Global Assets Liens & Foreclosures LLC vs Gold Flora Partners LLC

Case Number

24CV03459

Case Type

Hearing Date / Time

Fri, 12/13/2024 - 10:00

Nature of Proceedings

CMC; 13 Right to Attach

Tentative Ruling

(1) For all reasons discussed herein, the application of plaintiff for a right to attach order and order for issuance of a writ of attachment directed to defendant Coastal Wellness is ordered off-calendar.

(2) For all reasons discussed herein, the applications of plaintiff for right to attach orders and orders for issuance of a writ of attachment directed to defendants Gold Flora Partners, LLC, Captain Kirk Services Inc. dba Airfield Supply Company, Coastal Wellness dba Coastal Cannabis, Coastal Retail Concord LLC dba Coastal California At Caliva, Coastal Dispensary LLC, Varda Inc., Coastal Retail Lompoc, LLC dba Coastal Stockton, Releaf Alternatives, Inc. dba Coastal Vallejo, NC3 Systems dba Deli by Caliva Bellflower, NC3 Systems dba Caliva San Jose, NC4 Systems, Inc. dba Caliva Brisbane Delivery Service, NC6 Systems, Inc. dba Deli by Caliva Hanford, Caliva CamiSJ2 dba Deli By Caliva San Jose, and Calma Weho, LLC, are each denied.

Background:

On June 20, 2024, plaintiff Global Assets Liens & Foreclosures, LLC (Global Assets), filed a complaint against defendants Gold Flora Partners, LLC (Gold Flora LLC), Captain Kirk Services Inc. dba Airfield Supply Company (Captain Kirk), Coastal Wellness (Coastal Wellness), Coastal Wellness dba Coastal Cannabis (Coastal Cannabis), Coastal Retail Concord LLC dba Coastal California At Caliva (Coastal Concord), Coastal Dispensary LLC (Coastal Dispensary), Varda Inc. (Varda), Coastal Retail Lompoc, LLC dba Coastal Stockton (Coastal Lompoc), Releaf Alternatives, Inc. dba Coastal Vallejo (Releaf), NC3 Systems dba Deli by Caliva Bellflower (NC3 Bellflower), NC3 Systems dba Caliva San Jose (NC3 San Jose), NC4 Systems, Inc. dba Caliva Brisbane Delivery Service (NC4), NC6 Systems, Inc. dba Deli by Caliva Hanford (NC6), Caliva CamiSJ2 dba Deli By Caliva San Jose (Caliva San Jose), and Calma Weho, LLC (Weho) (collectively, defendants), alleging four causes of action: (1) breach of written contract; (2) account stated; (3) open account; and (4) goods sold and delivered. As alleged in the complaint:

Defendants are affiliated companies controlled and operated by mutual principals who each conduct their business under the trade name “Gold Flora”. (Compl., ¶ 15.) Plaintiff is the assignee and owner of certain accounts receivable acquired through receivership proceedings filed in the Superior Court of Santa Barbara County as case number 23CV02629 entitled East West Bank v. Herbl, Inc. (the receivership action). (Id. at ¶ 20 & Exh. A.)

From late 2022 through mid-2023, the predecessor of Global Assets engaged in a series of business transactions with defendants related to the supply of wholesale cannabis products for retail sale to the public. (Compl., ¶ 24.) The transactions between Global Assets’ predecessor and defendants occurred pursuant to the terms and conditions of written customer onboarding instructions, credit applications, purchase orders, and invoices (collectively, the contract or contracts) exchanged between the predecessor and defendants. (Ibid.) Delivery of the cannabis products was affected in a timely manner to defendants at specified receiving addresses as stated on corresponding invoices. (Id. at ¶ 25.)

Defendants agreed to remit payment for the cannabis products within a specified date as indicated on each individual invoice. (Compl., ¶ 24.) A total balance of $350,606.47, representing the unpaid invoices for the sale and delivery of cannabis products to defendants, became due from defendants between December 2022 and July 2023. (Id. at ¶¶ 21, 29, 32 & 35.) Defendants have failed to pay the balance due for the unpaid invoices. (Id. at ¶¶ 22, 27, 30, 32-33 & 36.)

Court records reflect that on July 17 and 18, 2024, Global Assets separately filed fifteen notices and applications for a right to attach order and order for issuance of writ of attachment (collectively, the writ or writs of attachment) directed to Gold Flora LLC, Captain Kirk, Coastal Wellness, Coastal Cannabis, Coastal Concord, Coastal Dispensary, Varda, Coastal Lompoc, Releaf, NC3 Bellflower, NC3 San Jose, NC4, NC6, Caliva San Jose, and Weho. The writs of attachment are each supported by an “omnibus” memorandum.

On September 26, 2024, Coastal Wellness filed a general and special demurrer to the first through third causes of action alleged in the complaint, which was opposed by Global Assets.

On October 11, 2024, Coastal Wellness filed notice of its opposition to the writ of attachment asserting that Global Assets had failed to effectively serve Coastal Wellness with the writ of attachment or notify it of the hearing. Coastal Wellness further opposed the writ of attachment on the same grounds set forth in its demurrer. On the same date, Global Assets filed a notice in lieu of a reply brief asserting that defendants have not filed or served opposition to the writs of attachment.

On October 17, 2024, Global Assets filed a notice of correction stating that it does not seek a right to attach order or an order for issuance of a writ of attachment as to Coastal Wellness.

On October 18, 2024, the Court entered a Minute Order overruling the demurrer of Coastal Wellness and ordering Coastal Wellness to, on or before October 28, 2024, file and serve its answer to the complaint. Further, the Court continued the hearing on the writs of attachment due to, among other things, Coastal Wellness lack of opportunity to oppose the writs and timing issues with respect to the notice of correction filed by Global Assets one day prior to the hearing.

On October 24, 2024, Coastal Wellness answered the complaint, generally denying its allegations and asserting nineteen affirmative defenses.

Court records further reflect that on November 12, 2024, Global Assets filed an amendment to the complaint to substitute Gold Flora Corporation (Gold Flora Corp) for fictitiously named defendant Doe 1.

On November 14, 2024, the defaults of Gold Flora LLC, Captain Kirk, Coastal Concord, Coastal Dispensary, Varda, Coastal Lompoc, Releaf, NC3 Bellflower; NC6, Caliva San Jose; NC3 San Jose, Weho, and NC4, were entered as requested by Global Assets.

On November 22 and 25, 2024, Global Assets filed, respectively, ex parte and amended ex parte applications (collectively, the ex parte application) for an order appointing Kevin Singer of Receivership Specialists as receiver over the operations and property of all defendants named in this action except as to Coastal Wellness (the receiver application). The ex parte application of Global Assets was jointly opposed by Gold Flora LLC, Captain Kirk, Coastal Concord, Coastal Dispensary, Varda, Coastal Lompoc, Releaf, NC3 Bellflower; NC6, Caliva San Jose; NC3 San Jose, Weho, and NC4.

On November 26, 2024, Gold Flora LLC, Captain Kirk, Coastal Concord, Coastal Dispensary, Varda, Coastal Lompoc, Releaf, NC3 Bellflower; NC6, Caliva San Jose; NC3 San Jose, Weho, and NC4 filed a motion (the motion to vacate) for an order setting aside and vacating the defaults entered against each of them on November 14, 2024, based on attorney mistake, inadvertence, surprise, or neglect. The motion to vacate was opposed by Global Assets.

On November 27, 2024, Coastal Wellness filed an opposition to the writ of attachment on the grounds that counsel for Global Assets notified the Court on October 17, 2024, that it does not seek a writ of attachment as to Coastal Wellness.

Also on November 27, 2024, the Court denied the ex parte application of Global Assets and the motion to vacate.

On December 2, 2024, Gold Flora LLC, Captain Kirk, Coastal Concord, Coastal Dispensary, Varda, Coastal Lompoc, Releaf, NC3 Bellflower; NC6, Caliva San Jose; NC3 San Jose, Weho, and NC4 filed a renewed ex parte application for an order setting aside and vacating the defaults entered against them on the grounds of attorney mistake, inadvertence, surprise, or neglect (the renewed motion to vacate), which was opposed by Global Assets, and an “omnibus” opposition to the writs of attachment.

On December 3, 2024, the Court granted the renewed motion to vacate and awarded sanctions against the culpable attorney in favor of Global Assets. On the same date, Gold Flora LLC, Captain Kirk, Coastal Concord, Coastal Dispensary, Varda, Coastal Lompoc, Releaf, NC3 Bellflower; NC6, Caliva San Jose; NC3 San Jose, Weho, and NC4 (hereinafter the Gold Flora Defendants) filed their answer to the complaint generally denying its allegations and asserting twelve affirmative defenses.

Analysis:

(1) Writ of Attachment as to Coastal Wellness

As the undisputed record before the Court shows, for all reasons further detailed above, that Global Assets does not seek a writ of attachment as against Coastal Wellness, the writ of attachment directed to Coastal Wellness is moot. Therefore, the Court will order the writ of attachment as to Coastal Wellness off-calendar.

(2) Writs of Attachment as to the Gold Flora Defendants

“ ‘ “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.]” (Kemp Bros. Construction, Inc. v. Titan Electric Corp. (2007) 146 Cal.App.4th 1474, 1476 (Kemp).) The Attachment Law, codified at Code of Civil Procedure section 482.010 et seq., “is purely statutory and is strictly construed.” (Ibid.) Relevant here, “[e]xcept 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., § 483.010, subd. (a).)

An application for issuance of a right to attach order must be made under oath, and must show the amount to be secured by the attachment, a description of the property to be attached, that the property is subject to attachment, “that the attachment is sought to secure the recovery on a claim upon which an attachment may be issued”, and that the attachment is not sought for any purpose other than the recovery on the underlying claim, among other things. (Code Civ. Proc., § 484.020, subds. (a)-(e).) The application must be supported by an affidavit showing that the plaintiff would be entitled to a judgment on the underlying claim. (Code Civ. Proc., § 484.030.) Facts appearing in the supporting affidavit must be set forth “with particularity” and must 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.” (Code Civ. Proc., § 482.040.)

In the each of the separate writs of attachment directed to each of the Gold Flora Defendants, Global Assets asserts that facts showing it is entitled to a judgment on the claim upon which the attachment is based are set forth in the declaration of Chris Traina (Traina). (Writs of Attachment, ¶ 7(b).) The Traina declarations attached to each of the writs of attachment appear to be substantively identical, and therefore will be referred to by the Court collectively.

Traina is a consultant for and authorized agent of Global Assets. (Traina Decls., ¶ 1.) Traina declares that the facts set forth in his declaration are based on Traina’s review of “records obtained and kept in the ordinary course of business.” (Ibid.) Traina effectively repeats the allegations of the complaint stating that Global Assets is the assignee and owner of accounts receivable which Global Assets acquired pursuant to an Order Authorizing and Confirming Sale of Receivership Personal Property (the Order) which was entered in the receivership action on January 10, 2024. (Id. at ¶ 2 & Exh. A.) Traina contends that the Order authorizes and confirms the sale of receivership property to Distro and the subsequent assignment of that property to Global Assets. (Ibid.)

Traina further declares that he is “informed and believe[s]” that since late 2022, Herbl, Inc. (Herbl) engaged in a series of business transactions with each of the Gold Flora Defendants which relate to the supply of wholesale cannabis products. (Traina Decls., ¶ 3.) According to Traina, the dealings between Herbl and each of the Gold Flora Defendants occurred pursuant to documents which Traina describes as “written customer onboarding instructions and credit application” which include terms and conditions. (Id. at ¶ 4.)

To provide an example of the documents pursuant to which Traina contends the transactions between Herbl and the Gold Flora Defendants occurred, Traina submits copies of two Customer Credit Applications (the credit application or applications) which appear to identify Releaf and Coastal Dispensary as customers of Herbl. (Traina Decls., ¶ 4 & Exh. B.) The credit applications include a section titled “Customer Application Terms And Conditions” which state that information listed on the credit applications “is for the purpose of obtaining credit”, that the signature of the customer attests the customer’s “financial responsibility, ability and willingness to pay each invoice within the terms specified”, that the customer agrees “to be liable for the full balance due on this account”, and that all purchases made pursuant to each credit application “shall be for business purposes only ….” (Id. at Exh. B, PDF pp. 19 & 21, ¶¶ 1, 2, 4 & 5.)

The credit application which appears to identify Releaf as a customer of Herbl was ostensibly signed by Ryan Eusebio, who is identified as a “Manager”, on October 29, 2018. (Traina Decls., Exh. B at PDF p. 21.) The credit application which appears to identify Coastal Dispensary as a customer of Herbl was ostensibly signed by Jena Farrow, who is identified as an “Accountant”, on January 14, 2020. (Id. at Exh. B, PDF p. 19.)

Traina further asserts that Global Assets “continues to work with” third party representatives of the receivership estate in an effort to locate and obtain additional documents, data, and copies of contracts. (Traina Decls., ¶ 5.)

Traina also states on information and belief that Herbl delivered the products to each of the Gold Flora Defendants in a timely manner and at the receiving address stated on invoices corresponding to each of the Gold Flora Defendants, none of which were disputed. (Traina Decls., ¶ 6.) Based on invoices attached to the Traina declaration as exhibits C through Q, Traina declares that the amount due and owing from the Gold Flora Defendants totals at least $281,988.45. (Id. at ¶ 7 & Exhs. C-Q.) Traina also provides a breakdown of the individual amounts purportedly owed by each of the Gold Flora Defendants pursuant to the exhibits. (Id. at ¶ 7 [chart].)  

Traina declares that, though a demand has been made to the Gold Flora Defendants orally and in writing, no portion of the past due balance owed by any of these defendants has been repaid. (Traina Decls., ¶ 7.)

Notwithstanding whether or not the writs of attachment are otherwise appropriate with respect to whether the claim is one upon which an attachment may be issued (and the Court presently makes no findings in this regard), the general and conclusive information offered in the Traina declaration is, for present purposes, insufficient to establish the probable validity of Global Assets’ claims against the Gold Flora Defendants.

For example, wholly absent from the Traina declaration is any information or evidence showing that Traina has personal knowledge of each fact stated in the declaration or the exhibits to that declaration. (Lydig Construction, Inc. v. Martinez Steel Corp. (2015) 234 Cal.App.4th 937, 944; see also Evid. Code, §§ 1271, 1400-1401 & 1521.) Also absent from the Traina declaration is any information to show the basis on which Traina is informed of and believes the facts set forth in his declaration, such as the nature of the records reviewed by Traina, or the manner in which Traina determined that invoices or other exhibits attached to the Traina declaration are accurate.

Also absent from the Traina declaration is any information showing how Traina determined the manner in or process by which each of the credit applications or invoices referenced in and attached to the declaration were prepared, or by whom, or on what basis Traina is informed and believes the information appearing in the invoices with respect to products delivered or amounts owed by each of the Gold Flora Defendants is accurate. In addition, apart from Releaf and Coastal Dispensary, Traina does not include copies of credit applications applicable to the remaining Gold Flora Defendants. For these reasons, the information offered in the Traina declaration is insufficient for present purposes to permit the Court to determine the reliability of the information obtained from the unspecified records purportedly reviewed by Traina.

Additionally, it is unclear based on the sparse and conclusory information and arguments presented by Global Assets whether and why damages are readily ascertainable from the credit applications alone, and whether and how the purported contracts (here, the credit applications) or invoices provide a reasonable or definite basis for the computation of damages. (See, e.g., CIT Group/Equipment Financing, Inc. v. Super DVD, Inc. (2004) 115 Cal.App.4th 537, 540.)

On December 9, 2024, Global Assets submitted a reply which is supported by a supplemental declaration of Traina in which Traina sets forth new matters regarding his role as a consultant for Global Assets, his purported expertise in this role, Traina’s review and analysis of the accounting history and reports relating to the Gold Flora Defendants, software managed and operated by Traina with respect to Herbl’s invoices and other documents, pay dates appearing in invoices purportedly transmitted to defendants, and other matters which could have been but are not set forth in the moving papers. (See, e.g., Supp. Traina Decl., ¶¶ 1-3, 6 & 8-23; Exhs. 3-5.)

The general rule of motion practice is that new matters and evidence may not be introduced for the first time in reply. (Jay v. Mahaffey (2013) 218 Cal.App.4th 1522, 1537.) Furthermore, declarations submitted with a reply should not address substantive issues in the first instance but should only fill gaps in the evidence created by the opposition. (Id. at p. 1538.) A court may disregard new matters introduced for the first time in reply. (San Diego Watercrafts, Inc. v. Wells Fargo Bank, N.A. (2002) 102 Cal.App.4th 308, 316.)

The additional evidence offered by Traina is ostensibly intended to shore up the probable validity of the claim on which the attachment is based. But the gaps sought to be filled are gaps in the original information and evidence offered by Global Assets, and not gaps created by the opposition of the Gold Flora Defendants. The evidence and information offered for the first time in reply could and should have been included with the original moving papers.

In addition, by presenting these new matters for the first time in reply, Global Assets has failed to comply with Code of Civil Procedure section 484.040, which requires that affidavits submitted in support of a writ of attachment be made within the time prescribed by Code of Civil Procedure section 1005, subdivision (b). (See Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial (The Rutter Group 2024) ¶ 9:912 [noting that “most courts refuse to consider plaintiff's ‘supplemental’ declarations or ‘reply’ papers filed after the time limit for service of the original papers”].) Global Assets has also failed to offer any reasoned factual or legal argument demonstrating good cause for presenting additional evidence and information in its reply, which appears solely intended to remedy the defective Traina declaration. (Ibid.; see also Code Civ. Proc., § 484.090, subd. (d) [the court may receive and consider additional evidence “upon good cause shown”].) For these and all reasons further discussed above, the Court will disregard the reply of Global Assets.

The examples provided above are intended to illustrate deficiencies appearing in the Traina declaration submitted in support of each of the writs of attachment, but are not exhaustive. For all reasons discussed above, the information offered in the Traina declaration is inadequate to show whether it is more likely than not that Global Assets will obtain a judgment against any of the Gold Flora Defendants in this action, and insufficient to enable the Court to make the findings required under Code of Civil Procedure section 484.090, subdivision (a)(2). (Code Civ. Proc., § 481.190; Kemp, supra, 146 Cal.App.4th at p. 1476.) Therefore, the Court will deny the writs of attachment.

The Gold Flora Defendants raise evidentiary objections to material appearing in the Traina declaration. Considering the Court’s ruling herein, it is not necessary for the Court to rule on these objections.