Tentative Rulings
Case Number: *******4022 Hearing Date: January 31, 2023 Dept: 85
Pawnee Leasing Corp. v. R. Company, Inc. and Raul Munoz, *******4022
Tentative decision on application for right to attach orders against (1) R. Company, Inc: denied; (2) Raul Munoz: mostly denied
Plaintiff Pawnee Leasing Corp. (“Pawnee”) applies for right to attach orders against Defendants R. Company, Inc. (“Company”) and Raul Munoz (“Munoz”) in the amount of $83,723.61.
The court has read and considered the moving papers (no opposition was filed) and renders the following tentative decision.
A. Statement of the Case
1. Complaint
Plaintiff filed this Complaint against Defendants Company and Munoz on October 21, 2022, for (1) breach of written agreement; (2) breach of guaranty; (3) open book account; (4) reasonable value; (5) account stated; (6) indebtedness; (7) unjust enrichment; (8) claim and delivery; and (9) conversion. The Complaint alleges in pertinent part as follows.
On January 19, 2022, Tandem Finance (“Assignor”) and Company entered into an Equipment Finance Agreement (“Agreement”) under which Company would pay monthly rent of $1,382.38 for 60 months for a 2013 Kenworth truck. Company was also liable for taxes, fees, charges and other obligations as set forth in the Agreement. Assignor concurrently assigned its rights to Pawnee.
Also on January 19, 2022, Munoz signed a Guaranty of Agreement (“Guaranty”) for the full amount owed by Company.
On July 1, 2022, Company failed to make the monthly payments pursuant to the Agreement. Pawnee has accelerated the rental payments owed under the Agreement, which total $77,413.28 after discounting 4% pursuant to the Agreement. Company also owes (1) $715.33 for Other Miscellaneous Charges Due; and (2) a $95 termination fee. This total owed is $78,223.61. The RFA also charges annual interest at 24%.
Pawnee seeks (1) $78,223.61 in damages, with interest at an annual rate of 24% or 10% based on the cause of action, (2) the residual value of the equipment, (3) late charges, (4) delinquency charges, (5) property taxes, fees, and liens, (6) an order requiring the release of the equipment to Pawnee, (7) fair compensation for the time and money properly expended in pursuit of recovering the equipment, (8) immediate possession of all collateral and books and records pertaining thereto as set forth in the Agreement, and (10) attorney’s fees and costs.
2. Course of Proceedings
On December 17, 2022, Pawnee personally served Company and Munoz with the Complaint, Summons, and moving papers for the instant applications.
B. Applicable Law
Attachment is a prejudgment remedy providing for the seizure of one or more of the defendant’s assets to aid in the collection of a money demand pending the outcome of the trial of the action. See Whitehouse v. Six Corporation, (1995) 40 Cal.App.4th 527, 533. In 1972, and in a 1977 comprehensive revision, the Legislature enacted attachment legislation (CCP 481.010 et seq.) that meets the due process requirements set forth in Randone v. Appellate Department, (1971) 5 Cal.3d 536. See Western Steel & Ship Repair v. RMI, (12986) 176 Cal.App.3d 1108, 1115. As the attachment statutes are purely the creation of the Legislature, they are strictly construed. Vershbow v. Reiner, (1991) 231 Cal.App.3d 879, 882.
A writ of 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). CCP 483.010(a). A claim is “readily ascertainable” where the amount due may be clearly ascertained from the contract and calculated by evidence; the fact that damages are unliquidated is not determinative. CIT Group/Equipment Financing, Inc. v. Super DVD, Inc., (2004) 115 Cal.App.4th 537, 540-41 (attachment appropriate for claim based on rent calculation for lease of commercial equipment).
All property within California of a corporation, association, or partnership is subject to attachment if there is a method of levy for the property. CCP 487.010(a), (b). While a trustee is a natural person, a trust is not. Therefore, a trust’s property is subject to attachment on the same basis as a corporation or partnership. Kadison, Pfaelzer, Woodard, Quinn & Rossi v. Wilson, supra, 197 Cal.App.3d at 4.
If the action is against a defendant who is a natural person, an attachment may be issued only on a commercial claim which arises out of the defendant’s conduct of a trade, business, or profession. CCP 483.010(c). Consumer transactions cannot form a basis for attachment. CCP 483.010(c); Kadison, Pfaelzer, Woodard, Quinn & Rossi v. Wilson, (1987) 197 Cal.App.3d 1, 4 (action involving trust property was a commercial, not a consumer, transaction).
The plaintiff may apply for a right to attach order by noticing a hearing for the order and serving the defendant with summons and complaint, notice of the application, and supporting papers any time after filing the complaint. CCP 484.010. Notice of the application must be given pursuant to CCP section 1005, sixteen court days before the hearing. See ibid.
The notice of the application and the application may be made on Judicial Council forms (Optional Forms AT-105, 115). The application must 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. CCP 484.030.
Where the defendant is a corporation, a general reference to “all corporate property which is subject to attachment pursuant to subdivision (a) of Code of Civil Procedure Section 487.010” is sufficient. CCP 484.020(e). 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” is sufficient. CCP 484.020(e). A specific description of property is not required for corporations and partnerships as they generally have no exempt property. Bank of America v. Salinas Nissan, Inc., (“Bank of America”) (1989) 207 Cal.App.3d 260, 268.
Where the defendant is a natural person, the description of the property must be reasonably adequate to permit the defendant to identify the specific property sought to be attached. CCP 484.020(e). Although the property must be specifically described, the plaintiff may target for attachment everything the individual defendant owns. Bank of America v. Salinas Nissan, Inc., (1989) 207 Cal.App.3d 260, 268.
A defendant who opposes issuance of the order must file and serve a notice of opposition and supporting affidavit as required by CCP section 484.060 not later than five court days prior to the date set for hearing. CCP 484.050(e). The notice of opposition may be made on a Judicial Council form (Optional Form AT-155).
The plaintiff may file and serve a reply two court days prior to the date set for the hearing. CCP 484.060(c).
At the hearing, the court determines whether the plaintiff should receive a right to attach order and whether any property which the plaintiff seeks to attach is exempt from attachment. The defendant may appear the hearing. CCP 484.050(h). The court generally will evaluate the attachment application based solely on the pleadings and supporting affidavits without taking additional evidence. Bank of America, supra, 207 Cal.App.3d at 273. A verified complaint may be used in lieu of or in addition to an affidavit if it states evidentiary facts. CCP 482.040. The plaintiff has the burden of proof, and the court is not required to accept as true any affidavit even if it is undisputed. See Bank of America, supra, at 271, 273.
The court may issue a right to attach order (Optional Form AT-120) if the plaintiff shows all of the following: (1) the claim on which the attachment is based is one on which an attachment may be issued (CCP 484.090(a)(1)); (2) the plaintiff has established the probable validity of the claim (CCP 484.090(a)(2)); (3) attachment is sought for no purpose other than the recovery on the subject claim (CCP 484.090(a)(3); and (4) the amount to be secured by the attachment is greater than zero (CCP 484.090(a)(4)).
A claim has “probable validity” where it is more likely than not that the plaintiff will recover on that claim. CCP 481.190. In determining this issue, the court must consider the relative merits of the positions of the respective parties. Kemp Bros. Construction, Inc. v. Titan Electric Corp., (2007) 146 Cal.App.4th 1474, 1484. The court does not determine whether the claim is actually valid; that determination will be made at trial and is not affected by the decision on the application for the order. CCP 484.050(b).
Except in unlawful detainer actions, the amount to be secured by the attachment is the sum of (1) the amount of the defendant’s indebtedness claimed by the plaintiff, and (2) any additional amount included by the court for estimate of costs and any allowable attorneys’ fees under CCP section 482.110. CCP 483.015(a); Goldstein v. Barak Construction, (2008) 164 Cal.App.4th 845, 852. This amount must be reduced by the sum of (1) the amount of indebtedness that the defendant has in a money judgment against plaintiff, (2) the amount claimed in a cross-complaint or affirmative defense and shown would be subject to attachment against the plaintiff, and (3) the value of any security interest held by the plaintiff in the defendant’s property, together with the amount by which the acts of the plaintiff (or a prior holder of the security interest) have decreased that security interest’s value. CCP 483.015(b). A defendant claiming that the amount to be secured should be reduced because of a cross-claim or affirmative defense must make a prima facie showing that the claim would result in an attachment against the plaintiff.
Before the issuance of a writ of attachment, the plaintiff is required to file an undertaking to pay the defendant any amount the defendant may recover for any wrongful attachment by the plaintiff in the action. CCP 489.210. The undertaking ordinarily is $10,000. CCP 489.220. If the defendant objects, the court may increase the amount of undertaking to the amount determined as the probable recovery for wrongful attachment. CCP 489.220. The court also has inherent authority to increase the amount of the undertaking sua sponte. North Hollywood Marble Co. v. Superior Court, (1984) 157 Cal.App.3d 683, 691.
C. Statement of Facts
On January 19, 2022, Assignor and Company entered into an Agreement for the equipment, under which Company would pay $1,382.38 in monthly rent for 60 months. Fitzgerald Decl., 4-5, Ex. 1. Per an addendum to the Agreement, the first payment was to be on or after January 24, 2022, the day that Company requested Assignor to pay an advance to the equipment vendor not to exceed the equipment price. Fitzgerald Decl., 4, Ex. 1. The Agreement specifies that subsequent payments are due the same day of every month thereafter. Fitzgerald Decl., 4, Ex. 1. The Agreement includes a $795 administration fee. Fitzgerald Decl., 4, Ex. 1. Company is also liable for (1) state and federal taxes and fees Assignor incurs through the Agreement and (2) finding and paying for physical insurance. Fitzgerald Decl., 6, Ex. 1. Company received title to the equipment, but Assignor was granted first-priority security interest it. Fitzgerald Decl., 6, Ex. 1.[1]
Company’s failure to make a payment when due results in a 15% late charge, plus an annual interest rate of 24%. Fitzgerald Decl., 6, Ex. 1. The failure to make a monthly payment also constitutes a default which would entitle Pawnee to (1) all unpaid rent and other amounts owed thus far under the Agreement, (2) all future unpaid rent and other amounts owed under the Agreement, discounted by 4% to reflect present value, and (3) foreclosure on or sale of the equipment. Fitzgerald Decl., 6, Ex. 1. Default also results in a $95 termination fee and makes Company liable for any attorney’s fees incurred in collection efforts. Fitzgerald Decl., 6, 9, 11, Ex. 1.
The Agreement included a Guaranty signed by Munoz, in which he guarantied all debts that Company incurred under the Lease. Fitzgerald Decl., 12, Ex. 1. The guarantor is also liable for attorney’s fees incurred in collection efforts. Fitzgerald Decl., 14, Ex. 1.
An Assignment of the Agreement, dated January 24, 2022, transferred all of Assignor’s rights under the Agreement to Pawnee. Fitzgerald Decl., 4, Ex. 1.
On July 1, 2022, Company defaulted by failure to pay under the Agreement. Fitzgerald Decl., 8, Ex. 2. Pawnee accelerated the balance due under the Agreement. A payoff quotation states that Company owes (1) $77,413.28 for the remaining balance after the 4% annual discount, (2) $715.33 in miscellaneous fees, and (3) the $95 termination fee. Fitzgerald Decl., 8-9, 15, Ex. 2. The payoff quotation states that payments began on March 1, 2022. Fitzgerald Decl., 8, Ex. 2. It divided miscellaneous charges into (1) three late charges of $207.36 each in July, August, and September 2022, and (2) $63.02 and $30.23 as finance charges. Fitzgerald Decl., 9, 15, Ex. 2. These amounts are due before any interest imposed under the Agreement. Fitzgerald Decl., 13. Pawnee estimates $5,500 in estimated attorney’s fees and costs. Fitzgerald Decl., 17.
According to Company’s Statement of Information, Munoz is its Chief Executive and Financial Officer, Secretary, and Director. Fitzgerald Decl., 16, Ex. 3.
D. Analysis
Plaintiff Pawnee applies for right to attach orders against Defendants Company and Munoz in the amount of $83,723.61, including $2,500 in costs and $3,000 in attorney’s fees.
1. A Claim Based on a Contract and on Which Attachment May Be Based
A writ of 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). CCP 483.010(a).
Plaintiff’s claim for $83,723.61 against Company is based on the Agreement. The claim for the same amount against Munoz is based on the Guaranty. Fitzgerald Decl., 4, 12, Ex. 1. Pawnee has a claim on which attachment can be based against each Defendant.
2. An Amount Due That is Fixed and Readily Ascertainable
A claim is “readily ascertainable” where the damages may be readily ascertained by reference to the contract and the basis of the calculation appears to be reasonable and definite. CIT Group/Equipment Financing, Inc. v. Super DVD, Inc., (2004) 115 Cal.App.4th 537, 540-41. The fact that the damages are unliquidated is not determinative. Id. But the contract must furnish a standard by which the amount may be ascertained and there must be a basis by which the damages can be determined by proof. Id. (citations omitted).
Strict compliance is required with statutory requirements for affidavits for attachment (Anaheim National Bank v. Kraemer, (1932) 120 Cal.App. 63, 65), and technical defects in a declaration for failure to comply with CCP section 2015.5 precludes its use as an evidentiary document. CCP 482.040 (facts stated in affidavit must be set forth with particularity); Witchell v. Korne, (1986) 179 Cal.App.3d 965, 975. The court must apply the same evidentiary standard to the declarations in an attachment hearing as to a case tried on oral testimony. VFS Financing, Inc. v. CHF Express, LLC, (2009) (C.D. Cal.) 620 F.Supp.2d 1092, 1096-97. The declarant must show personal knowledge of the relevant facts, and such evidence must be admissible and not objectionable. Id. All documentary evidence, including contracts and canceled checks, must be presented in admissible form, and admissibility as non-hearsay evidence or exception to the hearsay rule, such as the business records exception. Lydig Construction, Inc. v. Martinez Steel Corp., (2015) 234 Cal.App.4th 937, 944; Pos-A-Traction, Inc., v. Kepplly-Springfield Tire Co., (C.D. Cal. 2000) 112 F.Supp.2d, 1178, 1182. For business records, evidence should be presented to establish that the record was made in the regular course of business, at or near the time of the act or event, and the custodian of records or other qualified witness must identify the record and its mode of preparation, as well as the sources of information and method and time of preparation. Id.
Pawnee’s payoff quotation, described in the supporting declaration as a Statement of Account, asserts that the unpaid principal is $78,223.61, which includes (1) $77,413.28 for the balance of monthly payments after a 4% annual discount, (2) $715.33 in miscellaneous fees, and (3) the $95 termination fee. Fitzgerald Decl., 8-9, 15, Ex. 2. The payoff quotation divided $715.33 in miscellaneous charges into (1) three late charges for $207.36 each in July, August, and September 2022 and (2) two finance charges of $63.02 and $30.23. Fitzgerald Decl., 9, 15, Ex. 2. Although these charges purport to incur interest at 24% per year or the rate permitted by law, the application does not seek interest. Fitzgerald Decl., 6, 9-10, 13, Ex. 1.
Per an addendum to the Agreement, the first payment was to be made on or after January 24, 2022, on the day that Company requested Assignor to pay an advance to the equipment vendor not to exceed the equipment price. Fitzgerald Decl., 4, Ex. 1. The payoff quotation specifies that payments began on March 1, 2022. Fitzgerald Decl., 8, Ex. 2. The default occurred on July 1, 2022. Fitzgerald Decl., 8, Ex. 2.
The payoff quotation does not show payment history. Based on the date payments began and the date of default, it appears that Company made four of the 60 $1,382.38 payments before defaulting. Fitzgerald Decl., 5, Ex. 1. Aside from failing to provide the arithmetical calculation of the total required payments minus the payments made, Pawnee fails to calculate the discount of the accelerated balance to present value by 4%. Fitzgerald Decl., 6, Ex. 1. The principal balance owed is not readily ascertainable.
As to late charges, the Agreement provides for late charges at 15% of the amount owed. Fitzgerald Decl., 6, Ex. 1. The payoff quotation assesses late charges only for the first three late monthly payments of $1,382.38. Fitzgerald Decl., 8-9, 15, Ex. 2. Late fees of 3 x ($1,382.38 x 0.15) = 3 x $207.36 = $622.08 are ascertainable.
The invoice lists finance charges of $30.23 and $63.02. Fitzgerald Decl., 8-9, 15, Ex. 2. Pawnee fails to explain what finance charges have been incurred. The finance charges are disallowed.
The payoff quotation includes a $95 termination fee. Fitzgerald Decl., 9, 15, Ex. 2. The Agreement imposes this fee upon termination, which has occurred. Fitzgerald Decl., 6, Ex. 1. The $95 fee is ascertainable.
Pawnee claims that it expects to incur $3,000 in attorney’s fees and $2,500 in costs. Fitzgerald Decl., 17. Although the Agreement provides that Company would be responsible for these fees and costs, neither estimate is supported by an attorney declaration. Fitzgerald Decl., 6, Ex. 1. These costs are disallowed.
With the exception of $622.08 in late charges and a $95 termination fee, the damages are not readily ascertainable.
3. Probability of Success
A claim has “probable validity” where it is more likely than not that the plaintiff will recover on that claim. CCP 481.190. In determining this issue, the court must consider the relative merits of the positions of the respective parties. Kemp Bros. Construction, Inc. v. Titan Electric Corp., (2007) 146 Cal.App.4th 1474, 1484. The court does not determine whether the claim is actually valid; that determination will be made at trial and is not affected by the decision on the application for the order. CCP 484.050(b).
Pawnee provides evidence that Company signed the Agreement for the equipment, and that Munoz signed the Guaranty. Fitzgerald Decl., 4, 12, Ex. 1. In the event of default, the Agreement allowed Pawnee to collect all past and future monthly payments owed, subject to a 4% discount and late charges, and assess a termination fee. Fitzgerald Decl., 6, Ex. 1.
Through its payoff quotation, Pawnee has demonstrated that Company defaulted on July 1, 2022. Fitzgerald Decl., 8, 15, Ex. 2. It also shows that Munoz did not pay Company’s debt under the Guaranty. Plaintiff has demonstrated a probability of success.
4. Attachment Based on a Commercial Claim
If the action is against a defendant who is a natural person, an attachment may be issued only on a commercial claim which arises out of the defendant’s conduct of a trade, business, or profession. CCP 483.010(c). Consumer transactions cannot form a basis for attachment. CCP 483.010(c); Kadison, Pfaelzer, Woodard, Quinn & Rossi v. Wilson, (“Kadison”) (1987) 197 Cal.App.3d 1, 4 (action involving trust property was a commercial, not a consumer, transaction).
According to Company’s Statement of Information, Munoz is its Chief Executive and Financial Officer, Secretary, and Director. Fitzgerald Decl., 16, Ex. 3. He signed the Guaranty to induce Pawnee’s entrance into the Agreement. Fitzgerald Decl., 12, Ex. 1. His liability arose from his course of business.
5. Defendant’s Property Is Adequately Described
Where the defendant is a natural person, the description of the property must be reasonably adequate to permit the defendant to identify the specific property sought to be attached. CCP 484.020(e). Although the property must be specifically described, the plaintiff may target for attachment everything the individual defendant owns. Bank of America v. Salinas Nissan, Inc., (1989) 207 Cal.App.3d 260, 268. The requirement of specificity avoids unnecessary hearings where an individual defendant is willing to concede that the described property is subject to attachment. Ibid. A general list of categories - e.g., “real property, personal property, equipment, motor vehicles, chattel paper, negotiable and other instruments, securities, deposit accounts, safe-deposit boxes, accounts receivable, general intangibles, property subject to pending actions, final money judgments, and personal property in decedents’ estates” – is sufficient. Ibid.
The application seeks attachment of Munoz’s (1) deposit accounts pursuant to CCP section 488.455; (2) accounts receivable or general intangibles pursuant to CCP section 488.470; and (3) real property at 22975 Orangewood Court, Grand Terrace, California 92313 (“Real Property”) pursuant to CCP sections 488.315 and 488.415. This is an adequate description of the property to attach.
6. Attachment Sought for a Proper Purpose
Attachment must not be sought for a purpose other than the recovery on the claim upon which attachment is based. CCP 484.090(a)(3). Pawnee seeks attachment for breach of both contracts, a proper purpose.
E. Conclusion
Pawnee’s applications for right to attach orders are denied with the exception of $622.08 in late charges and a $95 termination fee. The court will discuss with Pawnee’s counsel whether it wants a right to attach order in this small amount. If so, Pawnee has not filed proposed right to attach orders for each Defendant and is ordered to do so within two court days or they will be deemed waived. No writ shall issue for either Defendant until Pawnee files a $10,000 undertaking for that Defendant.
[1] The declaration in support of Pawnee’s application claims that under the Agreement, it retained title while Company only had rights to use the equipment as permitted. Fitzgerald Decl., 7. That is not what the Agreement says.
