Judge James C. Chalfant, Case Number: 23STCV29943, Date: 2024-02-22 Tentative Ruling

Plaintiff NFS Leasing, Inc. (“NFS”) applies for right to attach orders against Defendants Zeeba Automotive Group, Inc., Zeeba Company, Inc. (collectively “Borrowers”), Sonny Investments LLC (“Sonny”), Kayvon Marashi (“Kayvon”), and Saied Mohammed Marashi (“Saied”) in the amount of $2,968,390.42.

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

A. Statement of the Case

1. Complaint

NFS filed its Complaint on December 7, 2023, alleging (1) breach of the equipment financing and security agreement, (2) claim and delivery, (3) breach of personal guarantees, and (4) breach of corporate guaranty. The Complaint alleges in pertinent part as follows.

a. Loans and Guaranties

On November 29, 2022, Borrowers entered Master Equipment Finance Agreement Number 2022-0311 with a Multiple Borrower Addendum (collectively “MFA”). Under the MFA, NFS financed Borrowers’ acquisition and refinancing of various pieces of Equipment. The Equipment and other collateral secured all financing thereunder, pursuant to separate schedules under the MFA. The MFA combines with the schedules to constitute an Equipment Finance Agreement (“EFA”).

Under the EFA, Borrowers agreed to periodically pay principal, financing fees, and interest as outlined in each schedule without invoices or other written demand. Failure to make a payment within five days of the due date would also incur a late charge plus interest at a Late Payment Rate. The Borrowers also agreed to be jointly and severally liable to NFS for the full performance of all obligations thereunder.

The loan amount was $1,059,324.08 under Schedule 1 and $1,891,149.27 under Schedule 2. Borrowers were to repay both in 48 monthly installments.

An event of default includes failure to make any payment when due, or any default under any agreement or guaranty for a total amount of $50,000. Under the EFA, upon default, NFS could declare all obligations under the EFA immediately due and payable. Any event of default by one borrower would also allow NFS to exercise rights and remedies against all borrowers.

Also on November 29, 2022, Kayvon and Saied (collectively “Marashis”) signed separate Personal Guaranty and Security Agreements (“Personal Guaranties”) for all amounts owed under the EFAs after five days’ notice of payment due. The Marashis agreed to waive any right to require NFS to proceed against Borrowers before proceeding against them. Sonny also signed a Corporate Guaranty Agreement (“Corporate Guaranty”) with identical relevant terms.

b. Default

In September 2023, Borrowers were in default under the EFA. In association with amendments to the EFA Schedules, they entered a Voluntary Surrender (“VS”) whereby they agreed to surrender all Equipment to NFS and waive all rights and interests therein. Of the 53 pieces of Equipment, one was totaled and NFS has begun repossession efforts as to the remaining 52.

On November 10, 2023, NFS sent Defendants a Notice of Default under the EFA for failure to make payments due thereunder. Borrowers failed to repay the amounts due or return the Equipment. This default entitles NFS to accelerate and declare immediately due and payable all sums owed. As of December 6, 2023, Borrowers and Guarantors owe $2,968,390.42 plus accruing interest and attorneys’ fees and costs.

c. Damages

Based on the applicable EFA or Guaranty for each Defendant, NFS seeks $2,968,390.42 in damages plus continuing interest, fees, costs and expenses under the EFA. NFS also seeks possession of all Equipment and other collateral under the EFA, as well as attorney’s fees and costs.

2. Course of Proceedings

On December 11, 2023, NFS personally served Borrowers with the Complaint and Summons.

On December 29, 2023, NFS personally served Borrowers with the moving papers.

On January 10, 2024, NFS served Sonny with the Complaint, Summons, and moving papers by substitute service effective January 20, 2024.

On January 25, 2024, Borrowers filed separate Answers.

On January 26, 2024, NFS filed undated proofs of service on the Marashis with the Complaint and Summons by e-mail pursuant to a written agreement with Kayvon’s attorney per CCP section 417.10(d). Also on January 26, NFS served both Marashis with the moving papers by e-mail.

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.

On November 29, 2022, Borrowers and NFS entered the MFA, under which NFS financed Borrowers’ acquisition and refinancing of various pieces of Equipment. Calumby Decl., ¶5, Ex. A. Two schedules described the Equipment and other collateral securing the financing. EFA. Calumby Decl., ¶5, Ex. A. The MFA combines with the schedules to constitute the EFA. Calumby Decl., ¶5. The EFA is governed by the law of Massachusetts. Calumby Decl., ¶5, Ex. A, ¶17.

Under the EFA, Borrowers agreed to periodically pay principal, financing fees, and interest as outlined in each schedule without invoices or other written demand. Calumby Decl., ¶6, Ex. A ¶2. Failure to make a payment within five days of the due date would incur a $250 late charge plus interest at a Late Payment Rate of 1.5% per month. Calumby Decl., ¶6, Ex. A, ¶¶ 2, 14.

Under Paragraph 1 of the Multiple Borrower Addendum, the Borrowers also agreed to be jointly and severally liable to NFS for the full performance of all obligations thereunder. Calumby Decl., ¶7, Ex. A.

Schedule 1 was for a loan principal of $1,059,324.08 and Schedule 2 was for a loan principal of $1,891,149.27. Calumby Decl., ¶¶ 8-9, Ex. A. Borrowers were required to repay both Schedules in 48 monthly installments, albeit with two of those installments as $0 under each schedule. Calumby Decl., ¶¶ 8-9, Ex. A. Each Schedule also required advance payment of the last three monthly installments totaling $90,419.58 under Schedule 1 and $161,420.79 under Schedule 2. Calumby Decl., ¶¶ 8-9, Ex. A.

The Schedules identified the price of each piece of Equipment thereunder. Calumby Decl., ¶¶ 8-9, Ex. A. For example, Schedule 1 lists the original price of the Ford 2022 TRANSIT T 350 CARGO Transit, VIN 1FTBW9CK1NKA75374 (“75374 Vehicle”) as $49,465.37. Calumby Decl., ¶¶ 8-9, Ex. A. Borrowers granted NFS a security interest in the Equipment as well as Borrowers' inventory, accessories, parts, attachments, improvements, accessions, replacements, substitutions, additions and proceeds therefrom or thereto. Calumby Decl., ¶10, Ex. A ¶1. NFS perfected this security interest when it filed UCC-1 financing statements and amendments with the Office of the Secretary of State of Delaware. Calumby Decl., ¶11, Ex. B.

An Event of Default under the EFA included (a) failure to make any payment with respect to any agreement or obligation when due; (b) any event or condition which after notice, lapse of time, or both would constitute an event of default or permit acceleration of any obligation; and (k) the default of any Borrower or Guarantor in an amount totaling $50,000. Calumby Decl., ¶12, Ex. A ¶7. Upon an Event of Default, NFS could repossess the collateral and declare all outstanding balances immediately due and payable. Calumby Decl., ¶13, Ex. A ¶8. This includes the “Present Value” of all future payments, defined as the payment amount discounted at a 5% annual rate. Calumby Decl., ¶13, Ex. A ¶¶ 6, 8. Borrowers would also be responsible for any costs and expenses incurred to repossess, store, repair, sell, or lease the Equipment. Calumby Decl., ¶13, Ex. A ¶8.

Under Paragraph 3 of the Multiple Borrower Addendum, any event of default by one Borrower would entitle NFS to exercise its rights and remedies against all Borrowers. Calumby Decl., ¶14, Ex. A.

Also on November 29, 2022, the Marashi Defendants signed separate Personal Guaranties holding them jointly and severally liable for all amounts owed under the EFAs after five days’ notice of payment due. Calumby Decl., ¶¶ 15, 17, Exs. C-D. Paragraph 1 of the Personal Guaranties stated that the Marashi Defendants have a substantial financial interest in the Borrowers. Calumby Decl., ¶16, Exs. C-D. The Marashi Defendants waived any right to require NFS to proceed against Borrowers before proceeding against them. Calumby Decl., ¶18, Exs. C-D. Sonny also signed a Corporate Guaranty with identical terms. Calumby Decl., ¶¶ 19-21, Ex. E.

In September 2023, Borrowers were in default under the EFA. Calumby Decl., ¶22. They requested that NFS amend the remaining obligations due under the EFA. Calumby Decl., ¶22. In connection with these amendments, Borrowers signed the VS, which NFS agreed to hold in escrow until and unless subsequent default occurred. Calumby Decl., ¶22, Ex. F.

Under the VS, Borrowers agreed to surrender all Equipment to NFS, waive all rights and interests therein, and consent to immediate repossession and liquidation thereof. Calumby Decl., ¶23, Ex. F. A schedule to the VS identified 53 Vehicles that are part of the Equipment. Calumby Decl., ¶24, Ex. F. One vehicle has been totaled, and repossession of the other 52 is underway. Calumby Decl., ¶24, Ex. F.

On November 10, 2023, NFS sent Defendants a Notice of Default under the EFA. Calumby Decl., ¶25, Ex. G. The notice asserted that Borrowers failed to pay $104,187.35 that had become past due under the Schedules as of November 1, 2023. Calumby Decl., ¶25, Ex. G. Borrowers had five days to pay $105,156.19, which reflected fees added to the $104,187.35 owed, plus $52.09 for each day subsequent to the Notice of Default. Calumby Decl., ¶25, Ex. G.

To date, Borrowers have failed to repay the amount owed under the EFA or to return the Equipment. Calumby Decl., ¶26. NFS exercises its right to declare all outstanding amounts owed immediately due and payable. Calumby Decl., ¶27.

NFS has subtracted the present value discount of accelerated payments, advance payments made, and loss insurance proceeds received from all amounts past due and remaining under the EFA. Calumby Decl., ¶28. The total owed before collection costs in this action and accruing interest is $2,968,390.42. Calumby Decl., ¶28. Under the Guaranties, the Guarantors are jointly and severally responsible for this amount. Calumby Decl., ¶¶ 29-32.

Defendants have calculated what they assert is the total balance under the EFA as follows. They first itemized all 53 pieces of Equipment listed in the VS. Kayvon Decl., ¶3, Ex. A. They then identified the original purchase price paid and the original loan amount from NFS for each vehicle. Kayvon Decl., ¶3, Ex. A. For example, the 75374 Vehicle’s original purchase price was $48,597.62, and its original loan amount was $43,217.11. Kayvon Decl., ¶3, Ex. A. The aggregate original purchase price of all Equipment was $2,855,758.99, and the aggregate original loan amount was $2,525,990.59. Kayvon Decl., ¶3, Ex. A.

Borrowers’ “FP&A” person has calculated loan payoff amounts for each vehicle, which may include $10,000 per vehicle in early pay-off fees. Kayvon Decl., ¶4, Ex. A. The total payoff amount is $1,964,759.68. Kayvon Decl., ¶4, Ex. A.

Defendants collected the Manheim Market Reports (“MMR”) for each vehicle based on the make, model, year, and mileage as of February 14, 2024. Kayvon Decl., ¶5, Ex. B. MMR is an industry standard for determining wholesale pricing, and Defendants believe that NFS uses it also. Kayvon Decl., ¶5. Defendants used the wholesale adjusted MMR as the projected selling price. Kayvon Decl., ¶5, Exs. A-B.

The total projected selling price of all Equipment is $2,146,300. Kayvon Decl., ¶5, Ex. A.

This includes a projected selling price of $29,700 for the 75374 Vehicle. Kayvon Decl., ¶5, Exs. A-B. Other noteworthy vehicles include four 2023 Ford E-Transit cargo vans, with projected selling prices of $34,300 for VIN 1FTBW9CK9PKA26538 (“538 Van”), $34,400 for VIN 1FTBW9CK1PKA26579 (“579 Van”), $34,200 for VIN 1FTBW9CK0PKA26735 (“735 Van”), and $34,400 for VIN IFTBW9CK1PKA27389 (“389 Van”). Kayvon Decl., ¶5, Exs. A-B. The combined projected selling price of these four Vans is $34,300 + $34,400 + $34,200 + $34,400 = $137,300.

The projected selling price of nine 2023 Ford Transit T350 passenger wagons includes $54,600 for 1FBAX2X87PKA16349 (“349 Wagon”), $52,400 for VIN 1FBAX9C86PKA16597 (“597 Wagon”), $52,100 for VIN 1FBAX2X80PKA15897 (“897 Wagon”), $53,300 for VIN 1FBAX9C81PKA15695 (“695 Wagon”), $47,300 for VIN 1FBAX2X81PKA15892 (“892 Wagon”), $29,800 for VIN 1FTBW9CK9NKA74991 (“991 Wagon”), $29,700 for VIN 1FTBW9CK1NKA75374 (“374 Wagon”), $52,100 for VIN 1FBAX9C85PKA15540 (“540 Wagon”), and $51,500 for VIN 1FBAX2X82PKA16775 (“775 Wagon”). Kayvon Decl., ¶5, Exs. A-B. The combined projected selling price of these nine Wagons is $54,600 + $52,400 + $52,100 + $53,300 + $47,300 + $29,800 + $29,700 + $52,100 + $51,500 = $422,800.

Subtracting the payoff amount from the projected selling price yields NFS’ equity in each vehicle. Kayvon Decl., ¶6, Ex. A. The aggregate equity is $2,146,300 - $1,964,759.68 = $181,540.32. Kayvon Decl., ¶¶ 6-7, Ex. A. The value of the collateral exceeds the amount owed. Kayvon Decl., ¶7.

Of the 53 pieces of Equipment, two are in Borrowers’ possession, the status of three is unknown, and NFS already has possession of the rest. Kayvon Decl., ¶8, Ex. A. NFS recently called about two pieces of Equipment, one of which it had already repossessed, and one Borrowers have since located. Kayvon Decl., ¶8. Defendants will continue to cooperate with NFS. Kayvon Decl., ¶8.

On June 7, 2010, NFS obtained its California finance lender’s license. Calumby Supp. Decl., ¶18, Ex. 4. It has since maintained this license, and the license remains active. Calumby Supp. Decl., ¶18, Ex. 4.

On January 1, 2022 and January 1, 2023, pursuant to Massachusetts General Law chapter 271 section 49, NFS sent the Massachusetts Office of Attorney General notice that it intended to engage in commercial lease and financing transactions. Calumby Supp. Decl., ¶16, Ex. 3. It warned that the finance charges and expenses upon amounts financed could exceed 20% annually. Calumby Supp. Decl., ¶16, Ex. 3. NFS has since calculated the EFA’s effective interest rate as 17% per year. Calumby Supp. Decl., ¶17.

NFS’s ledger shows that November 2023 was the last month for which Defendants paid amounts due. Calumby Supp. Decl., ¶13, Ex. 2. Between the outstanding balance in November 2023 and the amount due every month from December 2023 to February 2024, the amount past due is $134,557.83 for Schedule 1 and $240,218.17 for Schedule 2, or $374,776 total. Calumby Supp. Decl., ¶13(a), Ex. 2.

Interest on the amounts past due at 1.5% per month totals $3,574.27 under Schedule 1 and $6,380.94 under Schedule 2, for a total of $9,955.21. Calumby Supp. Decl., ¶13(b), Ex. 2.

The EFA lists late charges of $250 per late payment. Calumby Supp. Decl., ¶13(c), Ex. 2. As payment under each Schedule per month is separate, late fees total $1,000 per Schedule for the four months, or $2,000. Calumby Supp. Decl., ¶13(c), Ex. 2.

The remaining future payments total $1,052,752.02 under Schedule 1 and $1,987,030.39 under Schedule 2, or $3,039,782.41 total. Calumby Supp. Decl., ¶13(d), Ex. 2. Discounting these at a 5% annual rate (Calumby Decl., ¶13, Ex. A ¶¶ 6, 8) decreases the present value by $136,177.46. Calumby Supp. Decl., ¶13(e), Ex. 2.

Each Schedule (Calumby Decl., Ex. A) also required advance payment of $90,419.58 under Schedule 1 and $161,420.79 under Schedule 2. Calumby Supp. Decl., ¶13(f), Ex. 2. NFS credited this $251,840.37 against the amounts owed. Calumby Supp. Decl., ¶13(f), Ex. 2.

NFS has received $52,500 in insurance proceeds from the loss of one of the 53 pieces of Equipment. Calumby Supp. Decl., ¶13(h), Ex. 2. NFS has recovered 50 of the other 52 vehicles and incurred $30,250 in repossession fees to do so. Calumby Supp. Decl., ¶9, Exs. 1-2.

NFS’s damages total $374,776 + $9,955.21 + $2,000 + $3,039,782.41 - $136,177.46 - $251,840.37 - $52,500 = $2,985,995.79 before repossession of the collateral and $2,985,995.79 + $30,250 = $3,016,245.79 before sale of the 52 surviving pieces of Equipment. Calumby Supp. Decl., ¶12.

NFS sold 34 of the 50 recovered pieces of Equipment. Calumby Supp. Decl., ¶7. Its spreadsheets show that the total net sales are $1,371,589. Calumby Supp. Decl., ¶7, Ex. 1. This has reduced the amount owed to $3,016,245.79 - $1,371,589 = $1,644,656.79. Calumby Supp. Decl., ¶12, Ex. 2.

NFS is waiting to receive an additional $140,910 in proceeds from sales of three of the 34 pieces of Equipment sold thus far. Calumby Supp. Decl., ¶7, Ex. 1.

NFS has recovered 13 vehicles not yet sold. Calumby Supp. Decl., ¶8, Ex. 1. Based on their current condition, NFS estimates that it can sell the 538 Van, 579 Van, 735 Van, and 389 Van for $35,898.44 each. Calumby Supp. Decl., ¶8, Ex. 1. It can also sell the 349 Wagon, 597 Wagon, 897 Wagon, 695 Wagon, 892 Wagon, 991 Wagon, 374 Wagon, 540 Wagon, and 775 Wagon for $51,253.17 each. Calumby Supp. Decl., ¶8, Ex. 1. The total revenue from future sales should be ($35,898.44 x 4) + ($51,253.17 x 9) = $143,593.76 + $461,278.53 = $604,872.29. Calumby Supp. Decl., ¶8, Ex. 1.

If NFS receives the anticipated additional proceeds from Equipment sold and not yet sold but in its possession, its damages would be reduced to $1,644,656.79 - $140,910 - $604,872.29 = $898,874.50. Calumby Supp. Decl., ¶15, Ex. 2.

The two vehicles not yet recovered are both 2023 Ford Transit T350 passenger wagons. Calumby Supp. Decl., ¶10, Ex. 1. If NFS recovers them in the same condition as the others, it estimates it can sell them for $51,253.17 each, or $102,506.34. Calumby Supp. Decl., ¶10, Ex. 1.

NFS claim against Borrowers for $2,968,390.42 is based on a breach of the EFA. Calumby Decl., ¶5, Ex. A. The claim against Guarantors is based on the Guaranties to the EFA. Calumby Decl., Exs. C-E. NFS has contract claims 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., (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).

The Schedules to the EFA outline the payment owed each month over the course of four years. Calumby Decl., ¶¶ 8-9, Ex. A. Any late payment under either Schedule would accrue a $250 late charge plus interest at a Late Payment Rate of 1.5% per month. Calumby Decl., ¶6, Ex. A, ¶¶ 2, 14.

Upon an Event of Default, NFS could repossess the collateral and declare all outstanding balances immediately due and payable. Calumby Decl., ¶13, Ex. A ¶8. This includes the “Present Value” of all future payments, defined as the payment amount discounted at a 5% annual rate. Calumby Decl., ¶13, Ex. A ¶¶ 6, 8. Borrowers would also be responsible for any costs and expenses incurred to repossess, store, repair, sell, or lease the Equipment. Calumby Decl., ¶13, Ex. A ¶8. Under Paragraph 3 of the Multiple Borrower Addendum, any event of default by one Borrower would entitle NFS to exercise rights and remedies against all borrowers. Calumby Decl., ¶14, Ex. A.

Under the Guaranties, Guarantors are jointly and severally liable for all amounts owed under the EFAs after five days’ notice of payment due. Calumby Decl., ¶¶ 15, 17, Exs. C-E. Guarantors waived any right to require NFS to proceed against Borrowers before proceeding against them. Calumby Decl., ¶18, Exs. C-E.

The November 10, 2023 Notice of Default asserted that Borrowers failed to pay $104,187.35 that had become past due under the Schedules on November 1. Calumby Decl., ¶25, Ex. G. Borrowers had five days to pay $105,156.19, which reflected fees added to the $104,187.35 owed, plus $52.09 for each day subsequent to the Notice of Default. Calumby Decl., ¶25, Ex. G.

NFS asserts that because Borrowers failed to repay the amount owed under the EFA, it has exercised its right to declare all outstanding amounts owed immediately due and payable. Calumby Decl., ¶27. NFS has subtracted the present value discount of accelerated payments, advances paid on those amounts, and loss insurance proceeds received from all amounts past due and remaining under the EFA. Calumby Decl., ¶28. The total owed before collection costs in this action and accruing interest is $2,968,390.42. Calumby Decl., ¶28. Under the Guaranties, Guarantors are jointly and severally responsible for this amount. Calumby Decl., ¶¶ 29-32.

Strict compliance is required with statutory requirements for affidavits for attachment. Anaheim National Bank v. Kraemer, (1932) 120 Cal.App. 63, 65. All documentary evidence, including contracts and canceled checks, must be presented in admissible form, and admissibility as nonhearsay evidence or exception to the hearsay rule, such as the business records exception. Pos-A-Traction, Inc., v. Kepplly-Springfield Tire Co., (C.D. Cal. 2000) 112 F.Supp.2d, 1178, 1182. For business records, evidence should be presented to establish that the record was made in the regular course of business, at or near the time of the act or event, and the custodian of records or other qualified witness must identify the record and its mode of preparation, as well as the sources of information and method and time of preparation. Id.

NFS’s moving papers included no payment history showing that Borrowers failed to pay amounts past due or owe the amount claimed. This is particularly important when, as here, the amount due each month varied under the Schedules and NFS admits that Borrowers made some advance payments. Calumby Decl., ¶¶ 8-9, 28, Ex. A. Defendants argue in opposition that this presentation is too conclusory to warrant a right to attach order. Opp. at 3.

The calculations Defendants offer in opposition are even more speculative. Kayvon Decl., Ex. A. Defendants assert that their calculations began with the original purchase price paid and the original loan amount from NFS for each Vehicle. Kayvon Decl., ¶3, Ex. A. However, neither matches the terms of the EFA. For example, Defendants assert the 75374 Vehicle’s original purchase price was $48,597.62, and its original loan amount was $43,217.11. Kayvon Decl., ¶3, Ex. A. Schedule 1 lists the original price as $49,465.37, which does not match either amount. Calumby Decl., ¶¶ 8-9, Ex. A.

Defendants then assert an “FP&A” person has calculated loan payoff amounts for each piece of Equipment, totaling $1,964,759.68. Kayvon Decl., ¶4, Ex. A. They provide no explanation of how this person calculated the payoff amount, except to say it may include $10,000 per vehicle in early pay-off fees. Kayvon Decl., ¶4, Ex. A. Nothing explains how these payoff amounts are ascertainable from the EFA.

NFS attempts to remedy its evidentiary defects in reply. Its ledger shows the amounts Defendants have paid, including a partial payment in November 2023 for each Schedule. Calumby Supp. Decl., ¶13(a), Ex. 2. The ledger calculates that Defendants owe $374,776 in payments past due, $9,955.21 in interest for those payments, $2,000 in administrative late fees, and $3,039,782.41 in future payments less $136,177.46 based on a 5% annual discount rate. Calumby Supp. Decl., ¶¶ 13(a)-(e), Ex. 2.

NFS also credits $251,840.37 in advance payments and $52,500 in insurance proceeds from the loss of one of the 53 pieces of Equipment. Calumby Supp. Decl., ¶¶ 13(f), (h), Ex. 2. It also asserts $30,250 in repossession fees for 50 of the other 52. Calumby Supp. Decl., ¶9, Ex. 2. Damages total $374,776 + $9,955.21 + $2,000 + $3,039,782.41 - $136,177.46 - $251,840.37 - $52,500 = $2,985,995.79 before repossession of collateral and $2,985,995.79 + $30,250 = $3,016,245.79 before sale of the 52 surviving pieces of equipment. Calumby Supp. Decl., ¶12.

The reply evidence is an improvement if not necessarily sufficiently detailed about the calculations. In any event, NFS cannot use its reply brief to cure the failure in its moving papers to provide sufficient payment history and accounting of the amount owed. NFS failed to meet its burden of showing readily ascertainable damages.

The amount to attach must be reduced by, inter alia, the value of any security interest in the property of the defendant held by the plaintiff, 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)(4).

The EFA granted NFS a security interest in the Equipment as well as Borrowers’ inventory, accessories, parts, attachments, improvements, accessions, replacements, substitutions, additions and proceeds therefrom or thereto. Calumby Decl., ¶10, Ex. A ¶1. NFS perfected this security interest when it filed UCC-1 financing statements and amendments with the Office of the Secretary of State of Delaware. Calumby Decl., ¶11, Ex. B. NFS does not dispute that the proceeds from the sale of this collateral should reduce the amount Defendants owe.

NFS admits it has repossessed 50 pieces (Calumby Supp. Decl., ¶9, Ex. 1) and received an insurance payout from the destruction of one of the others. It lists the actual sale price for 37 pieces it has already sold. Calumby Supp. Decl., Ex. 1. NFS asserts it has received $1,371,589 from those sales thus far, will receive another $140,910 from three of them, and estimates another $604,872.26 in sales of the 13 remaining vehicles in its possession. Calumby Supp. Decl., ¶¶ 7-8, Ex. 1.

NFS asks the court to reduce the ascertainable damages only by the $1,371,589 it has already received, arguing that market conditions could change or the unsold Equipment could be destroyed or stolen. Reply at 7. A greater reduction in damages could leave NFS under secured even after a right to attach order is granted. Id.

NFS’ argument has merit only as to the two vehicles NFS has yet to repossess. But otherwise, CCP section 483.015(b)(4) requires that the amount to attach must be reduced by the value of any security interest in the defendant’s property held by the plaintiff. NFS has possession of 13 unsold vehicles, and their value must be subtracted from the attachment amount. NFS estimates a sale price of $35,898.44 each of the four unsold Vans and $51,253.17 each for nine unsold Wagons, a total of $604,872.29. Calumby Supp. Decl., ¶8, Ex. 1.

Again, this information was presented for the first time in reply, and NFS failed to give Defendants an opportunity to disagree. It also would be better if NFS seeks attachment after actual sales of the remaining vehicles rather than estimated sale prices.

On November 29, 2022, Borrowers and NFS entered the MFA, under which NFS financed Borrowers’ acquisition and refinancing of various pieces of Equipment. Calumby Decl., ¶5, Ex. A. Two Schedules outlined the payments due across 48 months and described the Equipment and other collateral securing the financing. EFA. Calumby Decl., ¶5, Ex. A.

An Event of Default under the EFA includes (a) failure to make any payment with respect to any agreement or obligation when due; (b) any event or condition which after notice, lapse of time, or both would constitute an event of default or permit acceleration of any obligation; and (k) the default of any Borrower or Guarantor in an amount totaling $50,000 across all instances. Calumby Decl., ¶12, Ex. A ¶7. Upon an Event of Default, NFS could repossess the collateral and declare all outstanding balances immediately due and payable. Calumby Decl., ¶13, Ex. A ¶8. Under Paragraph 3 of the Multiple Borrower Addendum, any event of default by one Borrower would entitle NFS to exercise rights and remedies against all borrowers. Calumby Decl., ¶14, Ex. A.

On the same day, Guarantors signed the Guaranties that they would be jointly and severally liable for all amounts owed under the EFAs after five days’ notice of payment due. Calumby Decl., ¶¶ 15, 17, Exs. C-E. Guarantors waived any right to require NFS to proceed against Borrowers before proceeding against them. Calumby Decl., ¶18, Exs. C-E.

On November 10, 2023 NFS sent Defendants a Notice of Default for $104,187.35 past due as of November 1, 2023. Calumby Decl., ¶25, Ex. G. The notice gave them five days to pay this amount, plus flat fees and $52.09 in additional fees for each day subsequent to the Notice of Default. Calumby Decl., ¶25, Ex. G. To date, Borrowers have failed to repay the amount owed under the EFA or to return the Equipment. Calumby Decl., ¶26.

A contract is unconscionable if one of the parties lacked a meaningful choice in deciding whether to agree and the contract contains terms that are unreasonably favorable to the other party. OTO, LLC. v. Kho, (2019) 8 Cal.5th 111, 125. Under this standard, the unconscionability doctrine has both a procedural and a substantive element. The procedural element addresses the circumstances of contract negotiation and formation, focusing on oppression or surprise due to unequal bargaining power, while the substantive element pertains to the fairness of an agreement’s actual terms, and to assessments of whether they are overly harsh or one-sided. Ibid. Procedural and substantive unconscionability are evaluated on a sliding scale: the more substantively oppressive the contract term, the less evidence of procedural unconscionability is required to conclude that the term is unenforceable. Conversely, the more deceptive or coercive the bargaining tactics employed, the less substantive unfairness is required. Id. at 125-26. The ultimate issue in every case is whether the terms of the contract are sufficiently unfair, in view of all relevant circumstances, that a court should withhold enforcement. Id. at 126.

Without any analysis, Defendants note that their Answers have asserted parts of the contract are unenforceable based on unconscionability. Opp. at 3. They cite Civil Code section 1671(b), which prohibits contract provisions that liquidate the damages of a breach when the provision was unreasonable under the circumstances existing at the time the contract was made. Defendants also cite Honchariw v. FJM Private Mortgage Fund, LLC (2022), 83 Cal. App. 5th 893, 902-903, which held that a contract provision imposes a penalty and is therefore unenforceable if it assesses amounts disproportionate to the anticipated damages. Opp. at 3.

The court need not discuss this issue in detail. If a defendant seeks to reduce damages based on an affirmative defense (CCP §483.015(b)), he or she must make a prima facie showing of a probability of success on that argument. Defendants’ failure to provide substantive legal analysis why any of the EFA’s provisions for damages is a penalty or unconscionable waives the argument. See Reply at 3.

Under the EFA, the failure to make a payment within five days of the due date would incur interest at a Late Payment Rate of 1.5% per month, or 18% annually. Calumby Decl., ¶6, Ex. A, ¶¶ 2, 14. Defendants assert that this interest rate is usurious. Opp. at 3.

The EFA is governed by Massachusetts law. Calumby Decl., ¶5, Ex. A, ¶17. Criminal usury thereunder is defined as charging interest and expenses exceeding an aggregate 20% annual rate on sums loaned. ALM GL ch. 271, §49(a). This does not apply if the person notifies the attorney general of his intent to engage in a transaction or transactions which would otherwise be usurious. ALM GL ch. 271, §49(d).

An interest rate of 18% is not usurious under Massachusetts law. Assuming arguendo that it is, NFS presents evidence that it warned the Massachusetts Office of Attorney General that finance charges and expenses upon amounts financed under the EFA could exceed 20% annually. Calumby Supp. Decl., ¶16, Ex. 3. The EFA’s effective interest rate of 17% per year is not usurious. See Calumby Supp. Decl., ¶17.

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.

The Personal Guaranties of the Marashi Defendants affirm that they both have a personal ownership interest in Borrowers. Calumby Decl., ¶16, Exs. C-D. The claim against the Marashi Defendants is 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.

NFS seeks to attach the Marashi Defendants’ interest in real property except leasehold estates with unexpired terms of less than one year; accounts receivable, chattel paper, and general intangibles arising out of the conduct of a business or profession, except any such individual claim with a principal balance of less than $150; equipment; farm products; inventory; final money judgments arising out of conduct of a business or profession; money on the premises of such a business or profession, less the first $1,000 in aggregate; negotiable documents of title and other instruments; securities; and minerals. 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). NFS seeks attachment for a proper purpose.

The applications for right to attach orders are denied. NFS may renew the application after selling the remaining 13 vehicles by presenting detailed evidence of the payment history and amounts owed. If NFS does renew, it must comply with the requirements of CCP section 1008(b), with the exception of a showing why it could not have presented this information in the exercise of due diligence.

[1] Defendants failed to lodge courtesy copies of their oppositions in violation of the Presiding Judge’s First Amended General Order Re: Mandatory Electronic Filing. The court almost refused to consider the oppositions. Defense counsel is admonished to provide courtesy copies in all future filings or their papers will be deemed waived.

[2] The five oppositions and declarations in support thereof are identical.