Judge: Curtis A. Kin, Case: 23STCV18989, Date: 2024-02-15 Tentative Ruling

Case Number: 23STCV18989    Hearing Date: February 15, 2024    Dept: 82

Plaintiff Skanska USA Building Inc. seeks a writ of attachment against defendant MIK Construction, Inc. in the amount of $723,810.85.  For the reasons that follow, the request is GRANTED IN PART.

I.       Factual Background

            Plaintiff Skanska USA Building Inc. (“Skanska”) was the construction manager of a project to replace the Acute Care Services building at Hollywood Presbyterian Medical Center (“Project”). (Childress Decl. ¶¶ 2, 3.) Pursuant to a written subcontract agreement dated May 24, 2019, Skanska engaged defendant MIK Construction, Inc. (“MIK”) to furnish and install the site concrete, asphalt, hardscape, and related work and services at the Project. (Childress Decl. ¶¶ 5, 6; Kim Decl. ¶ 8.)

            From July 2020 to April 2022, MIK and Skanska corresponded with respect to changing the type of foam used in the Project. (Kim Decl. ¶ 9.) On April 19, 2022, Skanska submitted a change order to the Project owner. (Kim Decl. ¶ 10.) The Project owner rejected Skanska’s request for change order. (Kim Decl. ¶ 12.)

            To mitigate any potential claims and delays on the Project, on April 30, 2022, Skanska and MIK executed Change Order No. 3 to MIK in the amount of $1,480,000 with respect to the changing of foam. (Kim Decl. ¶¶ 12, 14 & Ex. 4; Childress Decl. ¶ 8.) Change Order No. 3 contains a provision stating, “Subcontractor agrees upon written demand by Contractor to remit any and all SCO [Subcontractor Change Order] Advances to Contractors within 10 calendar days of receipt of such demand.” (Kim Decl. ¶ 14 & Ex. 4 at 1.) Pursuant to Change Order No. 3, Skanska advanced the sum of $723,810.85 to MIK through two payments. (Childress Decl. ¶¶ 9, 10 & Exs. B, C.) Pursuant to Skanska’s orders, MIK procured the desired kind of foam. (Kim Decl. ¶¶ 15, 16.)

            On April 17, 2023, the Project owner terminated its contract with Skanska and provided notice of its intent to assume the subcontract between Skanska and MIK. (Kim Decl. ¶ 17.)

On June 21, 2023, with respect to the foam paid for by Skanska, Gordon Childress, Skanska’s Executive Vice President, purportedly stated that Skanska would not ask for a credit or refund on the foam, according to Billy Kim, President of MIK. (Kim Decl. ¶ 21.) Childress denies Kim’s assertion, stating that he “specifically told Mr. Kim that Skanska expected MIK to repay these funds now that Skanska was no longer involved with the Project.” (Supp. Childress Decl. ¶¶ 3, 4.)

            MIK has become general contractor on the Project. (Kim Decl. ¶ 23.) On July 21, 2023, Skanska issued a formal demand to MIK for repayment of the $723,810.85 it paid pursuant to Change Order No. 3. (Childress Decl. ¶ 13 & Ex. D; Kim Decl. ¶ 16.) MIK refuses to make repayment. (Childress Decl. ¶¶ 14, 15.)

On July 25, 2023, MIK recorded a mechanic’s lien in the amount of $381,374.45 for amounts due under the subcontract and for change orders and extra work ordered by Skanska. (Kim Decl. ¶ 25.)

II.      Applicable Law

            “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.

(4) The amount to be secured by the attachment is greater than zero.

(CCP § 484.090(a)(1-4).)

            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.)

III.     Analysis

A.           Evidentiary Matters

All evidentiary objections are OVERRULED.

B.           Basis of Attachment

“[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).) 

Skanska presents Change Order No. 3, which states:

This Subcontractor Change Order (SCO) is an Advance on Subcontractor’s issues with processing changes with the Owner. Subcontractor has asserted it was delayed and/or impacted due to rejected and lack of negotiated changes in good faith by the Owner. While the claim with the Owner is pending, Skanska has opted to advance this SCO to Subcontractor with full reservation of rights.

(Childress Decl. ¶ 8 & Ex. A at 1.) Change Order No. 3 provides for MIK to provide all labor, material, and equipment on the portions of the Project specified therein. Change Order No. 3 also provides explicitly:

Subcontractor agrees upon written demand by Contractor to remit any and all SCO Advances to Contractor within 10 calendar days of receipt of such demand.

(Childress Decl. ¶ 8 & Ex. A at 1.) Change Order No. 3 was executed by Skanska as Contractor and MIK as Subcontractor.  

MIK objects to Skanska’s presentation of Change Order No. 3 as inadmissible hearsay. However, MIK presents the same change order in support of its opposition. (Kim Decl. ¶ 14 & Ex. 4.) MIK does not deny the existence of the change order.

Pursuant to Change Order No. 3, Skanska paid $723,810.85 as an advance on the labor, material, and equipment for the work described in the change order. (Childress Decl. ¶¶ 8, 9.) MIK does not deny that Skanska paid $723,810.85. (Opp. at 8:14-17.) Skanska has demanded repayment of $723,810.85 pursuant to the change order. (Childress Decl. ¶ 13 & Ex. D; Kim Decl. ¶ 24.) The amount to be secured is readily ascertainable.

Based on the foregoing, the Court finds that Skanska’s claim for payment of the amount due under Change Order No. 3 is one upon which attachment may be issued.

C.           Probable Validity of Plaintiff’s Claims

“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.)

            Based on the discussion above, Skanska demonstrates probable validity of its claims. Pursuant to Change Order No. 3, Skanska and MIK agreed that Skanska would advance money to MIK and that MIK would repay the money within 10 days of demand by Skanska.

            MIK argues that Skanska has not demonstrated probable validity for several reasons. Each reason is without merit, as discussed below.

            MIK asserts that Skanska directed it to procure the materials for the work described in the change order and submitted a claim to the owner for the same work. MIK also argues that the terms of Skanska’s subcontract with it transferred title to the work to Skanska at the time of Skanska’s payment. MIK’s arguments ignore the terms of the change order, a written contract executed by both Skanska and MIK. MIK agreed to pay Skanska for any advances made on the change order within 10 days of demand. Skanska made the required demand. There are no other conditions for repayment set forth in Change Order No. 3.

            Kim avers that Childress disclaimed any right to repayment on the materials. (Kim Decl. ¶ 21.) Not only does Childress deny having disclaimed any refund (Supp. Childress Decl. ¶¶ 3, 4), Kim’s averment strains credulity. There is no explanation proffered as to why Childress or Skanska would not enforce its rights to repayment.

            MIK also argues that Change Order No. 3 violates public policy because it seeks to waive MIK’s mechanics lien rights. (See Civ. Code § 8122 [“An owner, direct contractor, or subcontractor may not, by contract or otherwise, waive, affect, or impair any other claimant’s rights under this part, whether with or without notice, and any term of a contract that purports to do so is void and unenforceable unless and until the claimant executes and delivers a waiver and release under this article”].) The change order does not seek to prevent MIK from obtaining payment for its work on the Project. MIK has recorded a lien of “$381,374.45 against the property for the Project for amounts due under its Subcontract and for change orders and extra work that Skanska directed MIK to perform.” (Kim Decl. ¶ 25.) Any repayment of funds advanced under Change Order No. 3 can be added to the lien.

            MIK also contends that Change Order No. 3 is unenforceable as a pay-if-paid clause. “A pay if paid provision makes payment by the owner to the general contractor a condition precedent to the general contractor’s obligation to pay the subcontractor for work the subcontractor has performed.” (Wm. R. Clarke Corp. v. Safeco Ins. Co. (1997) 15 Cal.4th 882, 885.) The California Supreme Court ruled pay-if-paid clauses unenforceable because “they effect an impermissible indirect waiver or forfeiture of the subcontractors’ constitutionally protected mechanic's lien rights in the event of nonpayment by the owner.” (Id. at 886.) Nothing in Change Order No. 3 states that Skanska will pay MIK only if the Project owner pays Skanska.  To the contrary, Skanska advanced funds to MIK pursuant to Change Order No. 3.  Skansak now seeks the return of the advanced funds pursuant to the explicit terms of Change Order No. 3.  The prohibition against pay-if-paid clauses has no bearing on Change Order No. 3.

Based on the foregoing, MIK has not defeated the probable validity of Skanska’s claim against it.

D.          Purpose and Amount of Attachment

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).)

Skanska declares that attachment is not sought for a purpose other than the recovery on its claim. (See App. ¶ 4.) MIK argues that Skanska’s application for right to attach order is sought to harass MIK to dismiss or settle its Cross-Complaint. There is no evidence for this assertion. Skanska is entitled to enforce its rights under The Attachment Law, CCP § 482.010, et seq.

Further, the amount requested by Skanska to be secured is greater than zero.

However, CCP § 483.015(b)(2) provides that the amount to be secured by an attachment “shall be reduced by…[t]he amount of any indebtedness of the plaintiff that the defendant has claimed in a cross-complaint filed in the action if the defendant’s claim is one upon which an attachment could be issued.” (CCP § 483.015(b)(2).) MIK has filed a First Amended Cross-Complaint seeking at least $400,000 from Skanska for work it performed under the subcontract between them. (FAXC ¶¶ 13, 16, 17.) MIK’s claim for its work is a readily ascertainable amount that is $500 or more. In its reply, Skanska has not explained how CCP § 483.015(b)(2) is inapplicable. Accordingly, the amount of attachment is reduced by $400,000 to $323,810.85.

E.           Property Subject to Attachment

CCP § 487.010(a) states that, where the defendant is a corporation, all corporate property for which a method of levy is provided in CCP § 488.300, et seq. is subject to attachment. Skanska moves to attach any property of MIK.

F.           Exemptions

MIK has not filed a claim of exemption. 

G.          Undertaking

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. Neither party addresses the proper amount of an undertaking. In the absence of any argument by either party, the Court orders an undertaking in the amount of $10,000.

IV.     Conclusion

            The application is GRANTED IN PART.  Plaintiff Skanska USA Building Inc. is entitled to the issuance of a writ of attachment in the amount of $323,810.85, subject to plaintiff first posting an undertaking in the amount of $10,000.

            The Court will with the proposed Right to Attach Order and Order for Issuance of Writ of Attachment After Hearing (Judicial Council Form AT-120), electronically received December 13, 2023.