Judge: Mary H. Strobel, Case: 21STCV04269, Date: 2022-08-02 Tentative Ruling

Case Number: 21STCV04269    Hearing Date: August 2, 2022    Dept: 82

Plaintiff 290 Beowawie LLC (“Plaintiff”) moves for a writ of attachment against Defendant Indinero Inc. (“Defendant” or “Indinero”) in the amount of $1,577,390.02.

Plaintiff’s Evidentiary Objections

(1)  – (6) Overruled. 

(7)  Sustained. 

Relevant Procedural History

            On February 2, 2021, Plaintiff filed a complaint for breach of contract and other claims.  On July 19, 2021, Plaintiff filed the operative first amended complaint (“FAC”) for breach of contract and other claims.

            On March 10, 2022, Defendant filed an answer.  On May 31, 2022, Defendant filed a first amended answer.

On May 26, 2022, Plaintiff filed the instant application for writ of attachment.  The court has received Defendant’s opposition and Plaintiff’s reply.

Summary of Applicable Law

“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.)

The application shall be executed under oath and must include: (1) a statement showing that the attachment is sought to secure the recovery on a claim upon which an attachment may be issued; (2) a statement of the amount to be secured by the attachment; (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.  (CCP § 484.020.)

“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.) 

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.

(4) The amount to be secured by the attachment is greater than zero.

CCP § 484.090.

“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 Attachment Law statutes are subject to strict construction.” (Epstein v. Abrams (1997) 57 Cal.App.4th 1159, 1168.) 

“In determining the probable validity of a claim where the defendant makes an appearance, 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.”  (Loeb & Loeb v. Beverly Glen Music, Inc. (1985) 166 Cal.App.3d 1110, 1120.)  The court’s determination in an attachment proceeding “shall have no effect” on the main action.  (CCP § 484.100.)

Analysis 

1.    Probable Validity of Plaintiff’s Claim

The application is based on Plaintiff’s cause of action for breach of contract.  To establish a claim for breach of contract, a plaintiff must prove: (1) existence of a contract; (2) plaintiff’s performance or excuse for nonperformance; (3) defendant’s breach of the contract; and (4) damages incurred by plaintiff as a result of the breach.  (Durell v. Sharp Healthcare, (2010) 183 Cal.App.4th 1350, 1367.)  

Factual Background

On or about May 31, 2020, Defendant InDinero and Plaintiff, along with Plaintiff’s principal, David Johnson, executed a Release and Settlement Agreement (“Agreement”).  (Johnson Decl. ¶ 3, Exh. A.)  Attached to the copy of the Agreement authenticated by Johnson are Exhibits A-E, which appear to be various unsigned contracts, including an unsigned First Amendment to Subordination and Postponment Agreement.  (Ibid.)  The Recitals to the Agreement also refer to, among other things, a promissory note dated February 12, 2018, and an Executive Employment Agreement in which Defendant hired Johnson.  (Ibid.) 

In a declaration, Johnson states that the Agreement required Defendant “to make certain cash payments to 290 Beowawie LLC of which the sum of $2,313,595.88 remains to be paid.”  (Ibid.)  Johnson does not specify the provisions of the Agreement that required payments to be made to Plaintiff or provide a calculation of the amount due.  However, Plaintiff submits evidence that Defendant has admitted a debt of $2,313,595.88 under the Agreement.  Johnson authenticates an email from Defendant’s interim CFO, dated February 3, 2021, apologizing for a “delay in payment.”  (Id. ¶ 4, Exh. B.)  Johnson also declares that Defendant “has admitted the debt in connection with the 2022 audit of its 2021 financial statements by sending me an audit confirmation letter asking me to confirm that the amount of the debt is $2,313,595.88. Given the payment terms of the Agreement, as of August 2, 2022, the amount due and owing under the Agreement is no less than $1,542,397.08.”  (Id. ¶ 5.)

Plaintiff’s attorney, Carl Aires, also authenticates a deposition transcript of a person most qualified (“PMQ”) of Jones & Roth, an auditor.  (Aires Decl. ¶ 5, Exh. E.)  Exhibits to this deposition, authenticated by the PMQ, include a February 2, 2022, letter signed by Defendant’s President of Operations, which states that Defendant’s auditor, Jones & Roth, confirmed an unpaid principal balance of $2,313,595.88 on a note payable to “David Johnson,” Plaintiff’s principal.  (Id. Exh. E at p. 124 of 134 and JRCPA000007.)   

Plaintiff Shows a Probably Valid Claim

Based on the evidence summarized above, Plaintiff shows a probably valid claim against Defendant for breach of the Agreement in the amount of $1,542,397.08.  Plaintiff submits undisputed evidence of the existence of the Agreement and Plaintiff’s performance.  (Johnson Decl. ¶¶ 2-3, Exh. A.)  Plaintiff also submits evidence of Defendant’s breach.  (Id. ¶¶ 4-5.)  Finally, Plaintiff submits evidence of damages in the amount of $1,542,397.08, estimated costs of $875, and allowable attorney’s fees pursuant to paragraph 18 of the Agreement, calculated pursuant to Local 3.214, in the amount of $34,117.94, for a total amount of $1,577,390.02.  Significantly to the court, Plaintiff also submits evidence that Defendant “does not contest the debt” in a total amount of $2,313,595.88, greater than the amount of the requested attachment.  (Id. ¶¶ ¶¶ 4-5 and Exh. B; Aires Decl. ¶ 5, Exh. E at 1-5, 33-55, and Exh. 4.) 

In opposition, Defendant does not respond to Plaintiff’s assertions about the Agreement, including that it required Defendant to make cash payments to Plaintiff or that a debt of at least $1,542,397.08 is currently owed to Plaintiff.  (See Sehulster Tunnels/Pre-Con v. Traylor Brothers, Inc. (2003) 111 Cal.App.4th 1328, 1345, fn. 16 [failure to address point is “equivalent to a concession”].) 

Plaintiff shows a probably valid contract claim against Defendant in the amount of $1,577,390.02.

Defendant Has Not Shown that Section 7 of the Subordination Agreements Bars This Attachment Proceeding

In opposition, Defendant contends that the application must be denied pursuant to a subordination agreement executed by Plaintiff.  (Oppo. 4-6.)  Defendant’s president, Jessica Mah, authenticates a Subordination and Postponement Agreement (re TempCFO, Inc.) (“Subordination Agreement”) dated January 31, 2019 entered into between David Johnson, InDinero, and Beedie Investments Limited.  She also authenticates the First Amendment to Subordination and Postponement Agreement (re TempCFO, Inc.) (“First Amendment to Subordination Agreement”) dated May 31, 2020 entered into between 290 Beowawie LLC, InDinero, and Beedie Investments Limited.  (Mah Decl. ¶¶ 2-3, Exh. 1-2.) 

The Subordination Agreements state that Beedie Investments Limited is the “Senior Lender.”  Defendant is the “Borrower.”  The “Creditor” is David Johnson and, pursuant to the First Amendment, also Plaintiff. 

Defendant relies, in part, on section 7 of the Subordination Agreements.  (Oppo. 5.)  Defendant Section 7 of the Subordination Agreement requires Creditor to give Senior Lender written notice of any default by Borrower under any of the Subordinated Obligations.  Creditor also agreed not to take “Enforcement Action” against Borrower prior to specified events.  However, Section 7 also states: “The foregoing provisions of this Section 7 are solely for the purpose of defining the relative rights of the holders of Senior Lender … and Creditor … and shall not limit or otherwise affect any rights which Creditor may have against Borrower under the terms of the Subordinate Agreements.”  (Mah Decl. Exh. 1.)  Based on this language, section 7 of the Subordination Agreements does not preclude Plaintiff’s attachment proceeding. 

Defendant Has Not Shown Standing to Enforce the Subordination Agreements

As argued in reply, Defendant also has not shown, under the probable validity standard, that it has standing to enforce the Subordination Agreements.  (Reply 2.)  “California law does not give a party personal standing to assert rights or interests belonging solely to others.”  (Yvanova v. New Century Mortgage Corp. (2016) 62 Cal.4th 919, 936.) 

Section 13 of the Subordination Agreement states: “This Agreement is solely for the benefit of Senior Lender and its successors and assigns, and neither Borrower nor any other person shall have any right, benefit, priority or interest under, or because of the existence of, this Agreement.”  (Mah Decl. Exh. 1 [bold italics added].)  The First Amendment includes an identical statement.  (Mah Decl. Exh. 2.)

Defendant, which relies on the Subordination Agreement as a defense, fails to address this relevant language in its opposition brief.  A court “will not act as counsel for either party … and will not assume the task of initiating and prosecuting a search of the record for any purpose … not pointed out in the briefs.” (Fox v. Erickson (1950) 99 Cal.App.2d 740, 742; Nelson v. Avondale HOA (2009) 172 Cal.App.4th 857, 862-863 [argument waived if not raised]; Inyo Citizens for Better Planning v. Inyo County Board of Supervisors (2009) 180 Cal.App.4th 1, 14 [court does not serve as “backup” counsel].) 

Moreover, the plain meaning of the quoted statement from Section 13 appears to be that Defendant (the “Borrower”) has no interest in and no right to enforce the Subordination Agreement, including all contractual provisions from the Subordination Agreement discussed in Defendant’s opposition brief.  Defendant has developed no argument to the contrary.

On this briefing, Defendant fails to show a probably valid defense to Plaintiff’s contract claim based on the Subordination Agreements.  Defendant is not precluded from further developing its arguments based on the Subordination Agreement in future proceedings.

Based on the foregoing, Plaintiff shows a probably valid contract claim against Defendant in the amount of $1,577,390.02.

2.    Basis of Attachment

“[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).)  “An attachment may not be issued on a claim which is secured by any interest in real property arising from agreement ….”  (CCP § 483.010(b).)

Here, Plaintiff’s application for writ of attachment is based on a contract where the total amount allegedly due is in excess of $500.  It does not appear this contract claim is secured by real property.  Plaintiff’s damages may be fixed and readily ascertainable from terms of the contract and Plaintiff’s declarations.  Defendant makes no argument to the contrary in its opposition brief.  (See Sehulster Tunnels/Pre-Con v. Traylor Brothers, Inc. (2003) 111 Cal.App.4th 1328, 1345, fn. 16 [failure to address point is “equivalent to a concession”].) 

Johnson declares “[g]iven the payment terms of the Agreement, as of August 2, 2022, the amount due and owing under the Agreement is no less than $1,542,397.08.”  (Johnson decl. ¶ 5.)  Plaintiff seeks to attach this amount plus costs of suit and attorneys’ fees.  (Id. ¶ 7.)  Plaintiff submits evidence that Defendant has not disputed the debt.  The amount due is fixed and ascertainable based on the contract.

3.    Purpose and Amount of Attachment

Code of Civil Procedure section 484.090 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.”

Plaintiff declares, and the court finds, that attachment is not sought for a purpose other than the recovery on Plaintiff’s claim.  (Appl. ¶ 4.)  The amount to be secured is greater than zero.

4.    Subject Property

Code of Civil Procedure section 487.010(a) provides that “[w]here the defendant is a corporation, all corporate property for which a method of levy is provided” is subject to attachment.   Thus, a request for attachment of all of Defendant’s property is appropriate. 

5.    Exemptions

Defendant does not claim any exemptions.

6.    Reduction of Amount to be Secured

Code of Civil Procedure section 483.015(b) provides that the amount to be secured by the attachment shall be reduced by, inter alia:  “(2) The amount of any indebtedness of the plaintiff that the defendant has claimed in a cross-complaint filed in the action if the defendant’s claim is one upon which an attachment could be issued.”

“[T]o sustain reduction in a writ amount, most courts require that the defendant provide enough evidence about its counterclaims and/or defenses to prove a prima facie case [for attachment against Plaintiff].”  (Ahart, California Practice Guide: Enforcing Judgments and Debts, ¶ 4:64 (1998 rev.).)  Defendant has the burden of proof to satisfy the requirements of attachment for any offset claim.  (See CCP § 483.015 and Lydig Construction, Inc. v. Martinez Steel Corp. (2015) 234 Cal.App.4th 937, 945.)  

Defendant does not show any basis to reduce any attachment issued to Plaintiff.

7.    Undertaking

Code of Civil Procedure section 489.210 requires the plaintiff to file an undertaking before issuance of a writ of attachment.  Code of Civil Procedure section 489.220 provides, with exceptions, for an undertaking in the amount of $10,000.  Neither party argues for a different amount of undertaking. 

Conclusion

The application is GRANTED.      

Plaintiff to post an undertaking of $10,000.