Judge: Michael J. Strickroth, Case: 2023-01311191, Date: 2023-06-12 Tentative Ruling

Application for Right to Attach Order/Writ of Attachment

Plaintiff Newport Beach Auto Gallery, Inc. (“NBAG”) moves for a right to attach order and order for issuance of a writ of attachment against defendant Evan Paul in the amount of $7,676,602.74 is DENIED.

Request for Judicial Notice:

Plaintiff’s request for Judicial Notice of Exhibits A through W is GRANTED. The Court may take judicial notice of Exhibits A, U, V and W, as they are records of courts of California and documents that were filed in prior litigation pursuant to Evidence Code Section 452(d). The Court may take judicial notice of Exhibits B-T as official documents of the State of California pursuant to Evidence Code § 452(c).

NBAG has shown Real Estate Portfolio Management, LLC (“REPM”) loaned defendant Evan Paul Auto Capital, LLC (“EPAC”) $1,000,000. (Steve George Declaration as Managing Member of REPM [“George REPM Decl.”], ¶ 5.) The loan was memorialized in a written Promissory Note dated 9/12/2017 (“Note”) with defendant Evan Paul (“Paul”) signing a personal guarantee. (George REPM Decl., ¶ 5.)

Paul argues that pursuant to Corporations Code Section 25118, subdivision (e)(1) exemptions from the usury provision do not apply to individual guarantors.

Section 25118, subdivision (e) states in pertinent part: “This section does not apply to: (1) Any evidence of indebtedness issued or guaranteed (if the guaranty is part of the consideration for the indebtedness) by an individual, a revocable trust having one or more individuals as trustors, or a partnership in which, at the time of issuance, one or more individuals are general partners.”

Section 25118 does not apply here because the Court previously found the Note was exempt from the usury laws as to EPAC under the constitutional usury exemption, pursuant to California Constitution, Article XV, § 1, Section 1 and not pursuant to Section 25118 which applies to loans for business purposes to sophisticated borrowers. (ROA No. 94.)

Moore v. Hill (2010) 188 Cal.App.4th 1267 states: 

“In enacting statutory exemptions to Article XV, the Legislature has granted exemptions to (1) classes of persons or entities; and, (2) types of transactions. For example, in addition to commercial finance lenders, the Legislature has exempted other classes of persons or entities such as incorporated insurers, state and local public retirement systems, and out-of-state public retirement or pension systems. . . [¶] The fact that the Legislature distinguished between class-based exemptions and exemptions limited to specific transactions conducted by certain persons or entities, shows that where it exempted a class the Legislature intended to enact a broad, unqualified exemption to members of that class under the usury laws, because it did not limit the exemption to a specific type or category of applicable transaction. Under such a broad, unqualified class-based exemption, all the transactions of class members, whether loans or obligations, are exempt from the usury laws. There is one caveat: ‘The exempted classes of persons ... belong to those classes, and qualify for an exemption, by virtue of their licenses[,]’ and therefore must act within the scope of that license in order to enjoy the benefit of exemption.”  (Id. at 1282, fn. 13; emphasis added.)

There is no evidence Paul was a licensed financial lender or that he acted within the scope of the alleged license. Therefore, the usury exemption does not apply to Paul.

Based on the foregoing, the Motion is DENIED.

Defendant Evan Paul to give notice.