Case Number: 19STCV43653 Hearing Date: August 27, 2024 Dept: 85
JTX Group, Inc. v. Global Meat Federation, et al., 19STCV43653
Tentative decision on application for right to attach order: denied
Plaintiff JTX Group Inc. (“JTX”) applies for a right to attach order against Defendants TD Capital LLC (“TD Capital”)[1] in the amount of $1,500,000.
The court has read and considered the moving papers, opposition, and reply, and it renders the following tentative decision.
- Statement of the Case
- Complaint
On March 23, 2022, Plaintiff JTX filed the operative Third Amended Complaint (“TAC”) against Global Meat Federation, Inc. (“GMF”), Jamal Dawood (“Dawood”), Jacky Lo (“Lo”), Salvatore DiMaria (“Dimaria”), Haotian Luo (“Luo”), Walter Lima (“Lima”), Medline Medline Management Corporation (“Medline”), David He aka Huijun He (“He”), Ray Cai (“Cai”), TD Capital LLC (“TD Capital”), Colony Capital LLC (“Colony Capital”), United Properties, Inc., Manning Land Company, LLC, Manning’s Beef, LLC, Charlie DiMaria & Son, Inc., China Liaoning Dingxu Ecological Agriculture Development Inc., McSen Realty Corp., McSen Fund, LLC, MsSen Group Inc., Harbor Green Grain L.P., ADD Enterprises, and Ramada Realty, LLC, alleging causes of action for: (1) breach of contract; (2) breach of covenant of good faith and fair dealing; (3) rescission; (4) implied-in-fact contract; (5) money had and received; (6) common counts – monies loaned; (7) negligent misrepresentation; (8) promissory estoppel; (9) breach of fiduciary duty; (10) actual fraud; (11) violation of Business and Professions Code section 17200; (12) conversion; and (13) violation of Penal Code section 496. The TAC alleges in pertinent part as follows.
JTX is a corporation based in California and Qingfu Xu, also known as “Frank Xu” (“Xu”) exercised authority on its behalf. TAC, ¶1. On or about March 23, 2019, Xu attended a meeting to discuss “a real estate opportunity in which Medline was involved.” TAC, ¶45. Among the individuals present at the meeting were Defendants: (1) Lo, (2) Luo, (3) He, (4) Cai, (5) Dawood, and (6) Lima. TAC, ¶45. Dawood represented that he and Lo were officers and/or directors of Medline. Ibid.
Approximately two weeks later, Xu attended a meeting with Lo, He, and Dawood. TAC, ¶47. The participants discussed a potential investment opportunity relating to GMF. TAC, ¶47. Dawood and Lo represented that they owned GMF through Medline and with Salvatore DiMaria. TAC, ¶47. They also represented that “a combination of Lo, Dawood, DiMaria, and/or GMF owned and/or controlled the DiMaria entities and that these entities owned assets which included the building where a beef slaughterhouse was located, the slaughterhouse operations and other business related to the beef business…. (“Beef Businesses”)”. TAC, ¶48. At the meeting, Dawood and Lo represented that the Beef Businesses generated $18 million in EBITDA in 2018, and Lo represented that there was an opportunity to increase the value of the Beef Businesses by selling beef to the Chinese market. TAC, ¶¶ 48-50. Thereafter, Xu took a tour of the slaughterhouse with Lo, Cai, and He. Id., ¶ 52. Defendant Lima was not present. TAC, ¶48-50.
On or about April 30, 2019, Lo informed Xu that he had an offer from Jensen Meat Company to purchase all of GMF for $96 million. TAC, ¶55. Lo indicated that the offer was not acceptable because he, Dawood, and DiMaria did not want to sell more than a 55% stake; theywanted to benefit from the projected increase in value of GMF. TAC, ¶56. Lo represented that he had an acceptable offer from China Liaoning Dingxu Ecological Agricultural Development, Inc., doing business as McSen, Inc., McSen Group, McSen Group, LLC, and/or McSen (collectively, “McSen”). Id., ¶ 57. Lo showed Xu a letter of intent from McSen to purchase 55% of GMF, and a McSen check signed by Cai for $3 million. TAC, ¶¶ 57, 60.
Four days later, Lo informed Xu that the McSen check had not cleared, and Lo asked Xu if JTX would be interested in replacing McSen as the buyer of 55% of GMF. TAC, ¶64. On May 5, 2019, Xu had a meeting with Lo, Luo, Dawood, and Lima “to develop a preliminary term sheet.” TAC, ¶66. “At the meeting, Lima and Haotian [Luo] charted out the organizational structure of GMF, which included the slaughterhouse, the Beef Businesses and other entities and/or assets owned and/or controlled by GMF that would be part of the acquisition.” TAC, ¶66. “Lo and Dawood represented that GMF was 100% owned and/or controlled by Lo, Dawood, and DiMaria, owned and/or controlled by GMF whether individually or through Medline.” TAC, ¶66. During the meeting, Lo represented that Jensen Meat had increased its offer to $156 million for the purchase of GMF in its entirety. TAC, ¶67.
JTX alleges that all of the Defendants knew or should have known that “each of the following actions was undertaken by one or more of the Defendants with the improper purpose of misleading Xu to convince JTX to provide funds to GMF: (a) having investment meetings and tours of the Beef Businesses, (b) informing Xu about Lo’s wealth and/or access to funds, (c) informing Xu regarding the purported interest of other entities in investing in GMF and/or the Beef Businesses; (d) presenting the [letter of intent] from McSen; (e) presenting a $3 million check from McSen, executed by Cai, in connection with the purported purchase of a 55% interest in GMF; and (f) showing Xu that broker agreements, one between Ramada Realty and GMF and the other between McSen Realty and McSen, were in place.” TAC, ¶68.
JTX also alleges that “Defendants knew or should have known, that representations made by David [He], Lo, Dawood, DiMaria, Luo, Lima, David [He] and Cai regarding the ownership interest in GMF, the assets of GMF, the financial projections relating to GMF and the Beef Businesses including, but not limited to the representations, actions and concealments described in this Complaint were each false, inaccurate and/or made without reasonable basis for believing them to be true.” TAC, ¶69.
JTX decided to invest in GMF. On or about May 9, 2019, a “non-binding term sheet between GMF and Medline, on the one hand, and JTX, on the other, was finalized (the ‘Term Sheet’) and the parties executed it. TAC, ¶3. The term sheet was signed by Lo and Yi Liu (“Liu”), Xu’s business partner in JTX. TAC, ¶74. Per the terms, JTX would purchase a 55% stake in GMF for $52,800,000 and would provide working capital at the outset. TAC, ¶¶ 75-78. Between May 7 and May 22, 2019, JTX transferred a total of $1.5 million as working capital to TD Capital. TAC, ¶80.
“Lo’s representations regarding the opportunity to expand the business in China had been a major motivator for JTX to invest in GMF.” TAC, ¶84. JTX’s partners, Xu and Liu, had preliminary discussions with potential overseas investors to see their interest level in funding $26,400,000. None of the potential investors were [sic] interested because of the trade talk tensions between the U.S. and China.” TAC, ¶85. The $1.5 million was distributed amongst the various Defendants that include “GMF, TD [Capital], United, Colony [Capital], the McSen Entities, DiMaria, ADD, Lo, Harbor Green and Dawood” in order to facilitate money laundering schemes. TAC, ¶91. In particular, Dawood admitted in a separate lawsuit that “GMF received monies from JTX, and used Colony Capital to lend this money to Lo,” as opposed to the intended purpose of the working capital deposit. TAC, ¶91. JTX sought to terminate the deal, and Defendants have refused to return the $1.5 million initial investment.
JTX seeks damages or restitution/disgorgement in the amount of $1.5 million, punitive damages, the imposition of a constructive trust, prejudgment interest, reasonable attorney’s fees and costs.
- Course of Proceedings
On July 30, 2020, JTX filed its First Amended Complaint, adding Luo, Colony Capital, United Properties, Inc., McSen Group, Inc., and Harbor Green Group, L.P. as Defendants. The FAC also reduced the number of causes of action from 21 to 16.
On October 16, 2020, Defendants DiMaria, Manning Land Company, LLC, Manning’s Beef LLC, and Manning Land Company LLC (the “Manning Defendants”) filed a Cross-Complaint against Cross-Defendants GMF and Dawood.
On December 12, 2020, JTX filed an Amendment adding United Properties, Inc. as a Defendant.
On April 27, 2021, default was entered against Defendant Colony Capital.
On March 1, 2021, Defendant Dawood filed a Cross-Complaint against Cross-Defendant Lo.
On March 11, 2021, JTX voluntarily dismissed Defendant Lima from the action.
On March 25, 2021, JTX voluntarily dismissed Defendants McSen Group, Inc., Cai, and McSen Realty Corp.
On April 1, 2021, Cross-Defendants GMF and Dawood filed their answer to the Cross-Complaint filed by the Manning Defendants. On the same day, GMF and Dawood filed their Cross-Complaint against Cross-Defendants Lo.
On April 27, 2021, JTX and Defendant Colony Capital stipulated to set aside the default entered against Defendant Colony Capital.
On July 16, 2021, JTX filed its Second Amended Complaint.
On January 7 through January 14, 2022, Cross-Complainants GMF and Dawood filed Amendments to their Cross-Complaint, adding Xu, H. Harry Aharonian (Aharonian”), and Liu as Cross-Defendants.
On March 21, 2022, Medline, TD Capital, LLC and Colony Capital filed a Cross-Complaint against JTX, Lo, Aharonian, Liu, A&J Capital, Inc. and Greenpeak Capital, LLC.
On March 23, 2022, JTX filed its operative TAC, reducing the number of causes of action to 13 and adding ADD Enterprises, Inc. as a Defendant.
On April 22, 2022, Cross-Defendants Aharonian, Liu, A&J Capital, Inc. and Greenpeak Capital filed their answer to the First Amended Cross-Complaint of GMF and Dawood.
On April 25, 2022, Defendant United Properties, Inc. filed its answer to the TAC.
On May 16, 2022, Defendants DiMaria and ADD Enterprises Inc. filed their joint answer to the TAC.
On August 8, 2022, Defendants GMF, Dawood, TD Capital, Colony Capital, and Medline filed their respective answers to the TAC.
On August 16, 2022, the Cross-Complaint filed by Colony Capital, TD Capital, and Medline was voluntarily dismissed as to Cross-Defendants Xu and Greenpeak Capital, LLC.
On August 29, 2022, the Cross-Complaint filed by Colony Capital, TD Capital, and Medline was voluntarily dismissed as to Cross-Defendants Liu and A&J Capital, Inc.
On September 30, 2022, Cross-Defendants TD Capital, Medline, and Colony Capital filed their First Amended Cross-Complaint.
On October 5, 2022, United Properties, Inc.’s Motion for Summary Judgment was granted.
On November 3, 2022, judgment was entered in Defendant United Properties, Inc.’s favor.
On June 22, 2023, ADD Enterprises Inc.’s Motion for Summary Judgment was denied, and its alternative Motion for Summary Adjudication was granted in part.
- 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).
All property within California of a corporation, association, or partnership is subject to attachment if there is a method of levy for the property. CCP §487.010(a), (b). While a trustee is a natural person, a trust is not. Therefore, a trust’s property is subject to attachment on the same basis as a corporation or partnership. Kadison, Pfaelzer, Woodard, Quinn & Rossi v. Wilson, supra, 197 Cal.App.3d at 4.
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 corporation, a general reference to “all corporate property which is subject to attachment pursuant to subdivision (a) of Code of Civil Procedure Section 487.010” is sufficient. CCP §484.020(e). Where the defendant is a partnership or other unincorporated association, a reference to “all property of the partnership or other unincorporated association which is subject to attachment pursuant to subdivision (b) of Code of Civil Procedure Section 487.010” is sufficient. CCP §484.020(e). A specific description of property is not required for corporations and partnerships as they generally have no exempt property. Bank of America v. Salinas Nissan, Inc., (“Bank of America”) (1989) 207 Cal.App.3d 260, 268.
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.
- Statement of Facts
- JTX’s Evidence[2]
In March 2019, JTX’s principal and owner, Xu met with Dawood. During discussions of various business ventures, Dawood informed Xu that he and Lo owned a stake in a beef processing business. Xu Decl., ¶¶ 2-4. Because of Xu’s interest in this business venture, Dawood gave a presentation about how GMF needed an equity investor. He represented that GMF owned a beef processing plant in Pico Rivera under the name Manning Beef, which generated $18 million in EBITDA annually. Xu Decl., ¶¶ 5-8; Exs. A-B.
In May 2019, Lo informed Xu that He and his company McSen were interested in acquiring a 55% stake in GMF and that GMF was valued at $96 million. Xu Decl., ¶9. Lo later informed Xu that, if he intended to invest in GMF, time was of the essence because the deal with McSen had fallen through. Xu Decl., ¶10. As a result, Xu and his colleague Aharonian scheduled a meeting with Lo, Dawood, and their colleague Lima to discuss the proposed investment in GMF. Xu Decl., ¶¶ 10-11; Aharonian Decl., ¶¶ 2-3. Dawood led the negotiations and represented that GMF owned all of the assets in its beef processing business. Xu Decl., ¶¶ 12-15; Aharonian Decl. ¶¶ 6-8, Ex. B. Dawood reemphasized that investment would need to have happen quickly because of the existence of competing offers. Ibid. The negotiated term sheet relied on the McSen’s Letter of Intent as a framework, and thus similar valuations and financial representations were used. Xu Decl., ¶¶ 12-15.
Because of Xu and Aharonian’s experience with similar acquisitions, it was negotiated that JTX would loan GMF up to $4 million for working capital under a promissory note (“Note”) while due diligence was being conducted. Xu Decl., Ex. C. The loan would be converted to equity if JTX decided to proceed with the acquisition. Ibid. Otherwise, it was agreed that JTX would be able to ask for a return of the loan with 30 days’ notice. Ibid. In negotiating the Note, a material term was that JTX’s funds could only be used for GMF’s Beef Business. Xu Decl., ¶¶ 17-18; Aharonian Decl., ¶9. The negotiations are evidenced by text messages between Aharonian and Dawood from May 6 through May 8, 2019 as well as redline edits to the Note. Aharonian Decl., ¶9, Exs. C, D; Xu Decl., Ex. E.
By May 7, 2019, JTX had wired $500,000 to GMF through TD Capital under the working capital loan. Xu Decl., ¶19. Thereafter, JTX made additional wires of $500,000 from two other companies owned by Xu, and these payments indicated that they were made by JTX or were for the benefit of GMF. Xu Decl., ¶21. Ultimately, because of changes in US/China trade policies and GMF’s unsatisfactory responses to JTX’s due diligence requests, JTX decided not to continue the process of acquiring a stake in GMF. Xu Decl., ¶22; Aharonian Decl., ¶11. JTX sent two successive termination notices to GMF, but the $1.5 million was never returned. Xu Decl., ¶¶ 23-25; Aharonian Decl. ¶¶ 12-13, Exs. G-H.
In late September 2019, Xu and Aharonian learned Dawood had defrauded JTX using DiMaria’s Beef Businesses. Xu Decl., ¶25; Aharonian Decl., ¶14. When questioned by Aharonian, Dawood initially claimed to be ignorant of any deal with JTX. When confronted with the Note, Dawood claimed that JTX was in breach for failing to fund the entire $4 million loan. Aharonian Decl., ¶¶ 17-18, Ex. 1.
- TD Capital’s Evidence
At 1:26 p.m. on August 5, 2024, Plaintiff’s counsel, Felix Woo, Esq., sent counsel for TD Capital and other Defendants email asking whether he would accept electronic service of the writ of attachment papers, or if I preferred personal delivery. Yrungaray Decl., ¶4. This email made no mention of waiving the additional notice period for electronic service and did not include any relevant documents or hearing dates to ascertain exactly what was being asked of counsel. Yrungaray Decl., ¶4. At 5:20 p.m. TD Capita’s counsel responded by email that electronic service was fine. Yrungaray Decl., ¶4, Ex. 1.
On August 19, 2024, in connection with potential motions in limine, Mr. Woo sent an email advising defense counsel that the motions in limine were required to be served on August 19, 2024, but “based on our agreement to waive personal delivery, if you are rushed, you can e-serve me with the MILs by the personal delivery deadline.” Yrungaray Decl., ¶5, Ex. 2.
Mr. Woo’s August 19, 2024 email was the first time TD Capital’s counsel became aware that JTX contended there had been an agreement to waive the two-day extension for email delivery. Yrungaray Decl., ¶6. In his email at 4:50 p.m. on August 5, 2024, Plaintiff’s counsel wrote: “Hubert indicated to me that waiving the notice period to serve personally is OK with him. Are you OK with it.” TD Capital’s counsel did not understand this to mean that JTX was requesting a waiver of the additional notice period for electronic service. Yrungaray Decl., ¶6. He was not a party to any of Mr. Woo’s communications with Attorney Kuo. Yrungaray Decl., ¶6. Nor did any of Attorney Woo’s email communications clearly indicate he was seeking waiver of the extension for electronic service. Yrungaray Decl., ¶6.
The failure to provide adequate notice of the motion for attachment has prejudiced TD Capital’s ability to oppose. Yrungaray Decl., ¶8. The hearing is scheduled for August 27, 2024, which is within the 30-day period before the September 23, 2024 trial and during a time when counsel is trying to focus efforts to prepare for trial. Yrungaray Decl., ¶8. TD Capital’s counsel also has been materially prejudiced because his personal schedule includes preexisting obligations to travel with and move two children to college. Yrungaray Decl., ¶9.
- Reply Evidence
Early in the afternoon of August 20, 2024, JTX’s attorney sent an email to the other counsel asking them if they would agree to waive personal service of the motion and accept electronic service instead. Reply Woo Decl., ¶2. Personal service is not required for motions and the only reason counsel made the request was to determine whether the papers could be emailed later that day or if they needed to be messengered. Reply Woo Decl., ¶2, Ex. P. Moreover, the title of the email asked opposing counsel waive personal service in lieu of email service. Reply Woo Decl., ¶4. The proof of service attached to the moving papers explicitly indicated that the electronic service was made in lieu of personal service and that JTX’s counsel had obtained the other parties’ consent to do so. Reply Woo Decl., ¶4.
Once Mr. Kuo, counsel for Defendants DiMaria and ADD Enteprises (who are not affected by the motions), and Candice Bryner, Esq., who has taken the lead on almost all matters for TD Capital and Colony Capital, agreed to accept email or electronic service, there was no need for JTX’s counsel to rush to print the papers and have them messengered to the various counsel. Reply Woo Decl., ¶3, Ex. P. Mr. Yrugaray also confirmed this later over email. Reply Woo Decl., ¶3, Ex. P.
Had any of the counsel emailed JTX’s counsel that they required personal service, he would have done so. Reply Woo Decl., ¶3.
Defense counsel should be familiar with all the evidence presented with JTX’s motion, as it is the same evidence upon which JTX relied to oppose Colony Capital’s summary judgment motion. Reply Woo Decl., ¶5.
- Analysis
Plaintiff JTX applies for a right to attach order against Defendant TD Capital in the amount of $1.5 million.
- Timely Service
Defendants TD Capital and Colony Capital jointly argue that the instant application was not filed with the requisite notice required by CCP section 484.040. They assert that, because they were served electronically, they should have been served on August 1, 2024, not August 5, 2024. Opp. at 2; Yrungaray Decl., ¶¶ 3-4, Ex. 1.
Pursuant to CCP section 484.040, the defendant must be served with, as pertinent, the moving papers within the time frame of CCP section 1005(b). In turn, CCP section 1005(b) requires that moving papers be served and filed at least 16 court days before the the scheduled hearing. When documents are served electronically, two calendar days are added to the notice period. CCP §1010.6.
JTX electronically served the moving papers on August 5, 2024. Because the hearing on the instant matter is scheduled for August 27, 2024, the deadline for service was August 5, 2024. CCP section 1010.6(a)(1)(B) adds two additional court days to the notice period, would result in a service date of August 1, 2024. The service was untimely on Monday, August 5, 2024.
JTX argues that its attorney sent an email on August 5 to the other counsel asking them if they would agree to waive personal service of the motion and accept electronic service instead. Reply Woo Decl., ¶2. The only reason counsel made the request was to find out if the papers could be emailed later that day or if they needed to be messengered. Reply Woo Decl., ¶2, Ex. P. The title of the email asked opposing counsel waive personal service in lieu of email service. Reply Woo Decl., ¶4. The proof of service attached to the moving papers explicitly indicated that the electronic service was made in lieu of personal service and that JTX’s counsel had obtained the other parties’ consent to do so. Reply Woo Decl., ¶4.
An agreement to accept electronic service is insufficient to shorten the time required for electronic service. JTX argues that, even though untimely, the application should not be denied because TD Capital suffered no prejudice. Reply at 3. TD Capital had 15 calendar days to prepare an opposition and all counsel are well versed in the evidence relied on in the moving papers. Reply at 4.
The court need not determine if TD Capital suffered prejudice because the application is otherwise defective and must be denied. See post.
- A Claim Based on a Contract and on Which Attachment May Be Based
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).
Plaintiff JTX’s claim against TD Capital is premised on its causes of action for money had and received and money loaned as well as a quasi-contract theory of liability. JTX was directed to wire the loan proceeds to TD Capital at the direction of Dawood and GMF through fraud. An attachment may be based on fraud where a quasi-contract has been established. Klein v. Benaron (1967) 247 Cal.App.2d 607, 610. The claimed damages of $1.5 million against TD Capital exceed the $500 minimum claim amount for issuing an attachment. CCP §483.010(a).
JTX has a claim against TD Capital on which to base a writ of attachment.
- 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).
JTX’s evidence shows that it had loaned GMF, through TD Capital, the amount of $1.5 million. Xu Decl. ¶¶19-21, Ex. E; Aharonian Decl. ¶ 10, Ex. F. This amount is readily ascertainable.
- Probability of Success
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).
JTX’s claims for relief relied upon for attachment are premised on theories of liability of implied-in-fact contract and quasi-contract. Its evidence shows that JTX agreed to loan GMF up to $4 million for working capital under the Note while due diligence was being conducted. Xu Decl., Ex. C. The loan would be converted to equity if JTX decided to proceed with the acquisition. Ibid. Otherwise, it was agreed that JTX would be able to ask for a return of the loan with 30 days’ notice. Ibid. In negotiating the Note, a material term was that JTX’s funds could only be used for GMF’s Beef Business. Xu Decl., ¶¶ 17-18; Aharonian Decl., ¶9 Exs. C, D; Xu Decl., Ex. E.
JTX wired a total of $1.5 million to GMF through TD Capital under the working capital loan. Xu Decl., ¶¶ 19, 21. Ultimately, because of changes in US/China trade policies and GMF’s unsatisfactory responses to JTX’s due diligence requests, JTX decided not to acquire a stake in GMF. Xu Decl., ¶22; Aharonian Decl., ¶11. JTX sent two successive termination notices to GMF, but the $1.5 million was never returned. Xu Decl., ¶¶ 23-25; Aharonian Decl. ¶¶ 12-13, Exs. G-H. When questioned by Aharonian, Dawood initially claimed to be ignorant of any deal with JTX. When confronted with the Note, Dawood claimed that JTX was in breach for failing to fund the entire $4 million loan. Aharonian Decl., ¶¶ 17-18, Ex. 1.
JTX’s moving papers rely heavily on a Woo declaration that was never filed to show the $1.5 million loan did not go to GMF, where the money actually went, and that Dawood lied to JTX, Wu, and Aharonian to induce JTX to loan the money. App. at 8-12. As JTX failed to file this declaration, it has failed to meet its burden.
JTX has not shown a probability of success on its claim for breach of quasi-contract.
- Conclusion
JTX’s application for a right to attach order against TD Capital is denied.
[1] While Plaintiff JTX provides courtesy copies of a motion, as well as forms for notice, application, and right to attach order, against Defendant Colony Capital, no such motion or forms were filed with the court. Thus, the court shall only consider the application against Defendant TD Capital. Additionally, while the court has the motion and forms for the application against TD Capital, the supporting Declaration of Felix T. Woo was never filed, even though the court has a courtesy copy. As will be discussed, this failure is fatal to the application.
[2] As stated ante, the Declaration of Felix T. Woo was never filed. Only the declarations of Xu and Aharonian were filed and their contents are summarized herein.