Case Number: 20PSCV00156    Hearing Date: June 02, 2020    Dept: J

HEARING DATE:                 Tuesday, June 2, 2020

NOTICE:                                OK[1]

RE:                                          Pacific Mercantile Bank v. Vakil (20PSCV00156)

______________________________________________________________________________

 

Plaintiff Pacific Mercantile Bank’s APPLICATION FOR RIGHT TO ATTACH ORDER

AND WRIT OF ATTACHMENT

            Responding Party: Defendant, Usman Vakil

Tentative Ruling

Plaintiff Pacific Mercantile Bank’s Application for Right to Attach Order and Writ of

Attachment is GRANTED. The court will issue a writ for $763,613.45 and order an undertaking of $10,000.00.

Background

Plaintiff Pacific Mercantile Bank (“Plaintiff”) alleges as follows: Defendant Usman Vakil

(“Vakil”) executed a written Business Loan Agreement with Plaintiff dated October 16, 2018,

bearing loan number 80012780-001 (“Loan Agreement”), wherein Plaintiff agreed to lend

$400,000.00 to Vakil in connection with Vakil’s business (the “Loan”). In connection with the

Loan Agreement, Vakil executed and delivered a Promissory Note in favor of Plaintiff (the

“Note”). Pursuant to the Note, Vakil promised to pay Plaintiff in one payment all

outstanding principal plus all accrued unpaid interest on July 31, 2019. Vakil also agreed to pay

regular monthly payments of all accrued unpaid interest due as of each payment date beginning

on November 10, 2018. On or about April 23, 2019, Plaintiff and Vakil entered in a written

Change in Terms Agreement (“CIT 1”), wherein the parties increased the principal amount of the

Loan from $400,000 to $750,000 and the original maturity date was shortened from July 31,

2019 to June 30, 2019. On or about June 26, 2019, Plaintiff and Vakil entered in a second written

Change in Terms Agreement (“CIT 2”), wherein the parties agreed to extend the maturity date

from June 30, 2019 to August 30, 2019. On or about August 30, 2019, Plaintiff and Vakil entered

in a third written Change in Terms Agreement (“CIT 3”), wherein the parties agreed to extend

the maturity date from August 30, 2019 to October 31, 2019. On or about November 5, 2019,

Plaintiff and Vakil entered in a fourth written Change in Terms Agreement (“CIT 4”), wherein

the parties agreed to extend the maturity date from October 31, 2019 to December 31, 2019.

Vakil failed to repay the Loan when it matured on December 31, 2019.

On February 26, 2020, Plaintiff filed a complaint, asserting causes of action against Vakil and

Does 1-20 for:

  1. Breach of Contract
  2. Common Counts

A Case Management Conference is set for July 23, 2020.

Discussion

Plaintiff applies for a right to attach order and writ of attachment against Vakil. The amount to be secured by the attachment is $763,613.45.

Analysis

“Attachment is a prejudgment remedy which requires a court to make a preliminary determination of the merits of a dispute. It allows a creditor who has applied for an attachment following the statutory guidelines and established a prima facie claim to have a debtor’s assets seized and held until final adjudication at trial.” (Lorber Industries, Inc. v. Turbulence, Inc. (1985) 175 Cal.App.3d 532, 535.) “A purpose of the attachment statutes is to confine attachments to commercial situations and to prohibit them in consumer transactions. The language, ‘trade, business or profession,’ in section 483.010, subdivision (c) fulfills that purpose by limiting the use of attachments to ‘commercial transactions’ and precluding them in ‘consumer transactions.’” (Kadison, Phaelzer, Woodard, Quinn & Rossi v. Wilson (1987) 197 Cal.App.3d 1, 4 [citation omitted].)

Attachment is governed by Attachment Law, Title 6.5 of the Code of Civil Procedure, CCP §§ 481.010-493.060. “[A]ttachment procedures are solely creatures of statute and. . . such statutes must be strictly construed.” (Arcata Publications Group v. Beverly Hills Publishing Co. (1984) 154 Cal.App.3d 276, 279.)

PROCEDURAL CONSIDERATIONS: “Upon the filing of the complaint or at any time thereafter, the plaintiff may apply…for a right to attach order and a writ of attachment by filing an application for the order and writ with the court in which the action is brought.” (CCP §§ 484.010, 485.210(a).) “No order or writ shall be issued. . . except after a hearing. At the times prescribed by subdivision (b) of Section 1005, the defendant shall be served with all of the following: (a) A copy of the summons and complaint. (b) A notice of application and hearing. (c) A copy of the application and of any affidavit in support of the application.” (CCP § 484.040.)

On March 10, 2020, Plaintiff filed a proof of service, which reflected that Vakil had been personally served on March 9, 2020 with, inter alia, the summons and complaint. The court does not appear to be in receipt of a proof of service reflecting service of the notice of application and application, though it is apparent this was done, inasmuch as the application is opposed. The court further notes that Vakil was present in court during the March 9, 2020 hearing on Plaintiff’s Ex Parte Application.

The court, then, determines that adequate notice has been provided.

SUBSTANTIVE CONSIDERATIONS: “At the hearing, the court shall consider the showing made by the parties appearing and shall issue a right to attach order, which shall state the amount to be secured by the attachment determined by the court in accordance with Section 483.015 or 483.020, if it finds all of the following:

  1. The claim upon which the attachment is based 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.
  4. The amount to be secured by the attachment is greater than zero.” (CCP § 484.090(a).)

The amount to be secured by an attachment is based on the amount of the defendant’s

indebtedness claimed by the plaintiff. (CCP § 483.015(a)(1).) That claim must be reduced by the

amount of any indebtedness of the plaintiff that the defendant has claimed in a cross-complaint

or has raised as a defense. CCP § 483.015(b)(2)&(3).

“The following property of the defendant is subject to attachment: (a) Where the defendant is a corporation, all corporate property for which a method of levy is provided by Article 2 (commencing with Section 488.300) of Chapter 8. (b) Where the defendant is a partnership or other unincorporated association, all partnership or association property for which a method of levy is provided by Article 2 (commencing with Section 488.300) of Chapter 8. (c) Where the defendant is a natural person, all of the following property: (1) Interests in real property except leasehold estates with unexpired terms of less than one year. (2) Accounts receivable, chattel paper, and general intangibles arising out of the conduct by the defendant of a trade, business, or profession, except any such individual claim with a principal balance of less than one hundred fifty dollars ($150). (3) Equipment. (4) Farm products, (5) Inventory. (6) Final money judgments arising out of the conduct by the defendant of a trade, business, or profession. (7) Money on the premises where a trade, business, or profession is conducted by the defendant and, except for the first one thousand dollars ($1,000), money located elsewhere then on such premises and deposit accounts, but, if the defendant has more than one deposit account or has at least one deposit account and money located elsewhere than on the premises where a trade, business, or profession is conducted by the defendant, the court, upon application of the plaintiff, may order that the writ of attachment be levied so that an aggregate amount of one thousand dollars ($1,000) om the form of such money and in such accounts remains free of levy. (8) Negotiable documents of title. (9) Instruments. (10) Securities. (11) Minerals or the like (including oil and gas) to be extracted. (d) In the case of a defendant described in subdivision (c), community property of a type described in subdivision (c) is subject to attachment if the community property would be subject to enforcement of the judgment obtained in the action in which the attachment is sought. . .” (CCP § 487.010.)

“Item “9c” must be checked if the action is against a natural person. In addition, the property to be attached. . . must be described. [CCP § 484.020(e)].”See Ahart, CAL. PRAC. GUIDE: ENFORCING JUDGMENTS & DEBTS (The Rutter Group 2018) ¶ 4:189. Plaintiff’s Attachment 9(c) to the application complies with this requirement.

“The court has the power to determine disputed facts on the basis of a preponderance of the evidence as disclosed in the affidavits and declarations… [Hobbs v. Weiss (1999) Cal.App.4th 76, 80…].” (Weil & Brown, et al., CAL. PRAC. GUIDE:  CIV. PRO. BEFORE TRIAL (The Rutter Group 2019) ¶ 9:948 (emphasis theirs).)

“The court’s determinations shall be made upon the basis of the pleadings and other papers in the record; but, upon good cause shown, the court may receive and consider at the hearing additional evidence, oral or documentary, and additional points and authorities, or it may continue the hearing for the production of the additional evidence or points and authorities.” (CCP § 484.090(d).)

CLAIM:

“[A]n 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) exclusive of costs, interest, and attorney’s fees.” (CCP § 483.010(a) [emphasis added].) “An attachment may not be issued on a claim which is secured by any interest in real property arising from agreement, statute, or other rule or law . . . [h]owever, an attachment may be issued where the claim was originally so secured but, without any act of the plaintiff or the person to whom the security was given, the security has become valueless or has decreased in value to less than the amount then owing on the claim . . .” (CCP § 483.010(b).) “If the action is against a defendant who is a natural person, an attachment may be issued only on a claim which arises out of the conduct by the defendant of a trade, business, or profession.” (CCP § 483.010(c).)

The claim is for money, and based upon an express or implied contract, whose total sum is more than $500. (See Declaration of Kevin Semon, ¶¶3-9 and 13.) Plaintiff’s claim is not secured by any interest in real property. (Id., ¶13.)

Vakil, in opposition, concedes that he personally received a “business related loan” from Plaintiff in the amount of $750,000.00 (Vakil Decl., ¶8) and that the loan was not secured by any collateral (Id., ¶11).

The claim, then, is proper.

PROBABLE VALIDITY:

“A claim has ‘probable validity’ where it is more likely than not that the plaintiff will obtain a judgment against the defendant on that claim.” (CCP § 481.190.)

“[T]he elements of a cause of action for breach of contract are (1) the existence of the contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s breach, and (4) the resulting damages to the plaintiff.” (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 821.) “The essential allegations of a common count ‘are (1) the statement of indebtedness in a certain sum, (2) the consideration, i.e., goods sold, work done, etc., and (3) nonpayment.’” (Allen v. Powell (1967) 248 Cal.App.2d 502, 510, quoting 2 Witkin, Cal. Procedure, Pleadings § 266, p. 1242.)

Plaintiff submits the following evidence: Vakil executed a written Business Loan Agreement with Plaintiff dated October 16, 2018, bearing loan number 80012789-001 (“Business Loan Agreement”), wherein Plaintiff agreed to lend $400,000.00 to Vakil in connection with Vakil’s business (the “Loan”). (Semon Decl., ¶3, Exh. A.) Vakil also executed a written Promissory Note, dated October 16, 2018 (“Note”). (Id., Exh. B.) Pursuant to the Note, Vakil promised to pay Plaintiff the principal amount of $400,000.00 in one payment all outstanding principal, plus all accrued unpaid interest on July 31, 2019. (Id., ¶4.) Vakil additionally agreed to pay regular monthly payments of all accrued unpaid interest due as of each payment date, beginning on November 10, 2018. (Id.) In the event of a default, the interest rate would immediately increase by adding an additional 6% point margin. (Id.)

On or about April 23, 2019, Plaintiff and Vakil entered in a written Change in Terms Agreement (“CIT 1”), wherein the parties increased the principal amount of the Loan from $400,000 to $750,000 and the original maturity date was shortened from July 31, 2019 to June 30, 2019. (Id., ¶5, Exh. C.) On or about June 26, 2019, Plaintiff and Vakil entered in a second written Change in Terms Agreement (“CIT 2”), wherein the parties agreed to extend the maturity date from June 30, 2019 to August 30, 2019. (Id., ¶6, Exh. D.) On or about August 30, 2019, Plaintiff and Vakil entered in a third written Change in Terms Agreement (“CIT 3”), wherein the parties agreed to extend the maturity date from August 30, 2019 to October 31, 2019. (Id., ¶7, Exh. E.) On or about November 5, 2019, Plaintiff and Vakil entered in a fourth written Change in Terms Agreement (“CIT 4”), wherein the parties agreed to extend the maturity date from October 31, 2019 to December 31, 2019. (Id., ¶8, Exh. F.) Vakil failed to repay the Loan when it matured on December 31, 2019. (Id., ¶11.) Pursuant to the aforesaid loan documents, a failure to make a payment when due constitutes an Event of Default. (Id., ¶10, Exh. A, “Default,” p. 4; Exh. B, “Default,” p. 1.) Said documents also allow for attorneys’ fees and collection costs. (Id., Exh. A, “Attorneys’ Fees; Expenses,” p. 5; Exh. B, “Attorneys’ Fees; Expenses,” p. 2.) On or about January 23, 2020, Plaintiff sent Vakil a Notice of Event of Default on the Loan (“Notice”), which advised that Plaintiff was entitled to immediately exercise all of its rights and remedies under the Loan documents and that Plaintiff implemented the default rate and increased the interest rate to 11.75%. (Id., ¶12.) Despite Plaintiff’s demand, Vakil failed and refused, and continues to fail and refuse, to comply with Plaintiff’s demand to pay off the Loan and all accrued interest. (Id., ¶17.) As of February 28, 2020, the aggregate amount due and owing

on the Loan is $763,613.45, consisting of $746,700.00 in unpaid principal, $2,504.56 in unpaid

accrued interest through December 31, 2019, $14,378.89 in unpaid accrued interest at the default

rate between January 1, 2020 and February 28, 2020 and $30.00 in fees for preparing a demand

letter. (Id.)

Vakil confirmed the debt owed during a March 5, 2020 telephone call with Plaintiff’s counsel Scott Albrecht. (Albrecht Decl., ¶2.)

Vakil, in opposition, concedes that he made a request for a 12-month extension on the loan from Plaintiff, which was denied, and requests that he be granted an extension “to fully pay back the loan.” (Vakil Decl., ¶¶13 and 15.) The court notes that, even if Vakil had a claim for misrepresentation and fraud, California’s writ procedure allows reduction of an attachment in the amount of the responding party’s counterclaim only if the responding party has an attachable (i.e., contract) claim against the plaintiff. (CCP § 483/015.)

Vakil claims that the real property commonly located at 2245 Pointer Drive, Walnut, CA 91789 is exempt from attachment, but fails to provide the court with any legal authority in support of same.

The court, then, finds that Plaintiff’s claim has probable validity.

OTHER MATTERS:

The sole purpose of Plaintiff’s application is to secure recovery on the anticipated judgment for breach of the Loan, and the right to attach order and related writ of attachment are not sought for any other reason. (Id., ¶13.) Plaintiff has no information or belief that the claim has been discharged in a bankruptcy proceeding or subject to stay under bankruptcy law. (Id., ¶14.) The property sought to be attached under the writ is subject to and not exempt from attachment. (Id.)

UNDERTAKING:

“Before issuance of a writ of attachment, . . . the plaintiff shall 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.)

If a writ is ultimately issued by the court, a plaintiff must file an undertaking, or bond, in the amount of $10,000.00 in a case of unlimited jurisdiction. (CCP § 489.220(a).)

RULING:

All the requirements have been satisfied.

Accordingly, the application is GRANTED. The court will issue a writ for $763,613.45, and order an undertaking of $10,000.00.

[1] On March 5, 2020, Plaintiff filed the instant Application, concurrently with an “Ex Parte Application for Issuance of Right to Attach Order and Issuance of Writ of Attachment Against Defendant Vakil; or, in the Alternative, for an Order Shortening Time and/or Specially Setting the Hearing on its Application” (“Ex Parte Application”). On March 9, 2020, the court granted the Ex Parte Application as to the order shortening time to specially set hearing and scheduled the hearing on the Application for March 24, 2019, with Vakil’s response due by March 17, 2020 and any opposition by Plaintiff due by March 19, 2020. Plaintiff’s counsel was ordered to give notice; on March 12, 2020, Plaintiff filed a “Notice of Entry of Judgment or Order” (mail served March 9, 2020), attaching the “Order Granting Plaintiff’s Ex Parte Application for an Order Shortening Time for Hearing on Application for Issuance of Right to Attach Order and Issuance of Writ of Attachment Against Defendant Vakil.” On March 17, 2020, the court continued the March 24, 2020 hearing, on the court’s own motion, to June 2, 2020; the court provided notice of same to Plaintiff and ordered Plaintiff to give mail notice of the continuance to all parties. On March 20, 2020, Plaintiff filed (email-served on March 19, 2020) a “Notice of Continuance Re: Plaintiff’s Application for Issuance of Right to Attach Order and Issuance of Writ of Attachment.