Judge James C. Chalfant, Case 22STCV24811 2022-09-29 Tentative Ruling

Plaintiff Zions Bancorporation, doing business as Zions First National Bank (“Zions”) applies for a right to attach order against Defendant Ardeshir Sanati (“Sanati”) for $216,524.98.

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 Zions the Complaint against Defendants Sanati and Lancaster Smile Dental, doing Business as Sanati Dental Center (“Sanati Dental”), on August 1, 2022, alleging causes of actions for (1) breach of promissory note; (2) breach of guaranty; (3) money due; (4) money lent; (5) claim and delivery; and (6) conversion. The Complaint alleges in pertinent part as follows.

On May 26, 2017, Lendeavor, Inc. (“Lendeavor”) and Sanati Dental entered into written business loan agreement (“Loan Agreement”). The parties then entered into a Promissory Note (“Note”) for $276,375. The Note provided that Santai Dental would repay the Note in 84 monthly payments of principal and interest.

Also on May 26, 2017, Lendeavor and Sanati Dental entered into a Commercial Security Agreement (“Security Agreement”). The Security Agreement gave Lendeavor a security interest in all of Sanati Dental’s assets. Also on May 26, 2017, Sanati executed a Commercial Guaranty (“Guaranty”) for all of Sanati Dental’s present and future obligations and indebtedness.

On May 30, 2018, Lendeavor entered into a Master Loan Agreement (“Master Loan”) with Zions in which Zions purchased and obtained all right, title and interest in the Note, Loan Agreement, Security Agreement, and Guaranty.

On April 7, 2020, Zions and Sanati Dental entered into a Change-in-Terms Agreement that extended the Note’s maturity date and deferred three months of payments.

Sanati Dental and Sanati have defaulted on the agreements, including a failure to pay any of the amount owed on November 12, 2021. Defendants now owe the principal sum of $198,274.82, unpaid accrued interest at the rate set forth in the Note, late charges, attorney’s fees and costs, and other fees and charges.

Plaintiff Zions seeks (1) $198,274.82 in unpaid principal; (2) $13,780.30 in unpaid interest; (3) deferred interest of $2,663.07; (4) $731.33 in late fees; (5) repossession of the collateral in the Security Agreement; (6) a foreclosure judgment on the Security Agreement; (7) judgment for possession of the Collateral or sale thereof; (8) punitive and exemplary damages according to proof; and (9) attorney’s fees and costs.

2. Course of Proceedings

On August 5, 2022, Department 16 (Hon. Lia Martin) issued notice of an order to show cause for failure to file proof of service.

On September 9, 2022, Zions personally served Sanati Dental and Sanati with the Complaint, Summons, and the moving papers.

B. Applicable Law

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

A writ of attachment may be issued only in an action on a claim or claims for money, each of which is based upon a contract, express or implied, where the total amount of the claim or claims is a fixed or readily ascertainable amount not less than five hundred dollars ($500). CCP §483.010(a). A claim is “readily ascertainable” where the amount due may be clearly ascertained from the contract and calculated by evidence; the fact that damages are unliquidated is not determinative. CIT Group/Equipment Financing, Inc. v. Super DVD, Inc., (2004) 115 Cal.App.4th 537, 540-41 (attachment appropriate for claim based on rent calculation for lease of commercial equipment).

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

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

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

The notice of the application and the application may be made on Judicial Council forms (Optional Forms AT-105, 115). The application must be supported by an affidavit showing that the plaintiff on the facts presented would be entitled to a judgment on the claim upon which the attachment is based. CCP §484.030.

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

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

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

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

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

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

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

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

Before the issuance of a writ of attachment, the plaintiff is required to file an undertaking to pay the defendant any amount the defendant may recover for any wrongful attachment by the plaintiff in the action. CCP §489.210. The undertaking ordinarily is $10,000. CCP §489.220. If the defendant objects, the court may increase the amount of undertaking to the amount determined as the probable recovery for wrongful attachment. CCP §489.220. The court also has inherent authority to increase the amount of the undertaking sua sponte. North Hollywood Marble Co. v. Superior Court, (1984) 157 Cal.App.3d 683, 691.

On May 26, 2017, Sanati Dental and Lendeavor entered into a variety of agreements. Paskett Decl., ¶7. Pursuant to the Note, Lendeavor loaned $276,375 to Sanati Dental provided it repaid the loan plus 4.95% in interest at an annual rate or 4.95%. Paskett Decl., ¶7, Ex. 1. Payment would consist of 84 monthly payments of $2,925.30 from June 30, 2017, followed by 36 monthly payments of $2,925.29 from June 30, 2023. Paskett Decl., ¶7, Ex. 1. Any payment more than ten days late results in a late fee of the greater of $25 and 5% of the scheduled payment. Paskett Decl., ¶7, Ex. 1. Upon default, the total sum will continue to accrue interest at the 4.95% interest rate. Paskett Decl., ¶7, Ex. 1. Default would also give Lendeavor the right to declare the entire unpaid principal balance and interest due. Paskett Decl., ¶7, Ex. 1. Sanati Dental would also pay Lendeavor any attorney’s fees and legal expenses associated with attempts to enforce the Note. Paskett Decl., ¶7, Ex. 1.

The Security Agreement gave Lendeavor a security interest in all of Sanati Dental’s assets (“Collateral”). Paskett Decl., ¶7, Ex. 3.

The Loan Agreement incorporates the terms of the other two agreements plus a Guaranty signed by Sanati the same day. Paskett Decl., ¶7, Exs. 2, 4.

The Guaranty held Sanati absolutely and unconditionally liable for Sanati Dental’s full and punctual payment of the amounts owed to Lendeavor and its successors-in-interest. Paskett Decl., ¶¶ 7, 12, Ex. 4. The Guaranty is unsecured by real or personal property. Paskett Decl., ¶10.

On May 30, 2018, Lendeavor and Zions executed a Master Loan wherein Lendeavor sold all of its rights in various loans, including the Sanati Dental Note. Paskett Decl., ¶2, Ex. 5. The outstanding principal at the time was $256,345. Paskett Decl., ¶2, Ex. 5.

On April 7, 2018, Zions and Sanati Dental entered a Change-in-Terms Agreement wherein Zions extended the Note’s maturity date by 92 days. Paskett Decl., ¶2, Ex. 6. Sanati Dental also received a three-month deferral period such that it did not need to pay the next three monthly payments on the Note until after the final payments under the Note. Paskett Decl., ¶2, Ex. 6. At the time, the principal amount owed was $213,465.46. Paskett Decl., ¶2, Ex. 6.

Sanati Dental’s last payment on the Note was November 16, 2021, although the amount of interest it had paid in the months prior to that date varied. Paskett Decl., ¶¶ 3, 8, Ex. 7. Sanati Dental defaulted on the Note in December 2021, and demand for payment from either Sanati Dental or Sanati has failed. Paskett Decl., ¶¶ 3, 8, 14. Zions’ ledger shows that the outstanding principal is $198,274.82 and accrued interest is $14,855.87, based on a daily accrual rate of $26.89. Paskett Decl., ¶8, Ex. 7. While the ledger does not show any other fees, Lancaster has also accrued deferred interest of $2,663.07 and incurred late fees of $731.22. Paskett Decl., ¶8.

The application must be denied for lack of proper notice. Under CCP section 1005, Defendants were entitled to 16 court days’ notice of the application. Zion served Defendants on September 9, 2022, which provides only 13 court days’ notice for the hearing on September 29, 2022. Plaintiff therefore failed to give Defendant Sanati sufficient notice. The application for a right to attach order is denied.