Judge: Curtis A. Kin, Case: BC722308, Date: 2023-10-17 Tentative Ruling

Hon. Curtis Kin The clerk for Department 82 may be reached at (213) 893-0530.

Case Number: BC722308    Hearing Date: October 17, 2023    Dept: 82

Plaintiff Nike USA, Inc. moves for a right to attach order against defendant 5860 West Jefferson I, LLC in the amount of $6,669,117.53.

I.       Factual Background

            On May 2, 2016, plaintiff Nike USA, Inc. entered into a written lease agreement (“Lease”) with defendant 5860 West Jefferson, LLC for plaintiff to lease commercial property. (FAC ¶ 7.) 5860 West Jefferson, LLC later transferred its interest under the Lease to defendant 5860 West Jefferson I, LLC. (FAC ¶ 8.) 5860 West Jefferson, LLC and 5860 West Jefferson I, LLC are hereinafter referred to collectively as “Lessor.”

            Under the Lease, Lessor was to build the Base Shell and Core (“BSC”) structure and specified Tenant Improvements. (FAC ¶¶ 10, 11.) Lessor was to pay for the BSC. (FAC ¶ 11.)  Plaintiff was responsible for paying for the Tenant Improvements to the extent their cost exceeded $2,994,000 million. (FAC ¶ 12.)

Plaintiff intended to use the property for a photography and media studio. (FAC ¶ 9.) Time was of the essence under the Lease. (FAC ¶ 13.) The Lease provided for a delivery deadline of December 17, 2017, by which the property had to be ready for occupancy. (FAC ¶ 16.) The property was delivered after the deadline with substantial aspects of the construction incomplete and/or defective. (FAC ¶ 17.)

            As pertinent to the instant application, defendant Samitaur Constructs (“Samitaur”), an affiliate of Lessor, was the entity designated to construct the Tenant Improvements under the Lease. (FAC ¶ 11.) Neither Samitaur nor Lessor ever held a contractor’s license. (FAC ¶ 52.) Pursuant to Business & Professions Code § 7031(b) of the California Contractors’ State License Law, plaintiff seeks to recover the amounts it paid for the Tenant Improvements. (FAC ¶¶ 48, 53, 54.)

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.           Notice

The proof of service of the moving papers indicates that service was timely. Defendant 5860 West Jefferson I, LLC filed an opposition.

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).) 

            The amount sought to be attached is based on the sixth cause of action for Restitution of Amounts Paid for Unlicensed Construction Work pursuant to Business & Professions Code § 7031(b). (P&A at 2:4-7.) “[A] claim brought under the CSLL [Contractors’ State License Law] against an unlicensed contractor may appropriately form the basis for a right to attach order since an agreement for the performance of services lies at the heart of such a claim.” (Goldstein v. Barak Construction (2008) 164 Cal.App.4th 845, 853.) “A claim under section 7031, subdivision (b) is fundamentally contractual in nature since it is based on an unlicensed contractor's agreement with the beneficiary to provide services, and the beneficiary's agreement to pay for same. Had the unlicensed contractor not received payment for unlicensed services, the beneficiary would have no cause of action to recoup such payments under section 7031, subdivision (b).” (Id. at 854-55.)

Defendant does not dispute plaintiff’s claim is the type upon which an 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.)

With respect to the sixth cause of action, plaintiff obtained summary adjudication in its favor. (Frisch Decl. ¶ 2 & Ex. B.) Under section 7031(b), “a person who utilizes the services of an unlicensed contractor may bring an action in any court of competent jurisdiction in this state to recover all compensation paid to the unlicensed contractor for performance of any act or contract.” Defendant 5860 West Jefferson I, LLC admitted in discovery that it did not have any contractor’s license. (Frisch Decl. ¶ 4 & Ex. D at 10.) The Court (Hon. Gregory Keosian) found that defendant acted as a “contractor” as defined by section 7031(b) of the CSLL. (Frisch Decl. Ex. B at 4-6.)  The Court thus concluded that plaintiff is entitled to recover $6,669,117.53 in restitution due to defendant’s work as a contractor without a license. (Id. at 9-10.)  Defendant presents no argument concerning the probable validity of plaintiff’s claim.

            Accordingly, plaintiff demonstrates the probable validity of its claim for restitution under Business & Professions Code § 7031(b) against defendant 5860 West Jefferson I, LLC.

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).)

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.) Defendant argues that plaintiff delayed in seeking a right to attach order, as plaintiff obtained summary adjudication three years ago, the instant action has been pending for five years, and trial is currently set to begin in a matter of days. However, defendant cites no authority indicating that delay in seeking a right to attach order means the attachment is sought for an improper purpose. (Opp. at 4:7-11.) On the face of the application, plaintiff seeks attachment in the amount of restitution to which the Court found plaintiff is entitled. (App. ¶ 8; Frisch Decl. ¶ 4 & Ex. D at 9-10.)

Defendant also argues that plaintiff’s claim is subordinate to other notes secured by the subject commercial property. (Opp. at 4:18-21.) Even if true, this does not serve as a basis to deny a right to attach order. So long as plaintiff meets the requirements of CCP § 484.090(a), plaintiff may obtain an order of attachment and will be afforded the priority to which it is entitled vis-à-vis other creditors. Any issues concerning lien priority are not before this Court at this time and are more properly addressed post-judgment, assuming plaintiff obtains a net recovery against defendant.

Defendant thus fails to show that the instant application is for an improper purpose.

Plaintiff also demonstrates that the amount to be secured by the attachment is greater than zero, specifically, the $6,669,117.53 that it paid for unlicensed construction work. (Frisch Decl. ¶ 4 & Ex. D at 9-10.) Defendant contends that it is entitled to an offset based on cross-claims it asserted against plaintiff in its cross-complaint. (Opp. at 5:15-18; CCP § 483.015(b)(2) [amount to be secured by attachment reduced by “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”].) However, defendant’s declaration in support of its opposition does not address the value of any offset. (See CCP § 484.060(a) [defendant’s notice of opposition to amount sought to be secured by attachment “shall be accompanied by an affidavit supporting any factual issues raised and points and authorities supporting any legal issues raised”].) Defendant’s declaration only addresses its contention that any lien imposed by a writ of attachment would be subordinate to other liens. (See Opp. at 4:16-19, citing Wachtel Decl. Exs. A-I.) Indeed, defendant admits as much in its opposition, conceding “[t]he precise among of Lessor’s damages is subject to proof.” (Opp. at 5.)

Because defendant did not make any showing as to the proper amount of offset, the Court finds that plaintiff is entitled to a right to attach order in the amount of $6,669,117.53.

E.           Bankruptcy

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).” Plaintiff provides this statement. (App. ¶ 4.)

F.           Property Subject to Attachment

CCP § 487.010(c) lists categories of property subject to attachment where the defendant is a natural person. Plaintiff moves to attach any property of defendant who is not a natural person. (App. ¶ 9(a).) Plaintiff is entitled to the requested attachment. (See CCP § 487.010(b) [“The following property of the defendant is subject to attachment…(b) Where the defendant is a partnership or other unincorporated association, all partnership or association property for which a method of levy is provided by Article 2 (commencing with Section 488.300) of Chapter 8”].)

G.           Exemptions

Defendant did not file any claim of exemption.

H.          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. The Court orders the posting of a bond in the amount of $10,000 per CCP § 489.220(a).

IV.     Conclusion

            The application is GRANTED in the amount of $6,669,117.53. Plaintiff Nike USA, Inc. shall post an undertaking in the amount of $10,000 before any writ of attachment shall issue.