Judge: Mary H. Strobel, Case: 22STCV32359, Date: 2023-03-16 Tentative Ruling

Case Number: 22STCV32359    Hearing Date: March 16, 2023    Dept: 82

            Plaintiff Ricardo Castellanos (“Plaintiff”) moves for a writ of attachment against Defendant Aaron Haith II (“Defendant”) in the amount of $640,708.88.

Plaintiff’s Evidentiary Objections

(1)  Sustained. 

(2)  Sustained. 

(3)  Sustained. 

(4)  Overruled.  

Relevant Procedural History

            On October 3, 2022, Plaintiff filed a complaint against Defendant for breach of contract (settlement agreement).

            On December 5, 2022, Defendant filed a cross-complaint and an answer.

            On December 6, 2022, Plaintiff filed and served this application for writ of attachment.

            On January 31, 2023, Defendant filed an opposition and a notice of opposition. 

            On February 1, 2023, Defendant filed a second notice of opposition.

            On February 3, 2023, Plaintiff filed a reply and notice of opposition to claim of exemption. 

            On February 7, 2023, the application came for hearing before the court.  Defendant's oral motion to continue the hearing to present additional evidence to the court was made, argued, and granted for the limited purpose of filing a declaration of the accountant on the issue of an agreement between the parties to share expenses.

            On February 1, 2023, Defendant filed and served a declaration of accountant and tax preparer Linnette Fontanez.  On March 7, 2023, Plaintiff filed and served a supplemental reply in response to the Fontanez declaration. 

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.) 

“The court’s determinations [for an application for writ of attachment] shall have no effect on the determination of any issues in the action other than issues relevant to proceedings [for attachment]. The court’s determinations under this chapter shall not be given in evidence nor referred to at the trial of any such action.”  (CCP § 484.100.)

Analysis 

1.    Service of Application

            Defendant contends that he “had not appeared in the action prior to this application being served” and CCP section 482.070(d) required personal service of the application.  (Oppo. 4.)  The court need not decide whether Defendant’s interpretation of section 482.070(d) is correct.  Defendant appeared in this action on December 5, 2022, by filing an answer and cross-complaint.  The application was filed and served the next day.  Thus, contrary to Defendant’s assertion, he had appeared prior to service of the application. 

2.    Probable Validity of Plaintiff’s Claims

The application is based on Plaintiff’s causes 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.) 

            Plaintiff submits evidence of the following.  Plaintiff and Defendant are business partners in two limited liabilities companies (“LLCs”) that acquire, develop, and sell real properties in California and Indiana (“A&R Entities”).  Plaintiff and Defendant each own 50% of these entities.  On June 29, 2022, Plaintiff and Defendant participated in a mediation concerning a dispute over their management and operation of the A&R Entities.  Both parties were represented by legal counsel.  At mediation, Plaintiff and Defendant executed a settlement agreement dated June 29, 2022 (“Settlement Agreement”).  In that integrated, written agreement, Defendant agreed to buy out Plaintiff’s interests in the A&R Entities for the total amount of $550,000.  The Settlement Agreement required Defendant to pay the $550,000 to Plaintiff by September 30, 2022.  The agreement states that any unpaid portion of the $550,000 shall accrue interest at 10% a year after September 30, 2022.  Concurrent with Defendant’s payment of the $550,000, Plaintiff agreed to convey his membership interests in the A&R Entities to Defendant.  (Castellanos Decl. ¶¶ 3-12, Exh. A.)

Plaintiff submits evidence that Defendant has refused to make the payment required by the Settlement Agreement.  Plaintiff submits reasonable estimates of attorney’s fees, costs, and interest due pursuant to the terms of the agreement.  (Castellanos Decl. ¶¶ 3-12, Exh. A-C; Gwynn Decl. ¶¶ 3-7.)  Plaintiff’s evidence, if not rebutted, supports a probably valid contract claim in the amount of $640,708.88. 

Defendant contends that facts stated in a declaration for an application for writ of attachment must be stated “with particularity.”  (Oppo. 6, citing CCP § 482.040.)  Here, Plaintiff’s declarations, summarized above, are set forth with particularity and satisfy that requirement from section 482.040.  

Defendant appears to oppose the application based on claims for breach of contract made in his cross-complaint and declaration.  (Oppo. 2-3.)  “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.”  (See Loeb & Loeb v. Beverly Glen Music, Inc. (1985) 166 Cal.App.3d 1110, 1120.)

April 2021 Agreement to Share Expenses

Defendant contends that Plaintiff breached a “business agreement” entered into in April 2021 when he allegedly stopped paying for 50% of the expenses for the real properties owned by the A&R Entities.  (Oppo. 2-3; Cross-Compl. ¶¶ 24-35; Haith Decl. ¶¶ 2-4.) 

Defendant declares that he and Plaintiff entered an agreement in April 2021 “for the joint purchase and support of purchasing and renovating multi-unit real estate for resale and/or to hold as income property.”  (Haith Decl. ¶ 2)  Defendant does not specify whether this agreement was written, oral, or implied.  He declares that under this April 2021 agreement “[Plaintiff] and I agreed to share 50/50 all expenses related to any properties purchased by A&R….”  (Id. ¶¶ 2-3.)  However, Defendant then declares that “[Plaintiff] and I thereafter formed A&R Capital LLC, a California limited liability company  (“A&R Capital”), and A&R Capital Indy LLC ….”  (Id. ¶ 4 [bold italics added].)  Defendant does not submit copies of the operating agreements for these LLCs nor develop an argument that Plaintiff breached the terms of the operating agreements.  To the extent Defendant claims there was a different April 2021 agreement to share expenses, Defendant does not submit sufficient evidence concerning the execution of that agreement or the specific terms.  Nor does Defendant explain why that different agreement would apply to the parties’ conduct with respect to real property owned by LLCs, which are business entities presumably governed by their own operating agreements. 

In reply, Plaintiff submits evidence that undermines Defendant’s claim that Plaintiff and Defendant agreed to individually share all expenses, including an operating agreement for A&R Capital LLC executed in June 2019.  That operating agreement states that members are not obligated to make additional capital contributions unless unanimously agreed by all the members.  (Reply Castellanos Decl. ¶¶ 2-3, Exh. D, E.)  Defendant does not submit evidence of a unanimous agreement to make additional capital contributions.  This operating agreement also predates the purported April 2021 “business agreement” referred to by Defendant. 

The declaration of accountant Linnette Fontanez does not support Defendant’s claim that he and Plaintiff entered an agreement in April 2021 to each pay 50% of the expenses for the real properties owned by the A&R Entities.  Fontanez states that she has not been provided with an operating agreement, and she has “not been made aware of any agreements between the members involving their business operations.”  (Fontanez Decl. ¶¶ 3, 5.)  Accordingly, she lacks personal knowledge about whether the parties entered an agreement to share expenses and her testimony does not support Defendant’s claim. 

Fontanez authenticates emails to her from Plaintiff stating:

·         August 2, 2022: “How is it that our ending capital accounts are different when all contributions have been exactly the same and all disbursements have been exactly the same.  We have always been 50/50 partners.”  (Id. Exh. 3)

·         September 9, 2022: “The contributions that I made and the distributions I took should all match Aarons.  We’re 50/50 partners.”  (Id. Exh. 4.)

She also authenticates K-1 tax forms for both Plaintiff and Defendant showing that their respective share of profit, loss, and capital was 50% in years 2020 and 2021.  (Id. Exh. 5-8.)

This evidence only corroborates the undisputed fact that Plaintiff and Defendant each own a 50% interest in the LLCs.  “In general, members of a limited liability company are not liable for the ‘debts, obligations, or other liabilities’ of the limited liability company.”  (CB Richard Ellis, Inc. v. Terra Nostra Consultants (2014) 230 Cal.App.4th 405, 411; see Corp. Code § 17703.04(a).)  Thus, Plaintiff’s 50-50 membership in the LLCs does not obligate him to pay the expenses of the A&R Entities and, in itself, is not evidence of some separate agreement to share expenses.  Similarly, the evidence that contributions and distributions were the same is consistent with 50-50 ownership of the LLCs and does not support Defendant’s claim there was an agreement to share expenses.  (See generally Corp. Code § 17701.02(c), (f).) 

Even if Defendant could prove there was some April 2021 agreement to share expenses (which he has not proven), breach of that agreement would not necessarily defeat Plaintiff’s claim for breach of the Settlement Agreement.  Rather, Defendant could pursue a claim for offset of Plaintiff’s damages based on alleged breach of the April 2021 agreement.  Defendant has the burden of proof to satisfy the requirements of attachment for any offset claim.  (See CCP § 483.015; Lydig Construction, Inc. v. Martinez Steel Corp. (2015) 234 Cal.App.4th 937, 945.)  Among other requirements, “the contract sued on must furnish a standard by which the amount due may be clearly ascertained and there must exist a basis upon which the damages can be determined by proof.’ ” (See CIT Group/Equipment Financing, Inc. v. Super DVD, Inc. (2004) 115 Cal.App. 4th 537, 541.)  

Thus, to reduce Plaintiff’s attachment based on breach of a different agreement, Defendant would need to show that all elements of attachment are satisfied, including fixed and readily ascertainable damages in some specific amount.  Aside from the other defects in his evidence, discussed above, Defendant provides no calculation of damages from breach of the purported April 2021 business agreement. 

Defendant does not sufficiently show a probably valid claim for offset based on a purported April 2021 “business agreement.”  Defendant does not satisfy all requirements of attachment for this cross-claim. 

Alleged Breach of Settlement Agreement

Defendant also contends that Plaintiff breached the Settlement Agreement when he allegedly stopped paying for 50% of the expenses for the real properties owned by the A&R Entities, and also when he allegedly breached a confidentiality provision.  (Oppo. 2-3; Cross-Compl. ¶¶ 24-35; Haith Decl. ¶¶ 17-25.)

Defendant does not cite any provision in the Settlement Agreement that required Plaintiff, individually, to pay 50% of the expenses for the real properties.  In his declaration, Defendant cites to paragraph 15 of the Settlement Agreement, titled “Good Faith Cooperation,” that required the parties to “execute any and all further documents and take any and all further action that reasonably may be necessary or required to effectuate the provisions and purposes of this Agreement.”  (Haith Decl. ¶ 18.)  While Defendant may further develop this argument in future proceedings, he has not shown for purposes of this application that paragraph 15 required Plaintiff, individually, to pay 50% of the expenses for the real properties after the parties executed the Settlement Agreement.  As argued in reply, Defendant also fails to address other provisions of the Settlement Agreement, including “Indemnification,” which strongly suggest the parties did not agree in the settlement to share real property expenses individually after execution of the Agreement..  (Reply 5.) 

Defendant contends that Plaintiff breached confidentiality provisions in Paragraph 1 of the Settlement Agreement when Plaintiff allegedly disclosed the terms of the settlement to Semona Kessler (of Made Studios) and Judy Castellanos (Plaintiff’s mother who gave a loan for one of the properties).  (Haith Decl. ¶¶ 17 and 23-24.)  Defendant’s evidence is inadmissible and insufficient to support a probably valid claim.  (Id. ¶¶ 23-24 and court’s ruling on evidentiary objections above.)  Moreover, both Kessler and Judy Castellanos have submitted declarations disputing that Plaintiff disclosed the Settlement Agreement to them.  (Judy Castellanos Decl. ¶ 2; Kessler Decl. ¶ 2.)  Finally, even if Defendant could prove disclosure of the Settlement Agreement to Kessler or Judy Castellanos, Defendant has not addressed whether that breach was material, and has not provided sufficient evidence of damages in any specific amount.  (Brown v. Grimes (2011) 192 Cal.App.4th 265, 277 [only a material breach of contract is sufficient to allow the other party to suspend or be excused from its performance under the contract].) 

In his declaration, Defendant also contends that lender Coastline refused to extend terms for A&R notes after the Settlement Agreement was signed, and that the A&R Entities defaulted on its loans with Coastline as a result of Plaintiff’s alleged failure to pay “his 50% share” of expenses.  (Haith Decl. ¶¶ 25-26.)  These contentions are derivative of Defendant’s claim, analyzed above, that the parties had an agreement to individually share expenses.  Finally, Defendant fails to develop an argument or submit competent evidence that Coastline’s refusal to extend credit was connected to any alleged breach of the Settlement Agreement by Plaintiff. 

The court has considered the additional contentions made in Plaintiff’s reply not addressed above.  (See Reply 7-9, sections 4 and 5.)  While the reply contentions are consistent with the court’s determination of probable validity, they are not necessary for the court to decide this application. 

The declaration of accountant Linnette Fontanez is irrelevant to Defendant’s claim that Plaintiff breached the Settlement Agreement when he allegedly stopped paying for 50% of the expenses for the real properties owned by the A&R Entities, and also when he allegedly breached a confidentiality provision.  Such claim depends on the terms of the Settlement Agreement.  Fontanez does not show personal knowledge of the Settlement Agreement and her testimony and attached exhibits have no bearing on whether or not Plaintiff breached the terms thereof.    

Having considered the relative merits of the parties’ positions, the court finds that Plaintiff has shown a probably valid claim for breach of contract in the amount stated in the application.  Defendant is not precluded from further developing his cross-claims in future proceedings. 

3.    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).)  “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.  (§ 483.010(c); see Advance Transformer co. v. Sup.Ct. (1974) 44 Cal.App.3d 127, 143-144.)

Here, Plaintiff’s application for writ of attachment is based on a Settlement Agreement where the total amount allegedly due is in excess of $500.  The agreement is not secured by real property.  Defendant executed the Settlement Agreement as part of his trade, business, or profession.  (See Castellanos Decl. ¶¶ 3-8; Haith Decl. ¶¶ 14-15.)  Plaintiff’s damages are fixed and readily ascertainable from the terms of the Settlement Agreement and from Plaintiff’s declaration. 

4.    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.

            To the extent Defendant contends that Plaintiff seeks attachment for an improper purpose (see Oppo. 4:1-2), Defendant fails to develop the argument.  The court considers the contention unpersuasive and waived.  (Nelson v. Avondale HOA (2009) 172 Cal.App.4th 857, 862-863 [“When [a party] fails to raise a point, or asserts it but fails to support it with reasoned argument and citations to authority, we treat the point as waived”].) 

5.    Reduction of Amount to be Secured Based on Offset Claims or Affirmative Defenses

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.”  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.)  

For the reasons discussed above, Defendant has not proven all elements of attachment for his cross-claims, including fixed and readily ascertainable damages. 

6.    Subject Property

Plaintiff requests attachment against Defendant, a natural person, of items listed in CCP section 487.010(c) and (d), including interests in real property.  (Application ¶ 9c.)  That request is proper.  Contrary to Defendant’s argument (Oppo. 5), Plaintiff is not required by CCP section 484.020(e) to describe the property sought for attachment with further specificity.  (See Bank of America v. Salinas Nissan, Inc. (1989) 207 Cal. App. 3d 260, 267-268 [“all-inclusive” application satisfies CCP section 484.020(e)].) 

Plaintiff also requests attachment of safe deposit boxes.  (Appl. Attach. 9c, citing CCP § 488.460.)  CCP section 487.010(c) and (d) do not include safe deposit boxes as an item subject to pre-judgment attachment against an individual.  Plaintiff develops no argument that pre-judgment attachment of safe deposit boxes is consistent with section 487.010(c) and (d).  The court limits attachment to the items listed in CCP section 487.010(c) and (d).

7.    Exemptions

“If a defendant filing a notice of opposition desires to make any claim of exemption as provided in Section 484.070, the defendant may include that claim in the notice of opposition filed pursuant to this section.”  (CCP § 484.060(b).) The claim of exemption must be filed and served “no later than five court days prior to the date set for the hearing.”  (Id. § 484.060(a).)  A claim of exemption must describe the property to be exempted and specify the statute section supporting the claim.  (§ 484.070(c).)  “The claim of exemption shall be accompanied by an affidavit supporting any factual issues raised by the claim and points and authorities supporting any legal issues raised.”  (§ 484.070(d).)

On January 31, 2023, Defendant timely filed an opposition and a notice of opposition.  Defendant checked a box “will claim exemption,” but failed to specify any exemptions.  Since no exemptions were claimed in this notice, Defendant did not satisfy the statutory requirements of sections 484.060 and 484.070 to claim exemption.  On January 31, 2023, Defendant also did not submit an affidavit or legal brief claiming any specific statutory exemptions, or describing any specific exempt property. 

On February 1, 2023, Defendant filed a second notice of opposition and purported to claim exemptions in paragraph 4.c of the notice. This claim of exemption was not timely filed “five court days prior to the date set for the hearing.”  (CCP § 484.060(a).)  Because this notice of opposition and claim of exemption was not timely filed, it is legally defective and cannot be considered.  (See Id. § 484.060(c) [“If the defendant fails to file a notice of opposition within the time prescribed, the defendant shall not be permitted to oppose the issuance of the order.”].)  “The Attachment Law statutes are subject to strict construction.” (Epstein v. Abrams (1997) 57 Cal.App.4th 1159, 1168.) 

            Even if considered, the February 1, 2023, claim of exemption simply states that Plaintiff failed to identify the property sought for attachment and that all property listed “belongs to the LLC.”  As discussed, Plaintiff sufficiently described the property of Defendant sought for attachment.  (Bank of America v. Salinas Nissan, Inc. (1989) 207 Cal. App. 3d 260, 267-268.)  Defendant’s claim that the property belongs to the LLC is unclear and is not a sufficient basis upon which to an grant exemption.  The writ of attachment will only apply to property owned by Defendant.

As asserted in Plaintiff’s notice of opposition, both the January 31, 2023, and February 1, 2023, claim of exemption are also defective because Defendant does not describe the property to be exempted or submit an “affidavit supporting any factual issues raised by the claim and points and authorities supporting any legal issues raised.”  (CCP 484.070(c) and (d).)

Finally, to the extent Defendant claims certain assets are necessary for his support or that of his family (see 2/1/23 Claim of Exemption at ¶ 4.c(5)), Defendant has not filed a financial statement that complies with CCP section 703.530.  This requirement is mandatory.  (Rutter, Cal. Prac. Guide, Civ. Pro. Before Trial, ¶ 9:875.) 

            Defendant’s claims of exemption are DENIED.

8.    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. 

9.    Turnover Order  

Plaintiff seeks a turnover order.  (See Proposed Order ¶ 3.d.)  “If a writ of attachment is issued, the court may also issue an order directing the defendant to transfer to the levying officer either or both of the following: [¶] (1) Possession of the property to be attached if the property is sought to be attached by taking it into custody. [¶] (2) Possession of documentary evidence of title to property of or a debt owed to the defendant that is sought to be attached.”  (CCP § 482.080 [emphasis added].) 

            Plaintiff has not shown the applicability of this section to its attachment request or briefed the necessity of this additional remedy. The request for a turnover order is denied.

Conclusion

The application for writ of attachment is GRANTED in the amount requested.  Plaintiff to post an undertaking of $10,000. 

The court limits attachment to the items listed in CCP section 487.010(c) and (d).  The court does not grant attachment of safe deposit boxes. 

The request for a turnover order is DENIED.

Defendant’s claims of exemption are DENIED.