Judge James C. Chalfant, Case 22STCV17813 2023-04-25 Tentative Ruling

Plaintiff Chapman Court LLC (Landlord”) applies for a right to attach order against Defendant Brian Clark (“Tenant”) in the amount of $1,368,046.91.

The court has read and considered the moving papers (no opposition was filed) and renders the following tentative decision.

A. Statement of the Case

1. Complaint

Plaintiff Landlord filed the Complaint against Tenant on May 31, 2022, alleging a single cause of action for breach of contract. The Complaint alleges in pertinent part as follows.

On October 21, 2019, Tenant and Landlord entered a written lease agreement (“Lease”) for premises at 3511 W. 6th Street, Los Angeles, CA 90020 (“Premises”) from December 2019 through October 2029. Pursuant to the Lease, Tenant was required to pay Base Rent starting at $3.95 per rentable square foot per month, or $64,400.80 per month, with a 4% increase on every anniversary of the Lease’s Commencement Date. Tenant also was to pay the cost of utilities and any attorney’s fees Landlord incurs due to any breach.

Tenant also agreed to provide an irrevocable standby letter of credit for $200,000 within five business days of the Commencement Date. Tenant further agreed to provide a security deposit of $200,000.

In January 2020, Tenant breached the Lease for failure to provide the irrevocable standby letter of credit. In September 2020, he breached for failure to provide $100,000 of the $200,000 security deposit. Tenant also failed to pay the full monthly Base Rent from July 2020 thereafter, plus $186.08 in utility bills in February 2022.

In April 2022, Tenant returned the keys to the Premises without Landlord’s consent or waiver of its right to full enforcement of all remedies under the Lease. Article 19.2.1 allows Landlord to terminate the Lease and claim all amounts which would have been earned thereunder, adjusted for present-day value after mitigation. Landlord has mitigated its damages by releasing a portion of the Premises beginning April 2022 for $4,000 per month with an annual 3% increase. Efforts to lease the rest of the Premises have failed.

Landlord has calculated the Base Rent owed each year of the Lease after mitigation, although not the total. Landlord seeks compensatory damages for these amounts, interest at the rate listed in the Lease, and attorney’s fees and costs.

2. Course of Proceedings

On June 10, 2022, Landlord served Tenant with the Complaint and Summons.

On July 20, 2022, Tenant filed an Answer.

On August 31, 2022, Tenant filed notice of substitution of attorney from Avraham Sinai, Esq. to Paul Deese, Esq.

On March 29, 2023, Landlord served Tenant with the moving papers by email and U.S. 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.

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.

On October 21, 2019, Tenant and Landlord entered a Lease for commercial Premises from December 2019 through October 2029. Neman Decl., ¶¶ 3, 5-6, Ex. 1. Pursuant to the Lease, Tenant was required to pay Base Rent starting at $64,400.80 per month, with a 4% increase on every anniversary of the Lease’s December 1, 2019 Commencement Date. Neman Decl., ¶¶ 7-8, Ex. 1. Tenant also was required to pay Landlord the cost of supplying all utilities. Neman Decl., ¶5, Ex. 1.

Article 3.3 of the Lease required Tenant to provide a letter of credit for $200,000 within five business days of the Commencement Date. Neman Decl., ¶11, Ex. 1. Article 21 of the Lease required Tenant to provide a $200,000 security deposit upon the Lease’s execution. Neman Decl., ¶10, Ex. 1.

Article 29.21 provides that, in any action to enforce the Lease, the prevailing party is entitled to costs and attorney’s fees incurred. Neman Decl., ¶9, Ex. 1.

Tenant’s signature on the Lease is “Brian Clark, an individual.” Neman Decl., ¶5, Ex. 1.

On December 1, 2019, Tenant breached the Lease for failure to pay the $200,000 deposit. Neman Decl., ¶9. Although Tenant paid $100,000 in September 2020, he never paid the rest. Neman Decl., ¶14.

From July 2020 thereafter, Tenant failed to make full monthly payment of the Base Rent. Neman Decl., ¶15. Tenant had made two excess payments in February 2020 totaling $10,270.39. Neman Decl., ¶16. Landlord credited the $10,270.39 against the $64,400.80 Base Rent for July 2020, which reduced the balance to $54,130.41. Neman Decl., ¶16. Rent then continued to accrue. Neman Decl., ¶16. Tenant’s only payments after July 1, 2020 were $2,500.00 in August 2021, $2,500.00 in December 2021, and $688.16 in February 2022. Neman Decl., ¶16.

In April 2022, Tenant returned the keys to the Premises without Landlord’s consent or waiver of its right to full enforcement of all remedies under the Lease. Neman Decl., ¶17.

A ledger of the amounts owed under the Lease (“Ledger”) shows that Tenant accrued $1,358,921 in debt through April 2022. Neman Decl., ¶19, Ex. 2. This includes Base Rent and utilities through April 2022 after the $100,000 security deposit and the partial payments made from February 2020. Neman Decl., ¶19, Ex. 2. Without utilities, Landlord has calculated the damages for this period as follows.

The Base Rent for July and August 2020 was $128,801.60. Neman Decl., ¶18(1). Landlord subtracts the $100,000 security deposit, $10,270.39 of credit from February 2020, $2,500.00 paid in August 2021, $2,500.00 paid in December 2021, and $688.16 paid in February 2022. Neman Decl., ¶18(1). The outstanding Base Rent for those two months is $12,843.05. Neman Decl., ¶18(1).

The unpaid Base Rent totals $193,202.40 between September and November 2020, $803,721.96 based on an increased Base Rent from December 2020 to November 2021, $278,623.60 based on an increased Base Rent from December 2021 to March 2022, and $69,655.90 for Base Rent at the same rate in April 2022. Neman Decl., ¶¶ 18(2)-18(5). When added to the outstanding Base Rent from July and August 2020, damages from Base Rent total $1,358,046.91. Neman Decl., ¶18.

Counsel for Landlord charges an hourly rate of $595. Tabibi Decl., ¶4. Although counsel estimates that Landlord’s attorney’s fees and costs each will exceed $5,000, this application limits them to $5,000 each. Tabibi Decl., ¶4. The $10,000 in estimated fees and costs increases the total subject to attachment as $1,368,046.91. Neman Decl., ¶19.

When counsel for Landlord made demands on Tenant for amounts owed under the Lease, Tenant said he could not pay. Tabibi Decl., ¶3. Before mediation on this action, Tenant sold two parcels of land he owns to Orellana Family Land Holdings, LLC for a total of $6,900,000. Tabibi Decl., ¶3, Ex. 1.

Landlord’s claim for $1,358,046.91 is based on a breach of the Lease. Neman Decl., ¶¶ 5-6, Ex. 1. Landlord has a claim 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).

Under the Lease, Base Rent started at $64,400.80 per month and increased by 4% on every anniversary of the Lease’s December 1, 2019 Commencement Date. Neman Decl., ¶¶ 7-8, Ex. 1. Tenant was also required to pay Landlord the cost of supplying all utilities. Neman Decl., ¶5, Ex. 1.

Landlord presents a Ledger showing that Tenant’s rental balance is $1,358,921 through April 2022, after deducting the $100,000 security deposit and the various Tenant checks from February 2020 to February 2022. Neman Decl., ¶19, Ex. 2. Because this total includes utilities, Landlord used the credits and charges from the Ledger to calculate the outstanding debt based on Base Rent alone as $1,358,046.91. Neman Decl., ¶18.

In any action to enforce the Lease, the non-prevailing party must reimburse the prevailing party any costs and expenses incurred. Neman Decl., ¶9, Ex. 1. Counsel for Landlord estimates that its attorney’s fees and costs will exceed the $10,000 that Landlord seeks for attachment. Tabibi Decl., ¶4. This increases the total amount to attach to $1,368,046.91. Neman Decl., ¶19.

The conduct of a trade, business, or profession is generally activity “which occupies the time, attention and effort. . . for the purpose of livelihood or profit on a continuing basis.” Nakasone v. Randall, (1982) 129 Cal.App.3d 757, 764 (quoting Advance Transformer Co. v. Superior Court, (1974) 44 Cal.App.3d 127, 134). “The term ‘business,’ therefore, embraces any activity engaged in for profit or for gain. The phrase ‘engaged in business,’ however, generally is held to imply business activity of a frequent or continuous nature.” Id. There is a distinction between one who spends his time and effort in carrying on an activity for livelihood or profit on a continuing basis and one who merely conserves his personal investments. Id.

Landlord asserts that the Premises are commercial in nature. Neman Decl., ¶3. This says nothing about whether Tenant leased the Premises for commercial purposes. However, the Lease provides that Tenant shalluse the Premises solely for the Permitted Use set forth in Section 7 of the Summary. Neman Decl., Ex. 1, §5.1. In turn, the Lease Summary provides that Tenant’s Permitted Use is as a “General office use consistent with a first-class office building in Los Angeles.” Ex 1. This is sufficient to demonstrate that the Lease is a commercial transaction and that Landlord’s claim is commercial in nature arising out of Tenant’s conduct of a business.

Landlord provides evidence that on October 21, 2019, Tenant and Landlord entered a Lease for commercial Premises from December 2019 through October 2029. Neman Decl., ¶¶ 3, 5-6, Ex. 1. The Ledger also shows that between July 2020 and April 2022, Tenant accrued rent on the Lease but only made a few partial payments. Neman Decl., ¶¶ 16, 19, Ex. 2. Landlord alleges that Tenant returned the keys to the Premises in April 2022, the last month on the Ledger. Neman Decl., ¶¶ 17, 19, Ex. 2. The failure to pay rent prior to April 2022 is a breach of contract and supports the damages Landlord sought.

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). This application for a right to attach order does not seek attachment for any purpose other than to recover upon Landlord’s claim in this action. Mem. at 8. 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.

Landlord seeks to attach Tenant’s interests in real property other than leasehold estates with unexpired terms of less than 1 year, accounts receivable, chattel paper, general intangibles of at least $150, equipment, farm products, inventory, final money judgments related to a trade or business, money after the first $1,000 on premises where a trade or business is conducted, money located elsewhere, deposit accounts, negotiable documents of title, instruments, securities, and minerals or the like to be extracted, and any community property of said types which would otherwise be subject to enforcement of a judgment entered in this action. This description is sufficiently specific.

The application for a right to attach order in the amount of $1,368,046.91 is granted. No writ shall issue until Landlord posts a $10,000 bond.