Judge James C. Chalfant, Case Number: 23STCV15362, Date: 2023-08-17 Tentative Ruling

Plaintiff EK Line, Inc. (“EK”) applies for a right to attach order against Defendant Cornerstone Apparel, Inc. (“Cornerstone”) for $1,266,056.40.

The court has read and considered the moving papers (no opposition was filed) and renders the following tentative decision.

A. Statement of the Case

1. Complaint

Plaintiff EK filed the Complaint against Cornerstone on June 30, 2023, alleging (1) book account, (2) account stated, and (3) goods supplied, and (4) breach of contract. The Complaint alleged in pertinent part as follows.

Over the past year and a half, EK has sold Cornerstone clothing goods and invoiced Cornerstone for $1,266,074.40. The invoices provide that Cornerstone must pay an annual interest rate of 18%, plus attorney’s fees and costs for any action to collect on the invoices. Interest accrues from the first of the month after each invoice’s deadline. Beginning March 28, 2022 and thereafter, these invoices have remained unpaid.

EK seeks $1,266,074.40 in damages, plus 18% annual interest and attorney’s fees and costs.

2. Course of Proceedings

On July 13, 2023, EK personally served Cornerstone with the Complaint, Summons, and moving papers. On July 14, 2023, EK also served Cornerstone with these documents by substitute service, effective July 24, 2023.

On July 18, 2023, the court denied EK’s ex parte application for a right to attach order but granted a temporary protective order (“TPO”). The court required personal service of the Complaint, Summons, moving papers, and TPO by July 21, 2023.

On July 19, 2023, EK personally served Cornerstone with the TPO.

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.

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); see also CCP §483.010(b) (“an attachment may not be issued on a claim which is secured by any interest in real property arising from agreement, statute, or other rule of law…However, an attachment may be issued where the claim was originally so secured but, without any act of the plaintiff or the person to whom the security was given, the security has become valueless or has decreased in value to less than the amount then owing on the claim). 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.

From late 2021 through March 2, 2023, Cornerstone ordered clothing from EK to sell under the brand name “Papaya.” Jang Decl., ¶¶ 2, 4, Ex. 2. EK issued an invoice for each purchase, which Cornerstone stamped “Received” with the date each time. Jang Decl., ¶¶ 3, 4, Ex. 3. Each invoice stated that 18% annual interest would accrue from the first of the month after the invoice becomes due. Jang Decl., ¶4, Ex. 3. Each invoice also required Cornerstone to pay attorney’s fees and other expenses that EK incurred to collect unpaid invoices. Jang Decl., ¶4, Ex. 3.

The principal of the unpaid invoices totals $1,266,056.40. Jang Decl., ¶4, Ex. 1. The interest owed on the invoices through June 30, 2023 totals $170,965.66. Jang Decl., ¶5, Ex. 4.

For over a year, EK CEO Jae Kim (“Kim”) repeatedly demanded payment from Cornerstone. Kim Decl., ¶2. Cornerstone promised to eventually pay but never did. Kim Decl., ¶2. Cornerstone CEO Ho Lee recently informed Kim that Cornerstone could not pay this debt. Kim Decl., ¶2.

Plaintiff EK applies for a right to attach order against Defendant Cornerstone in the amount of $1,266,056.40.

EK’s application is based on a series of invoices that have become past due, totaling $1,266,056.40. Jang Decl., ¶4, Exs. 1, 3. Attachment may be based on this contract claim.

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).

Each invoice states that 18% annual interest would accrue from the first of the month after the invoice becomes due. Jang Decl., ¶4, Ex. 3. Each invoice also requires Cornerstone to pay attorney’s fees and other expenses that EK incurred to collect unpaid invoices. Jang Decl., ¶4, Ex. 3.

EK need not rely on interest or attorney’s fee calculations. The principal of the unpaid invoices totals $1,266,056.40, which the amount it seeks to attach. Jang Decl., ¶4, Ex. 1. The damages are ascertainable.

EK asserts that Cornerstone acknowledged the invoices and receipt of goods therein with the “Received” stamp. Jang Decl., ¶¶ 3, 4, Ex. 3. It then failed to pay on those invoices. Mem. at 4. After over a year where Cornerstone promised to pay the amount owed, it announced that it would not be able to do so. Kim Decl., ¶2.

The invoices state that 18% annual interest would accrue from the first of the month after the invoice becomes due. Jang Decl., ¶4, Ex. 3. EK fails to provide evidence as to the due date for payment of the invoices. Under the Commercial Code, the due date presumably would be a reasonable time. As no invoices have been unpaid since March 2022, and the last invoice is in March 2023, a reasonable time has passed. EK has demonstrated a probability of success on the merits.

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). EK seeks attachment for a proper purpose.

The application for a right to attach order is granted in the amount of $1,266,056.40. EK has both filed the $10,000 undertaking and filed a proposed right to attach order. The TPO expires after the instant hearing.