Global Assets Liens & Foreclosures, LLC, v. Shambala Healing Center, Inc.

A copy of the APA, with certain exhibits omitted, is attached to Dunmore's declaration. (Dunmore Dec., exhibit 1.) The open AR identified in the APA that Distro agreed to purchase included accounts associated with Shambala. (Dunmore Dec., P. 4.) The Dunmore declaration also includes copies of a first and a second amendment to the APA, entered into between Distro and Herbl, respectively, on November 22 and December 7, 2023. (Dunmore Dec., P.P. 5-6 & exhibits 2-3.)

In connection with the acquisition by Distro of the AR, WeCann, who is the broker hired by the receiver to market the assets of Herbl, provided Distro with access to a document data room which contained the business records and documents of Herbl, including those associated with the AR purchased by Distro. (Dunmore Dec., P. 8.) On March 3, 2024, after the Court in the Receivership Action entered the Order, Distro granted, assigned, and transferred to Plaintiff all of the assets that Distro acquired pursuant to the Order. (Dunmore Dec., P. 7 & exhibit 4.) Distro provided Plaintiff with access to the document data room database described above after it entered into the Assignment. (Dunmore Dec., P. 8.)

The application is also supported by a declaration of Chris Traina, who is a consultant for and the authorized agent of Plaintiff with possession, custody, and control of the files maintained by Plaintiff in relation to this action. (Traina Dec., P.P. 1-2.) Traina asserts that Plaintiff is the owner of certain accounts receivable that previously belonged to Herbl. (Traina Dec., P. 3.) Traina states that, in connection with the Assignment, Distro provided Plaintiff with access to an online document data room which contained the documents and records of Herbl related to the assets sold pursuant to the Order. (Traina Dec., P. 4.) According to Traina, those documents consist of accounting records, invoices, and account ledgers which evidence Herbl's outstanding accounts receivable, including those which are the subject of this action. (Ibid.)

Attached to the Traina declaration is a copy of a document titled "Customer Terms and Conditions" (the Contract) ostensibly executed on December 18, 2020, by AJ Prasaguet, who is identified in the Contract as the Managing Partner of Shambhala. (Traina Dec., P. 6 & exhibit C.) Also attached to the Traina declaration are copies of invoices purportedly issued by Herbl in connection with goods sold and delivered to Shambala between May 18 and June 15, 2023 (the Invoices). (Traina Dec., P. 5 & exhibit B.)

Traina states that, based on their review of the Herbl documents that Plaintiff was given access to by Distro, Traina is informed that the goods associated with the Invoices were timely delivered without objection. (Traina Dec., P. 5.) Traina asserts that the face of each of the Invoices require payment by the "pay by" date indicated on each of the Invoices. (Ibid.) Based on Traina's review of Herbl's records, Traina is also informed that Shambala did not pay for the goods in question, leaving an outstanding balance owed of $14,907.55, excluding interest. (Traina Dec., P.P. 5-6.)

Traina also asserts that, pursuant to the Contract, Shambala agreed, in the event the account is turned over to a collection agency, to pay collection costs and attorney's fees which entitles Plaintiff to recover attorney's fees to prosecute this action. (Traina Dec., P. 6.) Traina states that those attorney's fees total $5,700. (Ibid.)

Shambala opposes the motion.

Analysis

"Upon the filing of the complaint or at any time thereafter, the Plaintiff may apply pursuant to this article 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." (Code Civ. Proc., Sec. 484.010.) "Except as otherwise provided by statute, an 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." (Code Civ.

Proc., Sec. 483.010, subd. (a).) " ' "Attachment is an ancillary or provisional remedy to aid in the collection of a money demand by seizure of property in advance of trial and judgment." ' [Citation.] California's Attachment Law [codified as Code of Civil Procedure section 482.010 et seq.] is purely statutory and is strictly construed. [Citation.] As germane here, a Plaintiff seeking a right to attach order must show ' "the probable validity" ' of its claim. [Citation.] '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.' [Citation.]" (Kemp Bros.

Construction, Inc. v. Titan Electric Corp. (2007) 146 Cal.App.4th 1474, 1476 (Kemp).) The Court must "make a preliminary determination of the merits of a dispute." (Lorber Industries v. Turbulence, Inc. (1985) 175 Cal.App.3d 532, 535.)

Code of Civil Procedure section 484.020 sets forth the procedural requirements for an application for a right to attach order and writ of attachment. Among other requirements, the application must be "executed under oath...." (Code Civ. Proc., Sec. 484.020.) The present the application is signed by Plaintiff's counsel, Miriam Ortiz (attorney Ortiz), and states that the matters asserted in the application are true and correct. (Application at p. 3.) The application further asserts that facts showing Plaintiff is entitled to judgment on the claim upon which the attachment is based are set forth in the declaration of attorney Ortiz submitted in support of the application. (Application, P. 7(c).)

Attorney Ortiz's declaration describes the Order and a motion filed by the receiver in the Receivership Action only, and does not include any information showing why attorney Ortiz has personal knowledge of every fact stated in the application. For these reasons, and as attorney Ortiz is not the party making the application, the application is procedurally deficient. (Code Civ. Proc., Sec. 2015.5; In re Marriage of Reese & Guy (1999) 73 Cal.App.4th 1214, 1223 [the purpose of an oath "is to help ensure that declarations contain a truthful factual representation and are made in good faith."].).)

Notwithstanding the procedural deficiencies described above, the application must also "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." (Code Civ. Proc., Sec. 484.030.) "The facts stated in each affidavit filed pursuant to this title shall be set forth with particularity. Except where matters are specifically permitted by [The Attachment Law] to be shown by information and belief, each affidavit shall show affirmatively that the affiant, if sworn as a witness, can testify competently to the facts stated therein.

As to matters shown by information and belief, the affidavit shall state the facts on which the affiant's belief is based, showing the nature of his information and the reliability of his informant. The affiant may be any person, whether or not a party to the action, who has knowledge of the facts." (Code Civ. Proc., Sec. 482.040.) "This means that the affiant or declarant must show actual, personal knowledge of the relevant facts, rather than the ultimate facts commonly found in pleadings, and such evidence must be admissible and not objectionable." (Lydig Construction, Inc. v.

Martinez Steel Corp. (2015) 234 Cal.App.4th 937, 944 (Lydig).)

The application also states that the Traina declaration sets forth the facts showing Plaintiff is entitled to a judgment on the claim upon which the attachment is based. (Application, P. 7(c).) In their opposition to the application, Shambala asserts that there exists a threshold evidentiary problem in regard to the authenticity of the Invoices, hearsay contained within the Traina declaration, whether Traina may properly authenticate those records under Evidence Code section 1271, and whether the payment or other records of Herbl were complete or accurate considering that Herbl was insolvent or approaching insolvency. Shambala further asserts that neither Distro nor the receiver in the Receivership Action could vouch for the accuracy of Herbl's records.

"All documentary evidence ... must be presented in admissible form, generally requiring proper identification and authentication, and admissibility as nonhearsay evidence or under one or more of the exceptions to the hearsay rule, such as the business records exception." (Lydig, supra, 234 Cal.App.4th at p. 944.) "Authentication of a writing means (a) the introduction of evidence sufficient to sustain a finding that it is the writing that the proponent of the evidence claims it is or (b) the establishment of such facts by any other means provided by law." (Evid.

Code, Sec. 1400.) "Authentication of a writing is required before it may be received in evidence. [P.] Authentication of a writing is required before secondary evidence of its content may be received in evidence." (Evid. Code, Sec. 1401.) Further, the proponent of a writing "ha[s] the burden of showing their authenticity, including the absence of any material alteration." (J&A Mash & Barrel, LLC v. Superior Court (2022) 74 Cal.App.5th 1, 19 (J&A Mash).)

The Traina declaration does not describe or explain the manner, custom, or practice by which Herbl created or otherwise processed the Invoices, including those purportedly submitted to Shambala, or any payment or nonpayment of any of the Invoices. (People ex rel. Harris v. Sarpas (2014) 225 Cal.App.4th 1539, 1571.) Traina also does not state whether they "saw the [Invoices] made or executed[]" or include information or evidence showing why Shambala has "at any time admitted" the authenticity of the Invoices or "acted upon" the Invoices "as authentic...." (Evid.

Code, Sec.Sec. 1413 &1414, subd. (a)-(b).) The application also does not show why Traina is "familiar with the procedures followed" by Herbl in preparing the Invoices. (Jazayeri v. Mao (2009) 174 Cal.App.4th 301, 322 (Jazayeri).) In addition to the method by which the Invoices were prepared by Herbl, the application also includes no information or evidence showing why the Invoices were "made in the regular course" of Herbl's business, "at or near the time of the act, condition, or event[.]" (Evid.

Code, Sec. 1271, subds. (a)-(d).) For these and all reasons further discussed above, the application fails to show why the copies of the Invoices attached to the Traina declaration are complete, genuine, or trustworthy. (J&A Mash, supra, 74 Cal.App.5th at pp. 19-20 [general discussion].)

Alternatively, "[t]he fact conflicting inferences can be drawn regarding authenticity goes to the document's weight as evidence, not its admissibility." (Jazayeri, supra, 174 Cal.App.4th at p. 321.) To the extent the application is sufficient to show that the Invoices were made in the regular course of Herbl's business, Shambala has raised in its opposition questions and disputes from which conflicting inferences may be drawn regarding the authenticity of those documents. For these and all further reasons discussed above, under the circumstances present here, the Invoices are not sufficiently weighty to show a "probable validity of the claim upon which the attachment is based." (Code Civ.

Proc., Sec. 484.090, subd. (a)(2); Sec. 482.040; see also Kemp, supra, 146 Cal.App.4th at pp. 1481-1482 [the Court must "assess the sufficiency" of the evidence to determine the probable validity of claim].) " '[A]ttachment is a harsh remedy at best in that an alleged debtor loses control of his property before the claim against him is adjudicated. This being so, the provisions relating thereto should be strictly construed.' " [Citation.]" (J.C. Peacock, Inc. v. Hasko (1961) 196 Cal.App.2d 363, 365.)

For all reasons discussed above, Plaintiff has failed to meet their burden to establish the probable validity of the claim upon which the attachment is based. Therefore, the Court will deny the application.

Tentative Ruling: Mechanics Bank v. California Organic Fertilizers, Inc., et al. Tentative Ruling: Mechanics Bank v. California Organic Fertilizers, Inc., et al.