malicious prosecution, because "[t]he policy of encouraging free access to the courts that underlies the absolute privilege applicable in defamation actions is outweighed by the policy of affording redress for individual wrongs when the requirements of favorable termination, lack of probable cause, and malice are satisfied." (Albertson, supra, 46 Cal.2d 375, 382, 295 P.2d 405.)

This privilege is absolute in that it applies regardless of whether a statement was uttered with malice or bad faith. (Gosewisch v. Doran (1911) 161 Cal. 511, 514, 119 P. 656; Thornton v. Rhoden, supra, 245 Cal.App.2d 80, 93, 53 Cal.Rptr. 706; Izzi v. Rellas (1980) 104 Cal.App.3d 254, 265, 163 Cal.Rptr. 689.) However, its applicability depends on whether the statement was "made in" a "judicial proceeding." Albertson, supra, 46 Cal.2d 375, 295 P.2d 405, faced the question whether a notice of lis pendens was privileged. The court determined the privilege should be given a broad application in view of its underlying policy, holding: "It is our opinion that the privilege applies to any publication, such as the recordation of a notice of lis pendens, that is required [citation] or permitted [citation] by law in the course of a judicial proceeding to achieve the objects of the litigation, even though the publication is made outside the courtroom and no function of the court or its officers is invoked. [Citation.] Thus, it is not limited to the pleadings, the oral or written evidence, to publications in open court or in briefs or affidavits. If the publication has a reasonable relation to the action and is permitted by law, the absolute privilege attaches." (Id., at pp. 380-381, 295 P.2d 405.) The court supported this expansive reading of the statutory privilege by reference to common-law absolute privileges described in the Restatement of Torts sections 585-589 which protect certain actors in judicial proceedings against defamation actions. (Id., at pp. 378, 381, 295 P.2d 405.)

In Thornton v. Rhoden, supra, 245 Cal.App.2d 80, 53 Cal.Rptr. 706, Justice Kaus thoughtfully elaborated on the nature of the connection which must exist between a statement and a judicial proceeding for the statement to be privileged. "A rule which requires the demonstration of...