Judge James C. Chalfant, Case Number: 22STCV25303, Date: 2024-02-29 Tentative Ruling

Plaintiff LaundryLux Funding Services, LLC (“LaundryLux”) applies for right to attach orders against Defendants Cleotilda Ortiz (“Ortiz”) and Alberto Castro (“Castro”) in the amount of $168,091.76, including $18,369.30 in attorney’s fees and $2,096.11 in costs.

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

A. Statement of the Case

1. First Amended Complaint

Plaintiff LaundryLux filed the Complaint on August 5, 2022. The operative pleading is the First Amended Complaint (“FAC”) filed against Ortiz and Castro, both individually and each doing business as Lavanderia Rio Grande (“Lavanderia”), on April 19, 2023. The FAC alleges (1) breach of promissory note, (2) breach of guaranty, (3) money lent, (4) foreclosure of security agreement, and (5) claim and delivery. The FAC alleges in pertinent part as follows.

On March 28, 2018, Ortiz and Castro executed and delivered to LaundryLux a Secured Promissory Note and Agreement (“Note”) for $119,786.93, secured by all of Defendants’ machinery, equipment, furniture, fixtures, inventories, and other assets wherever located to secure payment, including the equipment listed on Schedule A (“Equipment”) (collectively, “Collateral”). Pursuant to the Note, Lavanderia agreed to repay the principal of $119,786.93 plus interest at an annual rate of 8.49%.

To perfect its interest, LaundryLux filed two UCC-1 Statements for the Collateral.

On June 17, 2020, Ortiz, on behalf of both Defendants, executed and delivered to LaundryLux an Amendment to the Note (“Amended Note”) whereby Lavanderia would make 135 payments of $1,500 and a final payment of $2,738.70 on October 10, 2031. Both the Note and Amended Note provide that failure to make timely payments would result in a 5% or $5 late charge, whichever is greater.

To induce entry into the Note, Ortiz and Castro, individually and doing business as Lavanderia, signed an Irrevocable Guaranty to the Agreement (“Guaranty”) for the full amount owed under the Note.

Ortiz and Castro last made a payment on the Amended Note on April 29, 2022. They have not cured the default despite demand letters to do so. Lavanderia, Ortiz, and Castro now owe $122,462.34 plus interest at the default rate of 15.9% per year. The Note also permits repossession of the Equipment after default and recovery of attorney’s fees and costs incurred to enforce the Note.

LaundryLux seeks damages of $122,462.34, interest at an annual rate of either 15.9% or 10% from April 29, 2022, repossession of the Collateral, including the items listed on Schedule A, and attorney’s fees and costs.

2. Cross-Complaint

On January 7, 2024, Cross-Complainants Ortiz and Castro filed a Cross-Complaint against LaundryLux alleging (1) recission, (2) fraud or intentional misrepresentation, (3) breach of the implied covenant of good faith and fair dealing, (4) unjust enrichment, (5) breach of contract, and (6) violation of Business and Professions (“Bus. & Prof.”) Code section 17200. The Cross-Complaint alleges in pertinent part as follows.

To induce entry into the Note, LaundryLux told Ortiz and Castro that the Note would be funded by payment to a third party which would deliver the equipment on Schedule A (“Equipment”) to them. Laundrylux asserted that it did not make the equipment, which would come from a third-party supplier in good working order.

Contrary to these representations, LaundryLux never funded the Note or lent money to Ortiz and Castro. The delivered equipment was sometimes defective, of substandard quality, or owned and sold by Laundrylux itself. LaundryLux refused to repair the defective equipment. LaundryLux also charged an usurious interest rate and recorded an illegal UCC security lien.

LaundryLux is not authorized to conduct business in California. It is not licensed with the Department of Financial Protection & Innovation to operate as a finance lender in California.

Ortiz and Castro would not have entered the Note if they knew LaundryLux’s representations were false at the time. LaundryLux discussed the terms of the Note with Ortiz and Castro in Spanish because it knew they could not read or write in English. Despite this, LaundryLux had them sign the Note in small-print English.

LaundryLux’s fraud has damaged Ortiz and Castro’s credit reputation and compelled them to hire attorneys to defend them in the current action.

Ortiz and Castro seek rescission of the Note, return of all consideration paid to LaundryLux, an injunction enjoining LaundryLux from making any untrue or misleading statement that would violate Bus. & Prof. Code section 17500, attorney’s fees and costs, prejudgment interest, and special, general, exemplary, and punitive damages.

3. Course of Proceedings

On August 27, 2022, LaundryLux served Castro with the Complaint, Summons, and application for writ of possession with notice.

On September 28, 2022, LaundryLux requested entry of default against Castro. Department 53 (Hon. Robert B. Broaddelt) denied a default on October 3, 2022 for failure to match the name of the Defendant on the Complaint and Summons.

On October 6, 2022, LaundryLux served Ortiz with the Complaint and Summons through substitute service, effective October 16.

On November 15, 2022, this court denied LaundryLux’s applications against Ortiz and Castro for writs of possession for the Equipment.

On December 2, 2022, Department 53 entered a default against Ortiz. On January 9, 2023, the court set the default aside pursuant to a stipulation between the parties.

On March 2, 2023, Department 53 denied Castro and Ortiz’s motion to dismiss this action for forum non conveniens.

On April 19, 2023, LaundryLux filed the FAC and served Ortiz and Castro on April 26, 2023.

On May 16, 2023, LaundryLux dismissed the FAC’s fifth cause of action.

On June 16, 2023, this court denied LaundryLux’s ex parte applications for writs of possession for failure to demonstrate irreparable harm.

On January 5, 2024, Department 53 overruled Castro and Ortiz’s demurrer to the FAC.

On January 7, 2024, Castro and Ortiz filed and served the Cross-Complaint.

On January 8, 2024, Ortiz and Castro filed an Answer to the FAC.

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 March 28, 2018, Ortiz and Castro entered into the Note for $119,786.93 in exchange for a security interest in the Equipment. Miguel Decl., ¶4, Ex. 1.[2] Under the Note, Ortiz and Castro promised to pay $119,786.93 plus 8.49% annual interest. Miguel Decl., ¶5, Ex. 1. Should they default for failure to make payments within ten days of the due date, they would be charged a 5% late penalty. Miguel Decl., Ex. 1. All future payments would also become immediately due and payable with 15.9% annual interest. Miguel Decl., ¶10, Ex. 1. LaundryLux would be entitled to recover attorney’s fees for enforcement of the Note, defined as 15% of the amount then owed, plus costs. Miguel Decl., ¶10, Ex. 1.

Ortiz and Castro also signed a Guaranty that held each personally liable for the debts incurred through the Note. Miguel Decl., ¶4, Ex. 1.

On June 12, 2020, Ortiz, on behalf of herself and Castro, executed and delivered the Amended Note. Miguel Decl., ¶6, Ex. 2. The Amended Note changed the payment schedule to 135 payments of $1,500 and a final payment of $2,738.70 on October 10, 2031. Miguel Decl., ¶6, Ex. 2. Any missed payment would automatically result in default on the Note. Miguel Decl., ¶6, Ex. 2.

Ortiz and Castro’s payment history shows they have not made a payment since April 29, 2022, and therefore have defaulted. Miguel Decl., ¶9, Ex. 3. They owe $122,462.34 of the principal balance, plus $27,260.12 in interest at the default rate of 15.9% from April 29, 2022. Miguel Decl., ¶¶ 9-10, Ex. 3. They also owe attorney’s fees of 15% of $122,462.34, or $18,369.30. Miguel Decl., ¶10. Financial Manager Antonio Miguel (“Miguel”) asserts that LaundryLux has incurred $2,096.11 in costs. Miguel Decl., ¶¶ 1, 10.

LaundryLux seeks attachment to recover on amounts owed and not for any other purpose. Miguel Decl., ¶11.

Plaintiff LaundryLux applies for right to attach orders against Defendants Ortiz and Castro in the amount of $168,091.76, including $18,369.30 in attorney’s fees and $2,096.11 in costs.

The notice of the application and the application may be made on Judicial Council forms (Optional Forms AT-105, 115). A separate form must be used for each Defendant. LaundryLux submits a single application for right to attach orders against both Defendants. The application is procedurally defective.

When any matter is required or permitted to be supported, evidenced, established, or proved by the sworn statement, declaration, or affidavit in writing of the person making the same, such matter may be proven by unsworn declaration in writing of such person which recites that it is certified or declared by him or her to be true under penalty of perjury, is subscribed by him or her, and (1) if executed within this state, states the date and place of execution; or (2) if executed at any place, within or without this state, states the date of execution and that it is so certified or declared under the laws of the State of California. CCP §2015.5.

LaundryLux’s only evidence submitted with the moving papers is Miguel’s declaration. Defendants object that Miguel did not make this declaration under penalty of perjury. Opp. at 4. The court agrees. Additionally, the declaration was executed in New York and Miguel did not state that it was made under the perjury laws of California. It also does not state that the information is true and correct. The declaration fails to comply with CCP section 2015.5 and iis inadmissible.

LaundryLux attempts to cure these defects in reply with a substantively identical declaration from Miguel that complies with CCP section 2015.5. LaundryLux cites Runkle v. Lane, (“Runkle”) (1940) 40 Cal. App. 2d 654, 656, which held that the plaintiff unquestionably had the right to file an amendment to the affidavit for attachment. The timing of that affidavit is unstated in the opinion and it was based on a CCP section 558 which has been repealed. Id. This case does not establish that the moving party cure a defective declaration after the defendant objects.

LaundryLux asserts that Defendants cannot claim any prejudice because they had the opportunity to respond to the merits of Miguel’s unsworn declaration, which are identical to the merits of his reply declaration. Reply at 2.

Prejudice is not the issue. Strict compliance is required with statutory requirements for affidavits for attachment (Anaheim National Bank v. Kraemer, (1932) 120 Cal.App. 63, 65), and technical defects in a declaration for failure to comply with CCP section 2015.5 precludes its use as an evidentiary document. CCP §482.040 (facts stated in affidavit must be set forth with particularity); Witchell v. Korne, (1986) 179 Cal.App.3d 965, 975. The court must apply the same evidentiary standard to the declarations in an attachment hearing as to a case tried on oral testimony. VFS Financing, Inc. v. CHF Express, LLC, (2009) (C.D. Cal.) 620 F.Supp.2d 1092, 1096-97. The declarant must show personal knowledge of the relevant facts, and such evidence must be admissible and not objectionable. Id.

LaundryLux asserts that, if this court will not consider Miguel’s declaration, it can treat the verified FAC as an affidavit in support of the application. CCP §482.040. Reply at 2. Not so because LaundryLux is a limited liability company. When the plaintiff is a non-natural person and its officer verifies the complaint, it cannot be used as an affidavit or declaration establishing the facts therein alleged. CCP §446(a). The FAC cannot serve as evidence.

LaundryLux also asserts that Law Revision Commission Comments to CCP section 484.030 indicates that the application itself may contain the necessary supporting evidence. Reply at 2-3. The application may therefore constitute a sufficient affidavit. Id.

The application suffers from the same defect as the verified FAC. It is signed by Migeul, an officer, and not an individual plaintiff. Additionally, the application includes evidence and only refers to the inadmissible FAC and Miguel’s declaration. It cannot provide the necessary support for the application.

LaundryLux alternatively asks the court to exercise its authority under CCP section 484.090(d) to receive and consider additional evidence at the hearing “upon good cause shown,” including Miguel’s reply declaration. Reply at 3.

LaundryLux has failed to show good cause. It cannot explain why Miguel did not make his original declaration under penalty of California perjury law. Moreover, this is LaundryLux’s third failed application for a provisional remedy and the court is not inclined to exercise its discretion favorably towards it.

Because LaundryLux failed to provide any admissible evidence to support its application, the application is denied.[3] LaundryLux may not renew its application without full compliance with CCP section 1008(b), including its due diligence requirement.

[1] Defendants Castro and Ortiz 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 for this case or they will not be considered.

[2] The submitted copy of the Note is a low-quality scan that is barely legible. Miguel Decl., ¶5, Ex. 1. Counsel is advised to ensure that exhibits are readable.

[3] The application also fails to address, for both Defendants who are natural persons, that LaundryLux’s claim is based 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 application further seeks to attach, aside from the Equipment, “All property subject to attachment” under CCP section 487.010(c). 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). The description fails to provide Castro and Ortiz with sufficient notice of what property LaundryLux seeks to attach and is inadequate.