Case Number: GC050360 Hearing Date: April 18, 2014 Dept: A

Wang v Basba

MOTION FOR LEAVE TO AMEND COMPLAINT
APPLICATION FOR WRIT OF ATTACHMENT

Calendar: 25
Case No: GC050360
Date: 4/18/14

MP: Plaintiff, Charles Wang and Anita Wang
RP: Defendants, Benju Basba and Rebecca Basba

RELIEF REQUESTED:
1. Order granting Plaintiff leave to file a Fourth Amended Complaint
2. Writ of Attachment for $1,813,577.89 to be imposed on property of the Defendants at 711 Camino Grove Ave., Arcadia, CA.

DISCUSSION:
The Plaintiffs claim that the Defendant, Benju Basba, breached an agreement to repay $1,000,000 under a promissory note. Further, the Plaintiffs claim that Defendant, Rebecca Basba, is liable because she was married to Benju Basba at the time of the loan and that Benju Basba made a fraudulent conveyance to Rebecca Basba to avoid paying the debt.
This hearing concerns the Plaintiffs’ application for a writ of attachment. The hearing was continued from March 21, 2014.
In addition, this hearing concerns the Plaintiffs’ request for leave to file a Fourth Amended Complaint.

1. Motion for Leave to File Fourth Amended Complaint
The Plaintiffs seek to add claims for fraud and conspiracy to defraud and to add two new defendants.
CCP section 473(a) permits the Court to grant leave to a party to amend a pleading. The Court’s discretion regarding granting leave to amend is usually exercised liberally to permit amendment of pleadings. Nestle v. Santa Monica (1972) 6 Cal.3d 920, 939. If a motion to amend is timely made and the granting of the motion will not prejudice the opposing party, it is error to refuse permission to amend. Morgan v. Superior Court of Los Angeles County (1959) 172 Cal. App. 2d 527, 530.

The Plaintiff’s attorney, Matthew Pero, provides facts in his declaration to demonstrate that the facts underlying the new claims was discovered in the deposition of Sabrina Ma on December 3, 2014, the deposition of Grant Lin on January 8, 2014, and in a declaration provided by Sabrina Ma in March 2014. These facts indicate that the motion is timely because it was filed after information was obtained through discovery.
Further, granting the motion will not cause prejudice to the Defendants. Since there is no trial date, the Defendants have sufficient time to obtain discovery and to prepare a defense to the new claims.

The Defendants argue that the new causes of action lack sufficient facts. Generally, the Court does not ordinarily consider the validity of the proposed amended pleading when determining whether to grant leave to amend. Kittredge Sports Co. v. Superior Court (1989) 213 Cal.App.3d 1045, 1045. In the pending case, since there is no trial date, the Defendants may test the legal sufficiency of the new cause of action by filing the appropriate attack on the pleading. Accordingly, this is not grounds to deny the motion.

Therefore, the Court will grant the Plaintiff’s motion because the Plaintiff’s motion is timely and because the Defendants will not suffer any prejudice from granting the motion.

2. Application for Writ of Attachment
The Plaintiffs request a writ of attachment for $1,813,577.89 to be imposed on property of the Defendants. The attachment is a prejudgment remedy that will allow the Plaintiff to have a lien on the Defendant’s assets until a final adjudication of Plaintiff’s claims.
CCP section 484.090 permits the Court to issue a writ of attachment after finding the following:

1) the Plaintiff’s claim 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; and
4) The amount to be secured by the attachment is greater than zero.

The Plaintiffs request the writ of attachment under the Fraudulent Transfer Act, which is enacted at Civil Code sections 3439 to 3439.12. Under section 3439.07, in an action for relief against a fraudulent transfer, a creditor may obtain an attachment or other provisional remedy against the asset transferred or its proceeds. The Plaintiffs claim that Defendant, Benju Basba, transferred real property at 711 Camino Grove, Arcadia, CA, to avoid paying a personal loan. This fraudulent transfer claim is a claim upon which an attachment may be issued under Civil Code section 3439.07.
In order to obtain the writ of attachment, the Plaintiffs must establish the probability validity of the claim upon which the attachment is based, i.e., the probable validity of the Plaintiffs’ claim that the Defendant is a debtor who made a fraudulent transfer.

a. Claim that Defendant is a Debtor
The Plaintiffs claim that the Defendant, Benju Basba, is a debtor because he failed to repay a $1,000,000 business loan. The Plaintiff, Anita Wang, states that the promissory note attached as exhibit 4 to the motion is a copy of the promissory note.
A review of the promissory note reveals that it identifies the Defendant, Benju Basba, as the borrower, the Plaintiffs, as the lenders, and the amount as $1,000,000. The promissory note indicates that the interest will be paid and identifies the dates by which the loan must be repaid. The note includes a signature next to the line indicating “borrower”.
However, the Plaintiffs did not transfer the money to the Defendant. Copies of the Plaintiffs’ checks are attached as exhibit 1. A review of the checks reveals that they were made out to LinkHeart Inc., Omniqur Inc., and INIT Technology Inc. The Plaintiffs do not offer any business records or other evidence to demonstrate that the Defendant owns an interest in these business entities.
In the opposition, the Defendant provides evidence in his own declaration that the payments totaling $1,000,000 were not made to him. Benju Basba states in paragraph 7 that the Plaintiffs invested $500,000 in LinkHeart, Inc., which was a company formed to test a heart device. The Defendant states that he was also an investor in LinkHeart, Inc. and that he did not receive any money from the company and he did not work for the company. Benju Basba states in paragraph 8 that the company was incorporated under the name of Heart Link Biomedical and that stock certificates were issued to the Plaintiffs for the investment. A copy of the stock certificate is in exhibit 2 to Plaintiffs’ application. The stock certificate indicates that the Plaintiff, Charles Wang, owns 4,000,000 shares in the company. Benju Basba states in paragraph 9 that he did not receive the $500,000 paid to LinkHeart, Inc. and that he did not make a promise to pay back the $500,000.
Benju Basba then states in paragraph 11 that the Plaintiffs also loaned $500,000 to INIT Technology. Benju Basba states that he did not receive any money and that he did not agreed to repay the loan.

The Court has the power to determine disputed facts in the ruling on a motion on the basis of a preponderance of the evidence as disclosed in the affidavits and declarations. Hobbs v. Weiss (1999) 73 Cal.App.4th 76, 80. Under CCP section 484.100, this determination of fact has no effect on the issues in the man action and is inadmissible at trial.

Here, the Court determines that the disputed facts indicate that the money was an investment. The Plaintiffs did not write checks to the Defendant. Instead, the Plaintiffs wrote checks to the company, LinkHeart Inc., and received stock certificates in return. This indicates that the Plaintiffs have not established the probable validity of the Plaintiffs’ claim that the Defendant is a debtor.

b. Claimed Fraudulent Transfer of Real Property
The Plaintiffs claim that the real property at 711 Camino Grove, Arcadia, CA was fraudulently transferred by Benju Basba to Rebecca Basba.
The Plaintiffs argue that the transfer was fraudulent because Benju Basba transferred the real property for no consideration. However, this does not establish that it was a fraudulent transfer. Under Civil Code sections 3439.04(a)(2) and 3439.05, the Plaintiffs must also establish that the Defendant was engaged or about to engage in a business or transaction for which his assets were unreasonably small in relation to the business or that the transfer was made when the Defendant was insolvent.
The Plaintiffs did not offer evidence regarding these requirements to establish the probable validity of their claim that the transfer was fraudulent. The Plaintiffs offer no evidence regarding the Defendant’s assets to demonstrate that his assets were unreasonably small in relation to the alleged $1,000,000 loan when he made the transfer of the real property on April 19, 2011. The Plaintiffs offer no evidence that the Defendant was insolvent.
The Plaintiffs claim that the Defendant is presumed insolvent because he is not paying his debts as they become due. Under Civil Code section 3439.02(c), this is one definition of insolvency. However, the Plaintiffs offer no evidence that the Defendant was failing to pay any other debts. Instead, the Plaintiffs claim that the Defendant was not paying the promissory note, which, as noted above, will not be established with probable validity for the purposes of this hearing. Accordingly, there is insufficient evidence regarding the Defendant’s finances.
Further, the Defendant, Rebecca Basba, provides facts in a declaration regarding the transfer of property. Benjamin Basba and Rebecca Basba were married until the marriage was dissolved on February 16, 2010 (see copy of judgment of dissolution in exhibit 3 to her declaration). Rebecca Basba adds that a reason for the dissolution was that Benjamin Basba was living abroad. Rebecca Basba provides facts in paragraphs 4 and 5 that she and Benjamin Basba sought to reconcile and decided to purchase a house in the United States for the family, which included two young children. Rebecca Basba states that she obtained a power of attorney for this purpose (see exhibit 4). Rebecca Basba states in paragraph 5 that she paid the entire down payment and that Benju Basba did not provide any money.
Rebecca Basba states in paragraph 7 that the reconciliation did not work out because Benju Basba did not want to move back to the United States. Rebecca Basba states in paragraph 8 that she closed escrow and the grant deed was recorded on March 31, 2011. Rebecca Basba states in paragraph 8 that she noted that the title was not correct and that she contacted Benju Basba to withdraw his name. Rebecca Basba states in paragraph 8 that Benju Basba agreed and then quitclaimed the property to her. Rebecca Basba states in paragraph 14 that there was no transfer without receiving reasonable equivalent value because Benju Basba had no monetary interest in the property when he made the quitclaim.

Here, the Court determines that the disputed facts indicate that the transfer was not fraudulent. The transfer of property was made to remove Benju Basba’s name from a title related to a property that was purchased by Rebecca Basba. Since Benju Basba had no monetary interest in the property, the quitclaim for no consideration indicates that the transfer was merely to clear title so that the property was held solely by the person who had paid for it, which is Rebecca Basba. This indicates that the Plaintiffs have not established the probable validity of the Plaintiffs’ claim that the Defendant, Benju Basba, fraudulently transferred the property to Rebecca Basba.

The Court continued the hearing from March 21, 2014. The Plaintiffs did not file any additional documents. The papers filed by the Plaintiffs show no basis to find that they can establish the probable validity of their claim that the transfer of money was a loan, as opposed to an investment, or that the transfer was fraudulent at this hearing.

Therefore, the Plaintiffs are not entitled to a writ of attachment because they have failed to demonstrate the probable validity of the claim upon which their attachment is based. As noted above, under CCP section 484.100, the Court’s determination of facts has no effect on the issues in the man action and is inadmissible at trial.

RULING:
1. GRANT Plaintiffs’ motion for leave to file a Fourth Amended Complaint.
2. DENY Plaintiffs’ application for a writ of attachment.