Judge: James C. Chalfant, Case: 22STCV17303, Date: 2022-09-08 Tentative Ruling

Case Number: 22STCV17303    Hearing Date: September 8, 2022    Dept: 85

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

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

            Except in unlawful detainer actions, the amount to be secured by the attachment is the sum of (1) the amount of the defendant’s indebtedness claimed by the plaintiff, and (2) any additional amount included by the court for estimate of costs and any allowable attorneys’ fees under CCP section 482.110.  CCP §483.015(a); Goldstein v. Barak Construction, (2008) 164 Cal.App.4th 845, 852.  This amount must be reduced by the sum of (1) the amount of indebtedness that the defendant has in a money judgment against plaintiff, (2) the amount claimed in a cross-complaint or affirmative defense and shown would be subject to attachment against the plaintiff, and (3) the value of any security interest held by the plaintiff in the defendant’s property, together with the amount by which the acts of the plaintiff (or a prior holder of the security interest) have decreased that security interest’s value.  CCP §483.015(b).  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.

            C. Statement of Facts

            1. United’s Evidence

            On March 13, 2014, United and Tenant entered into the Lease for the Premises, originally to end on June 30, 2019.  Benji Decl., ¶8, Ex. A.  The Agreed Use was for a photography studio and beauty school, and section 6.1 restricted use of the Premises to the Agreed Use and reasonably comparable legal uses.  Ex. A.

            The Lease established a monthly Base Rent of $6,300 and a security deposit of $12,600.  Ex. A.  An addendum added Fixed Rental Adjustments (“FRAs”) increasing the rent to (1) $6,645 from April 1, 2015; (2) $6,895.85 from April 1, 2016; (3) $7,102.72 from April 1, 2017; and (4) $7,315.80 from April 1, 2018.  Ex. A.  A second addendum offered to extend the Lease for an additional 60 months in exchange for a Market Rental Value Adjustment (“MRVA”) for July 2019, which would increase the rent to a Market Rental Value agreed on through a predetermined process.  Ex. A.  This process could not decrease the rent.  Ex. A.

            Section 8.4(b) of the Lease required Tenant to “obtain and maintain loss of income…insurance in amounts as will reimburse” the Tenant for any lost earnings attributable to all perils commonly insured against by prudent lessees in the same business.  Ex. A. 

            For any late payment, Tenant would incur the greater of 10% of the amount or $100 in one-time late charges after five days and interest at an annual rate of 10%.  Benji Decl., ¶8, Ex. A.  In the event of default, United was entitled to both repossession and all rent owed both through repossession and afterwards to the extent that Tenant did not prove that United could reasonably mitigate.  Ex. A.  If United obtained repossession through unlawful detainer, it retained the right to recover all unpaid rent and damages under the Lease in the same or separate proceeding.  Ex. A.  United was also entitled to recovery for all the detriment proximately caused by the breach, including reasonable attorney’s fees and costs.  Benji Decl., ¶16, Ex. A.

            On March 3, 2014, Michael and Tal entered into the Guaranty of the Lease as managers of the Tenant.  Benji Decl., ¶¶ 9-10, 20, Exs. B, E.  Under the Guaranty, they are liable for all amounts that Tenant owes.  Benji Decl., ¶¶ 9, 15, Ex. B.

            On September 12, 2016, United and Tenant entered into the First Amendment of the Lease, which increased the monthly rent from that month thereafter by $3,104.15.  Benji Decl., ¶11, Ex. C. 

            On May 1, 2020, Tenant failed to pay the full amount due and therefore breached the Amended Lease.  Benji Decl., ¶12.  Since then, based on the statement that United’s computer system generated from collected rent payments, Tenant has failed to pay the $12,500 due every month through April 2022 except June 2020 and February 2021.  Benji Decl., ¶¶ 6, 13, Ex. D.  Tenant also owes $5,000 in rent for May 2022.   Ex. D.  United also has incurred $15,633.20 in legal services.  Benji Decl., ¶13, Ex. D.[2]  United applied Tenant’s $12,600 security deposit as credit against this debt.  Benji Decl., ¶¶ 13, 18, 21, Ex. D.

            United has regained possession of the Premise through an unlawful detainer judgment.  Benji Decl., ¶17.

            2. The Hajeks’ Evidence[3]

            The Academy provided in-person professional level beauty courses to prepare students for careers in movies, music videos, TV shows, fashion shows, editorial publications, and other media.  Michael Decl., ¶4; Tal Decl., ¶4.  The Academy only offered in-person classes.  Michael Decl., ¶5; Tal Decl., ¶5. 

            On March 15, 2020, COVID-19 health orders required the Academy to close its doors and cease in-person activities.  Michael Decl., ¶¶ 3, 6; Tal Decl., ¶¶ 3, 6.  This prevented the Academy and the Hajeks from using the Premises as the Lease intended.    Michael Decl., ¶7; Tal Decl., ¶7.

            On November 12, 2021, United issued a notice to perform or quit that informed the Hajeks that the Tenant failed to provide evidence of required liability insurance, permit United to inspect the premises, or repair the damage to the wall in the parking lot.  Opp. Ex. 1.

            On December 27, 2021, United filed an unlawful detainer complaint based on the November 12 notice and the Hajeks’ failure to act.  Opp. Ex. 1.  United sought forfeiture of the Lease, reasonable attorney’s fees, and damages based on a daily fair rental value of $210 from December 1, 2021.  Opp. Ex. 1.

            D. Analysis

            Plaintiff United applies for a right to attach order against the Hajeks in the amount of $278,533.20, which includes $500 in estimated costs and $7,500 in attorney’s fees.

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

            A writ of attachment may be issued only in an action on a claim or claims for money, each of which is based upon a contract, express or implied, where the total amount of the claim or claims is a fixed or readily ascertainable amount not less than five hundred dollars ($500).  CCP §483.010(a). 

            Plaintiff United’s claim is based on the Guaranty signed by the Hajeks as Tenant’s Guarantors.  Benji Decl., ¶9, Ex. B.  Tenant owes United under the Amended Lease.  Benji Decl., ¶¶ 8, 11, Exs. A, C.  United claims that Tenant owes at least $270,533.20.  Mem at 6.  United has a claim on which attachment can be based.

            2. An Amount Due That is Fixed and Readily Ascertainable  

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

            United claims that the total ascertainable base rent owed is $270,533.20: $283,133.20 less Tenant’s $12,600 security deposit.  Mem. at 7; Benji Decl., ¶13, Ex. D.  United adds $500 in costs and $7,500 in attorney’s fees.  App. at 2; Benji Decl., ¶13, Ex. D.  United does not claim attachment of any other charges, like late charges or $75,000 in property damage.  Mem. at 6; Benji Decl., ¶¶ 13, 18, Ex. D.

            The amounts do not match the ledger provided as Exhibit D, which shows that Tenant owes 22 months of rent at $12,500 plus $5,000 for the month of May 2022, a total of $280,000, or $267,400 after subtracting the security deposit.  Benji Decl., ¶13, Ex. D. 

            Even this is not correct.  United claims that the Amendment increased the rent to $12,500 for the applicable period.  Mem. at 6.  The Amendment merely increased the existing base rent of $7,315.80 by $3,104.15 from September 1, 2016 onward.  Benji Decl., ¶11, Ex. C.[4]  The base rent is therefore $7,315.80 plus the $3,104.15, a total rate of $10,419.95.  Benji Decl., ¶¶ 8, 11, Exs. A, C. 

            The $7,315.80 base rent for the 22 months in which Tenant failed to pay rent between May 2020 and April 2022 yields unpaid base rent of $229,238.90.  Although United does not explain why the unpaid rent May 2022 is $5,000, the court will accept this lesser amount and add $5000 to $229,238,90 for a total unpaid rent of $234,238.90.  After subtracting the $12,600 security deposit, the total amount of ascertainable damages from base rent is $219,558.85.

            The Ledger also shows total legal services – which is likely fees and costs combined – of $15,633.20.  Benji Decl., ¶13, Ex. D.  These fees and costs may have been incurred but there is no attorney declaration showing that they are reasonable and they are disallowed.

            Damages of $219,558.85 are readily ascertainable.

            3. Probability of Success 

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

            United asserts in reply that Tenant cannot contest that it owes rent because the court has entered default against it.  Reply at 4.  This application is not made against Tenant.  United seeks right to attach orders against the Hajeks in their individual capacity as guarantors and the Hajeks retain the right to oppose the application.

            United’s claims for relief are breach of the Lease and Guaranty.  The evidence shows that the Tenant entered into a Lease and Addendum to Lease whereby it agreed to pay rent and attorney’s fees if United filed suit after a breach.  Benji Decl., ¶8, Ex. A.  Michael and Tal entered into the Guaranty with United and assumed liability for all amounts that Tenant owes.  Benji Decl., ¶¶ 9, 15, Ex. B.

            The Hajeks do not deny that Tenant failed to pay rent.  Opp. at ¶5.  They assert that March 15, 2020, COVID-19 health orders required the Academy to close its doors and cease in-person activities.  Michael Decl., ¶¶ 3, 6; Tal Decl., ¶¶ 3, 6.  The Hajeks use this fact to assert two affirmative defenses – frustration of purpose and illegality.

            a. Frustration of Purpose

            Where the reason the parties entered an agreement has been frustrated by a supervening circumstance that was not anticipated, such that the value of performance by the party standing on the contract is substantially destroyed, the doctrine of commercial frustration applies to excuse performance.  See, e.g. Habitat Trust for Wildlife, Inc. v. City of Rancho Cucamonga, (2009) 175 Cal.App.4th 1306, 1336.  “A thing is impossible in legal contemplation when it is not practicable; and a thing is impracticable when it can only be done at an excessive and unreasonable cost.”  Id. at 1336.   However, mere business impact is not enough; there must be extreme hardship from a not reasonably foreseeable event which nearly destroys the value of performance.  Lloyd v. Murphy, (1944) 25 Cal.2d 48, 50.

            The Agreed Use under the Lease was for a photography studio and beauty school, and section 6.1 restricted use of the Premises to the Agreed Use and reasonably comparable legal uses.  Benji Decl., ¶8, Ex. A.  The Hajeks assert that the COVID-19 moratoria prevented them from fulfilling the Agreed Use because students could not attend class.  Opp. at ¶5; Michael Decl., ¶3; Tal Decl., ¶3.  In reply, United cites a variety of federal and state cases where courts have refused to apply the frustration of purpose defense to commercial leases when the tenants could not use the building for the intended business due to COVID-19.  Reply at 7.

            Affirmative defenses must be supported with legal authority and evidence.  As United notes, the Hajeks fail to provide copies of the applicable health orders or otherwise demonstrate that the orders prevented the Academy’s operations on the Premises.  Reply at 3.  Nor do they present sufficient evidence, as opposed to conclusions, that the Academy could not operate as the Academy or a reasonably comparable use.  For this reason, the Hajeks fail to support their affirmative defense of frustration of purpose.  

            Assuming arguendo that the Academy could not operate on the premises, the relevant question is who should bear the risk of loss for this unanticipated public health crisis?  These issues are commonly addressed in a force majeure clause.  As United notes, Section 8.4 of the Lease required Tenant to maintain insurance for loss of income due to all perils commonly insured against by prudent lessees in the same business.  Reply at 5; Benji Decl., ¶8, Ex. A.  While not a force majeure that expressly allocates risk, this clause suggests that Tenant should bear the risk of a public health hazard that could shut down the Academy.

            The Hajeks have failed to demonstrate the affirmative defense of frustration of purpose.

            b. Illegality

            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.  The Hajeks assert that operation of the Academy would have been unlawful because the health orders mandated closure of the school.  Opp. at 3; Michael Decl., ¶6; Tal Decl., ¶6.

            As United notes, the defense of illegality does not apply.  Reply at 6.  Nothing about the Lease was illegal and nothing prevented Tenant from continuing to pay rent for the Premises.  Nor do the Hajeks show that operation of the Academy or a reasonably comparable use would have been illegal under the COVID-19 orders.  The orders, which are not provided, merely closed the doors of the Premises; they did not prevent the business from operating in another way such as online, even if that were generally infeasible for an in-person business.

            c. Conclusion

            United has shown a probability of success on its claim for breach of the Lease, and therefore the Guaranty, in the amount of $219,558.85.

            4. Attachment Based on a Commercial Claim 

            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). 

            United’s claim against the Hajeks is based on the Guaranty, which they signed to induce United to extend credit to Tenant.  Benji Decl., ¶9, Ex. B.  Per Nevada’s public records, the Hajeks are managers of tenant.  Benji Decl., ¶20, Ex. E.  United’s claim is a commercial claim arising from the Hajeks’ operation of Tenant. 

            5. Defendant’s Property Is Adequately Described 

            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. 

            United seeks attachment of (1) interests in real property except leasehold estates with unexpired terms of less than one year; (2) accounts receivable, chattel paper, and general intangibles arising from the Hajeks’ business or profession; (3) equipment; (4) farm products; (5) inventory; (6) final money judgments arising from their business or profession; (7) money on their business’ premises, off-premises in excess of $1,000 when located where the Hajeks conduct business, or in deposit accounts in excess of $1,000; (8) negotiable documents of title; (9) instruments; (10) securities; (11) minerals to be extracted; and (12) interest in the real property commonly referred to as 5427 Morella Ave, Valley Village, CA 91607.  This description is sufficiently specific.

            6. Attachment Sought for a Proper Purpose¿ 

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

            The Hajeks contend that the unlawful detainer action only requested monetary damages based on rent from December 1, 2021.  Opp. ¶8, Ex. 1.  Yet, the Complaint in this action seeks baserent from May 2020 through May 2022.  Benji Decl., ¶13, Ex. D; Opp. ¶8, Ex. 2.  The Hajeks assert that this discrepancy demonstrates an ulterior motive.  Opp. ¶9.

            Not so.  The parties contracted for this exact circumstance in the Lease, which allows United to pursue unpaid rent in a civil suit after repossession through a separate unlawful detainer action.  Benji Decl., ¶8, Ex. A.  United exercises that right through the Complaint, and that fact does not by itself suggest an ulterior motive.

            United seeks attachment for breach of contract, a proper purpose. 

            E. Conclusion 

            Plaintiff United’s application for right to attach orders is granted in the amount of $219,558.85.  United failed to submit right to attach orders on the proper Judicial Council form and is ordered to do so in the next two court days, or they will be deemed as waived.  No writ of attachment shall issue for any Defendant until United posts a $10,000 undertaking for that Defendant.