Judge: Peter A. Hernandez, Case: 22PSCV00967, Date: 2022-12-06 Tentative Ruling
Case Number: 22PSCV00967 Hearing Date: December 6, 2022 Dept: O
Plaintiff Glorious Sky, LLC’s Application
for Right to Attach Order and Order for
Issuance of Writ of Attachment is summarily
DENIED as to Defendant Chris Tian and
DENIED as to MT Hermon LLC and Chris Tian.
Backgroun
Plaintiff Glorious Sky, LLC (“Glorious Sky”) alleges as follows:
On May 3, 2022, a written agreement was made between Glorious Sky and Defendant MT Hermon LLC (“MT”) for bitcoin mining hosting and related services. MT breached the agreement.
On September 12, 2022, Glorious Sky filed a First Amended Complaint, asserting causes of action against MT, Mike Tian (“Mike”), Chris Tian (“Chris”) and Does 1-50 for:
1.
Breach of Contract
2.
Common Counts
3.
Fraud
4.
Intentional Tort
5. Violation of California Penal Code section 496(c)
On October 18, 2022, MT filed a cross-complaint, asserting causes of action against Glorious Sky, Ke Gao (“Gao”) and Roes 1-10 for:
1.
Breach of Contract
2.
Breach of Fiduciary Duty
3. Fraud
A Case Management Conference is set for January 19, 2023.
Glorious Sky applies for a right to attach order and writ of attachment against MT, Mike and Chris. The amount to be secured by the attachment is $1,286,743.00.
Analysis
“Attachment is a prejudgment remedy which requires a court to make a preliminary determination of the merits of a dispute. It allows a creditor who has applied for an attachment following the statutory guidelines and established a prima facie claim to have a debtor's assets seized and held until final adjudication at trial.” (Lorber Industries, Inc. v. Turbulence, Inc. (1985) 175 Cal.App.3d 532, 535.) “A purpose of the attachment statutes is to confine attachments to commercial situations and to prohibit them in consumer transactions. The language, ‘trade, business or profession,’ in section 483.010, subdivision (c) fulfills that purpose by limiting the use of attachments to ‘commercial transactions’ and precluding them in ‘consumer transactions.’” (Kadison, Phaelzer, Woodard, Quinn & Rossi v. Wilson (1987) 197 Cal.App.3d 1, 4 [citation omitted].)
Attachment is governed by Attachment Law, Title 6.5 of the Code of Civil Procedure, sections 481.010-493.060. “[A]ttachment procedures are solely creatures of statute and . . . such statutes must be strictly construed.” (Arcata Publications Group v. Beverly Hills Publishing Co. (1984) 154 Cal.App.3d 276, 279.)
On September 26, 2022, Glorious Sky filed two proofs of service, which reflected that MT and Mike had beenelectronically served with the summons and FAC by agreement of their attorney as designated agent for service of process on September 18, 2022. On September 26, 2022, Glorious Sky filed another proof of service, which reflected that MT and Mike had been electronically served with the application and supporting documents on September 22, 2022. The court determines that adequate notice has been provided as to MT and Mike.
There is nothing in ecourt, however, reflecting that Chris has ever been served with the summons and FAC, let alone the instant application and supporting documents. The application, then, is summarily denied as to Chris on the basis of insufficient notice.
Substantive Considerations: “At the hearing, the court shall consider the showing made by the parties appearing and shall issue a right to attach order, which shall state the amount to be secured by the attachment determined by the court in accordance with Section 483.015 or 483.020, if it 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.” (Code Civ. Proc., § 484.090, subd. (a).)
“The court's determinations shall be made upon the basis of the pleadings and other papers in the record; but, upon good cause shown, the court may receive and consider at the hearing additional evidence, oral or documentary, and additional points and authorities, or it may continue the hearing for the production of the additional evidence or points and authorities.” (Code Civ. Proc., § 484.090, subd. (d).) “The court has the power to determine disputed facts on the basis of a preponderance of the evidence as disclosed in the affidavits and declarations… [Hobbs v. Weiss (1999) 73 Cal.App.4th 76, 80…].” (Weil & Brown, et al., CAL. PRAC. GUIDE: CIV. PRO. BEFORE TRIAL (The Rutter Group 2022) ¶ 9:948 (emphasis theirs).)
“The following property of the defendant is subject to attachment: (a) Where the defendant is a corporation, all corporate property for which a method of levy is provided by Article 2 (commencing with Section 488.300) of Chapter 8. (b) Where the defendant is a partnership or other unincorporated association, all partnership or association property for which a method of levy is provided by Article 2 (commencing with Section 488.300) of Chapter 8. (c) Where the defendant is a natural person, all of the following property: (1) Interests in real property except leasehold estates with unexpired terms of less than one year. (2) Accounts receivable, chattel paper, and general intangibles arising out of the conduct by the defendant of a trade, business, or profession, except any such individual claim with a principal balance of less than one hundred fifty dollars ($150). (3) Equipment. (4) Farm products, (5) Inventory. (6) Final money judgments arising out of the conduct by the defendant of a trade, business, or profession. (7) Money on the premises where a trade, business, or profession is conducted by the defendant and, except for the first one thousand dollars ($1,000), money located elsewhere then on such premises and deposit accounts, but, if the defendant has more than one deposit account or has at least one deposit account and money located elsewhere than on the premises where a trade, business, or profession is conducted by the defendant, the court, upon application of the plaintiff, may order that the writ of attachment be levied so that an aggregate amount of one thousand dollars ($1,000) om the form of such money and in such accounts remains free of levy. (8) Negotiable documents of title. (9) Instruments. (10) Securities. (11) Minerals or the like (including oil and gas) to be extracted. (d) In the case of a defendant described in subdivision (c), community property of a type described in subdivision (c) is subject to attachment if the community property would be subject to enforcement of the judgment obtained in the action in which the attachment is sought. . .” (Code Civ. Proc., § 487.010.)
A plaintiff must provide a statement that the attachment is not sought for a purpose other than the recovery on the claim upon which the attachment is based, a statement that the applicant has no information or belief that the claim is discharged in a proceeding under Title 11 of the United States Code (Bankruptcy) or that the prosecution of the action is stayed in a proceeding under Title 11 of the United States Code (Bankruptcy). (Code Civ. Proc., § 484.020, subds. (c) and (d).) Glorious Sky has complied with these requirements.
A plaintiff must also provide a description of the property to be attached under the writ of attachment and a statement that the party is informed and believes that such property is subject to attachment. (Code Civ. Proc., § 484.020, subd. (e).) “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.” (Id.) Glorious Sky has complied with this requirement via Paragraphs 9(a) and (c).
CLAIM:
“[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) [emphasis added].)
“An attachment may not be issued on a claim which is secured by any interest in real property arising from agreement, statute, or other rule or law . . . [h]owever, an attachment may be issued where the claim was originally so secured but, without any act of the plaintiff or the person to whom the security was given, the security has become valueless or has decreased in value to less than the amount then owing on the claim . . .” (Code Civ. Proc., § 483.010, subd. (b).) “If the action is against a defendant who is a natural person, an attachment may be issued only on aclaim which arises out of the conduct by the defendant of a trade, business, or profession.” (Code Civ. Proc., § 483.010, subd. (c).)
The claim is proper, inasmuch as it is based on a contract between the parties where the amount at issue is ascertainable and in excess of $500.00.
Probable Validity:
“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.” (Code Civ. Proc., § 481.190.)
Gao, Glorious Sky’s President, represents that Glorious Sky is a Texas limited liability company that conducts crypto currency investment business in the United States (Gao, ¶ 1); that in April 2022 he met Mike, who told Gao that he was running MT’s business on behalf of his son, Chris, and was MT’s agent (Id., ¶ 4); that, through this conversation Gao learned that MT was running a Bitcoin mining facility located at 1052 Mahoning Ave NW, Warren, OH 44483 (“Facility”); that he told Mike that he was very interested in the Facility because Glorious Sky was looking for a Bitcoin mining facility to host its Bitcoin miners (Id., ¶ 6); that, in April and May 2022, Mike called him numerous times and represented to him that (1) the Facility had all required licenses to provide the hosting services, (2) the Facility had the capacity to host 1,500 Antminer S19 or other similar miners (“Miners”) at the same time and that (3) the Facility met all safety requirements and was able to provide sustainable hosting services (Id., ¶ 7.)
Gao represents that Glorious Sky, relying on these representations, entered into the Hosting and Security Agreement (“Agreement”) with MT on May 3, 2022, whereby MT agreed to provide hosting services to 1,500 Miners at the Facility (Id., ¶ 8); that Glorious Sky wired $500,000.00 to MT on May 4, 2022 as the security deposit (Id., ¶ 9) and delivered 443 Miners to MT in May 2022 via several shipments (Id., ¶ 10.) Gao, however, has failed to attach the Agreement or to provide the court with any documentary evidence of the aforementioned wire transfer or delivery of Miners. It is unclear whether Mike and/or Chris were parties to the Agreement.
Gao next represents that, while visiting the Facility in June 2022, he found that Mike’s representations about the Facility were false, in that the Facility was not licensed, had “serious safety issues due to [a] defective ventilation system” and did not have the capacity to host more than 300 Miners. (Id., ¶ 11.) Again, Gao has not provided the court with any documentary evidence supporting these statements.
Gao represents that, after raising these issues with Mike, Mike moved all of the Miners to another MT mining facility located at 1775 Logan Ave., Youngstown, OH 44505 (“Substitute Facility”), but that the Substitute Facility also had “serious safety issues” and was never able to provide the hosting services at the Minimum Service Level required under the Agreement. (Id., ¶ 12.) Gao fails to identify what “serious safety issues” existed the Substitute Facility or to support these statements with documentary evidence. Gao represents that the Substitute Facility caught fire on June 20, 2022 “due to MT’s negligence completely disregarding and failing to address the safety issues,” which again have not been specified. (Id., ¶ 14.) Gao represents that Glorious Sky decided to terminate the Agreement, but states that Glorious Sky and MT were unable to reach an agreement on the amount of the hosting service fees because MT refused to give a discount credit to GS as agreed under an unspecified portion of the Agreement; more specifically, Glorious Sky believed it should only pay $28,000.00 for said services provided by MT. (Id., ¶¶ 15-17.) Gao thus acknowledges that there is a dispute between the parties regarding what monies should be refunded. Gao has not provided the court with any basis regarding how the $28,000.00 was calculated.
Gao represents that MT has failed to refund Glorious Sky’s security deposit and is still withholding 93 of Glorious Sky’s Miners. (Id., ¶ 18.) Gao represents that Glorious Sky paid $736,743.00 to Defendants “toward future services,” but provides no documentary evidence in support of same. (Id., ¶ 23.) Gao represents that Defendants have also refused to return crypto currency “mining” machines worth $305,000.00, but fails to provide the court with any documentary evidence establishing value. (Id., ¶ 24.) The amount to be secured by the attachment is $1,286,743.00; however, per Gao’s declaration, the amount to be secured is actually $1,041,743.00. (Id., ¶ 25.) No explanation is provided for this discrepancy.
The court determines that Glorious Sky has not established the probable validity of its claim.
RULING:
All the requirements
have not been satisfied. Accordingly,
the application is denied.