Judge James C. Chalfant, Case Number: 23STCV23854, Date: 2024-01-11 Tentative Ruling

Plaintiff Alex Nerush (“Nerush”) applies for right to attach orders against Defendants Naum Shekhter (“Naum”), Margarita Shekhter (“Margarita”), 2156 Stratford, LLC, a California limited liability company (“Stratford CA”), and Naum and Margarita as trustees of the NMS Family Living Trust (“Trust”) in the amount of $59,000,000.

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

A. Statement of the Case

1. Complaint

Plaintiff Nerush commenced this action on September 29, 2023 against Defendants Naum and Margarita, individually and as trustees of the Trust, Vera Shekhter (“Vera”), Adam Shekhter (“Adam”), Alan Shekhter (“Alan”), Alexander Shekhter (“Alexander”), NMS Properties, Inc. (“NMS”), WS Communities, LLC (“WS”), and Stratford CA. The verified Complaint alleges breach of contract, common count for money lent, and fraudulent conveyances in pertinent part as follows.

Naum is a successful real estate developer. Naum and Nerush are half-brothers. Vera is Naum’s mother. Adam, Alan, and Alexander are Naum and Margarita’s children.

In 2009, Naum began asking Nerush to loan him money to support investments in various real estate projects. Between August 2009 and October 2010, Nerush loaned Naum $8,995,000 (“Initial Loans”). Naum prepared and drafted promissory notes for these loans but never executed them.

Naum then solicited Nerush to invest in various projects. From December 2010 to December 2014, Nerush invested $19,000,000 (“Investments”). Naum never documented Nerush’s Investments.

In 2016, Naum offered to convert Nerush’s Initial Loans and Investments into a single loan due and payable in five years. As of May 1, 2016, Naum acknowledged in writing that he owed Nerush $55,000,000 in loans, Investments (now “Additional Loans”), and interest. In May 2016, Naum provided a draft of an Amended and Restated Master Promissory Note (“Amended Note”). This Amended Note listed Initial Loans of $8,995,000. Naum later provided a summary of all loans showing that as of December 6, 2014, the loans total $28,552,380.31 plus accrued interest.

The parties never executed the Amended Note. On April 25, 2016, Naum emailed Nerush that beginning May 1, 2016, the total loan would be $55,248,000 with compound interest at a 10% rate. The principal and accrued interest would be payable on April 30, 2021, subject to an option to extend for an additional five years. If Naum exercised this option, the compound interest rate during the additional five years would be 12%. Naum would use his interest in his partnership to secure this loan.

Nerush never agreed to the five-year extension. He never received the security Naum promised him. As of February 2021, Naum had not paid anything on the loan. After Nerush complained, Naum agreed to start paying off the loan in monthly installments. From February 2021 to October 2022, Naum paid Nerush $3,100,000. Naum still owes over $100,000,000.

Naum transferred portions of the investments to the other Defendants without consideration in exchange. These transfers were an attempt to prevent Nerush from collecting on Naum’s debt.

Nerush seeks $100,000,000 in compensatory damages, nullification of any transfers or conveyances from Naum to the other Defendants as necessary to satisfy Nerush’s claims, and costs of suit.

2. Course of Proceedings

On November 22, 2023, Nerush served Naum, individually and as trustee of the Trust, Vera, and Margarita with the Complaint, Summons, and moving papers by substitute service, effective December 2, 2023. Nerush also personally served Stratford CA and NMS with these documents.

On January 3, 2024, Department 57 (Hon. Michael Small) rejected requests for entry of default as to Naum, Stratford CA, NMS, and Margarita because the names on the declarations of mailing did not match the names on the Summons and Complaint. Department 57 did enter default judgment as to Vera.

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.

Real estate developer Naum is Nerush’s half-brother. Nerush Decl., ¶2. Naum has done business over the last 30 years through various entities. Nerush Decl., ¶2. One of them is NMS, a corporation organized under California law with its principal place of business in Los Angeles. Nerush Decl., ¶2. Naum is NMS’s founder and Chief Executive Officer. Nerush Decl., ¶2, Ex. 1. Through NMS, Naum has developed numerous multi-family residential real estate projects in Santa Monica and West Los Angeles. Nerush Decl., ¶3.

In 2009, Naum began to solicit Nerush to support investment in various projects. Nerush Decl., ¶4. Naum promised to document Nerush’s loans. Nerush Decl., ¶4. In reliance on these promises, Nerush loaned Naum $8,995,000 between August 2009 and October 2010. Nerush Decl., ¶4. Naum drafted various promissory notes for these Initial Loans, but they were never executed. Nerush Decl., ¶4.

Beginning December 2010, Naum solicited Nerush to invest in various projects with Naum. Nerush Decl., ¶5. From December 2010 to December 2014, Nerush invested $19,000,000. Nerush Decl., ¶5. Naum never documented Nerush’s Investments despite promises to do so. Nerush Decl., ¶5.

In 2016, Naum offered to convert Nerush’s Initial Loans and Investments into a single loan payable in five years. Nerush Decl., ¶6. On April 19, 2016, Naum acknowledged in writing that he owed Nerush $55,000,000 in loans, investments, and interest as of May 1, 2016. Nerush Decl., ¶6, Ex. 2.

In May 2016, Naum provided a draft of an Amended Note identifying Naum as the borrower. Nerush Decl., ¶7, Ex. 3. The recitals stated that Nerush had loaned Naum a collective $8,995,000 in the various Initial Loans reflected in Schedule 1 to the Amended Note. Nerush Decl., ¶7, Ex. 3. A Master Promissory Note dated March 28, 2012 reflected those loans. Nerush Decl., ¶7, Ex. 3.

The second recital asserted that Nerush made Additional Loans as reflected in Schedule 2, but the aggregate amount of these loans remained blank in the recital. Nerush Decl., ¶7, Ex. 3.

The third recital explained that Naum and Nerush now agreed to add the accrued and unpaid interest on both the Initial and Additional Loans to the principal. Nerush Decl., ¶7, Ex. 3. However, the recital left blank the space for accrued interest on the Initial and Additional Loans. Nerush Decl., ¶7, Ex. 3.

Shortly thereafter, Naum sent Nerush a summary of all the loans Nerush had made. Nerush Decl., ¶8, Ex. 4. This summary showed that the principal of the Initial Loans totaled $8,995,000. Nerush Decl., ¶8, Ex. 4. After a loan on December 6, 2014, the principal of the Additional Loans totaled $19,557,380.31. Nerush Decl., ¶8, Ex. 4. The principal of all loans totaled $28,552,380.31. Nerush Decl., ¶8.

On April 25, 2016, Naum emailed Nerush that beginning May 1, 2016, the total loan balance would be $55,248,000 with compound interest at a 10% rate. Nerush Decl., ¶9, Ex. 5. The principal and accrued interest would be payable on April 30, 2021, subject to an option to extend for an additional five years. Nerush Decl., ¶9, Ex. 5. The compound interest rate during the additional five years would increase to 12%. Nerush Decl., ¶9, Ex. 5. The loan would be secured by a partnership interest. Nerush Decl., ¶9, Ex. 5.

The Amended Note was never executed because Nerush never agreed to the five-year extension and because he never received any security for Naum’s obligations. Nerush Decl., ¶10.

Nerush complained to Naum about his failure to pay any of the amounts owed under the loans. Nerush Decl., ¶11. On February 4, 2021, Naum emailed NMS Controller Kurt Lietz instructions to wire $100,000 per month to Nerush, including a $200,000 wire to reflect both January and February 2021. Nerush Decl., ¶11, Ex. 6. In accordance with his promise to begin paying off the loans, Naum paid Nerush $3,100,000 from February 2021 to October 2022. Nerush Decl., ¶12.

Based on a 10% interest rate, the $8,995,000 in Initial Loans has accrued $12,287,402 in interest as of October 11, 2023. Nerush Decl., ¶13. Based on the same rate, the $19,557,380.31 in Additional Loans has accrued $34,135,281 in interest as of the same date. Nerush Decl., ¶13. The sum of the principal and accrued interest on all Loans totals $62,687,661.31. Nerush Decl., ¶13.

After subtracting the $3,100,000 Naum repaid and the $540,535 in interest credits based on these repayments, the outstanding balance totals $59,047,126.31. Nerush Decl., ¶13. This is conservative when compared to Naum’s April 2016 assertion that he owed Nerush $55,123,000. Nerush Decl., ¶13.

Naum and Margarita live next door to Nerush at 2156 Stratford Circle, Los Angeles, CA 90049 (“Residence”). Nerush Decl., ¶14. Nerush estimates the value of the Residence as between $15,000,000 and $25,000,000. Nerush Decl., ¶14. Naum has told Nerush about a current deed of trust against the Residence in the approximate amount of $12,000,000. Nerush Decl., ¶14.

In 2004, Margarita as Stratford CA’s manager executed a grant deed conveying the Residence to 2156 Stratford, LLC, a Delaware limited liability company (“Stratford DE”). Nerush Decl., ¶14, Ex. 7. Stratford DE is the current titleholder for the Residence. Nerush Decl., ¶14. If the Residence is sold, the funds from the sale in excess of the amount owed on the deed of trust should be subject to a writ of attachment. Nerush Decl., ¶14. It is the only major asset in which Naum still has an interest. Nerush Decl., ¶14.

Nerush has personally seen that the Residence contains valuable art and furnishings. Nerush Decl., ¶15. Naum and Margarita also both own expensive watches, jewelry, and purses. Nerush Decl., ¶15.

All transactions relevant to this action were conducted by NMS, not by Naum in a personal capacity. Naum Decl., ¶3. Naum communicated with Nerush about these investments and loans solely on NMS’ behalf. Naum Decl., ¶4. Naum always used his NMS email address instead of his personal one to discuss the investments and loans with Nerush. Naum Decl., ¶4.

NMS and Nerush never reached an agreement to convert the Investments to loans. Naum Decl., ¶4. Nerush and NMS have engaged in various settlement discussions about the Investments at issue. Naum Decl., ¶5.

Stratford CA holds title to the Residence and conducts no other business. Margarita Decl., ¶3. It acquired the Residence several years before the Initial Loans and Investments. Margarita Decl., ¶3. It did not use a loan or investment from Nerush to make this acquisition. Margarita Decl., ¶3. Stratford CA has never procured a loan or investment from Nerush. Margarita Decl., ¶3. A $59 million writ of attachment would cause irreparable damage to Stratford CA because it could not pay its obligations to third parties. Margarita Decl., ¶4.

Plaintiff Nerush applies for right to attach orders against Naum, Margarita, Stratford CA, and Naum and Margarita in their capacity as trustees of the Trust in the amount of $59,000,000.

An application for a right to attach order is a law and motion matter. CRC 3.1103(a)(2). All law and motion matters require a memorandum of points and authorities detailing the basis for the motion. CRC 3.1113(a). The absence of a memorandum may be construed as an admission that the motion is not meritorious. CRC 3.1113(a).

Nerush failed to file a supporting memorandum of points and authorities with its applications. It merely attached identical declarations and exhibits to each one. Nerush also failed to file and serve a Notice of Application for a Right to Attach Order for each Defendant that separately names that Defendant. The applications are denied as procedurally defective.

[1] Nerush failed to lodge courtesy copies of the notices of the applications for right to attach orders, and Defendants failed to lodge courtesy copies of their oppositions, in violation of the Presiding Judge’s First Amended General Order Re: Mandatory Electronic Filing. All counsel are admonished to provide courtesy copies in all future filings of this case or they will not be considered.

[2] Defendants’ written evidentiary objections are all overruled.