Reported / Citable
Background
Diplomat Property Manager, LLC's predecessor made construction loans secured by real property to developer Andre Wegner, his company Top Flight, and a related entity. Top Flight then entered voluntary Property Assessed Clean Energy (PACE) assessment contracts on the properties, and FortiFi Financial, Inc., the program administrator, recorded the assessments, which by statute create tax liens with priority over other liens. Diplomat alleges that FortiFi colluded with Wegner, paid funds to a Wegner-controlled contractor before work began and without supporting invoices, never monitored the work, and that Top Flight strategically defaulted and let taxes become delinquent. These are allegations; the court made no findings on them.
In April 2021 Sound Equity, which serviced Diplomat's loans, sued the borrowers, and a receiver was appointed to sell eight properties. FortiFi intervened in November 2022 to oppose sales that would strip its liens, but later told the court it did not oppose revised sales on the understanding that delinquent PACE debts would be paid and the liens would remain. The court directed payment of the delinquent assessments. Diplomat alleges buyers would not purchase subject to the liens, so proceeds meant for it went to FortiFi first, and it seeks, among other relief, $844,205. It pleaded declaratory relief, tortious interference, aiding and abetting breach of contract, conspiracy to commit fraud, and unfair competition. The trial court denied FortiFi's anti-SLAPP motion at step one, and FortiFi appealed.
The Court’s Holding
Reviewing de novo, the Court of Appeal held FortiFi did not carry its first-step burden. Recording a PACE assessment is not protected prelitigation activity: the statute requires recording to create a tax lien, not to redress a grievance, homeowners enter the contracts voluntarily, and assessments are ordinarily paid without dispute. The court rejected the argument that any act that is a legal prerequisite to eventual judicial foreclosure is protected, noting that in FortiFi's cited cases a dispute already existed. It likened PACE recording to a deed of trust, which facilitates credit, rather than a mechanic's lien, which follows nonpayment; RGC Gaslamp presupposed a grievance. Because no dispute existed at recording, the court did not need to apply the good-faith-contemplation test, and it declined to rely on the alleged conspiracy's intent, reasoning that otherwise a fraud scheme could be shielded by a plan to litigate.
The court also held Diplomat's claims do not arise from FortiFi's conduct in the receivership. The claims rest on pre-funding of loans and work apparently never done. The alleged conspiracy was complete, and Diplomat's loss incurred, when Top Flight defaulted, before FortiFi intervened. The court would not presume the receivership court would have stripped the liens without compensation absent FortiFi's arguments; either payoff or sale subject to the liens harmed Diplomat anyway. It also refused to consider an unpublished trial court order FortiFi cited, denied Diplomat's motion to strike the reply brief, and imposed no sanctions.
The order was affirmed and Diplomat recovers its costs. Because step one failed, the court did not reach whether Diplomat's claims have merit, so the fraud and conspiracy allegations remain unproven.
Key Takeaways
- Recording a PACE assessment is a statutory step that creates a voluntary tax lien, and the Court of Appeal held it is not protected prelitigation activity under section 425.16.
- That an act is a legal prerequisite to a possible later judicial remedy is not enough by itself; the court looked for an existing dispute or grievance when the act occurred.
- Claims do not arise from litigation conduct merely because the defendant later defended its position in court; the injury-producing conduct must be the protected activity.
- The ruling decides only the first anti-SLAPP step, so the merits of Diplomat's fraud and conspiracy allegations remain open.
Why It Matters
This published opinion addresses a question the cases FortiFi cited did not resolve: whether recording a PACE lien is protected prelitigation activity. It distinguishes mechanic's lien authority and treats PACE recording like a deed of trust, so PACE administrators accused of misconduct in funding or administering assessments cannot ordinarily use an anti-SLAPP motion to defeat such claims at the outset.
The holding is limited. It concerns the recording of assessments before any default and claims not based on later receivership litigation; the court did not say that enforcement conduct in litigation can never be protected.