Judge: James C. Chalfant, Case: 22STCV34701, Date: 2023-04-18 Tentative Ruling

Case Number: 22STCV34701    Hearing Date: April 18, 2023    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[3]

            1. Landlord’s Evidence

            a. 538 Lease

            On June 29, 2018, Tenant signed the 538 Lease for three years from August 15, 2018.  Sfaee Decl., ¶5, Ex. B.  The listed permitted use was as an office and warehouse.  Sfaee Decl., ¶5, Ex. B.  Monthly Base Rent would start at $12,500 and increase by 5% every 12 months.  Sfaee Decl., ¶6, Ex. B.  If Tenant remained in possession after the 538 Lease expired, it must pay Holdover Rent of 250% of the Monthly Minimum Rent for the month immediately before the lease expired.  Sfaee Decl., ¶6, Ex. B.  Tenant also agreed to pay a $25,000 security deposit.  Sfaee Decl., ¶5, Ex. B. 

            Section 4.2 required Tenant to pay his share of Common Area Maintenance (“CAM”) expenses.  Sfaee Decl., ¶5, Ex. B. 

            Failure to make any rent payment on time would incur a 16% penalty.  Sfaee Decl., ¶5, Ex. B.

            Section 7.2 required that Landlord keep foundations, exterior walls, interior bearing walls, fire sprinklers and detection systems, fire hydrants, parking lots, walkways, parkways, fences, signs, and utility systems of the common area in good condition at its own expense.  Sfaee Decl., ¶5, Ex. B. 

Section 7.1 holds the Tenant responsible for keeping every part of the premises in good condition and repair.  Sfaee Decl., ¶5, Ex. B.  This includes, but is not limited to, plumbing, heating, air conditioning, ventilating, electrical, lighting facilities, boilers, interior walls, interior surfaces of exterior walls, ceilings, floors, windows, doors, plate glass, and skylights.  Sfaee Decl., ¶5, Ex. B. 

            Under sections 13.1 and 13.2, if Tenant breaches the lease for failure to pay rent, Landlord may repossess the 538 Premises and recover all unpaid rent that has already accrued, the present value of any future unpaid rent less the amount of rental loss that Tenant proved Landlord could have reasonably avoided, and any other amount necessary to compensate Landlord including attorney’s fees and costs.  Sfaee Decl., ¶5, Ex. B.  Alternatively, Landlord could continue the 538 Lease after the breach and collect rent as it becomes due.  Sfaee Decl., ¶5, Ex. B. 

            b. 531 Lease

            On October 9, 2020, Tenant signed the 531 Lease for three years from November 1, 2020.  Sfaee Decl., ¶5, Ex. A.  The listed permitted use was as a clothing warehouse.  Sfaee Decl., ¶5, Ex. A. 

            Monthly Base Rent would start at $16,500 and increase by 6% every 12 months.  Sfaee Decl., ¶7, Ex. A.  Tenant also agreed to pay a $16,500 security deposit.  Sfaee Decl., ¶5, Ex. A. 

            The 531 Lease also required Tenant to pay his share of CAM expenses.  Sfaee Decl., ¶5, Ex. A. 

            Failure to make any rent payment on time would incur a 16% penalty.  Sfaee Decl., ¶5, Ex. A.

            Section 7.2 required that Landlord keep foundations, exterior walls, interior bearing walls, fire sprinklers and detection systems, fire hydrants, parking lots, walkways, parkways, fences, signs, and utility systems of the common area in good condition at its own expense.  Sfaee Decl., ¶5, Ex. A. 

Section 7.1 holds the Tenant responsible for keeping every part of the premises in good condition and repair.  Sfaee Decl., ¶5, Ex. A.  This includes but is not limited to plumbing, heating, air conditioning, ventilating, electrical, lighting facilities, boilers, interior walls, interior surfaces of exterior walls, ceilings, floors, windows, doors, plate glass, and skylights.  Sfaee Decl., ¶5, Ex. A.

            Under sections 13.1 and 13.2, if Tenant breaches for failure to pay rent, Landlord may repossess the 531 Premises and recover all unpaid rent that has already accrued, any future unpaid rent less the amount of rental loss that Tenant proved Landlord could have reasonably avoided, and any other amount necessary to compensate Landlord including attorney’s fees and costs.  Sfaee Decl., ¶5, Ex. A.  Alternatively, Landlord could continue the 531 Lease after the breach and collect rent as it becomes due.  Sfaee Decl., ¶5, Ex. A. 

            c. Breach

            For two years, Tenant failed to timely or fully pay rent due under both Leases but continued to use the Premises.  Sfaee Decl., ¶8.  Landlord’s ledger shows that Tenant owes $271,899 under the 531 Lease and $155,000 under the 538 Lease, a total of $426,899.  Sfaee Decl., ¶¶ 9-10, 16, Ex. C.  Tenant said multiple times that his financial troubles caused him to fall behind on rent, but he promised to catch up and pay Landlord in full.  Sfaee Decl., ¶11.

            Landlord filed an Unlawful Detainer Action (“UD Action”) against Tenant.  Sfaee Decl., ¶12.  After Landlord served Tenant with the Complaint in this action, Tenant demurred to the Complaint based on the UD Action.  Masserat Decl., ¶4.  On January 19, 2023, counsel for Landlord emailed Tenant that no case law bars a civil action for damages concurrent with the UD Action.  Masserat Decl., ¶6, Ex. 1.  The email also warned that if Tenant did not make Landlord whole after his failure to pay rent for two years while occupying the Premises, Landlord would pursue a pre-judgment writ of attachment.  Masserat Decl., ¶6, Ex. 1. 

            On February 16, 2023, the parties in the UD Action stipulated that Tenant would vacate the Premises by February 28, 2023, and Landlord would return the security deposits within 30 days.  Sfaee Decl., ¶12, Ex. D.  The stipulation did not include a judgment for monetary damages, as Landlord reserved the right to pursue all monetary damages in this action.  Sfaee Decl., ¶12, Ex. D. 

            Tenant vacated the Premises on March 1, 2023.  Sfaee Decl., ¶13.  Tenant acknowledged the email from Landlord’s counsel but has not made any new payments towards the amounts owed under the Leases.  Sfaee Decl., ¶15; Masserat Decl., ¶6.  Landlord is applying for a $10,000 bond.  Masserat Decl., ¶19.

            2. Tenant’s Evidence[4]

            Tenant spent $435,000 to make the property habitable and acceptable for business.  Smith Decl., ¶¶ 3, 7.  This is $8,101 more than the rent Landlord alleges Tenant owes.  Smith Decl., ¶4.

            3. Reply Evidence

            Tenant was a lessee of the Premises from October 2018 to March 2023.  Sfaee Reply Decl., ¶2.  He stopped paying rent in November 2021.  Sfaee Reply Decl., ¶3.  In mid-February 2023, after a contested UD Action, Tenant stipulated to vacate the Premises.  Sfaee Reply Decl., ¶4.

            When Landlord inspected the Premises in March 2023, it discovered that Tenant had performed unauthorized and unpermitted remodeling during his tenancy.  Sfaee Reply Decl., ¶5.  Landlord is currently abating the unpermitted construction.  Sfaee Reply Decl., ¶6.  The unpaid rent sought through this application, which only includes rent up to October 2022, is unrelated to these damages.  Sfaee Reply Decl., ¶¶ 7-8. 

            D. Analysis

            Plaintiff Landlord applies for a right to attach order against Defendant Tenant in the amount of $426,899.

1.      Preliminary Issue

            If the defendant desires to oppose the issuance of the right to attach order sought by plaintiff or objects to the amount sought to be secured by the attachment, the defendant shall file and serve upon the plaintiff no later than five court days prior to the date set for the hearing a notice of opposition.  CCP §484.060(a). 

Tenant filed and served his opposition on April 12, 2023, only four court days before the hearing on April 18, 2023.  The opposition was untimely, but the court has considered it because Landlord has filed a reply.

            2. 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). 

            Landlord’s claim against Tenant is based on breach of the 538 Lease and the 531 Lease for non-payment of rent.  Sfaee Decl., ¶5, Exs. A-B.  Landlord alleges damages of $271,899 under the 531 Lease and $155,000 under the 538 Lease.  Sfaee Decl., ¶¶ 9-10, 16, Ex. C.  Landlord has a claim on which to base attachment.

            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).

            Under the 538 Lease, monthly Base Rent would start at $12,500 on August 15, 2018 and increase by 5% every 12 months.  Sfaee Decl., ¶¶ 5-6, Ex. B.  If Tenant remained in possession after the 538 Lease expired, it must pay Holdover Rent that is 250% of the Monthly Minimum Rent for the month immediately before the lease expired.  Sfaee Decl., ¶6, Ex. B. 

            Under the 531 Lease, monthly Base Rent would start at $16,500 from November 1, 2020 and increase by 6% every 12 months.  Sfaee Decl., ¶¶ 5, 7, Ex. A. 

            Both Leases also required that Tenant pay for its share of CAM expenses.  Sfaee Decl., ¶5, Exs. A-B. 

            Landlord provides a ledger showing that Tenant owes $271,899 under the 531 Lease and $155,000 under the 538 Lease, a total of $426,899.  Sfaee Decl., ¶¶ 9-10, 16, Ex. C.  Tenant does not object to the accuracy of the ledger as a reflection of the base rent and CAM expenses incurred at the time or of the payments Tenant made.   The $426,899 in damages are readily ascertainable.

            3. Attachment Based on 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, (1987) 197 Cal.App.3d 1, 4 (action involving trust property was a commercial, not a consumer, transaction).

            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.

            The permitted use listed on the 538 Lease is as an office and warehouse.  Sfaee Decl., ¶5, Ex. B.  The permitted use listed on the 531 Lease is as a clothing warehouse.  Sfaee Decl., ¶5, Ex. A.  Tenant signed both Leases as Lessee.  Exs. A, B.  This is sufficient evidence that Tenant leased the Premises to conduct a trade, business, or profession.  Landlord’s claims are commercial claims for which attachment is proper. 

            4. 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).

            The ledger provides evidence that over the course of two years, Tenant failed to timely or fully pay rent due under both Leases but continued to use the Premises.  Sfaee Decl., ¶8.  Tenant said multiple times he had financial troubles that caused him to fall behind on rent, but he promised to catch up and pay Landlord in full.  Sfaee Decl., ¶11.

            a. Cross-Claim for Renovation Cost

            The amount of an attachment must be reduced by the amount claimed in a cross-complaint or affirmative defense and shown would be subject to attachment against the plaintiff.  CCP §483.015(b)(2).  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.

            Tenant does not dispute that he incurred the debt and CAM expenses listed on the ledger.  Reply at 2.  Tenant asserts that these damages are excessive because he spent more on repairs to the Premises.  Opp. at 4-5.

            The Order is not in evidence.  If, arguendo, it should be considered, on February 16, 2023, a LADBS inspector issued Landlord the Order for the 538 Premises.  Ex. 1.  The Order asserted that Landlord lacked the necessary permits and approvals for (1) the construction of partition walls for the warehouse’s indoor nursery; (2) electrical work; (3) mechanical work, which could include heating, air conditioning, refrigeration, or ventilation; and (4) plumbing work.  Ex. 1.  The Order directed Landlord to remove all unpermitted plumbing, HVAC systems, electrical equipment, and partition walls and obtain the required permits and approvals before reinstalling them.  Ex. 1.

            Tenant spent $435,000 to make the property habitable.  Smith Decl., ¶¶ 3, 7.  This is $8,101 more than the rent Landlord alleges Tenant owes.  Smith Decl., ¶4.  Tenant asserts that the court must reduce the indebtedness to Landlord by $435,000, which would eliminate the debt in full.  Opp. at 2. 

            Landlord presents evidence that it is abating the unpermitted construction performed by Tenant himself.  Sfaee Reply Decl., ¶¶ 5-6.  The Order is dated February 2023, long after Tenant stopped paying rent in 2021, and Tenant never complained about the conditions during the UD Action.  Reply at 2; Opp. Ex. 1.

            Strict compliance is required with statutory requirements for affidavits for attachment.  Anaheim National Bank v. Kraemer, (1932) 120 Cal.App. 63, 65), and even technical defects in a declaration 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.  All documentary evidence, including contracts and canceled checks, must be presented in admissible form, and admissibility as non-hearsay evidence or exception to the hearsay rule, such as the business records exception.  Lydig Construction, Inc. v. Martinez Steel Corp., (2015) 234 Cal.App.4^th 937, 944; 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.

            Tenant provides no documentary evidence to support his conclusion that it was Landlord’s umpermitted work that required repair work, and that it cost him $435,000.  Smith Decl., ¶3.  Even if he did so, he could only obtain an offset if he does not bear the responsibility for the repair work at issue under the Leases. 

            Section 7.2 of each Lease required that Landlord keep foundations, exterior walls, interior bearing walls, fire sprinklers and detection systems, fire hydrants, parking lots, walkways, parkways, fences, signs, and utility systems of the common area in good condition at its own expense.  Sfaee Decl., ¶5, Exs. A-B. 

Section 7.1 holds the Tenant responsible for keeping every part of the premises in good condition and repair.  Sfaee Decl., ¶5, Exs. A-B.  This includes but is not limited to plumbing, heating, air conditioning, ventilating, electrical, lighting facilities, boilers, interior walls, interior surfaces of exterior walls, ceilings, floors, windows, doors, plate glass, and skylights.  Sfaee Decl., ¶5, Exs. A-B. 

            The Order alleges a violation for construction of partition walls for an indoor nursery without required permits and approvals.  Ex. 1.  Tenant is responsible for the cost of maintenance for non-load-bearing interior walls.  Sfaee Decl., ¶5, Exs. A-B.  Given this responsibility, it is unclear whether he or Landlord has the responsibility for the demolition and repair of these unpermitted walls.  The other three violations in the Order are for electrical, mechanical, and plumbing work without a permit and required removal of all unpermitted equipment.  Ex. 1.  The Order does not state whether the unauthorized installations are on the Premises or the exterior or common areas.  Again, it is unclear whether the repair of this unpermitted work was Landlord’s or Tenant’s responsibility.  Tenant has not demonstrated that Landlord was responsible for the repairs at issue.

            Tenant has failed to demonstrate a probability of success on his claim of offset.

            b. Conclusion

            Landlord has demonstrated a probability of success on the merits.

            5. 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).  This application for a right to attach order does not seek attachment for any purpose other than to recover upon Landlord’s claims in this action.  Landlord seeks attachment for a proper purpose.

            6. Description of Property to be Attached

            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 all non-exempt property subject to attachment under CCP section 487.010, including “bank accounts, real property, etc.”  The application refers to a rider which is not attached.  This description is not sufficiently specific for anything besides bank accounts and real property. 

            7. Exemptions

            The property exempt from attachment consists of (a) all property exempt from enforcement of a money judgment,[5] (b) property which is necessary for the support of a defendant who is a natural person or the family of such defendant supported in whole or in part by the defendant, (c) “earnings” as defined by CCP section 706.011, and (d) all property not subject to attachment pursuant to CCP section 487.010.  CCP §487.020. 

            If the defendant claims that any personal property described in the application is exempt from attachment, the defendant may include that claim in the notice of opposition to the right to attach order (CCP §484.060(a)), or may file and serve a separate claim of exemption for the property (CCP §484.070(b)).  If the defendant does not do either, the claim of exemption will be barred in the absence of a showing of a change in circumstances occurring after the expiration of the time for claiming exemptions.  CCP §484.070(a); Bank of America, supra, 207 Cal.App.3d at 268 (plaintiff’s failure to oppose exemption claim concedes its propriety).  This waiver applies only to personal property.  Thus, a homestead exemption for a dwelling is not waived by failing to make a claim for exemption.  Martom v. Aboyan, (1983) 148 Cal.App.3d 826, 831.

            The defendant also may obtain a determination at the hearing whether real or personal property not described in the application or real property described in the application is exempt from attachment by including an exemption claim for such property in the notice of opposition/separate claim of exemption.  The defendant’s failure to claim such property as exempt does not preclude the defendant from raising the issue at a later time.  CCP §484.070(b).  The claim of exemption shall (1) describe the property claimed to be exempt, and (2) specify the statute section supporting the claim.  CCP §484.070(c).  The claim of exemption shall be accompanied by an affidavit supporting any factual issues raised by the claim and points and authorities supporting any legal issues raised.  CCP §484.070(d).  The defendant must file and serve the claim of exemption and supporting papers not less than five court days before the date set for the hearing.  CCP §484.070(e).

            a. Amount Necessary to Support a Family

            The property exempt from attachment includes property which is necessary for the support of a defendant who is a natural person or the family of such defendant supported in whole or in part by the defendant.¿ CCP §487.020(b).¿¿

            Tenant asserts that all of his property is necessary to support him and his family.  Opp. at 4.  Tenant fails to provide any evidence of what this property is, why it is necessary for his family’s support, or a financial statement.  Reply at 4; CCP §703.530.  Tenant has not met his burden of proof for the exemption.

            b. Employee Compensation

            Compensation payable by an employer to an employee for personal services performed by such employee, whether denominated as wages, salary, commission, bonus, or otherwise, is exempt from attachment.  CCP §487.020(c); CCP §706.011(b).

            Tenant asserts that, if he had employees that required payment for services rendered, their compensation would be exempt.  Opp. at 4.  He provides no authority that this exemption can apply to an employer who has not yet distributed the funds at issue as “earnings” for his employees.  Even if it can apply, Tenant does not provide any details regarding the specifics of this personal property.  Tenant has not met his burden of proof for the exemption.

            E. Conclusion

            The application for a right to attach order is granted in the amount of $426,899.[6]  The attachable property is limited to bank accounts and real property.  Landlord failed to file a proposed right to attach order on the appropriate Judicial Council form and is ordered to do so in the next two court days or it will be deemed waived.  No writ of attachment shall issue until Landlord files an undertaking of $10,000.