Judge Stephen I. Goorvitch, Case Number: 24STCV17270, Date: 2024-10-18 Tentative Ruling

Judge: Stephen I. Goorvitch, Case: 24STCV17270, Date: 2024-10-18 Tentative Ruling

Plaintiff Pureland Hospitality LLC (“Plaintiff” or “Pureland”) moves for a writ of attachment against Defendant United Escrow Co., Inc. (“Defendant” or “United Escrow”) in the amount of $3.3 million. Defendant opposes the application, which is granted.

“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.

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

Defendant objects to the declaration of Jim Zhang, arguing that it is speculative, lacks foundation, and contains legal conclusions. The court overrules the objections. The declaration provides a proper basis for Zhang’s personal knowledge and lays a proper foundation for the admissibility of the attached exhibits.

Plaintiff objects to the declaration of Christine Chung. The court sustains the objections to Paragraph 8 and Paragraph 9 based upon hearsay and lack of foundation. Exhibit 3 is not properly authenticated, i.e., the relevant portion of the exhibit is a business record of Citibank, N.A. (“Citibank”) and there is no declaration from Nelson Wong or a custodian of records from Citibank authenticating the record.[1]

The court also sustains objections to the record of Antares attached to Chung’s declaration. These are business records of Antares, and there is no declaration from a document custodian authenticating them. Although Chung can testify that she received these documents, she cannot testify that they are authentic business records of Antares. Therefore, their contents are inadmissible hearsay.

Finally, Defendant requests judicial notice of the court’s own files and records in this matter, in particulate the underlying application, the answer, and “related supporting documents.” The court will construe “related supporting documents” as relating to the underlying application. The request for judicial notice is granted per Evidence Code section 452(d).

The application and related pleadings appear to have been served, because Defendants filed an opposition and do not challenge service. Therefore, Defendants received proper notice of this application.

Plaintiff demonstrates probable validity of its claims. The application is based on Plaintiff’s cause of action for breach of written 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.)

Plaintiff and Antares GR Limited (“Antares”) to purchase and operate a hotel in Orange County, Florida. (Zhang Decl. ¶¶ 1-3.) United Escrow served as the escrow officer, per an agreement dated July 20, 2023 (the “escrow agreement”). (Id. ¶ 2.) The escrow agreement required Defendant to return the $3.3 million deposited in escrow by Plaintiff “in full and automatically” if Antares failed to issue a commitment to purchase the property within 90 days of Plaintiff’s deposit. (Id. ¶ 3 & Exh. A ¶ 8.) Plaintiff submits evidence that it abided by the terms of the escrow agreement by depositing $3,300,000.00 in escrow, in strict compliance with the established timelines, which Defendant does not dispute. (Id. ¶ 6 Exhs. B & C; see also Chung Decl. ¶¶ 7, 10 & Exhs. 2, 5.)

Plaintiff contends that Defendant breached its obligations under the contract. First, Plaintiff contends that Antares did not issue a commitment to purchase the target property within 90 days of the Escrow Agreement, pursuant to its obligations. (Zhang Decl., ¶ 7.) Despite this non-compliance, Defendant failed to refund Plaintiff’s deposit “in full and automatically,” pursuant to the escrow agreement. (Id. ¶ 11.) Second, Defendant later confirmed its breach by stating that it released Pureland’s money to Antares, not to Plaintiff, and claimed ignorance of the current status of Plaintiff’s money. (Id. Exhs. F & G.)

Defendant makes a series of arguments, none of which is persuasive. Defendant argues that Plaintiff’s application for a writ of attachment is not supported by sufficient admissible evidence. The declaration of Jim Zhang and attached exhibit are sufficient.

Defendant also argues that it is not liable because it fully complied with the express terms of the agreement. The agreement states as follows:

(2) Within five (5) working days after Pureland’s depositing funds as per §1, Antares shall demonstrate proof of funds from a major, well-known first-class bank, in an amount of USD nine figures or higher on deposit (at least thirty-three million United States Dollars ($33,000,000)). Escrow will contact the designated bank to inquire and verify in writing that sufficient funds on deposit in the USD nine figures, and that same funds are available for Antares'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 Pureland, immediately, in full and automatically.

(Zhang Decl. Exh. A.) Defendant argues that it complied with these requirements because “Defendant United sent out a verification letter to Mr. Nelson Wong, SVP of Commercial Banking Group at Citibank, NA.” (Defendant’s Opposition (“Oppo.”) at 7:6-8.) Defendant also argues that “the same verification of Defendant Antares’ deposit account was then notified by United Escrow to both Plaintiff and Defendant Antares on July 31, 2023 in writing as required under Section 3 of the Escrow Agreement.” (Id. at 7:9-14.)

There are problems with Defendant’s arguments. As discussed, Defendant relies on inadmissible evidence, as the court has sustained objections to the relevant parts of Chung’s declaration and exhibits. Putting that aside, Defendants still was not authorized to transfer Plaintiff’s funds to Antares. Per the agreement:

(5) Upon Pureland’s deposit of funds as per §4 above, Antares 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 Pureland and Antares. Antares may retain a licensed law firm or accounting firm to form the SPE. If Antares elects not to cause the formation of the SPE within ten (10) working days after Pureland’s deposit of funds as per §4 above, then Escrow will refund funds placed as per §1 and §4 to Pureland, immediately, in full and without any further instructions from Pureland or Antares. Upon both (i) establishment of the SPE, and (ii) Pureland’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 Pureland’s ten percent (10%) ownership interest in the SPE, which Escrow will release to Pureland, and (B) Documentation of Antares’s ninety percent (90%) ownership interest in the SPE, which Escrow will release to Antares. Pureland’s funds placed as per §1 and §4 above convert into Pureland’s required Participation Capital investment, against which Pureland receives its ten percent (10%) ownership interest in the SPE. In order to preserve value, Pureland and Antares hereby instruct Escrow to arrange the conversion of Pureland’s Participation Capital investment into United States Treasuries (or other liquid, risk-free securities, rated AAA or AA+ by Standard & Poor’s) through Antares, selected as per Antares’s discretion, and titled to and held by the SPE.

(6) Upon mutual execution of these written escrow Instructions, upon Escrow’s advising Pureland that Escrow has verified Antares’s proof of funds, and upon Pureland’s placement of its funds in accord with §1 and §4 above (ten percent (10%) of the Funding Amount, equal to USD 3.3 million) into Escrow’s trust account, Antares shall utilize one hundred percent (100%) of the Funding Amount, equal to USD thirty-three million ($33,000,000.00), to fund the Project on behalf of the SPE through your Escrow, for disbursing instructed remittances at closing.

(Zhang Decl. Exh. A.) This agreement does not clearly state that the funds shall be transferred directly to Antares. Rather, Defendant was required to “to arrange the conversion of Pureland’s Participation Capital investment into United States Treasuries (or other liquid, risk-free securities, rated AAA or AA+ by Standard & Poor’s) through Antares, selected as per Antares’s discretion, and titled to and held by the SPE.” (Id. ¶ 6.) Defendant apparently failed to comply with this term.

“[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 secured by real property. (Code Civ. Proc. § 483.010(b).) In an actin against a defendant who is a natural person, the claim must arise from the defendant’s trade, business, or profession. (Code Civ. Proc. § 483.010(c); see also 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 a contract claim for which the total amount allegedly due is in excess of $500. The claim is not secured by real property. Plaintiff’s claim arises from Defendants’ conduct of a trade or business, i.e. escrow holding company. Defendant do not dispute that the amount in controversy is reasonably ascertainable.

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 contends that it seeks attachment of the $3,300,000.00 in funds for the sole purpose of securing its claim. (Zhang Decl., ¶ 16.) Plaintiff provides evidence to demonstrate that it has repeatedly requested that Defendant pay the sought funds, rather than engage in litigation. (Zhang Decl., ¶¶ 9-11.) Plaintiff further demonstrates that it did not realize Defendant was no longer in possession of Plaintiff’s funds until Defendant advised Plaintiff as such on June 12, 2024. (Id., ¶¶ 9-13, Exh. F, G.)

Defendant argues that the attachment is sought for an improper purpose because the escrow funds have already been disbursed to Antares, in accordance with the instruction in the Escrow Agreement. This does not address the dispositive issue, whether Plaintiff is pursuing the writ for a purpose other than recovery on the claim.

Defendants do not show that the amount of attachment should be reduced pursuant to CCP section 483.015(b). Defendants have not claimed any exemptions.

Plaintiff requests attachments against Defendant, who is a corporation, for all property for which a method of levy is provided by Article 2 (commencing with Section 488.300) of Chapter 8. (Code Civ. Proc. § 487.010(a); Application ¶ 5, Attachment 5.) That request is proper. Plaintiff is not required by 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 Code Civ. Proc. section 484.020(e)].)

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. Therefore, the court orders an undertaking of $10,000.

2. The court signs the proposed order on Form AT-120, lodged on August 13, 2024.

3. Plaintiff’s counsel shall provide notice and file proof of service with the court.

[1] Even if the court considered Nelson Wong’s report that xxxxx7878 has an average balance of “9” figures, this record does not establish that Antares deposited at least $33 million.