Judge John J. Kralik, Case Number: 21BBCV00794, Date: 2023-08-18 Tentative Ruling

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Superior Court of California

County of Los Angeles

Department B

Plaintiffs Sunswept LLC, Allen Ravert, Bernadette M. O’Rourke, and Glen Dobbs (“Plaintiffs”) allege that they have been model tenants of the premises owned by Defendant/landlord Edward J. Hanessian as Trustee of The Anne Hanessian Living Trust (“Defendant”) for more than 26 years. The property at issue is located at 12159-12163 Ventura Blvd., Studio City. Plaintiffs allege that Ravert went above and beyond the requirements of the lease and essentially acted as the de facto unpaid manager of the premises by making various accommodations and providing numerous services to Defendant beyond the lease terms.

Pursuant to the lease’s terms, Plaintiffs have an option to purchase the lot either at a set minimum price of $2.3 million for 2021 or for a “fair market appraisal” amount, whichever is greater. Ravert exercised the option and offered an amount exceeding the minimum purchase price by over $1 million. However, Plaintiffs allege that Defendant solicited a deeply flawed appraisal of the lot worth significantly more than Ravert’s offer. The parties attempted to negotiate the purchase price of the lot, but Plaintiffs allege that Defendant deployed improper and unethical tactics, including refusal to honor his prior agreements and executing a purchase agreement with a third party.

The First Amended Complaint (“FAC”), filed October 15, 2021, alleges causes of action for: (1) breach of contract; (2) breach of covenant of good faith and fair dealing; and (3) declaratory relief.

On April 4, 2022, Defendant/Cross-Complainant Edward J. Hanessian, as Trustee of the Anne Hanessian Living Trust filed a cross-complaint for declaratory relief.

On April 20, 2022, Cross-Defendant/Cross-Complainant Jeffrey Fischer filed a cross-complaint for: (1) declaratory relief; (2) breach of contract; and (3) negligent interference of contractual relations.

On April 26, 2023, the Court entered the Final Statement of Decision and the Supplemental Proposed Statement of Decision.

On May 22, 2023, the Court entered the Interlocutory Judgment for Declaratory Relief in Phase 1 Trial as follows:

1. The Hanessian Trust breached the option to purchase the Property contained in the April 1, 2014 Lease between the Hanessian Trust and the Plaintiffs (“April 2014 Lease”).

2. The Hanessian Trust breached the right of first refusal contained in the April 2014 Lease.

3. If the option to purchase or right of first refusal had been properly performed, the resulting contract for sale of the Property to Plaintiffs reasonably should have been performed by December 31, 2021.

4. Plaintiffs have the right of specific performance of the option to purchase the Property and the right of first refusal to purchase the Property.

5. The Fair Market Value of the Property is $4 million. In addition, in purchasing the Property, Plaintiffs must pay the $165,485.10 in rent withheld pursuant to COVID-19 Lockdown measures at closing, which Plaintiffs may do either by paying the $165,485.10 into escrow before closing, or adding that amount to the purchase price so that it can be funded through Plaintiffs’ loan.

6. For the reasons set forth in the Court’s Supplemental Statement of Decision, the purchase price of $4 million is not adjusted pursuant to Petrolink because the Hanessian Trust’s investment of the sales proceeds it would have received on December 31, 2021 would have exceeded the rents paid since December 31, 2021.

7. Escrow for the sale of the Property shall be opened with a national title insurance company, with Plaintiffs to make an initial deposit of $25,000.00, which shall be released and paid to the Hanessian Trust as part of the purchase price at the close of escrow.

8. Plaintiffs must close escrow to purchase the Property within ninety (90) days of the date this Judgment is entered.

9. The sale of the Property to Plaintiffs is “as is,” with no warranties regarding the condition of the Property. The $4 million purchase price may not be adjusted based on the findings of any inspection of the Property.

10. Plaintiffs and the Hanessian Trust shall each bear the closing costs that are customary for a buyer and seller.

11. Any remaining security deposits that the Hanessian Trust holds with respect to the Property shall be assigned by the Hanessian Trust to Plaintiffs at closing, along with any remaining leases on the Property.

13. Both Fischer and the Hanessian Trust have a present right to terminate the contract entered into between Fischer and the Hanessian Trust dated August 28, 2021 for the purchase of the Property (the “Fischer Sale Agreement”).

14. In the event that Plaintiffs fail to close escrow to purchase the Property within ninety (90) days of entry of this Judgment and in conformity with the Court’s Statement of Decision and Supplemental Statement of Decision, the Hanessian Trust may thereafter: (a) sell the Property to Fischer pursuant to the Fischer Sale Agreement should neither the Hanessian Trust nor Fischer terminate the Fischer Sale Agreement; or (b) if the Fischer Sale Agreement has been terminated, the Hanessian Trust shall continue to own the Property free and clear of any obligations to sell it to Plaintiffs or to Fischer.

15. The Court shall retain continuing jurisdiction to make any orders as are reasonably necessary to effectuate the sale of the Property pursuant to the terms that the Court has ordered.

On July 19, 2023, Plaintiffs filed an application for a right to attach order and writ of attachment against Defendant Edward J. Hanessian. In the alternative, Plaintiffs filed a motion for temporary protective order (“TRO”).

On August 4, 2023, Defendant Edward J. Hanessian as the Trustee of the Anne Hanessian Living Trust filed an opposition brief.

“Upon the filing of the complaint or at any time thereafter, the plaintiff may apply pursuant to this article for a right to attach order and a writ of attachment by filing an application for the order and writ with the court in which the action is brought.” (CCP § 484.010.)

(1) a statement showing that the attachment is sought to secure the recovery on a claim upon which an attachment may be issued;

(3) a statement that the attachment is not sought for a purpose other than the recovery on the claim upon which the attachment is based;

(4) a statement that the applicant has no information or belief that the claim is discharged or that the prosecution of the action is stayed in a proceeding under the Bankruptcy Act (11 U.S.C. section 101 et seq.); and

(5) a description of the property to be attached under the writ of attachment and a statement that the plaintiff is informed and believes that such property is subject to attachment.

“The application [for a writ of attachment] shall 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.) Statutory attachment procedures are purely creations of the legislature and as such “are subject to ‘strict construction.’” (Hobbs v. Weiss (1999) 73 Cal.App.4th 76, 79 [citing Vershbow v. Reiner (1991) 231 Cal.App.3d 879, 882]; see also Nakasone v. Randall (1982) 129 Cal.App.3d 757, 761.) A judge does not have authority to order any attachment that is not provided for by the attachment statutes. (Jordan-Lyon Productions, Ltd. v. Cineplex Odeon Corp. (1994) 29 Cal.App.4th 1459, 1466.) “The declarations in the moving papers must contain evidentiary facts, stated ‘with particularity,’ and based on actual personal knowledge with all documentary evidence properly identified and authenticated.” (Hobbs, supra, 73 Cal.App.4th at 79–80 [citing CCP § 482.040].) “In contested applications, the court must consider the relative merits of the positions of the respective parties and make a determination of the probable outcome of the litigation.” (Id. at 80 [ellipses and quotation marks omitted].) “A claim has ‘probable validity’ where it is more likely than not that the plaintiff will obtain a judgment against the defendant on that claim.” (CCP § 481.190.)

The Court shall issue a right to attach order if the Court finds all of the following:

(1) The claim upon which the attachment is based is one upon which an attachment may be issued.

(2) The plaintiff has established the probable validity of the claim upon which the attachment is based.

(3) The attachment is not sought for a purpose other than the recovery on the claim upon which the attachment is based.

A claim of exemption must describe the property to be exempted and specify the statute section supporting the claim. (CCP § 484.070(c).) The plaintiff has the burden of opposing the defendant’s claim of exemption, and if the plaintiff fails to oppose a claim of exemption, “no right to attach order or writ of attachment shall be issued as to the property claimed to be exempted.” (CCP § 484.070(f).)

With the opposition papers, Defendant submitted objections to the declarations of Allen Ravert and Geoffrey Davis, Esq. in support of Plaintiff’s application. The Court rules as follows:

Plaintiffs’ application for writ of attachment is based on its claim for breach of the written lease agreement for the commercial property.

The standard elements of a claim for breach of contract are: “(1) the contract, (2) plaintiff's performance or excuse for nonperformance, (3) defendant's breach, and (4) damage to plaintiff therefrom. [Citation.]” (Wall Street Network, Ltd. v. New York Times Co. (2008) 164 Cal.App.4th 1171, 1178.)

Plaintiffs argue that they have already established their burden on this element and cite to the Court’s Statement of Decision. This matter was already litigated and the Court found that the Hanessian Trust breached the option to purchase the property and the right of first refusal contained in the lease, such that Plaintiffs have the right of specific performance of the option to purchase the property and the right of first refusal to purchase the property.

In support of the application, Plaintiffs provide the declaration of Allen Ravert, who is one of the Plaintiffs in this action and one of the owners of Sunswept LLC. (Ravert Decl., ¶1.) As noted above, the Court has sustained objections to a majority of Mr. Ravert’s declaration, but will summarize the declaration here for the purpose of showing that the declaration insufficiently accounts for the damages Plaintiff claims, as Plaintiff’s papers are not supported by documentary evidence. Mr. Ravert states that in the summer and fall of 2021, he and his partners were trying to purchase the subject properties and contacted American Business Bank for financing. (Id., ¶2.) He states that they were pre-qualified for the financing. (Id., ¶2, Exs. A-B.) He states that following the Court’s decision in this case ordering the sale of the property to be completed, he diligently worked to confirm new financing for the purchase. (Id., ¶3.) He states that on July 13, he received an SBA loan approval, which had the same basic structure as the financing obtained in 2021, but subject to current interest rates. (Id.) He states that he does not want to produce any loan documentation into the public record or to the other parties in this lawsuit because someone contacted one of his lenders, claiming that he and his partners broke COVID-era PPP loan rules in an effort to derail financing for this purchase. (Id., ¶4.) He states that if they have to purchase the property at the full court-ordered purchase price and at the current interest rate, it will be a significant financial hardship as the projected interest over the 25-year loan term would be about $2 million higher than if they had purchased the property in 2021. (Id., ¶5.) Mr. Ravert also states that in addition to the increased cost of financing, they suffered other losses, such as the lost opportunity to rent out the “Umami” space with a potential long-term tenant. (Id., ¶6.) He states that another loss caused by Mr. Hanessian’s refusal to sell the property in 2021 was that he and Glen Dobbs sold another investment property in 2021 with the intent to purchase the Ventura Blvd. property to complete an IRS 1031 exchange so as not to owe capital gains taxes on the property sold; however, because the sale did not go through, they owed $67,968 in taxes. (Id., ¶7.) He states that another expense was paying $3,500 for an appraisal in 2021, and another appraisal in 2023. (Id.)

Plaintiffs argue that Defendant caused $1,814.019 in incidental damages for his delay in performing under the agreement. Plaintiffs argue that there was $1,338,583 in increased interest expense, $336,000 in lost rent on the Umami space, $135,936 in lost IRS 1031 exchange, and $3,500 in the cost of the 2021 appraisal.[1] (App. Memorandum of Points & Authorities at pp. 7-10.)

While Plaintiff argues that there have been certain losses, the Court cannot ascertain whether these losses and lost opportunities did in fact occur. For example, Plaintiff has not provided any documentary evidence showing that it had a potential tenant for the Umami space, the identity of the potential tenant, and the rental rate they had almost agreed to. Further, there is no documentary evidence or tax papers showing that Mr. Ravert and Glenn Dobbs each owed taxes in the amount of $67,968 for the capital gains on the property that they sold. There is also no receipt for the $3,500 appraisal in 2021. Finally, with respect to the increased interest expense, the Court understands Plaintiffs’ calculations if the Court were to accept the figures provided by Plaintiff. Plaintiff attaches an email from Jeffrey Munson (dated September 9, 2021) with a “pre-qual” letter with a fee schedule and his September 10, 2021 letter stating that ABB has reviewed Mexicali Cocina & Cantina and its owners’ financial information, but stated that the letter did “not constitute a loan approval or a commitment to rate, fees, or terms,” it has “performed cursory due diligence” for the property, and a completed loan file with an acceptable appraisal would be required for underwriter review before a final credit decision could be made. (Ravert Decl., Ex. A [9/10/21 Email], Ex. B [9/10/21 Letter].) The email and letter likely provide the best-case scenario for Plaintiffs if their loans were approved in 2021; however, the figures are speculative as further investigation, review, and appraisal still had to be done before any final rates and terms were provided.

While the Court may find that Plaintiffs heave established the probable validity of their breach of contract claim regarding the elements of a contract, Plaintiffs’ performance, and Defendant’s breach, the damages component is speculative at this time and has not been substantiated by Plaintiff. Defendant argues in opposition that the case is not ripe for an accounting and that the damages are not fixed or readily ascertainable, such that Plaintiffs have not satisfied their attachment burden. Moreover, it appears that the sale of the property has not been accomplished at this time, an event which will be relevant to multiple damage questions, and may necessitate further legal analysis regarding the choice of remedies.

At this time, the Court finds that while Plaintiffs have not established each element of the probable validity of their breach of contract claim as the damages component estimated by Plaintiff is not fully substantiated. Thus, this factor has not been met.

The Court shall issue a right to attach order if the claim upon which the attachment is based is one upon which an attachment may be issued. (CCP § 484.090.) “[A]n 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) exclusive of costs, interest, and attorney’s fees.” (CCP § 483.010(a).) “If the action is against a defendant who is a natural person, an attachment may be issued only on a claim which arises out of the conduct by the defendant of a trade, business, or profession.” (CCP § 483.010(c).)

The amount Plaintiffs seek to be secured by the attachment is $3,014,019, which includes estimated costs of $52,449 and attorney’s fees of $1,147,551, which is greater than $500.00. (See AT-105, §8.) However, as discussed above, these figures regarding the amount to be secured by the attachment are speculative and unsubstantiated at this time. As discussed above, Plaintiff has only provided declaration statements regarding his damages, but it has not provided admissible documentary evidence showing the losses it incurred based on lost financing opportunities, lost rental opportunities, money spent on the IRS 1031 exchange, and the money spent on a prior appraisal. As such, this factor has not been met.

CCP § 484.090(a)(3)-(4) states that the Court shall issue a right to attach order if “the attachment is not sought for a purpose other than the recovery on the claim upon which the attachment is based . . . [and] the amount to be secured by the attachment is greater than zero.”

In this case, Plaintiff attests on Form AT-105 that the attachment is not sought for a purpose other than the recovery on a claim upon which the attachment is based. (AT-105, §4.) Also, it is clear from the evidence presented that the amount to be secured is greater than zero. There is no indication that the application is sought for any other purpose, and Defendant does not argue that the action is brought for any other purpose.

Where the defendant is a corporation, a reference to “all corporate property which is subject to attachment pursuant to subdivision (a) of Code of Civil Procedure Section 487.010” satisfies the requirements of this subdivision. 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” satisfies the requirements of this subdivision. Where the defendant is a natural person, the description of the property shall be reasonably adequate to permit the defendant to identify the specific property sought to be attached.

Plaintiffs seek any property of Defendant Edward J. Hanessian who is a natural person. That is subject to attachment under CCP § 487.010. (AT-105, ¶9(c).) Specifically, Plaintiffs seek: “Proceeds of the sale of the property that is the subject of this litigation, known as 12159, 12161 and 12163 Ventura Boulevard and 12158 Ventura Place, Studio City, California. Sale is set to close in August 2023. Escrow has been opened with First American Title Insurance company, 385 E. Colorado Blvd., Suite 205, Pasadena, CA 91101.” (Id.)

Plaintiffs have properly described the property sought to be attached. (See CCP § 487.010(c).) However, the issue persists regarding whether Plaintiffs have adequately substantiated their damages and the amount to be attached.

Defendant has not stated whether they are claiming an entitlement to any exemptions.

In the alternative, Plaintiffs move for a TRO against Defendant Edward J. Hanessian regarding the proceeds of the sale of the property that is subject to the ligation, located at 12159, 12161, and 12163 Ventura Boulevard and 12158 Ventura Place, Studio City, California.

In light of the ruling on the application for writ of attachment, Plaintiffs’ alternative motion for a TRO is denied as Plaintiffs have not established their basis for an attachment or a TRO.

Plaintiffs’ application for writ of attachment against Defendants Edward J. Hanessian is denied.

Plaintiffs’ alternative motion for a Temporary Restraining Order is denied without prejudice.

[1] These figures are calculated in Plaintiffs’ memorandum of points and authorities.

· Increased Interest Expense: Plaintiffs calculate that the cost of financing this purchase in 2023 instead of 2021 as follows.

o $1.6 million SBA financing:

§ Interest over 25 years at 6.579% (2023): $1,664,729

§ Interest over 25 years at 2.85% (2021): $638,920

§ Difference: $1,664,729 - $638,920 = $1,025,809 in total excess interest

o $2 million commercial loan:

§ Interest in first 5 years at 6.88% (2023): $654,396

§ Interest in first 5 years at 3.65% (2021): $341,623

§ Difference: $654,396- $341,623= $312,773 in total excess interest

o The total increased interest on both loans is $1,338,583 (= $1,025,809 + $312,773)

· The Umami space = loss of $14,000 per month in rent from January 2022 to the end of 2023, for $336,000 in lost rent.

· Lost IRS 1031 Exchange = Plaintiffs Ravert and Dobbs sold another property in fall of 2021, which resulted in an otherwise avoidable tax liability of $135,936 (or $67,968 each).

· 2021 Appraisal Cost = $3,500, which Plaintiffs claim was no longer valid and they had to obtain a new appraisal in 2023.