Case Number: 19STCV28944 Hearing Date: December 10, 2019 Dept: 85

Royal Business Bank v. Jasmine Chu, et al., 19STCV28944

Tentative decision on application for right to attach order: granted

Plaintiff Royal Business Bank (“Bank”) applies for a right to attach order against Defendant Jasmine Chu aka Jasmine Lotman (“Chu”) in the amount of $3,035,814.84.

The court has read and considered the moving papers, opposition,[1] and reply, and renders the following tentative decision.

A. Statement of the Case

1. Complaint

Plaintiff Bank commenced this action against Defendants Chu, Paul Lotman aka Paul M. Lotman (“Lotman”), and Lotman, Inc. on August 14, 2019 alleging causes of action for (1) breach of contract (unconditional guarantee/commercial guaranty), (2) money due, (3) breach of contract (unconditional guarantee/commercial guaranty), (4) money due, (5) breach of contract (unconditional guarantee/commercial guaranty/commercial guaranty security agreements), (6) money due, (7) recovery of personal property, and (8) conversion. The verified Complaint alleges in pertinent part as follows.

a. The SBA Loan

On June 27, 2016, Bank, as lender, and BW Independence Venture, LLC (“Independence” or “Borrower”), as borrower, entered into a written Business Loan Agreement (“SBA Loan Agreement”). On June 27, 2016, Independence executed and delivered to Bank a U.S. Small Business Administration SBA Note (“SBA Note”) (collectively the “SBA Loan Documents”) for the principal sum of $2,155,000.00, as modified on May 29, 2017 pursuant to a written Modification to Note.

Pursuant to the terms of the SBA Loan Agreement, the Borrower promised to repay to Bank the principal amount of $2,155,000, together with interest on the unpaid outstanding principal balance, and other charges as more particularly set forth in said SBA Note, payable in monthly installments beginning one month from the month of initial disbursement and continuing monthly thereafter on the first calendar day of each month, until July 1, 2041, when the entire unpaid balance due would be due and payable.

Events of monetary and non-monetary defaults under the Loan Documents have occurred, including but not limited to, (a) Borrower’s failure to make the payment due on June 1, 2019, or any subsequent payment due thereafter; (b) a material adverse change in Borrower’s financial condition; and (c) Bank in good faith believes itself insecure.

Pursuant to the terms of the SBA Loan Documents, Bank accelerated the unpaid balance due on the SBA Note and made demand upon Borrower for payment, but Borrower failed and refused to pay the sum due. There is now due from Independence the principal sum of $2,053,613.50, together with unpaid accrued interest, late charges and other fees and charges, according to proof.

b. The Non-SBA Loan

On June 27, 2016, Bank, as lender, and Independence, as borrower, entered into a written Business Loan Agreement (“Loan Agreement”). In reliance thereof, on June 27, 2016, Independence executed and delivered to Bank a Promissory Note (“Note”) (collectively, “Loan Documents”), in writing, for the sum of $940,000.00, exclusive of interest, for value received.

Pursuant to the terms of the Note, Borrower promised to repay to Bank the principal amount of $940,000, together with interest on the unpaid principal balance, and other charges as more particularly set forth in said Note, payable in monthly installments beginning August 10, 2016 through July 10, 2026, when the entire unpaid balance due under the terms of the Note would be due and payable.

Events of monetary and non-monetary defaults under the Loan Documents have occurred, including but not limited to: (a) Borrower’s failure to make the payment due on June 10, 2019, or any subsequent payment due thereafter; (b) a material adverse change in the Borrower’s financial condition; and (c) Bank in good faith believes itself insecure. Pursuant to the terms of the Loan Documents, Bank accelerated the unpaid balance due on the Note and made demand upon Borrower for payment, but Borrower failed and refused to pay the sum due.

There is now due from Independence the principal sum of $893,643.39, together with unpaid accrued interest, late charges and other fees and charges, according to proof.

c. The Guaranties

On June 27, 2016, Defendants each executed and delivered to Bank an Unconditional Guaranty and a Commercial Guaranty that jointly and severally, guaranteed to Bank the full and punctual payment, performance and satisfaction of Borrower’s indebtedness to Bank, then existing or thereafter arising or acquired. The loans made to Independence by Bank evidenced by the SBA Note and Note constitute credit as defined in said Guaranties and were granted to Independence in reliance upon the obligations of Defendants.

Independence is indebted to Bank pursuant to the terms of the SBA Note and Note in the aggregate principal sum of $2,947,256.89, together with unpaid accrued interest, accruing interest, late charges and other fees and charges, according to proof at time of trial or entry of judgment. Bank made demand upon Defendants for payment of the sums due and owing under the terms of their Guaranties. However, Defendants failed and refused, and continue to fail and refuse, to pay the sums due and owing to Bank.

2. Course of Proceedings

According a proof of service on file, Defendant Chu was personally served with the Summons, Complaint, and moving papers on September 11, 2019.

On October 11, 2019, Chu filed an Answer to the Complaint.

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).

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 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

1. Plaintiff’s Evidence

Borrower was originally established in March 2016 by Chu, who has a 90% ownership share in it. Chu was and still is the Borrower’s Managing Member. Tam Decl. ¶6. Borrower was formed for the specific purpose of acquiring commercial real estate in Independence, Missouri, and of owning and operating a franchised motel known as Best Western Truman Inn (the “Collateral”). Tam Decl. ¶6. Chu, along with family members, have been partners in the hospitality arena and have shared ownership interests in Best Western franchises in Indiana, Texas, Missouri and Iowa. Chu has been and still is involved in the day-to-day management and control of Borrower’s business affairs. Tam Decl. ¶6.

a. The SBA Loan

On June 27, 2016, Bank, as lender, and Independence, as borrower, entered into the SBA Loan Agreement. Tam Decl. ¶7, Ex. 1. In reliance thereof, on June 27, 2016, Independence executed and delivered the SBA Note for the sum of $2,155,000, exclusive of interest, for value received, and as modified on or about May 29, 2017 pursuant to a written Modification to Note. Tam Decl. ¶7, Ex. 2.

Pursuant to the terms of the SBA Note, Borrower promised to repay the principal amount of $2,155,000, together with interest on the unpaid outstanding principal balance, and other charges as more particularly set forth in said SBA Note, payable in monthly installments beginning one month from the month of initial disbursement and continuing monthly thereafter on the first calendar day of each month, until July 1, 2041 when the entire unpaid balance due under the terms of the SBA Note shall be due and payable. Tam Decl. ¶8, Ex. 2.

The interest rate on the SBA Note is subject to change from time to time based on changes in an independent index which is the daily Wall Street Journal Prime Rate (“Index”) plus 2.25% over the Index. The SBA Note further provides that should any payment not be paid within ten days of its due date, Borrower shall pay a late charge of up to 5.00% of the unpaid portion of the regularly scheduled payment. Tam Decl. ¶9, Ex. 2.

On June 27, 2016, Chu executed and delivered to Bank her written Unconditional Guarantee (“SBA Guaranty”). Tam Decl. ¶11, Ex. 3. Pursuant to the terms of the SBA Guaranty, Chu jointly and severally guaranteed to Bank the full and punctual payment, performance and satisfaction of the indebtedness of the Borrower, then existing or thereafter arising or acquired. Tam Decl. ¶11, Ex. 3. The loan made to Borrower constitutes credit as defined in the SBA Guaranty and was granted in reliance upon Chu’s obligation. Tam Decl. ¶11, Ex. 3.

As the member and manager of Borrower, Chu may enter into any agreements of any nature with Plaintiff on Borrower’s behalf. Tam Decl. ¶12. On June 27, 2016, Borrower provided to Bank its Limited Liability Company Resolution to Borrow/Grant Collateral bearing Chu’s signature. Tam Decl. ¶12, Ex. 4. Chu executed the SBA Loan Documents as the authorized signer for and on behalf of Borrower and also executed the SBA Guarantee in her individual capacity. Tam Decl. ¶12, Exs. 3, 4.

Events of monetary and non-monetary defaults under the SBA Loan Documents have occurred and continue to occur, including but not limited to: (a) Borrower’s failure to make the payment due on June 1, 2019, or any subsequent payment due thereafter; (b) a material adverse change in Borrower’s financial condition; and (c) Bank in good faith believes itself insecure. Tam Decl. ¶13. Pursuant to the SBA Loan Documents, Bank accelerated the unpaid balance due on the SBA Note and made demand upon Borrower and Chu for payment, but Borrower and Chu failed and refused and continue to fail and refuse to pay the sums due. Tam Decl. ¶13.

As of August 8, 2019, there was and still is owing from Independence and the Guarantors, jointly and severally, in accordance with the terms of SBA Note and SBA Guaranty the principal sum of $2,053,613.50, together with unpaid accrued interest from April 11, 2019 (date interest paid to) of $37,499.54 and late charges of $2,421.42. Interest continues to accrue at the daily rate of $436.04. Tam Decl. ¶15, Ex. 5.

The SBA Loan Documents and the SBA Guaranty, at section 9, provide that Borrower and Chu agree to pay all of Bank’s costs and expenses, including Bank’s attorneys’ fees and legal expenses, incurred in connection with the enforcement thereof. Bank has been required to retain the law firm of Buchalter, A Professional Corporation, to enforce its rights herein. Tam Decl. ¶16.

The SBA Guaranty provides, at Section 6, for certain waivers, including but not limited to, Chu’s waiver of any right to require Bank to proceed against Borrower, or any other guarantor, before proceeding against her, and further provides that Chu waives any right to require Bank to proceed against any collateral that secures Borrower’s obligation before proceeding against Chu. Tam Decl. ¶17.

b. The Non-SBA Loan

On June 27, 2016, Bank, as lender, and Independence, as borrower, entered into the Loan Agreement. Tam Decl. ¶19, Ex. 6. In reliance thereof, on June 27, 2016, Independence executed and delivered to Bank the Note for the sum of $940,000, exclusive of interest, for value received. Tam Decl. ¶19, Ex. 7.

Pursuant to the terms of the Note, Borrower promised to repay to Plaintiff the principal amount of $940,000, together with interest on the unpaid outstanding principal balance, and other charges as more particularly set forth in said Note, payable in monthly installments beginning August 10, 2016, until July 10, 2026, when the entire unpaid balance due shall be due and payable. Tam Decl. ¶20, Ex. 7.

On June 27, 2016, Chu executed and delivered to Bank her written Commercial Guaranty (“Guaranty”), for value received. Tam Decl. ¶22, Ex. 8. Pursuant to the terms of the Guaranty, Chu, jointly and severally, guaranteed to Bank the full and punctual payment, performance and satisfaction of Independence’s indebtedness to Bank, then existing or thereafter arising or acquired. Tam Decl. ¶22, Ex. 8. The loan evidenced by the Note constitute credit as defined in the Guaranty and was granted to Independence in reliance upon the obligations of Chu. Tam Decl. ¶22, Ex. 8.

Chu executed the Loan Documents as the authorized signer for and on behalf of Borrower and further that Chu executed the Guaranty in her individual capacity. Tam Decl. ¶23, Exs. 8, 9.

Events of monetary and non-monetary defaults under the Loan Documents have occurred and continue to occur, including but not limited to, (a) Borrower’s failure to make the payment due on June 10, 2019, or any subsequent payment due thereafter; (b) a material adverse change in the Borrower’s financial condition; and (c) Bank in good faith believes itself insecure. Tam Decl. ¶24.

Pursuant to the terms of the Loan Documents, Bank accelerated the unpaid balance due on the Note and made demand upon Borrower and Chu for payment, but Borrower and Chu failed and refused and continue to fail and refuse to pay the sums due. Tam Decl. ¶24.

There is now owing from Independence and the Guarantors, jointly and severally, the principal sum of $893,643.39, together with unpaid accrued interest from May 14, 2019 (date interest paid to) of $17,274.42. Interest continues to accrue at the daily rate of $186.18. Tam Decl. ¶26, Ex. 10.

The Loan Documents and Guaranty, at Page 3, provide that Borrower and Chu agree to pay all of Bank’s costs and expenses, including Bank’s attorneys’ fees and legal expenses, incurred in connection with the enforcement thereof. Bank has been required to retain the law firm of Buchalter, A Professional Corporation, to enforce its rights herein. Tam Decl. ¶27.

The Guaranty provides, at Page 2, for certain waivers, including but not limited to, Chu’s waiver of any right to require Bank to proceed against Borrower, or any other guarantor, before proceeding against her, and further provides that Chu waives any right to require Bank to proceed against any collateral that secures Borrower’s obligation before proceeding against Chu. Tam Decl. ¶28.

2. Defendants’ Evidence

Although Chu is an investor in Borrower, she does not consider it to be her “trade, business or profession”, but rather an investment. Chu Decl. ¶3. Borrower has engaged a local management company that runs the operation. Chu Decl. ¶3. Chu does communicate with the management on occasion concerning operations and review the financials but has received no income whatsoever from Borrower or the Collateral directly since 2016. Chu Decl. ¶3.

The hotel has been struggling for more than a year and has not been profitable since 2016. Chu Decl. ¶3. In the past few years, Borrower has been a drain on Chu’s resources and her family and Chu have infused money into the property in an effort to keep it operating. Chu Decl. ¶3.

The Collateral is currently being actively marketed for sale and Chu believes that it will be sold within a matter of months. Chu Decl. ¶4. The proceeds of any sale are the only means Chu has to substantially pay down the debt at issue in this litigation. Chu Decl. ¶4. The Collateral remains in the possession and control of the Borrower. Chu Decl. ¶4.

Chu and the other investors have attempted to work with Bank on potential resolutions to avoid litigation, including offering to cooperate with Bank in taking over operations of the Collateral, the appointment of a third party or receiver take over operations, or to diligently move toward a sale in a non-distressed manner in order to maximize proceeds and determine the amount of any deficiency. Chu Decl. ¶5. Bank has largely refused to work with Chu and the other investors. Chu Decl. ¶5.

Chu’s family would be severely harmed by any pre-judgment attachment resulting in any levy against their personal assets because their current earnings are required to maintain a standard of living and to pay their current liabilities as they become due. Chu Decl. ¶7. Chu believes she has no assets subject to attachment, as her sole income is paid earnings from her job as a registered dietitian and her sole real property is her marital homestead. Chu Decl. ¶7. Chu does not actively conduct any other trade, business, or profession from which she receives any steady or consistent income. Chu. Decl. ¶7.

Chu does not possess any assets in any category of property that Bank is seeking for attachment. Chu Decl. ¶8. The monthly expenses for Chu and her family exceed their collective income and they have been forced by the instant litigation to incur additional expenses. Chu Decl. ¶11. Chu also anticipates additional expenses as they are expecting another child. Chu Decl. ¶11.

Chu’s declared homestead is heavily encumbered, and she has no intention or ability to transfer her home during litigation. Chu Decl. ¶12.

3. Reply Evidence

On August 6, 2019, Bank’s counsel, Barry A. Smith (“Smith”), participated in a phone call that included Chu, her husband, and their counsel, John Smaha (“Smaha”). Smith Decl. ¶2. Smith advised them that Bank would be filing a lawsuit, and the parties discussed maintenance of the Collateral. Smith Decl. ¶2. In a subsequent call, Smaha indicated that the prior on-site hotel management company was inept and that Chus decided to hire a replacement, Noble Hospitality, in July 2019 as a replacement. Smith Decl. ¶2.

In subsequent communications with defense counsel, Smith reminded Smaha that the Chu family had previously hired Amber Hotel Company (“Amber Hotel”) as the real estate broker for other of their hotel properties, and Bank would not object to the same broker to market and sell the Collateral. Smith Decl. ¶3. On September 16, 2019, Chu retained Amber Hotel as her broker for the Collateral. Smith Decl. ¶3. Steve Post is the president of Amber Hotel and provided Smith with a copy of the Listing Agreement signed by Chu. Smith Decl. ¶3, Ex. A. Smith compared Chu’s signature on the Listing Agreement with other known examples of her signature on the subject loan documents and verifications of pleadings in the present action, and they appear to be the same and genuine. Smith Decl. ¶3.

Bank is not directing Amber Hotel’s work or making decisions as to the marketing or sale of the Collateral. Smith Decl. ¶4. To date, the Collateral has not yet sold and based upon the valuations that Post has discussed with Smith, there will be a deficiency balance on the loan owed by the borrower when the property does sell. Smith Decl. ¶4.

D. Analysis

Plaintiff Bank seeks a right to attach order against Chu in the amount of $3,035,814.84, which includes estimated costs of $1,000, and estimated attorney fees of $30,362.57.

1. A Claim Based on a Contract

Bank’s claim is based on the SBA Guaranty and the Guaranty, which are express written contracts between Bank and Chu under which Chu is obligated to satisfy the indebtedness of Borrower to Bank. Tam Decl. Exs. 3, 8. Bank has shown that its claim is based on a contract.

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).

Bank provides the SBA Guaranty and the Guaranty, which contains the terms and conditions of payment as well as provisions demonstrating Bank’s entitlement to payment. Tam Decl. Exs. 3, 8. Bank provides the relevant invoices and cost summaries that reflect the amount owed by Chu, which demonstrate an amount of $2,053,613.50, together with unpaid accrued interest from April 11, 2019 (date interest paid to) of $37,499.54 and late charges of $2,421.42 due and owing pursuant to the SBA Guaranty, and $893,643.39, together with unpaid accrued interest from May 14, 2019 (date interest paid to) of $17,274.42 due and owing pursuant to the Guaranty. Tam Decl. Exs. 5, 10.

The amount due under the SBA Guaranty and the Guaranty is fixed and readily ascertainable.

3. Probability of Success

Bank asserts a probability of success on its claim for breach of the Guaranties because it has provided the relevant documentation and because Chu’s obligations are not secured by real or personal property and Bank has no security interest in any real or personal property of Chu to secure the Guaranties. App. at 9.

Chu asserts that the instant application is premature because it arises from a claim secured by an interest in real property, the Collateral. Opp. at 6. Chu asserts that the Collateral is a substantial property that remains unliquidated and that any deficiency from the sale of the Collateral has yet to be determined. Opp. at 6-7. Chu argues that the court should refrain from granting attachment pending liquidation and final sale of the Collateral. Opp. at 7.

Chu’s argument is unavailing. As Bank correctly notes (App. at 6, 9; Reply at 7), a guaranty is an obligation separate and independent from that binding the principal debtor, and suit may be maintained upon it without reference to any proceeding against the principal debtor or the security. Coppola v. Superior Court, (1989) 211 Cal.App.3d 484, 865-66; Eisendrath v. Bank of America, (1953) 118 Cal.App.2d 434, 438. Furthermore, both Guaranties contain provisions that confirm this separate obligation and explicitly waive any defense based on or requirement that Bank first proceed against any collateral, as well as all rights and defenses that Chu may have because Borrower’s obligations are secured by real or personal property. App. at 6-7; Reply at 7-8; Tam Decl. Exs. 3, p.2; 8, p.2. The application is not premature and the fact that the Collateral has not yet been liquidated has no bearing on Bank’s ability to pursue the instant application based on Chu’s Guaranties.

Bank also claims estimated costs of $1,000 and attorney fees of $30,362.57 but fails to support these amounts with an attorney declaration and they are denied.

5. Attachment is 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, (1987) 197 Cal.App.3d 1, 4 (action involving trust property was a commercial, not a consumer, transaction).

The conduct of a trade, business, or profession is generally activity “which occupies the time, attention and effort. . . for the purpose of livelihood or profit on a continuing basis.” Nakasone v. Randall, (1982) 129 Cal.App.3d 757, 764 (quoting Advance Transformer Co. v. Superior Court, (1974) 44 Cal.App.3d 127, 134). “The term ‘business,’ therefore, embraces any activity engaged in for profit or for gain. The phrase ‘engaged in business,’ however, generally is held to imply business activity of a frequent or continuous nature.” Id. There is a distinction between one who spends his time and effort in carrying on an activity for livelihood or profit on a continuing basis and one who merely conserves his personal investments. Id.

In Security Pacific National Bank v. Matek, (“Matek”) (1985) 175 Cal.App.3d 1071. In Matek, the defendant was a general partner in the business of retrofitting a fishing vessel who personally borrowed money from the plaintiff bank and tendered the loan proceeds to the partnership. Id. at 1073, 1076. Although the defendant contended that he was a real estate broker and did not spend time on the business, the court found that he “had a voice in many vital partnership affairs” and was actively engaged in the partnership business when he borrowed the money. Id. at 1076-77.

Bank’s claim for attachment is based on the Guaranties, which are commercial agreements. Chu is the 90% owner and Managing Member of Borrower and was, and still is, engaged in the ownership, management and operation of Borrower’s business. Tam Decl. ¶¶ 6, 12, 23, Exs. 4, 9. She signed SBA Loan Agreement, the SBA Note, Borrower’s resolution to borrow, the Loan Agreement, the Note, and the resolution to borrow the non-SBA Loan. Tam Exs. 1-2, 4, 6-7, 9. She participated in an August 13, 2019 conference call with Bank to discuss Borrower’s indebtedness. Tam Decl. ¶6. She subsequently participated in an August 6, 2019 phone call that included Chu, her husband, their counsel (Smaha), and Bank’s representative in which the parties discussed maintenance of the Collateral. Smith Decl. ¶2. In a subsequent call, Smaha indicated that the prior on-site hotel management company was inept and the Chus decided to hire a replacement in July 2019 Smith Decl. ¶2. On September 16, 2019, Chu retained Amber Hotel as her broker to sell the Collateral, and her signature is on the Listing Agreement. Smith Decl. ¶3, Ex. A.

Chu argues that the claim does not arise out of her conduct of a trade, business, or profession. Opp. at 7-8. Chu asserts that she is a dietician at a university who invested in a business and guaranteed an SBA loan for that purpose. She was not engaged in the business of guaranteeing for consideration the debts of others, and her involvement with Borrower was not frequent or continuous and did not provide her with a livelihood or any distribution since 2016. Rather, she invested in a hotel managed for a short period by her father and then an outside professional manager under Bank’s oversight with full cooperation of Borrower. As a result, Chu argues that she was not engaged in a trade, business, or profession within the meaning of CCP section 483.010(c). Opp. at 9.

The court does not agree. Chu focuses on the wrong business when she contends that she does not manage the hotel. The question is her involvement in Borrower. She is Borrower’s 90% owner and managing member. She admits that she is involved in the management of Borrower. Chu Decl. ¶3. Chu also admits to infusing funds into the hotel owned by Borrower. Chu Decl. ¶3. The fact that Chu has a separate, primary occupation and has not profited from her involvement with Borrower is irrelevant for the purposes of attachment. Chu’s conduct qualifies business of a frequent or continuous nature. She is the majority owner of a business to which Bank extended credit in reliance on her Guaranties, she occupied herself in Borrower’s business on a continuing basis by providing credit for, and management to, Borrower. Furthermore, she hired a new management company for the Collateral and signed the Listing Agreement to sell it. Smith Decl. ¶¶ 2, 3, Ex. A.

As such, Chu is at the commercial end of the attachment law spectrum. She conducted a trade, business, or profession under CCP section 483.010(c), and Bank’s claim against Chu is a commercial claim.

6. Defendants’ 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.

Bank claims entitlement to attach the property of Chu as follows: interests in real property, specifically the property located at 6242 Pasatiempo Avenue, San Diego, CA 92120 (the “Property”), accounts receivable, chattel paper, general intangibles, equipment of a going business, farm products, inventory of a going business, final money judgments arising out of the conduct by the defendant of a trade, business, or profession, money on the premises where a trade, business, or profession is conducted, negotiable documents of title, instruments, securities, and minerals or the like. App. at 10.

The property to be attached is adequately described.

7. Claims of Exemption

a. Exemption Law

All property exempt from enforcement of a money judgment is also exempt from attachment. CCP §487.020(a).[2] So are wages and any property “necessary for support of the defendant or his or her family.” CCP §487.020(b), (c).

If the defendant claims that any personal property described in the application is exempt from attachment, the defendant may include that claim in the notice of opposition to the right to attach order (CCP §484.060(a), or may file and serve a separate claim of exemption for the property. CCP §484.070(b). If the defendant does not do either, the claim of exemption will be barred in the absence of a showing of a change in circumstances occurring after the expiration of the time for claiming exemptions. CCP §484.070(a); Bank of America v. Salinas Nissan, Inc., (“Bank of America”) (1989) 207 Cal.App.3d 260, 268 (plaintiff’s failure to oppose exemption claim concedes its propriety). This waiver applies only to personal property. A homestead exemption for a dwelling is not waived by failing to make a claim for exemption. Martom v. Aboyan, (1983) 148 Cal.App.3d 826, 831.

The defendant also may obtain a determination at the hearing whether real or personal property not described in the application or real property described in the application is exempt from attachment by including an exemption claim for such property in the notice of opposition/separate claim of exemption. The defendant’s failure to claim such property as exempt does not preclude the defendant from raising the issue at a later time. CCP §484.070(b). The claim of exemption shall (1) describe the property claimed to be exempt, and (2) specify the statute section supporting the claim. CCP §484.070(c). The claim of exemption shall be accompanied by an affidavit supporting any factual issues raised by the claim and points and authorities supporting any legal issues raised. CCP §484.070(d). The defendant must file and serve the claim of exemption and supporting papers not less than five court days before the date set for the hearing. CCP §484.070(e).

If the plaintiff opposes the claim of exemption, the plaintiff shall file and serve a notice of opposition to the claim of exemption, accompanied by an affidavit and memorandum of points and authorities on any legal issues, not less than two days before the date set for the hearing. If the plaintiff does not file and serve a notice of opposition, no writ of attachment shall be issued as to the property claimed to be exempt. Bank of America, supra, 207 Cal.App.3d at 270 (plaintiff’s failure to oppose exemption claim conceded its propriety). If the defendant claims an exemption to all of the property described in the plaintiff’s application and the plaintiff does not file and serve a notice of opposition, no hearing shall be held, no right to attach order or writ of attachment shall issue, and any temporary protective order previously issued shall immediately expire. CCP §484.070(f).

If the plaintiff files and serves a notice of opposition to the claim, the defendant has the burden of proving that the property is exempt from attachment. CCP §484.070(g).

b. Homestead Exemption

Chu argues that her residence is her Declared Homestead and is exempt from attachment pursuant to CCP section 704.930.[3] Opp. at 10; Chu Decl. ¶8(a). To the extent that Chu is claiming a homestead exemption pursuant to CCP section 704.720, the following analysis applies.

A homestead exemption exists under certain conditions. The amount of the homestead exemption is $100,000 if the judgment debtor lives in the home at the time of the attempted sale with at least one other member of the family unit. CCP §704.730(a)(1).

Chu provides evidence that she has resided continuously at her residence. Chu Decl. ¶9. Chu’s husband and son live with her at the residence. Ibid. Chu qualifies for a $100,000 homestead exemption. As Bank correctly notes (Reply at 10) the recording of a homestead exemption does not affect the plaintiff’s right to attach the homestead. CCP §487.025. The homestead exemption applies post-judgment, and even then will not prevent sale of Chu’s home unless there are insufficient bids to satisfy all encumbrances and the $100,000 exemption. CCP §§ 487.025, 704.800.

c. Necessities of Life Exemption

Chu also asserts a right to exemption pursuant to CCP section 487.020, which provides an exemption for property necessary for the support of a defendant or the family of a defendant. Opp. at 10-11.

Property which is necessary for the support of a defendant who is a natural person or the family of such defendant supported in whole or in part by the defendant” may be exempt. Code CCP §487.020(b). All property of the defendant is considered when determining the needs of the defendant, his spouse, and his dependents. CCP §703.115. Where property is claimed exempt pursuant to a provision exempting property necessary of the support of the claimant and the claimant’s family, “the claim of exemption shall include a financial statement” which “shall be executed under oath by the [claimant]…” CCP §703.530. The financial statement must detail the names, ages, relationships, earnings, income, assets, and outstanding obligations of all members of the family. CCP §703.530.

Chu asserts that her household’s monthly expenses exceed its combined income and that they rely on dwindling savings and loans to fund routine expenses. Chu Decl. ¶11. Chu fails to otherwise support her claim of exemption with any analysis.

Chu also fails to provide sufficient documentary evidence establishing that her residence and other assets are necessary for the support of herself or her family. Although Chu and Bank refer to a concurrently filed Financial Statement (Opp. at 11; Reply at 12), the court does not have this document. To the extent that Chu’s summary of her and her husband’s monthly income in her declaration (Chu Decl. ¶¶ 9-10) is intended to serve as a financial statement, it does not contain all the information required by CCP section 703.530, such as the assets and outstanding obligations of Chu and all members of her family. Nor is there a detailed financial statement from Chu’s husband beyond her claim that he makes $1,000 a month as an instructor with the Wave Volleyball Club. Chu Decl. ¶9.

Chu has not sufficiently supported her claim for a necessities of life exemption.

d. Other Statutory Exemptions

Chu asserts that all her income is exempt from attachment pursuant to CCP section 487.020(c). Compensation payable by an employer to an employee for personal services performed by such employee, whether denominated as wages, salary, commission, bonus, or otherwise, is exempt from attachment. CCP §487.020(c); CCP §706.011(b). Chu’s income from her occupation as a registered dietician with the UCSD Athletics Department is therefore exempt from attachment. However, Bank disavows any attempt to attach Chu’s earnings until final judgment. Reply at 12.

Chu’s Notice of Opposition also claims an exemption for the motor vehicles of her family pursuant to CCP §704.010, but fails to provide any details regarding the number of vehicles or their value. The court therefore cannot determine the extent of an exemption. In any case, Bank does not seek attachment of either Chu’s wages or motor vehicles. Reply at 13.

As part of her necessities of life exemption, Chu’s Notice of Opposition contends that the balance of her checking accounts and savings accounts are exempt. Although not exempt for necessities of life, these accounts are exempt in the aggregate amount of $1000. CCP §487.010(b)(7).

E. Conclusion

Bank’s application for a right to attach order against Chu is granted in the amount of $3,004,452.27. Chu has a $100,000 homestead exemption for her residence which would apply post-judgment. She also has a $1000 aggregate exemption in deposit accounts. No writ of attachment shall issue until Bank posts a $10,000 bond.

[1] Chu failed to lodge a courtesy copy of her opposition brief in violation of the Presiding Judge’s General Order Re: Mandatory Electronic Filing. Her counsel is admonished to provide courtesy copies in all future filings.

[2]The property exempt from enforcement of a money judgment is listed in CCP section 704.010 et seq.

[3] This statute only states the requirement for a homestead declaration, it does not provide for any exemption.