Judge James C. Chalfant, Case Number: 22STCV35314, Date: 2023-12-12 Tentative Ruling

Plaintiffs Jing Du (“Du”), Yu Bai (“Bai”), and Ye Qiu (“Qiu”) apply for right to attach orders against Defendants Amaxi Nutrition Products, Inc, a Wyoming corporation (“Amaxi WY”), and Andrew Khun (“Khun”) in the amount of $1,575,000.

The court has read and considered the moving papers, opposition, reply, and Plaintiffs’ opposition to claims of exemption[1] and renders the following tentative decision.

A. Statement of the Case

1. Complaint

Plaintiffs Du, Bai, and Qiu filed their Complaint on January 7, 2022. The operative pleading is the First Amended Complaint (“FAC”) filed on March 24, 2023 against Defendants Amaxi Nutrition Products, Inc, a suspended California corporation (“Amaxi Nutrition”), Amaxi Regional Center, LLC, a suspended California company (“Amaxi Regional”), USA Milk Company (“Milk”) (collectively, “CA Entities”), Amaxi WY (collectively, with CA Entities “Entities”); Khun; Jonathan Lau (“Jonathan”), Margaret Lau (“Margaret”), and heirs and devisees of Macie Wang (“Wang”).

The unverified FAC alleges claims for Plaintiffs Du and Bai of fraud and deceit, negligent misrepresentation, and breach of contract, and a claim for Qiu of breach of contract. The FAC alleges in pertinent part as follows.

Defendants and Wang devised a scheme to obtain money from investors seeking to apply for the EB-5 Immigrant Investor Program (“EB-5”). EB-5 allows foreign investors and their families to apply for a Green Card after making required investments in a U.S. commercial enterprise that plans to create or preserve ten permanent full-time jobs for qualified U.S. workers.

Wang, her brother Khun, Jonathan, and Margaret created the Entities to defraud the investors seeking to apply for EB-5. Amaxi WY is the successor-in-interest to Amaxi Nutrition. Khun is Amaxi WY’s principal. Wang and Defendants solicited Plaintiffs to invest in the Entities.

In 2014, Defendants approached Du and Bai to convince them that Amaxi Nutrition was a suitable investment for EB-5. They said Amaxi Nutrition was organized to develop and manufacture brands of baby formula and other nutrition products. Du and Bai would pay a $1,000,000 offering price for 100,000 preferred shares, plus $45,000 in expenses. Wang, Jonathan, and other Defendants also promised Du and Bai they would receive either a return of their full investment, one or more parcels of real estate of equal value, or an ownership interest in the business within five years of the investment.

In reliance on these representations, Bai signed a private placement memorandum (“PPM”) with Amaxi Nutrition in 2014. Du and Bai gave $1,045,000 to Wang, Jonathan, and other Defendants. Bai received a stock certificate signed by Jonathan and dated September 23, 2014.

In 2016, Defendants approached Qiu to convince her that Amaxi Regional and Milk were suitable investments for EB-5. They said that Amaxi Regional and Milk were organized to develop and manufacture brands of baby formula and other nutrition products. They advised Qiu to pay $500,000 for 0.5 shares of stock in Amaxi Regional and Milk, plus a $30,000 investment fee. Wang and other Defendants also promised Qiu that she would receive either a return of their full investment, one or more parcels of real estate of equal value, or an ownership interest in the business within five years of the investment.

In reliance on these representations, Qiu signed a subscription agreement with Amaxi Regional and Milk (“Milk Subscription Agreement”) in June 2016 and paid $530,000.

In 2019, Qiu sent an inquiry to Wang and Defendants as to the status of her investment. On August 26, 2019, Wang, Amaxi Regional, and Milk indicated that they would refund her investment on or around the beginning of 2020.

In the beginning of 2020, Du, Bai, and Qiu all asked Defendants about the status of their investments. Wang, Khun, and the Entities confirmed the amount each had invested and reassured them those amounts would be repaid.

In September 2022, Khun met with Bai regarding the Plaintiffs’ investments. He acknowledged the Entities owed Plaintiffs a refund of their investments. He promised to refund them by mortgaging his companies’ properties. He provided written documents of the properties he planned to mortgage to provide the funds needed to repay Plaintiffs. To date, none of the Plaintiffs have received a refund.

Plaintiffs seek damages of at least $1,575,000, special damages, pre-judgment interest, punitive and exemplary damages, and reasonable attorney’s fees and costs.

2. Course of Proceedings

On November 14, 2022, Plaintiffs served Margaret with the Complaint and Summons.

On November 15, 2022, Plaintiffs served Khun with the Complaint and Summons.

On November 30, 2022, Plaintiffs served Amaxi WY with the Complaint and Summons by substitute service, effective December 10, 2022.

On March 24, 2023, Plaintiffs filed the FAC and served it on Khun, Margaret, and Amaxi WY by electronic mail.

On May 16, 2023, pursuant to Plaintiffs’ request, Department 53 (Hon. Robert Broadbelt) dismissed the FAC without prejudice against the heirs and devisees of Wang, unless otherwise a named Defendant.

On October 12, 2023, Department 53 granted Plaintiffs’ ex parte application to serve the FAC and Summons on Jonathan by publication in the Los Angeles Times and on the Entities by personal service on the California Secretary of State.

On October 25, 2023, Department 53 sustained Khun, Margaret, and Amaxi WY’s demurrer to Qiu’s breach of contract cause of action, sustained Khun and Margaret’s demurrer to Bai and Du’s breach of contract cause of action, and overruled the demurrers as to all other causes of action. It also granted a motion to strike the prayer for attorney’s fees. The court granted 20 days’ leave to file a Second Amended Complaint ("SAC”).

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.

Bai and Du are married. Bai Decl., ¶1. In 2014, they sought to make the required investments to become eligible to apply for a Green Card under EB-5. Bai Decl., ¶2. Wang, Khun, and Amaxi Nutrition represented that an investment in Amaxi Nutrition would be suitable for EB-5. Bai Decl., ¶2. They asserted that Amaxi Nutrition was organized to develop and manufacture brands of baby formula and other nutrition products. Bai Decl., ¶2. Du and Bai would need to pay a $1,000,000 offering price for 100,000 preferred shares, plus $45,000 in expenses, for a total of $1,045,000. Bai Decl., ¶2.

Wang, Khun, and Amaxi Nutrition also sent Bai a PPM listing the offering price as $10 per share. Bai Decl., ¶3, Ex. I, p. 1. The purchase price of the minimum purchase of 100,000 shares was $1,000,000, plus $45,000 in offering expenses. Bai Decl., ¶3, Ex. I, pp. 1, 11.

Amaxi Nutrition’s plan was to manufacture and sell infant, baby, toddler, children, and adult nutritional supplements. Bai Decl., ¶3, Ex. I, p. 19. The PPM also identified Khun as Amaxi Nutrition’s President and one of the managers who would run the company. Bai Decl., ¶3, Ex. I, p. 21. It described Khun as a results-driven and dedicated individual with wide-ranging experience in planning and leading operations involving the food manufacturing environment. Bai Decl., ¶3, Ex. I, p. 21. The PPM also promised that Du and Bai would receive either a return of their full investment, one or more parcels of real estate of equal value, or an ownership interest in the business within five years of the investment. Bai Decl., ¶4, Ex. I.

Bai signed a subscription agreement attached to the PPM on August 7, 2014. Bai Decl., ¶5, Ex. I. Wang signed relevant documents as Amaxi Nutrition’s President, and Jonathan signed as its Secretary. Bai Decl., ¶5, Ex. I. On September 23, 2014, Amaxi Nutrition issued a stock certificate for 100,000 shares. Bai Decl., ¶5, Ex. I.

In 2016, Qiu sought to make the required investments to become eligible to apply for a Green Card under EB-5. Qiu Decl., ¶2. She learned about such an investment opportunity with Wang, Amaxi Regional, and Milk and had counsel contact them for more information. Qiu Decl., ¶2.

Wang, Amaxi Regional, and Milk represented that an investment in Amaxi Regional and Milk would be suitable for EB-5. Qiu Decl., ¶2. They provided documents to show that Amaxi Regional and Milk were organized to develop and manufacture brands of baby formula and other nutrition products. Qiu Decl., ¶2. Qiu would need to invest $500,000 for 0.5 shares of stock in the companies. Qiu Decl., ¶2. She would also need to pay a $30,000 management fee. Qiu Decl., ¶2.

The PPM explained the objective was to finance the acquisition of one facility and the ongoing operations of an existing facility at 10655 7th Street, Rancho Cucamonga, California 91730 (“Facility”). Qiu Decl., ¶5, Ex. A. The offering price was $100 per share. Qiu Decl., ¶5, Ex. A, p.1.

The PPM also asserted that Khun held 10% of outstanding Milk shares and was its current President. Qiu Decl., ¶3, Ex. A, p. 5. It described Khun as a highly successful manager with wide-ranging experience in planning and executing business operations in the food manufacturing environment. Qiu Decl., ¶3, Ex. A, p. 5.

Milk’s September 2015 business plan (“Business Plan”) listed its purpose as the manufacturing and sale of infant, baby, toddler, children, and adult nutritional supplements. Qiu Decl., ¶4, Ex. B, p. 16. It listed Khun as President and 20% owner. Qiu Decl., ¶4, Ex. B, p. 14. It asserted he is skilled in evaluating and implementing continuous process improvements to minimize waste and reduce costs while maximizing quality and yield. Qiu Decl., ¶4, Ex. B, p. 14. The Business Plan was “Sponsored by” Amaxi Regional. Qiu Decl., ¶4, Ex. B.

Qiu visited the Facility in June 2016. Qiu Decl., ¶6. To induce her investment, Wang, Amaxi Regional, Milk, and other Defendants promised Qiu that she would receive either a return of their full investment, one or more parcels of real estate of equal value, or an ownership interest in the business within five years of the investment. Qiu Decl., ¶6.

In June 2016, in reliance on Defendants’ representations, Qiu signed a Milk Subscription Agreement and paid Wang, Khun, Milk, Amaxi Regional, and other Defendants $530,000. Qiu Decl., ¶7, Ex. C. The Milk Subscription Agreement provided that Qiu agreed to purchase 0.5 shares of preferred stock at a price of $100 per share, in accordance with the terms of the PPM. Qiu Decl., ¶7, Ex. C. Wang signed as Amaxi Regional and Milk’s CEO. Qiu Decl., ¶7, Ex. C.

In the beginning of 2019, Qiu texted Wang that she had learned the EB-5 program was terminated in May 2018. Qiu Decl., ¶8, Ex. D. She said that Wang should have refunded the investment from that day. Qiu Decl., ¶8, Ex. D. Qiu asked Wang to refund her money by February 2020, the end of the five-year timeframe Defendants had originally promised. Qiu Decl., ¶8, Ex. D.

On August 5, 2019, Qiu sent a written demand for a $500,000 refund by the end of September. Qiu Decl., ¶9, Ex. E. On August 26, 2020, Milk acknowledged receipt of the demand and stated that the refund was scheduled for the beginning of 2020. Qiu Decl., ¶10, Ex. F. On March 10, 2020, Qiu sent Wang and Amaxi Regional a final demand for the $500,000 refund. Qiu Decl., ¶11, Ex. G.

From 2020 onward, Bai and Du began asking Wang and later Khun about the status of their investment. Bai Decl., ¶6. Wang told Bai and Du that Amaxi Nutrition never made the products it was supposed to make. Bai Decl., ¶6. Wang, Khun, and Amaxi Nutrition acknowledged the amount of the investment Bai and Du made, and they promised to refund it. Bai Decl., ¶6. Qiu learned about these conversations and requested Bai and Du’s help in obtaining a refund for her investment as well. Bai Decl., ¶7; Qiu Decl., ¶12.

On July 2, 2020, counsel for Plaintiffs sent Khun a demand letter for both investments (“July 2020 Letter”). Marks Decl., ¶2, Ex. K. The letter listed the recipient address as 15222 Valley Blvd., City of Industry, CA 91746. Marks Decl., ¶2, Ex. K. Plaintiffs’ counsel asserted he was informed Khun would be handling issues related to Amaxi Nutrition and Wang’s estate. Marks Decl., ¶2, Ex. K. He was also informed that Khun had told Plaintiffs their investments would be repaid. Marks Decl., ¶2, Ex. K.

On July 17, Amaxi Nutrition replied that it had no record of an investment from Qiu. Marks Decl., ¶3, Ex. L. The Facility’s address was listed on this response. Marks Decl., ¶3, Ex. L. Because this response did not mention Bai and Du, counsel for Plaintiffs interpreted it as an admission that Khun had agreed to repay their investment. Marks Decl., ¶3, Ex. L.

Amaxi WY’s filings with the Wyoming Secretary of State list its principal place of business as the Facility’s address. Qiu Decl., ¶13, Ex. H.

To date, Plaintiffs have not received a refund of their investments. Bai Decl., ¶10; Qiu Decl., ¶12. They seek attachment only to recover Bai and Du’s $1,045,000 investment and Qiu’s $530,000 investment. Bai Decl., ¶12; Qiu Decl., ¶14. These amounts are unsecured. Bai Decl., ¶13; Qiu Decl., ¶15.

Amaxi Nutrition’s 2013 formation documents identified Wang as President and Wing Ng as Secretary. RJN Ex. A. 2014 and 2018 Statements of Information (“SOI”) list Wang as CEO and Director, Jonathan as Secretary, and Margaret as Chief Financial Officer. RJN Exs. B-C.

Amaxi Regional’s 2014 formation documents identified Wang as the agent for service of process. RJN Ex. D. Its 2016 and 2018 SOIs list Wang as the manager and agent for service of process. RJN Exs. E-F.

Milk’s May 2015 formation documents identified Wang as the agent for service of process. RJN Ex. G. Its July 2015 SOI lists Wang and Jonathan as managers, while Wang is also an agent for service of process. RJN Ex. H.

From 2013 until late 2017, Michael Douthwaite (“Douthwaite”) was Amaxi Nutrition’s operations manager. Douthwaite Decl., ¶3. From 2013 to 2020, Lina Tan (“Tan”) was the Manager of its Accounting Department. Tan Decl., ¶2. Amaxi Nutrition had 18 non-temporary employees from 2013 until late 2017. Douthwaite Decl., ¶6.

Amaxi Nutrition was a real company with real assets. Khun Decl., ¶17. Its primary objective was to manufacture, market, and export infant formula into the Chinese market. Douthwaite Decl., ¶5; Tan Decl., ¶2. During Douthwaite’s tenure, it actively pursued this goal. Douthwaite Decl., ¶¶ 3, 5. It engaged with prospective clients and worked to meet Chinese and U.S. regulatory requirements. Douthwaite Decl., ¶5. It installed a complete and functional production line, acquired and stored raw ingredients, and engaged in limited production. Douthwaite Decl., ¶5. It had the potential for financial success until Wang died. Khun Decl., ¶17.

Wang ran and directed Amaxi Nutrition. Douthwaite Decl., ¶8; Tan Decl., ¶3. Amaxi Nutrition employees like Douthwaite and Tan never interacted with Khun about company matters or saw him perform company duties or functions. Douthwaite Decl., ¶7; Tan Decl., ¶3. Khun was not invested in any aspect of company operations or activities. Douthwaite Decl., ¶7; Tan Decl., ¶3. Khun was not an officer, director, owner, or employee of Amaxi Nutrition. Douthwaite Decl., ¶7.

Khun formed Amaxi WY on July 29, 2021. Khun Decl., ¶39; RJN Ex. I. This was a year after Wang’s death. Khun Decl., ¶39. The Facility’s address is listed as both the mailing address and principal place of business. RJN Ex. I.

Unlike Amaxi Nutrition, Amaxi WY’s goal is to develop food products primarily for sale within the U.S. Khun Decl., ¶40. The products it offers are also different. Khun Decl., ¶40. The two companies have no common ownership, directors, or officers. Khun Decl., ¶40. Amaxi WY did not acquire any assets or stock from Wang’s companies or assume their obligations. Khun Decl., ¶40. Wang was never involved with Amaxi WY. Khun Decl., ¶41.

Khun and Wang never participated in each other’s businesses. Khun Decl., ¶5. Khun was never involved in the formation, management, or operation of the CA Entities. Khun Decl., ¶6. Khun did not discuss the solicitation of investments for the CA Entities with Wang or anyone else. Khun Decl., ¶14.

Khun never told anyone he was handling issues related to Amaxi Nutrition and Wang’s estate. Khun Decl., ¶38. He had not seen Plaintiffs’ July 2020 Letter (Marks Decl., Ex. K) before this application. Khun Decl., ¶36.

Until he learned about Plaintiff’s contentions in this case, he did not know about the PPMs or Milk’s Business Plan. Khun Decl., ¶¶ 18-19, 27. He did not authorize either document to list him as President or provide his information, and he did not know they did so. Khun Decl., ¶¶ 18-19, 27. Until Plaintiffs contacted him, he did not know they invested in Wang’s companies. Khun Decl., ¶¶ 20, 28-29.

Khun did not communicate with Plaintiffs until after Wang’s death. Khun Decl., ¶¶ 20, 25, 30. He sympathized with them when they contacted him about amounts his sister Wang owed. Khun Decl., ¶25. He engaged in conversation with them for some time, but he never suggested he was involved in Wang’s business affairs or legally responsible for her debts. Khun Decl., ¶25. He told them he was never involved with or a member, officer, director, or board member of the CA Entities. Khun Decl., ¶25. He never promised to pay any money to Plaintiffs to compensate them for claims against those companies or Wang. Khun Decl., ¶¶ 25, 37. He refused to sign a document prepared by Plaintiffs’ counsel that would commit him to repaying the investments at issue. Khun Decl., ¶37. The text Khun sent on October 10, 2021 did not promote Amaxi Nutrition products. Khun Decl., ¶33. A new company was formed developing these products under a different label. Khun Decl., ¶33. Khun only mentioned this investment opportunity as a way to recoup some of Plaintiff’s losses. Khun Decl., ¶33.

The Complaint alleged fraud, negligent misrepresentation, and two causes of action for breach of contract. Adair Decl., ¶2. The causes of action were against all Defendants but based only on Wang and her companies’ conduct. Adair Decl., ¶2. The Complaint did not allege that Khun and Amaxi WY were part of the misrepresentations or parties to the contracts. Adair Decl., ¶3.

Defendants demurred to the Complaint, but Plaintiffs filed the FAC before a hearing on the demurrer. Adair Decl., ¶3. Because the FAC still did not allege that Khun or Amaxi WY were part of the misrepresentations or parties to the contracts, Defendants demurred again. Adair Decl., ¶3.

Department 53 sustained the demurrer on behalf of Khun and Margaret as to the breach of contract causes of action. Adair Decl., ¶4. The court ruled that the FAC alleges that Plaintiffs entered the contract with Wang and suspended corporation Amaxi Nutrition, and they have not alleged that Khun and Margaret were parties to the contract. Adair Decl., ¶4.

Plaintiffs have recently filed the SAC, which alleges that Khun and Amaxi WY were parties to the two contracts at issue. Adair Decl., ¶5.[4] Neither Plaintiffs’ discovery responses nor the evidence filed with this application demonstrates this. Adair Decl., ¶5.

Interrogatories in this action asked Plaintiffs to identify every person with whom they discussed possible investments. Dieringer Decl., ¶3, Exs. 1-3. Answers included Wang, Lixin Azarmehr, Yulian Yan, Jennifer Fu, and the other Plaintiffs. Dieringer Decl., ¶3, Exs. 1-3; Adair Decl., ¶5. Nobody named Khun in responses or supplemental responses. Dieringer Decl., ¶3, Exs. 1-3; Adair Decl., ¶5. This contradicts Bai’s declaration, which states that Khun helped solicit Bai and Du’s investment in Amaxi Nutrition. Dieringer Decl., ¶4.

Requests for Production of Documents (“RFPs”) in this action asked Plaintiffs for all documents that constitute any communication between that Plaintiff and Khun from 2016 to present day. Dieringer Decl., ¶6, Ex. 4. Qiu responded that she could not produce any documents because no such communication ever existed. Dieringer Decl., ¶6, Ex. 4. Bai and Du produced communications starting from October 2021, years after the Plaintiffs’ investments. Dieringer Decl., ¶6.

Qiu asserts she paid $530,000 to Wang, Khun, Milk, Amaxi Regional, and other Defendants. Dieringer Decl., ¶8. She has produced the two checks to show this payment. Dieringer Decl., ¶8, Ex. 5. Both were made out to Amaxi Regional, not Khun. Dieringer Decl., ¶8, Ex. 5.

Defendants also requested that Bai produce documents evidencing the amount he invested in Amaxi Nutrition. Dieringer Decl., ¶10. Bai produced hundreds of pages of documents, some in Chinese, but none of it appears to be documentary evidence of his payments. Dieringer Decl., ¶¶ 11-12. Nothing suggests a payment to Khun. Dieringer Decl., ¶¶ 11-12.

On November 15, 2022, Plaintiffs personally served Khun with the Complaint and Summons at 15222 East Valley Boulevard, City of Industry, CA 91746. Shikai Decl., ¶5, Ex. M.

On November 16, 2023, Plaintiffs electronically served counsel for Defendants with the SAC. Shikai Decl., ¶6, Ex. N.

Plaintiffs’ claim a total of $1,575,000 paid pursuant to the subscription agreement in Bai’s PPM and Qiu’s Milk Subscription Agreement. Qiu Decl., ¶7, Ex. C; Bai Decl., ¶5, Ex. I. Plaintiffs’ claim is also based on Khun’s alleged misrepresentations creating an implied contract and his oral promises to repay the investments. Bai Decl., ¶9. Plaintiffs have contract claims on which to base attachment. See Reply at 2-3.

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).

Bai asserts that he and his wife paid $1,045,000 pursuant to the subscription agreement attached to the PPM to invest in Amaxi Nutrition. Bai Decl., ¶¶ 2, 5, Ex. I. Qiu asserts that she paid $530,000 under the Milk Subscription Agreement to invest in Amaxi Regional and Milk. Qiu Decl., ¶7, Ex. C.

Bai’s PPM set the purchase price of 100,000 Amaxi Nutrition shares at $1,000,000, plus $45,000 in offering expenses. Bai Decl., ¶3, Ex. I, pp. 1, 11. Amaxi Nutrition issued a stock certificate for 100,000 shares. Bai Decl., ¶5, Ex. I. Bai’s damages of $1,045,000 are ascertainable.

The Milk Subscription Agreement provides that Qiu agrees to purchase 0.5 shares of preferred stock at a price of $100 per share, in accordance with the terms of the PPM. Qiu Decl., ¶7, Ex. C. This suggests an investment of only $50, not $530,000 as Qiu asserts. Because Defendants do not contest the ascertainable damages, this defect is waived.

a. The Written Agreements (Subscription Agreement and the Milk Subscription Agreement) and Implied Contract Through Fraud

Plaintiffs assert Khun was one of the Defendants who told Du and Bai that an investment in Amaxi Nutrition would be suitable for EB-5. Bai Decl., ¶2. He also promised Bai via the PPM that Du and Bai would receive either a return of their full investment, one or more parcels of real estate of equal value, or an ownership interest in the business within five years of the investment. Bai Decl., ¶4, Ex. I. Mem. at 5.

Qiu asserts that Amaxi Regional and Milk made similar representations to induce her investment via the Milk Subscription Agreement. Mem. at 6; Qiu Decl., ¶¶ 2-3, 6. They made those representations through representatives, principals, and officers like Khun. Mem. at 6.

Plaintiffs also assert Khun orally agreed to repay the money they invested in Milk, Amaxi Regional, and Amaxi Nutrition. Bai Decl., ¶9. He did this in furtherance of his role as President of the Entities. Plaintiffs cite Bai’s PPM, Qiu’s PPM, and Milk’s September 2015 Business Plan. Qiu Decl., ¶¶ 3, 4, Exs. A-B; Bai Decl., ¶5, Ex. I. Mem. at 4; Reply at 5. These documents identify Khun as President of both Amaxi Nutrition and Milk. Qiu Decl., ¶¶ 3, 4, Exs. A-B; Bai Decl., ¶5, Ex. I. Mem. at 8.

Khun denies that he was an officer, director, or owner of any of the CA Entities. Khun and Wang never participated in each other’s businesses. Khun Decl., ¶5. Khun was never involved in the formation, management, or operation of the CA Entities. Khun Decl., ¶6. Khun did not discuss the solicitation of investments for the CA Entities with Wang or anyone else. Khun Decl., ¶14.

Khun has not received monies or anything of value from investment in the CA Entities. Khun Decl., ¶15. He has not received compensation for services rendered to them. Khun Decl., ¶15. He has never held himself out as a representative of any of the three Entities. Khun Decl., ¶13. Until he learned about Plaintiff’s contentions in this case, he did not know about the PPMs or Milk’s Business Plan. Khun Decl., ¶¶ 18-19, 27. He did not authorize either document to list him as President or provide his information, and he did not know they did so. Khun Decl., ¶¶ 18-19, 27. Until Plaintiffs contacted him, he did not know they invested in Wang’s companies. Khun Decl., ¶¶ 20, 28-29. Multiple Amaxi Nutrition employees also assert they never interacted with Khun about company matters or saw him perform company duties or functions. Douthwaite Decl., ¶7; Tan Decl., ¶3.

As Defendants’ opposition notes, none of the PPMs or Business Plan was signed by Khun. Opp. at 11. For example, although the Bai PPM identified Khun as Amaxi Nutrition’s President, Wang signed it on a page identifying her as President. Bai Decl., ¶3, Ex. I. Filings with the California Secretary of State for the CA Entities never list him as a shareholder or officer. Opp. at 7; RJN Exs. A-H. Khun’s evidence is more persuasive. Based on the evidence presented, Khun demonstrates that he was never involved in the formation, management, or operation of the CA Entities.

Assuming arguendo Khun was an officer or shareholder of a CA Entity, this alone would not render him personally liable for amounts the CA Entities owe thereunder. Opp. at 11. A corporation is regarded as a legal entity, separate and distinct from its stockholders, officers and directors, with separate and distinct liabilities and obligations. Opp. at 12; Sonora Diamond Corp. v. Superior Court (2000), 83 Cal. App. 4th 523, 538. The mere status of officer, director, or shareholder does not make that person personally liable for the corporation’s debts. Khun is not personally liable under the contracts between Plaintiffs and the CA Entities unless he participated in a fraud.

Plaintiffs also fail to provide supporting foundation that Khun and Plaintiffs discussed possible investment in the CA Entities, and Khun denies ever doing so. Plaintiffs failed to provide such evidence during discovery. Dieringer Decl., ¶3, Exs. 1-3. Interrogatories asked Plaintiffs to identify every person with whom they discussed possible investments. Dieringer Decl., ¶3, Exs. 1-3. None of the answers named Khun in responses or supplemental responses. Dieringer Decl., ¶3, Exs. 1-3; Adair Decl., ¶5. When RFPs asked Qiu for documents constituting any communication she had with Khun since 2016, she said there never was any. Dieringer Decl., ¶6, Ex. 4. Bai and Du only produced communications starting from October 2021, years after Plaintiffs’ investments. Dieringer Decl., ¶6. Qiu asserts that she paid her $530,000 investment to Wang, Khun, Milk, Amaxi Regional, and other Defendants (Qiu Decl., ¶7; Dieringer Decl., ¶8) but she only produced checks to Amaxi Regional. Dieringer Decl., ¶8, Ex. 5.

Plaintiffs have not shown that Khun has a personal obligation to repay the investments either under the written agreements or participation in a fraud.

Plaintiffs assert that Amaxi WY is the successor-in-interest to Amaxi Nutrition. Mem. at 5.

Khun does not deny that he owns and controls Amaxi WY. Khun Decl., ¶39; RJN Ex. I. As Defendants note (Opp. at 14-15), Plaintiffs fail to provide any evidence of common ownership, directors, or officers between the CA Entities and Amaxi WY. Khun Decl., ¶40. Khun founded Amaxi WY in 2021, a year after Wang’s death. Khun Decl., ¶39; RJN Ex. I. Defendants assert that Amaxi WY develops different food products than Amaxi Nutrition for a different geographical market. Khun Decl., ¶40. Amaxi WY did not acquire any assets or stock from Wang’s companies or assume their obligations. Khun Decl., ¶40.

Plaintiffs present evidence that Amaxi WY’s principal place of business is at the same address as the Facility that Milk once operated. Qiu Decl., ¶¶ 5, 13, Exs. A, H; RJN Ex. H. The CA Entities used this Facility to manufacture, produce, and market dietary supplements for different age groups. Qiu Decl., ¶4, Ex. B, p. 16; Bai Decl., ¶3, Ex. I, p. 19. Reply at 4. Amaxi WY now uses the same Facility for that purpose. Reply at 5, 7. This does not alone does not demonstrate that Amaxi WY is a successor-in-interest to any of the CA Entities.

Plaintiffs have not shown that Amaxi WY has an obligation to repay the investments under the written agreements.

Plaintiffs assert that Khun and Amaxi WY entered into oral and implied-in-fact agreements to repay the amounts Plaintiffs invested under the Bai PPM and the Milk Subscription Agreement. Mem. at 8.

A contract coming within the statute of frauds is invalid unless it is memorialized by a writing subscribed by the party to be charged. Civil Code §1624(a); Secrest v. Security Nat. Mortg. Loan Trust 2002-2, (2008) 167 Cal.App.4th 544, 552. A special promise to answer for the debt, default, or miscarriage of another, except when specified under Civil Code section 2794, comes within the statute of frauds. Civil Code §1624(a)(2).

If Khun orally agreed after Wang’s death to repay the amount that she and the CA Entities owed, such an agreement falls within the statute of frauds. Civil Code §1624(a)(2). Plaintiffs must demonstrate that Khun memorialized this agreement in writing. Civil Code §1624(a). Plaintiffs argue that Khun does not cite a written denial of liability (Reply at 6), but that argument improperly reverses the burden.

Plaintiffs assert that Khun promised in a May 2022 conversation that he would refund Bai, Du, and Qiu’s investments through Amaxi WY. Bai Decl., ¶9. Mem. at 6. Plaintiffs fail to provide a writing to satisfy the statute of frauds. Khun rejected a proposed written settlement that would require him to admit he was responsible for amounts owed. Khun Decl., ¶37.

Assuming arguendo Khun orally agreed to refund investments into the CA Entities, Plaintiffs cannot enforce that agreement due to the statute of frauds.

In the July 2020 Letter, Plaintiffs demanded that Khun refund both investments. Marks Decl., ¶2, Ex. K. Plaintiffs’ counsel asserted he was informed Khun would be handling issues related to Amaxi Nutrition and Wang’s estate. Marks Decl., ¶2, Ex. K. He was also informed that Khun had told Plaintiffs their investments would be repaid. Marks Decl., ¶2, Ex. K.

On July 17, 2020, Amaxi Nutrition replied that it had no record of an investment from Qiu. Marks Decl., ¶3, Ex. L. Because this response did not mention Bai and Du, Plaintiffs’ counsel interpreted it as an admission that Khun had agreed to repay their investment. Marks Decl., ¶3, Ex. L.

Plaintiffs reassert this inference based on the doctrine of adoptive silence. Reply at 6. When a person makes a statement in the presence of a party to an action under circumstances that would normally call for a response if the statement were untrue, the receiving party’s silence, evasion, or equivocation may be considered as a tacit admission of the statements made in his presence. In re Neilson’s Estate, (1962) 57 Cal.2d 733, 746; People v Charles, (2015) 61 Cal.4th 308, 323.

Khun denies receiving the July 2020 Letter. Khun Decl., ¶36. Plaintiffs note that the address on the July 2020 Letter matches the address where it personally served Khun with the Complaint and Summons. Marks Decl., ¶2, Ex. K; Shikai Decl., ¶5, Ex. M. Reply at 5-6.

If matching addresses suggest that Khun received the Letter, Amaxi Nutrition’s July 17 response, which is unsigned, has a different address, which suggests that he did not write it. Marks Decl., ¶3, Ex. L. In any event, Plaintiffs cite no authority suggesting that a silent admission can overcome the statute of frauds. Plaintiffs’ July 2020 Letter does not show that Khun or Amaxi WY agreed to repay the investments.

Plaintiffs have failed to show an enforceable agreement, written, oral, or implied, against Khun or Amaxi WY and have failed to demonstrate a probability of success on the merits.

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.

Plaintiffs fail to demonstrate Khun had any commercial interest in the CA Entities, whether directly or through Amaxi WY. As Defendants argue (Opp. at 15), Plaintiffs claim boils down to Khun’s personal liability based on an oral promise to repay Wang’s debt. This is not 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.

Plaintiffs seek to attach Khun’s interests in real property, except leasehold states with unexpired terms of less than one year. 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). Plaintiffs seek attachment for a proper purpose. Bai Decl., ¶12; Qiu Decl., ¶14.

[1] Defendants failed to lodge courtesy copies of their opposition, and Plaintiffs failed to lodge a courtesy copy of their reply and opposition to claims of exemption, both 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.

[2] Defendants request judicial notice of (1) the entity formation documents for Amaxi Nutrition (RJN Ex. A); (2) Amaxi Nutrition’s Statement of Information (“SOI”) filed August 20, 2014 (RJN Ex. B); (3) Amaxi Nutrition’s SOI filed September 30, 2018 (RJN Ex. C); (4) the entity formation documents for Amaxi Regional (RJN Ex. D); (5) Amaxi Regional’s SOI filed June 27, 2016 (RJN Ex. E); (6) Amaxi Regional’s SOI filed August 17, 2018 (RJN Ex. F); (7) the entity formation documents for Milk (RJN Ex. G); (8) Milk’s SOI filed July 9, 2015 (RJN Ex. H); and (9) the entity formation documents for Amaxi WY on file with Wyoming’s Secretary of State, dated July 29, 2021 (RJN Ex. I). Exhibits A-H are on file with the California Secretary of State and the requests are granted. Evid. Code §452(c).

Although Plaintiffs cite the FAC in their moving papers (Mem. at 5), it is unverified and cannot be relied on as evidence. CCP §446(a).

[3] All three of Defendants’ written objections to Plaintiffs’ evidence are sustained.

[4] The SAC is not in the court’s electronic case file.

[5] Plaintiffs request judicial notice of the exhibits attached to their reply declaration. Shikai Decl., ¶¶ 5-6, Exs. M-N. Plaintiffs failed to file a separate document requesting judicial notice. See CRC 3.1113(l). The requests for judicial notice are denied, but the court may still consider the exhibits as evidence.

[6] Defendants’ notice of opposition purports to seek exemptions for Khun. However, it only says it seeks to exempt all of Khun’s property. The opposition memorandum also does not discuss exemptions. Exemption Opp. at 3. Therefore, the exemption issue is waived.