Judge Curtis A. Kin, Case Number: 23STCP02068, Date: 2023-11-09 Tentative Ruling

Petitioner Dr. Roy Lubit, MD Ph.D, derivatively on behalf of 7760 Romaine, LLC and 1159 Formosa, LLC, moves for a right to attach order against respondent FMB Development, LLC in the amount of $4,000,000.

On May 20, 20214, petitioner Dr. Roy Lubit, MD Ph.D, and respondents FMB Development, LLC (“FMB”), Elim Management, Inc. (“Elim”), and Joel Haggin entered into two separate agreements titled “Joint Venture Agreement for Real Estate Investment” (collectively, “Agreements”). (Lubit Decl. ¶¶ 6, 7 & Exs. A, B.) The purpose of the Agreements was to purchase, build, and sell real properties located at 1159 N. Formosa (“Formosa Property”) and 7760 Romaine Street (“Romaine Property”), both in West Hollywood. (Id. Ex. A at § 2.1, Ex. B at § 2.) The Agreements provide for the opening of two limited liability companies to hold the respective real properties. (Id. Ex. A at § 2.1, Ex. B at § 2.)

Under the Formosa Agreement, FMB is the managing member. (Id. Ex. A at § 3.2.) Under the Romaine Agreement, FMB, Elim, and/or Haggin are the managing members. (Id. Ex. B at § 4.)

In September 2014, the Formosa and Romaine Properties were deeded to FMB. (RJN Exs. A, D.) FMB obtained a $4,000,000 loan, which was secured by the Formosa Property and the Romaine Property. (RJN Exs. B, E.) FMB subsequently transferred the properties to 1159 Formosa, LLC and 7760 Romaine, LLC. (RJN Exs. C, F.)

“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.

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

Petitioner’s requests to take judicial notice of Exhibits A-F are GRANTED pursuant to Evidence Code §§ 452(g) and (h), but only for the limited purposes set forth in Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal.App.4th 256, 265. (Fontenot, 198 Cal.App.4th at 265 [“Taken together, the decisions discussed above establish that a court may take judicial notice of the fact of a document's recordation, the date the document was recorded and executed, the parties to the transaction reflected in a recorded document, and the document's legally operative language, assuming there is no genuine dispute regarding the document's authenticity”].”)

“[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).)

“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.)

Petitioner moves to attach $4,000,000 based on the amount that FMB borrowed purportedly in violation of the Formosa Agreement and the Romaine Agreement. Petitioner contends that FMB wrongfully secured the $4,000,000 loan without the permission of all members of the LLC, including petitioner. (Pet. P&A at 9:22-27; cf. App. ¶ 9 [amount of requested attachment is $4 million.) The Agreements require that [a]ll major decisions affecting the sale of the property will be made by all parties of The LLC.” (Lubit Decl. Ex. A at Art. VIII, Ex. B at § 19.) However, the Agreements also charged FMB with the responsibility of “[c]ompleting [the] loan process with a lender for 65% LTV.” (Id. Ex. A at § 3.2(b), Ex. B at § 4.) While the sale of the properties is subject to a $4 million lien, it appears that the parties expressly agreed that FMB was responsible for completing a loan process.

In any event, the loans appear to have been paid off. According to preliminary title reports concerning the two subject properties, the properties are not encumbered by any deeds of trust for $4,000,000 or any deeds of trust recorded on September 12, 2014, with respect to the Formosa Property, or September 15, 2014, with respect to the Romaine Property. (Bryn Decl. ¶ 3, Schedule B to Exs. 2, 3; cf. RJN Exs. B, E [Deeds of Trust recorded on 9/12/14 against Formosa Property and 9/15/14 against Romaine Property].) Therefore, to the extent that FMB required petitioner’s consent before securing the $4 million loan with the subject properties, it would appear the properties are no longer encumbered (or never were) as security for said loan.

Further, even if this Court were to disregard the evidence in the preliminary title reports as is argued in petitioner’s late-filed Reply, the Court could still not find petitioner has demonstrated a judgment in his favor is more likely than not on this record. Assuming, arguendo, the properties are still encumbered, the purported breach of the Agreements was using the properties for security for a loan. There is no damage flowing from such breach if the security is not acted upon. Here, petitioner provides no evidence of the terms of any loan, whether any such loan remains unsatisfied, whether there is or has been any loan default, or whether there is any likelihood the security interest would be used to satisfy any such unspecified loan or portion thereof. Damages are an essential element of a claim for breach of contract (CACI 303), and petitioner provides no evidence of damages flowing from the alleged breach.[1]

Based on the foregoing, petitioner fails to demonstrate that it is more likely than not that petitioner will obtain a judgment in his favor.

In addition, petitioner does not show how any arbitration award may be rendered ineffectual without the writ of attachment. (See CCP § 1281.8(b) [“A party to an arbitration agreement may file in the court in the county in which an arbitration proceeding is pending…an application for a provisional remedy in connection with an arbitrable controversy, but only upon the ground that the award to which the applicant may be entitled may be rendered ineffectual without provisional relief.”]; 1281.8(a)(1) [“provisional remedy” includes attachments].) Petitioner only states that “[r]espondents may have dissipated assets available to pay the $4,000,000 in damages to the LLCs should FMB Development’s loan be paid prior to the conclusion of any arbitration between the parties.” (Lubit Decl. ¶ 16.) Petitioner does not explain the basis for this contention. Petitioner merely speculates that respondents may not have sufficient assets to satisfy any award. Attaching FMB’s property with a speculative showing would only serve to invade the province of the arbitrator, who the parties agreed would adjudicate their disputes. (10/3/23 Minute Order [stating parties agreed to arbitration]; Woolley v. Embassy Suites, Inc. (1991) 227 Cal.App.3d 1520, 1527, emphasis added [The logical reason for the requirement that an applicant be required to show that an arbitration award may be rendered ineffectual is to ensure that the court does not invade the province of the arbitrator—i.e., the court should be empowered to grant provisional relief in an arbitrable controversy only where the arbitrator's award may not be adequate to make the aggrieved party whole”].)

[1] Instead, petitioner merely presumes harm in the full amount of the purported $4 million security interest, failing to account for—or, more to the point, carry his burden to demonstrate—any actual unpaid portion of the loan that the security interest would be used to satisfy. As such, petitioner also fails to demonstrate that his claim is for a “fixed or readily ascertainable amount,” which is a separate and independent reason why he is not entitled to a writ of attachment. (CCP § 483.010(a).)