Opinion
No. 2:14-cv-1666-WBS-EFB
09-17-2015
PLATTE RIVER INSURANCE COMPANY, a Nebraska corporation, Plaintiff, v. PREMIER POWER RENEWABLE ENERGY, INC., a California corporation; DEAN RICHARDS MARKS, an individual; and SARILEE MARKS, an individual, Defendants.
ORDER AND FINDINGS AND RECOMMENDATIONS
This matter came before the court for hearing on plaintiff Platte River Insurance Company's application for writs of attachment or alternatively a temporary protective order to secure $1,011,121.00 from defendants Premier Power Renewable Energy, Inc., Dean Richards Marks, and Sarilee Marks' property. ECF No. 18. Attorney James Curran appeared on behalf of Platte River; attorney Mark Slater appeared on behalf of defendants Dan Marks and Sarilee Marks.
Defendant Premier Power Renewable Energy, Inc. has not appeared in this action.
I. Background
This action arises out of a performance bond and indemnity contract, that were part of an overall construction project for a roof mounted solar system for a public school district in Colorado. Defendant Premier Power Renewable Energy, Inc. ("Premier Power"), which is owned by defendants Dean Richards Marks and Sarilee Marks, entered into construction contracts to install the solar system. The Marks and Premier Power also entered into an agreement with plaintiff for plaintiff to issue performance bonds for which the Marks would hold plaintiff harmless and indemnify plaintiff in the event of any claims on the bonds. As discussed below, Premier Power allegedly defaulted on its performance obligations on the project and claims were made against the bond. The Marks allegedly failed to meet their indemnity and hold harmless plaintiff, Platte River Insurance Company ("Platte River"), and plaintiff now brings this action for breach of the indemnity contract.
Plaintiff also alleges that certain real property was transferred by the Marks to avoid having those assets available to satisfy any debt owe to plaintiff. Based on that allegation, plaintiff seeks prejudgment remedies of a writ of attachment and/or a temporary protective order to prevent the Marks from transferring any other assets pending either the resolution of this case or the determination of whether particular assets are exempt from attachment or execution to satisfy plaintiff's claim.
A. Plaintiff's Complaint
Plaintiff, Platte River, commenced this against Premier Power, Dean Richards Marks, and Sarilee Marks, alleging claims for (1) breach of written indemnity agreement, (2) specific performance, (3) injunctive relief, and (4) Quia Timet. ECF No. 1. The complaint alleges that on March 3, 2009, Premier Power entered into a General Indemnity Agreement ("Agreement") in favor of Platte River, as an inducement and partial consideration for Platte River issuing surety bonds on behalf of Premier Power. Id. ¶ 10. It further alleges that on November 4, 2010, Dean Marks and Sarilee Marks entered into a General Indemnity Agreement Addendum for Additional Indemnitor in favor of Platte River, as an inducement and partial consideration for Platte River issuing surety bonds on behalf of Premier Power. Id. ¶ 11. That same date Platte River issued the performance bonds. Id.
Thereafter, Premier Power entered into a construction contract known as "3020kWp-DC Roof Mount, Solar Roof System" in Douglas County, Colorado, id. ¶ 13, and Platte River executed a Performance and Payment Bonds (collectively, "the Bonds") for certain performance and payment obligations under it. Id. ¶ 14. Various claimants under the Bonds have alleged that Premier Power defaulted on its performance and payment obligations which were secured by the Bonds. Pursuant to the indemnity agreement with the Marks, Platte River requested defendants to indemnify it for the claims made against the Bonds, but they failed to do so. Id. ¶ 15. As a result, Platte River has incurred liabilities in excess of $1,011,121.60. Id. ¶ 21.
As discussed below, Premier Power allegedly failed to pay a subcontractor for constructing the project and, ultimately, an arbitration award was issued on October 2, 2014, in favor of the subcontractor and against Premier Power for the amount of $2,996,059.44. The arbitrator found that the subcontractor had met all of its performance obligations and that Premier Power was in breach of its obligations to make payment on the subcontract.
The Marks have failed to indemnify, provide a defense, or otherwise hold harmless the plaintiff. Id. ¶¶ 16-21.
B. Procedural History
Platte River filed the instant motion for writ of attachment or, in the alternative, for a temporary protective order, which came before the court for hearing on December 10, 2014. ECF Nos. 18, 26. After that hearing, the court set the matter for further hearing on February 18, 2015, and directed the parties to submit further briefing identifying the specific property allegedly subject to attachment and whether such property is subject to attachment under the applicable legal standard. ECF Nos. 29, 31. After the February 18 hearing, the court took the matter under submission. However, defendants Dean Marks and Sarilee Marks subsequently filed a voluntary Chapter 13 Bankruptcy Petition, resulting in an automatic stay of this action. See 11 U.S.C. § 362(a); ECF No. 36. On June 29, 2015, the parties filed a joint status report, which indicated that defendants' bankruptcy case was dismissed on June 1, 2015.
II. Motion for Writ of Attachment
A. Legal Standard
A plaintiff in federal court is entitled to every remedy that is available under the law of the state where the court is located for "seizing a person or property to secure satisfaction of the potential judgment," including a writ of attachment. Fed. R. Civ. P. 64; Reebok Int'l Ltd. v. Marnatech Enters., Inc., 970 F.2d 552, 558 (9th Cir. 1992). The procedures and grounds for obtaining a prejudgment writ of attachment are governed by California Code of Civil Procedure sections 481.010-493.060.
"Attachment . . . is a remedy by which a plaintiff with a contractual claim to money (not a claim to a specific item of property) may have various items of a defendant's property seized before judgment and held by a levying officer for execution after judgment." Waffer Int'l. Corp v. Khorsandi, 69 Cal. App. 4th 1261, 1271 (1999) (parenthetical in original and emphasis omitted). "Attachment is a harsh remedy because it causes the defendant to lose control of his property before the plaintiff's claim is adjudicated. Martin v. Aboyan, 148 Cal. App. 3d 826, 831 (1983). "Therefore, the requirements for the issuance of a writ of attachment are strictly construed against the application." Blastrac, N.A. v. Concrete Solutions & Supply, 678 F. Supp. 2d. 1001, 1004 (C.D. Cal. 2010). Furthermore, "[t]he moving party has the burden of establishing grounds for an attachment order." VFS Fin., Inc. v. CHF Express, LLC, 620 F. Supp. 2d 1092, 1095 (C.D. Cal. 2009).
A court may issue an attachment "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 . . . ." Cal. Civ. Proc. Code § 483.010 (a). Furthermore, where the defendant is a natural person, an attachment may issue "only on a claim which arises out of the conduct by the defendant of a trade, business, or profession." Cal. Civ. Proc. Code § 483.010 (b). A plaintiff seeking a writ of attachment must submit an affidavit demonstrating that "[t]he plaintiff on the facts presented would be entitled to a judgment on the claim upon which the application is based," and "that the property sought to be attached is not exempt from attachment." Cal. Civ. Proc. Code § 485.210(c)(1), (3). The court shall issue the writ of attachment if it finds that:
(1) The claim upon which the attachment is based is one upon which an attachment may be issued.Cal. Civ. Proc. Code § 484.90(a). Furthermore, before a court may issue 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." Cal. Civ. Proc. Code § 489.210. The presumptive amount of the undertaking under the statute is $10,000, but that amount may be increased on a showing that the probable recovery for a wrongful attachment would be greater. Cal. Civ. Proc. Code § 489.220.
(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.
B. Platte River has satisfied section 484.90(a)
A claim upon which an attachment may issue is defined by California Code of Civil Procedure Section 483.010(a). That section requires the following three requirements be met: (1) claim for money; (2) based upon express or implied contract; and (3) the amount of the claim is readily ascertainable and is not less than $500 exclusive of costs, interest, and attorney's fees. Cal. Civ. Proc. Code § 483.010(a).
Platte River seeks collateral security for its ongoing exposure under the Bonds, as well as attorneys' fees in enforcing the instant action—conservatively estimated at $200,000—for a total attachment amount of $1,221,121.60. Platte River's claim for breach of the indemnification agreement specifically alleges that it asked defendants to indemnify it pursuant to the Agreement for the claims made against the Bonds, but they failed to do so. Platte River's action seeks to obtain cash or collateral in the amount of $1,011,121.60 for the claims made against the Bonds. Compl. ¶ 19. This type of action constitutes a claim for money. See Travelers Cas. And Sur. Co. of America v. J.K. Merz Const., Inc., 2007 WL 4468680, at * 5-6 (N.D. Cal. Dec. 17, 2007) (finding that plaintiff's action for collateral under an indemnity contract was not for a specific piece of property, but rather one for "payment of money by the defendant should certain developments occur, i.e., should a claim or demand be made on [the plaintiff] under the subject bonds."). Indeed, Platte River does not claim a right to any specific piece of property.
Second, the claim is based on the indemnity agreement between the parties, and therefore arises out of a contract. Third, the amount claimed is readily ascertainable and is not less than $500. Platte River submits the declaration of Ron Wills, Senior Bond Claims Specialist for Platte River, which shows that at defendants request Platte River executed the Bonds in connection with the Construction Contract. ECF No. 18-2 ¶ 12. The Bonds were both in the amount of $1,011,121.60. Id. Further, there does not appear to be any dispute that Premier Power entered into a Subcontract with Power Partners MasTec, LLC ("PPM"), whereby PPM was to provide certain labor, materials, and equipment and services in connection with the Construction Contract. Id. ¶ 13. PPM completed its work and asserted a claim against the Payment Bond in excess of $1.6 million, alleging that Premier Power defaulted on its payment obligations under the Subcontract. Id. ¶ 14. The dispute over the claim eventually went to arbitration and on October 2, 2014, a final award was issued in the arbitration in favor of PPM and against Premier Power, awarding $1,964,419.56 in damages, $707,191.04 in interest, and $324,448.84 in attorney's fees, expenses and costs, for a total award of $2,996,059.44. Id. ¶ 18. Platte River is bound by the judgment obtained by PPM against Premier up to the amount of $1,011.121.60 under the Payment Bond. Id. ¶19. Pursuant to Section 8 of the Agreement, Platte River requested in writing that defendants deposit cash or collateral with Platte River to cover the $1,011,121.60, but defendants failed to do so. Id. ¶¶ 19, 20. Based on these facts, the court is able to ascertain the amount owed under the agreement is $1,011,121.60.
Defendants argue, however, that Platte River's request to attach property to secure payment for an estimated $200,000 in attorneys' fees should be denied because Platte River has failed to provide any admissible factual evidence to establish this figure. ECF No. 22 at 3-4; ECF No. 33 at 6. Although the amount under the claim must be ready ascertainable, a party need only provide an estimate of any costs and attorney's fees it seeks to include in the amount to be secured by the writ of attachment. See Cal. Civ. Proc. Code § 482.110(a) (a "plaintiff's application for a right to attach order and a writ of attachment pursuant to this title may include an estimate of the costs and allowable attorney's fees."); Cal. Civ. Proc. Code § 482.110(b) ("In the discretion of the court, the amount to be secured by the attachment may include an estimate amount for costs and allowable attorney's fees."). The supplemental declaration of Ron Wills provides that Platte River has already paid $83,585.33 in attorneys' fees. ECF No. 27-2 ¶ 7. He further states that Platte River anticipates that additional fees to take this matter through trial will likely exceed $100,000. Id. ¶ 8. He also states that due to the complexity of this case, including an issue regarding an alleged fraudulent transfer of property, attorney's fees could easily exceed $200,000. Id. ¶ 10.
However, Platte River's math does not add up. Even assuming that it will take $100,000 to take this action to trial, after including the $83,585.33 in fees already paid, the estimated total would be $183,585.33 in fees. Platte River does not explain the approximately $16,500 it added to reach the estimated total of $200,000. Further, while it will certainly incur more litigation expenses, Platte River provides no explanation for how it determined that it would take an additional $100,000 to take this matter to trial. Without further elaboration, it simply provides the unsupported statements of Mr. Wills, a Senior Bond Claims Specialist for Platte River, that it will take $100,000 to litigate this matter. Mr. Wills does not purport to be a litigator, or even an attorney, and there is no indication that he has specialized knowledge or experience that would permit him to estimate the cost of litigating this action (or any other action for that matter). Accordingly, the court finds that Platte River has failed to demonstrate that it will incur an additional $100,000 in attorney fees. Without supporting evidence, the amount of fees therefore must be limited to the $83,585.33 that Platte River has already paid in attorneys' fees.
If he does have such knowledge or experience, it is not apparent from his declaration.
Platte River has also established the probable validity of its claim. A plaintiff has established the probable validity requirement "where it is more likely than not that the plaintiff will obtain a judgment against the defendant on the claim." Cal. Civ. Proc. Code § 481.190. The record shows that on March 3, 2009, Premier Power entered into an Indemnity Agreement in favor of Platte River, as an inducement and partial consideration for Platte River issuing surety bonds on behalf of Premier Power. Wills Decl. ¶ 8, Ex. 1. On or about November 4, 2010, Dean Marks and Sarilee Marks entered into the General Indemnity Agreement Addendum for Additional Indemnitor ("the Addendum") in favor of Platte River, as an inducement and partial consideration for Platte River issuing surety bonds on behalf of Premier Power. Id. ¶ 9, Ex. 2. Platte River received a claim against the Payment Bond by Power Partners MasTec, LLC in the amount of $1,011,121.60. Id. ¶ 19. Pursuant to the Indemnity Agreement, defendants were required to defend, indemnify, and hold harmless Platte River from all claims against the Bonds, but failed to do so. Id. ¶ 23, Ex. 1. Under the agreement, defendants were required to deposit cash or collateral in the amount of the claim, but failed to do so. Id.
Defendants do not dispute that they breached the indemnity agreement. Nor do they contend that Platte River is not likely to prevail on its claim. Instead, at the hearing defendants argued that Platte River has not established probable validity because it has yet to make any payments on the Bonds. Platte River conceded that it has yet to make any payments to any of the claims on the Bonds, but argues that it need not first pay a claim to establish probable validity. Rather, Platte River argues, under the Indemnity Agreement it is entitled to the collateral upon making a demand, and failure to provide collateral is a breach of the agreement.
Indeed, the Indemnity Agreement provides that if Platte River deems "it necessary to set up a reserve in any amount to cover any claim [or] demand . . . under or on any Bond(s) or for any other reason whatsoever, [defendants] will immediately upon demand deposit with [Platte River] an amount of money or collateral in an amount sufficient to cover such reserve and any increase thereof, or for any payment or compromise of any liability, claims, demands, judgment, damages, fees and distribution or other expenses." ECF No. 18-2 at 10. Thus, the Indemnity Agreement expressly requires defendants to provide collateral upon a demand from Platte River, and does not require Platte River to make a payment on a claim prior to making such a demand. Accordingly, the court finds that Platte River has established the probable validity of the claim upon which the attachment is based.
Furthermore, Ron Wills's declaration provides that Platte River seeks to attach $1,221,121.60 worth of defendants' property and seeks attachment for no purpose other than the recovery on Platte River's claims upon which the attachment is based. Accordingly, Platte River has satisfied the remaining requirements of Cal. Civ. Proc. Code § 484.90(a).
As the writ seeks to attach assets of the individual defendants Dean Marks and Sarilee Marks, Platte River is also required to establish that the claim arises out of a trade or business. See Cal. Civ. Proc. Code § 483.010(c) (where the action is against a natural person, the claim must arise out of a trade or business). Platte River contends that the addendum to the security agreement demonstrates that the individual defendants entered into the agreement for a business purpose. ECF No. 18-1 at 11. The addendum specifically states that Richard Marks and Sarilee Marks have a beneficial interest in the bonds. ECF No. 18-2 at 19. Furthermore, defendants do not dispute that the claims arise out of their trade or business. Thus, Platte River has also satisfied the requirements of Cal. Civ. Proc. Code § 483.010(c).
Accordingly, defendants have demonstrated compliance with the California procedures for obtaining a writ of attachment.
C. Exemptions
Defendants contend that Platte River is not entitled to the writ because the properties it seeks to attach are exempt from attachment.
California Code of Civil Procedure section 484.020 requires an application for a writ of attachment to include, among other things, "[a] description of the property to be attached under the writ of attachment and a statement that the plaintiff is informed and believes that such property is subject to attachment. Cal. Civ. Proc. Code § 484.020(e). "Where the defendant is a natural person, the description of property shall be reasonably adequate to permit the defendant to identify the specific property to be attached." Id.
"If the defendant claims that the personal property described in the plaintiff's application, or a portion of such property, is exempt from attachment, the defendant shall claim the exemption as provided in this section. If the defendant fails to make the claim or makes the claim but fails to prove that the personal property is exempt, the defendant may not later claim the exemption except as provided in Section 482.100." Cal. Civ. Proc. Code § 484.070(a).
"If the plaintiff desires to oppose the claim of exemption, the plaintiff shall file and serve on the defendant, not less than two days before the date set for the hearing, a notice of opposition to the claim of exemption, accompanied by an affidavit supporting any factual issues raised and points and authorities supporting any legal issues raised." Cal. Civ. Proc. Code § 484.070(f). If the plaintiff fails to file the requisite opposition, no writ of attachment shall issue as the property claimed to be exempt. Id. Where the plaintiff files an opposition to the claim of exemption, "the defendant has the burden of proving that the property is exempt from attachment." Cal. Civ. Proc. Code § 484.070(g).
Platte River's initial motion did not specifically identify what property it is attempting to attach. For that reason, analysis of any claims of exemption were largely hypothetical and the court ordered Platte River to submit a supplemental brief identifying precisely the property it seeks to attach. Platte River has filed its supplemental brief, and apart from a generalized discussion of various properties, Platte River still contends that the specific details concerning all of defendants' assets and real property remains unclear. ECF No. 32 at 2. Thus, Platte River again requests a generalized attachment order as to defendants' known property and an injunction prohibiting defendants from transferring or encumbering any interest in real property or personal property, with the exception that defendants be permitted to make payments related to ordinary bills, so that Platte River can determine if there is any additional property. Id.
Because an assessment must be made as to the exempt or non-exempt status of each asset or category of assets, the court addresses each below. Further, as explained below, the court finds that Platte River is entitled to a writ of attachment as to some of defendants' known property, but that other known properties are either exempt from attachment or that Platte River has not met its burden on the motion as to them. Furthermore, the court finds that Platte River is not entitled to the injunction it seeks.
1. Placerville Property/Interest in Eagle Ridge
Platte River indicates that it seeks to attach real property located at 2540 Los Cerros Drive, Placerville, California ("Placerville Property"). Platte River contends that this property may be attached pursuant to California Code of Civil Procedure § 487.010(c)(1), which provides that an individual's interest in real property, except leasehold estates with unexpired terms of less than one year, is subject to attachment. Cal. Civ. Proc. Code § 487.010(c)(1).
However, in its supplemental brief, Platte River explains that on September 11, 2012, defendants assigned their interest in the Placerville Property to the Marks Living Trust. ECF No. 32 at 3. Thereafter, defendants, as trustees of the Marks Living Trust, transferred the Placerville Property to Eagle Ridge, LLC ("Eagle Ridge"). Id. The Marks Living Trust owns 25 percent of Eagle Ridge, with the remainder owned by defendants' children. Id. Accordingly, Platte River now argues that it is entitled to an order attaching all interest the Marks Living Trust has in Eagle Ridge. Further, Platte River contends that the transfer of the Placerville Property to Eagle Ridge was fraudulent and is therefore voidable. Id. at 3. Platte River states that if defendants do not voluntarily unwind the transfer, it will be forced to file a separate action against defendants, the Marks Living Trust, and Eagle Ridge to have the transfer voided. Id. Once this is completed, title to the Placerville Property will be solely owned by the Marks Living Trust, and Platte River will seek to attach all of the Placerville Property.
Thus, Platte River has changed its course. Although its motion for a writ of attachment seeks to attach real property pursuant to California Code of Civil Procedure § 487.010(c)(1), in its supplemental brief it now essentially argues that it is seeking to attach defendants' interest in Eagle Ridge. ECF No. at 32 at 3. California Code of Civil Procedure § 487.010(c) identifies the type of property that is subject to attachment. That section provides for the attachment of real property, see Cal. Civ. Proc. Code § 487.010(c)(1), but does not provide that an individual's interest in a Limited Liability Company is subject to attachment.
Platte River argued for the first time at the hearing that defendants' interest in Eagle Ridge would be subject to attachment as a security under section 487.010(c)(10). However, Platte River fails to cite authority in support of its contention that an interest in an LLC constitutes a security for purposes of section 487.010(c). In any event, Platte River's motion only sought to attach the Placerville Property, and did not seek to attach defendants' interest in Eagle Ridge. As such, its last minute attempt to seek attachment of defendants' interest in Eagle Ridge must be rejected for failure to provide sufficient notice of the property it seeks to attach. Cal. Civ. Proc. Code § 484.020 (requiring an application for a writ of attachment to include, among other things, "[a] description of the property to be attached under the writ of attachment and a statement that the plaintiff is informed and believes that such property is subject to attachment."); see also Cal. Civ. Proc. Code § 484.020(e) ("Where the defendant is a natural person, the description of property shall be reasonably adequate to permit the defendant to identify the specific property to be attached."). Accordingly, Platte River has failed to demonstrate that it is entitled to a writ of attachment as to defendants' interest in Eagle Ridge, and therefore its motion should be denied as to this property.
Court records reflect that on August 18, 2015, Platte River filed a complaint against defendants, the Marks Living Trust, and Eagle Ridge, seeking to avoid the alleged fraudulent transfer of the Placerville Property to Eagle Ridge. Platte River Ins. Co. v. Marks, 2:15-cv-1747-WBS-EFB, ECF No. 1. Should Platte River succeed in that action, it may be able to seek attachment of the Placerville Property in this action. However, that issue is not currently before the court and therefore need not be decided at this time.
2. Accounts Receivable, Chattel, and General Intangibles from Defendants' Trade, Business or Possession
Platte River also requests an order attaching two separate accounts, which it contends may contain proceeds from the sale of Premier Power stock: (1) Fidelity Individual Investment Account ending in 312 in the name of Dean and Sarilee Marks, and (2) Fidelity Individual Investment Account ending in 155 in the name of Dean Marks. ECF No. 32 at 5. It contends that such property is subject to attachment pursuant to California Code of Civil Procedure § 487.010(c)(2). That section provides that "[a]ccounts 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" is subject to attachment. Cal. Civ. Proc. Code § 487.010(c)(2).
Platte River contends that in September 2008, Dean Marks was issued a stock-certificate for 12,488,056 shares of common stock in Premier Power. ECF No. 32 at 4. According to a Sale and Purchase Agreement produced by defendants, in July 2012, Dean Marks sold 10,746,365 shares of that stock for $973,800. Curran Decl. ¶ 9. Therefore, Platte River requests an order attaching the $973,800 to the extent it has not been paid. Platte River further states that defendants have produced statements from their Fidelity Investment accounts which show that as of November 2014, defendants "jointly own 3,000,000 shares of Premier Power stock, and Dean Marks individually own [sic] $2,550,000 [sic]." ECF No. 32 at 4. Therefore, Platte River seeks an order attaching the Fidelity Individual Investment Account ending in 312 and in 115. Defendants' pleadings do not address Platte River's argument to attach the $973,800 or the Fidelity Individual Investment Accounts ending in 312 and 115. Accordingly, Platte River's request to attach this property is unopposed.
The investment accounts purport to contain stock that arises out of defendants' trade, business, or profession. Accordingly, the accounts are subject to attachment pursuant to California Code of Civil Procedure § 487.010(c)(2). As defendants do not claim that this property is exempt, Platte River is entitled to a writ of attachment as to the Fidelity Individual Accounts ending in 312 and 115.
Defendants' request for an order attaching the $973,800 is more problematic. While the money does arise out of the sale of Premier Power stock and is therefore subject to attachment pursuant to California Code of Civil Procedure § 487.010(c)(2), it is unclear where the money is located, or whether defendants even still have possession of this money. Without the location of money, the court is unable to issue an order having the property "seized before judgment and held by a levying officer for execution after judgment." See Waffer Int'l. Corp., 69 Cal. App. 4th at 1271. Accordingly, the motion should be denied without prejudice to the $973,800.
3. Deposit Accounts
Platte River also seeks to attach all but the first $1,000 of defendants' individual deposit account ending in account number 172, at U.S. Bank pursuant to California Code of Civil Procedure § 487.010(c)(7). ECF No. 32 at 5. That section provides:
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 than 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) in the form of such money and in such accounts remains free of levy.Cal. Civ. Proc. Code § 487.010(c)(7).
Defendants argue that this account holds earnings from Sarilee Marks's employment with the El Dorado Community Health Center in Placerville, which are exempt pursuant to California Code of Civil Procedure §§ 487.020(c) and 706.011. ECF No. 33 at 5. Platte River concedes that earnings are exempt from attachment. ECF No. 34 at 4. Accordingly, the court finds that the individual deposit account ending in account number 172 at U.S. Bank is exempt and not subject to attachment. Accordingly, the motion must be denied as to this property.
At the hearing, Platte River argued that it is unable to discern whether the account only contains Ms. Marks's earnings because defendants have failed to adequately respond to Platte River's discovery requests. Platte River, however, has not filed a motion to compel discovery, or for discovery sanctions and there is no evidence before the court indicating that the account at issue contains monies that are not exempt.
4 Loan Instruments
Platte River also seeks to attach any amount payable under a loan made by Dean Marks to Premier Power. ECF No. 32 at 5-6. According to Platte River, Dean Mark entered into three separate loan agreements with Premier Power, totaling $400,000. ECF No. 32-1 ¶ 13. The loan repayment term under each agreement is "at the request of the lender." Id. Defendants have not produced any documents evidencing that these loans have been repaid. Id.
California Code of Civil Procedure § 487.010(c)(8) provides that instruments are subject to attachment. An instrument is defined as "a negotiable instrument of any other writing that evidences a right to the payment of monetary obligation, is not itself a security agreement or lease, and is of a type that in ordinary course of business is transferred by delivery with any necessary endorsement or assignment." Cal. Comm. Code § 9102(a)(47).
Accordingly, Dean Marks's right to receive payment for a loan made to Premier Power is subject to attachment pursuant to California Code of Civil Procedure § 487.010(c)(8). Furthermore, defendants do not contend that such property is exempt. Accordingly, Platte River's motion as to this property must be granted.
5. Securities Accounts
Platte River seeks to attach multiple brokerage and investment accounts pursuant to California Code of Civil Procedure § 487.010(c)(10), which provides that securities are subject to attachment. Platte River states that defendants have the following accounts which may be subject to attachment:
1. Fidelity Education Account ending in 061 in the name of Dean Marks, as participant and Richard H. Marks, as beneficiary.
2. Fidelity Rollover IRA Account ending in 219 in the name of Sarilee Marks.
3. Fidelity Rollover IRA Account ending in 254 in the name of Dean Marks.
4. Fidelity Individual IRA Account ending in 990 in the name of Dean Marks.
5. Vanguard Retirement Savings Plan ending in 658 in the name of Dean Marks
As for the education account ending in 061 in the name of Dean Marks, defendants do not contend that it is exempt, and therefore court finds that it is subject to attachment.
At the February 18 hearing, defendants' counsel requested additional time to conduct research as to whether education accounts are exempt from attachment. Notwithstanding the fact that the motion was before the court for further hearing and the parties had already submitted supplemental briefs, the court entertained the request and permitted defendants' to file a one-page brief by the end of the day. No brief was filed.
As for the remaining accounts (accounts ending in 219, 254, 658, 990), defendants argue that these accounts are retirement accounts and are therefore not subject to attachment. ECF No. 33 at 6. Platte River does not dispute that any validly-funded retirement account would be exempt from attachment. ECF No. 32 at 6. It only claims that defendants have not provided it with sufficient documents to determine whether the retirement accounts were properly funded. Id. "Therefore, Platte River reserves the right to seek an attachment of any retirement accounts, including but not limited to any accounts listed above, to the extent those accounts were not properly funded." Id.
Again, Platte River has not moved to compel further responses to its discovery requests.
Based on the evidence currently before the court, it cannot be determined that these accounts are not subject to attachment and the motion must be denied, without prejudice, as to these accounts. Should Platte River discover evidence demonstrating that the accounts are not properly-funded retirement accounts, it may renew its motion as to these accounts.
D. Temporary Protective Order
Platte River argues that it is entitled to a Temporary Protective Order to protect its rights under the Indemnity Agreement, which provides that defendants agreed to assign, transfer, and convey all their rights, title, interests and estate in and to all of their property to Platte River. ECF No. 32 at 7. It contends that the assignment provision in the Indemnity Agreement is broad enough to support Platte River's request for a right to attach order against all of Defendants' property located in California, as well as a temporary restraining order prohibiting defendants from disposing of any other property located outside of California. Id.
Platte River further explains that it has already served discovery requests on defendants to determine their assets. ECF No. 32 at 2. Defendants have refused to provide complete responses to Platte River's discovery requests, and Platte River intends to bring a motion to compel responses to its discovery request. Id. Specifically, defendants have refused to produce their tax returns, a complete copy of the Marks Family Trust, and information regarding the $973,800 received for the sale of Dean Marks' sale of stock in Premier Power. Id.
Accordingly, Platte River requests that the court issue an order prohibiting defendants from transferring, encumbering, refinancing or otherwise dissipating any of their assets until Platte River can complete discovery, determine the location of defendants' property, determine what property is subject to attachment, enforce any order issued by the court, and pursue any other remedies necessary to protect its rights. Id.
"California law allows a creditor to obtain a TPO against a debtor's property after it has been shown in an ex-parte proceeding the probable validity of its claim and the probability of great harm if relief is not granted." In re Wind Power Systems, Inc., 841 F.2d 288, 291 (9th Cir. 1988). California Code of Civil Procedure section 486.010 provides that "[a]t the time of applying for a right to attach order under Chapter 4 . . . , the plaintiff may apply pursuant to this chapter for a temporary protective order by filing an application for the order with the court in which the action is brought. Cal. Civ. Proc. Code § 486.010(a). That section further provides that "[t]he application shall state what relief is requested and shall be supported by an affidavit, which may be based on information and belief, showing that the plaintiff would suffer great or irreparable injury . . . if the temporary protective order were not issued. Cal. Civ. Proc. Code § 486.010(b).
After obtaining a TPO, a creditor can then "obtain an order to attach and a writ of attachment after notice and a full hearing." In re Wind Power Systems, Inc., 847 F.2d at 291. A TPO shall expire at the earliest of the following: (1) forty days from its issuance, (2) a period of less than 40 days if ordered by the court, or (3) when a levy of attachment upon the property is made by the plaintiff. "The attachment statutes are given strict construction." See Rose v. Abraham, No. CIV F 08-606 AWI SMS, 2008 WL 2275573, at * 3 (E.D. Cal. May 21, 2008).
Platte River seeks a TPO to provide it with an opportunity to conduct further discovery into whether defendants possess additional property that may be subject to attachment. It is clear, however, that the purpose of a TPO is to provide a temporary injunction until the court has had the opportunity to conduct a full hearing on plaintiff's application for a writ of attachment. See In re Wind Power Systems, Inc., 847 F.2d at 291; Rose, 2008 WL 2275573, at * 3. Platte River does not seek a TPO for this purpose. Instead, it is seeks an injunction to prevent defendants from hiding assets while it conducts additional discovery into what other assets may be subject to attachment. Platte River is not entitled a TPO for this purpose. Accordingly, Platte River's request for a TPO must be denied.
IV. Conclusion
Accordingly, it is hereby ORDERED that Platte River submit a proposed right to attach order and a proposed writ of attachment for issuance by the clerk, consistent with the recommendations above, within fourteen days of the date of these findings and recommendations.
Further, it is hereby RECOMMENDED that:
1. Platte River's motion for a writ of attachment be granted in part as detailed above.
2. The Clerk be directed, after Platte River files a $10,000 undertaking, to issue a writ that would attach only to the property subject to attachment as set forth above, and, within that list, only such property as is necessary to secure an obligation in the amount of $1,094,706.93 ($1,011,121.60 for claims made on the Bonds and $83,585.33 for attorneys' fees).
The parties' briefs do not address the requirement that Platte River file an undertaking, and therefore the court finds the statutory presumed amount of $10,000 appropriate. --------
These findings and recommendations are submitted to the United States District Judge assigned to the case, pursuant to the provisions of 28 U.S.C. § 636(b)(l). Within fourteen days after being served with these findings and recommendations, any party may file written objections with the court and serve a copy on all parties. Such a document should be captioned "Objections to Magistrate Judge's Findings and Recommendations." Failure to file objections within the specified time may waive the right to appeal the District Court's order. Turner v. Duncan, 158 F.3d 449, 455 (9th Cir. 1998); Martinez v. Ylst, 951 F.2d 1153 (9th Cir. 1991). DATED: September 17, 2015.
/s/_________
EDMUND F. BRENNAN
UNITED STATES MAGISTRATE JUDGE