Judge James C. Chalfant, Case Number: 23STCV07593, Date: 2023-08-31 Tentative Ruling

Plaintiff Hunt Capital Partners, LLC (“Hunt”) applies for a right to attach order against Defendants Global Premier Development, Inc. (“Global”) and Andrew Hanna (“Hanna”) in the amount of $987,617.22.

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

A. Statement of the Case

1. Complaint

Plaintiff Hunt filed the Complaint against Global, Hannah, LBB Housing Investors, L.P. (“LBB”), and SF Eddy Housing Investors, L.P. (“SF”). The Complaint alleges claims for breach of a predevelopment note, a breach of continuing guaranty, money lent, account stated, and fair valuation as to both “Long Beach villas” and “Eddy St.” The Complaint alleges in pertinent part as follows.

Hanna is Global’s President and CEO.

a. LBB

On October 14, 2019, LBB executed a Predevelopment Loan Note (“LBB Note”) to provide capital for the operation of its business in connection with a future apartment complex in Long Beach, California (“LBB Property”). Pursuant to the LBB Note, LBB received $400,000 and agreed to repay it pursuant to the terms and conditions therein. To induce Hunt’s entry into the LBB Note, Hanna signed a guaranty (“LBB Guaranty”) both in his own capacity and as Global’s CEO.

On April 27, 2020, LBB and Hunt executed an Amendment to the LBB Note (“LBB First Amendment”) that increased the loan principal from $400,000 to $600,000, changed the maturity date from February 28, 2020 to July 31, 2020, and changed the interest rate from 8% to 10%. Global and Hanna also signed an agreement consenting to the LBB First Amendment (“2020 Guarantor Consent”).

On January 8, 2021, LBB and Hunt entered into a second Amendment to the LBB Note (“LBB Second Amendment”) that changed the maturity date to July 31, 2021. Global and Hanna also signed an agreement whereby they consented to the LBB Second Amendment (“2021 Guarantor Consent”).

Pursuant to the LBB Second Amendment, the LBB Note matured and became due and payable in full on March 31, 2021. LBB did not repay the LBB Note at maturity. LBB now owes $600,000 in principle plus interest of $219,803.47 as of March 10, 2023. It will accrue 10% annual interest thereafter, or $227.09 per diem. The LBB Note also holds LBB liable for attorney’s fees incurred in enforcement of the LBB Note.

Under the LBB Guaranty, Hanna and Global also owe these amounts and are independently liable for attorney’s fees incurred in enforcement of the LBB Guaranty.

b. SF

On October 23, 2019, SF executed a Predevelopment Loan Note (“SF Note”) to provide capital for the operation of its business in connection with a future apartment complex in San Francisco, California (“SF Property”). SF received $120,000 pursuant to the SF Note and agreed to repay it pursuant to the terms and conditions therein. To induce Hunt’s entry into the SF Note, Hanna signed a guaranty thereto (“SF Guaranty”) both in his own capacity and as Global’s CEO.

Defendants failed to pay amounts due under the SF Note. The SF Note matured and became due and payable in full on February 28, 2020. SF did not repay the principal at maturity. It now owes $120,000 in principle plus interest of $47,813.75. It will accrue 10% annual interest thereafter, or $46.69 per diem. The SF Note also holds SF liable for attorney’s fees incurred in enforcement of the SF Note.

Under the SF Guaranty, Hanna and Global also owe these amounts and are independently liable for attorney’s fees incurred in enforcement of the SF Guaranty.

c. Prayer for Relief

Against LBB, Global, and Hanna, Hunt seeks damages of $819,803.47 plus interest of $227.09 per diem after March 10, 2023.

Against SF, Global, and Hanna, Hunt seeks damages of $167,813.75 plus interest of $46.69 per diem after March 10, 2023.

Hunt also seeks attorney’s fees and costs against all parties pursuant to the terms of the Notes and Guaranties.

2. Cross-Complaint

On July 30, 2023, Cross-Complainants SF and LBB filed a Cross-Complaint against Cross-Defendants Hunt and JPMorgan Chase & Co. (“JPMorgan”). As to Hunt, each Cross-Complainant alleged breach of written contract and breach of the implied covenant of fair dealing. LBB also alleged breach of the implied covenant of fair dealing against JPMorgan. The Cross-Complaint also alleged intentional misrepresentation, negligent misrepresentation, tortious interference with contract, and declaratory relief. Factual allegations are in pertinent part as follows.

The LBB Property is at 1400 Long Beach Blvd, Long Beach, California, and the SF Property is at 30 Eddy St., San Francisco, California. Both are affordable housing projects. In 2019, LBB and SF received a total of $39,146,660 in state tax credit awards as equity for the affordable housing development.

On March 27, 2019, Hanna contacted Hunt Vice President Dana Mayo (“Mayo”) with the opportunity to be an equity investor or financial partner in LBB and SF. Hanna explained that the combined project cost was about $46,000,000.

On August 6, 2019, LBB and Hunt executed a Letter of Intent Agreement (“LBB LOI”) whereby Hunt would acquire a 99.99% interest in LBB. In return, Hunt would pay $0.90 for every $1 of Tax Credit that LBB obtained, a total equity investment of about $21,500,000.

On October 12, 2019, SF and Hunt executed a Letter of Intent Agreement (“SF LOI”) whereby Hunt would acquire a 99.99% interest in SF. In return, Hunt would pay $0.90 for every $1 of Tax Credit that SF obtained, for a total equity investment of about $14,000,000.

Both LOIs had an exclusivity clause that required LBB, SF, and all their partners to deal exclusively with Hunt until the closing of the partnerships.

After execution of the LOIs, Hunt introduced LBB and SF to JPMorgan to process construction loans and permanent loans for both housing projects. LBB and SF provided all preliminary due diligence related documentation, and Hunt reported in October 2019 that JPMorgan was satisfied with it. Hunt also represented that it would move forward with the closing of the partnerships for both projects.

In reliance on these representations, Global, LBB, and SF staff spent many hours over ten months in conference calls with Hunt and JPMorgan. They also adhered to the LOIs’ exclusivity clause and rejected other partnership offers. They executed the LBB and SF Notes as predevelopment loans from Hunt to meet predevelopment capital needs of both projects. LBB closed the purchase of the LBB Property on December 4, 2019 with two trust deed loans that totaled $6,200,000. SF closed the purchase of the SF Property on October 23, 2019 with two trust deed loans that totaled $3,200,000.

On October 17, 2019, LBB and JPMorgan executed a Letter Agreement for JPMorgan to provide a construction loan facility in the amount of $22,830,000 and permanent loan facility in the amount of $6,500,000. In compliance with the Letter Agreement, LBB sent JPMorgan a $30,000 good faith initial deposit to cover JPMorgan’s expenses. Although JPMorgan also sent a Letter Agreement to SF, it was never signed.

On August 7, 2020, JPMorgan notified Hanna that it decided not to move forward with the project. It asserted that LBB did not pass the litigation check of the sponsors, even though ten months earlier it said that LBB did so and no pending or anticipated litigation had occurred since. JPMorgan also did not show any intent to move forward with SF’s project. Meanwhile, Hunt refused to honor the equity commitments in the LOIs.

This sudden abandonment of a housing project after the investment of that much time and money is unusual for low-income housing Tax Credit Investors like Hunt and JPMorgan. JPMorgan knew the damage its decision would do to the projects. Despite all efforts to mitigate the impact, LBB and SF struggled to put the projects back on the market or find other investors. They also failed to meet the deadlines to retain the Tax Credit and had to return all $39,146,660.

LBB seeks $21,500,000 in damages from JPMorgan and Hunt based on breaches of contract and of the covenant of good faith and fair dealing. SF seeks $14,000,000 in damages from Hunt based on breaches of contract and of the covenant of good faith and fair dealing. For Hunt’s negligent and intentional misrepresentation and JPMorgan’s tortious interference with contract, LBB and SF seek $35,500,000. SF and LBB also seeks a judicial determination that Hunt cannot enforce the Notes. LBB and SF also seek interest on all damages sought, attorney’s fees, and costs.

3. Course of Proceedings

On May 12, 2023, Hunt served Global with the Complaint and Summons.

On June 11, 2023, Global filed its Answer.

On July 29, 2023, SF and LBB filed and served a joint Answer to the Complaint.

On July 31, 2023, SF and LBB filed the Cross-Complaint and served Hunt.

On August 2, 2023, Hon. Thomas Griego signed an order to serve Defendant Hanna with the Summons by publication in the Irvine World News at least once a week for four successive weeks.

On August 29, 2023, Hunt filed an Answer to the Cross-Complaint.

Global has moved for leave to file its own Cross-Complaint, which will be heard by Department 15 on August 30, 2023.

B. Applicable Law

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

On October 14, 2019, LBB executed the LBB Note to provide capital for the operation of its business in connection with an apartment complex to be built on the LBB Property. Kohn Decl., ¶6, Ex. 1. LBB received $400,000 pursuant to the LBB Note and agreed to repay it pursuant to the terms and conditions therein. Kohn Decl., ¶6, Ex. 1.

Also on October 14, 2019, to induce Hunt’s entry into the LBB Note, Hanna and Global signed the LBB Guaranty for all amounts owed under the LBB Note. Kohn Decl., ¶7, Ex. 2. Hanna signed the LBB Guaranty both as an individual and as Global’s CEO. Kohn Decl., ¶7, Ex. 2.

On April 27, 2020, LBB and Hunt executed the LBB First Amendment, which increased the LBB Note’s principal from $400,000 to $600,000, changed the maturity date to July 31, 2020, and increased the interest rate to 10%. Kohn Decl., ¶8, Ex. 3. Global and Hanna signed the 2020 Guarantor Consent under which they consented to the LBB First Amendment. Kohn Decl., ¶8, Ex. 3.

On January 8, 2021, LBB and Hunt executed the LBB Second Amendment, which changed the maturity date to March 31, 2021. Kohn Decl., ¶9, Ex. 4. Global and Hanna signed the 2021 Guarantor Consent under which they consented to the LBB Second Amendment. Kohn Decl., ¶9, Ex. 4.

Pursuant to the LBB Second Amendment, the LBB Note matured and became due and payable in full on March 31, 2021. Kohn Decl., ¶13. LBB did not repay the LBB Note at maturity. Kohn Decl., ¶13. As of March 10, 2023, a Hunt invoice and payment history shows that LBB owes $600,000 in principal, plus interest of $219,803.47. Kohn Decl., ¶¶ 14, 30, Ex. 7. It will accrue 10% annual interest thereafter, or $227.09 per diem. Kohn Decl., ¶14.

The LBB Note also holds LBB liable for attorney’s fees incurred in enforcement of the LBB Note. Kohn Decl., ¶15, Ex. 1. Under the LBB Guaranty, Hanna and Global guaranteed all amounts owed and agreed to be liable for all attorney’s fees incurred in the enforcement of the LBB Guaranty. Kohn Decl., ¶¶ 16, 18-20, Ex. 2.

On October 23, 2019, SF executed the SF Note to provide capital for the operation of its business in connection with the SF Property. Kohn Decl., ¶10, Ex. 5. SF received $120,000 pursuant to the SF note and agreed to repay it pursuant to the terms and conditions therein. Kohn Decl., ¶10, Ex. 5. The SF Note’s maturity date is February 28, 2020. Kohn Decl., ¶10, Ex. 5.

Also on October 23, 2019, to induce Hunt’s entry into the SF Note, Hanna and Global signed the SF Guaranty. Kohn Decl., ¶11, Ex. 6. Hanna signed it both as an individual and as Global’s CEO. Kohn Decl., ¶11, Ex. 6,

The SF Note matured and became due and payable in full on February 28, 2020. Kohn Decl., ¶22, Ex. 5. SF did not repay the principal at maturity. Kohn Decl., ¶22. As of March 10, 2023, a Hunt invoice and payment history shows that SF owes $120,000 in principal, plus interest of $47,813.75. Kohn Decl., ¶¶ 23, 30, Ex. 7. It will accrue 10% annual interest thereafter, or $46.69 per diem. Kohn Decl., ¶¶ 23, 27.

The SF Note also holds SF liable for attorney’s fees incurred in enforcement of the SF Note. Kohn Decl., ¶24, Ex. 5. Under the SF Guaranty, Hanna and Global guaranteed all amounts owed and agreed to be liable for all attorney’s fees incurred in the enforcement of the SF Guaranty. Kohn Decl., ¶¶ 25, 27-28, Ex. 6.

Hunt agents used public records from the California Secretary of State to compile the list of assets that Hunt seeks to attach. Kohn Decl., ¶31. Hunt believes that the value of these assets total at least $500,000. Kohn Decl., ¶32.

Hunt relied on the representations that LBB and SF sought commercial loans. Kohn Decl., ¶33. Both Notes state that the proceeds from the loans were only to be used for business purposes and not for personal, family, household, or agricultural purposes. Kohn Decl., ¶33, Exs. 1-2.

In 2019, LBB and SF received a total of $39,146,660 in state tax credit awards as equity for affordable housing development. Hanna Decl., ¶6.

On March 27, 2019, Hanna contacted Hunt Vice President Mayo with the opportunity to be an equity investor or financial partner in LBB and SF. Hanna Decl., ¶7. Hanna explained that the combined project cost was about $46,000,000. Hanna Decl., ¶7.

On August 6, 2019, LBB and Hunt executed the LBB LOI which outlined the “proposal of the basic business terms to be included in the Partnership Agreement.” Hanna Decl., ¶8, Ex. A. Under this, Hunt would acquire a 99.99% interest in LBB. Hanna Decl., ¶8, Ex. A. In return, Hunt would pay $0.90 for every $1 of Tax Credit that LBB had, for a total equity investment of about $21,500,000. Hanna Decl., ¶8, Ex. A.

On October 12, 2019, SF and Hunt executed the SF LOI Agreement, which outlined the “proposal of the basic business terms to be included in the Partnership Agreement.” Hanna Decl., ¶9, Ex. B. Under this, Hunt would acquire a 99.99% interest in SF. Hanna Decl., ¶9, Ex. B. In return, Hunt was to pay $0.90 for every $1 of Tax Credit that SF received for a total equity investment of about $14,000,000. Hanna Decl., ¶9, Ex. B. Hunt also agreed to make a predevelopment loan with a maximum principal of $400,000 and an interest rate of 8%. Hanna Decl., ¶11, Ex. B. $120,000 of this amount would be made available upon signing of the SF LOI, with the remaining $280,000 to be made available once Hunt received the entitlement from San Francisco Planning Department (“SF Planning”) by November 30, 2019. Hanna Decl., ¶11, Ex. B.

Both LOIs had an exclusivity clause “in recognition of the time and expense” Hunt spent to “evaluate the transaction prior to closing.” Hanna Decl., ¶10, Exs. A-B. LBB, SF, and all their partners and principals were required to deal exclusively with Hunt with respect to the transactions specified in the LOI Agreements unless they are terminated by mutual consent. Hanna Decl., ¶10, Exs. A-B.

SF sent Hunt entitlement paperwork before November 30, 2019. Hanna Decl., ¶12, Ex. C. SF later sent Hunt a loan draw request for $68,154 of the unpaid $280,000 which included a breakdown of the expenditure of the original $120,000 draw. Hanna Decl., ¶12, Ex. C. Hunt replied that it needed a few things before granting another draw, like structural calculations and the potential for a placed in-service extension. Hanna Decl., ¶12, Ex. C. These conditions were not part of the SF LOI. Hanna Decl., ¶12.

After execution of the LOIs, Hunt introduced Hanna to JPMorgan. Hanna Decl., ¶13. Hunt asserted that JPMorgan was interested in processing construction and permanent loans for both housing projects. Hanna Decl., ¶13. LBB and SF provided JPMorgan with all preliminary due diligence-related documentation, and Hunt reported in October 2019 that JPMorgan was satisfied with it. Hanna Decl., ¶¶ 14-15. This included litigation checks which both LBB and SF passed. Hanna Decl., ¶15. Hunt represented that JPMorgan would move forward to close the partnerships for both projects. Hanna Decl., ¶15.

In reliance on these representations, Global, LBB, and SF staff spent many hours over ten months in conference calls with Hunt and JPMorgan. Hanna Decl., ¶16. They also adhered to the LOI’ exclusivity clause and rejected other partnership and investment offers. Hanna Decl., ¶17. Also in reliance on these representations, Global, SF, and LBB signed the Notes and Guaranties for predevelopment loans to meet predevelopment capital needs of both projects. Hanna Decl., ¶¶ 18-19.

Further relying on the representations, LBB closed the purchase of the LBB Property on December 4, 2019 with two trust deed loans that totaled $6,200,000. Hanna Decl., ¶20. SF closed the purchase of the SF Property on October 23, 2019 with two trust deed loans that totaled $3,200,000. Hanna Decl., ¶20.

On August 7, 2020, JPMorgan notified Hanna that it decided not to move forward with LBB’s project. Hanna Decl., ¶21. It asserted that LBB did not pass the litigation check of the sponsors, even though Hunt had said ten months earlier that JPMorgan was satisfied with the litigation check and LBB had no pending or anticipated litigation since. Hanna Decl., ¶¶ 21-22. Because the projects have identical sponsors, JPMorgan has no intent to move forward with SF’s project either. Hanna Decl., ¶23. Meanwhile, Hunt has refused to honor the equity commitments in the LOIs. Hanna Decl., ¶23.

Between August 2020 and foreclosure of the Properties in 2022, Global tried to mitigate damages by negotiating with potential investors. Hanna Decl., ¶25. However, interest rates and costs had increased in the past two years, the deadlines for tax credit compliance were fast approaching, and no investor was willing to take the risk. Hanna Decl., ¶25. Hanna Decl., ¶25. Global eventually lost both Properties to foreclosure. Hanna Decl., ¶25. LLB and SF also had to return to the State the $39,146,660 of awarded Tax Credits. Hanna Decl., ¶25.

Global had heavily relied on cashing out $4,000,000 in predevelopment advances and partial developer fees that it would receive at closing the partnership of these projects to fund predevelopment costs for Global’s other Tax Credit projects. Hanna Decl., ¶24.

Defendants’ out-of-pocket expenses incurred on the projects total $2,775,049. Hanna Decl., ¶26, Ex. D. Ongoing lawsuits with the foreclosing lenders on the Properties could also lead to liability between $2,000,000 and $5,000,000. Hanna Decl., ¶26.

On August 10, 2023, Defendants’ counsel offered to stipulate that Hunt could attach the Global property Village at Tehachapi (“Village”), an 81-unit apartment building. Yu Decl., ¶3, Ex. I. Counsel asserted that the asset was enough security to satisfy the judgment if Hunt ultimately prevailed. Yu Decl., ¶3, Ex. I. A later email clarified that its appraised value was $13.8 million and its debt $5.4 million, which yielded a net value well over the $987,617 that Hunt seeks to attach. Yu Decl., ¶3, Ex. I.

On August 15, 2023, Defendants’ counsel offered to stipulate that Hunt could attach both the Village and Sunny View Apartments II (“Sunny”), a 70-unit apartment building with an appraised value of about $10.46 million and debt of $5,344,000. Yu Decl., ¶4, Ex. I. The combined net equity of $13,516,000 far exceeds the less than $1,000,000 that Hunt seeks to attach. Yu Decl., ¶4, Ex. I.

On August 17, 2023, Hunt asked for more information about the properties and their ownership to assess Defendants’ offer. Yu Decl., ¶5, Ex. I. Defendants’ counsel responded with the requested information. Yu Decl., ¶5, Ex. I. Defendants acknowledged that the properties were in escrow for sale to a non-profit organization buyer, but Global was willing to pay the buyer liquidated damages and imburse costs to cancel the escrow. Yu Decl., ¶5, Ex. I. Counsel emphasized that Hunt needed to respond before the opposition to this application was due. Yu Decl., ¶5, Ex. I.

Hunt requested additional information on August 21, 2023, which Defendants also provided. Yu Decl., ¶6, Ex. I. As of August 23, 2023, Hunt has not responded to the offer. Yu Decl., ¶7.

Hunt should have already known the value of each Global property. Hanna Decl., ¶28. Global provided Real Estate Schedules of its assets during due diligence after SF and LBB signed the LOI Agreements. Hanna Decl., ¶28.

In 2022, Hanna learned that Hunt had secretly invested in a Limited Partnership position of Milpitas Aspen (“Aspen”). Hanna Decl., ¶29. Hunt expected to sell the project and gain substantial benefits when it cashes out an over $12 million dollar capital account plus 20% of the sales proceeds. Hanna Decl., ¶29.

Hanna attempted to contact an Aspen syndicator, Hudson Housing Fund XXXV (“Hudson”), to confirm Hunt’s involvement. Hanna Decl., ¶29. Hanna also emailed Mayo to ask if Hunt had invested in Hudson or Garnet LIHTC Fund XIII (“Garnet”). Hanna Decl., ¶30, Ex. E. On October 27, 2022,[2] Hudson’s attorney sent a Notice to Cease and Desist that asserted that the relationship between Hudson and its investors was confidential and proprietary. Hanna Decl., ¶30, Ex. E. Hudson instructed Hanna not to contact any person or entity that he believed was a Hudson investor about any matter that affected Hudson’s interests. Hanna Decl., ¶30, Ex. E. Despite Hunt’s silence on the issue, this led Hanna to believe that Hunt had in fact invested in Aspen through Hudson. Hanna Decl., ¶31.

On August 13, 2023, Hanna asked Aspen’s non-profit managing general partner, Graham Espley-Jones (“Espley-Jones”), about Hunt. Hanna Decl., ¶32, Ex. F. The next day, Espley-Jones replied that he had no idea who Hanna referred to. Hanna Decl., ¶32, Ex. F. There was only one deal with Global, which is Aspen, and Hunt had no involvement in that transaction. Hanna Decl., ¶32, Ex. F.

Due process and CCP section 484.040 require service of the summons, complaint, and moving papers the defendant in the manner of service under CCP section 413.10 et seq. Because Hanna has not been served, the court does not have jurisdiction and cannot grant a right to attach order against him.

Hunt concedes that service by publication on Hanna will not be complete until September 18, 2023 and ask that the court continue the hearing as to him for six to eight weeks to complete service. Where the plaintiff is not ready or has failed to complete service, the court may either deny the application or grant a continuance for good cause. CCP §484.080(a). Given that service by publication is in process, the court will continue the hearing on the application for Hanna to October 19, 2023 at 9:30 a.m.

Defendants assert without authority that due process does not allow the court to hear the application against any Defendant until all have been served and have an opportunity to be heard. Opp. at 4. Not so. Personal jurisdiction is just that: personal. There is no due process need for the court to have jurisdiction over all defendants to hear a motion as to one of them. The court can still rule on the application for a right to attach order against Global, who was properly served with the Complaint and Summons and now opposes the application. Reply at 2.

Hunt’s claim for $987,617.22 is based on Global’s breaches of the SF Guaranty and LBB Guaranty, which in turn stem from SF and LBB’s breaches of the SF and LBB Notes. Kohn Decl., Exs. 1-2, 5-6. Hunt has a claim 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., (“CIT”) (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).

Hunt presents an invoice and payment history to show that LBB owes $600,000 in principal, plus interest of $219,803.47. Kohn Decl., ¶¶ 14, 30, Ex. 7. A similar invoice and payment history shows that SF owes $120,000 in principal, plus interest of $47,813.75. Kohn Decl., ¶¶ 23, 30, Ex. 7. Although both will accrue 10% annual interest after March 10, 2023, Hunt does not rely on daily interest for the attachment totaling $987,617.22. Kohn Decl., ¶¶ 14, 23, 27, 29. Global does not dispute that these damages are ascertainable.

Global does not deny that SF and LBB have not paid amounts owed under the LBB and SF Notes, or that it is liable for those amounts under the Guaranties. Kohn Decl., ¶¶ 16, 18-20, 25, 27-28, Exs. 2, 6. Defendants assert that they can demonstrate a probability of success on affirmative defenses and LBB’s and SF’s cross-complaint that more than offset these damages. Opp. at 5, 11-12.

The amount to be attached 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), (3). 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. Lydig Construction, Inc. v. Martinez Steel, (“Lydig”) (2015) 234 Cal.App.4th 937, 944-945.

Hunt’s reply argues that Defendants failed to support the opposition with any evidence except for an unverified Cross-Complaint. Reply at 2. This is incorrect. The opposition on file includes a memorandum of points and authorities, two declarations, and seven exhibits.

In an action for intentional misrepresentation, a plaintiff establishes a prima facie case by proving the following: (1) a knowingly false representation by the defendant; (2) an intent to deceive or induce reliance; (3) justifiable reliance by the plaintiff; and (4) resulting damages. Service by Medallion, Inc. v. Clorox Co., (“Medallion”) (1996) 44 Cal.App.4th 1807, 1816.

For negligent misrepresentation, a plaintiff must prove: (1) a misrepresentation of a past or existing material fact, (2) made without reasonable ground for believing it to be true, (3) made with the intent to induce another’s reliance on the fact misrepresented, (4) justifiable reliance on the misrepresentation, and (5) resulting damage. Ragland v. U.S. Bank National Assn., (“Ragland”) (2012) 209 Cal.App.4th 182, 196.

Defendants assert that after the LOIs were signed, Hunt introduced Hanna to JPMorgan. Hanna Decl., ¶13. Hunt represented that JPMorgan was interested in processing construction and permanent loans for both housing projects. Hanna Decl., ¶13. LBB and SF provided all preliminary due diligence related documentation, and Hunt reported in October 2019 that JPMorgan was satisfied with it. Hanna Decl., ¶¶ 14-15. This included litigation checks that both companies passed. Hanna Decl., ¶15. Hunt also represented that JPMorgan would move forward with steps to close the partnerships for both projects. Hanna Decl., ¶15.

Defendants assert that they signed the Notes and Guaranties in reliance on this representation. Hanna Decl., ¶¶ 18-19. They also closed the purchase of the Properties and financed them with loans totaling $9,400,000. Hanna Decl., ¶20.

JPMorgan notified Hanna in August 2020 that it would not move forward with LBB’s project. Hanna Decl., ¶21. Because the projects have identical sponsors, JPMorgan seems to have no intent to move forward with SF’s project either. Hanna Decl., ¶23. Despite efforts to mitigate damages and find other investors, this ultimately led to foreclosure on the properties. Hanna Decl., ¶¶ 24-25.

Defendants incurred out-of-pocket expenses on the projects totaling $2,775,049. Hanna Decl., ¶26, Ex. D. Ongoing lawsuits with the lenders foreclosing the Properties could also lead to liability between $2,000,000 and $5,000,000. Hanna Decl., ¶26. Defendants also had to return to the State millions in tax credit equity that they had been awarded. Opp. at 7; Hanna Decl., ¶6.

Defendants assert that Hunt represented that JPMorgan would commit to closing the partnerships (Hanna Decl., ¶15) to induce their entry into the Notes and Guaranties. Reliance on this statement was a substantial factor in the financial harm that Defendants now face. Opp. at 6-7.

Defendants do not provide sufficient evidence that JPMorgan committed to the partnerships in October 2019. They merely show that Hunt’s unidentified authorized representative told Hanna and his staff that JPMorgan “was satisfied with its preliminary due diligence”, including litigation checks and financial review. Hanna Decl., ¶15. This does not show a commitment.

Assuming arguendo that it did so, that fact alone would not allow LBB and SF to prevail on a claim for misrepresentation against Hunt when JPMorgan backed out. Intentional misrepresentation requires that Hunt knew that the commitment was false and negligent misrepresentation required that Hunt had no reasonable grounds to believe that JP Morgan would commit to the partnership. Medallion, supra, 44 Cal.App.4th at 1816; Ragland, supra, 209 Cal.App.4th at 196. Defendants have shown neither.

Global has not demonstrated a probability of success on LBB and SF’s crossclaims for negligent or intentional misrepresentation.

In 2019, LBB and SF executed the LOIs with Hunt. Hanna Decl., Exs. A-B. Under the terms in each LOI, Hunt would acquire a 99.99% interest in the partnership to be formed by the parties. Id. Hunt would pay the partnership $0.90 for every $1 of Tax Credit that Defendant had received for the housing project at issue. Id. Each LOI had an exclusivity clause “in recognition of the time and expense” Hunt spent to “evaluate the transaction prior to closing.” Hanna Decl., ¶10, Exs. A-B. This clause required LBB, SF, and all their partners and principals were to deal exclusively with Hunt with respect to the transactions at issue unless the LOI was terminated by mutual consent. Hanna Decl., ¶10, Exs. A-B.

One provision in the SF LOI also provided for a $400,000 predevelopment loan from Hunt to SF with 8% interest. Hanna Decl., ¶11, Ex. B. $120,000 of this was to be made available upon signing of the SF LOI with the remaining $280,000 to be made available once Hunt received the entitlement from SF Planning. Hanna Decl., ¶11, Ex. B. SF timely sent Hunt that entitlement paperwork before November 30, 2019. Hanna Decl., ¶12, Ex. C. However, when it then asked for part of the remaining $280,000, Hunt conditioned payment on receipt of additional information. Hanna Decl., ¶12, Ex. C. That was not part of the SF LOI. Hanna Decl., ¶12, Ex. C.

Defendants assert that Hunt breached the LOIs when it chose to not make the equity investments described therein, not enter into the partnerships with LBB and SF, and failed to make fund the remainder of the predevelopment loan to SF. Opp. at 8. Defendants acted in reliance on the LOIs, and they rejected all other investment offers to comply with the exclusivity provision of each. Hanna Decl., ¶17. Global also heavily relied on receiving $4,000,000 in predevelopment advances and partial developer fees upon closing the partnerships. Hanna Decl., ¶24. Hunt’s breach led to loss of the Properties via foreclosure and the return of millions in tax credits. Opp. at 9; Hanna Decl., ¶¶ 6, 26.

This argument fails because Defendants fail to demonstrate a binding agreement for Hunt’s obligations. Although Defendants fail to provide case law concerning the enforceability of LOIs, at a minimum each LOI outlined the “proposal of the basic business terms to be included in the Partnership Agreement” (Hanna Decl., ¶¶ 8-9, Exs. A-B) and neither LOI is itself a partnership agreement. The LOIs are expressly contingent on final review and approval by Hunt, a satisfactory site visit, the accuracy of documentation, receipt of copies of all mortgage loans, “soft loans”, and grants, satisfactory review of the partnership agreement and due diligence, and approval of construction plans, market study, and property appraisal. Exs. A, B.

Defendants fail to show that these contingencies were satisfied or lifted. Defendants admit that JPMorgan asked for due diligence-related documentation to decide whether to proceed with the partnership. Hanna Decl., ¶14. JPMorgan preliminarily was satisfied and later declined to provide loans for the LBB project. Hanna Decl., ¶¶ 15, 21. Defendants contend that JPMorgan’s reason was spurious, but the fact remains that Defendants fail to show that Hunt was obligated to close the partnerships once JPMorgan backed away.

The one exception is that the SF LOI provides for Hunt to make a $400,000 predevelopment loan. Hanna Decl., ¶11, Ex. B. $120,000 of the $400,000 was to be made available upon signing of the SF LOI, and the remaining $280,000 was to be provided if entitlements were in place before November 30, 30291. Hanna Decl., ¶12, Ex. C. SF sent Hunt entitlement paperwork before November 30, 2019. Hanna Decl., ¶12, Ex. C. SF later sent Hunt a loan draw request for $68,154 of the unpaid $280,000 which included a breakdown of the expenditure of the original $120,000 draw. Hanna Decl., ¶12, Ex. C. Hunt replied that it needed a few things before granting another draw, like structural calculations and the potential for a placed in-service extension. Hanna Decl., ¶12, Ex. C. These conditions were not part of the SF LOI. Hanna Decl., ¶12.

Hunt’s obligation to loan the remaining $280,000 if the contingencies other than Property entitlements had not been satisfied is not entirely clear. Assuming that Hunt was obligated to fund this loan unconditionally, Defendants cannot offset Hunt’s breach of the SF LOI unless there is a prima facie showing that the claim would result in an attachment against the plaintiff. Lydig, supra, 234 Cal.App.4th at 944-45. This means that Defendants’ damages must be readily ascertainable by reference to the contract. See CIT, supra, 115 Cal.App.4th at 540-41. The SF LOI provides for a loan up to $400,000 which SF would repay with 8% interest. Hanna Decl., ¶11, Ex. B. SF received $120,000 and sought only another $68,154 which was never received. Hunt’s breach of contract may have resulted in damage, but not damages that are readily ascertainable from the SF LOI. All of Defendants’ damages, including loss of the SF Property, are consequential damages not ascertainable from the SF LOI itself.

Defendants have not demonstrated a probability of success on most of the breach of contract claim and have not shown that the damages cited are eligible to offset the amount that Hunt seeks to attach.

To establish a breach of the covenant of good faith and fair dealing, the nonbreaching party must show: (1) a contract between the parties; (2) the nonbreaching party fulfilled all obligations under the contract; (3) any conditions precedent for the breaching party’s performance occurred or were excused; (4) the breaching party did not act fairly or in good faith and prevented plaintiff from receiving the benefits of the contract; and (5) the nonbreaching party was harmed. Herskowitz v. Apple Inc., (N.D. Cal. 2013) 940 F.Supp.2d 1131.

Defendants assert that the LOIs include an implied covenant of good faith and fair dealing. Opp. at 9; Hanna Decl., Exs. A-B. Hunt misled SF and LBB with the assertion that JPMorgan would close the partnerships. Hanna Decl., ¶15. In reliance on this fact, Defendants borrowed large amounts of money through the Notes and Guaranties. Hanna Decl., ¶¶ 18-19. Hunt then broke the covenant of good faith and fair dealing when it chose to not make the equity investments described therein, not enter the partnerships with LBB and SF, and make the remainder of the predevelopment loan included in the SF LOI. Hanna Decl., Exs. B-C. This led to the loss of the Properties via foreclosure and the return of millions in tax credits. Hanna Decl., ¶¶ 6, 26. Opp. at 9.

Because this argument relies on many of the same facts as the breach of contract and misrepresentation arguments, it fails for the same reasons. Among other things, Defendants fail to provide sufficient evidence that JPMorgan committed to making loans after its initial due diligence, that its subsequent declination was made in bad faith, that Hunt knew JPMorgan’s initial representations were false, and that Hunt was obligated to close the partnerships once JPMorgan backed away. Additionally, Defendants fail to show that any damages incurred from Hunt’s breach of the implied covenant are readily ascertainable from the LOIs.

Defendants have not demonstrated a probability of success on the covenant of good faith and fair dealing claim.

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).

Defendants argue that Hunt seeks attachment for an improper purpose. First, after Hunt filed this application, Defendants offered to stipulate to attachment of two Global properties with a net value that far exceed the amount that Hunt now seeks to attach. Yu Decl., ¶¶ 3-4, Ex. I. Counsel for Defendants provided all the information Hunt requested about the properties, even though Hunt should have already had it from real estate schedules of Global’s assets. Yu Decl., ¶¶ 5-6, Ex. I; Hanna Decl., ¶28. Hunt never responded to this offer. Yu Decl., ¶7.

This evidence is insufficient to show that Hunt brings this action for an improper reason. Hunt could choose not to agree to attachment of specific property for valid concerns. For example, Defendants admit that Global would need to pay to get the properties out of escrow because it was about to sell them to a non-profit. Yu Decl., ¶5, Ex. I. Hunt could choose to not interfere with this transaction.

Defendants assert that in 2022, Hanna “learned” that Hunt secretly invested with Aspen, another Global project. Hanna Decl., ¶29. Hanna tried to ask Hudson and Mayo if Hunt had invested in Aspen and received a cease and desist notice for its effort. Hanna Decl., ¶30, Ex. E. In 2023 Hunt emailed Espley-Jones, Aspen’s non-profit managing general partner, to ask if Hunt had invested in Aspen. Hanna Decl., ¶32, Ex. F.

Aside from the fact that much of Defendants’ argument is on pages of its opposition not considered by the court, the evidence is speculative. It is not clear why Hunt’s investment in Aspen would be relevant, and Defendants fail to provide evidence that Hunt has done so. In any event, Espley-Jones’s email in response to Hanna’s inquiries expressly states that there was only one deal with Global, for Aspen, and Hunt had no involvement in that transaction. Hanna Decl., ¶32, Ex. F. Hunt seeks attachment for a proper purpose.

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 an amount for the probable recovery for wrongful attachment. See CCP §489.220. This provision does not mean just the probable loss a defendant will sustain from attachment; it includes the trial court’s evaluation of the plaintiff’s probability of prevailing in the action. North Hollywood Marble Co. v. Superior Court, (1984) 157 Cal.App.3d 683, 689. Thus, the trial court can exercise its discretion to consider all material factors in balancing the competing interests of the parties.

Again, in an unconsidered portion of the opposition, Defendants assert that the undertaking should be $1,500,000 to cover possible damages and the attorney’s fees and costs in opposition to this application. Opp. at 18. The request to increase the undertaking beyond $10,000 is denied.

The application for a right to attach order is granted as to Global in the amount of $987,617.22. The application against Hanna is continued to October 19, 2023 at 9:30 a.m.

No writ of attachment shall issue until Hunt files a $10,000 bond. See CCP §489.220(a). Global seeks an order permitting it to substitute a bond for any attached property under CCP section 489.310. Opp. at 18. Whenever a writ is issued, a defendant who has appeared in the action may apply by noticed motion to substitute an undertaking for any of its property. CCP §489.310. Defendants would be permitted to substitute a $987,617.22 bond in lieu of attachment of its property.

[1] Defendants’ 18-page opposition exceeds the 15-page limit of CRC 3.1113(d), and the court has exercised its discretion to read and consider only the first 15 pages. Defendants also failed to lodge a courtesy copy of the opposition, and Hunt failed to do so for its reply, in violation of the Presiding Judge’s First Amended General Order Re: Mandatory Electronic Filing. Counsel is admonished to provide courtesy copies of all papers in future filings.

[2] Hanna’s declaration misstates this date as October 23, 2023. Hanna Decl., ¶30.