Judge: James C. Chalfant, Case: 21STCV31213, Date: 2023-03-07 Tentative Ruling

Case Number: 21STCV31213    Hearing Date: March 7, 2023    Dept: 85

            The court may issue a right to attach order (Optional Form AT-120) if the plaintiff shows all of the following: (1) the claim on which the attachment is based is one on which an attachment may be issued (CCP §484.090(a)(1)); (2) the plaintiff has established the probable validity of the claim (CCP §484.090(a)(2)); (3) attachment is sought for no purpose other than the recovery on the subject claim (CCP §484.090(a)(3); and (4) the amount to be secured by the attachment is greater than zero (CCP §484.090(a)(4)).

            A claim has “probable validity” where it is more likely than not that the plaintiff will recover on that claim.  CCP §481.190.  In determining this issue, the court must consider the relative merits of the positions of the respective parties.  Kemp Bros. Construction, Inc. v. Titan Electric Corp., (2007) 146 Cal.App.4th 1474, 1484.  The court does not determine whether the claim is actually valid; that determination will be made at trial and is not affected by the decision on the application for the order.  CCP §484.050(b).

            Except in unlawful detainer actions, the amount to be secured by the attachment is the sum of (1) the amount of the defendant’s indebtedness claimed by the plaintiff, and (2) any additional amount included by the court for estimate of costs and any allowable attorneys’ fees under CCP section 482.110.  CCP §483.015(a); Goldstein v. Barak Construction, (2008) 164 Cal.App.4th 845, 852.  This amount must be reduced by the sum of (1) the amount of indebtedness that the defendant has in a money judgment against plaintiff, (2) the amount claimed in a cross-complaint or affirmative defense and shown would be subject to attachment against the plaintiff, and (3) the value of any security interest held by the plaintiff in the defendant’s property, together with the amount by which the acts of the plaintiff (or a prior holder of the security interest) have decreased that security interest’s value.  CCP §483.015(b); see also CCP §483.010(b) (“an attachment may not be issued on a claim which is secured by any interest in real property arising from agreement, statute, or other rule of law…However, an attachment may be issued where the claim was originally so secured but, without any act of the plaintiff or the person to whom the security was given, the security has become valueless or has decreased in value to less than the amount then owing on the claim).  A defendant claiming that the amount to be secured should be reduced because of a cross-claim or affirmative defense must make a prima facie showing that the claim would result in an attachment against the plaintiff.

            Before the issuance of a writ of attachment, the plaintiff is required to file an undertaking to pay the defendant any amount the defendant may recover for any wrongful attachment by the plaintiff in the action.  CCP §489.210.  The undertaking ordinarily is $10,000. CCP §489.220.  If the defendant objects, the court may increase the amount of undertaking to the amount determined as the probable recovery for wrongful attachment.  CCP §489.220.  The court also has inherent authority to increase the amount of the undertaking sua sponte.  North Hollywood Marble Co. v. Superior Court, (1984) 157 Cal.App.3d 683, 691.

            2. Turnover Order

            If a right to attach order and subsequent writ of attachment are issued, the court also may issue a turnover order directing the defendant to transfer certain property to the levying officer.¿ CCP §482.080.¿ The only types of property which a levying officer may take into custody are tangible personal property in the defendant’s possession or control, chattel paper, instruments, negotiable documents of title, and certain securities.  See¿CCP §§ 488.435, 488.440, 488.445.¿ Intangible assets such as deposit accounts and accounts receivable are attached by service of the writ on the financial institution, not by taking any property into custody.¿ Pacific Decision Sciences Corp. v. Superior Court, (2004) 121 Cal.App.4th 1100, 1109.¿ The turnover order must be personally served on the defendant and must contain a notice to the defendant that failure to comply may subject the defendant to contempt.¿ CCP §482.080(b).

            C. Statement of Facts[3]

            Kingfisher’s President Hamza Sevinc (“Sevinc”) has an architecture license in Turkey.  Sevinc Decl., ¶¶ 2, 7.  He wanted to do business in the United States by partnering with an architect licensed here.  Sevinc Decl., ¶7.

            International is part of the financial advising, real estate development, property management, and entertainment industries.   Sevinc Decl., ¶8.  Sevinc and International formed Kingfisher as a partnership so that Sevinc could do business in the United States and obtain an E-2 Visa.  Sevinc Decl., ¶8.  Sevinc deposited $200,000 into Kingfisher’s bank account.  Sevinc Decl., ¶9.

            During the partnership, Sevinc came to believe that International Chief Financial Officer (“CFO”) Visman Chow (“Chow”) did not invest his money wisely.  Sevinc Decl., ¶10.  International spent $65,000 but Sevinc has not received any profit from the business.  Sevinc Decl., ¶11.  Sevinc invested enough money to obtain an E-2 visa but could not get one via the partnership with International.  Sevinc Decl., ¶12. 

            Sevinc terminated the partnership and came to the United States via tourist visa to obtain an E-2 visa through Kingfisher.  Sevinc Decl., ¶¶12-13.  His visa application was approved.  Sevinc Decl., ¶13.

            International promised to repay Sevinc’s investment money via two promissory notes to Kingfisher.  Sevinc Decl., ¶14, Exs. A-B.  Under the first note, dated April 6, 2016, International agreed to repay principal of $86,030.  Sevinc Decl., ¶15, Ex. A.  Interest accrued at an annual rate of 5% and was payable monthly beginning May 7, 2016.  Sevinc Decl., ¶15, Ex. A.  On April 6, 2017, the principal and remaining interest would become due.  Sevinc Decl., ¶15, Ex. A.  International transferred $15,000 to Sevinc, followed by the $86,030 principal.  Sevinc Decl., ¶15. 

After the $86,030 payment, the remaining balance owed was $34,000.  Sevinc Decl., ¶16.  On September 27, 2016, International signed a note (the “September 26 Note”) in which it agreed to repay the $34,000 with 5% annual interest, for a total of $35,700.  Sevinc Decl., ¶¶ 16-17, Ex. B.  Interest was payable monthly from October 27, 2016 to September 27, 2017, when the principal and remaining interest would become due.  Sevinc Decl., ¶¶ 16-17, Ex. B.  Default on any installment would accelerate the remaining principal and interest.  Sevinc Decl., ¶17, Ex. B.  Kingfisher could also collect attorney’s fees on any action to enforce the September 26 Note.  Sevinc Decl., ¶¶ 17, 33, Ex. B. 

            As of February 9, 2023, International has failed or refused to pay amounts owed under the September 26 Note.  Sevinc Decl., ¶18.

            The September 26 Note does not have an interest rate after the maturity date of September 27, 2017.  Sevinc Decl., ¶22, Ex. B.  Kingfisher has calculated pre-judgment interest on the original $35,700 at a 10% annual rate per Civil Code section 3289(b).  Sevinc Decl., ¶24.  At a daily rate of $9.70 for the 1958 days from the breach on September 27, 2017, to February 6, 2023, total pre-judgment interest is $19,150.85.  Sevinc Decl., ¶24. 

            Kingfisher incurred court filing fees of $464.51 when it filed suit on August 24, 2021.  Sevinc Decl., ¶¶ 26-27, Ex. C.  It incurred $300 in process server fees to serve the Summons and Complaint on September 14, 2021.  Sevinc Decl., ¶¶ 28-29, Ex. D.  Kingfisher has also incurred $705.10 in various court costs.  Sevinc Decl., ¶30, Ex. E.  Total costs in this action are $1,469.61.  Sevinc Decl., ¶31.  Sevinc estimates attorney’s fees of $10,000 in this action.  Sevinc Decl., ¶34.

            The total sum Kingfisher seeks to attach is $66,320.46.  Sevinc Decl., ¶¶ 35-36.  Kingfisher also seeks a turnover order to compel International to turn over documents and evidence in its possession of the title to any property subject to levy.  Sevinc Decl., ¶36.  The turnover order should also include documents and evidence in Defendant’s possession of receivables.  Sevinc Decl., ¶36. 

            D. Analysis

            Plaintiff Kingfisher applies for a right to attach order against International in the amount of $66,320.46, which includes $1,469.61 in costs and $10,000 in attorney’s fees.  Kingfisher also applies for a turnover order directing International to transfer to the levying officer possession of property in International’s possession, documentary evidence for title of property, and documentary evidence of debt owed to International.

            1. A Claim Based on a Contract and on Which Attachment May Be Based 

            A writ of 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).  CCP §483.010(a). 

            Kingfisher’s claim against International is based on the September 26 Note for $35,700, not including pre-judgment interest.  Sevinc Decl., ¶¶ 16-17, Ex. B.  The contract claim is a claim on which attachment may be based. 

            2. An Amount Due That is Fixed and Readily Ascertainable  

            A claim is “readily ascertainable” where the damages may be readily ascertained by reference to the contract and the basis of the calculation appears to be reasonable and definite.  CIT Group/Equipment Financing, Inc. v. Super DVD, Inc., (2004) 115 Cal.App.4th 537, 540-41.  The fact that the damages are unliquidated is not determinative.  Id.  But the contract must furnish a standard by which the amount may be ascertained and there must be a basis by which the damages can be determined by proof.  Id. (citations omitted). 

            Kingfisher’s claim is for the principal and interest under the September 26 Note, pre-judgment interest, attorney’s fees, and costs.  The total sum Kingfisher seeks to attach is $66,320.46.  Sevinc Decl., ¶¶ 35-36.  International does not dispute that it has not paid Kingfisher under the September 26 Note.

            a. Principal and Interest Upon Maturity

            Under the September 26 Note, International agreed to repay $34,000 with 5% annual interest.  Sevinc Decl., ¶¶ 16-17, Ex. B.  Interest was payable monthly from October 27, 2016 to September 27, 2017, at which the September 26 Note would mature and the principal and remaining interest would become due.  Sevinc Decl., ¶¶ 16-17, Ex. B.  The September 26 Note bore interest for one year at 5% and Kingfisher has calculated that interest at $1,700.  Sevinc Decl., ¶16.  This makes the total owed on maturity as $35,700.  Sevinc Decl., ¶16. 

            b. Pre-Judgment Interest

            The September 26 Note does not provide for interest after maturity.  Sevinc Decl., ¶22, Ex. B.  Kingfisher has calculated daily interest at a 10% annual rate per Civil Code section 3289(b).  Sevinc Decl., ¶24. 

Pre-judgment interest is available on attachment and is owed from the time that the obligation to pay money begins.  See Santa Clara Waste Water Company v. Allied World National Assurance Company, (2017) 18 Cal.App.5th 881, 890.  If a contract entered into after January 1, 1986, does not stipulate a legal rate of interest, the obligation shall bear interest at a rate of 10% per annum after breach.  Civil Code §3289(b).

            The date of breach for the September 26 Note was the September 27, 2017 date that it became due.  Sevinc Decl., ¶¶ 16-17, Ex. B.  At a daily rate of $35,700 x (0.1/365) = $35,700 x 0.0002739726 = $9.70 for the 1958 days from September 27, 2017 to February 6, 2023, the total pre-judgment interest is $19,150.85.  Sevinc Decl., ¶24.

            c. Attorney’s Fees and Costs

            The September 26 Note allows Kingfisher to collect attorney’s fees on any action to enforce it.  Sevinc Decl., ¶¶ 17, 33, Ex. B.  Kingfisher provides evidence of costs that totaled $1,469.61.  Sevinc Decl., ¶¶ 26-31, Exs. C-E.  These costs lack foundation as they were obviously incurred by Kingfisher’s attorney and there is no evidence that Kingfisher has paid them.

            As for attorney’s fees, Kingfisher President Sevinc estimates attorney’s fees of $10,000 in this action.  Sevinc Decl., ¶34.  As he is not an attorney, the estimate lacks an adequate foundation.  See Opp. at 7.  The costs of $1469.61 and estimated fees of $10,000 are disallowed.

            d. Conclusion

            Ascertainable damages total $54,859.85 ($35,700 +$19,150.85).

            3. Probability of Success 

            A claim has “probable validity” where it is more likely than not that the plaintiff will recover on that claim.  CCP §481.190.  In determining this issue, the court must consider the relative merits of the positions of the respective parties.  Kemp Bros. Construction, Inc. v. Titan Electric Corp., (2007) 146 Cal.App.4th 1474, 1484.  The court does not determine whether the claim is actually valid; that determination will be made at trial and is not affected by the decision on the application for the order.  CCP §484.050(b). 

            Sevinc asserts that he and International partnered in Kingfisher so that he could do business in the United States and obtain an E-2 visa.  Sevinc Decl., ¶¶ 8-9.  He deposited $200,000 into International’s bank account.  Sevinc Decl., ¶9.  Although International spent $65,000, Sevinc has not received any profit from the business.  Sevinc Decl., ¶11.  Sevinc invested enough money to obtain an E-2 visa but could not get one via the partnership with International.  Sevinc Decl., ¶12.  Instead, he obtained an E-2 visa after he dissolved the partnership and applied through Kingfisher alone.  Sevinc Decl., ¶¶ 12-13. 

            Sevinc presents evidence that International then promised to repay him his investment money via two promissory notes.  Sevinc Decl., ¶14, Exs. A-B.  The second one, the September 26 Note, was for $34,000 with 5% annual interest, all of which was due by September 27, 2017.  Sevinc Decl., ¶¶ 16-17, Ex. B.  As of February 9, 2023, International has failed or refused to pay amounts owed under the September 26 Note. Sevinc Decl., ¶18.

            International does not deny that it has not paid any amount owed under the September 26 Note.  Instead, it argues that the September 26 Note is unenforceable. 

            a. Consideration

            In general, past consideration is not sufficient consideration to support a contract.  Past consideration will not support a promise to the extent it exceeds an existing duty of the promisor.  In re Insurance Installment Fee Cases, (“Insurance”) (2012) 211 Cal. 4th 1395, 1415; Passante v. McWilliam, (“Passante”) (1997) 53 Cal. 4th 1240, 1247.  The key factor is that consideration must be given in exchange for the promise. It must be bargained for at the time. Thus, if services have been rendered with an expectation of future payment, there is sufficient consideration for a contract.  Passante, supra, 53 Cal. 4th at 1247.

            International contends that enforcement of the September 26 Note is barred because it violates applicable regulations for an E-2 visa transaction.  For INA purposes, the concept of investment connotes the placing of funds or other capital assets at risk, in the commercial sense, in the hope of generating a financial return.  RJN Ex. A (9 FAM 402.9-6(B)(c)).  If the funds are not subject to partial or total loss if business fortunes reverse, then it is not an investment in the sense intended by Immigration and Nationality Act (“INA”) section 101(a)(15)(E)(ii).  RJN Ex. A (9 FAM 402.9-6(B)(c)).

Sevinc’s investment of $200,000 into Kingfisher was an investment to qualify for an E-2 visa.  Sevinc Decl., ¶¶ 8-9.  For the $200,000 to qualify as an equity investment, Sevinc cannot now seek a refund of those monies as a loan transaction.  Opp. at 5. 

            International is conflating two transactions.  The first transaction was Sevinc’s $200,000 deposit into Kingfisher.  Under the INA, this money was required to be an at-risk investment.  However, the transaction at issue is not the $200,000 investment but International’s September 26 Note to repay a portion of those funds.  Nothing prevents a company from agreeing to return all or part of an at-risk investment.  See Reply at 2. 

            International’s second argument has more traction.  It contends that the September 26 Note lacks consideration because Sevinc cannot treat the invested monies as a loan transaction.  Opp. at 4.  This may be true.  International, which apparently held the Kingfisher partnership’s funds, had no obligation to return Sevinc’s invested money.  To the extent that it agreed to do so, Sevinc’s investment looks like a disguised loan to secure an E-2 visa and a fraud on the INS. 

            The problem is that International presents no evidence why its CFO singed the September 27, Note, which expressly states that it was issued “for value receieved (sic.)”.   Sevinc Decl., Ex. A.  Without such evidence, International’s defense that the transaction lacked consideration is unsupported.

            b. Unclean Hands

            A plaintiff who has been guilty of improper conduct connected with the controversy at hand will be denied by equity any recognition or relief with regard to the controversy.  Moriarty v. Carlson, (1960) 184 Cal.App.2d 51.  The actions of the party alleged to have soiled hands must relate “directly to the transaction concerning which the complaint was made....”  Pond v. Insurance Co. of North America, (1984) 151 Cal.App.3d 280, 290.  While equity does not demand that a plaintiff lead a blameless life as to other matters, it does require that he have acted fairly and without fraud or deceit as to the controversy in issue.  A plaintiff’s failure to do so is a complete defense to the complaint.  Dickson, Carlson & Campillo v. Pole, (2000) 83 Cal.App.4th 436, 446.  The defense of unclean hands applies to both equitable and legal claims.  Pond v. Insurance Co. of North America, 151 Cal.App.3d at 290.

            The defense of unclean hands does not apply in every instance where the plaintiff has committed some misconduct in the matter in controversy, but only where it would be inequitable to grant any relief.  Dickson, Carlson, 83 Cal.App.4th at 447.  The court must consider the material facts affecting the equities between the parties, including the nature of the plaintiff’s misconduct, the degree of harm caused, and the extent of the plaintiff’s damages.  Id.  The decision whether to apply the defense in a particular case is committed to the trial court’s discretion.  Id.   

            International points out that Sevinc invested $200,000 to obtain an E-2 visa and now seeks the return of a portion of those monies because he never got any profit nor a visa.  Opp. 5-6; Sevinc Decl., ¶¶ 11-12.  International argues that Sevinc has attempted to disguise a loan as an investment to secure an E-2 visa, he misled INS officials, and is guilty of unclean hands.  Opp. at 5-6.

            It is certainly possible that Sevinc is guilty of unclean hands by misleading INS officials.  On the other hand, his main purpose in investing the $200,000 was to obtain an E-2 visa, which he did not achieve through the Kingfisher partnership with International.  It is not a fraud on the INS to seek the return of funds when an immigration-related purpose is not achieved.

            4. Attachment Sought for a Proper Purpose¿ 

            Attachment must not be sought for a purpose other than the recovery on the claim upon which attachment is based.¿ CCP §484.090(a)(3).  Kingfisher seeks attachment for a proper purpose. 

            E. Conclusion

            The applications for a right to attach order is granted in the amount of $54,859.85.  No writ of attachment shall issue until Kingfisher posts a $10,000 bond.  Kingfisher seeks a turnover order to the levying officer of documentary evidence of title to property or to a debt owed to International.  CCP 21482.020(a).  Sevinc Decl., ¶36.  The request is granted.