Judge: H. Jay Ford, III, Case: 21SMCV00285, Date: 2022-09-27 Tentative Ruling

Case Number: 21SMCV00285    Hearing Date: September 27, 2022    Dept: O

 Case Name:  Wintrust Specialty Finance v. Scremline Investment Corporation, et al.

SUBJECT:                DEMURRER TO FAC

MOVING PARTY:   Defendants Screamline Investment Corporation, Kamrouz Farhadi, Shoehleh Sapir and Starline Tours of Hollywood

RESP. PARTY:         Plaintiff Wintrust Specialty Finance

TENTATIVE RULING

            Defendants Screamline Investment Coprporation, Kamrouz Farhadi, Shoehleh Sapir and Starline Tours of Hollywood’s Demurrer to the First Amended Complaint (FAC) is OVERRULED.  Defendants’ Motion to Strike the FAC is DENIED.  Defendants to answer in 10 days.  

            Plaintiffs’ Request for Judicial Notice (RJN) is DENIED.  Plaintiff’s RJN references Exhibits 2 and 3 but no such exhibits are attached. 

            Defendants demur to the complaint on grounds that (1) Plaintiff fails to sufficiently allege standing as assignee of Advantage Funding Commercial Capital Corp. to sue on Agreement Nos. 1 and 2 or the guarantees; (2) the essential elements of the contract causes of action are only “vaguely” alleged; (3) Plaintiff alleges conflicting outstanding balance amounts under each Agreement; and (4) Plaintiff cannot state a claim for account stated, Defendants have had no transactions with it. 

            Standing as assignee sufficiently pleading.  Plaintiff alleges that Advantage Funding Commercial Capital Corp. assigned all of its rights, title and interest in Agreement Nos. 1 and 2, and the guarantees thereunder to Plaintiff on 1-30-20.  See FAC, ¶¶11 and 24.  Plaintiff attaches redacted copies of the Asset Purchase and Sale Agreement and Assignment and Assumption Agreement pursuant to which the agreements were assigned to the FAC.  See FAC, ¶6.  These allegations must be accepted as true on demurrer.  See Travelers Indem. Co. of Conn. v. Navigators Specialty Ins. Co. (2021) 70 Cal.App.5th 341, 358-359 (court must treat a demurrer as admitting all material facts properly pleaded but it does not assume truth of contentions, deductions or conclusions of law).  Plaintiff sufficiently alleges standing as assignee of Advantage and the real party in interest to sue for breach of Agreement Nos. 1 and 2 and the guarantees executed by Farhadi, Sapir and Starline Tours of Hollywood, Inc.

            Plaintiff alleges outstanding balances due under Agreement Nos. 1 and 2.  Plaintiff also alleges an outstanding balance under Agreement No. 1 of $44,774.80, plus NSF fees in the amount of $35 and $800 for repossession costs.  See FAC, ¶20.  Plaintiff alleges an outstanding balance under Agreement No. 2 of $34,170.83, plus late fees in the amount of $6,666.08 and $800 for repossession costs.  Id. at ¶33. 

            Plaintiff’s allegation of the amounts due under these Agreements before application of certain credits does not render the claims defective.  Plaintiff is seeking to collect the amounts set forth in ¶¶20 and 33, as evidenced by the amount of damages set forth in the caption of the FAC and the outstanding amounts alleged under the guarantees.  Any other interpretation of the damages allegations in the 1^st  and 2^nd causes of action would be unreasonable. 

            Elements of breach of contract sufficiently pleaded.  Plaintiff alleges each element of its 1^st through 8^th causes of action for breaches of contract.  Plaintiff alleges the material terms of Agreement Nos. 1 and 2 and the guarantees (FAC, ¶¶10, 23, 36, 40, 44, 48, 52, 56),  the assignor’s performance (FAC, ¶¶12, 25), Defendant Screamline’s breach of Agreement Nos. 1 and 2 (FAC, ¶¶13, 26, 37, 41, 45, 49, 53, 57) and Plaintiff’s damages (FAC, ¶¶20, 33, 37, 41, 45, 49, 53, 57).    Plaintiff’s allegations are not vague, nor is there any requirement that breach of contract be alleged with specificity. 

            Plaintiff also sufficiently alleges breach of the guarantees by Guarantor Defendants.  Plaintiff alleges the amounts due under the Guarantees, which are the amounts due under Agreements Nos. 1 and 2.  Plaintiff alleges that those amounts are still outstanding and remain unpaid.  See FAC, ¶¶14, 20, 27 and 33.  Plaintiff incorporates these allegations into each of the causes of action for breaches of the Guarantees.  Id. at ¶¶35, 39, 43, 47, 51, 55.  Plaintiff also alleges in the account stated claim that “Defendants,” including Guarantor Defendants failed to pay the outstanding indebtedness under the Agreements.  Id. at ¶64. 

            Account stated sufficiently pleaded.  “This count alleges that at a specified time and place an account was stated by and between plaintiff and defendant, by which a balance of a specified sum was found due from defendant to plaintiff (or in which it was agreed that defendant was indebted to plaintiff in that sum).”  4 Witkin, Cal. Proc, (6^th ed. 2021), Plead §571. 

            “Parties transacting business with each other, and keeping accounts of their transactions and items of indebtedness, may come to an agreement upon the amount of the final balance due from one to the other. This agreement is an “account stated,” a new and independent executory contract. The items in the original accounts are merged in the account stated. No right of action remains as to these items, and they are not subjects for inquiry in the action on the account stated, except where it is alleged that there was fraud or mistake, etc., in the stating of the account.”  1 Witkin, Summary (11^th ed. 2017), Contracts, §1003. 

            Plaintiff alleges that within the last four years, an account was stated by and between Plaintiff and Defendants whereby Defendants agreed they were indebted to Plaintiff in the sum of $87,245.71.  See FAC, ¶63.  Plaintiff’s allegations state a claim for account stated and must be accepted as true.  Defendants’ denial that it ever had transactions with Plaintiff is not grounds for demurrer, because it challenges the truth of Plaintiff’s allegations. 

            Motion to Strike.  Plaintiff’s failure to sign the FAC was an error. Plaintiff submitted a notice of errata on 3-14-22 attaching a signed copy of the FAC.  However, the signature page bears the date of the original complaint, not the FAC.  This error is not prejudicial and can be remedied with a Notice of Errata. 

            Defendants no longer contend that Plaintiff is not in good standing or that its standing is forfeited.  Plaintiff states in its RJN that a copy of Plaintiff’s corporate status according to the Secretary of State website is attached as Exhibit 3 to the RJN.  There is no Exhibit 3 is attached to the RJN, although one is listed in the notice.

 Case Name:  Wintrust Specialty Finance v. Scremline Investment Corporation, et al.

SUBJECT:                (1) APPLICATION FOR WRIT OF ATTACHMENT

                                    (2) APPLICATION FOR WRIT OF ATTACHMENT

                                    (3) APPLICATION FOR WRIT OF ATTACHMENT

                                    (4) APPLICATION FOR WRIT OF ATTACHMENT

MOVING PARTY:   Plaintiff Wintrust Specialty Finance

RESP. PARTY:         (1) Defendant Screamline Investment Corporation,

                                    (2) Defendant Kamrouz Farhadi

                                    (3) Defendant Shoehleh Sapir

                                    (4) Defendant Starline Tours of Hollywood

TENTATIVE RULING

            Plaintiff’s Application for Writ of Attachment is GRANTED as to Defendant Screamline Investment Corporation.  Plaintiff to post an undertaking of $10,000.

            Plaintiff’s Application for Writ of Attachment is GRANTED as to Defendant Kamrouz Farhadi.  Plaintiff to post an undertaking of $10,000.

            Plaintiff’s Application for Writ of Attachment is GRANTED as to Defendant Shoehleh Sapir.  Plaintiff to post an undertaking of $10,000.

            Plaintiff’s Application for Writ of Attachment is GRANTED as to Defendant Starline Tours of Hollywood, Inc.  Plaintiff to post an undertaking of $10,000.

Plaintiff lists $89,713.07 as the amount of attachment in each of the four applications.  However, Plaintiff lists $89,658.07 in the proposed Right to Attach Orders.  The right to attach orders is amended to reflect $89,713.07 as the amount of attachment. 

Defendants’ Evidentiary Objections to Supplemental Declaration of Normandin (filed on 8-3-22)—OVERRULE

Defendants’ Objections to Reply RJN—OVERRULE

Defendants’ Evidentiary Objections to Second Supplemental Declaration of David Normandin (filed on 9-13-22)—OVERRULE

Defendants’ Evidentiary Objections to Dec. of K. Bitters (filed on 9-13-22)—OVERRULE

Defendants’ Evidentiary Objections to Reply RJN (filed on 9-13-22)—OVERRULE

Defendants’ Evidentiary Objection to Second Supplemental Declaration of Sandra Tiberi (filed on 9-13-22)—OVERRULE

Defendants’ Evidentiary Objection to Declaration of Kenneth Ferrer (filed on 9-13-22)—OVERRULE

1.  The Claim: The money claim must be for a “fixed or readily ascertainable amount” of not less than $500 (excluding costs, interest, and attorney fees).  CCP § 483.010(a).  “If the action is against a defendant who is a natural person, an attachment may be issued only on a claim which arises out of the conduct by the defendant of a trade, business, or profession.”  CCP §483.010(c).  CCP §483.010(c)).  “A purpose of the attachment statutes is to confine attachments to commercial situations and to prohibit them in consumer transactions.”  Kadison, Pfaelzer, Woodard, Quinn & Rossi v. Wilson (1987) 197 Cal.App.3d 1, 4. 

The damages need not be liquidated. But they must be measurable by reference to the contract itself and the basis for computing damages must be reasonable and certain.  CIT Group/Equipment Financing, Inc. v. Super DVD, Inc. (2004) 115 Cal.App.4th 537, 541 (master lease and corresponding lease schedules provided clear formula for computation of damages: monthly rent multiplied by unexpired term). 

Plaintiff establishes that the claim is or a fixed or readily ascertainable amount.  See Memorandum of Points and Authorities filed on 5-10-22, Dec. of D. Normandin, ¶¶24, 30, 32; Reply filed on 8-2-22, Dec. of D. Normandin, ¶3, Ex. 2, Addenda to Agreement No. 1 and Addenda to Agreement No. 2; Supp. Dec. of D. Normandin filed on 8-30-22, ¶¶7-26; Dec. of K. Ferrer, ¶¶9-16.  Plaintiff establishes that the amount due is readily ascertainable based on the Agreement Nos. 1 and 2 and the Addendum to both agreements executed by Defendants Screamline, Farhadi and Sapir.  Plaintiff establishes the amount due under Agreement No. 1 and the Addenda is $69,279.80 and under Agreement No. 2 and the Addenda is $63,346.00.  Id. After credits, Plaintiff claims there is $89,713.07 outstanding on both loans.  Id. 

Defendants argue the amounts are not readily ascertainable, because they dispute the validity of the credits.  Defendants contend the collateral was not sold in a commercially reasonable manner, but Defendants have no evidence that the auction procedure was unreasonable.  The mere fact that Defendants offered $40,000 prior to the auction is not evidence that the auction itself was commercially unreasonable.  Sapir’s testimony that the buses are worth $100,000 each is inadmissible, because it lacks foundation.  See Dec. of S. Sapir, ¶3. 

Plaintiff also establishes that the Guarantees were executed by individual Guarantor Defendants (Sapir and Farhadi) in connection with their business, trade or profession.  Farhadi signed Agreement No. 1 as president of Defendant Screamline.  Sapir is the CFO of Defendant Screamline.  See Dec. of S. Sapir filed on 7-27-22, ¶1. 

Plaintiff also submits evidence regarding how the auction was conducted.  See Dec. of K. Bitters, ¶¶6-13.  Notice was provided to Defendants regarding the intent to sell the collateral online.  See Dec. of Tiberit, ¶4, Ex. 6.  Defendants fail to identify any aspect of the process that was unreasonable. 

2.  Probable Validity of the Claim: Is the claim supported and/or does the defendant have a viable argument in opposition to the claim?  If the application is unopposed, that appears to be a basis for finding that plaintiff has met his/her burden.  "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.). 

The court has the power to determine disputed facts on the basis of a preponderance of the evidence as disclosed in the affidavits and declarations (unlike summary judgment motions, for example, in which the court has no power to weigh the evidence).  See Hobbs v. Weiss (1999) 73 Cal. App.4th 76, 80 (court must “consider the relative merits of the positions of the respective parties and make a determination of the probable outcome of the litigation”).  The trial court is not required to accept as true the sworn testimony of any witness or undisputed affidavit testimony. It may make contrary findings based on inferences drawn from other evidence.  See Bank of America v. Salinas Nissan (1989) 207 Cal.App.3d 260, 273.

Plaintiff establishes the probable validity of its claims for breaches of contract and guarantees.  Plaintiff establishes that the parties entered into Agreement Nos. 1 and 2 and the Addendum thereto and the Guarantees.  See Memorandum of Points and Authorities filed on 5-10-22, Dec. of D. Normandin, ¶¶9-20; Reply filed on 8-2-22, Dec. of D. Normandin, ¶3, Ex. 2, Addenda to Agreement No. 1 and Addenda to Agreement No. 2; Supp. Dec. of D. Normandin filed on 8-30-22, ¶¶3-26; Dec. of K. Ferrer, ¶¶9-16.

Plaintiff establishes that it is the assignee of the original lender and beneficiary of the loans and the guarantees.  See Memorandum of Points and Authorities filed on 5-10-22, Dec. of D. Normandin, ¶20.  Plaintiff also establishes that Defendants acknowledged it was Adventures assignee on the two loans by executing the Addendum to Agreement Nos. 1 and 2.  See Reply filed on 8-2-22, Dec. of D. Normandin, ¶3, Ex. 2, Addenda to Agreement No. 1 and Addenda to Agreement No. 2. 

Plaintiff establishes that Defendants defaulted on their loan obligations under Agreement Nos. 1 and 2 and their guarantee obligations under the Guarantees.  See Memorandum of Points and Authorities filed on 5-10-22, Dec. of D. Normandin, ¶¶21-29; Reply filed on 8-2-22, Dec. of D. Normandin, ¶3, Ex. 2, Addenda to Agreement No. 1 and Addenda to Agreement No. 2. 

Plaintiff establishes its damages.  See Memorandum of Points and Authorities filed on 5-10-22, Dec. of D. Normandin, ¶¶24, 30, 32; Reply filed on 8-2-22, Dec. of D. Normandin, ¶3, Ex. 2, Addenda to Agreement No. 1 and Addenda to Agreement No. 2; Supp. Dec. of D. Normandin filed on 8-30-22, ¶¶7-26; Dec. of K. Ferrer, ¶¶9-16. 

In response, Defendants do not deny that they defaulted on Agreement Nos. 1 and 2, the Addendum and the Guarantees.  Defendants admit that they defaulted on their obligations due to the impact the pandemic had on their business.  See Dec. of S. Sapir filed on 7-27-22, ¶3.

Defendants challenge Plaintiff’s standing as assignee.  However, Defendants do not present any evidence challenging Plaintiff’s status as assignee.  Defendants also acknowledged Plaintiff’s valid status as assignee when they signed the Addendum, affirming the amounts due under the loans and acknowledging Plaintiff’s right to receive payments.  See Reply filed on 8-2-22, Dec. of D. Normandin, ¶3, Ex. 2, Addenda to Agreement No. 1 and Addenda to Agreement No. 2. 

Defendants fail to identify any aspect of the auction that is commercially unreasonable under Commercial Code §916.

Defendants assert defenses based on impracticability.  However, Defendants fail to submit substantial evidence in support of this defense.  Sapir’s declaration regarding the impact of COVID 19 on the business is conclusory and lacking in foundation.  See Dec. of Sapir filed on 7-27-22, ¶3.  Moreover, based on the irrevocability provision contained in Agreement Nos. 1 and 2, Plaintiff establishes that the defenses have more likely than not been waived.  See Reply , Supp. Dec. of Normandin, ¶¶9 and 14, Exs. 1 and 5. 

Defendant originally argued Plaintiff’s suspended status but concedes that Plaintiff has been reinstated and revived.  Revivor is given retroactive effect.  See 9 Witkin, Summary, (11^th ed. 2017), §238. 

Plaintiff establishes the probable validity of its causes of action. 

3.  Suit for Damages.  Yes. 

4.  Property to be Attached:  Where the defendant is an individual, the application must specify the particular property sought to be attached.  (See CCP §487.010.)  Defendant must be able to identify the property that plaintiff seeks to attach, so that the defendant can determine whether he desires to make a claim of exemption as to that property.  However, the requirement of a specific description does not prohibit the plaintiff from targeting for attachment all of the property of an individual defendant.  See Bank of America v. Salinas Nissan (1989) 207 Cal.App.3d 260, 268. 

However, all property within California held by a corporation, partnership or unincorporated association is subject to attachment if there is a statutory method of levy for the property (CCP §487.010(a),(b)).  By logical extension, the above requirement also should apply to limited liability companies.  See CCP §481.170 (defining “person” for attachment purposes to include corporations, partnerships, unincorporated associations and limited liability companies.)

When a plaintiff notices a hearing on an attachment application, the defendant must assert any exemption claims for targeted personal property five days before the hearing or such claims are deemed waived, absent a change of circumstances.  (CCP §§484.070(a), (e); 482.100.)

Plaintiff seeks to attach all property of Defendants Screamline and Starline. 

Plaintiff seeks to attach all property identified in Attachment 9(c) belonging to Defendant Sapir.  See Application for Writ of Attachment as to Defendant Shoeleh Sapir, Attachment 9(c).

Plaintiff states in its Application for Writ of Attachment as to Defendant Farhadi that it seeks to attach all property identified in Attachment 9(c).  There is no Attachment 9(c) to the application. However, the property is identified in Attachment 3(c) of the Proposed Right to Attach Order.  See Proposed Right to Attach Order as to Farhadi, Attachment 3(c).    

5.  Undertaking:  An undertaking is required pursuant to CCP §489.210 which provides that, "Before issuance of a writ of attachment . . ., the plaintiff shall file an undertaking to pay the defendant any amount the defendant may recover for any wrongful attachment by the plaintiff in the action."  A flat amount of undertaking is provided for by statute: $10,000 (CCP §489.220(a)).  The Court may set a higher amount pursuant to CCP §489.220(b) if there is an objection to the undertaking.

Plaintiff has not yet posted any undertaking.  The writs will issue upon the posting of an undertaking of $10,000 per writ.

6.  Claim of Exemption.  None.  Defendants opposed the application on substantive legal grounds.