Judge Mitchell L. Beckloff, Case Number: 23STCV07593, Date: 2024-02-21 Tentative Ruling

Judge: Mitchell L. Beckloff, Case: 23STCV07593, Date: 2024-02-21 Tentative Ruling

Plaintiff, Hunt Capital Partners, LLC, applies for a writ of attachment against Defendant, Andrew Hanna, in the amount of $987,617.22.

On April 6, 2023, Plaintiff filed a complaint for breach of contract and other claims against Defendants LBB Housing Investors, L.P. (LBB); Global Premier Development, Inc. (Global); Hanna; and SF Eddy Housing Investors L.P. (SF).

On June 13, 2023, Plaintiff filed its applications for writs of attachment against Global and Hanna. Global opposed the application.

On July 31, 2023, LBB and SF filed a cross-complaint against Plaintiff and JPMorgan Chase & Co.

On August 30, 2023, Global filed a cross-complaint against Plaintiff and JPMorgan Chase & Co.

On August 31, 2023, the Honorable Judge James Chalfant (Dept. 85) granted the application for a writ of attachment as to Global in the amount of $987,617.22. The court ordered Plaintiff to file a $10,000 undertaking. Because Plaintiff had not yet completed service of summons on Hanna, the court did not rule of the application against Hanna and continued that application to October 19, 2023.

On September 8, 2023, Plaintiff filed an undertaking in the amount of $10,000 as to Global.

On October 2, 2023, the court (Judge James Chalfant) accepted a preemptory challenge filed by Hanna. The court reassigned the application for a writ of attachment against Hanna to Department 86 (Judge Mitchell Beckloff). This department continued the hearing on the application to February 16, 2024.

On January 17, 2024, the court granted Hanna’s ex parte application to continue the hearing on the application to February 21, 2024.

On February 14, 2024, Hanna filed and served an opposition to the application and claim of exemption.

On February 16, 2024, Hanna filed an unauthorized sur-reply. Hanna did not request or obtain leave of court to file a sur-reply. Accordingly, the court disregards and strikes the written sur-reply on its own motion. Hanna may orally respond to the reply brief at the time of hearing.

“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.” (Code Civ. Proc., § 484.010.)

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 has ‘probable validity’ where it is more likely than not that the plaintiff will obtain a judgment against the defendant on that claim.” (Id. at § 481.190.) “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.”¿(Hobbs v. Weiss (1999) 73 Cal. App.4th 76, 80.)

“The application 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.”¿(Code Civ. Proc., § 484.030.) Code of Civil Procedure section 482.040 states in pertinent part:

The facts stated in each affidavit filed pursuant to this title shall be set forth with particularity. Except where matters are specifically permitted by this title to be shown by information and belief, each affidavit shall show affirmatively that the affiant, if sworn as a witness, can testify competently to the facts stated therein. As to matters shown by information and belief, the affidavit shall state the facts on which the affiant's belief is based, showing the nature of his information and the reliability of his informant. The affiant may be any person, whether or not a party to the action, who has knowledge of the facts.

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

The application is based on Plaintiff’s cause of action for breach of a guaranty agreement. 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.)

In support of the application, Plaintiff submits the Declaration of Jeffery Kohn, general counsel for Plaintiff. Kohn declares: In October 2019, LBB executed a note in favor of Plaintiff for the purposes of providing capital for its business operations. LBB borrowed $400,000 from Plaintiff pursuant to the note. Also in October 2019, to induce Plaintiff to make the loan to LBB, Hanna executed a written guaranty of LBB’s obligations to Plaintiff. (Kohn Decl. ¶¶ 6-7.) In April 2020 and January 2021, LBB and Plaintiff entered into amended loan agreements which increased the amount borrowed to $600,000, among other changes. (Kohn Decl. ¶¶ 8-9.)

In October 2019, SF executed a note in favor of Plaintiff for the purposes of providing capital for its business operations. SF borrowed $120,000 from Plaintiff pursuant to the note. Also in October 2019, to induce Plaintiff to make the loan to SF, Hanna executed a written guaranty of SF’s obligations to Plaintiff (together with the LBB guaranty, Guaranties). (Kohn Decl. ¶¶ 10-11.)

Although Plaintiff performed its obligations under the LBB note and SF note, LBB and SF have breached their obligations by failing to repay the loans. Both loans have matured and are payable in full. Although demand has been made, Hanna has not performed his obligations under the Guaranties. The total amount due on both notes and on the Guaranties is $987,617.22, including interest (but not attorney’s fees). (Kohn Decl. ¶¶ 13-30, Exh. 7.)

The foregoing evidence, if not rebutted, supports all elements of Plaintiff’s claim for breach of the Guaranties against Hanna, specifically: (1) the existence of the loans and Guaranties;

(2) Plaintiff’s performance of the agreements; (3) Defendant’s breach of the Guaranties for failure to pay the full amount due after the borrowers’ defaults; and (4) Plaintiff’s damages in the amount of $987,617.22.

In opposition, Hanna raises certain defenses to attachment. Hanna has the initial burden of proof to submit evidence to support the defenses and claims for offset. (Lydig Construction, Inc. v. Martinez Steel Corp. (2015) 234 Cal.App.4th 937, 944-945.) “Courts are generally suspicious of vague, unsupported counterclaims and defenses.” (Ibid.)

Hanna contends Plaintiff lacks standing to enforce the Guaranties because Hanna executed Guarantor Consents in October 2019 specifying that “Plaintiff HCP and JPMorgan had executed certain Assignment Agreements, and Guarantors also acknowledges and consents to the assignment of the Guaranty Agreements to JPMorgan as the assignee pursuant to the Assignments.” (Opposition 4:3-6; Hanna Decl. ¶ 5, Exh. A, B.)

Hanna submits documents entitled “Consent and Acknowledgment of Guarantor,” which make reference to an Assignment of Agreements between Plaintiff and JPMorgan Chase Bank. However, Hanna has not submitted a copy of the Assignment of Agreements and, therefore, the terms of any such assignment are unclear on this record. In reply, Plaintiff submits evidence that Plaintiff borrowed money pursuant to a Revolving Line of Credit from JPMorgan Chase Bank in 2019 and that the Guaranties were pledged as collateral. Plaintiff submits evidence that the JPMorgan loans were paid off in 2020 and the collateral was released back to Plaintiff. (Kagey Decl. ¶¶ 7-18.) This evidence supports a conclusion, under the probable validity standard, that Plaintiff is the current owner of the Guaranties and that any prior assignment to JPMorgan does not prevent Plaintiff from enforcing the Guaranties.[1]

Hanna next contends it is premature for Plaintiff to enforce the Guaranties because Plaintiff has not pursued or exhausted its remedies against the borrowers. Hanna relies on paragraph 25 of the Guaranties, which states in full:

25. With respect to all of the Indebtedness, the Guaranty may not be enforced against Guarantor by Borrower or Lender (for itself or on behalf of Borrower), without first pursuing or exhausting any other right or remedy, provided, however, that nothing in this Guaranty shall prevent the Borrower or the Lender from suing to enforce the provisions of the Loan Documents or from exercising any rights hereunder.

Hanna does not address paragraph 7 of the Guaranties, which states in relevant part:

7. Except as otherwise provided herein or in any of the other Loan Documents Guarantor hereby waives and agrees not to assert or take advantage of:

(a) any right to require Lender to proceed against any other person or to proceed against or exhaust any security held by Lender at any time or to pursue any other remedy in Lender's power before proceeding against Guarantor hereunder;

There is a potential ambiguity in the Guaranties created by paragraphs 25 and 7 with respect to whether Hanna waived any obligation of Plaintiff to pursue or exhaust its remedies against the borrowers, as permitted by Civil Code section 2856. In opposition, Hanna does not develop any argument that paragraph 25 should be given precedent in resolving this conflict. “Where general and specific provisions [of a contract] are inconsistent, the specific provision controls.” (California Union Square L.P. v. Saks & Co. LLC (2021) 71 Cal.App.5th 136, 143.) Arguably, paragraph 7 is the more specific provision and should control here.

Moreover, even if paragraph 25 applies, Hanna does not explain why Plaintiff’s filing of this lawsuit, which names LBB and SF as co-defendants, does not satisfy the requirement for Plaintiff to “pursu[e] or exhaust[] any other right or remedy.” Because paragraph 25 could be satisfied by this lawsuit (see Kagey Decl. ¶ 6 [asserting SF and LBB are insolvent and have no assets]), Defendant does not show, for purposes of pre-judgment attachment, that Plaintiff has failed to pursue or exhaust other rights or remedies against the borrowers.

Plaintiff intentionally misrepresented to Defendants that JPMorgan Chase & Co. (‘JPMorgan’) has passed litigation check of Defendant and the sponsors, with the intent to convince Defendant to believe that JPMorgan would actually move forward and close the partnerships with Defendant and induce Defendant to borrow large sums of loan from Plaintiff prematurely. Defendant’ [sic] detrimental reliance on Plaintiff’s representations was a substantial factor in causing their substantial financial harm. (Ans., Aff. Def. ¶ 12.)

Hanna raises this defense in opposition as a basis to reduce or offset the attachment. (Opposition 6:3-7:17; see Code Civ. Proc., § 483.015, subd. (b).) “To sustain reduction in a writ amount, most courts require that defendant [or cross-defendant] provide enough evidence about its counterclaims [or claims] and/or defenses to prove a prima facie case.” (Lydig Construction, Inc. v. Martinez Steel Corp., supra, 234 Cal.App.4th at 944-945.) Accordingly, Hanna must satisfy all requirements for pre-judgment attachment, including a showing that his defense is probably valid and that his damages are fixed and readily ascertainable from a contract. (Ibid.)

To prove fraud or intentional misrepresentation, Defendant must show: “(1) a knowingly false representation by the defendant; (2) an intent to deceive or induce reliance; (3) justifiable reliance by the plaintiff; and (4) resulting damages.” (Service by Medallion, Inc. v. Clorox Co. (1996) 44 Cal.App.4th 1807, 1816.) “The elements of negligent misrepresentation are (1) a misrepresentation of a past or existing material fact, (2) made without reasonable ground for believing it to be true, (3) made with the intent to induce another's reliance on the fact misrepresented, (4) justifiable reliance on the misrepresentation, and (5) resulting damage.” (Ragland v. U.S. Bank National Assn. (2012) 209 Cal.App.4th 182, 196.)

17. Upon signing the LBB Letter of Intent Agreement, HCP introduced JPMorgan to me and indicated that JPMorgan was interested in processing construction loans and permanent loans for both LBB and SF EDDY.

18. My staff started coordinating with HCP and JPMorgan by providing all preliminary due diligence related documentations, such as LBB and SF EDDY projects information, financial models, Sponsors’ financial information, full disclosure of sponsors’ past and current litigation status including detailed explanation of GPD’s seven years long litigation with AIG/ SunAmerica which was settled and concluded in 2018.

19. In or about October 2019, HCP, through its authorized representative, told me and my staff that JPMorgan was satisfied with its preliminary due diligence of the Sponsors, which included passing litigation checks and other required financial reviews of the Sponsors, and would move forward to close partnerships of both projects.

25. On or about August 7, 2020, JPMorgan’s representative notified me over the phone that JPMorgan decided to not move forward with the LBB project, as they did not pass the litigation check of the Sponsors, disregard of the fact that HCP’s representative had explicitly informed LBB ten months prior that JPMorgan has been satisfied with all the litigation check with the Sponsors.

Defendant does not show Plaintiff made any representation that JPMorgan would make a final commitment to the partnerships. Rather, Plaintiff’s representative only stated “JPMorgan was satisfied with its preliminary due diligence of the Sponsors.” (Hanna Decl. ¶ 19 [emphasis added].) Moreover, Defendant has not shown, under the probable validity standard, that Plaintiff knew the alleged statement was false or that Plaintiff had no reasonable grounds to believe in the truth of the statement. Accordingly, on this record, Hanna has not shown a probably valid defense for intentional or negligent misrepresentation.

Finally, while not raised by Plaintiff in reply, it appears Hanna’s alleged damages from the alleged fraud are not fixed and readily ascertainable from any contract. (See Hanna Decl. ¶ 30 [discussing consequential damages].)

For these reasons, Hanna has not shown the attachment should be reduced by any specific amount in connection with Defendant’s defense for intentional or negligent misrepresentation.

Breach of Letters of Intent; and Breach of Implied Covenant of Good Faith and Fair Dealing

Plaintiff breached its LBB and SF EDDY Letter of Intent Agreements with Defendants for failure to perform any part of its equity commitments to the projects, Plaintiff also breached the implied covenant of good faith and fair dealing, and by reason of such breach, Defendant has been excused of any duty it may have had to perform any obligation set forth in any agreement with Plaintiff. (Ans., Aff. Def. ¶ 10.)

In opposition, Hanna contends Plaintiff breached the Letter of Intent Agreements (LOIs) between Plaintiff and LBB and SF by:

failing and refusing to: a) enter into the LBB and SF EDDY partnerships as the Investor Limited Partner, along with all of the benefits and obligations to Defendants associated therewith, b) make any portion of the Tax Credit equity investments to the partnership as agreed, and c) fund balance of the predevelopment loan in the amount of $280,000 as required by the SF EDDY Letter of Intent Agreement and SF EDDY Note. (Opposition 8:8-12; see also Hanna Decl. ¶¶ 12-13, 28-30, Exh. E, F.)

For purposes of this application, Hanna has not shown the LOIs created binding obligations for Plaintiff to enter the partnerships. Generally, “[t]he purpose and function of a preliminary letter of intent is not to bind the parties to their ultimate contractual objective. Instead, it is only ‘to provide the initial framework from which the parties might later negotiate a final . . . agreement, if the deal works out.’ ” (Rennick v. O.P.T.I.O.N. Care, Inc. (9th Cir. 1996) 77 F.3d 309, 315.) Here, the LOIs outline the “proposal of the basic business terms to be included in the Partnership Agreement.” (Hanna Decl. Exh. E, F [emphasis added].)

Moreover, Hanna does not identify any specific terms that were binding upon Plaintiff, were allegedly breached, and resulted in fixed and readily ascertainable contract damages. While Hanna refers to the “exclusivity” clause in the LOIs, Hanna does not cite evidence that Plaintiff breached that clause. Hanna also states, generally, the “SF EDDY Letter of Intent Agreement specifically required Plaintiff to fund the remaining of the SF EDDY predevelopment loan in the amount of $280,000 upon request, with the condition that the entitlements are in place before November 30, 2019.” (Opposition 8:2-4.) Hanna does not cite the specific clause at issue. Moreover, Hanna does not identify any damages he suffered that are fixed and readily ascertainable from the terms of the LOIs. Rather, Hanna argues LBB, SF, and Global suffered consequential damages, such as out of pocket expenses and legal expenses related to “ongoing lawsuits with the lenders.” (Hanna Decl. ¶ 30.) Those types of consequential damages are not “readily ascertainable by reference to the contract . . . .’ ” (CIT Group/Equipment Financing, Inc. v. Super DVD, Inc. (2004) 115 Cal.App.4th 537, 541.)

Finally, as argued in reply, “[t]he LOIs are expressly contingent on several factors, including final review and approval by Hunt, a satisfactory site visit, accuracy of documentation, receipt of copies of all mortgage loans, ‘soft loans’ and grants, satisfactory review of the partnership agreement and due diligence, approval of construction plans, market study, and property appraisal.” (Reply 4:10-13; see Hanna Decl. Exh. E, F.) The court agrees, for purposes of this application, Hanna has not shown the contingencies of the LOIs were satisfied.

Hanna’s claim for breach of implied covenant of good faith and fair dealing is derivative of the arguments discussed above. Hanna has not satisfied all requirements of attachment for any of his defenses.

Based on the foregoing, Plaintiff has shown a probably valid claim against Hanna in the amount of $987,617.22.

“[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.” (Code Civ. Proc., § 483.010, subd. (a).) “An attachment may not be issued on a claim which is secured by any interest in real property arising from agreement . . . .” (Code Civ. Proc., § 483.010, subd. (b).) “[A]n attachment will lie upon a cause of action for damages for a breach of contract where the damages are readily ascertainable by reference to the contract and the basis of the computation of damages appears to be reasonable and definite.’ ” (CIT Group/Equipment Financing, Inc. v. Super DVD, Inc., supra, 115 Cal.App.4th at 541.)

“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. (Code Civ. Proc., § 483.010, subd. (c); see Advance Transformer Co. v. Superior Court (1974) 44 Cal.App.3d 127, 143-144.)

Here, Plaintiff’s application for writ of attachment is based on an agreement where the total amount allegedly due is in excess of $500. The Guaranties are not secured by real property. Plaintiff’s damages are fixed and readily ascertainable from the terms of the Guaranties and Plaintiff’s declaration and exhibits. The evidence shows Hanna executed the Guaranties as part of his trade, business, or profession. (See Kohn Decl. Exh. 2, 6 [Hanna executed Guaranties in business capacity]; and Hanna Decl. ¶ 1.)

Code of Civil Procedure section 484.090 states 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, attachment is not sought for a purpose other than the recovery on Plaintiff’s contract claim. (Appl. ¶ 4.) The amount to be secured is greater than zero.

Hanna has not submitted sufficient evidence that Plaintiff filed the application “for an ulterior purpose of harassing Defendant.” (Opposition 3:10.) That Plaintiff has been granted a writ of attachment as to Global, and received an offer to attach certain of Global’s assets, does not prove Plaintiff seeks attachment against Hanna for an improper purpose. (See Hanna Decl. ¶¶ 31-32.) Hanna also reiterates his position that Plaintiff lacks a probably valid claim. For the reasons discussed earlier, the court disagrees.

For the reasons discussed earlier, Hanna has not proven that the attachment should be reduced.

Plaintiff requests attachment against Defendant, a natural person, of items listed in Code of Civil Procedure section 487.010, subdivisions (c) and (d). (Appl. ¶ 9c.) That request is proper. (See Bank of America v. Salinas Nissan, Inc. (1989) 207 Cal.App.3d 260, 267-268.)

However, Plaintiff has included some items in the proposed order not specified in Code of Civil Procedure section 487.010, subdivisions (c) and (d), such as “all estates” or any judgment in which Defendant has an interest. (See Appl. Attach. 9(c) at ¶¶ 17-18.) The writ of attachment shall be limited to the items specified in Code of Civil Procedure section 487.010, subdivisions (c) and (d).

“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.” (Code Civ. Proc., § 484.060, subd. (b).) A claim of exemption must describe the property to be exempted and specify the statute section supporting the claim. (Id. at § 484.070, subd. (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.” (Id. at § 484.070, subd. (d).)

Defendant claims exemption “of the following entities pursuant to C.C.P. 487.010: Foundation for Better Housing, a California Non-Profit Corporation, Salton Power, Inc., a California Corporation, Dreamland Foundation, a California Non-Profit Corporation.” (Hanna Decl. ¶ 33.) Hanna has not specified the exemption upon which he relies.

Hanna states: “I do not have ownership interest in those entities. I do not take any salary, distribution, dividend, payment, repayment or other transfer of money or assets from those entities.” (Hanna Decl. ¶ 33.) If that is true, then the writ of attachment will not apply to any transfers of money or assets from the stated entities. As discussed, the writ of attachment will only issue as to Hanna’s assets and those items of property listed in Code of Civil Procedure section 487.010, subdivisions (c) and (d).

Because Hanna does not cite any pertinent statutory exemption or explain how it applies, the claim of exemption is DENIED.

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. The court concludes that the statutory undertaking of $10,000 is appropriate. Hanna has not submitted evidence to support a finding that his probable recovery for wrongful attachment is likely to be more than $10,000. Hanna is representing himself in this action, and thus he does not show he will be entitled to attorney’s fees.

The writ of attachment shall be limited to the items specified in Code of Civil Procedure section 487.010, subdivisions (c) and (d).

[1] Because Hanna first raised the issue in opposition, and did not present the written assignments themselves, Plaintiff had good cause to submit this new evidence in reply. (Balboa Ins. Co. v. Aguirre (1983) 149 Cal.App.3d 1002, 1010.)