Judge: Curtis A. Kin, Case: 23STCV22978, Date: 2024-02-20 Tentative Ruling

Case Number: 23STCV22978    Hearing Date: February 20, 2024    Dept: 82

Plaintiff GN Textile, Inc. moves for right to attach orders in the amount of $1,060,027.71 against defendants D I F Group, Inc. and Dulos, Inc.

I.       Factual Background

            Plaintiff GN Textile, Inc. sells and ships textiles to manufacturers and wholesale customers. (Park Decl. ¶ 3.) Defendant D I F Group, Inc. (“DIF”) is a garment manufacturer. (Kim Decl. ¶ 2.) Defendant Dulos, Inc. is a clothing wholesaler. (Kim Decl. ¶ 2.)

            DIF sent purchase orders for textiles to DIF. (Park Decl. ¶ 6.) From December 16, 2019 to January 3, 2022, plaintiff invoiced DIF. (Park Decl. ¶ 6 & Ex. A.) According to the invoices, the textiles were shipped to a warehouse operated by Dulos in Vietnam. (Park Decl. ¶ 15 & Ex. A.)  

            The invoices stated: “ALL CLAIMS MUST BE MADE WITHIN FIVE (5)DAYS OF RECEIPT OF GOODS.” (Park Decl. ¶ 8 & Ex. A.) The invoices also stated: “CUSTOMER HEREBY AGREES TO PAY INTERES[T] AT THE RATE SELLER PAYS TO ITS FACTORS ON ALL OVERDUE PAYMENTS, AND ALL COSTS OF COLLECTION INCLUDING REASONABLE ATTORNEY’S FEES.” (Ibid.) DIF and Dulos accepted the deliveries of the textiles without claim or complaint. (Park Decl. ¶ 9.)

            Payment on the invoices was due either within 60 days (“Net 60”) or 90 days (“Net 90”) of each invoice until 2020 and due C.O.D. since 2021. (Park Decl. ¶ 7.) A balance of $638,762.10 remains unpaid. (Park Decl. ¶¶ 16, 17 & Ex. D.)

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

1.            Evidentiary Matters

            Plaintiff’s requests for judicial notice are GRANTED. (Evid. Code § 452.) Plaintiff’s evidentiary objections are DENIED.

2.            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).) 

a.    D I F Group, Inc.

Plaintiff presents invoices that were billed to DIF. (Park Decl. ¶¶ 6, 15 & Ex. A.) The invoices provided that claims must be provided within 5 days of receipt of goods. (Park Decl. ¶ 8 & Ex. A.) The invoices also provided that DIF agrees to pay interest at the rate that plaintiff pays to its factors, i.e., prime plus 4.5%, on all overdue payments, as well as reasonable attorney fees incurred in collection. (Park Decl. ¶¶ 8, 21 & Ex. A.) DIF accepted the shipments without claim or complaint. (Park Decl. ¶ 9.)

Defendants argue that there is no evidence that they agreed to pay the amounts on the invoices, including interest and attorney fees. Commercial Code § 2207 determines whether the terms listed in the invoices are a term of the contract between plaintiff and DIF. (See Hebberd-Kulow Enterprises, Inc. v. Kelomar, Inc. (2013) 218 Cal.App.4th 272, 283 [“[T]o find the interest provision an agreed upon term under section 2207, the court had to rely on more evidence than the invoices”].) “[S]ection 2207 inquires as to whether the parties intended to complete an agreement….” (Steiner v. Mobil Oil Corp. (1977) 20 Cal.3d 90, 99.) “If the parties intend to contract, but the terms of their offer and acceptance differ, section 2207 authorizes a court to determine which terms are part of the contract, either by reference to the parties’ own dealings (see § 2207, subds. (1), (2)), or by reference to other provisions of the code. (See § 2207, subd. (3).)” (Id. at 99-100.)

            Here, DIF offered to purchase textiles from plaintiff by sending purchase orders to plaintiff. (Park Decl. ¶ 6.) Plaintiff then invoiced DIF with a term that claims must be provided within 5 days of receipt of goods. The terms in the invoice “are to be construed as proposals for addition to the contract.” (Comm. Code § 2207.) It is undisputed that GN Textile and DIF are merchants. (Park Decl. ¶ 3; Kim Decl. ¶ 2; Boyd v. Oscar Fisher Co. (1989) 210 Cal.App.3d 368, 379, citing Comm. Code § 2104 [“‘Between merchants’ means a transaction where both parties deal in or are otherwise knowledgeable about goods like those involved in the transaction”].)

Between merchants, the terms in the invoices, including the interest and attorney fee provisions, were to become part of the contract unless “(a) The offer expressly limits acceptance to the terms of the offer; [¶] (b) They materially alter it; or [¶] (c) Notification of objection to them has already been given or is given within a reasonable time after notice of them is received.”

            With respect to subdivision (a) of Commercial Code § 2207(2), defendants provide no evidence that the purchase order limited acceptance to the terms of the offer.

With respect to whether the interest and attorney fee provisions materially alter the terms of the offer, they do not. “A clause that would materially alter the contract is one which ‘result [s] in surprise or hardship if incorporated without express awareness by the other party.’ [Citation.]” (C9 Ventures v. SVC-West, L.P. (2012) 202 Cal.App.4th 1483, 1506.)

Concerning the interest provision, “[A] clause providing for interest on overdue invoices” is an example of a clause “which involve no element of unreasonable surprise and which therefore are to be incorporated in the contract unless notice of objection is seasonably given.” (Comm. Code § 2207, Off. Cmt. 5; see also O'Connor v. Televideo System, Inc. (1990) 218 Cal.App.3d 709, 718-19 [“The fact that the parties agreed to the 1 ½ percent monthly charge is also established by Commercial Code section 2207 which provides that additional terms become part of the contract between merchants unless the person receiving them objects”].)

            Concerning the attorney fee provision, such provisions also become part of the contract if no objections are made. (See Boyd v. Oscar Fisher Co. (1989) 210 Cal.App.3d 368, 379 [invoices added attorney fee provision when dealer acknowledged receiving and reading attorney fee provision]; South Bay Transportation Co. v. Gordon Sand Co. (1988) 206 Cal.App.3d 650, 660 [attorney fee provision added to contract by signed bills of lading].) The attorney fee provision was in the invoices, which DIF had the opportunity to read and to which it had the opportunity to object. (See also Comm. Code § 2201(2) [record in conformation of contract is enforceable against recipient of record “unless notice in a record of objection to its contents is given within 10 days after it is received”].)

            Over the course of more than two years, DIF never objected to the invoices or the textiles they received. (Park Decl. ¶¶ 6, 9.) Accordingly, the invoices, including the interest and attorney fee provisions, are enforceable against DIF.

b.    Dulos, Inc.

With respect to Dulos, plaintiff does not present any contract into which Dulos entered. The invoices were billed to DIF with the textiles shipped to Dulos. (Park Decl. ¶¶ 6, 15 & Ex. A.) Contrary to the assertion in the declaration of Mijin Park, Dulos was never invoiced. (Id. ¶ 6.)

In the reply, plaintiff contends that attachment may be sought against Dulos as the alter ego of DIF. (Meizlisch v. San Francisco Wool Sorting & Scouring Co. (1931) 213 Cal. 668, 670 [finding sufficient evidence to warrant attachment as alter ego].)

“In California, two conditions must be met before the alter ego doctrine will be invoked. First, there must be such a unity of interest and ownership between the corporation and its equitable owner that the separate personalities of the corporation and the shareholder do not in reality exist. Second, there must be an inequitable result if the acts in question are treated as those of the corporation alone.” (Sonora Diamond Corp. v. Superior Court (2000) 83 Cal.App.4th 523, 538-539.) “Among the factors to be considered in applying the doctrine are commingling of funds and other assets of the two entities, the holding out by one entity that it is liable for the debts of the other, identical equitable ownership in the two entities, use of the same offices and employees, and use of one as a mere shell or conduit for the affairs of the other.” (Ibid., internal citations omitted.) “Other factors which have been described in the case law include inadequate capitalization, disregard of corporate formalities, lack of segregation of corporate records, and identical directors and officers.” (Ibid.)

            In support of the assertion that Dulos is an alter ego of DIF, plaintiff presents Statements of Information filed with the Secretary of State indicating that Hagihll Kim is the Chief Executive Officer, Secretary, and Chief Financial Officer of both Dulos and DIF.  (RJN Exs. A, B.) Plaintiff also presents a Guaranty signed by Kim and two other individual guarantors in exchange for forbearance from filing a lawsuit against DIF. (Park Decl. ¶ 12 & Ex. C.) Park, the CEO of plaintiff, testified that she has interacted with DIF and Dulos at their principal place of business and shared computers and locations with them. (Park Decl. ¶ 3.)

            Even if DIF and Dulos share officers, employees, and location, this is insufficient to demonstrate that they are alter egos. “Alter ego is an extreme remedy, sparingly used.” (Sonora Diamond, 83 Cal.App.4th at 539.) “No one characteristic [in the alter ego factors] governs, but the courts must look at all the circumstances to determine whether the doctrine should be applied.” (Ibid.) Plaintiff does not submit evidence of commingling of funds, inadequate capitalization of DIF, disregard of corporate formalities, or similar factors under the alter ego doctrine. Plaintiff has provided insufficient evidence for the Court to find there is sufficient unity of interest between DIF and Dulos to disregard their corporate separateness.  Further, plaintiff fails to establish that inequity would necessarily result from failing to apply the alter ego doctrine for purposes of attachment.

Based on the foregoing, the Court finds that plaintiff’s claim for payment of the amount due under the invoices is one upon which attachment may be issued, but only as to defendant DIF. 

3.            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.)

            For the reasons set forth above, plaintiff establishes that DIF accepted the textiles reflected in the invoices without objection, thereby accepting the terms set for in the invoices. DIF has not paid all amounts set for in the invoices by the due dates set forth therein. (Park Decl. ¶¶ 7, 16, 17 & Ex. D.) Accordingly, plaintiff demonstrates a probable validity of obtaining a judgment on its contract claim against DIF. (Compl. ¶¶ 25, 26, 48-51.)

4.            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).)

Plaintiff declares that “[a]ttachment is not sought for a purpose other than the recovery on a claim upon which the attachment is based.” (App. ¶ 4.)

Plaintiff also demonstrates that the amount to be secured by the attachment is greater than zero. (App. ¶ 8.) Defendant has not directly objected to plaintiff’s calculations, including $638,762.10 principal, $398,325.77 interest, $5,000 costs, and $17,939.84 attorney fees pursuant to Local Rule 3.214. (Rho Decl. ¶¶ 2, 3 & Ex. 1; RJN Ex. C.)

However, with respect to attorney fees, it is unclear how plaintiff calculated $17,939.84. (Rho Decl. ¶ 6.) Under Local Rule 3.214, in a contested case, for amounts over $100,000, the attorney fees are calculated as follows: “$5,270 plus 2% of the excess over $100,000.” $638,762.10 (principal) minus $100,000 is $538,762.10, and two percent (2%) of $538,762.10 is $10,775.24.  When adding $5,270 to $10,775.24 per Local Rule 3.214, the resulting sum is $16,045.24. Accordingly, the requested attachment is reduced by $1,894.60, the difference between the $17,939.84 requested by plaintiff and $16,045.24, the correct amount.

5.    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. Plaintiff moves to attach any property of DIF.

6.    Exemptions

No claims of exemptions have been filed.

7.    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. Plaintiff agrees to provide an undertaking in the amount required by CCP § 489.220(a). The Court will order an undertaking in the amount of $10,000 for DIF.

IV.     Conclusion

            With respect to Dulos, Inc., the application is DENIED.

            With respect to D I F Group, Inc., the application is GRANTED in the amount of $1,058,133.11 ($1,060,027.71 requested, minus $1,894.60 for overstated attorney fees). Plaintiff GN Textile, Inc. shall post an undertaking in the amount of $10,000 before any writ of attachment will issue.