2018-00234752-CU-BC

Andrey Antonov vs. Johnny Estrada

Nature of Proceeding: Writ of Attachment (Valencia Property Pros, LLC)

Filed By: Dincel, Kim O.

Plaintiffs Andrey Antonov (“Antonov”) and AAJV Venture 1, LLC’s (“AAJV”) separate applications for right to attach order and for writ of attachment as against defendants Johnny Estrada (“Johnny”), Africa Estrada (“Africa”), Valencia Construction, Inc.

(“VCI”) and Valencia Property Pros, LLC (“VPP”) is ruled on as follows.

Factual Background

This action arises out of two loans, the first in November 2017 for $450,000 relating to property on 48th Street in Sacramento (“November Note”) and the second in December 2017 for $410,000 relating to property on Walnut Avenue in Sacramento (“December Note”). According to the exhibits attached to the operative First Amended Complaint (“1AC”), it appears loans were made by AAJV to VPP with Johnny and Africa each signing as a “managing member” of VPP and also each signing separate personal guaranties in their individual capacities relative to both loans.

The 1AC purports to assert two contract causes of action by AAJV as against VPP, Johnny and Africa relative to the November Note and the December Note and although both notes indicate by their own terms they are secured by a deed of trust recorded against the individual properties, the 1AC alleges neither actually is. According to the 1AC, defendants owe over $230,000 on the November Note and an unspecified amount on the December Note. (These two contract causes of action do expressly reference the personal guaranties apparently signed by Johnny and Africa but the court finds no properly-pled cause of action for breach of any personal guaranty associated with either note.) In the common counts claim, AAJV avers it is owed over $655,000 (exclusive of prejudgment interest and attorney fees) from VPP, Johnny and Africa. Both AAJV and Antonov have pled a fraud claim against Johnny, Africa and VCI (a corporation allegedly controlled by Johnny and Africa), seeking unspecified compensatory and punitive damages.

The court’s file does not reflect the filing of an answer by any of the named defendants in response to either the original complaint or the 1AC.

Moving Papers. Both plaintiffs AAJV and Antonov have filed four separate but essentially identical applications which seek pre-judgment attachment as against VPP, Johnny, Africa and VCI’s respective assets to secure the recovery of the $746,789 plus fees of $10,000 and costs of $2,500.

Opposition. Defendants oppose, arguing first that neither plaintiff is entitled to attachment as against VCI since neither has established the existence of any contract with VCI and since the only cause of action currently alleged against VCI is for fraud, a

tort claim does not support pre-judgment attachment. The opposition next contends that attachment should be denied as to the November Note on account of its usurious interest rate in excess of 10% annually, thereby entitling Johnny and Africa to recover from plaintiffs (treble) damages which would more than offset the latter’s claims against the former. Defendants further assert that California law prohibits attachment when the underlying contract claim is secured by real property unless the security has without any act of the secured party been rendered valueless and that given the Walnut Avenue property has been appraised at $700,000, attachment must be denied since plaintiffs are unable to demonstrate (1) their security has diminished in value, (2) they are not responsible for this diminution, and (3) the attachment is not sought for a purpose other than to recover on the underlying contract claims. The opposition also suggests attachment should be denied since any lack of security is solely attributable to plaintiffs’ mistake in “failing to record the November Note and December

Note” (even though the recording a note does not create an enforceable security interest). Defendants maintain that attachment should not issue against Johnny or Africa since it is unclear if the claims against them arise from their conduct in a trade, business or profession (as opposed to for personal, family or household purposes) and regardless, Johnny and Africa claim that their assets which plaintiffs seek to attach are exempt from attachment as necessary for the support of their family. Finally, the opposition insists if the court issues a right to attach order, the attachment should be reduced to the amount sought in the 1AC and further reduced by the amount of the usury claim defendants have against plaintiffs relative to the November Note.

Objections to Evidence

Neither side (timely) filed any written objections to evidence.

Analysis

Standards for Attachment. A Right to Attach Order and Order for Issuance of a Writ of Attachment may be issued where the court finds that (1) the claim upon which the attachment is based is one upon which an attachment may be issued; (2) the applicant 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 of the claim upon which the attachment is based; and (4) the amount to be secured by the attachment is greater than zero. (Code Civ. Proc. §484.090(a).) The court’s determination is to be made upon the basis of the pleadings and other papers in the record. (Code Civ. Proc. §484.090(d).) There are strict statutory requirements that must be met to establish a prima facie claim to relief. Strict construction of the statutory scheme prevents any relief unless specifically provided in statute. (Pacific Decision Sciences Corp. v Superior Court (2004) 121 Cal.App.4th 1100, 1106.)

In light of the first element, a writ of attachment may be issued only if the underlying action is a claim for money based upon an express or implied contract; the total amount of the claim is a fixed or readily ascertainable amount of at least $500 exclusive of costs, interest, and attorney fees; the claim is not secured by any interest in real property; and the property sought to be attached must be proper for attachment. (Code Civ. Proc. §483.010; Kadison, Pfaelzer, Woodward, Quinn & Rossi v. Wilson (1987) 197Cal.App.3d 1, fn. 1; Western Steel and Ship Repair, Inc. v. R.M.L, Inc.

(1986) 176 Cal.App.3d 1108, 1113.) Any claim of attachment against a natural person may be made under the statute only if the debt arises from the defendant’s conduct of a “trade, business, or profession.” (Code Civ. Proc. §483.010(c).)

The applicant has the burden of proving with admissible evidence that it is more likely than not s/he will obtain a judgment against the defendant on the claim. (Code Civ. Proc. §§484.030, 481.190, 484.090(a)(2).) Thus, a trial court not only has the power to but ultimately must weigh the evidence offered in connection with the application in order to determine the “probable validity” of the applicant’s claims. (See, e.g., Hobbs v. Weiss (1999) 73 Cal.App.4th 76, 80.) Still, the court is not required to accept as true even undisputed declarations where contrary inferences may be drawn from other evidence. (See, e.g., Bank of America v. Salinas Nissan, Inc. (1989) 207 Cal.App.3d 260, 270.)

Plaintiff Antonov Alleges No Claim Supporting Attachment. At the outset, the court finds that plaintiff Antonov has asserted in the operative 1AC against any of the named defendants no claim for a fixed or readily ascertainable amount of money based upon an express or implied contract and thus, he is under California law precluded from seeking attachment here. Both of the contract causes of action relating to the November Note and the December Note are brought by AAJV alone and the same is true for the common counts claim. The only cause of action to which plaintiff Antonov is a party is the one for fraud and fraud is a tort claim where the amount of money which defendants may ultimately be liable for is neither fixed nor readily ascertainable. Consequently, to the extent the four pending applications seek attachment on behalf of plaintiff Antonov, they are all denied as to him.

Plaintiff AAJV Alleges No Claim Supporting Attachment Against VCI. AAJV’s application for attachment as against defendant VCI must likewise be denied since the sole cause of action alleged by AAJV against VCI in the 1AC is for fraud, a tort claim that is not a proper basis for attachment. The court notes that plaintiffs’ reply concedes VCI was not a party to any of the contracts and while the reply proceeds to argue that VCI was an intended beneficiary of the two loans, the 1AC does not currently allege this nor does it otherwise plead any breach of contract cause of action as against VCI. Therefore, the court finds no proper basis on which AAJV may now seek attachment of VCI’s assets.

AAJV Alleges Claims Supporting Attachment Against VPP, Johnny and Africa. As noted above, the 1AC asserts breach of contract and common counts claims against VPP, Johnny and Africa based on both the November Note and the December Note, both of which are attached to the 1AC as Exhibits A and C, respectively. Although it appears both loans were made by AAJV to VPP with Johnny and Africa each signing merely as a “managing member” of VPP, Paragraph 7 of both notes states in its entirety:

RESPONSIBILITIES OF PERSONS UNDER THIS NOTE

If more than one person signs this Note, each of us is fully and personally obligated to keep all of the promises made in this Note, including the promise to pay the full amount owed. Any person who is a guarantor, surety, or endorser of this Note is also obligated to do these things. Any person who takes over these obligations, including the obligations of the guarantor, surety, or endorser of this Note, is also obligated to keep all of the promises made in this Note. The Note Holder may enforce its rights under this Note against each person individually or against all of us together. This means that anyone of us may be required to pay all of the amounts owed under this Note.

Thus, coupled with the lack of any argument by the opposition to the contrary, the court finds that plaintiff AAJV has adequately pled claims against VPP, Johnny and Africa which are based on express or implied contracts and that these claims seek inter alia money damages in a fixed or readily ascertainable amount of at least $500, as required by Code of Civil Procedure §483.010(a).

Furthermore, despite the fact both the November Note and the December Note state these loans are to be secured by a deed of trust recorded, the court finds no evidence which supports a finding that either note is actually secured by a recorded deed of trust. As such, this court holds that AAJV is not precluded from seeking attachment as against VPP, Johnny and/or Africa by virtue of Code of Civil Procedure §483.010(b)’s requirement that the underlying contract-based claim not be secured (unless the security has decreased in value to less than the amount owing on the claim). It is true that the opposition argued at Page 6:14-20 that “Plaintiff’s mistake” in failing to record its security interest should now preclude AAJV from obtaining attachment but defendants have cited no legal authority whatsoever for such a proposition and this argument is therefore rejected.

The opposition’s assertion at Page 6:21-Page 7:6 that attachment is improper as against Johnny and Africa because Code of Civil Procedure §483.010(c) requires attachment against a natural person be based only on a claim which arises out of a “trade, business, or profession” and because the November Note and the December Note (and the two personal guaranties executed in connection with both notes) “do not specify the nature and purpose of the loans” also does not withstand scrutiny. That both the November Note and the December Note arise from Johnny and Africa’s conduct of a “trade, business, or profession” is all but confirmed by the fact that both notes indicate by their own terms that the borrower is VPP, an LLC, and indicate that Johnny and Africa were executing the notes as a “managing member” of VPP. Moreover, had Johnny and Africa entered into either note in their individual capacities, there would have been no need for the personal guaranties executed in connection with both notes and ultimately, the court finds absolutely no evidence which supports a finding that either of the two loans was “primarily for personal, family, or household purposes” within the meaning of §483.010(c). After all, both Johnny and Africa’s declarations in support of the opposition attest under oath in Paragraph 13 that it was a “business transaction between Plaintiff [AAJV] and Defendants [other than VCI]” ( underline added for emphasis) and in Paragraph 10 that they both “gave a personal guarantee to AAJV for the November and December Notes…,” thereby removing any lingering doubt about whether either loan was for “primarily for personal, family, or household purposes.” Accordingly, §483.010(c) does not operate as a categorical bar to AAJV’s application for attachment as against Johnny or Africa and coincidentally, for the same reason, the opposition’s contention that the November Note has a usurious interest rate necessarily fails inasmuch as the constitutional provision on which defendants rely applies only to loan proceeds used “primarily for personal, family, or household purposes…”

In light of the foregoing, the court concludes that AAJV’s contract-based claims against VPP, Johnny and Africa are “probably valid” and therefore, AAJV is presumptively entitled to attachment as against the assets of each of these three defendants subject to any applicable limitations on the amount to be attached and claim of exemption from attachment.

Limitations on Amount to be Attached. Although the court agrees with plaintiffs that

the amount sought to be attached need not be identical to the amount of contract-based damages alleged in the operative complaint, the court can find no legitimate justification which would entitled a plaintiff to attach assets in an amount greater than the contract-based damages alleged in the operative complaint before accounting for any prejudgment interest as well as any reasonably anticipated fees and costs that may be recovered in the action. However, it appears that the $746,789 amount (exclusive of fees of $10,000 and costs of $2,500) which plaintiff AAJV seeks to secure by attachment is the sum of the $656,671 alleged in the common counts claim of the 1AC plus the prejudgment interest which has accrued as of the filing of these four applications. As a result, there is no valid basis on which to reduce the amount subject to attachment.

Johnny and Africa’s Claim of Exemption from Attachment. Johnny and Africa have each filed identical claims of exemption and financial statements (attached to their respective declarations) in which they aver under penalty of perjury that their combined monthly take home pay is roughly $2,260 and that their total monthly expenses are in excess of $11,600, including over $4,150 for housing, $900 for food and household supplies, $1,800 for utilities, $961 for medical/dental payments, $1,700 for insurance, $891 for transportation, $500 for car payments, $100 for laundry and $465 for HOA fees on two properties. These financial statements suggest that this family currently operates with a monthly deficit of over $9,000 but such a proposition defies logic. Instead, this court finds that Johnny and Africa have more likely than not understated their monthly income and/or overstated their monthly expenses but regardless, virtually all of the claimed monthly expenses are unreasonably excessive and do not necessarily compel a conclusion that the rental income derived from the three identified properties (i.e., 74 Creeks Edge Way, 4708 Greenhome Drive and 490 Summer Garden Way) is necessary for the support of Johnny and Africa’s family. In the end, Johnny and Africa have failed to satisfy their burden under Code of Civil Procedure §484.070(g) to prove the three listed properties are indeed exempt from attachment based on the “necessary for the support” exemption found in §487.020(b).

Conclusion

For the reasons explained above, plaintiff Antonov is not entitled to attachment against any defendant and plaintiff AAJV is not entitled to attachment against defendant VCI. Plaintiff AAJV’s applications for attachment as to defendants VPP, Johnny and Africa are granted in full, as the claims of exemption by Johnny and Africa are both denied in their entirety.

*** If defendants request oral argument in an attempt to persuade the court to grant Johnny and Africa’s claims of exemption from attachment, they should be prepared to provide the court with documentary proof of their claimed monthly income and expenses as well as their ownership of not only the three rental properties claimed to be exempt but also the other properties identified in their financial statements. ***

Plaintiff AAJV shall pursuant to Code of Civil Procedure §489.220(a) post an undertaking in the amount of $10,000 within ten (10) days.

Pursuant to CRC Rule 3.1312, plaintiff AAJV to submit a proposed right to attach order along with an order for issuance of writ of attachment after hearing which the court will sign upon proof of the timely posting of the specified undertaking.

Defendants are reminded that they are under Code of Civil Procedure §489.310 permitted to post a bond or undertaking in order to liberate any asset which may hereafter be attached by AAJV pursuant to this ruling.

This minute order is effective immediately. No formal order or other notice is required. (Code Civ. Proc. §1019.5; CRC Rule 3.1312.)