Judge William A. Crowfoot, Case Number: 23AHCV01884, Date: 2025-04-16 Tentative Ruling

Judge: William A. Crowfoot, Case: 23AHCV01884, Date: 2025-04-16 Tentative Ruling

On August 18, 2023, CHR Development, Inc. (“CHR”) and Dream Auto, Inc. (“Dream Auto”) filed this Complaint against Option Motor Cars, Inc. (“Option Motor Cars”) and Michael Xuye Li (“Li”) for breach of contract, breach of implied covenant of good faith and fair dealing, conversion, tort of another for attorney’s fees, violation of Penal Code section 496, and unfair competition. The action arises from a series of loans made in 2017, 2018, 2019, and 2022.

On March 25, 2024, Option Motor Cars, Li, and Eric Feng (“Feng”) (collectively, “Cross-Complainants”) filed a cross-complaint for fraud and declaratory relief against Dream Auto and CHR, as well as Hugh Chuang, Robert Chuang, Yu-Huan Chuang, Dream Auto International Trading, Ltd. (“Dream Auto Taiwan”), and Legacy International Trading, Ltd. (“Legacy”) (collectively, “Cross-Defendants”). The Court refers to the individual Cross-Defendants by their first name for clarity and intends no disrespect.

Cross-Complainants allege that Li and Option purchased and sold cars to Hugh, Dream Auto Taiwan, and Legacy, who then sold those cars in Taiwan. Option and Li obtained a line of credit from third-party financiers in China and Taiwan; Hugh, Dream Auto Taiwan, and Legacy sold the cars, the proceeds of which were supposed to be used to pay down the line of credit. Cross-Complainants allege that Hugh and his companies did not pay down the line of credit and skimmed amounts from the car sales, incurred personal gambling debts, and defrauded customers who placed deposits for cars they never received. When the third-party line of credit was withdrawn and Li and Option were faced with the responsibility of repayment, Hugh proposed a solution involving his father, Yu-Huan, and his brother, Robert. In this arrangement, Yu-Huan would transfer $2.7 million to Robert and his alter ego, CHR, which would then be controlled by Hugh. The money was loaned to Option at an interest rate of over 20% and the arrangement required Option to hire Yu-Huan’s wife and Hugh’s sister with monthly salaries of $1,533 and $6,800, respectively. Option was also required to pay Robert and CHR for loan servicing charges of $8,733. Cross-Complainants allege that this loan (“Yu-Huan Loan”) was a fraud because Hugh took the $2.7 million dollars for himself and/or returned it to his family members. Before Cross-Complainants discovered the fraud, Hugh had obtained an advance of $1,000,000 from Feng in order to purchase cars in Canada for resale in China. This amount was allegedly taken by Hugh for himself and his family.

On March 6, 2025, CHR filed this application for a right to attach order against Option for $1,011,809.

On April 3, 2025, Option filed an opposition brief along with the declaration of Li.

Code of Civil Procedure Section 484.010 provides that “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.) An application for a writ of attachment shall include the following under oath:

(a) A statement showing that the attachment is sought to secure the recovery on a claim upon which an attachment may be issued

(c) A statement that the attachment is not sought for a purpose other than the recovery on the claim upon which the attachment is based.

(d) A statement that the applicant has no information or belief that the claim is discharged in [bankruptcy] or prosecution of the action is stayed in a [bankruptcy] proceeding.

(e) A description of the property to be attached under the writ of attachment and a statement that the plaintiff is informed and believes that such property is subject to attachment.

At the hearing, the Court shall issue a right to attach order if it finds 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.

(Code Civ. Proc., § 494.090, subd. (a)(1)-(4).) In determining the probable validity of a claim where the defendant makes an appearance, 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. (Loeb & Loeb v. Beverly Glen Music, Inc. (1985) 166 Cal.App.3d 1110, 1120; Code Civ. Proc., § 481.190.) In addition, the amount to be secured must be a fixed or readily ascertainable amount not less than five hundred dollars exclusive of costs, interest, and attorney’s fees. (Code Civ. Proc., § 483.010, subd. (a).)

CHR contends that it is likely to obtain a judgment on its claims for breach of contract, conversion, and unfair competition. (Motion, pp. 6-9.) As an initial matter, the remedy of attachment is not available for conversion and unfair competition. Therefore, the Court only considers whether CHR demonstrates the probable validity of its contract claim.

The elements of a breach of contract claim are: “(1) the contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendants’ breach, and (4) damage to plaintiff therefrom.” (Wall Street Network, Ltd. v. New York Times Co. (2008) 164 Cal. App. 4th 1171, 1178.) In a declaration, Robert Huang reiterates the allegations of the Complaint and declares that CHR loaned Option $1,000,000 on or about June 30, 2018, to purchase and resell motor vehicles (“2018 CHR Loan”). (R. Chuang Decl., ¶ 4.) As part of this loan, Option was required to repay the principal amount and 40% of all profits and pay a salary of $100,000 to an employee designated by CHR for Option. (R. Chuang Decl., ¶ 5.) Robert declares that a remaining principal balance of $640,000 was owed as of April 2022 and that on April 19, 2022, the 2018 CHR Loan was “renegotiated and/or amended and/or merged with another written agreement regarding other debt owned by Option.” (R. Chuang Decl., ¶ 7.) The new loan (“2022 CHR Loan”) acknowledged an outstanding principal amount owed of $1,000,000 and a continued promise to pay 40% of all profits and pay a salary to a CHR employee designated to work for Option. (R. Chuang Decl., ¶ 7, Ex. 2.) Translated copies of the 2018 CHR Loan and 2022 CHR Loan are attached to Robert’s declaration as Exhibits 1 and 2; the 2022 CHR Loan also includes an indecipherable table identifying different makes and models of vehicles.

In support of the amount requested to be attached, Robert declares that from August 2022 to June 2023, Option repaid to CHR about $90,000 of the principal leaving “at least” $910,000 of the principal and $46,480 in interest outstanding, as well as $55,329 in wages owed to CHR’s employee. (R. Huang Decl., ¶ 9.) Robert also declares that Option stopped paying and terminated the employee designated by CHR to work for Option and has never paid any percentage of its profits to CHR. (Ibid.)

CHR submits no evidence other than Robert’s declaration which merely approximates the amount owed by Option. There are no documents supporting any of these numbers and the 2022 CHR Loan documents do not provide a clear and definite formula for computing damages. (Kemp Bros. Construction,, Inc. v. Titan Electric (2007) 146 Cal.App.4th 1474, 1481, n. 5; CIT Group/Equipment Fin., Inc. v Super DVD, Inc. (2004) 115 Cal.App.4th 537, 540–541.) Accordingly, the Court cannot conclude, based only on Robert’s say-so, that the amount to be attached is a correct calculation of CHR’s damages arising from Option’s alleged breach of the 2022 CHR Loan. Accordingly, the Application is DENIED.

William A. Crowfoot

Judge of the Superior Court

Parties who intend to submit on this tentative must send an email to the Court at ALHDEPT3@lacourt.org indicating intention to submit on the tentative as directed by the instructions provided on the court website at www.lacourt.org. Please be advised that if you submit on the tentative and elect not to appear at the hearing, the opposing party may nevertheless appear at the hearing and argue the matter. Unless you receive a submission from all other parties in the matter, you should assume that others might appear at the hearing to argue. If the Court does not receive emails from the parties indicating submission on this tentative ruling and there are no appearances at the hearing, the Court may, at its discretion, adopt the tentative as the final order or place the motion off calendar.