Judge James C. Chalfant, Case Number: 22STCV31684, Date: 2024-02-13 Tentative Ruling

Plaintiff Atlas VI JCP Carson, LLC (“Atlas” or “Landlord”) applies for right to attach orders against Defendants Subway Real Estate, LLC (“Tenant”) and Behzad Salehi (“Sublessee”) in the amount of $168,882.42, including $5,000 in costs and $50,000 in attorney’s fees.

The court has read and considered the moving papers and Sublessee’s opposition (no opposition from Tenant is on file) and renders the following tentative decision.

A. Statement of the Case

1. Complaint

Landlord filed its Complaint on September 27, 2022. The operative pleading is the First Amended Complaint (“FAC”) filed on February 23, 2023, alleging breach of lease and breach of sublease in pertinent part as follows.

a. Contract History

On June 25, 2012, Landlord’s predecessor-in-interest VCG-Southbay Pavilion, LLC (“VCG”) and Tenant entered a 120-month lease (“Lease”) for 20700 Avalon Boulevard, Carson, CA 90746 (“Premises”). On July 13, 2012, Tenant and Sublessee entered a sublease for the Premises (“Sublease”). On May 31, 2022, the Lease expired and possession of the Premises was returned to Landlord.

b. Lease Terms and Damages

Section 2.01(a) of the Lease requires Tenant to pay the Minimum Annual Rent (“MAR”) set for each year in monthly installments. When the Lease term expired, the monthly MAR payment was $6,054.57. The current outstanding MAR balance is $74,290.02.

Section 2.01(a) of the Lease also requires Tenant to pay Percentage Rental equal to the product of the Percentage Rental rate in the data sheet and gross sales that year in excess of the “Annual Breakpoint” also in the data sheet. Section 3.02 requires Tenant to provide adequate financial records of such gross sales within 20 days of the end of each month and 45 days of the end of each Lease year. Since August 2020, Defendants have failed to either pay the Percentage Rental or provide the financial records of gross sales.

The Lease identified “Additional Rent” as all sums of money required to be paid or reimbursed by Tenant to Landlord under the Lease. This included utilities under section 12.01(a). Before the Lease ended, Defendants were obligated to pay $1,198.82 per month for electricity usage. Outstanding utilities total $27,385.88.

Under section 2.08, Additional Rent also includes a 10% late charge on all payments made over ten days after the due date. Outstanding late charges total $8,569.60.

Section 6.02 also holds Defendants liable for any costs Landlord incurs removing any signage necessary to “de-identify” the Premises. Landlord paid $3,636.92 to have this signage removed.

Section 27.22 allows the prevailing party in any action based on a breach of the Lease to recover attorney’s fees and costs from the non-prevailing party.

c. Enforcement

Section 19.01 of the Lease defines an event of default as (1) the failure to pay any MAR, Percentage Rental, and Additional Rent 10 days after written notice from Landlord; and (2) failure to comply with any other covenant of this Lease 20 days after written notice.

Landlord sent Tenant written notice and demand to pay all outstanding amounts (“Demand Letter”) in February, March, and June 2022. The June 2022 Demand Letter listed the total amount owed as $110,245.50.

d. Third-Party Beneficiary

Under section 19.01 of the Lease, Tenant’s liability under the Lease was limited to $40,000 plus available insurance proceeds. The parties intended to rely on Sublessee for any amounts owed in excess of this amount.

Landlord is entitled to bring an action for breach of the Sublease as a third-party beneficiary. The Sublease describes the Lease, attaches it, and states that the Sublessee agrees to perform and observe all Tenant obligations thereunder.

e. Prayer for Relief

Landlord seeks $40,000 in damages from Tenant and $113,882.42 in damages from Sublessee. As to both, Landlord also seeks consequential damages, legal interest, and attorney’s fees and costs.

2. Course of Proceedings

On November 2, 2022, Landlord personally served Tenant with the Complaint and Summons.

On November 27, 2022, Landlord personally served Sublessee with the Complaint and Summons.

On December 21, 2022, Tenant filed an Answer to the Complaint.

On February 23, 2023, Landlord filed and served the FAC.

On August 16, 2023, Department 50 (Hon. Teresa Beaudet) overruled Sublessee’s demurrer to the FAC’s cause of action for breach of the Sublease.

On September 5, 2023, Sublessee 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.

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 June 25, 2012, VCG and Tenant entered a 120-month Lease for the Premises. Harris Decl., ¶5, Ex. A. Section 2.01(a) of the Lease required Tenant to pay the MAR set for each year in monthly installments. Harris Decl., ¶11, Ex. A.

Section 2.06 of the Lease also identified “Additional Rent” as all sums of money required to be paid or reimbursed by Tenant to VCG under the Lease. Harris Decl., ¶13, Ex. A. This included utilities like electricity under section 12.01(a). Harris Decl., ¶13, Ex. A.

Under section 2.08, failure to pay any charges under the Lease within ten days of the due date would result in a 10% late charge. Harris Decl., ¶14, Ex. A.

Section 6.02 automatically renders any improvements Tenant makes to the Premises part of VCG’s property. Harris Decl., ¶24, Ex. A. VCG could designate any such alteration that was atypical and require the Tenant to remove at its own cost and expense. Harris Decl., ¶24, Ex. A. If it did not, VCG could remove those items and demand that Tenant pay the actual expense of such removal and related repairs to the Premises. Harris Decl., ¶24, Ex. A.

Section 19.01(a) defines an event of default to include failure to pay rent ten days after written notice that such amounts remained unpaid. Harris Decl., ¶24, Ex. A. Default based on any other breach of the Lease required 20 days’ written notice. Harris Decl., ¶24, Ex. A. In the event of such default, VCG could continue the Lease while enforcing its right to recover all rent from Tenant as it became due. Harris Decl., ¶24, Ex. A. VCG agreed under section 19.01(g) to limit Tenant’s liability to $40,000 after available insurance proceeds. Harris Decl., ¶24, Ex. A.

Section 27.22 required Tenant to reimburse VCG for any attorney’s fees and costs incurred to enforce the Lease. Harris Decl., Ex. A. Such expenses would qualify as Additional Rent. Harris Decl., Ex. A.

On July 13, 2012, Tenant and Sublessee entered a Sublease for the Premises. Harris Decl., ¶6, Ex. B. Section 6 identified the purpose of the Sublease as the operation of a Subway restaurant pursuant to a franchise agreement with Doctor's Associates Inc. Harris Decl., ¶7, Ex. B. Under section 4 of the Sublease, Sublessee agreed to perform all of Tenant’s obligations under the attached Lease and make all rental payment thereunder to VCG. Harris Decl., ¶7, Ex. B. Under section 6, if Sublessee defaulted under the Lease, VCG could demand, receive, and collect from Sublessee any monies due thereunder. Harris Decl., ¶7, Ex. B.

Sublessee has admitted the authenticity of both the Lease and Sublease. Turner Decl., ¶¶ 2-4, Exs. G-H.

On May 31, 2022, the Lease expired and possession returned to Landlord. Harris Decl., ¶9.

Ledgers since May 2019 show Defendants owe $74,290.02 in MAR, $27,385.88 in unpaid electricity usage charges, and $8,569.60 in late fees for a total of $110,245.50. Harris Decl., ¶¶ 15-22, Ex. F. The final ledger also reflects an August 2, 2022 invoice for $3,636.92 Landlord paid to have Tenant signage removed. Harris Decl., ¶25, Exs. F, I. This raises the principal owed to $113,882.42. Harris Decl., ¶9, Ex. F.

Landlord sent Demand Letters in February, March, and June 2022. Harris Decl., Exs. C-E. The February 2022 Demand Letter advised Tenant it had five days to pay the rent that had accrued since August 2020. Harris Decl., ¶26, Ex. C. The March 2022 Demand Letter informed Tenant that Landlord would now charge a 10% late charge on all outstanding rent balances. Harris Decl., ¶27, Ex. D. The June 2022 Demand Letter sent to Sublessee’s attorney asserted Tenant owed $110,245.50 in rent. Harris Decl., ¶28, Ex. E. It also warned Tenant that if it did not have its signage removed at its own expense within five days, Landlord would do so and seek to recover this cost from Tenant. Harris Decl., ¶28, Ex. E. All three Demand Letters’s letterheads asserted that VCG had assigned the Lease to Landlord. Harris Decl., Exs. C-E.

Counsel for Landlord estimates attorney’s fees of $50,000 and costs of $5,000. Turner Decl., ¶6.

On December 22, 2023, Sublessee sent Landlord an offer to compromise the matter for $40,000. Opp. Ex. A. The offer cited section 19.01(g) of the Lease, which limited Tenant’s liability for default to that amount. Opp. Ex. A.

Landlord claims $113,882.42 in damages plus attorney’s fees and costs. Harris Decl., ¶9, Ex. F. Its claims are based on Sublessee’s breach of the Sublease and Tenant’s breach of the Lease. Harris Decl., Exs. A-B. Landlord has contract claims 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).

Section 2.01(a) of the Lease required Tenant to pay VCG the MAR set for each year in monthly installments. Harris Decl., ¶11, Ex. A. Section 2.06 of the Lease also identified “Additional Rent” as all sums of money required to be paid or reimbursed by Tenant to VCG under the Lease. Harris Decl., ¶13, Ex. A. This included utilities like electricity, 10% late fees on all amounts overdue by ten days, VCG’s cost to remove Tenant improvements if Tenant does not do so upon VCG’s demand, and attorney’s fees and costs incurred through VCG’s enforcement of the Lease. Harris Decl., Ex. A.

Ledgers since May 2019 show Defendants owe $110,245.50 in MAR, unpaid electricity usage charges, and late fees. Harris Decl., ¶¶ 15-22, Ex. F. The final ledger also reflects a $3,636.92 invoice Landlord paid to have Tenant signage removed, including a deposit to TDI signs. Harris Decl., ¶25, Exs. F, I. This raises the principal owed to $113,882.42. Harris Decl., ¶9, Ex. F. Counsel estimates attorney’s fees of $50,000 and costs of $5,000. Turner Decl., ¶6.

Sublessee argues that section 19.01(a) of the Lease only entitles Landlord to recover these amounts from Tenant. Harris Decl., ¶24, Ex. A. Opp. at 4. That was true under the Lease, but the Sublease changed that. Sublessee agreed under to pay VCG all amounts Tenant owed under the Lease. Harris Decl., ¶7, Ex. B. If Sublessee defaulted under the Lease, VCG could demand, receive, and collect any monies due thereunder from Sublessee. Harris Decl., ¶7, Ex. B.

Sublessee then asserts section 19.01(g) of the Lease limits his liability for breach to $40,000. Harris Decl., ¶24, Ex. A. Not so. Paragraph 4 of the Sublease states that Sublessee assumed all of Tenant’s obligations under the Lease to make rental payments. It does not state that Sublessee is entitled to all of Tenant’s rights under the Lease, most particularly the cap on liability. Paragraph 6 of the Sublease makes clear that Landlord may collect from Sublessee all monies due upon default. No language in the Sublease suggests Sublessee would in exchange receive the right to the same protections Tenant had, including a $40,000 limit on damages.

Damages of $113,882.42 + $50,000 + $5,000 = $168,882.42 are ascertainable as to both Defendants.

Strict compliance is required with statutory requirements for affidavits for attachment. Anaheim National Bank v. Kraemer, (1932) 120 Cal.App. 63, 65. All documentary evidence, including contracts and canceled checks, must be presented in admissible form, and admissibility as nonhearsay evidence or exception to the hearsay rule, such as the business records exception. Pos-A-Traction, Inc., v. Kepplly-Springfield Tire Co., (C.D. Cal. 2000) 112 F.Supp.2d, 1178, 1182. For business records, evidence should be presented to establish that the record was made in the regular course of business, at or near the time of the act or event, and the custodian of records or other qualified witness must identify the record and its mode of preparation, as well as the sources of information and method and time of preparation. Id.

On June 25, 2012, VCG and Tenant entered a 120-month Lease for the Premises. Harris Decl., ¶5, Ex. A. Although Landlord asserts that VCG is its predecessor-in-interest (Harris Decl., ¶5), it does not submit an assignment or other documentation of this relationship as evidence. However, the Demand Letters indicate that VCG assigned the Lease to Landlord. Harris Decl., Exs. C-E.

Section 19.01(a) defines an event of default to include failure to pay rent, but only ten days after written notice that such amounts remained unpaid. Harris Decl., ¶24, Ex. A. Default based on any other breach of the Lease, like failure to remove Tenant property when asked, requires twenty days’ written notice. Harris Decl., ¶24, Ex. A. In the event of such default, Landlord could continue the Lease while enforcing its right to recover all rent from Tenant as it became due. Harris Decl., ¶24, Ex. A.

On July 13, 2012, Tenant and Sublessee entered a Sublease for the Premises. Harris Decl., ¶6, Ex. B. Under section 4 of the Sublease, Sublessee agreed to perform all obligations under the attached Lease and make all rental payment thereunder to VCG. Harris Decl., ¶7, Ex. B. Under sections 6 and 7, if Sublessee defaulted under the Lease, VCG could demand, receive and collect any monies due thereunder. Harris Decl., ¶7, Ex. B.

Landlord issued Tenant three Demand Letters in 2022 based on rent unpaid. Harris Decl., Exs. C-E. The June 2022 Demand Letter also advised Tenant to remove signage from the Premises within five days. Harris Decl., Ex. E. Landlord did not pay to have the signage removed until August 2022, well after the 20 days required under the Lease. Over a year later, Landlord’s ledgers confirm Tenant and Sublessee have not paid the $113,882.42 owed under the Lease. Harris Decl., Ex. F.

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).

These terms “trade,” “business,” and “profession” encompass almost any activity engaged in for profit with “frequency and continuity.” Advance Transformer Co. v. Superior Court, (1974) 44 Cal.App.3d 127, 139. The purpose of the attachment statutes is to confine attachment to commercial situations and prohibit their use in consumer transactions. Kadison, supra, 197 Cal.App.3d at 4.

Section 6 of the Sublease stated its purpose was for Sublessee to operate a Subway restaurant pursuant to a franchise agreement. Harris Decl., ¶7, Ex. B. The claim against Sublessee is a commercial claim.

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 Sublessee’s 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 personalty in estates of decedents. The description of attachable property is adequate.

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). Landlord seeks attachment for a proper purpose.

The applications for right to attach orders are granted against Defendant Salehi for $168,882.42 and against Defendant Subway Real Estate, LLC for $95,000 ($40,000 cap plus $55,000 in attorney’s fees and costs). The proposed right to attach order for Defendant Salehi is defective because it does not describe the property to be attached and must be modified. No right to attach order shall issue until Landlord posts a $10,000 undertaking for each.