Judge: Curtis A. Kin, Case: 23STCV17779, Date: 2023-12-05 Tentative Ruling
Case Number: 23STCV17779 Hearing Date: December 5, 2023 Dept: 82
APPLICATIONS FOR RIGHT TO ATTACH ORDERS
Date: 12/5/23
(9:30 AM)
Case: Paul Kramer et al.
v. Royal Holdings Technologies Corp. et al. (23STCP17779)
TENTATIVE RULING:
Plaintiffs Paul Kramer and Linda Crouse’s UNOPPOSED
application for right to attach order with respect to defendant Royal Holdings
Technologies Corp. is GRANTED IN PART.
Plaintiffs Paul Kramer and Linda Crouse’s UNOPPOSED
application for right to attach order with respect to defendant Todd Dunphy is
GRANTED IN PART.
Plaintiffs Paul Kramer and Linda Crouse’s UNOPPOSED
application for right to attach order with respect to defendant Barend
Oberholzer is DENIED.
With respect to defendant Barend Oberholzer, also known as
Barry Oberholzer, defendant Oberholzer was not served with the documents as
required by CCP § 484.040, including (a) a copy of the summons and operative
First Amended Complaint, (b) notice of application for right to attach order,
and (c) a copy of the application for right to attach order and the
declarations in support of the application. Pursuant to CCP §§ 484.040 and
484.080(a), the application as to defendant Oberholzer is DENIED.
With respect to defendants Royal Holdings Technologies Corp.
dba X.Labs and Todd Dunphy, the Court finds:
1)
the claim is one upon which attachment may be issued;
2)
plaintiffs have established the probable validity of
the claim;
3)
attachment is not sought for any purpose other than
recovery on the claim;
4)
the amount to be attached is greater than zero.
Plaintiffs Paul Kramer and Linda Crouse’s claim against
Royal Holdings Technologies Corp. (“RHTC”) and Dunphy is based on funds
disbursed to RHTC pursuant to three written Loan Agreements – dated April 13,
2020 (“April 2020 Agreement”); November 1, 2020 (“November 2020 Agreement”), as
amended on March 1, 2021 and April 1, 2021; and February 9, 2021 (“February
2021 Agreement”) (collectively, “Loan Agreements”) – between plaintiffs and
RHTC. (Kramer Decl. ¶¶ 4, 8, 11, 12, 14 & Exs. 1, 3, 6, 7, 8.)
On November 1, 2020, Dunphy, a principal of RHTC, signed a
Continuing Secured Guaranty (“Guaranty”), whereby Dunphy guarantied the amounts
owed by RHTC under the November 2020 Agreement, as well as “any and all
loans…extended by” plaintiffs to RHTC and “all debts…of” RHTC to plaintiffs.
(Kramer Decl. ¶ 9 & Ex. 4 at ¶¶ 1, 2.) The Guaranty also applies to future
transactions. (Kramer Decl. ¶ 9 & Ex. 4 at ¶¶ 4, 13.)
The Loan Agreements define “default” as including a failure
to make all payments when due under the agreements. (Kramer Decl. ¶ 3 & Ex.
1 at § 3; ¶ 8 & Ex. 3 at § 3; ¶ 14 & Ex. 8 at § 4.) RHTC breached the
Loan Agreements, as amended, by failing to make the payment due on August 30,
2020 under the April 2020 Agreement, the payment due on May 31, 2021 under the
November 2020 Agreement, as amended on April 1, 2021, and the payment due on
May 31, 2021 under the February 2021 Agreement. (Kramer Decl. ¶ 3 & Ex. 1
at § 2(a); ¶ 12 & Ex. 7; ¶ 14 & Ex. 8 at § 2(i); ¶ 18.)
RHTC failed to pay amounts due under the agreements,
purportedly totaling $877,233.45. (Kramer Decl. ¶¶ 18, 20; Shackelford Decl. ¶
3 & Ex. 10.) However, plaintiffs compounded interest in calculating the
amount owed. (See Shackelford Decl. ¶ 3 & Ex. 10 [interest accrued
during each full year after maturity date added to balance; interest for
following year based on sum of principal and interest from previous year].)
“[I]n the computation of interest upon any bond, note, or other instrument or
agreement, interest shall not be compounded, nor shall the interest thereon be
construed to bear interest unless an agreement to that effect is clearly
expressed in writing and signed by the party to be charged therewith….” (Civ.
Code § 1916-2.)
The Loan Agreements do not expressly provide for compound
interest. They only state the applicable interest rate before and after
default. (Kramer Decl. ¶ 3 & Ex. 1 at §§ 2(a), 5; ¶ 8 & Ex. 3 at §§
2(a), 5; ¶ 14 & Ex. 8 at §§ 2(a), 6.) Because the interest as calculated by
plaintiffs violates Civil Code § 1916-2, the Court subtracts from the proposed
amount to be attached the interest from the ending balances for each of the
Loan Agreements. (April 2020 Agreement [$270,664.47 - $200,000 = $70,664.47];
November 2020 Agreement [$387,252.92 - $315,000 = $72,252,92]; February 2021
Agreement [$184,406.15 - $150,000 = $43,306.15]; $70,664.47 + $72,252.92 +
$34,406.15 = $177,323.54 to be subtracted.)
With respect to attorney fees, the Loan Agreements provide
for attorney fees in connection with the enforcement of rights under the
agreements. (Kramer Decl. ¶ 3 & Ex. 1 at § 7; ¶ 8 & Ex. 3 at § 8; ¶ 14
& Ex. 8 at § 9.) Plaintiffs claim fees in the amount of $32,970, with a 10%
annual interest rate applied. (Shackelford Decl. ¶ 3.) However, the Loan
Agreements do not expressly provide for interest to be calculated for attorney
fees, only on the principal. (Compare Kramer Decl. ¶ 3 & Ex. 1 at §§
2(a), 5; ¶ 8 & Ex. 3 at §§ 2(a), 5; ¶ 14 & Ex. 8 at §§ 2(a), 6.)
Plaintiffs do not explain how much of the $32,970 claimed is interest.
Accordingly, the Court subtracts $32,970.00 from the amount to be
attached as proposed by plaintiffs.
With respect to costs, plaintiffs do not break down its
claimed costs of $1,939.91. The filing fee for the Complaint is $435.00. The
filing fees for two applications for right to attach orders is $120.00.
Accordingly, the Court subtracts $1,384.91, the difference of $1,939.91
claimed by plaintiffs and the $555.00 for the aforementioned filing fees, from
the amount to be attached as proposed by plaintiffs.
The applications with respect to RHTC and Dunphy are GRANTED
IN PART in the amount of $665,555.00. ($877,233.45 proposed by
plaintiffs - $177,323.54 interest - $32,970.00 fees - $1,384.91 costs).
The Court notes that RHTC and Dunphy were served the
summons, First Amended Complaint, and moving papers at non-California
addresses. The Court cannot attach property that is located out of state. (See
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”].) To the extent
that plaintiffs can locate property of RHTC and Dunphy that is in California,
plaintiffs are entitled to attempt to attach such property. (See, e.g., Pacific
Decision, 121 Cal.App.4th at 1108 [intangibles have no physical
characteristics that serve as basis to assign them to locality]; CCP § 481.115,
citing Comm. Code § 9102(a)(42) [defining “general intangibles” to include
money and payment intangibles].)
By no later than 12/9/23, plaintiffs are ordered to file
proposed right to attach orders for defendants RHTC and Dunphy in accordance
with this ruling.
The Writs as to RHTC and Dunphy shall issue upon the posting
of two separate bonds in the amount of $10,000 each for the two defendants.
(CCP §489.220.)
Plaintiffs also seek a temporary protective order pursuant
to CCP § 486.010 et seq. preventing defendants from “transfer[ing],
directly or indirectly, any interest in” their property that is subject to
attachment. (Proposed Orders at ¶¶ 2(i), 3(a).) Temporary protective orders may
issue if plaintiffs “will suffer great or irreparable injury (within the
meaning of Section 485.010) if the temporary protective order is not issued.”
(CCP § 486.020.) Arguably, “there is a danger that the property sought to be attached
would be concealed, substantially impaired in value, or otherwise made
unavailable to levy,” as set forth in CCP § 485.010(b)(1) because RHTC has an
approximate $1.3 million judgment and an approximate $13,000 judgment against
it. (Shackleford Decl. ¶ 6.) However, the proposed temporary protective orders
do not account for any priority that these judgments may have. Considering that
the amounts at issue in this action have not been reduced to judgment, it would
not be in the interest of justice to issue the temporary protective orders as
proposed. (CCP § 486.040.) The writs of attachment sought by plaintiffs sufficiently
protect their interests.