Judge Stephen I. Goorvitch, Case Number: 24STCV09280, Date: 2025-02-05 Tentative Ruling

Judge: Stephen I. Goorvitch, Case: 24STCV09280, Date: 2025-02-05 Tentative Ruling

Case Number: 24STCV09280 Hearing Date: February 6, 2025 Dept: 82

T-Boys Properties, LLC, et al. Case No. 24STCV09280

v. Hearing: February 5, 2025

Location: Stanley Mosk Courthouse

Department: 82 United Escrow Co., et al. Judge: Stephen I. Goorvitch

[Tentative] Order On Application for Writ of Attachment

INTRODUCTION

Plaintiffs T-Boys Properties, LLC, 17K Muskrat 1, Inc., and Vasken Tatarian (“Plaintiffs”) move for a writ of attachment against Defendant United Escrow Co. (“Defendant”) in the amount of $4,000,000. The court grants the application with respect to T-Boys Properties, LLC and denies the application with respect to the remaining plaintiffs.

BACKGROUND

Since approximately March 2020, T-Boys Properties, LLC (“T-Boys”) has engaged in the business of cannabis production and wholesaling. (Tatarian Decl. ¶ 3.) T-Boys owns certain real property commonly known as 17080 Muskrat Avenue, Adelanto, California 92301 (the “Property”), and conducts a portion of its business on the Property. (Id. ¶ 4.) Vasken Tatarian is the chief executive officer of T-Boys and also 17K Muskrat 1, Inc. (Id. ¶ 2.)

In or around February 2023, Tatarian received an offer to purchase the Property and T-Boys’ business. (Id. ¶ 5.) After due diligence, Tatarian was informed that a company called SCG America GR Sdn Bhd. (“SCG”) was willing to purchase both the Property and T-Boys’ business for $80,000,000. (Id. ¶ 6.)

On June 1, 2023, Tatarian, on behalf of T-Boys (or “TBP”), executed escrow instructions with SCG. (Id. ¶ 9 & Exh. A.) The escrow instructions appear to be signed by Juan Alberto Abal Solis, as president of SCG. (Ibid.) Christine Chung, the escrow officer, acknowledged and accepted the escrow instructions on behalf of Defendant. (Ibid.) The relevant terms of the escrow instructions include the following:

(1) Upon execution of this Agreement, TBP shall deposit into Escrow’s trust account the sum of four million United States Dollars ($4,000,000.00), equal to 5% of the Funding Amount.

(2) Within five (5) working days after TBP’s depositing funds as per §1, SCG shall demonstrate proof of funds from a major, well-known first-class bank, in an amount of at least USO nine figures or higher on deposit. Escrow will contact the designated bank to inquire and verify in writing that sufficient funds on deposit in the USO nine figures or higher, and that same funds are available for SCG’s withdrawal and/or disposal.

(3) Upon independently verifying the above proof of funds, Escrow will state the results of its verification. If Escrow is unable to verify the proof of funds, Escrow will refund funds placed as per §1 to TBP, immediately, in full and automatically.

(4) At any time after Escrow’s verification of the Proof of Funds as per §3 above, TBP shall deposit into Escrow's trust account an additional sum of four million United States Dollars ($4,000,000.00), equal to 5% of the Funding Amount.

(5) Upon TBP’s deposit of funds as per §4 above, SCG shall form a new body corporate or LLC, (hereinafter the “Special Purpose Entity”, or “SPE”). The name and domicile of the SPE shall be mutually agreed upon by TBP and SCG. SCG may retain a licensed law firm or accounting firm to form the SPE. If SCG elects not to cause the formation of the SPE within ten (10) working days after TBP’s deposit of funds as per §4 above, then Escrow will refund funds placed as per §1 and §4 to TBP, immediately, in full and without any further instructions from TBP or SCG. Upon both (i) establishment of the SPE, and (ii) TBP's placement of funds as per §1 and §4 above, the following documents will be placed with Escrow, which Escrow will forward as follows: (A) Documentation of TBP’s ten percent (10%) ownership interest in the SPE, which Escrow will release to TBP, and (B) Documentation of SCG’s ninety percent (90%) ownership interest in the SPE, which Escrow will release to SCG. TBP’s funds placed as per §1 and §4 above convert into TBP’s required Participation Capital investment, against which TBP receives its ten percent (10%) ownership interest in the SPE. In order to preserve the Participation Capital’s value, TBP and SCG hereby instruct Escrow to arrange the conversion of the Participation Capital investment into United States Treasuries (or other liquid, risk-free securities, rated AAA or AA+ by Standard & Poor's), through the SPE, selected as per SCG’s discretion, and titled to and held by the SPE. The investment into United States Treasuries or other securities using TBP’s Participation Capital takes place after the successful funding of Project in the amount of USD eighty million.

(6) Upon mutual execution of these written escrow instructions, upon Escrow’s verifying SCG’s proof of funds, and upon TBP’s placement of its funds in accord with §1 and §4 above (ten percent (10%) of the Funding Amount, equal to USD 8 million) into Escrow’s trust account, SCG shall utilize one hundred percent (100%) of the Funding Amount, equal to USD eighty million ($80,000,000.00), to fund the Project on behalf of the SPE through your Escrow, for disbursing instructed remittances at closing.

….[¶]

(8) In the event that SCG elects not to issue the Commitment within ninety (90) days or earlier after placement of TBP's funds as per §1 and §4 above, then same funds will be refundable to TBP, in full and automatically.

(9) Escrow will carry out SCG’s and TBP’s jointly executed instructions, and Escrow will continue to hold any remaining funds in accord with these instructions. Escrow understands that except as set forth in §3, §5, §6, and/or §8 hereof, no funds may be released from Escrow without the joint signature of both TBP and SCG…..

(Id. ¶ 9 & Exh. A.)

On June 20, 2023, Plaintiffs borrowed $4,000,000 and arranged for those funds to be deposited into the escrow with Defendant. (Id. ¶ 12.) In late June 2023, Chung informed Plaintiffs that Defendant had obtained written verification of SCG’s proof of funds. (Id. ¶ 13; see also Chung Decl. ¶¶ 8-10, Exh. 5.) Although section four of the escrow instructions required Plaintiff T-Boys to deposit an additional $4,000,000 after receipt of such written verification, T-Boys did not make this second deposit. (Chung Decl. ¶ 11.) Tatarian explains that T-Boys did not make the second deposit because Chung “covered portions of a document that she claimed confirmed the funds held by SCG with her fingers” when she visited Defendant’s office in Los Angeles and because Plaintiffs “became concerned about SCG’s ability to complete the Transaction.” (Tatarian Decl. ¶¶ 13-14.) After Defendant did not provide “additional confirmation of SCG’s funds,” Plaintiffs demanded the return of the initial $4,000,000 deposit. (Ibid.)

Defendant submits evidence that, on or about August 9, 2023, SCG formed a Separate Purpose Entity under the name of “Agricultural Research Acquisitions, Inc.” in the State of Delaware and gave Defendant a commitment letter to fund the transaction in the sum of eighty million dollars ($80,000,000.00). (Chung Decl. ¶¶ 11-13, Exh. 6-8.)

On August 11, 2023, SCG allegedly sent Defendant written instructions to disburse the initial deposit in the amount of $4,000,000 to an account named “ZUG Exim, LLC” at Citibank, N.A. (Id. ¶ 14, Exh. 9.) On August 14, 2023, Defendant wire-transferred $3,990,000.00 of the funds in the trust account to the designated account as instructed by SCG and retaining $10,000.00 in the trust account to cover the costs. (Id. ¶ 15.) Sometime after the wire transfer, Plaintiff notified Defendant of its intent to cancel the escrow. (Id. ¶ 16.) On or about September 14, 2023, Defendant sent cancellation instructions to all parties in the transaction as requested by Plaintiff. (Id. ¶ 16, Exh. 11, 12.) SCG allegedly refused to cancel the escrow nor to return the deposit back to Plaintiff by providing a written notice of the same to Defendant by e-mail on September 15, 2023. (Id. ¶ 16, Exh. 11-12.)

LEGAL STANDARD

“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.) “Except as otherwise provided by statute, an 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.)

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.

(Code Civ. Proc. § 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.” (Code Civ. Proc. § 481.190.) “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.)¿“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.)

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.

(Code Civ. Proc. § 482.020.) “The Attachment Law statutes are subject to strict construction.” (Epstein v. Abrams (1997) 57 Cal.App.4th 1159, 1168.)

EVIDENTIARY ISSUES

Defendant objects to paragraphs 6 and 10, and exhibit G, of the declaration of Aaron Malo, on various grounds. This evidence is inadmissible hearsay and lacks foundation. Therefore, the objections are sustained.

Defendant requests judicial notice of Plaintiff’s application for a right to attach order and for issuance of writ of attachment, the first amended complaint filed by Plaintiffs, and the answer to complaint filed by Defendant. There is no opposition to the request. The request is granted.

DISCUSSION

A. Probable Validity of Plaintiff’s Claim

The application is based on Plaintiffs’ cause of action for breach of contract. To establish a claim for breach of contract, a plaintiff must prove: (1) the 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.) “Escrow companies … owe a fiduciary duty to parties to an escrow to properly carry out all escrow instructions. Failure of an escrow company to perform gives parties to the escrow a cause of action for breach of contract for any proximately caused damages.” (Alereza v. Chicago Title Co. (2016) 6 Cal.App.5th 551, 561.)

Here, Plaintiffs have submitted evidence of the existence of the escrow instructions, T-Boys’ performance of the material terms of the escrow instructions, and its damages in the amount of $4,000,000. The disputed issue is whether Plaintiffs have proven Defendant’s breach. Plaintiffs allege that Defendant breached the escrow instructions by “failing to obtain the required proof of SCG’s funds, and thereafter failing to refund in full all amounts deposited into Escrow by Plaintiffs” and also by “disbursing the vast majority of Plaintiffs’ funds to a third party, prior to the closing of the Transaction, and prior to the funding of the full Purchase Price of Eighty Million Dollars ($80,000,000).” (First Amended Complaint (“FAC”) ¶¶ 79-80.)

1. Failing to Obtain Proof of SCG’s Funds

Plaintiffs have adequately shown, under the probable validity standard, that Defendant failed to obtain a proper verification of funds as required by the escrow instructions. Section two of the escrow instructions states:

Within five (5) working days after TBP’s depositing funds as per §1, SCG shall demonstrate proof of funds from a major, well-known first-class bank, in an amount of at least USO nine figures or higher on deposit. Escrow will contact the designated bank to inquire and verify in writing that sufficient funds on deposit in the USO nine figures or higher, and that same funds are available for SCG’s withdrawal and/or disposal.

(Tatarian Decl. Exh. A [emphasis added].)

In late June 2023, Christine Chung, the escrow officer, informed Plaintiffs that Defendant had obtained written verification of SCG’s proof of funds. (Id. ¶ 13; see also Chung Decl. ¶¶ 8-10, Exh. 5 and Malo Decl. ¶ 4, Exh. C.) However, Plaintiffs present compelling evidence that

Defendant did not obtain a valid written verification of SCG’s proof of funds. Specifically, Tatarian declares:

In late June of 2023, Ms. Chung informed me that United had obtained written verification of SCG’s proof of funds. Accordingly, I made arrangements to visit United’s offices in Los Angeles so that I could review the materials that United had obtained. Unfortunately, when I arrived in the United offices and requested that Ms. Chung show me the written verification of SCG’s proof of funds, she refused to do so. Instead, she covered portions of a document that she claimed confirmed the funds held by SCG with her fingers, and revealed only selected portions of that document. The information revealed to me was so sparse that I was unable to determine who held the beneficial interest in the account described in the document Ms. Chung was holding, where the alleged funds were on deposit, the full amount of those funds, or even the currency in which the funds were held.

(Tatarian Decl. ¶ 13.) In her opposing declaration, Chung does not respond to this testimony or refute it. Defendant has not disputed that Plaintiff requested to view the supporting documents at Defendant’s office. Defendant also has not provided an explanation for obscuring part of the supporting documents when Plaintiff requested proof of verification.

In discovery, Defendant produced a letter that was purportedly signed by Senior Vice President Nelson Wong on behalf of Citibank, N.A., on or about June 26, 2023, and that purports to confirm that SCG had a nine-figure average balance in U.S. Dollars in its account at Citibank. (Malo Decl. ¶ 5, Exh. D.) However, Plaintiff submits a declaration of Nelson Wong, which states:

I was employed with Citibank, N.A. for more than 20 years, until my retirement in April of 2023. I have reviewed the document attached hereto as Exhibit ‘A’ and incorporated herein by this reference. I do not recall ever seeing that document prior to this week. I did not fill out the bottom portion of the document attached hereto as Exhibit ‘A.’ I did not sign that document. I did not send that document to United Escrow Co. or anyone else. I was not employed with Citibank in June of 2023.

(Wong Decl. ¶¶ 2-5 [emphasis added].) Exhibit A to Wong’s declaration is the same letter referenced above, which was produced by Defendant in discovery. (See Malo Decl. ¶ 5, Exh. D.)

In the opposition papers, Chung maintains that she “personally contacted Nelson Wong of Citibank, NA on the phone at (909) 393-7672 on or about June 23, 2023 who represented himself as the Senior Vice President of Commercial Banking division of Citibank, NA, Los Angeles, South Region.” (Chung Decl. ¶ 8.) In its opposition brief filed on January 21, 2025, Defendant also asserts that it “is, at least, entitled to an opportunity to subpoena Nelson Wong at the time of the trial and cross-examine him ….” (Oppo. 9-10.) Defendant contends that “[t]his issue should be resolved at the trial and not at this early summary proceeding.” (Ibid.)

Contrary to Defendant’s assertion, the court may weigh the credibility of the Wong and Chung declarations for purposes of deciding whether a pre-judgment writ of attachment should issue. “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.) Having considered the relative merits of the parties’ evidence, the court finds that Plaintiff has submitted the more credible and persuasive evidence. Nelson Wong is not a party to this action and has no apparent reason to fabricate his testimony. Chung, on the other hand, was the escrow officer, is the president of Defendant, and has a pecuniary interest in defending against Plaintiff’s lawsuit. (Chung Decl. ¶ 3.) Although Chung claims to have contacted Wong on June 23, 2023, she does not provide corroboration and her testimony is inconsistent. Indeed, while Chung purports to attach “e-mail trails exchanged between myself and Nelson Wong as late as May 24, 2023 in a different prior escrow transaction,” the attached emails are dated May 2019. (Id. ¶ 9, Exh. 4.)

Defendant had sufficient time to subpoena Wong and obtain his deposition testimony. The application and Wong declaration were filed and served on November 22, 2024, and the opposition was not filed until January 21, 2025. Defendant does not submit any evidence that it attempted to subpoena Wong during that time period. Defendant also did not request a continuance of the hearing to depose Wong. “If weaker and less satisfactory evidence is offered when it was within the power of the party to produce stronger and more satisfactory evidence, the evidence offered should be viewed with distrust.” (Evid. Code § 412.)

Other circumstances further cause the court to discount Defendant’s evidence. Specifically, Plaintiff submits evidence, based on a subpoena to Citibank, that SCG’s account did not have nine figures in U.S. Dollars in it at any time during the month of June 2023. (Malo Decl. ¶ 8, Exh. E.) Defendant does not rebut that evidence in opposition. In addition, Plaintiff’s counsel declares:

In March of 2024, on behalf of Plaintiffs, I sent counsel for counsel United an email demanding that United either: (a) release the full $4,000,000 of Plaintiffs’ funds it had received; or (b) interplead those funds with the court. In response, counsel for United sent me an email stating: ‘Upon receipt of the fully executed cancellation instructions, our client will promptly process the refund as instructed. However, if either party submits written objection to the cancellation instructions, and the parties are not able to resolve the dispute short of any court action, we will proceed to submit the matter to the Los Angeles Superior Court in interpleader action along with the deposit of the entire escrow funds.’”

(Malo Decl. ¶ 1 & Exh. J [emphasis added].) However, it is undisputed that Defendant did not have possession of the $4,000,000 when Defendant’s counsel made this statement in March 2024. Defendant’s counsel does not explain why he represented that Defendant could interplead the “entire escrow funds” in March 2024 when Defendant no longer had possession of the funds.

Under the probable validity standard, Plaintiff has made a sufficient showing that Defendant failed to obtain a proper verification of funds as required by the escrow instructions and, therefore, did not have authority under the escrow instructions to disburse Plaintiff’s $4,000,000 deposit.

2. Disbursing Plaintiff’s Deposit Before Funding of the Full Purchase Price

Sections five, six, and nine of the escrow instructions provide, in relevant part, as follows:

(5) …. In order to preserve the Participation Capital’s value, TBP and SCG hereby instruct Escrow to arrange the conversion of the Participation Capital investment into United States Treasuries (or other liquid, risk-free securities, rated AAA or AA+ by Standard & Poor's), through the SPE, selected as per SCG’s discretion, and titled to and held by the SPE. The investment into United States Treasuries or other securities using TBP’s Participation Capital takes place after the successful funding of Project in the amount of USD eighty million.

…. [¶]

(9) Escrow will carry out SCG’s and TBP’s jointly executed instructions, and Escrow will continue to hold any remaining funds in accord with these instructions. Escrow understands that except as set forth in §3, §5, §6, and/or §8 hereof, no funds may be released from Escrow without the joint signature of both TBP and SCG…..

(Tatarian Decl. ¶ 9, Exh. A [emphasis added].) For purposes of this application, the court concludes that sections five and six are reasonably interpreted to require SCG to deposit the $80,000,000 with escrow before Plaintiff’s deposits are invested in United States Treasuries or other securities. Defendant has not developed a persuasive argument that a commitment letter from SCG was sufficient to fund the Project under the terms of the escrow instructions. Plaintiff submits undisputed evidence that Defendant disbursed $3,990,000 of Plaintiff’s $4,000,000 deposit before SCG funded the Project in the amount of $80,000,000. (Tatarian Decl. ¶¶ 14-16; Chung Decl. ¶¶ 13-16.) Accordingly, for this additional reason, Plaintiff has submitted evidence that Defendant breached the escrow instructions.

3. Defendant’s Contentions

The court has considered all of Defendant’s remaining contentions. None persuades the court that an attachment for $4,000,000 should not issue. Contrary to Defendant’s assertion, it has the initial burden of proof on its affirmative defenses. (See Oppo. 14; CCP § 483.015; and Lydig Construction, Inc. v. Martinez Steel Corp. (2015) 234 Cal.App.4th 937, 945.) Regardless, Defendant has not identified any affirmative defenses that it contends are relevant to this application. Because the court has not relied on the death certificate of Juan Alberto Abal Solis, the court need not decide whether Plaintiffs have proven the death of SCG’s president or whether that issue is relevant to Defendant’s liability. (Oppo. 12-13.) The Wong declaration and related evidence, discussed above, support an inference that Defendant failed to verify that SCG had sufficient funds and thereby breached the escrow instructions. (Oppo. 13-14.) Finally, Defendant cites no authority for its argument that “Plaintiff has no claim against Defendant United since the escrow funds have already been disbursed.” (Oppo. 6:27-28.) Plaintiff’s claim is for breach of contract based on wrongful release of escrow funds. Defendant may be liable for the damages suffered by Defendant’s breach, even though Defendant does not have possession of the funds.

In summary, Plaintiff T-Boys has shown a probably valid claim against Defendant in the amount of $4,000,000. However, since only T-Boys was a party to the escrow instructions, Plaintiffs 17K Muskrat 1, Inc. and Tatarian are not entitled to a writ of attachment.

B. Basis for 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.” (Code Civ. Proc. § 483.010(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(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. (2004) 115 Cal.App. 4th 537, 541.)

Here, Plaintiffs’ application for writ of attachment is based on a contract claim for which the total amount allegedly due exceeds $500. The claim is not secured by real property. Plaintiffs’ alleged damages are fixed and readily ascertainable from the terms of the escrow instructions and Plaintiffs’ declarations.

C. 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.” The court finds that the attachment is not sought for a purpose other than the recovery on the claim upon which the attachments is based and the amount to be secured by the attachment is greater than zero.

D. Reduction of Amount to be Secured

Defendant has not argued, or shown, that the amount of attachment should be reduced pursuant to CCP section 483.015(b).

E. Exemptions

Defendant has not claimed any exemptions.

F. Subject Property

Plaintiff requests attachment of any property of Defendant, a corporation. (Application ¶ 9c.) That request is proper. “[A]ll corporate property for which a method of levy is provided by Article 2 (commencing with Section 488.300) of Chapter 8” may be attached. (CCP § 487.010(a).)

G. Undertaking

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

CONCLUSION AND ORDER

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

The applications of Plaintiffs 17K Muskrat 1, Inc. and Tatarian are DENIED.

Plaintiffs’ counsel shall provide notice and file proof of service with the court.

IT IS SO ORDERED

Dated: February 6, 2025 ______________________

Stephen I. Goorvitch

Superior Court Judge