Judge Curtis A. Kin, Case Number: 20STCV04529, Date: 2023-10-03 Tentative Ruling

Sun Coast Distributing, Inc.; Sun Pacific Group, Inc.; and Jerry James FBO IRA Account # Z150834 move for a right to attach order against defendant Joe Samuel Bailey in the amount of $7,420,000.

Plaintiffs, along with three non-parties (collectively, “lender-investors”), made loans or investments to defendants Joe Samuel Bailey and Renew Spinal Care, Inc. (FAC ¶ 15; FAC Ex. 1 at Recitals, ¶ A.) On July 24, 2019, the lender-investors entered into a written Settlement Agreement and Mutual Release (“Settlement Agreement”) with defendants to resolve the outstanding debts. (FAC ¶ 17.) Under the Settlement Agreement, defendant Bailey would pay $6 million as “full and final satisfaction of all claims” between the parties to the Settlement Agreement. (FAC Ex. 1 at Agreement, ¶ 2.) Defendants allegedly breached the Settlement Agreement by not paying $1 million that was due on September 30, 2019. (FAC ¶¶ 24(B), 25.)

“Upon the filing of the complaint or at any time thereafter, the plaintiff may apply pursuant to this article for a right to attach order and a writ of attachment by filing an application for the order and writ with the court in which the action is brought.” (CCP § 484.010.)

The application shall be executed under oath and must include: (1) a statement showing that the attachment is sought to secure the recovery on a claim upon which an attachment may be issued; (2) a statement of the amount to be secured by the attachment; (3) a statement that the attachment is not sought for a purpose other than the recovery on the claim upon which the attachment is based; (4) a statement that the applicant has no information or belief that the claim is discharged or that the prosecution of the action is stayed in a proceeding under the Bankruptcy Act (11 U.S.C. section 101 et seq.); and (5) a description of the property to be attached under the writ of attachment and a statement that the plaintiff is informed and believes that such property is subject to attachment. (CCP § 484.020.)

The application for a writ of attachment must be supported “by an affidavit showing that the plaintiff on the facts presented would be entitled to a judgment on the claim upon which the attachment is based.” (CCP § 484.030.)

The Court shall consider the showing made by the parties, as well as the pleadings and other papers in the record. (CCP § 484.090(a), (d).) The Court shall issue a right to attach order if it finds all of the following:

(1) The claim upon which the attachment is based is one upon which an attachment may be issued.

(2) The plaintiff has established the probable validity of the claim upon which the attachment is based.

(3) The attachment is not sought for a purpose other than the recovery on the claim upon which the attachment is based.

At the times prescribed by CCP § 1005(b), the defendant must be served with a copy of the summons and complaint, notice of application and hearing, and a copy of the application and supporting affidavits. (CCP § 484.040.)

“The Attachment Law statutes are subject to strict construction….” (Epstein v. Abrams (1997) 57 Cal.App.4th 1159, 1168.)

“[A]n attachment may be issued only in an action on a claim or claims for money, each of which is based upon a contract, express or implied, where the total amount of the claim or claims is a fixed or readily ascertainable amount not less than five hundred dollars ($500) exclusive of costs, interest, and attorney’s fees.” (CCP § 483.010(a).) “An attachment may not be issued on a claim which is secured by any interest in real property arising from agreement ….” (CCP § 483.010(b).)

The amount sought to be attached is based on a written Settlement Agreement. (Kent Decl. ¶ 4 & Ex. 2.) Defendant Bailey does not dispute that plaintiffs’ claim is the type upon which an attachment may be issued.

“A claim has ‘probable validity’ where it is more likely than not that the plaintiff will obtain a judgment against the defendant on that claim.” (CCP § 481.190.) “If the defendant opposes the application, ‘the court must then consider the relative merits of the positions of the respective parties and make a determination of the probable outcome of the litigation.’ [Citations.]” (Pech v. Morgan (2021) 61 Cal.App.5th 841, 855.)

The Settlement Agreement provides that Bailey shall pay Lender-investors $1 million from the first $1 million that Bailey receives from the final judgment in Bailey v. St. Louis (Fla. Dist. Ct. App. 2018) 268 So.3d 197, 199 on or before September 30, 2019. (Kent Decl. ¶ 4 & Ex. 2 at Agreement, ¶ 2(a).) Plaintiffs maintain that Bailey has represented in discovery responses that he has collected at least $12 million on the judgment. (Kent Decl. ¶ 8.) Bailey does not deny this assertion. (See Bailey Decl. ¶ 5 [“Although some money has been collected on the Bailey v. St. Louis case….”].) Rather, Bailey maintains that no money from the judgment has ever been in his possession. (Bailey Decl. ¶ 5.) Regardless of whether Bailey’s assertion is true, Bailey does not deny that he has an interest in the proceeds of the judgment. (Bailey Decl. ¶ 4.) Accordingly, regardless of who has possession of the proceeds, plaintiffs are entitled to attachment of some amount greater than zero, discussed below.

Defendant Bailey contends that the entire Settlement Agreement is void because it seeks recovery for loans that are usurious. (See Opp. at 10:1-12:14.) However, in the absence of fraud or undue influence, a settlement is “decisive of the rights of the parties thereto,” even if the underlying transactions from which the settlement arose were usurious. (Credit Finance Corp. v. Mox (1932) 125 Cal.App. 583; cf. Hardwick v. Wilcox (2017) 11 Cal.App.5th 975 [finding an agreement did not waive usury claim where party was unaware of usury claim and agreement was essentially a continuation of the underlying usurious agreement, as opposed to knowing settlement of usury claim].) Plaintiffs maintain that defendants raised a defense based on usury prior to the execution of the Settlement Agreement. (Sallin Decl. ¶ 14; Elwell Decl. ¶ 14; Bratten Decl. ¶ 14; Sturchio Decl. ¶ 14.) Although Bailey declares that the “Settlement Agreement was a ruse for the Plaintiffs to get usurious interest,” Bailey does not directly dispute plaintiffs’ assertion. (See Bailey Decl. ¶ 8.) Plaintiffs therefore demonstrate probable validity that Bailey entered into a valid Settlement Agreement that waived his prior claims of usury.

Accordingly, plaintiffs demonstrate the probable validity of its claim for breach of the Settlement Agreement against defendant Bailey.

The other required findings under CCP § 484.090 are that the “attachment is not sought for a purpose other than the recovery on the claim upon which the attachment is based” and that the “amount to be secured by the attachment is greater than zero.” (CCP § 484.090(a)(3), (a)(4).)

Plaintiffs declare that “[a]ttachment is not sought for a purpose other than the recovery on a claim upon which the attachment is based.” (App. ¶ 4.) Bailey contends that the instant application was filed for an improper purpose, as plaintiffs seek to sell their rights under the Settlement Agreement to the debtors in the Florida action where Bailey obtained a judgment in his favor or to pressure Bailey into an unfavorable settlement. (Schafer Decl. ¶¶ 4, 6.) Even if plaintiffs may have other motives to collect on monies to which they are entitled under the explicit terms of the Settlement Agreement, plaintiffs nonetheless demonstrate that attachment is here sought to recover upon their claim for breach of the Settlement Agreement.

Plaintiffs also demonstrate that the amount to be secured by the attachment is greater than zero. That said, plaintiffs seek $7,420,000, including $10,000 in costs and $300,000 in attorney fees, which is not fully supported by the Settlement Agreement upon which plaintiffs sue. The requested amount includes 79% (i.e., plaintiffs’ share under the Settlement Agreement) of the principal amount of $6 million. (P&A at 13:11-22.) Under the Settlement Agreement, however, the $6 million is not due until five years following execution of the agreement. (Kent Decl. ¶ 4 & Ex. 2 at Agreement, ¶ 2.) Bailey executed the Settlement Agreement on July 28, 2019. (Kent Decl. ¶ 4 & Ex. 2 at p. 8.) Accordingly, payments on the principal are not due until July 28, 2024.

As stated above, the Settlement Agreement does provide that Bailey shall pay Lender-investors $1 million from the first $1 million that Bailey receives from the final judgment in Bailey v. St. Louis (Fla. Dist. Ct. App. 2018) 268 So.3d 197, 199 on or before September 30, 2019. (Kent Decl. ¶ 4 & Ex. 2 at Agreement, ¶ 2(a).)[1] Bailey does not dispute that plaintiffs’ share under the Settlement Agreement is 79%. (Kent Decl. ¶ 5.) Accordingly, plaintiffs are entitled to attachment in the amount of $790,000 (i.e., 79% of $1 million past due).

Plaintiffs also request that the amount of attachment include $10,000 in costs and $300,000 in attorney fees. The Settlement Agreement provides that reasonable costs and attorney fees in connection with a dispute connected to the breach of the Settlement Agreement are recoverable. (Kent Decl. ¶ 4 & Ex. 2 at Agreement, ¶ 14.) While the Settlement Agreement may ultimately permit plaintiffs to recover reasonable costs and fees, plaintiffs here fail to establish entitlement to attach any particular amount for such. In wholly conclusory fashion, plaintiffs’ counsel—without evidence or corroboration—claims “estimated costs of $10,000” and exorbitant fees based on “more than six hundred (600) hours on this matter” at a billing rate of either $500 or $600 per hour. Based on these unsupported aversions by counsel, the Court cannot order attachment for any amount of costs or fees to which plaintiffs might ultimately be entitled upon a sufficient showing.

Based on the foregoing, plaintiffs are entitled to a right to attach order in the amount of $790,000.

CCP § 484.020(d) requires a “statement that the applicant has no information or belief that the claim is discharged in a proceeding under Title 11 of the United States Code (Bankruptcy) or that the prosecution of the action is stayed in a proceeding under Title 11 of the United States Code (Bankruptcy).” Plaintiffs provide this statement. (App. ¶ 4.)

CCP § 487.010(c) lists categories of property subject to attachment where the defendant is a natural person. Plaintiffs move to attach “all proceeds in the possession, custody or control of Defendant, Joe Samuel Bailey, including property held by his attorneys, with respect to the litigation commonly known as Bailey vs. St Louis, et al., 268 So. 3d 197 (Florida District Court of Appeal 2018).” (Proposed order at ¶ 3(c)(2).)

Bailey contends that plaintiffs do not indicate whether the judgment arose from the trade, business, or profession of Bailey. (See CCP § 487.010(c)(6).) Nevertheless, “[w]here the defendant is a natural person, the description of the property shall be reasonably adequate to permit the defendant to identify the specific property sought to be attached.” (CCP § 484.020(e).) “The requirement of specificity [under CCP § 484.020(e) does not] … prohibit a plaintiff from targeting for attachment everything an individual defendant owns [s]o long as the property descriptions are adequate.” (Bank of America v. Salinas Nissan, Inc. (1989) 207 Cal.App.3d 260, 268.) Plaintiffs’ description of the property to be attached is reasonably adequate and limited to property in which Bailey has an interest.

Bailey also contends that the judgment and proceeds from the judgment are not subject to attachment because they are out-of-state. (Bailey Decl. ¶ 5; see also Pacific Decision Sciences Corp. v. Superior Court (2004) 121 Cal.App.4th 1100, 1108 [“But, of course, a California court lacks jurisdiction to command a sheriff, marshal, or constable in Florida or New Jersey to levy a California writ of attachment on a New Jersey company or a Florida bank”].) Insofar as that may be true, there may be no assets upon which the writ of attachment may be executed. However, to the extent plaintiffs can locate assets or proceeds of defendant that are in California, plaintiffs are entitled to attach them. (See Pacific Decision, 121 Cal.App.4th at 1108 [discussing propriety of turnover order in aid of writ of attachment for “intangibles” such as an account receivable or deposit account with an out-of-state bank].)

CCP § 489.210 requires the plaintiff to file an undertaking before issuance of a writ of attachment. CCP § 489.220 provides, with exceptions, for an undertaking in the amount of $10,000. While defendants request a “substantial undertaking bond,” defendants do not justify that any attachment would be wrongful. Accordingly, the Court orders the posting of a bond in the amount of $10,000 set forth in CCP § 480.220(a).

The application is GRANTED in the amount of $790,000. Plaintiffs are ordered to post an undertaking in the amount of $10,000 before any writ of attachment shall issue.

[1] Bailey maintains that the Amendment to the Settlement Agreement, attached as Exhibit 2 to the declaration of Robert K. Kent, was not signed by all parties, as required by paragraph 10 of the Settlement Agreement. The Amendment sought to provide an additional five months for Bailey to make the $1 million down payment. (Kent Decl. ¶ 4 & Ex. 2.) Even if the Amendment were not effective, the Settlement Agreement required the $1 million to be paid by September 30, 2019.