2018-00239950-CU-BC

Trevor Shults vs. Robert Simpson

Nature of Proceeding: Writ of Attachment (Robert Simpson)

Filed By: Radcliffe, Scott E.

Plaintiffs Shults and Simpson’s separate applications for right to attach order and for writ of attachment as against defendant TSCS, LLC (“TSCS”) is ruled on as follows.

The notice of application and hearing does not provide notice of the court’s tentative ruling system, as required by Local Rule 1.06. Moving counsel is directed to contact all counsel and advise them of Local Rule 1.06 and the court’s tentative ruling procedure and the manner to request a hearing. If moving counsel is unable to contact opposing counsel prior to hearing, moving counsel is ordered to appear at the hearing in person or by telephone.

Factual Background

This action arises out of a dispute relating to TSCS, an LLC which operates a restaurant and bar in Sacramento. Plaintiffs are two of the founding members in TSCS but they subsequently agreed to sell their interests. The transaction was formalized in early 2018 and entailed TCSC giving a promissory note indicating inter alia that plaintiffs Shults and Simpson would be paid $52,867 and $22,000, respectively, on 5/1/2018.

Plaintiffs allege they have not been paid and on 8/31/2018 they commenced this action against TSCS and Kenny Thomas, the principal of the sole remaining member of TSCS. The complaint asserts breach of contract and breach of the implied covenant claims against TSCS plus a third claim for “fraud” against both TSCS and Thomas.

On 10/24/2018 TSCS and Thomas filed an answer which includes a general denial and a variety of purported affirmative defenses.

Moving Papers. By their respective applications, plaintiffs seek pre-judgment attachment of TSCS’s assets to secure their recovery of the amounts owed to them, $52,867 and $22,000, plus costs.

Opposition. Defendants TSCS and Thomas oppose, contending that the note which plaintiffs seek to enforce is just one component of the parties’ “Membership Interest Repurchase and Member Withdrawal Agreement” dated 1/16/2018 (“Agreement”) and

that TSCS has several viable defenses and affirmative claims against plaintiffs based on other provisions of the Agreement, including plaintiffs’ breach of their duty to indemnify against undisclosed liabilities which they fraudulently concealed prior to executing the Agreement. (Oppos., p.4:12-p.6:20.) The opposition maintains that TSCS’s damages from plaintiffs’ misconduct will exceed any sums due on the promissory note. Defendants also argue that “attachment is a harsh remedy that requires a strong evidentiary showing” but plaintiffs’ declarations are insufficient to meet their burden, particularly with respect to their performance of conditions precedent to payment on the note. In short, the opposition claims plaintiffs have not shown the “probable validity” of their contract causes of action but regardless, defendants’ own answer presents several affirmative defenses which negate any validity of plaintiffs’ claims.

Reply. Plaintiffs insist the Thomas Declaration in opposition is full of self-serving statements which are known lies, as he was aware of TSCS’s numerous debts and had retained various professionals prior to executing the Agreement in January 2018 (which specifies that TSCS remains liable for all debts and obligations). The reply also requests sanctions against defendants pursuant to Code of Civil Procedure §128.5 for the filing of Thomas’ false declaration.

Objections to Evidence

Plaintiffs’ four (4) written objections to Paragraph 22 and most of Paragraph 19 of the Thomas Declaration in opposition are sustained.

Defendants (timely) filed no written objections to plaintiffs’ 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.)

“Probable Validity” of Plaintiffs’ Claims. The court holds that plaintiffs have met their initial burden of producing admissible evidence sufficient to establish they will more likely than not prevail on their respective claims against TSCS in connection with the latter’s promise to make monetary payments on 5/1/2018. The promissory note which is the subject of this suit is attached to the complaint and clearly sets forth TSCS’s obligation to make payments due thereunder on or before 5/1/2018, with no express conditions precedent being identified therein. A copy of this note is also attached to and authenticated in plaintiffs’ respective moving declarations, which aver that no payment on the note has to date been received. Coupled with the lack of timely objection to either declaration, the court finds plaintiffs more likely than not will prevail on their breach of contract claim against TSCS.

“Probable Validity” of Defendants’ Affirmative Defenses. As noted above, the opposition essentially argues that plaintiffs have breached their obligations under the 1/16/2018 Agreement (of which the promissory note was a part) and thus, TSCS has several viable defenses and affirmative claims against plaintiffs which will likely exceed the amounts sought by plaintiffs, thereby mandating denial of their present applications for attachment.

While defendants insist they intend to file a cross-complaint, none is currently on file nor is there presently any motion seeking leave to file a cross-complaint. Accordingly, given the standards governing attachment cited above, the court need not here consider the potential merits of any affirmative claims which might be included in defendants’ anticipated cross-complaint.

Similarly, although defendants’ answer to complaint purports to assert a total of 24 affirmative defenses, a number of them are not genuine affirmative defenses recognized under California law but the answer does identify at least a few valid affirmative defenses which are relevant to the disposition of the present applications including unclean hands, estoppel and setoff. The court finds that the Thomas Declaration in opposition, the vast majority of which is not subject to any objections by plaintiffs, is sufficient to establish the probably validity of TSCS’ affirmative defenses as to the plaintiffs’ breach of contract claims inasmuch as the Thomas Declaration avers that he, as the principal of one of the members of TSCS, relied on plaintiffs’ restaurant management experience to handle the startup and operation of TSCS’ restaurant and bar, only discovering later a variety of mismanagement and other questionable conduct some of which had the effect of benefitting the adjacent restaurant and bar in which both plaintiffs have an ownership interest. Additionally, the Thomas Declaration indicates that a number of liabilities (which were under the Agreement to remain the responsibility of TSCS) were not timely disclosed prior to the execution of the Agreement and the related promissory note at issue. While the specific amount of damages which may be shown as a proximate result of plaintiffs’ own conduct is currently unclear, it would not take much to approach and even exceed the relatively small amounts now sought to be secured by attachment (i.e., $52,867 and $22,000). At a minimum, in light of this evidence, the amount of plaintiffs’ respective claims against TSCS can no longer be considered “fixed or readily ascertainable” within the meaning of Code of Civil Procedure §483.010 and this alone effectively precludes the requested attachment.

Plaintiffs’ characterization of the Thomas Declaration in opposition as consisting of “self-serving statements” and ‘known lies’ does not, without more, preclude the court from considering this evidence: Neither is a valid objection to the admissibility of the Thomas Declaration. Regardless, as noted above, court is obligated to weigh the evidence presented and is not required to accept as true even undisputed declarations where contrary inferences may be drawn from other evidence.

The court acknowledges the two brief declarations submitted with plaintiffs’ reply but finds that even though they may tend to contradict limited aspects of the Thomas Declaration relating to plaintiffs’ alleged non-disclosure of liabilities prior to the execution of the Agreement and the promissory note, these declarations do not compel a finding on the present record that any or all of TSCS’s affirmative defenses lack probable validity. (See, e.g., Blastrac, N.A. v. Concrete Solutions & Supply (C.D. Cal. 2010) 678 F.Supp.2d 1001, 1005 [“If an applicant fails to rebut a factually-supported defense that would defeat its claims, the applicant has not established probable validity. [Cites omitted.]” (Underline added for emphasis).)

Conclusion

For the reasons explained above, this court holds on the present evidentiary record that defendant TSCS’s affirmative defenses are probably valid and thus, neither plaintiff is entitled to any prejudgment attachment as against TSCS. Accordingly, plaintiffs Shults and Simpson’s respective applications are hereby DENIED.

Sanctions Under Code of Civil Procedure §128.5. Plaintiffs’ request for sanctions must be denied because they failed to comply with the express procedural requirements of §128.5(f)(1) and particularly (A) and (B), specifying that a motion for sanctions shall be made separately and that such a motion shall not be filed without first providing 21 days’ notice, and because the court is not persuaded the opposition to the present applications was frivolous, solely intended to cause unnecessary delay or filed in bad faith.

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