Judge James C. Chalfant, Case 21STCV40512 2023-03-09 Tentative Ruling

Plaintiff Packard Commercial, LLC (“Packard” or “Landlord”) applies for right to attach orders against Defendants Paul Mogannam (“Mogannam”) and Iris Chen, also known as Iris Chen Whalen (“Whalen”), in the amount of $944,434.18.

The court has read and considered the moving papers,[1] opposition,[2] and reply, and renders the following tentative decision.

A. Statement of the Case

1. Complaint

Plaintiff Packard filed the Complaint against Defendants Mogannam and Whalen on November 3, 2021, alleging four causes of action for breach of two guaranties per Defendant. The Complaint alleges in pertinent part as follows.

Packard is the owner and Landlord of 1000 South Hope Street, Los Angeles, California, 90015 (“Property”). On March 10, 2015, Flexogenix Group, Inc. (“Flexogenix”) entered a six-year Lease for Units A and B in the Property (“A&B Lease”). On March 20, Mogannam and Whalen each entered a Personal Guaranty for the A&B Lease (“Mogannam A&B Guaranty” and “Whalen A&B Guaranty”).

On December 16, 2015, Flexogenix entered a 67-month lease for Unit C-2 in the Property (“C-2 Lease”). The same day, Mogannam and Whalen each entered a Personal Guaranty for the C-2 Lease (“Mogannam C-2 Guaranty” and “Whalen C-2 Guaranty”).

Under the Leases, Flexogenix agreed to pay monthly rent and its pro-rata share of the Common Area Maintenance (“CAM”) expenses. CAM expenses included Property’s real estate taxes, operating expenses, and insurance.

On March 1, 2019 Flexogenix breached the leases by its failure to pay rent or abandonment of the Property without legal justification prior to the August 31, 2021 expiration of either lease. For the A&B Lease, Flexogenix refused to pay the $18,900.36 in rent, $2,000 in monthly parking fees, and $3,178.39 in CAM expenses then due. It also owed $2,100 in parking fees for February 2019. For the C-2 Lease, Flexogenix refused to pay the $4,672.08 in rent plus $677 in CAM expenses.

On March 18, 2019, Flexogenix filed for bankruptcy. Because at the time it was in possession of Unit C-2, Landlord applied to the bankruptcy court for $12,077.56 of administrative rent for Unit C-2. Flexogenix stopped operating its business on April 24, 2019.

On May 31, 2019, Landlord sent demand letters to Mogannam and Whalen for the amount owed under the Leases, pursuant to the Guaranties. Mogannam and Whalen refused to pay the amounts due.

On June 29, 2019, Flexogenix abandoned Units A, B, and C-2. Landlord incurred losses of $73,335.70 through repairs, cleaning, and lost commissions on Units A and B alone.

On July 31, 2019, Landlord submitted a claim of $43,355.07 for then accumulated past due rent and fees under the A&B Lease less the security deposit. Flexogenix rejected the A&B Lease in bankruptcy.

From March 1, 2019 to August 31, 2021, Flexogenix accumulated rent, parking fees, CAMS, and late fees of $779,800 and interest of $102,829.22 under the A&B Lease. It also accrued rent, CAMS, and late fees of $179,612.24 and interest of $24,050.03 under the C-2 Lease. Neither amount includes late fees for the period of March 1, 2020 through August 31, 2021 even though the breach predated the COVID-19 moratoriums.

On September 1, 2021, Landlord received the requested $12,077.56 in administrative rent for Unit C-2. This reduced the accrued rent, CAMS, and late fees under the C-2 Lease to $176,162.12.

Landlord seeks damages and legal interest from the date of the breach of the Leases according to proof, as well as attorney’s fees and costs.

2. Course of Proceedings

On December 10, 2021, Landlord served Mogannam with the Complaint and Summons.

On February 28, 2022, Mogannam filed an Answer to the Complaint.

On April 7, 2022, Landlord filed a notice of errata as to one of Whalen’s aliases.

On April 15, 2022, the court denied Landlord’s ex parte application for a right to attach order against Mogannam and Whalen for failure to demonstrate a risk of great and irreparable injury.

On May 23, 2022, Landlord amended the Complaint to reflect Mogannam’s name, which it originally listed as Mogannan.

On May 20, 2022, Whalen filed her Answer.

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.

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.

In December 2014 Flexogenix through RKF Group California, Inc. (“RKF”) approached Landlord about leasing Units A and B. Yahouda Decl., ¶3. After various letters of intent, the parties agreed to the final terms on January 25, 2015. Yahouda Decl., ¶3, Ex. A. In an email that day, RKF affirmed that Mogannam and Whalen would personally guaranty the lease as Flexogenix’s principals. Yahouda Decl., ¶3, Ex. A.

On March 10, 2015, Flexogenix executed the A&B Lease. Yahouda Decl., ¶4, Ex. B. The lease identified the area of the combined premises as 5,322 square feet. Yahouda Decl., ¶4, Ex. B. The agreed use included retail use for medical and general office purposes. Yahouda Decl., ¶4, Ex. B. Although Landlord represented in paragraph 2.3 that the premises complied with all applicable laws, Flexogenix was responsible for ensuring these laws allowed the intended use. Yahouda Decl., ¶4, Ex. B.

The A&B Lease was for a six-year term, with a Rent Commencement Date of the earlier of 150 days after signing the Lease and whenever Flexogenix opened for business. Yahouda Decl., ¶4, Ex. B. Base Rent would be $17,296.50 per month from the first month of commencement. Yahouda Decl., ¶4, Ex. B. It would then increase on each anniversary date of the Rent Commencement Date to (1) $17,815.40 on the Rent Commencement Date in 2016, (2) $18,349.86 on the Rent Commencement Date in 2017, (3) $18,900.36 on the Rent Commencement Date in 2018, (4) $19,467.37 on the Rent Commencement Date in 2019, and (5) $20,051.39 on the Rent Commencement Date in 2020. Yahouda Decl., ¶4, Ex. B.

The A&B Lease also required Flexogenix to pay a 64% share of CAM expenses, which the Lease estimated at $6 per square foot per year. Yahouda Decl., ¶4, Ex. B. The CAM expenses for the first month were therefore $2,661. Yahouda Decl., ¶4, Ex. B. Within 60 days of Flexogenix’s written request, Landlord must provide a detailed statement of Flexogenix’s share of actual CAM expenses. Yahouda Decl., ¶4, Ex. B. If the amount Flexogenix paid exceeded actual CAM expenses, Landlord must credit the balance against future payments. Yahouda Decl., ¶4, Ex. B. If actual CAM expenses exceeded the amount Flexogenix paid, it had ten days to pay the balance. Yahouda Decl., ¶4, Ex. B.

The A&B Lease included four reserved parking spaces and up to six unreserved parking spaces. Yahouda Decl., ¶4, Ex. B. Per an addendum, Flexogenix owed nothing for the reserved spaces but was to pay $100 per month per unreserved space for the first year. Yahouda Decl., ¶4, Ex. B. It was then to pay the prevailing posted monthly parking rate per unreserved space. Yahouda Decl., ¶4, Ex. B. Flexogenix could also buy two-hour parking validation stamps from Landlord at a daily maximum parking rate of $7 for the first 12 months and at the daily posted parking rates thereafter. Yahouda Decl., ¶4, Ex. B.

Upon execution of the A&B Lease, Flexogenix was required to pay a $34,593 security deposit. Yahouda Decl., ¶4, Ex. B. If Flexogenix failed to pay rent, Landlord could apply the security deposit to amounts due. Yahouda Decl., ¶4, Ex. B.

Any late payment would incur a late charge of the greater of 5% of the overdue amount or $100. Yahouda Decl., ¶4, Ex. B. Overdue amounts would also incur annual interest of 10% or the maximum allowed by law if less, starting from the 31st day after such amount became due. Yahouda Decl., ¶4, Ex. B.

In the event of Flexogenix’s default for failure to comply with any of the A&B Lease’s terms, including payment of rent, Landlord could terminate the lease and recover unpaid rent already earned, rent from termination to the time of award, and rent from the time of award to the end of the lease’s term, reduced by any rental loss Flexogenix proves Landlord could have reasonably avoided. Yahouda Decl., ¶4, Ex. B.

The A&B Lease also entitled Landlord to attorney’s fees for any legal action in connection with a default or breach. Yahouda Decl., ¶4, Ex. B.

The A&B Lease identified Mogannam and Whalen as guarantors. Yahouda Decl., ¶4, Ex. B. Mogannam signed the A&B Lease as Flexogenix’s Vice President, and Whalen as the Chief Executive and Financial Officer (“CEO” and “CFO”). Yahouda Decl., ¶4, Ex. B.

On March 25, 2015, Mogannam and Whalen each signed guaranties that held them jointly and several liable for all amounts owed under the A&B Lease. Yahouda Decl., ¶5, Exs. C-D. Each agreed that Landlord could proceed against them without proceeding against Flexogenix under the A&B Lease. Yahouda Decl., ¶5, Exs. C-D. Mogannam and Whalen also waived any right to require Landlord to first apply any security deposit it may hold under the lease. Yahouda Decl., ¶5, Exs. C-D.

On July 6, 2015, the City of Los Angeles Department of Building and Safety (“LADBS”) issued a building permit to change the Property’s use from retail to medical office. RJN Ex. 1. On October 19, 2015, LADBS issued a Certificate of Occupancy for the Property that listed its primary use as a Medical Office. RJN Ex. 2.

On December 16, 2015, Flexogenix entered the C-2 Lease to add additional office space. Yahouda Decl., ¶6, Ex. E. The C-2 Lease identified the area of the combined premises as 1,354 square feet. Yahouda Decl., ¶6, Ex. E. The agreed use included retail use for medical and general office purposes. Yahouda Decl., ¶6, Ex. E. Although Landlord represented that the premises comply with all applicable laws, Flexogenix was responsible for ensuring these laws allowed the intended use. Yahouda Decl., ¶6, Ex. E (¶2.3).

The C-2 Lease was for a 67-month term, with a Rent Commencement Date of March 1, 2016. Yahouda Decl., ¶6, Ex. E. Base Rent would begin at $4,536 per month on the first day of the month, including March 2016. Yahouda Decl., ¶6, Ex. E. It would then increase to (1) $4,672.08 on March 1, 2017, (2) $4,812.25 on March 1, 2018, (3) $4,956.61 on March 1, 2019, (4) $5,105.31 on March 1, 2020, and (5) $5,258.47 on March 1, 2021. Yahouda Decl., ¶6, Ex. E.

The C-2 Lease required Flexogenix to pay a 16% share of CAM expenses. Yahouda Decl., ¶6, Ex. E. It estimated this share of CAM expenses as $677 for March 2016. Yahouda Decl., ¶6, Ex. E. Within 60 days of Flexogenix’s written request, Landlord must provide a detailed statement of Flexogenix’s share of actual CAM expenses. Yahouda Decl., ¶6, Ex. E. If the amount Flexogenix paid exceeded actual CAM expenses, Landlord must credit the balance against future payments. Yahouda Decl., ¶6, Ex. E. If actual CAM expenses exceeded the amount Flexogenix paid, it has 10 days to pay the balance. Yahouda Decl., ¶6, Ex. E.

The C-2 Lease included one reserved parking space at no additional charge. Yahouda Decl., ¶6, Ex. E.

Upon execution of the C-2 Lease, Flexogenix was to pay a $4,536 security deposit. Yahouda Decl., ¶6, Ex. E. If Flexogenix failed to pay rent, Landlord could apply the security deposit to amounts due and within ten days request replacement of the amount applied to restore the security deposit back to its full amount. Yahouda Decl., ¶6, Ex. E.

Any late payment would incur a late charge of the greater of 5% of the overdue amount or $100. Yahouda Decl., ¶6, Ex. E. Overdue amounts would also incur annual interest of 10% or the maximum allowed by law if less, starting from the 31st day after such amount became due. Yahouda Decl., ¶6, Ex. E.

In the event of Flexogenix’s default for failure to comply with any of the C-2 Lease’s terms, including payment of rent, Landlord could terminate the lease and recover unpaid rent already earned, rent from termination to the time of award, and rent from the time of award to the end of the lease’s term, reduced by any rental loss Flexogenix proves Landlord could have reasonably avoided. Yahouda Decl., ¶6, Ex. E.

The C-2 Lease entitled Landlord to attorney’s fees for any legal action in connection with a default or breach. Yahouda Decl., ¶6, Ex. E.

The C-2 Lease identified Mogannam and Whalen as guarantors. Yahouda Decl., ¶6, Ex. E. Mogannam signed the C-2 Lease as Flexogenix’s Vice President, and Whalen as the CEO and CFO. Yahouda Decl., ¶6, Ex. E.

Also on December 16, 2015, Mogannam and Whalen each signed guaranties that they would be jointly and several liable for all amounts owed under the C-2 Lease. Yahouda Decl., ¶7, Exs. F-G. Landlord could proceed against them without proceeding against Flexogenix under the C-2 Lease. Yahouda Decl., ¶7, Exs. F-G. Mogannam and Whalen also waived any right to require Landlord to first apply any security deposit it may hold under the lease. Yahouda Decl., ¶7, Exs. F-G.

Flexogenix operated its medical clinic at the A&B Premises and the C-2 Premises for four years. Yahouda Decl., ¶8. On March 22, 2019, Landlord learned that Flexogenix had filed for bankruptcy. Yahouda Decl., ¶8.

Flexogenix vacated Units A and B in April 2019 but remained in possession of Unit C-2. Yahouda Decl., ¶8. On June 25, 2019, the bankruptcy court issued an order that authorized debtor-in-possession Flexogenix to reject both Leases. Yahouda Decl., ¶8; Topp Decl., ¶6, Ex. L. This allowed Landlord to repossess both premises. Yahouda Decl., ¶8; Topp Decl., ¶6, Ex. L. On June 29, 2019, Landlord repossessed Unit C-2. Yahouda Decl., ¶8.

Flexogenix, Mogannam, and Whalen did not pay any of the monthly rent or CAM expenses on either Lease from March 1, 2019 to the end of each Lease. Yahouda Decl., ¶9. The termination date was August 31, 2021 for the A&B Lease and September 25, 2021 for the C-2 Lease. Yahouda Decl., ¶9.

As to the A&B Lease, its ledger shows that Flexogenix stopped paying rent on March 1, 2019, and that it owes monthly rent, monthly CAM charges, and monthly parking fees for the period of March 1, 2019 through August 31, 2021, with late fees from March 1, 2019 through February 28, 2020, of $771,752.44. Yahouda Decl., ¶12, Ex. H.

As to the C-2 Lease, its ledger shows that the monthly rent, CAM charages, parking charges, and late fees owed, minus a September 1, 2021 $12,077.56 administrative rent payment received from Flexogenix’s bankruptcy estate, total $172,681.74. Yahouda Decl., ¶15, Ex. I.

Damages under both Leases total $771,752.44 + $172,681.74 = $944,434.18. Yahouda Decl., ¶16. Although Landlord is entitled to 10% interest, that is not included in the applications. Yahouda Decl., ¶17.

In late April 2019, Flexogenix put Landlord in touch with Jack Miletic, M.D. (“Miletic”) to see if he would lease Unit C-2. Joseph Decl., ¶6. However, Miletic never signed the lease offered at the time. Joseph Decl., ¶6.

Landlord could not retake possession and seek to mitigate until the bankruptcy court authorized debtor-in-possession Flexogenix to reject the Leases on June 25, 2019. Emrani Decl., ¶4. On June 3, 2019, Landlord entered into an Exclusive Lease Listing Agreement with CBRE to market the premises for leasing. Joseph Decl., ¶4, Ex. M. CBRE put a “For Lease” sign on the premises and listed them on LoopNet to advertise their availability. Joseph Decl., ¶5, Exs. N-O.

On November 18, 2019, Landlord signed a second Exclusive Lease Listing Agreement with CBRE after the first one expired. Joseph Decl., ¶7, Ex. P. Landlord did not receive offers to lease the premises by the time Flexogenix’s Leases would have expired. Joseph Decl., ¶8.

In April 2022, when CBRE’s a second Exclusive Lease Listing Agreement expired, Landlord signed a new listing agreement with Kennedy Wilson. Joseph Decl., ¶9. Although Landlord received two non-binding Letters of Intent in late 2022 to lease Units A and B, neither candidate finalized a lease. Joseph Decl., ¶9.

On September 14, 2022, Landlord served Mogannam and Whalen with Requests for Admissions, Form Interrogatories, and Requests for Production of Documents. Topp Decl., ¶2.[4]

On October 7, 2022, Mogannam served his responses to the Form Interrogatories. Topp Decl., ¶3, Ex. J. Interrogatory No. 15.1 asked about the facts supporting any denial of a material allegation and each special or affirmative defense in response to Landlord’s pleadings. Topp Decl., ¶3, Ex. J. Interrogatory No. 17.1 asked about the justification for every answer to the Requests for Admissions that was not an unqualified admission. Topp Decl., ¶3, Ex. J. Mogannam responded to both that the Guaranties were unenforceable and void because zoning regulations prohibited the purpose for which Flexogenix entered the Leases, the provision of medical procedures. Topp Decl., ¶3, Ex. J.

On November 16, 2022, Whalen provided initial responses to the discovery requests. Topp Decl., ¶2. Afer Landlord’s counsel advised her that some responses were deficient, on December 16, 2022, she submitted supplemental responses. Topp Decl., ¶¶ 4-5, Ex. K. Whalen’s responses asserted that the Property was in an R5 Multiple Dwelling Zone, which does not permit retail use for medical and general office purposes. Topp Decl., ¶5, Ex. K. Because this was the agreed use in both Leases, the Leases and Guaranties were unenforceable. Topp Decl., ¶5, Ex. K. This also supported application of the unclean hands doctrine. Topp Decl., ¶5, Ex. K. Mogannam later served supplemental responses to the discovery requests that stated the same. Topp Decl., ¶6.

Commercial Pro 247 Property Profiles confirm that Mogannam owns real property at (1) 121 S Hope Street, # 611, Los Angeles, CA 90012; and (2) 1721 Andover Way, Petaluma, CA 94954. Topp Decl., ¶¶ 7-8, Exs. Q-R. Another Commercial Pro 247 Property Profile shows that Whalen owns real property at 645 W. 9th Street, No. 730, Los Angeles, CA 90015. Topp Decl., ¶9, Ex. S.

On March 18, 2019, Fluxogenix filed its petition for bankruptcy. Castaneda Decl., ¶4, Ex. 3. Landlord produced the bankruptcy petition in discovery. Castaneda Decl., ¶4.[6]

On April 15, 2019, Whalen emailed Landlord that Flexogenix planned to vacate Units A and B (collectively Suite 101), by the end of April. Castaneda Decl., ¶3, Ex. 2. As to Suite 103, Miletic had shown significant interest in taking over the lease. Castaneda Decl., ¶3, Ex. 2. Flexogenix offered to vacate the premises in conjunction with Miletic’s starting date, which would likely be sometime in May or June 1. Castaneda Decl., ¶3, Ex. 2.

On May 29, 2019, in Fluxogenix’s bankruptcy proceedings, Sean Whalen (“Sean”) submitted a declaration in support of a motion to reject unexpired leases of nonresidential real property. Castaneda Decl., ¶2, Ex. 1. He stated that, as of May 1, 2019, Fluxogenix had stopped operating in Units A and B of the Property and removed all personal property. Castaneda Decl., ¶2, Ex. 1 (¶11). Flexogenix expected to shut down operations in Unit C-2, the premises for the C-2 Lease, by June 29, 2019. Castaneda Decl., ¶2, Ex. 1 (¶13).

At some point, Landlord drafted a lease to rent Unit C-2 to Miletic beginning July 1, 2019 for three years. Castaneda Decl., ¶5, Ex. 4. The Base Rent under this lease would be $5,105.30 per month from July 2019 to June 2020, $5,258.46 from July 2020 to June 2021, and $5,416.21 from June 2021 to July 2022. Castaneda Decl., ¶5, Ex. 4. The lease would also hold Miletic liable for 16% of CAM expenses, estimated at $921.96 for the first month. Castaneda Decl., ¶5, Ex. 4. This lease was not signed. Castaneda Decl., ¶5, Ex. 4.

On February 2, 2023, Landlord provided responses to special interrogatories. Castaneda Decl., ¶8, Ex. 7. Landlord was asked how much Miletic offered to pay per square foot to rent approximately 1,354 square feet of space in the Property. Castaneda Decl., ¶8, Ex. 7. Landlord replied that this was not what happened. Castaneda Decl., ¶8, Ex. 7. Miletic and Landlord had discussed a lease for Unit C-2 and agreed upon a monthly rent of $5,105.30, or about $3.77 per square foot. Castaneda Decl., ¶8, Ex. 7. Landlord drafted and sent him a lease to that effect. Castaneda Decl., ¶8, Ex. 7. Landlord believed that Miletic reviewed the draft lease, but he did not sign it or provide any comments or proposed changes. Castaneda Decl., ¶8, Ex. 7. Landlord never leased the premises to him. Castaneda Decl., ¶8, Ex. 7.

On April 13, 2022, Landlord filed an ex parte application for a right to attach order or temporary protective order against Mogannam. Castaneda Decl., ¶8, Ex. 7. Landlord asserted that Mogannam’s counsel would direct him to declare bankruptcy if the parties cannot reach a settlement. Castaneda Decl., ¶8, Ex. 7. Mogannam would encumber or otherwise make real property unavailable or create a lien against liquid assets to avoid lawful obligations to the Landlord. Castaneda Decl., ¶8, Ex. 7.

Whalen does not have a bank account with East West Bank, which the application for a right to attach order lists as attachable property. Whalen Decl., ¶2. Her bank account is with New Petalz LLC. Whalen Decl., ¶2, Ex. A.

Landlord applies for right to attach orders against Defendants Whalen and Mogannam in the amount of $944,434.18.

Landlord’s claims against Whalen and Mogannam are based on the Guaranties to the A&B Lease and the C-2 Lease. Yahouda Decl., ¶¶ 4-7, Exs. B-G. Landlord has claims on which to base attachment.

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).

As to the A&B Lease, its ledger adds the CAM expenses, Base Rent, Parking Expenses, and late charges up to February 2020. Yahouda Decl., ¶11, Ex. H. When added to $2,100 in parking booklet expenses prior to default, damages under this Lease total $771,752.44. Yahouda Decl., ¶11, Ex. H.

As to the C-2 Lease, its ledger adds the Base Rent, CAM charges, and late charges up to February 2020. Yahouda Decl., ¶11, Ex. H. Landlord credits a $12,077.56 administrative rent payment from Flexogenix’s bankruptcy estate. Yahouda Decl., ¶15, Ex. I. After Landlord credited Flexogenix for this, the accrued damages under the C-2 Lease decreased from $184,759.30 to $172,681.74. Yahouda Decl., ¶15, Ex. I.

Both Leases assess a 5% late charge on any payment not made when due. Yahouda Decl., ¶¶ 4, 6, Exs. B, E. Defendants assert that, under Garrett v. Coast & Southern Fed. Sav. & Loan Assn., (“Garrett”) (1998) 9 Cal.3d 731, 739, these late fees for the period of March 1, 2019 through February 28, 2020 are unenforceable because Flexogenix left the premises before Landlord assessed the fees. Opp. at 11.

Garrett stated that the fundamental difference between interest and penalty charge is that the former is a measure of compensation while the latter is punitive in nature. 9 Cal.3d at 739. Late charges in a home loan contract compensate the lender for its administrative expenses and the cost of money wrongfully withheld and encourage the borrower to make timely future payments. Id. at 739-40. Whether late charges are a reasonable endeavor to estimate fair compensation depends on the motivation and purpose of such charges. Id. at 740. If the sum extracted is designed to exceed substantially the damages suffered by the other party, the provision for the additional sum, whatever its label, is an invalid attempt to impose a penalty insofar as it compels prompt payment through the threat of imposition of charges bearing little or no relationship to the amount of the actual loss incurred by the lender. Id. at 740. The court invalidated the late charges provision in the home loan because the parties had not estimated a fair average compensation for any loss sustained by the delinquency in the payment of an installment. Id. at 740.

As Landlord points out (Reply at 13-14), the A&B Lease and the C-2 Lease both provided that a late charge of 5% of the overdue amount or $100, whichever is greater would be assessed for late payment of rent to compensate Landlord for costs not contemplated by the lease. The parties expressly agreed that this amount is a fair and reasonable estimate of the costs Landlord would incur. Yahouda Decl., Exs. B, E (§13.4). Landlord is entitled to late fees for the period before the COVID-19 ordinances went into effect.

Landlord’s readily ascertainable damages under the Leases total $944,434.18 ($771,752.44 + $172,681.74). Yahouda Decl., ¶16.

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).

The Declaration of Sean Whalen states that Flexogenix provides management services to individual professional corporations and is 97.5% owned by himself and his wife, Whelan. Castenada Decl., Ex. 1 (Sean Whelan Decl., ¶5). When Fluxogenix negotiated the A&B Lease with Landlord, it asserted that Whalen and Mogannam would be guarantors because they were Fluxogenix principals. Yahouda Decl., ¶3, Ex. A. Whalen and Mogannam signed both Leases as officers of Fluxogenix – Mogannam as Vice-President and Chief Medical Officer, and Whalen as CEO/CFO. Yahouda Decl., ¶¶ 4, 6, Exs. B, E.

Landlord’s action arises out of Defendants’ conduct of a business or profession.

Whalen and Mogannam do not dispute that Fluxogenix signed the A&B and C-2 Leases in 2015 and that they each signed a Guaranty for both. Yahouda Decl., ¶¶ 4-7, Exs. B-G. They do not dispute that they failed to pay amounts owed thereunder from March 2019 thereafter. In their argument for mitigated damages (Opp. at 8), they admit that they breached the Leases insofar as they advised Landlord that Flexogenix would vacate the premises soon. Castaneda Decl., ¶3, Ex. 2.

Defendants argue that breach of contract requires proof that they complied with their obligations under the Leases and Guaranties. Opp. at 6. Landlord replies that its obligations under the Leases were to provide the premises and not interfere with Flexogenix’s possession and quite enjoyment, and its obligations under the Guaranties were to lease the premises to Flexogenix. Reply at 7. It is obvious from the evidence that Landlord has met these obligations. Landlord did lease the premises to Flexongenix and there is no suggestion that it interfered with the tenant’s possession or quiet enjoyment. To the contrary, Defendants criticize Landlord for not taking repossession of the premises earlier. See post.

All contracts which have for their object, directly or indirectly, to exempt any one from responsibility for his own fraud, or willful injury to the person or property of another, or violation of law, whether willful or negligent, are against the policy of the law. CCP §1668.

Landlord presents evidence that on July 6, 2015, the LADBS issued a building permit to change the Property’s use from retail to medical office. RJN Ex. 1. On October 19, 2015, LADBS issued a Certificate of Occupancy for the Property that listed its primary use as a medical office. RJN Ex. 2. Under the LAMC, use of the premises as a “medical office” was allowed despite the fact that it is in an R5 zone.

During discovery, Whalen asserted that the Property was in an R5 Multiple Dwelling Zone, which does not permit retail use for medical and general office purposes. Topp Decl., ¶5, Ex. K. Defendants argue that applicable zoning regulations “may have precluded the [P]roperty from operating a medical practice carrying out procedures beyond the scope of permissible use. Under the Certificate of Occupancy, the approved use was as a medical office and the designated zone for the premises was R5. The medical procedures that took place may have been beyond the use contemplated and approved by the City of Los Angeles. Paragraph 2.3 of each Lease represented that the premises comply with all applicable laws and held Flexogenix responsible for ensuring that these laws allowed the intended use. Yahouda Decl., ¶¶ 4, 6, Exs. B, E. Defendants assert that this is unenforceable if the Landlord knew at the time that the intended use as a medical and general office was prohibited under zoning regulations. Opp. at 7.

Defendants have no admissible evidence that non-permitted medical procedures took place in the leased premises. As Landlord points out (Reply at 11, n. 2), Flexogenix would have been in breach of the Agreed Use in the Leases if it used the premises for other than medical and general office use. Yahouda Decl., ¶¶ 4, 6, Exs. B, E (¶1.8). Even if non-permitted medical procedures occurred, that would not make the object of the Leases illegal. Finally, Defendants present no evidence that they can evade their rental obligations when they, not Landlord, operated the premises as a medical office for four years. Defendants cannot benefit from an illegality and the use it as a sword against Landlord.

Defendants have failed to show a probability of success on an affirmative defense based on an illegal contract.

Upon termination of a lease before the end of the term, the lessor may recover (3) the worth at the time of award of the amount by which the unpaid rent for the balance of the term after the time of award exceeds the amount of such rental loss that the lessee proves could be reasonably avoided. CCP §1951.2(a).

The Leases both reflect that if Landlord seeks rent accrued that after a breach as damages, it must be reduced by whatever Flexogenix proves Landlord could have reasonably avoided. Yahouda Decl., ¶¶ 4, 6, Exs. B, E.

Landlord’s moving papers asserts that it made reasonable efforts to lease the premises once it was allowed to repossess them per the bankruptcy court’s order on June 25, 2019. Yahouda Decl., ¶8; Topp Decl., ¶6, Ex. L. Earlier that month, it entered into a listing agreement with CBRE, which then marketed the Property both through banners on the door and online listings. Joseph Decl., ¶¶ 4-5, Exs. M-O. Landlord renewed the listing agreement with CBRE in November 2019 when it expired. Joseph Decl., ¶7, Ex. P. Landlord did not receive offers to lease the premises by the time Flexogenix’s Leases would have expired. Joseph Decl., ¶8.

Defendants generally assert that in the ten months after May 2019 in which the premises remained empty, Landlord should have relet the premises at a lower rate if necessary. They acknowledge that COVID in March 2020 precluded leasing but contend that Landlord’s efforts from May 1 to March 2020 were unreasonable. Opp. at 9.

Defendants assert that Landlord should not have waited until the June 25 bankruptcy court’s order to make leasing efforts. Defendants gave notice on April 15, 2019 that it expected to vacate units A and B by the end of that month. Castaneda Decl., ¶3, Ex. 2. On May 29, 2019, in a declaration in support of a motion to reject unexpired leases, Fluxogenix claimed it had vacated Units A and B on May 1 and would vacate Unit C-2 by June 29. Castaneda Decl., ¶2, Ex. 1. Landlord should have begun efforts to relet the premises on May 1, 2019. Opp. at 8.

In reply, Landlord presents evidence that, in addition to the June 3, 2019 listing agreement with CBRE, it contacted CBRE for a listing agreement on May 2, 2019, just one day after Defendants claim they abandoned a portion of the premises. Reply Emrani Decl., ¶¶ 3-4, Ex. A. Landlord also argues that there is no evidence that Defendants surrendered possession of the premises until the June 25 bankruptcy order. Reply at 13. Defendants have not met their burden of showing that Landlord’s listing with CBRE was untimely.

Defendants also assert that Landlord had a new tenant for the premises. They contend that Landlord entered into alease with Miletic for Unit C-2 that ended the C-2 Lease for Fluxogenix. Opp. at 9. Opp. at 7-8.

Before Flexogenix vacated the premises, it advised Landlord that Miletic was interested in taking over the premises. Castaneda Decl., ¶3, Ex. 2. Miletic and Landlord had discussed a lease for Unit C-2 and agreed upon a monthly rent of $5,105.30. Castaneda Decl., ¶8, Ex. 7. Landlord drafted and sent him a lease that listed $5,105.30 as the Base Rent and $921.96 as the initial CAM estimate. Castaneda Decl., ¶¶ 5, 8, Exs. 4, 7. Miletic never signed the lease or returned it with corrections. Castaneda Decl., ¶¶ 5, 8, Exs. 4, 7. As a result, Landlord never had a tenant to substitute for Flexogenix for Unit C-2.

Based on current evidence, Defendants fail to meet their burden of showing that Landlord failed to mitigate its damages.

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).

Defendants note that the application does not include a sworn statement by Landlord that it is not seeking the writ for an improper use pursuant to CCP section 484.090(a)(3); there is only a conclusory statement signed by Landlord’s counsel. Defendants also cite Landlord’s previous application for a right to attach order, which asserted that Mogannam would declare bankruptcy or otherwise hide his assets if settlement efforts failed. Castaneda Decl., ¶7, Ex. 6. Because Landlord tried to gain priority over other creditors in the event of bankruptcy, Defendants contend that this is not a proper use under CCP section 484.090(a)(3). Opp. at 10.

Defendants are incorrect. Judicial Council Form AT-105 Item 4 expressly states that the attachment “is not for a purpose other than the recovery on a claim upon which the attachment is based” and permits the form to be signed by “Plaintiff or Plaintiff’s Attorney”. Nor is attachment for the purpose of claim priority an improper purpose. The proper purpose of attachment is to obtain such recovery. CCP §484.090(a)(3). Landlord seeks attachment for a proper purpose.

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. The requirement of specificity avoids unnecessary hearings where an individual defendant is willing to concede that the described property is subject to attachment. Ibid. A general list of categories - e.g., “real property, personal property, equipment, motor vehicles, chattel paper, negotiable and other instruments, securities, deposit accounts, safe-deposit boxes, accounts receivable, general intangibles, property subject to pending actions, final money judgments, and personal property in decedents’ estates” – is sufficient. Ibid.

As to Whalen, the property that Landlord seeks to attach includes real property at 645 W 9th Street, No. 730, Los Angeles, CA 90015. Topp Decl., ¶9, Ex. S. It also includes bank accounts at Chase East West Bank, Citibank, and Chase Bank. Whalen presents evidence that her bank accounts are at New Petalz LLC, not East West Bank. Whalen Decl., ¶2, Ex. A. Aside from this change, the description of attachable property is adequate.

As to Mogonnam, the property that Landlord seeks to attach includes real property at (1) 121 S Hope Street,#611, Los Angeles, CA 90012; and (2) 1721 Andover Way, Petaluma, CA 94954. Topp Decl., ¶¶ 7-8, Exs. Q-R. It also includes bank accounts at Wells Fargo Bank and Bank of America. The description of attachable property is adequate.

The applications for right to attach orders are granted against Defendants in the amount of $944,434.18, jointly and severally. No writ shall issue for any Defendant until Vineyard posts a $10,000 undertaking for that Defendant.

[1] Landlord’s 18-page memorandum exceeds the 15-page limit of CRC 3.1113(d). The court has exercised its discretion to read and consider only the first 15 pages. As a result, Landlord has waived its claim for a temporary protective order.

[2] Defendants failed to lodge a courtesy copy of their 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.

[3] Landlord requests judicial notice of (1) the City of Los Angeles Department of Building and Safety (“LADBS”) Document Report for the Property, dated July 7, 2015 (RJN Ex. 1); and (2) LADBS Certificate of Occupancy for the Property, dated October 19, 2015 (RJN Ex. 2). The requests are granted. Evid. Code §452(c).

[4] Landlord failed to include this declaration in its courtesy copy.

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

[6] Defendants request judicial notice of the fact that Landlord received the petition. Castaneda Decl., ¶4. Defendants never filed a separate request for judicial notice as required by CRC 3.1113(l), and the court has no way of knowing how Landlord possessed the petition. The request is denied.