Judge James C. Chalfant, Case 21STCV34431 2022-09-15 Tentative Ruling

Plaintiff Ascentium Capital, LLC (“Ascentium”) applies for right to attach orders against Defendants Robin Zakariaei, M.D. (“Zakariaei”) and Tarzana Medical Urgent Care (“Tarzana”) in the amount of $260,261.34.

The court has read and considered the moving papers, opposition,[1] and reply, and renders the following tentative decision.

A. Statement of the Case

1. Complaint

Plaintiff Ascentium filed this Complaint against Defendants Zakariaei and Tarzana on September 17, 2021 alleging causes of action for: (1) breach of confidential sales agreement, (2) breach of guaranty, (3) claim and delivery, and (4) conversion. The Complaint alleges in pertinent part as follows.

On April 26, 2018, Ascentium entered into a Conditional Sale Agreement (“Agreement”) with Tarzana for the latter to acquire a Cynosure Laser (“Laser”). Under the Agreement, Tarzana was required to pay $223,524 including interest for 66 months, with the first six monthly payments of $99 beginning May 1, 2018 and followed by 60 monthly payments of $3,715.50. Ascentium retained title to the Laser until Tarzana paid the full purchase price and Tarzana also granted Ascentium a security interest in the Laser that Ascentium filed a UCC-1 Financing Statement to perfect.

In connection with the Agreement, Ascentium and Zakariaei entered into a Guaranty for all sums that Tarzana owed under the Agreement (“Guaranty”).

The parties later revised the Agreement twice, such that no payments were due between April and September 2020, Tarzana would make monthly payments of $3,715.50 thereafter until it paid for the Laser in full, and Tarzana would make a COVID-19 Modification payment of $3,715.50 on May 1, 2024.

In October 2020 and thereafter, Tarzana defaulted on the Agreement by failing to pay the amount owed each month. Ascentium has made demands for payment and return of the Laser to no effect. The Agreement also entitles Ascentium to late charges of $1,857.75, and a returned item charge of $30, a Site Inspection/Repossession charge of $330. Ascentium must discount unearned interest at 3% per year.

Ascentium seeks (1) damages of $163,482 less unearned interest at 3% per year; (2) $1,857.75 in late charges; (3) $30 in return item charges; (4) repossession charges of $330; (5) immediate possession of the Laser; (6) damages for the fair market value of the Laser in the sum of $15,000; (7) interest on all damages; and (8) attorney’s fees and costs.

2. Cross-Complaint

On July 29, 2022, Tarzana filed a Cross-Complaint against Cross-Defendants Ascentium and Cynosure, LLC (“Cynosure”), alleging causes of action for: (1) recission and restitution; (2) intentional misrepresentation; (3) negligent misrepresentation; (4) breach of contract; (5) breach of implied covenant of merchantability; (6) mistaken receipt; (7) equitable indemnity; (8) tort of another; and (9) unfair competition. The Cross-Complaint alleges in pertinent part as follows.

Cynosure sells the Laser by claiming that it melts away fat in a relatively easy and painless way. Cynosure and Ascentium representatives approached Zakariaei shortly before April 26, 2018 and made oral and written representations that (1) the Laser is designed to safely and effectively eliminate unwanted fat cells and cause permanent reduction in stubborn fat; (2) disrupted fat cells will not regenerate; (3) multi-site trials of 100 patients yielded up to 25% fat reduction; and (4) the Laser enjoyed a 100% patient satisfaction rating in a clinical study.

Based on these representations, Zakariaei on Tarzana’s behalf entered the Agreement. Ascentium and Cynosure did not disclose the interest rate and Zakariaei only later learned that it was 10.08%. Other onerous terms included that (1) all unearned interest, less 3%, would be due upon default, (2) Tarzana would not own the Laser until it was paid in full, and (3) there would be a late penalty payment of 10%.

None of the Tarzana patients that used the Laser were satisfied with the results. The representations that Cynosure and Ascentium representatives made to Zakariaei were egregiously false. Tarzana no longer uses the Laser and has offered to allow Ascentium to pick it up at a mutually agreeable time. Ascentium has not accepted the offer.

Tarzana has paid $70,775.96 in connection with the Agreement. Ascentium admits that the Laser is worth $15,000 as of September 17, 2021, a decline in value of over 90%.

Tarzana seeks (1) rescission and restitution of any agreements between Tarzana and Ascentium; (2) $70,775.96 in damages, plus prejudgment interest at an annual rate of 10%; (3) an injunction enjoining Cynosure and Ascentium from selling the Laser; (4) indemnification of Tarzana by Cynosure if Ascentium prevails on the Complaint; (5) punitive damages; and (6) attorney’s fees and costs.

3. Course of Proceedings

On September 21, 2021, Ascentium served Tarzana with the Complaint and Summons by substitute service, effective October 1, 2021.

On September 23, 2021, Ascentium served Zakariaei with the Complaint and Summons by substitute service, effective October 3, 2021.

On January 11, 2022, Ascentium requested entry of Tarzana’s default. Dept. 52 (Hon. Armen Tamzarian) rejected the request for lack of a declaration of due diligence. Ascentium again requested entry of default for Tarzana on January 12, 2022. Dept. 52 granted the request.

On February 28, 2022, Ascentium requested a default judgment against Tarzana and Zakariaei. On March 14, 2022, Dept. 52 ruled that a default judgment would be entered once Ascentium filed a request for dismissal of Does 1-10.

On March 29, 2022, Dept. 52 entered a default judgment against Tarzana and Zakariaei, awarding damages of $164,154.62 and repossession of the Laser, with proceeds from sale of the Laser to be deducted against the monetary award.

On May 26, 2022, Tarzana and Zakariaei moved to set aside and vacate the default and default judgment, return all funds collected on the default judgment, vacate all writs, and withdraw all liens. Dept. 52 granted the motion on June 17, 2022.

On June 23, 2022, Ascentium applied for right to attach orders against Tarzana and Zakariaei in the amount of $260,261.34.

On June 27, 2022, Tarzana and Zakariaei filed a notice of removal to the United States District Court, Central District. Dept. 86 (Hon. Mitchell Beckloff) took the application for right to attach orders off-calendar as moot.

On July 12, 2022, the federal district court Court remanded the case to Dept. 52.

On July 29, 2022, Tarzana and Zakariaei filed an Answer and Tarzana also filed the Cross-Complaint. Tarzana served Ascentium and Cynosure with the Cross-Complaint and summons via e-mail.

B. Applicable Law

Attachment is a prejudgment remedy providing for the seizure of one or more of the defendant’s assets to aid in the collection of a money demand pending the outcome of the trial of the action. See Whitehouse v. Six Corporation, (1995) 40 Cal.App.4th 527, 533. In 1972, and in a 1977 comprehensive revision, the Legislature enacted attachment legislation (CCP §481.010 et seq.) that meets the due process requirements set forth in Randone v. Appellate Department, (1971) 5 Cal.3d 536. See Western Steel & Ship Repair v. RMI, (12986) 176 Cal.App.3d 1108, 1115. As the attachment statutes are purely the creation of the Legislature, they are strictly construed. Vershbow v. Reiner, (1991) 231 Cal.App.3d 879, 882.

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). A claim is “readily ascertainable” where the amount due may be clearly ascertained from the contract and calculated by evidence; the fact that damages are unliquidated is not determinative. CIT Group/Equipment Financing, Inc. v. Super DVD, Inc., (2004) 115 Cal.App.4th 537, 540-41 (attachment appropriate for claim based on rent calculation for lease of commercial equipment).

All property within California of a corporation, association, or partnership is subject to attachment if there is a method of levy for the property. CCP §487.010(a), (b). While a trustee is a natural person, a trust is not. Therefore, a trust’s property is subject to attachment on the same basis as a corporation or partnership. Kadison, Pfaelzer, Woodard, Quinn & Rossi v. Wilson, supra, 197 Cal.App.3d at 4.

If the action is against a defendant who is a natural person, an attachment may be issued only on a commercial claim which arises out of the defendant’s conduct of a trade, business, or profession. CCP §483.010(c). Consumer transactions cannot form a basis for attachment. CCP §483.010(c); Kadison, Pfaelzer, Woodard, Quinn & Rossi v. Wilson, (1987) 197 Cal.App.3d 1, 4 (action involving trust property was a commercial, not a consumer, transaction).

The plaintiff may apply for a right to attach order by noticing a hearing for the order and serving the defendant with summons and complaint, notice of the application, and supporting papers any time after filing the complaint. CCP §484.010. Notice of the application must be given pursuant to CCP section 1005, sixteen court days before the hearing. See ibid.

The notice of the application and the application may be made on Judicial Council forms (Optional Forms AT-105, 115). The application 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.

Where the defendant is a corporation, a general reference to “all corporate property which is subject to attachment pursuant to subdivision (a) of Code of Civil Procedure Section 487.010” is sufficient. CCP §484.020(e). Where the defendant is a partnership or other unincorporated association, a reference to “all property of the partnership or other unincorporated association which is subject to attachment pursuant to subdivision (b) of Code of Civil Procedure Section 487.010” is sufficient. CCP §484.020(e). A specific description of property is not required for corporations and partnerships as they generally have no exempt property. Bank of America v. Salinas Nissan, Inc., (“Bank of America”) (1989) 207 Cal.App.3d 260, 268.

Where the defendant is a natural person, the description of the property must be reasonably adequate to permit the defendant to identify the specific property sought to be attached. CCP §484.020(e). Although the property must be specifically described, the plaintiff may target for attachment everything the individual defendant owns. Bank of America v. Salinas Nissan, Inc., (1989) 207 Cal.App.3d 260, 268.

A defendant who opposes issuance of the order must file and serve a notice of opposition and supporting affidavit as required by CCP section 484.060 not later than five court days prior to the date set for hearing. CCP §484.050(e). The notice of opposition may be made on a Judicial Council form (Optional Form AT-155).

The plaintiff may file and serve a reply two court days prior to the date set for the hearing. CCP §484.060(c).

At the hearing, the court determines whether the plaintiff should receive a right to attach order and whether any property which the plaintiff seeks to attach is exempt from attachment. The defendant may appear the hearing. CCP §484.050(h). The court generally will evaluate the attachment application based solely on the pleadings and supporting affidavits without taking additional evidence. Bank of America, supra, 207 Cal.App.3d at 273. A verified complaint may be used in lieu of or in addition to an affidavit if it states evidentiary facts. CCP §482.040. The plaintiff has the burden of proof, and the court is not required to accept as true any affidavit even if it is undisputed. See Bank of America, supra, at 271, 273.

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). 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.

Ascentium is a wholly owned subsidiary of Regions Bank, an Alabama bank. Noon Decl., ¶28. Ascentium has multiple California Finance Lenders Licenses. Noon Decl., ¶29, Ex. 7; Alper Decl., ¶8. There is no business affiliation between Cynosure and Ascentium. Noon Decl., ¶32.

On April 26, 2018, Ascentium entered into the Agreement so that Tarzana could acquire the Cynosure Laser, which cost $165,000. Noon Decl., ¶11, Exs. 1-2. Under the Agreement, Tarzana was required to pay $223,524 in 66 installments – $99 for each of the first six months, then $3,715.50 per month for the remaining 60 months. Noon Decl., ¶11, Ex. 2. Until Tarzana paid all amounts owed under the Agreement, title to the Laser remained with Ascentium. Noon Decl., ¶11, Ex. 2. Title would then transfer to Tarzana as is, without representation or warranty. Noon Decl., ¶11, Ex. 2. The Agreement also makes no representation or warranty as to the merchantability or fitness of the Laser for a particular purpose. Noon Decl., ¶31, Ex. 2.

The Agreement is not a loan. Noon Decl., ¶32. Pursuant to Tarzana’s request, Ascentium bough the Laser from Cynosure and then sold it to Tarzana. Noon Decl., ¶32. Tarzana chose the enter into a purchase agreement instead of a loan and security agreement, equipment finance agreement, or equipment lease. Noon Decl., ¶32.

As a precaution, Ascentium also had Tarzana grant it a security interest in the Laser, which Ascentium filed a UCC-1 Financing Statement to perfect. Noon Decl., ¶12, Ex. 3.

Upon Tarzana’s default, including for failure to pay any amount due, the Agreement gives Ascentium the right to (1) terminate the Agreement, (2) repossess the Laser and enter private premises to do so, or have Tarzana deliver it to a location of Ascentium’s choosing at Tarzana’s expense, (3) declare all sums due and payable immediately with future payments discounted at a rate of 3% per year, (4) sell, hold, use or lease the Laser, and (5) exercise any other right or remedy available at law. Noon Decl., ¶11, Ex. 2.

In connection with the Agreement, Zakariaei executed a Guaranty in which he agreed to bear responsibility for all sums that Tarzana owed under the Agreement. Noon Decl., ¶13, Ex. 2. Zakariaei is listed on Tarzana’s Statement of Information as its Chief Executive Officer, Secretary, Chief Financial Officer, and Director. Noon Decl., ¶23; RJN Ex. 14. Zakariaei admitted in his declaration in support of Defendants’ motion to vacate the entry of default judgment that he held these same positions. Noon Decl., ¶24; RJN Ex. 8.

The parties later revised the Agreement twice. Due to COVID-19 concerns, Ascentium accorded Tarzana payment deferral relief in the first Amendment (“Amendment 1”) which changed the payment schedule such that Tarzana would owe nothing from April to June 2020, but it would make 43 monthly payments of $3,715.50 beginning July 1, 2020. Noon Decl., ¶¶ 14, 16, Ex. 4.

The second Amendment (“Amendment 2”) granted additional COVID-19 relief by changing the payment schedule such that Tarzana would owe nothing from July to September 2020, after which it would make payments according to the schedule previously agreed upon. Noon Decl., ¶15, Ex. 5. This extension of the payment schedule lowered the effective interest rate of the Agreement to 9.95%. Noon Decl., ¶27.

During the negotiation of Amendments 1 and 2, Tarzana and Zakariaei never indicated that the Laser did not work as anticipated or as represented by Cynosure. Noon Decl., ¶16.

Zakariaei has admitted that his last payment thereunder was on March 2, 2020. Noon Decl., ¶31; RJN Ex. 8. After the six months of payment deferral under the Amendments elapsed, Tarzana failed to make any payments on the Agreement. Noon Decl., ¶18. Pursuant to the Agreement, Defendants owe an outstanding balance of $163,482 discounted by 3% for all future payments, a total of $160,916.34. Noon Decl., ¶18, Ex. 6. Late fees, returned item charges, and repossession and inspection chargers are also owed under the Agreement but not sought in these applications. Noon Decl., ¶18, n. 1.

Because the resale prices that third-party liquidators have obtained for Ascentium in 2022 average $3,655, Ascentium is willing to deduct this from the debt as a secured portion. Noon Decl., ¶33, Ex. 8. Therefore, the unsecured balance due is $157,261.34. Noon Decl., ¶33.

Ascentium estimates that its attorney’s fees in this action will be $100,000 and its costs $3,000 if the case goes to trial. Noon Decl., ¶21.

On March 29, 2022, Dept. 52 (Hon. Armen Tamzarian) entered judgment after default against Tarzana and Zakariaei for $164,154.32. RJN Ex. 6; Alper Decl., ¶3. On May 4, 2022, after Ascentium levied the judgment on Tarzana and Zakariaei’s bank accounts, Zakariaei informed Ascentium’s counsel Andrew Alper, Esq. (“Alper”) that he wanted to settle the matter because the levy would put him out of business. Alper Decl., ¶4. Zaharieaei stated that he was not working at Tarzana but wanted to keep the Laser. Alper Decl., ¶4. Alper asked Zakariaei to make an offer and provide financial statements and tax returns to present to Ascentium. Alper Decl., ¶4. Zakariaei said he would do so but never did. Alper Decl., ¶4.

On May 26, 2022, Tarzana and Zakariaei filed a motion to vacate the default, judgment, and levies. Alper Decl., ¶5; RJN Ex. 8. Dept. 52 granted the motion on June 17, 2022 and ordered that the writ of execution be withdrawn upon payment of attorney’s fees to Ascentium. Alper Decl., ¶6; RJN Ex. 11.

After Alper received the attorney's fees payment on June 20, 2022, he ordered the sheriff to release the levies and sent opposing counsel a letter notifying it of this. Alper Decl., ¶7, Ex. 1. He then prepared an ex parte application for a right to attach order to attach the money that had been released due to vacation of the judgment, setting the hearing for June 27, 2022. Alper Decl., ¶12. The day before the hearing, Defendants served a Notice of Removal to federal court. Alper Decl., ¶13; RJN Ex. 13.

During oral argument the right to attach orders on June 27, 2022, Alper asserted that due the Notice of Removal was defective. Alper Decl., ¶14. Alper asked the federal court to remand the case sua sponte, which the clerk indicated probably would not be granted. Alper Decl., ¶17. Alper then filed a motion to remand and the federal court remanded the case without a hearing. Alper Decl., ¶18.

Zakariaei’s decision to purchase the Laser was based on Cynosure’s website representations reviewed by him shortly before April 26, 2018. Zakariaei Decl., ¶4, Ex. 1. The Cynosure website claimed that (1) the Laser is designed to safely and effectively eliminate unwanted fat cells and cause permanent reduction in stubborn fat; (2) disrupted fat cells will not regenerate; (3) multi-site trials of 100 patients yielded up to 25% fat reduction; and (4) the Laser enjoyed a 100% patient satisfaction rating in a clinical study. Zakariaei Decl., ¶¶ 4-5, Ex. 1. Zakariaei would not have purchased the laser if he knew these claims were false. Zakariaei Decl., ¶6.

Zakariaei has no legal training and had difficulty reading the Agreement because of the small font. Zakariaei Decl., ¶¶ 7-8. Zakariaei would not have signed the Agreement if he knew that (1) the effective interest rate of the Agreement was 10.08%, (2) missing a payment would accelerate all amounts owed and credit him only a 3% discount, or (3) he would not own the Laser until it paid all amounts owed under the Agreement. Zakariaei Decl., ¶¶ 10-13; Opp. RJN. He also would never have signed the Agreement if he knew that the Laser would be worth only $15,000 as of September 17, 2021. Zakariaei Decl., ¶14.

Up to and including on March 2, 2020, Tarzana paid a total of $70,775.96 under the Agreement. Zakariaei Decl., ¶¶ 15-16. Akariaei used the Laser on numerous patients. Zakariaei Decl., ¶17. Zakariaei no longer uses the Laser and is willing to return it to Ascentium. Zakariaei Decl., ¶¶ 19; RJN Ex. 8.

In Requesting Amendments 1 and 2, at no time did Zakariaei ever state that the Laser did not work as represented by Cynosure. Noon Reply Decl., ¶14.

Ascentium’s collection notes of conversations with Zakaraiei reflect multiple attempts to collect the amount owed under the Agreement and Guaranty. Noon Reply Decl., ¶7, Ex. 1. These notes reflect that Zakariaei first expressed Defendants’ inability to pay on April 20, 2020, which led to Amendments 1 and 2. Noon Reply Decl., ¶7, Ex. 1. On October 12, Zakaraiei reported that he was “at his wits” with the Laser and Tarzana was looking to settle the account and move forward. Ex. 1. There were no other statements made by him in the numerous discussions that can be construed to contend that the Laser did not work properly. Noon Reply Decl., ¶7. In fact, Zakaraiei indicated that he wanted to keep the Laser. Noon Reply Decl., ¶7.

On March 3, 2021, when Ascentium representatives arrived to repossess the Laser, the parties agreed that Zakaraiei would submit a proposed payment plan so he could maintain possession. Noon Reply Decl., ¶7, Ex. 1. Zakariaei made many proposals to settle, all of which Ascentium rejected. Noon Reply Decl., ¶7, Ex. 1.

The $15,000 value of the Laser set forth in the September 17, 2021 Complaint and the $3,655 in the supporting declaration for the right to attach applications stem from (1) Defendants’ claim that the Laser is defective, and (2) the fact that the declaration was filed almost a year after the Complaint. Noon Reply Decl., ¶9.

The ledger of Tarzana’s payments (Noon Decl., Ex. 6.) shows that Tarzana paid a total of $60,041.50, all of which was applied to monthly payments. Noon Reply Decl., ¶16. Ascentium does not know the basis for Zakariaei’s claim that Tarzana has paid $70,775.96, for which he provides no supporting documentary evidence. Noon Reply Decl., ¶16.

On June 9, 2022, the Department of Financial Protection and Innovation finalized PRO 01-18, regulations to implement SB 1235 (Financial Code §§ 22800-805). Reply RJN Ex. 1. These regulations are effective December 9, 2022. Reply RJN Ex. 1.

Plaintiff Ascentium’s claim against Tarzana is based on the Agreement and the claim against Zakariaei is based on the Guaranty included in the Agreement. Noon Decl., ¶¶ 11, 13, Ex. 2. Ascentium has a claim on which attachment can be based against each Defendant.

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).

Ascentium claims that the unpaid balance is $163,482. Noon Decl., ¶18, Ex. 6. After reducing all accelerated payments by 3% per year, the amount collectable as damages is a total of $160,916.34. Noon Decl., ¶18, Ex. 6. Because the resale prices that third-party liquidators have obtained for Ascentium in 2022 average $3,655, Ascentium is willing to deduct the Laser’s $3,655 value and therefore the unsecured balance due is $157,261.34. Noon Decl., ¶33.

Defendants claim this amount is incorrect because the ledger only credits payment of $60,042 while Zakariaei has paid $70,775.96. Zakariaei Decl., ¶¶ 15-16; Noon Decl. Ex. 6. As Ascentium notes, Zakariaei does not provide documentary evidence of these payments. Noon Reply Decl., ¶16.

Ascentium claims that it expects to incur $100,000 in attorney’s fees and $3,000 in costs if the case goes to trial. Noon Decl., ¶21. Neither estimate is supported by an attorney declaration that the estimates are reasonable. These costs are therefore disallowed.

Defendants admit that they have defaulted on the Agreement and Guaranty, with the last payment in March 2020. Zakariaei Decl., ¶16. However, they claim that the contract is voidable under (1) contract defenses including unilateral and bilateral mistake of fact, various types of fraud in the inducement, and violation of the implied covenant of good faith and fair dealing; (2) Failure to comply with commercial financing disclosure requirements under the Financial Code (“Fin. Code”); (3) unconscionability; and (4) unclean hands. Opp. at 5-8.

Mistake of fact is a mistake not caused by the neglect of a legal duty on the part of the person making the mistake and consisting in (1) an unconscious ignorance or forgetfulness of a fact past or present, material to the contract, or (2) belief in the present existence of a thing material to the contract, which does not exist, or in the past existence of such a thing, which has not existed. Civil Code §1577. Because the mistake cannot be caused by the neglect of a legal duty, a person with the capacity of reading and understanding a contract is bound by its contents on signing, in the absence of fraud or undue influence, and cannot avoid its terms merely by asserting that it is contrary to his or her subjective understanding. Tarpy v. County of San Diego (2003) 110 Cal.4th 267; Jefferson v. California Dep't of Youth Auth. (2002) 28 Cal.4th 299. A person cannot avoid a contract on the grounds that he or she did not read it before signing. Desert Outdoor Adver. v Superior Court (2011) 196 Cal.4th 866, 872; Stewart v. Preston Pipeline, Inc. (2005) 134 Cal.4th 1565, 1588.

A mistake of fact may be either mutual or unilateral. When both parties have entered into a contract under a mistake of fact, the mistake is mutual, and if the mistake is material, it is grounds for rescission. Civ. Code §1689(b)(1); Merced County Mut. Fire Ins. Co. v. State (1991) 233 Cal.3d 765, 771; Crocker-Anglo Nat'l Bank v. Kuchman (1964) 224 Cal.2d 490, 496. Alternatively, if a party's unilateral mistake of fact is due to fault of the other party or if the other party knew or had reason to know of the mistake, then the contract may be rescinded. Hernandez v. Badger Constr. Equip. Co. (1994) 28 Cal.4th 1791.

Zakariaei asserts that the material fact at issue – that the Laser does not fulfill the promises that Cynosure made – is not in dispute. Defendants assert that Ascentium’s claim that the Laser is now worth only 1% of its purchase price is a tacit admission that it does not work; nothing else can explain that price decrease. Opp. at 2, 5; Noon Decl., ¶33, Ex. 8. Additionally, Ascentium’s claim that the Laser is worth only $3,655 is inconsistent with the claim in the Complaint that it is worth $15,000, showing that Ascentium sold Defendants “snake oil”. Opp. at 5.

Defendants have presented no admissible evidence that the Laser does not work or that the drastic decrease in value shows the Laser is snake oil. The argument that the sharp decrease in Ascentium’s estimated Laser price proves it does not work is speculative. Additionally, Ascentium’s two statements of value are not contradictory. Many factors can explain a drastic decrease in value, such as improvements in medical technology, concerns over prior use, decreased interest in the medical procedure. Noon Reply Decl., ¶9. As Ascentium explains, Defendants’ assertion that the Laser is defective is one of them. Noon Reply Decl., ¶9, Ex. 8.

As Ascentium asserts, Defendants’ argument appears to be an after-the-fact defense. Zakariaei never argued that the Laser did not work when the parties negotiated the Amendments, and the collection notes do not reflect any real assertion by him that the Laser was defective either. Zakariaei wanted to keep the Laser for at least a year after his March 2020 payment, indicating that he did not think it was defective. Noon Reply Decl., ¶7, Ex. 1.

Zakariaei and Tarzana have failed to demonstrate a bilateral or unilateral mistake of fact that justifies recission.

In an action for intentional misrepresentation, a plaintiff establishes a prima facie case by proving the following: (1) a knowingly false representation by the defendant; (2) an intent to deceive or induce reliance; (3) justifiable reliance by the plaintiff; and (4) resulting damages. Service by Medallion, Inc. v. Clorox Co., (1996) 44 Cal.App.4th 1807, 1816.

For negligent misrepresentation, a plaintiff must prove: (1) a misrepresentation of a past or existing material fact, (2) made without reasonable ground for believing it to be true, (3) made with the intent to induce another’s reliance on the fact misrepresented, (4) justifiable reliance on the misrepresentation, and (5) resulting damage. Ragland v. U.S. Bank National Assn., (2012) 209 Cal.App.4th 182, 196.

Fraud can also include (1) the suppression of that which is true, by one having knowledge or belief of the fact (Civ. Code §1572(3)); or (2) a promise made without any intention of performing it (Civ. Code §1572(4)), when committed by or with connivance of a party to the contract with intent to deceive another party thereto or to induce him to enter into the contract.

Zakariaei asserts that Cynosure representatives affirmed the truth of the claims Cynosure made about the Laser on its website, including permanent results in fat loss and a 100% satisfaction rate. Zakariaei Decl., ¶¶ 4-5, Ex. 1. He would not have purchased the item and signed the Agreement or Guaranty had he known that the claims were false. Zakariaei Decl., ¶6.

The Agreement expressly disavows any representation or warranty by Ascentium as to the merchantability or fitness for a particular purpose of the Laser. Noon Decl., ¶¶ 11, 31, Ex. 2. Ascentium also demonstrates that Cynosure has similar disclaimers in its Purchase. However, a seller cannot escape liability for its own fraud or false representations by the insertion of provisions to that effect in the contract of sale herein. Ron Greenspan Volkswagen, Inc. v. Ford Motor Land Development Corp., 32 Cal. App. 4th 985, 993.

Fraud requires that Ascentium or someone acting on its behalf made material misrepresentations about the Laser. Defendants’ fraud claim fails because they have no admissible evidence of any representation or statement by Ascentium. Ascentium is a subsidiary of an Alabama Bank and has no visible ties to Cynosure, other than providing credit for Cynosure purchases like here. Zakariaei Decl., ¶32. The website Zakariaei visited was for Cynosure, not Ascentium. Zakariaei Decl., ¶¶ 4-5, Ex. 1. Defendants do not even identify any Ascentium or Cynosure representative to whom Zakariaei spoke. Reply at 5.

Zakariaei and Tarzana has failed to demonstrate that Ascentium has committed fraud.

To establish a breach of the covenant of good faith and fair dealing, the nonbreaching party must show: (1) a contract between the parties; (2) the nonbreaching party fulfilled all obligations under the contract; (3) any conditions precedent for the breaching party’s performance occurred or were excused; (4) the breaching party did not act fairly or in good faith and prevented plaintiff from receiving the benefits of the contract; and (5) the nonbreaching party was harmed. Herskowitz v. Apple Inc., (N.D. Cal. 2013) 940 F.Supp.2d 1131.

Defendants summarily assert that Ascentium breached the covenant of good faith and fair dealing because it induced them to sign the Agreement and Guaranty on the false belief that the Laser would perform as Cynosure advertised. Opp. at 5. As discussed above, the evidence that Ascentium participated in Cynosure’s marketing of the Laser is non-existent. Moreover, a party cannot breach the covenant of good faith and fair dealing before entering into a contract.

Zakariaei and Tarzana has failed to demonstrate that Ascentium breached the covenant of good faith and fair dealing.

Defendants claim that the Agreement is usurious under California Constitution article XV, section 1, which limits interest on a loan or forbearance to 10%. Defendants contend that any interest added to the purchase price should be disallowed because it was 10.08% under the original Agreement. Opp. 4.

As Ascentium argues, there are numerous reasons why a usury defense is untenable. First, Defendants fail to show a 10.08% interest rate upon default. Their request for judicial notice has been denied and Defendants provide no evidence of the calculation.

Second, usury does not apply to any loan or forbearance made or arranged by a bank holding company or a subsidiary of a bank holding company which is not a bank. Fin. Code §1287. Ascentium is a wholly owned subsidiary of Regions Bank, an Alabama bank. Noon Decl., ¶28.

Third, usury does not apply to a consumer finance lender. Fin. Code §22022. Ascentium has multiple California Finance Lenders Licenses. Noon Decl., ¶29, Ex. 7; Alper Decl., ¶8.

Fourth, Ascentium did not lend Defendants any money. The laser was sold on credit pursuant to a “time-price” doctrine in which a property is sold on credit and the seller finances the purchhase of property by extending payments over time. This is not subject to usury law because it is not a loan or forbearance. O’Connor v. Televideo System, Inc., (“O’Connor”) (1990) 218 Cal.App.3d 709, 714. See Fin. Code §22054 (bona fide conditional sales contracts for purchase of personal property are not subject to usury).

Fifth, the internal rate of return for Asentium under the Agreement and the Amendments was under 10%. Noon Decl., ¶27. Only when default interest is added is the return above 10%. But a debtor cannot bring his loan within the usury law by his voluntary default on an obligation where no violation would exist if he performed the contract. O’Connor, supra, 218 Cal.App.3d at 714.

Defendants also rely on SB 1235 (Fin. Code §§ 22800-805) to require consumer-style cost of credit disclosures by a seller in which the cost of financing is expressed in an annualized rate. Defendants acknowledge that the Agreement was executed before the September 30, 2018 date of SB 1235, but the Amendments were executed afterwards and therefore they contend that these provisions apply. Opp. at 7.

Defendants are incorrect. SB 1235 does not take effect until regulations have been adopted by the Commissioner of Financial Protection and Innovation. Fin. Code §22804(c). Ascentium provides evidence that the Commissioner of Financial Protection and Innovation did not adopt regulations governing these disclosures until June 2022, and they are effective December 2022. Reply RJN Ex. 1. Per Fin. Code section 22804(c), the provisions are unenforceable against Ascentium.[4]

A contract is unconscionable if one of the parties lacked a meaningful choice in deciding whether to agree and the contract contains terms that are unreasonably favorable to the other party. OTO, LLC. v. Kho, (2019) 8 Cal.5th 111, 125. The unconscionability doctrine has both a procedural and a substantive element. The procedural element addresses the circumstances of contract negotiation and formation, focusing on oppression or surprise due to unequal bargaining power, while the substantive element pertains to the fairness of an agreement’s actual terms, and to assessments of whether they are overly harsh or one-sided. Ibid. Procedural and substantive unconscionability are evaluated on a sliding scale: the more substantively oppressive the contract term, the less evidence of procedural unconscionability is required to conclude that the term is unenforceable. Conversely, the more deceptive or coercive the bargaining tactics employed, the less substantive unfairness is required. Id. at 125-26. The ultimate issue in every case is whether the terms of the contract are sufficiently unfair, in view of all relevant circumstances, that a court should withhold enforcement. Id. at 126.

Defendants assert that the Agreement is unconscionable because (1) it charges an usurious interest rate of 10.08%; (2) missing a payment accelerates all amounts owed and credits Tarzana only 3%; (3) Defendants forfeit the Laser and use thereof if Tarzana fails to pay all amounts owed under the Agreement; and (4) late payments are subject to an additional 10% penalty. Opp. at 7-8. Zakariaei claims he never would have signed the Agreement had he understood these terms, which he did not due to his lack of legal training and the small font. Zakariaei Decl., ¶¶ 7-8, 10-13.

Most of the cited terms – such as acceleration and repossession – are standard terms in any sales or credit agreement. Reply at 8. As discussed ante, the rate of return is not usurious. Nor is it unfair for unconscionability purposes. As modified by the Amendments, the return would have been less than 10% if Defendants had performed. The Agreement is not substantively unconscionable.

Defendants also fail to demonstrate procedural unconscionability. Zakariaei’s failure to understand the terms of the Agreement is irrelevant. Zakariaei Decl., ¶¶ 7-8. A person cannot avoid a contract on the grounds that he or she did not read it before signing. Desert Outdoor Adver. v Superior Court (2011) 196 Cal.4th 866, 872-873; Stewart v. Preston Pipeline, Inc. (2005) 134 Cal.4th 1565, 1588. As Ascentium notes in reply, Defendants never asked to negotiate the terms and could have looked for another company to finance the purchase if they so chose. Reply at 8.

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.

Defendants base the allegation of unclean hands on the same facts as their other affirmative defenses. Reply at 8. The defense of unclean hands therefore also fails.[5]

Ascentium has shown a probability of success on its claims for breach of the Lease and therefore the Guaranty, in the amount of $157,261.34.

If the action is against a defendant who is a natural person, an attachment may be issued only on a commercial claim which arises out of the defendant’s conduct of a trade, business, or profession. CCP §483.010(c). Consumer transactions cannot form a basis for attachment. CCP §483.010(c); Kadison, Pfaelzer, Woodard, Quinn & Rossi v. Wilson, (“Kadison”) (1987) 197 Cal.App.3d 1, 4 (action involving trust property was a commercial, not a consumer, transaction).

Ascentium’s claim against Zakariaei is based on the Guaranty, which he signed along with the Agreement. Noon Decl., ¶¶ 11-13, Ex. 2. Zakariaei is listed on Tarzana’s Statement of Information as its Chief Executive Officer, Secretary, Chief Financial Officer, and Director. Noon Decl., ¶23; RJN Ex. 14. The claim against Zakariaei is a commercial claim arising from his operation of Tarzana, the company that purchased the Laser.

As to Zakariaei, Ascentium seeks attachment of all accounts in either Defendant’s name, except for the first $1,000 from accounts in Zakariaei’s name, including without limitation (1) savings accounts, (2) commercial accounts, (3) monies, (4) bank accounts, (5) safe deposit boxes, (6) share accounts, (7) money market investment accounts, (8) time certificates of deposit, and (9) monies in any trust accounts. This description is sufficiently specific.

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). Ascentium seeks attachment for breach of both contracts, a proper purpose.

Plaintiff Ascentium’s application for right to attach orders is granted in the amount of $157,261.34. No writ of attachment shall issue against either Defendant until Ascentium posts an undertaking for that Defendant.

Defendants assert that the undertaking should be greater than the standard $10,000 and should be $56,216.45 based on the 10.08% interest rate of the Agreement for the lost use of its money multiplied by the two years this action will likely take. Opp. at 9-10. Defendants provide no evidence that they will suffer harm from the lost use of their funds or their probable recovery for wrongful attachment. CCP §489.220. The undertaking is therefore $10,000.

[1] Defendants failed to provide a courtesy copy of the opposition in violation of the Presiding Judge’s First Amended General Order Re: Mandatory Electronic Filing. Their counsel is admonished to provide courtesy copies in all future filings.

[2] Plaintiff Ascentium requests judicial notice of (1) the Complaint (RJN Ex. 1); (2) the proofs of service of the Complaint and Summons on Defendants Tarzana and Zakariaei (RJN Ex. 2-3); (3) the declaration of Jerry Noon (“Noon”) in support of the entry of Default Judgment filed on February 28, 2022 (RJN Ex. 4); (4) entry of default against the Defendants on January 11, 2022 (RJN Ex. 5); (5) the default judgment entered against the Defendants on March 29, 2022 (RJN Ex. 6); (6) Ascentium's California Finance Lenders Licenses on file with the California Department of Financial Protection and Innovation (RJN Ex. 7); (7) Defendants’ motion to vacate the default judgment (RJN Ex. 8); (8) declarations of Noon and Andrew Alper (“Alper”) in opposition to the Motion to vacation the default judgment filed on June 9, 2022 (RJN Exs. 9-10); (9) the minute order setting aside the default judgments and defaults (RJN Ex. 11); (10) Ascentium’s June 23, 2022 applications for right to attach orders (RJN Ex. 12); (11) the Notice of Removal filed on June 26, 2022 (RJN Ex. 13); (12) a Statement of Information on Tarzana Medical Urgent Care from the California Secretary of State website (RJN Ex. 14); (13) Ascentium's request for the district court to remand the case to state court (RJN Ex. 15); (14) Ascentium's motion for remand filed in federal court (RJN Ex. 16); (15) the federal order remanding the case to state court (RJN Ex. 17); and (16) Dept. 52’s minute order of July 14, 2022 advising the parties of the remand (RJN Ex. 18).

The court need not judicially notice Exhibits 1-6, 8-13, or 18; a judge may always review the existing court file. The requests for judicial notice of RJN Exs. 7 and 14 are granted. Evid. Code §452(c). RJN Exhibits 15-16 are subject to judicial notice (Evid. Code §452(d)) if relevant. However, Ascentium fails to establish their relevance and the requests are denied.

Tarzana and Zakariaei request judicial notice of the fact that the Agreement’s imputed interest rate is 10.08%. Opp. RJN. The court declines to judicially notice a present value interest calculation, which must be established by evidence.

In reply, Ascentium requests judicial notice of the Department of Financial Protection and Innovation’s website reflecting that SB 1235 (Financial Code §§ 22800-805) will be effective on December 9, 2022. Reply RJN Ex. 1. The request is granted. Evid. Code §452(c).

[3] The court has ruled on Ascentium’s written evidentiary objections. The clerk is directed to scan and electronically file the rulings.

[4] The California Financing Law (Fin. Code §22000 et seq.) also exempts bona fide conditional contracts of sale involving the disposition of personal property when these forms of sales agreements are not used for the purpose of evading this division. Fin. Code §22054. Defendants fail to demonstrate that the Agreement is not a bona fide conditional sales contract.

[5] Defendants also fail to affirmatively show their Cross-Complaint claim of offset with sufficient evidence to prove a prima facie case of attachment based on breach of contract. CCP §483.015(b)(2), (3); Lydig Construction, Inc. v. Martinez Steel, (2015) 234 Cal.App.4th 937; Pos-A-Traction, Inc. v. Kelly Springfield, (C.D. Cal. 1999) 112 F.Supp.2d 1178, 1183. See Opp. at 8. Nor does their factually unsupported claim of indemnity against Cross-Defendant Cynosure support denial of Ascentium’s applications. Opp. at 9.