Judge James C. Chalfant, Case Number: 24STCV18673, Date: 2024-10-01 Tentative Ruling

Plaintiff CG Owner, LLC v. Michael Sullivan & Associates, LLP,

24STCV18673

Tentative decision on application for right to attach order: granted

Plaintiff CG Owner, LLC (“CG”) applies for a right to attach order against Defendant Michael Sullivan & Associates, LLP (“Sullivan”).

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

Plaintiff CG commenced this action on July 25, 2024, by filing the Complaint against Defendant Sullivan alleging Breach of Lease and Anticipatory Breach of Lease. Compl., ¶¶ 9-21.

In 2012, Continental Grand II, L.P. ("Continental") owned real property, including a commercial building, at 400 North Continental Blvd, El Segundo ("Building"). Compl., ¶5. Continental and Defendant Sullivan signed a Lease dated November 4, 2012, for Sullivan to rent 17,062 rentable square feet in the Building, referred to as Suite 100 ("Premises"). Compl., ¶5. Sullivan was required to pay monthly rent and other charges as provided for in the Lease. Compl., ¶5.

In June 2017, CG purchased the Building from Continental and became the assignee and landlord under the Lease. Compl., ¶6. CG and Sullivan signed a ''Second Amendment to Lease" ("Amendment") dated June 12, 2019, extending the Lease to June 30, 2025. Compl., ¶7. The Amendment also provided that the rent would be $76,204.06 per month in 2023, $78,471 per month in 2024, and $80,912.32 per month in 2025. Compl., ¶7.

In breach of the Lease and the Amendment (collectively the "Lease Documents"), Sullivan vacated the Premises on or about November 30, 2023. Compl., ¶8.

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., (“CIT”) (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.

Sullivan executed the Lease Documents in which it agreed to lease the Premises through June 30, 2025. Hursh Decl., ¶¶ 2-5, Exs. 1-2. CG has performed all covenants and conditions under the Lease, including providing possession of the Premises to Sullivan. Hursh Decl., ¶7.

On or around November 30, 2023, Sullivan vacated the Premises. Hursh Decl., ¶6. Since then, Plaintiff CG has been attempting to relet the Premises, without success. Hursh Decl., ¶6.

Per the terms of the Lease Documents, the Lease remains in existence through June 30, 2025. Hursh Decl., ¶7. Sullivan has failed to pay the monthly rent and other obligations owed under the Lease Documents for the months of August 1, 2023, through July 31, 2024, and is now in default. Hursh Decl., ¶¶ 7-9. Sullivan owes $996,807.16 in unpaid rent for the period from August 1, 2023, through July 31, 2024. Hursh Decl., ¶9. Sullivan also owes other amounts under the Lease, including interest, and attorney’s fees. Solely for purposes of this attachment, CG is only seeking to attach the principal amount of $996,807.16 as reflected in the Lease ledger. Hursh Decl., ¶10, Ex. 3.

Sullivan’s inability to pay rent due because it was shut down due to COVID-19 is material, since the existence of a probable affirmative defense outweighs the possible existence of an affirmative defense. Fink Decl., ¶3. There is more than simply the possibility of a superseding intervening cause, it is a fact that government restrictions forced Sullivan to close its business. Fink Decl., ¶3. The forced closure of all non-essential businesses meant that it was impossible and financially unviable to use the Premises as was intended under the lease. Fink Decl., ¶4.

The defense of adherence to statute is more than a mere possibility, it is a probable affirmative defense in this case. Fink Decl., ¶5. The COVID-19 order [health order] mandated the closure of all non-essential businesses. Fink Decl., ¶5. Sullivan was required by statute to close its doors. Fink Decl., ¶5. To do otherwise would have been unlawful. Fink Decl., ¶5.

CG has not made reasonable attempts to mitigate its damages in that it has had ample opportunity to find a replacement tenant. Fink Decl., ¶6. On or about December 1, 2022, Sullivan sent CG a letter indicating that it desired to terminate the lease. Fink Decl., ¶6. On or about June 1, 2023, Sullivan send CG a second letter providing 60 days’ notice that Sullivan would vacate the Property. Fink Decl., ¶6.

Plaintiff CG seeks a right to attach order against Defendant Sullivan in the amount of $996,807.16 in unpaid rent and other charges.

CG’s claim for attachment is based on the Lease between the parties and exceeds $500.

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).

Sullivan has failed to pay the monthly rent and other obligations owed under the Lease Documents for the months of August 1, 2023 through July 31, 2024. Hursh Decl., ¶¶ 7-9. As reflected in the Lease ledger, Sullivan owes $996,807.16 in unpaid rent for the period from August 1, 2023, through July 31, 2024. Hursh Decl., ¶¶ 9-10, Ex. 3. This is amount that is fixed and readily ascertainable under the Lease Documents.

CG shows that, as reflected in the Lease ledger, Sullivan owes $996,807.16 in unpaid rent for the period from August 1, 2023, through July 31, 2024. Hursh Decl., ¶¶ 9-10, Ex. 3.

Sullivan does not dispute this calculation. It argues that Sullivan’s inability to pay rent was due to the fact that it was shut down due to COVID-19. Fink Decl., ¶3. The COVID-19 order [health order] mandated the closure of all non-essential businesses. Fink Decl., ¶5. Sullivan was required by statute to close its doors. Fink Decl., ¶5. To do otherwise would have been unlawful. Fink Decl., ¶5. The forced closure of all non-essential businesses meant that it was impossible and financially unviable to use the Premises as was intended under the lease. Fink Decl., ¶4. Opp. at 2-3.

Although not clear, it appears that Sullivan is relying on the doctrine of impossibility and/or frustration oof purpose. Sullivan has the burden of proof for these affirmative defenses.

Impossibility is an excuse for non-performance of a contract where it is strictly impossible or only possible because of extreme and unreasonable difficulty. Autry v. Republic Productions, (1947) 30 Cal.2d 144, 148-49. Where the reason the parties entered the agreement has been frustrated by a supervening circumstance that was not anticipated, such that the value of performance by the party standing on the contract is substantially destroyed, the doctrine of commercial frustration applies to excuse performance. See, e.g. Habitat Trust for Wildlife, Inc. v. City of Rancho Cucamonga, (2009) 175 Cal.App.4th 1306, 1336. “A thing is impossible in legal contemplation when it is not practicable; and a thing is impracticable when it can only be done at an excessive and unreasonable cost.” Id. at 1336.

The doctrine of frustration of purpose applies when a change in law frustrates the purpose of the agreement and excuses the parties from performance. See, e.g., Century Lites, Inc. v. Goodman (1944), 64 Cal. App. 2d Supp. 938, 939-40 (excusing payment under a lease for neon signs when World War II orders prohibited the use of outdoor neon lighting equipment). A frustration of purpose defense does not apply when government laws have only restricted and not completely destroyed use of the premises. See Grace v. Croninger, (1936) 12 Cal. App. 2d 603 (lease for use as a saloon and cigar store was not frustrated when prohibition laws prohibited the sale of liquor).

Sullivan has failed to meet its burden for either defense. It does not even identify the nature of its business or how COVID-19 orders affected it. The Lease describes Sullivan’s permitted use of the Premises as offices. Hursh Decl., Ex. 1. There is nothing about that use that was frustrated by the pandemic or any COVID order. Moreover, Sullivan does not identify the pertinent COVID order or when it began and ended. Sullivan has failed to pay the monthly rent and other obligations owed under the Lease Documents for the months of August 1, 2023 through July 31, 2024. Hursh Decl., ¶¶ 7-9. It is common knowledge that COVID pandemic had ended by those dates. Therefore, most probably no City or County of Los Angeles COVID order applied.

Sullivan also argues that CG has not made reasonable attempts to mitigate its damages in that it has had ample opportunity to find a replacement tenant. Fink Decl., ¶6. On or about December 1, 2022, Sullivan sent CG a letter indicating that it desired to terminate the lease. Fink Decl., ¶6. On or about June 1, 2023, Sullivan send CG a second letter providing 60 days’ notice that Sullivan would vacate the Property. Fink Decl., ¶6. Opp. at 3.

These conclusions do not meet Sullivan’s burden of proof to overcome CG’s conclusion that it has been unsuccessful in its attempts to relet the Premises since the November 30, 2023 date that Sullivan vacated the Premises. Hursh Decl., ¶6. Sullivan may obtain more evidence on the mitigation issue through discovery and present it at trial, but its evidence is insufficient for purposes of attachment.

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). CG seeks attachment for a proper purpose.

The application for a right to attach order against Sullivan is granted in the amount of $996,807.16. No right to attach order will issue until CG posts a $10,000 undertaking.

[1] No reply was in the court file on the morning of September 30, 2024.