Judge James C. Chalfant, Case 21STCV40853 2022-10-18 Tentative Ruling

Plaintiff Shahla Melamed (“Melamed”) applies for a right to attach order against Defendant 511 Seaward, LLC (“511 Seaward”) in the amount of $3,850,000.

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

A. Statement of the Case

1. Complaint

Plaintiff Melamed commenced this proceeding on November 5, 2021. The operative pleading is the First Amended Complaint (“FAC”) file on February 16, 2022 against Gabrijel Krstanovic (“Krstanovic”), Vasel Malota (“Malota”), Seaside Construction Management Company, LLC (“Seaside”), and 511 Seaward. The FAC alleges (1) breach of oral contract, (2) fraud, (3) negligent misrepresentation, (4) money lent or paid, (5) money had and received, and (6) financial elder abuse. The FAC alleges in pertinent part as follows.

Plaintiff Melamed is over 65 years old. Defendant 511 Seaward was organized for the purpose of purchasing and developing at 511 Seaward Road, Corona Del Mar, CA 92624 (“Property”), and 511 Seaward obtained title to the Property in July 2020. Defendant Krstanovic was the managing member and owner of Seaside and 511 Seaward. Defendant Malota was the CEO of Marshal Home LLC (“Marshal”), which is a member of 511 Seaward. Malota also organized 511 Seaward.

Melamed first met Krstanovic in September 2020. Before November 2020, Krstanovic solicited money from Melamed. Krstanovic claimed he would use the money to develop the Property. Krstanovic told Melamed that the Property was owned by one of Krstanovic’s companies, and that Malota was his partner in purchasing the Property on the company’s behalf. Krstanovic also said that he would use the money to develop other property in Orange and San Diego counties. Melamed’s investment would allow Krstanovic to repay the money with interest and profits in a few months.

Melamed paid (1) a $1 million cashier’s check payable to Seaside and Krstanovic on November 4, 2020; (2) two cash payments to Krstanovic in late 2020 totaling $1.8 million; and (3) a $900,000 cashier’s check payable to Krstanovic on March 22, 2021. Defendants pocketed the money instead of spending it on the real property. They have refused to return any of the money despite numerous requests from Melamed and promises from Krstanovic.

Krstanovic acted as the agent for 511 Seaward and Seaside when he solicited money from Melamed. Both companies are therefore responsible for his actions.

Plaintiff Melamed seeks (1) at least $3.7 million in general damages; (2) special damages; (3) punitive damages; (4) prejudgment interest at the lawful rate from May 31, 2021; and (5) attorney’s fees permissible under Welfare and Institutions (“W&I”) Code 15657.5.

2. Cross-Complaint

511 Seaward filed a Cross-Complaint against Cross-Defendants Krstanovic, Malota, and Seaside on March 25, 2022, alleging (1) implied indemnity, (2) comparable indemnity, (3) declaratory relief, (4) equitable indemnity, and (5) contribution. The Cross-Complaint alleges in pertinent part as follows.

511 Seaward is not responsible for the events that underlie Melamed’s claim. Despite this, it has incurred attorney’s fees, court costs, investigative costs and other costs in connection with defending against the FAC. If it is held liable for damages against Melamed, it will be only because of the actions of the Cross-Defendants.

511 Seaward therefore seeks (1) a declaration of its rights and duties; (2) an order declaring the percentage of fault, if any, between 511 Seaward and Cross-Defendants for damages and losses allegedly caused to Melamed; (3) a judgment against Cross-Defendants based on relative percentage of fault; (4) an order that 511 Seaward is entitled to full indemnification from Krstanovic for any settlements or judgments during this action; and (5) attorney’s fees and other costs incurred in defense against the FAC.

3. Course of Proceedings

On January 21, 2022, 511 Seaward filed a demurrer to the Complaint.

On February 14, 2022, Melamed filed a request for dismissal of the Complaint as to then-Defendant David Davutoglu (“Davutoglu”) without prejudice. Department 20 (Hon. Kevin Brazile) entered the dismissal on February 16, 2022.

Also on February 16, 2022, Melamed filed the FAC.

On March 14, 2022, Defendants Seaside and Krstanovic filed their Answer to the FAC.

On March 30, 2022, 511 Seaward filed its Cross-Complaint and its Answer to the FAC.

On April 21, 2022, Plaintiff Melamed served Defendant Malota with the FAC and Summons by substitute service, effective May 1, 2022.

On May 2, 2022, Cross-Defendants Krstanovic and Seaside filed their Answer to the Cross-Complaint.

Plaintiff Melamed requested entry of default as to Defendant Malota. Department 20 (Hon. Kevin Brazile) entered default on June 3, 2022. However, on June 8, 2022, Melamed and Malota stipulated to set aside the default. On June 23, 2022, Defendant Malota filed his Answer to the FAC.

On September 13, 2022, in conjunction with the instant noticed application for a right to attach order, Melamed filed an ex parte application for a Temporary Protective Order (“TPO”) to enjoin 511 Seaward from selling, transferring, encumbering, or impairing the value of the Property. The court denied the ex parte application on September 15, 2022, in part for lack of a memorandum of points and authorities.

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 issue in any action for damages pursuant to W&I Code section 15657.5 for financial abuse of an elder or dependent adult. W&I Code §15657.01. An “elder’ is a person 65 years or older residing in California. W&I Code §15610.27. Financial abuse of an elder occurs when a person takes, secretes, appropriates, or retains real or personal property of an elder or dependent adult for a wrongful use or with intent to defraud, or both. W&I Code §15610.30(a)(1). Financial abuse of an elder also occurs when a person takes, secretes, appropriates, or retains real or personal property of an elder by undue influence. Welf. & Inst. Code §15610.30(a)(3). Undue influence means excessive persuasion that overcomes a person’s free will. Welf. & Inst. Code §15610.70(a). Factors to be considered in determining whether undue influence was present include the vulnerability of the victim, the influencer’s apparent authority, the actions used by the influencer, and the equity of the result. Welf. & Inst. Code §15610.70(a)(1)-(4).

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.

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 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).

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.

Plaintiff Melamed applies for a right to attach order against Defendant Seaward in the amount of $3,850,000. Although the FAC alleges both a breach of contract and financial elder abuse under the W&I Code, Melamed seeks attachment only for financial elder abuse.[2]

An application for a writ of attachment is a law and motion matter. CRC 3.1103(a)(2). All law and motion matters require a memorandum of points and authorities detailing the basis for the motion. CRC 3.1113(a). The absence of a memorandum may be construed as an admission that the motion is not meritorious. CRC 3.1113(a).

Plaintiff Melamed failed to file a supporting memorandum of points and authorities with her application. She merely attached a declaration and exhibits to the application without any supporting legal authority.[3] This alone is reason to deny the application.

In opposition, Defendant 511 Seaward contends that it has received none of Melamed’s money and had no contract, express or implied, with her. Opp. at 5-6. 511 Seaward notes that its November 2020 Statement of Information listed Krstanovic only as its agent for service of process, not as a manager with the authority to enter into agreements for 511 Seaward. Mickelson Decl., ¶4b, Ex. B. In fact, Krstanovic has never been a member or manager of 511 Seaward. Montgomery Decl., ¶4. All of Melamed’s cash payments and cashier’s checks were made to Krstanovic, sometimes also to Seaside, which also has never been 511 Seaward’s manager. Melamed Decl., ¶7, Exs. 1-2. Consequently, 511 Seaward contends that Krstanovic is not its agent, and it is therefore not liable to Melamed under Corporations Code section 17703.01(b).

511 Seaward concedes that its purpose is to purchase, develop, and sell the Property, and that it bought the Property in October 2020. Montgomery Decl., ¶¶ 9-10, Ex. A. It further concedes that Marshall was one of its three founding members. Montgomery Decl., ¶8. In turn, Marshall’s member managers were Malota and Charles Lee. Montgomery Decl., ¶8.[4] Marshall agreed to loan $4.8 million to 511 Seaward as its capital contribution, but never did so. Montgomery Decl., ¶8. As a result, Marshall agreed in June 2021 that it had forfeited its membership in Seaward for not making any capital contribution. Montgomery Decl., ¶12.

After the remaining members brought in another company to provide financing which failed to prevent another default, Seaward’s debt was refinanced through a hard-money lender to prevent foreclosure in April 2022. Montgomery Decl., ¶¶ 13-15. Since then, the Property has been listed for sale and is vacant. Montgomery Decl., ¶¶ 13-15.

Melamed replies that Krstanovic signed the November 2020 Statement of Information as 511 Seaward’s manager even if he is not listed as one. Mickelson Decl., Ex. B. She argues that is sufficient to make him Seaward’s agent. Reply at 2-3. [5]

The application is procedurally defective. 511 Seaward also has presented evidence that Krstanovic’s was not its agent, and it is not liable for his misconduct. Krstanovic signed the November 2020 Statement of Information as manager, but he is not listed as one. While Krstanovic was listed as an additional member or manager of Marshall in October 25, 2020, it is unclear whether he had authority to bind 511 Seaward as opposed to Marshall. Melamed’s evidence is insufficient at this stage to show agency. The application is denied.

[1] Both Melamed and 511 Seaward failed to lodge a courtesy copy of their respective reply and opposition in violation of the Presiding Judge’s First Amended General Order Re: Mandatory Electronic Filing. Both counsel are admonished to provide courtesy copies in all future filings.

[2] Melamed filed a $10,000 undertaking against three Defendants that would not be effective for this application. A $10,000 bond must be filed against a single Defendant subject to a writ of possession.

[3] The declaration confusingly sometimes claims that her monies were an investment and sometimes a loan and fails to provide a sufficient description of the terms of either.

[4] Melamed notes that Krstanovic was listed as one of Marshall’s additional managers or members on its October 25, 2020 Statement of Information (Mickelson Decl., ¶4c).

[5] Melamed also argues that 511 Seaward failed to file a Notice of Opposition on Judicial Council Form AT-155. Reply at 2. However, Judicial Council forms are not mandatory for attachment proceedings.