This case was last updated from Los Angeles County Superior Courts on 08/11/2021 at 19:28:02 (UTC).

HYUN JOU PARK, ET AL. VS HESOOK, KIM, AN INDIVIDUAL, AND EACH AS TRUSTEE OF THE HESOOK KIM TRUST EXECUTED 8/24/04, ET AL.

Case Summary

On 08/19/2020 HYUN JOU PARK filed a Contract - Other Contract lawsuit against HESOOK, KIM, AN INDIVIDUAL, AND EACH AS TRUSTEE OF THE HESOOK KIM TRUST EXECUTED 8/24/04. This case was filed in Los Angeles County Superior Courts, Stanley Mosk Courthouse located in Los Angeles, California. The Judges overseeing this case are JAMES C. CHALFANT, CHRISTOPHER K. LUI and DAVID J. COWAN. The case status is Pending - Other Pending.

Case Details Parties Documents Dockets

 

Case Details

  • Case Number:

    *******1674

  • Filing Date:

    08/19/2020

  • Case Status:

    Pending - Other Pending

  • Case Type:

    Contract - Other Contract

  • County, State:

    Los Angeles, California

Judge Details

Presiding Judges

JAMES C. CHALFANT

CHRISTOPHER K. LUI

DAVID J. COWAN

 

Party Details

Plaintiffs and Appellants

PARK HYUN JOU

KATOFSKY JEFF ESQ.

LA DEPOSITIONS INC.

Defendants and Respondents

KIM HYUN KWON

KIM HESOOK

HESOOK KIM AN INDIVIDUAL AND AS TRUSTEES OF THE HESOOK KIM TRUST EXECUTED

HYUN KWON KIM AN INDIVIDUAL AND AS TRUSTEES OF THE HESOOK KIM TRUST EXECUTED

Not Classified By Court

ALBAREZ ANGELA M.

NAVAS-MOUNEIMNE EDITH

Attorney/Law Firm Details

Plaintiff Attorneys

KATOFSKY JEFF

SALOMONS GARY KEITH

SALOMONS GARY

Defendant Attorneys

BLOOM AARON B.

BLOOM AARON

 

Court Documents

Minute Order - MINUTE ORDER (HEARING ON MOTION FOR STAY OF PROCEEDINGS; CASE MANAGEMENT CO...)

6/11/2021: Minute Order - MINUTE ORDER (HEARING ON MOTION FOR STAY OF PROCEEDINGS; CASE MANAGEMENT CO...)

Other - - OTHER - RULING RE: MOTION TO STAY PROCEEDINGS (CONSISTING OF 4 PAGES),

6/11/2021: Other - - OTHER - RULING RE: MOTION TO STAY PROCEEDINGS (CONSISTING OF 4 PAGES),

Certificate of Mailing for - CERTIFICATE OF MAILING FOR (HEARING ON MOTION FOR STAY OF PROCEEDINGS; CASE MANAGEMENT CO...) OF 06/11/2021

6/11/2021: Certificate of Mailing for - CERTIFICATE OF MAILING FOR (HEARING ON MOTION FOR STAY OF PROCEEDINGS; CASE MANAGEMENT CO...) OF 06/11/2021

Minute Order - MINUTE ORDER (NUNC PRO TUNC ORDER)

6/14/2021: Minute Order - MINUTE ORDER (NUNC PRO TUNC ORDER)

Certificate of Mailing for - CERTIFICATE OF MAILING FOR (NUNC PRO TUNC ORDER) OF 06/14/2021

6/14/2021: Certificate of Mailing for - CERTIFICATE OF MAILING FOR (NUNC PRO TUNC ORDER) OF 06/14/2021

Ex Parte Application - EX PARTE APPLICATION FOR ENTRY OF PROPOSED ORDER ON STIPULATION CONTINUING HEARING

12/23/2020: Ex Parte Application - EX PARTE APPLICATION FOR ENTRY OF PROPOSED ORDER ON STIPULATION CONTINUING HEARING

Minute Order - MINUTE ORDER (EX PARTE APPLICATION OF DFFENDANTS, HESOOK KIM AND HYUN KWON ...)

12/24/2020: Minute Order - MINUTE ORDER (EX PARTE APPLICATION OF DFFENDANTS, HESOOK KIM AND HYUN KWON ...)

Stipulation and Order - STIPULATION AND ORDER TO CONTINUE HEARING ON APPLICATION FOR RIGHT TO ATTACH ORDER

12/24/2020: Stipulation and Order - STIPULATION AND ORDER TO CONTINUE HEARING ON APPLICATION FOR RIGHT TO ATTACH ORDER

Declaration - DECLARATION OF STACEY ROSENBERG IN SUPPORT OF SURREPLY RE MOTION TO DISQUALIFY

12/30/2020: Declaration - DECLARATION OF STACEY ROSENBERG IN SUPPORT OF SURREPLY RE MOTION TO DISQUALIFY

Declaration - DECLARATION OF HYUN JOU PARK IN SUPPORT OF SURREPLY RE MOTION TO DISQUALIFY

12/30/2020: Declaration - DECLARATION OF HYUN JOU PARK IN SUPPORT OF SURREPLY RE MOTION TO DISQUALIFY

Declaration - DECLARATION OF JEFF KATOFSKY IN SUPPORT OF SURREPLY RE MOTION TO DISQUALIFY

12/30/2020: Declaration - DECLARATION OF JEFF KATOFSKY IN SUPPORT OF SURREPLY RE MOTION TO DISQUALIFY

Proof of Service by Mail

12/30/2020: Proof of Service by Mail

Reply - REPLY SUPPLEMENTAL REPLY IN OPPOSITION TO MOTION TO DISQUALIFY

12/30/2020: Reply - REPLY SUPPLEMENTAL REPLY IN OPPOSITION TO MOTION TO DISQUALIFY

Response - RESPONSE TO SUR-REPLY BRIEF RE: MOTION TO DISQUALIFY PLAINTIFFS COUNSEL JEFFREY KATOFSKY AND KATOFSKY LAW; DECLARATION OF HYUN KWON KIM IN SUPPORT THEREOF

1/5/2021: Response - RESPONSE TO SUR-REPLY BRIEF RE: MOTION TO DISQUALIFY PLAINTIFFS COUNSEL JEFFREY KATOFSKY AND KATOFSKY LAW; DECLARATION OF HYUN KWON KIM IN SUPPORT THEREOF

Minute Order - MINUTE ORDER (RULING ON SUBMITTED MATTER RE: MOTION TO DISQUALIFY COUNSEL;)

1/8/2021: Minute Order - MINUTE ORDER (RULING ON SUBMITTED MATTER RE: MOTION TO DISQUALIFY COUNSEL;)

Order Appointing Court Approved Reporter as Official Reporter Pro Tempore

1/8/2021: Order Appointing Court Approved Reporter as Official Reporter Pro Tempore

Minute Order - MINUTE ORDER (HEARING ON MOTION TO DISQUALIFY COUNSEL PLAINTIFF'S COUNSEL J...)

1/8/2021: Minute Order - MINUTE ORDER (HEARING ON MOTION TO DISQUALIFY COUNSEL PLAINTIFF'S COUNSEL J...)

Certificate of Mailing for - CERTIFICATE OF MAILING FOR (RULING ON SUBMITTED MATTER RE: MOTION TO DISQUALIFY COUNSEL;) OF 01/08/2021

1/8/2021: Certificate of Mailing for - CERTIFICATE OF MAILING FOR (RULING ON SUBMITTED MATTER RE: MOTION TO DISQUALIFY COUNSEL;) OF 01/08/2021

73 More Documents Available

 

Docket Entries

  • 12/13/2021
  • Hearing12/13/2021 at 08:30 AM in Department 76 at 111 North Hill Street, Los Angeles, CA 90012; Status Conference

    Read MoreRead Less
  • 07/26/2021
  • Docketat 08:30 AM in Department 76, Christopher K. Lui, Presiding; Case Management Conference - Not Held - Advanced and Vacated

    Read MoreRead Less
  • 06/14/2021
  • Docketat 09:45 AM in Department 76, Christopher K. Lui, Presiding; Nunc Pro Tunc Order

    Read MoreRead Less
  • 06/14/2021
  • DocketMinute Order ( (Nunc Pro Tunc Order)); Filed by Clerk

    Read MoreRead Less
  • 06/14/2021
  • DocketCertificate of Mailing for ((Nunc Pro Tunc Order) of 06/14/2021); Filed by Clerk

    Read MoreRead Less
  • 06/11/2021
  • Docketat 08:30 AM in Department 76, Christopher K. Lui, Presiding; Case Management Conference - Not Held - Continued - Court's Motion

    Read MoreRead Less
  • 06/11/2021
  • Docketat 08:30 AM in Department 76, Christopher K. Lui, Presiding; Hearing on Motion for Stay of Proceedings - Held - Taken under Submission

    Read MoreRead Less
  • 06/11/2021
  • DocketMinute Order ( (Hearing on Motion for Stay of Proceedings; Case Management Co...)); Filed by Clerk

    Read MoreRead Less
  • 06/11/2021
  • DocketCertificate of Mailing for ((Hearing on Motion for Stay of Proceedings; Case Management Co...) of 06/11/2021); Filed by Clerk

    Read MoreRead Less
  • 06/11/2021
  • DocketOther - (Ruling Re: Motion to Stay Proceedings (consisting of 4 pages),); Filed by Clerk

    Read MoreRead Less
89 More Docket Entries
  • 09/10/2020
  • DocketProof of Service by Substituted Service; Filed by Hyun Jou Park (Plaintiff)

    Read MoreRead Less
  • 09/10/2020
  • DocketProof of Service by Substituted Service; Filed by Hyun Jou Park (Plaintiff)

    Read MoreRead Less
  • 09/10/2020
  • DocketProof of Personal Service; Filed by Hyun Jou Park (Plaintiff)

    Read MoreRead Less
  • 09/10/2020
  • DocketProof of Personal Service; Filed by Hyun Jou Park (Plaintiff)

    Read MoreRead Less
  • 09/03/2020
  • DocketNotice (OF CASE MANAGEMENT CONFERENCE); Filed by Hyun Jou Park (Plaintiff); Jeff Katofsky, Esq. (Plaintiff)

    Read MoreRead Less
  • 08/26/2020
  • DocketNotice of Case Management Conference; Filed by Clerk

    Read MoreRead Less
  • 08/19/2020
  • DocketNotice of Case Assignment - Unlimited Civil Case; Filed by Clerk

    Read MoreRead Less
  • 08/19/2020
  • DocketCivil Case Cover Sheet; Filed by Hyun Jou Park (Plaintiff); Jeff Katofsky, Esq. (Plaintiff)

    Read MoreRead Less
  • 08/19/2020
  • DocketSummons (on Complaint); Filed by Hyun Jou Park (Plaintiff); Jeff Katofsky, Esq. (Plaintiff)

    Read MoreRead Less
  • 08/19/2020
  • DocketComplaint; Filed by Hyun Jou Park (Plaintiff); Jeff Katofsky, Esq. (Plaintiff)

    Read MoreRead Less

Tentative Rulings

Case Number: 20STCV31674    Hearing Date: May 12, 2021    Dept: 76

Plaintiffs allege that Defendants caused the Trust to incur sever tax liability in connection with a 1031 exchange transaction, and has failed to Plaintiff Park her 1/5 share of trust assets.

The Court granted Defendants Heesook Kim and Hyun Kim’s motion for an order disqualifying attorney Jeff Katofsky and his law firm Katofsky Law from continuing to represent Plaintiff Hyun Jou Park in this action.

Defendants Hesook Kim and Hyun Kim move for an order staying all proceedings in the trial court while Plaintiff’s appeal of the order granting Defendants’ motion to disqualify Plaintiff’s counsel is pending in the Court of Appeal.

RULING

On April 28, 2021, a Notice of Default (Unlimited Civil Appeals) was filed, indicating that appellate Hyun Jou Park’s appeal was placed in default and will be referred to the Court of Appeal for dismissal if there is a failure to correct the defect and comply with the notice by the May 13, 2021 due date.

If the appeal is dismissed, then Plaintiff will be required to retain new counsel, thereby mooting this motion to stay the entire action.

Accordingly, the hearing on the motion to stay is CONTINUED to June 11, 2021. Plaintiff is to file a brief regarding the status of the appeal by June 1, 2021. The entire action is ordered stayed pending the hearing on the motion to stay.

Case Number: 20STCV31674    Hearing Date: February 09, 2021    Dept: 85

Hyun Jou Park, et al. v. Hesook Kim, et al., 20STCV31674

Tentative decision on application for right to attach order: denied

Plaintiff Hyun Jou Park (“Park”) applies for a right to attach order against Defendant Hesook Kim Trust (“Trust”) in the amount of $1,903,724.34.

The court has read and considered the moving papers, opposition, and reply[1], and renders the following tentative decision.

A. Statement of the Case

1. Complaint

Plaintiffs Park and Jeff Katofsky, Esq. (“Katofsky”) commenced this action on August 19, 2020. The operative pleading is the First Amended Complaint (“FAC”) against Defendants Hesook Kim (“Hesook”), Hyun Kwon Kim (“Kwon”), as individuals and as trustees of the Trust, alleging causes of action for (1) breach of oral contract, (2) intentional interference with contract, (3) negligent interference with contract, (4) promissory estoppel, and (5) common law fraud. The FAC alleges in pertinent part as follows.

In March 2020, Trust sold its primary asset for approximately $10 Million. The asset was intended to be divided pursuant to an oral contract into multiple real estate transactions to defer taxation under Revenue Code section 1031 (“section 1031”). The intent was to divide the proceeds into five equal parts and create transactions to distribute such parts, one of which was to be distributed to Park in the sum of $1,542,066,00. If not spent properly, the Trust would be subject to taxation and not deferral as intended.

In May 2020, Trust, using funds for four of the five equal parts and not including Park's part, closed on a $6 million cash transaction for real property located at 2005 Grismer Avenue, Burbank, CA 91504 ("Burbank Purchase"). That left approximately $1.7 million, most of which was promised to Park for her share. Defendants told Park to find a transaction that would satisfy their requirements of a section 1031 exchange that would include approximately $1,709,000 cash and approximately $1.7 million in debt.

Park, along with Defendants, entered into a contract (“Moorpark Transaction”) for real property located at 13257-9 Moorpark Avenue, Sherman Oaks, CA ("Moorpark Property"). In order to protect the entire 1031 exchange, Park spent, inter alia, over $260,000 in fees, inspections, costs and commissions on the transaction.

All contingencies were met, the deposit became non-refundable and the transaction was ready to close in late July or early August 2020. At Defendants' request, the purchasers assigned to the Trust their rights to the Moorpark Transaction. Significant legal work was required to protect the 1031 exchange and prepare for the closing of the Moorpark Transaction. Katofsky performed the legal work and Park paid for it at a cost of $32,800.

The Trust and Defendants signed all documents, including an all-inclusive trust deed and all related documents required by title and escrow. Some of the documents were rejected by title for a fraudulent notary acknowledgment. After being notified of the fraudulent notary acknowledgment, Defendants cancelled the Moorpark Transaction on the day of closing, refused any further document signing, and refused to close the transaction or pay Park.

Defendants breached their oral agreement with Park by cancelling the Moorpark Transaction, refusing to pay Park the agreed sums, and inducing Park to incur over $285,000 in expenses on the transaction.

2. Course of Proceedings

According to proofs of service on file, Kwon was personally served with the Summons and Complaint on August 28, 2020. Hesook was served with the Summons and Complaint on the same day, via substituted service, after personal service was attempted on August 25, 26, and 27, 2020. The documents were thereafter mailed on September 3, 2020.

Defendants’ counsel was served with the FAC on October 9, 2020 via mail and with the moving papers on October 14, 2020 via electronic mail.

On November 30, 2020, Park substituted attorney Gary Salomons, Esq. as his new counsel, replacing attorney Jeff Katofsky, Esq.

On January 8, 2021, Department 76 granted Defendants’ motion to disqualify Katofsky as Park’s counsel.

B. 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.

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.

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.

C. Statement of Facts

1. Plaintiff’s Evidence

Defendant Hesook is Park’s mother and Defendant Kwon is her brother. Park Decl., ¶2. The Trust is a family trust that operates within Los Angeles County. Id. Hesook and Kwon are co-trustees of the Trust, which Park first became aware of while the all-cash $6 million Burbank Transaction was pending. Id.

In March 2020, the Trust sold its primary asset for approximately $10 million. Park Decl., ¶3. On April 20, 2020, Park received an email from Kwon which stated the following: (1) the net cash amount received from the sale was $7,710,330; (2) to defer taxation under section 1031, the Trust intended to divide the proceeds into five equal parts and create separate transactions in order to distribute such parts; and (3) Park was to receive one of the five parts, in the amount of $1,542,066. Park Decl., ¶3; Song Decl., Ex. 1, Ex. A.

In May 2020, the Trust, using four of the five parts from the previously divided primary asset, and not including Park’s part, closed on the Burbank Transaction. Park Decl., ¶4. At no point did Hesook or Kwon give Park any details regarding the Burbank Transaction, aside from some minor details regarding the layout, location and selling price of the property, until after the transaction closed. Id. Consummation of the Burbank Transaction left approximately $1.7 million cash in the section 1031 exchange accommodator account, most of which was promised to Park for her part of the previously divided primary asset. Id.

Since the Trust used all cash (approximately $6 million) from the accommodator account for the Burbank Transaction, the remaining requirements for a legally compliant section 1031 exchange would include, among other things, spending the remaining $1.7 million in cash and placing $1.7 million in secured debt. Park Decl., ¶4, Ex. 1. If the remaining cash portion was not spent in combination with a secured debt instrument and structured properly, the Trust would be subject to taxation and not deferral, as originally intended. Park Decl., ¶4. A failed exchange would cause a taxable event not only on the $1.7 million cash "boot," but also on the remaining basis of the primary asset totaling approximately $3.4 million. Id. Park informed Hesook and Kwon about the potential consequences of a failed exchange, and they reassured Park of the Trust's intent to divide its primary asset in compliance with section 1031. Id.

To ensure deferral of taxation, Hesook and Kwon instructed Park to find a transaction that satisfied the remaining requirements before the identification deadline of July 15, 2020. Park Decl., ¶5. Park was instructed to identify a property with consideration of at least $3.4 million, structured with approximately $1.7 million in cash and a minimum of $1.7 million in secured debt. Id.

In reliance on their request, Park entered into the Moorpark Transaction with Hesook, Kwon and the Trust. Id. At the request of Defendants, Park assigned her rights to the Moorpark Transaction to the Trust. Id.

All contingencies requiring satisfaction for the Moorpark Transaction were met. Park Decl., ¶6. The deposit became non-refundable and the Moorpark Transaction was ready to close in late July or early August 2020. Id. Defendants signed all documents, including an all-inclusive Trust Deed, required by title and escrow. Park Decl., ¶6; Song Decl., Ex. 1, Ex. B. However, some of the documents were rejected by title due to a fraudulent notary acknowledgment, which Park discovered through the escrow officer who rejected the documents. Park Decl., ¶6. After being notified of the fraudulent notary acknowledgement, Defendants cancelled the Moorpark Transaction on the day of closing, refused any further document signing and refused to close the transaction. Id. Defendants refused to pay Park for the part she was owed and have indicated they will not pay Park as promised. Id.

Due to Defendants' failure to close on the Moorpark Transaction, Park incurred $301,300 in fees, inspections, costs and commissions on the Moorpark Transaction. Id. In total, Park suffered $1,843,366.00 in damages, exclusive of interest, costs and tax liability resulting from the Trust's decision to perform an exchange, which is over $1 million. Id. The damages do not include the forfeited deposit of $175,000. Id.

Park has incurred filing and motion fees in the amount of $764.80, which is comprised of the application’s e-filing reservation fee ($61.65), fee for filing the Complaint to initiate this action ($435), and fees incurred for serving the Complaint ($268.15). Song Decl., ¶4.

Daily interest at 10% is $505.03 (($1,843,366.00/365) x 10% = $505.03). Song Decl., ¶5. There are 118 days between the date of filing of the Complaint (August 19, 2020) and the date of the hearing of the application (December 15, 2020). Id. Interest totals $59,593.54 ($505.03 x 118 days). Id.

2. Defendants’ Evidence[2]

The Trust is a revocable trust, which provides that, during Hesook’s lifetime, the Trust’s income and principal shall be applied liberally to pay for Hesook’s expenses and maintain her standard of living, and the rights of the Trust’s remainder beneficiaries shall be of secondary importance. Kwon Decl., ¶2. Hesook’s four adult children (including Kwon and Park) are the Trust’s primary remainder beneficiaries. Id.

Neither the Trust nor Hesook are engaged in any sort of business enterprise, let alone the business of buying and selling properties for profit (or otherwise). Kwon Decl., ¶3. Neither Hesook nor Kwon are real estate brokers, agents, or any other type of real estate professional. Id. Neither Hesook nor the Trust have any employees, let alone any employees who are real estate brokers, agents, or any other type of real estate professional. Id. The Trust is neither a real estate investment trust (“REIT”) nor otherwise designed to run any businesses. Id. Rather, the Trust is a revocable trust, and the purpose of the Trust is to pay for Hesook’s expenses and maintain her standard of living. Id. The remainder beneficiaries have no rights to any remaining Trust assets until after Hesook has passed away. Id.

In March 2020, the Trust sold a piece of real property for approximately $9.6 million with the intention of purchasing replacement property and structuring the transactions so they would qualify as a tax-deferred exchange under section 1031. Kwon Decl., ¶4.

As part of the contemplated 1031 exchange, the Trust purchased one property in Burbank for approximately $6 million, and the Trust planned also to purchase the Moorpark Property. Kwon Decl., ¶5.

On May 29, 2020, Hesook and Kwon (as Trustees of the Trust) and Park entered into a Purchase and Sale Agreement with Joint Escrow Instructions (the “PSA”) with the seller, an entity named Double Play, LLC for the Moorpark Property. Kwon Decl., ¶6, Ex. A. Kwon and Hesook both signed the PSA. Id. Pursuant to the PSA, Hesook, Kwon, and Park were to jointly purchase the Moorpark Property for $3,500,000. Id. The transaction was later changed so that it was only Kwon and Hesook as Trustees of the Trust who would purchase the Moorpark Property. Id.

Katofsky advised Defendants (as Trustees of the Trust) and Park with respect to the 1031 exchange and the contemplated purchase of the Moorpark Property. Kwon Decl., ¶7. Park introduced Katofsky to Defendants and Katofsky drafted the PSA. Id.

Unbeknownst to Defendants when they consulted with Katofsky with respect to the Moorpark Transaction, Katofsky is a member and manager of seller Double Play, LLC. Thus, Katofsky was the real party-in-interest for the $3.5 million transaction adverse to Hesook, Kwon, and Park. Kwon Decl., ¶8.

Before Defendants acquired the Moorpark Property, Katofsky prepared and Defendants executed another Purchase and Sale Agreement with Joint Escrow Instructions dated June 15, 2021 (the “2021 PSA”). Kwon Decl., ¶9, Ex. B. Pursuant to the 2021 PSA, Defendants (as Trustees of the Trust) were to sell the Moorpark Property to an entity named MoreMoorPark, LLC for $2,010,000 (a $1.5 million loss). Kwon Decl., ¶9.

Kwon subsequently became aware of Katofsky’s role as seller in the Moorpark Transaction and Defendants became concerned that the Moorpark Transaction would amount to tax fraud, since immediately selling the Moorpark Property would negate the requisite section 1031 intent to hold the property for investment. Kwon Decl., ¶10. Defendants canceled the Moorpark Transaction, and thereby forfeited the $175,000 deposit they had made as liquidated damages. Id. Park did not contribute any money toward the $175,000 deposit. Id.

Defendants contemplated making a gift to Park, either gifting her a portion of the sales proceeds from the March 2020 sale of real property or gifting the Moorpark Property. Kwon Decl., ¶11. There is no contract between Defendants and Park whereby Defendants agreed to buy the Moorpark Property for Park. Id. Rather, it was contemplated as a gift, and Defendants decided not to go forward once they learned the Moorpark Transaction would amount to tax fraud. Id.

On August 12, 2020, Kwon received an email from Katofsky threatening a lawsuit and setting forth, without any supporting documentation, the $308,300 Park allegedly incurred in anticipation of the contemplated gift. Kwon Decl., ¶12, Ex. C. The $308,300 allegedly included $175,000 in real estate commissions on the sale. Id. Kwon understands that the commission was to go to Park’s son, but real estate commission are usually paid by the seller and are not due unless a transaction closes. Id. Since the Moorpark Transaction never closed, no commissions would have been due. Id. Park never provided Kwon with any documentation showing she paid $175,000 in commissions with respect to the Moorpark Transaction, or any of the other fees alleged in Katofsky’s email. Id.

D. Analysis

Park seeks a right to attach order against Defendant Trust in the amount of $1,903,724.34, which includes estimated costs of $764.80. Defendants oppose.

1. Preliminary Issue

Park wrongly applies for attachment against the Trust. A trust is not a legal entity; it is a collection of assets and liabilities without capacity to sue, be sued, or defend an action. Smith v. Cimmet, (2011) 199 Cal.App.4th 1381, 1391; Galdie v. Darwish, (“Galdie”) (2003) 113 Cal.App.4th 1331, 1343. Legal title to any property owned by the trust is owned by the trustee. Galdie, supra, 113 Cal.App.4th at 1343. The trustee has the power to enter into a contract with a third party when given to him or her by the trust instrument or the court. Id. at 1343-44. Any litigation concerning trust property must be maintained by or against the trustee in his or her representative capacity. Id. at 1349.

Park fails to name the proper Defendant in her application. Each Trustee should have been named in their capacity as trustee, and each in a separate application. By itself, this is reason to deny Park’s right to attach order.

2. Standing

Defendants assert that Park has no standing to sue or seek an attachment order because the Trustees owe her no duty because she is a remainder beneficiary of the Trust. Opp. at 9-10.

As Defendants note (Opp. at 9), during a settlor’s lifetime, remainder beneficiaries are powerless to act regarding a trust and do not have the right to petition the court concerning the internal affairs of the trust until the settlor is unable to exercise a power of revocation, whether due to incompetence or death. Prob. Code §15800(a); Saks v. Damon Raike & Co., (1992) 7 Cal.App.4th 419. Remainder beneficiaries lack standing to allege breach of a duty to the beneficiaries during the settlor’s lifetime, because no such duty exists. Estate of Giraldin, (2012), 55 Cal.4th 1058, 1066. During the period in which a trust is revocable, the trustee has a duty to do what the settlor directs, and the trustee is not liable to the beneficiaries for a loss that results from compliance with a settlor’s direction in accordance with the terms of that direction. Id. at 1073.

Defendant argue that Hesook is the settlor and is still alive, and therefore Park has no standing to sue for actions taken by Hesook as settlor/trustee, or by Kwon as co-trustee, for the administration of Trust assets, including the Trustees’ decision whether to use Trust assets to purchase real property or make a gift to Park. Opp. at 10.

While this is true, Defendants mischaracterize the nature of Park’s claim. Unlike Estate of Giraldin, Park’s action is not based on a claim that the Trustees have mismanaged the Trust’s assets and harmed her by diminishing her eventual entitlement to those assets as a remainder beneficiary. Park’s claim is that the Trustees breached a contract resulting in her financial harm. A trustee’s contractual obligations are a separate issue from the trustee’s duties to beneficiaries. While Defendants owe no duty to Park as a remainder beneficiary, they are obligated to perform contractual obligations. Park’s status as a remainder beneficiary is immaterial to her claim for breach of contract.

Park does not lack standing to bring the instant application.

3. Subject Matter Jurisdiction

Defendants assert that the court has no subject matter jurisdiction to adjudicate Park’s claim because it must be adjudicated in probate court. Opp. at 8.

The superior court having jurisdiction over a trust has exclusive jurisdiction of proceedings concerning the internal affairs of trusts. Prob. Code §17000(a). Settling the accounts and passing upon the acts of the trustee, including the exercise of discretionary powers, instructing the trustee, and compelling redress of a breach of the trust by any available remedy are, inter alia, proceedings that concern the internal affairs of a trust. Prob. Code §17200(b)(5), (6), (12).

Defendants argue that Park is challenging the Trustees’ actions on behalf of the Trust, including that cancellation of the Moorpark Transaction will cause the 1031 exchange to fail and subject the Trust to taxation. Opp. at 9. Because these issues concern the authority and discretion of the Trustees, and the internal affairs of the Trust, the exclusive forum for their resolution is probate court.

Defendants rely on Saks v. Damon Raike & Co., (“Saks”) (1992) 7 Cal.App.4th 419. In Saks, the beneficiaries sued the trustee and the trustee’s attorney and real estate broker for negligence, breach of contract, and breach of fiduciary duty. The beneficiaries claimed that the defendants’ imprudent transactions surrounding the acquisition and management of commercial real estate had depleted the trust estate by $2 million. Id. at 422. The trustee demurred on the grounds that the probate court had exclusive subject matter jurisdiction of all claims regarding the internal affairs of testamentary trusts. Id. at 424. The trial court sustained the trustee’s demurrer was sustained without leave to amend (id. at 424-25), and the Court of Appeal affirmed. Id. at 432.

The court disagrees that Park’s claim must be adjudicated in probate court. Saks is distinguishable as a claim against trustees for mismanagement of the trust resulting in the depletion of the trust estate. Id. at 422. As discussed ante, Park’s claim is not based on a challenge to the management of the Trust or its internal administration; it is that the Trustees breached an oral contract with her, which is not an internal affair.

Probate court has concurrent jurisdiction over actions and proceedings involving the trustees and third persons. Prob. Code §17000(b)(3). For the purposes of her breach of contract claim, Park is a third person and the court has subject matter jurisdiction to adjudicate her claim.

4. A Claim Based on a Contract

Park’s claim is based on an oral contract with Defendants wherein the parties agreed that the proceeds from the sale of the Trust’s real estate would be divided as a 1031 exchange, with Park receiving a share of $1,542,066. Park Decl., ¶3; Song Decl., Ex. 1, Ex. A; Kwon Decl., ¶4. As part of this contract, Park was required to set up and assign her rights to the Moorpark Transaction to the Trust to receive her share. Park Decl., ¶5.

This is a claim on which attachment can be based.

5. 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).

In support of the claimed amount of $1,542,066, Park provides an email from Kwon that refers to this amount from the Trust’s sale of one of its assets. Song Decl., Ex. 1, Ex. A. Defendants do not dispute this amount, instead arguing that the parties never entered a contract. Opp. at 10-12. This issue is addressed post.

Park also claims she incurred an additional $301,300 in fees, inspections, costs, and commissions on the Moorpark Transaction and is entitled to attach this amount. App. at 6-7. As Defendants correctly note, Park fails to specify what these costs entail or to provide any documentary evidence in support of these amounts, relying solely on her supporting declaration. Opp. at 13. Contrary to Park’s assertion (Reply at 8), this is insufficient.

The declaration supporting attachment must be set forth with particularity. This means that the plaintiff must show evidentiary facts rather than the ultimate facts commonly found in pleadings. A recitation of conclusions without a foundation of evidentiary facts is insufficient. See Rodes v. Shannon, (1961) 194 Cal.App.2d 743, 749 (declaration containing conclusions inadequate for summary judgment); Schessler v. Keck, (1956) 138 Cal.App.2d 663, 669 (same). The amount is fixed and readily ascertainable only as to $1,542,066.

Park also argues she is entitled to attach pre-judgment interest pursuant to Civil Code sections 3287 and 3289. App. at 7. Pre-judgment interest is available on attachment and is owed from the time that the obligation to pay money begins. See Santa Clara Waste Water Company v. Allied World National Assurance Company, (2017) 18 Cal.App.5th 881, 890. The rate for pre-judgment interest is 10%. Civil Code §3289(b).

Park provides calculations for her claimed prejudgment interest but utilizes the principal amount of $1,843,366 and the initial hearing date of December 15, 2020. App. at 7. Prejudgment interest on the ascertainable principal of $1,542,066 at 10% provides a daily rate of $422.48. There are 174 days between the date of filing of the Complaint (August 19, 2020) and the date of the hearing of the Application (February 9, 2021). The proper amount of prejudgment interest is $73,511.52.

Park also claims estimated costs in the amount of $764.80. These costs are supported by an attorney declaration. Song Decl., ¶4.

6. Probability of Success

Park asserts that she has demonstrated a probability of success on her claim for breach of contract because she has established that she was to receive $1,542,066 of the Trust’s proceeds, Defendants instructed her to find and prepare the Moorpark Transaction to ensure the Trust’s compliance with section 1031, and she performed by entering into the Moorpark Transaction and assigning her rights to the Trust, as well as incurring all costs for the transaction. App. at 7-8. Defendants breached the oral contract by canceling the Moorpark Transaction and refusing to pay Park her portion of the Trust’s proceeds[3]. App. at 8.

Defendants dispute that Park has shown a probability of success, arguing that the oral contract is barred by the statute of frauds, fails for lack of consideration, and is void due to illegality, mistake, and frustration of purpose[4]. Opp. at 10-13.

a. Statute of Frauds/ Contract Formation

A contract coming within the statute of frauds is invalid unless it is memorialized by a writing subscribed by the party to be charged. Civil Code §1624; Secrest v. Security Nat. Mortg. Loan Trust 2002-2, (2008) 167 Cal.App.4th 544, 552. An agreement employing a person to purchase or sell real estate, or to procure, introduce, or find a purchaser or seller of real estate, for compensation or a commission, falls within the statute of frauds. Civil Code §1624(a)(4).

Defendants wrongly argue that the parties’ oral contract is within the statute of frauds because it is for the purchase or sale of real estate. Opp. at 11. Park’s contract claim is for payment of Trust proceeds, not the purchase or sale of real property.

Nonetheless, Park does not adequately show the terms of the oral contract. The purported oral contract was for Park to find and enter into the Moorpark Transaction, assign her rights to the transaction to the Trust, and then receive her $1,542,066 share of the Trust’s proceeds. But the email upon which she relies shows that the $1,542,066 amount was only before payment of Hesook’s capital gains and that after taxes “each person will receive $1,048,605 which will be distributed once ALL 1031 exchange has been completed.” FAC, Ex. A. Park’s evidence does not explain how she was to receive $1,542,066 when the email indicates $1,048,605. If the email terms were modified, Park does not show how the modification occurred. Park also does not explain how she was supposed to receive $1,542,066 in cash if the Trust was using those funds to buy the Moorpark Property, which would be in the Trustees’ names.

Park has not sufficiently shown the terms of the oral contract.

b. Lack of Consideration

A plaintiff asserting breach of contract must plead and prove contract formation in addition to breach (offer, acceptance, and consideration). Binder v. Aetna Life Ins. Co., (1999) 75 Cal.App.4th 832, 839. A plaintiff asserting breach of contract must plead that the contract is supported by consideration. See, e.g. Civ. Code §1550; Haase v. Cardoza, (1958) 165 Cal.App.2d 35. A mere promise to make a gift (a donative promise) does not create an enforceable contract. See, e.g. Fritz v. Thompson, (1954) 125 Cal.App.2d 858, 863.

Defendants contend that the Trust’s purchase of the Moorpark Property was contemplated as a gift to Park and not pursuant to any contract, as evidenced by Park’s failure to allege any consideration. Opp. at 11.

Park presents evidence that she prepared the Moorpark Transaction, paid the costs for the transaction, and assigned her rights in the transaction to Defendants. Park Decl., ¶¶ 5-6. These facts may not show consideration for the oral contract, but they do show detrimental reliance which is a substitute for consideration. Tomerlin v. Canadian indem. Co., (1964) 61 Cal.2d 638, 649. Reply at 3.

c. Void Due to Illegality, Mistake, and Frustration of Purpose

(i) Illegality

A contract which requires the performance of unlawful acts is unenforceable. See, e.g. Fewel & Dawes v. Pratt, (1941) 17 Cal.2d 85, 90.

Defendants note that the Trustee’s purpose in purchasing the Moorpark Property was to use a 1031 exchange to minimize adverse tax consequences that would otherwise result from the sale of its other property. Opp. at 12. They argue that the transaction structured by Katofsky would have amounted to tax fraud, since selling the Moorpark Property immediately after purchase would negate the requisite intent to hold the property for investment at the time of the exchange. Defendants conclude that the oral contract is unenforceable as a violation of federal tax law. Opp. at 12.

The mere fact that a contract does not meet the requirements of section 1031 to avoid capital gains tax does not make it illegal.

(ii) Mistake

When a party has been induced by fraud or mistake to enter into a contract, the party may have the contract set aside. Merced County Mut. Fire Ins. Co. v. State of California, (1991) 233 Cal.App.3d 765, 771-72.

Defendants contend that the oral contract is unenforceable because they were induced to enter it based on their belief that making a gift to Park via a section 1031 exchange would be legal. Opp. at 11-12. Once the Trustees learned that the transaction would be illegal and constitute tax fraud, they decided not to go through with it. Opp. at 12.

The contract at issue is the oral contract between Park and Defendants. As discussed ante, Defendants have not shown that performing the Moorpark Transaction would have been illegal. They also have not shown that Park induced them to enter into the oral contract by fraud. However, if the oral contract conditioned payment to Park on the validity of a section 1031 exchange, then the failure of the Moorpark Transaction to constitute a valid tax exchange meant that the oral contract was based on a mutual mistake and may be set aside.

(iii) Frustration of Purpose

Where the reason the parties entered the agreement has been frustrated by a supervening circumstance that was not anticipated, such that the value of performance by the party standing on the contract is substantially destroyed, the doctrine of commercial frustration applies to excuse performance. See, e.g. Habitat Trust for Wildlife, Inc. v. City of Rancho Cucamonga, (2009) 175 Cal.App.4th 1306, 1336.

Defendants argue that their purpose for entering into the Moorpark Transaction was frustrated because it would not be able to enjoy the tax benefits of the 1031 exchange, which meant that any duty on the part of Trustees to perform the oral contract with Park was excused. Opp. at 13.

The court agrees. If Defendants are correct that the gift to Park was conditioned on the section 1031 exchange, then the failure of the Moorpark Transaction to meet section 1031 requirements was a frustration of purpose. Park provides no evidence that the oral contract was not conditioned on a valid section 1031 exchange.

d. Conclusion

Park has not demonstrated a probability of success on her claim for breach of contract because (a) the oral contract’s terms have not been adequately shown and (b) the contract was based on a mutual mistake and its purpose was frustrated when the Moorpark Transaction was not determined to be a valid section 1031 exchange.

7. Attachment Based on a Commercial Claim

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, (“Kadison”) (1987) 197 Cal.App.3d 1, 4 (action involving trust property was a commercial, not a consumer, transaction).

Defendants argue that the Trust, as a revocable trust, is merely the property of Hesook during her lifetime, meaning that its assets are effectively the assets of a natural person, rather than those of a partnership, corporation or other business entity. Park must show that the action is based on Hesook’s conduct of a trade, business, or profession but cannot do so since neither Hesook nor Kwon are in the business of buying or selling real estate. Opp. at 7.

Defendants are almost correct. In Kadison, the plaintiff law firm brought an action against co-trustees of a testamentary trust of their father’s estate. 197 Cal.App.3d at 2-3. The trust’s principle asset was real property worth $10 million with a market rental of $30,000 per month. Id. at 2. The trustees retained the law firm in three separate cases involving this real property. Id. The law firm brought suit when the co-trustee defendants failed to pay its fees. Id. The trustees argued that the trust property was not subject to attachment because they were natural persons whose claim did not arise out of their trade or business under CCP section 483.010(c). Id.

The Kadison court disagreed. While the co-trustees were natural persons, the trust was not. Id. at 4. Because the trust was not a natural person, CCP section 483.010(c) did not apply. Id. at 4. Even if the trust were considered a natural person, the law firms’ claim arose out of the trust’s conduct of a trade, business, or profession. Id. These terms encompass almost any activity engaged in for profit with “frequency and continuity”. Id. (citing Advance Transformer Co. v. Superior Court, (1974) 44 Cal.App.3d 127, 139). The purpose of the attachment statutes is to confine attachment to commercial situations and prohibit their use in consumer transactions. Id. The law firm’s representation of the trust, whose business was to manage real property, cannot be considered a consumer transaction. Id. When a business incurs a contract debt, its assets are subject to attachment. Id. at 5. How the business is characterized – company, corporation, partnership, joint venture, trust -- does not matter “so long as the debt is of a commercial nature.” Id. Therefore, the pre-judgment attachment of trust property was proper. Id.

The key issue in Kadison was the nature of the trust’s debt. The Kadison court concluded that the fact that a trustee is an individual does not bring the natural person exemption of CCP section 483.010(c) into play where the trustee is sued in his or her capacity as trustee. Rather, the court looks to the nature of the transaction performed by the trustee. Thus, the merely fact that Hesook and Kwon are individuals who are Trustees does not make them subject to the exemption in CCP section 483.010(c). However, the Trust is a revocable trust for purposes of marshalling Hesook’s assets during her lifetime and disposing of them upon death. There is no commercial aspect to the Trust because the Trustees are not the business of managing the Trust for the beneficiaries.

Park argues in reply that the Trustees are highly sophisticated real estate investors who have managed more than $20 million in real estate transactions. Reply at 6-7. His evidence fails to show more than a single sale of property and attempt to perform a section 1031 exchange. This is insufficient to show that the Trustees are engaged in the business of buying and selling real estate on behalf of the Trust.

Park has not shown that her claim arose from the Trustees’ conduct of the Trust’s trade, business, or profession.

8. Defendant’s Property Is Adequately Described

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.

Defendants assert that Park’s application is defective for failing to provide a reasonably adequate description of the property to be attached. Opp. at 14. As discussed ante, the Trust is not a natural person and Park was not required to provide a description of the Trust’s property to be attached. A specific description of property is not required for trusts or other entities as they generally have no exempt property. Bank of America v. Salinas Nissan, Inc., (“Bank of America”) (1989) 207 Cal.App.3d 260, 268.

9. Attachment Sought for a Proper Purpose 

Attachment must not be sought for a purpose other than the recovery on the claim upon which attachment is based.  CCP §484.090(a)(3).  

Defendants argues that Park is seeking attachment to attempt to force a gift from Hesook’s revocable trust and hijack her right to distribute the Trust’s assets. Opp. at 14. Park is trying to foreclose the possibility that Hesook will change her estate plan to Park’s detriment. Opp. at 14.  This argument is speculative and unsupported by any evidence.  Defendants have not shown that attachment is sought for an improper purpose. 

E. Conclusion

Park’s application for a right to attach order is denied.


[1] Park failed to lodge a courtesy copy of her reply brief in violation of the Presiding Judge’s General Order Re: Mandatory Electronic Filing. Her counsel is admonished to provide courtesy copies in all future filings.

[2] The court has rule on Park’s written evidentiary objections, most of which were overruled. The clerk is ordered to scan and electronically file the court’s courtesy copy of the objections and rulings.

[3] For the first time in reply, Park claims she has demonstrated a probability of success because she can assert the defense of promissory estoppel against Defendants. Reply at 3-4. The court has not considered this argument. Regency Outdoor Advertising v. Carolina Lances, Inc., (1995) 31 Cal.App.4th 1323, 1333.

[4] Park notes that the burden of proving that the Moorpark Property was a gift rests with Defendants and that they have failed to establish, by a preponderance of the evidence, that it was intended to be a gift. Reply at 4-5. While this is true, it is also sufficient for Defendants to establish that the purported oral contract was barred or otherwise invalid.

Case Number: 20STCV31674    Hearing Date: December 17, 2020    Dept: 76

Plaintiffs allege that Defendants caused the Trust to incur severe tax liability in connection with a 1031 exchange transaction, and has failed to Plaintiff Park her 1/5 share of trust assets.

Defendants Heesook Kim and Hyun Kim move for an order disqualifying attorney Jeff Katofsky and his law firm Katofsky Law from continuing to represent Plaintiff Hyun Jou Park in this action.

TENTATIVE RULING

Defendants Hesook Kim and Hyun Kim’s motion to disqualify attorneys Jeff Katofsky and Gary Solomons as counsel for Plaintiff is GRANTED.

ANALYSIS

Motion To Disqualify

Request For Judicial Notice

Defendants’ request that the Court take judicial notice of court records pertaining to the instant action, is GRANTED per Evid. Code § 452(d)(court records).

Plaintiff’s Objection to Reply

Plaintiff filed an objection to Defendants’ reply brief, asserting that the reply and its accompanying declarations improperly raise arguments and evidence that exceed the scope of the opening brief, and deprive Plaintiff of the right to respond. As the reply largely addresses circumstances that arose after the filing of opening briefs (most significantly, the substitution of counsel for Plaintiff while the motion was pending), the Court does not believe the inclusion of additional material in the reply is an impermissible effort to “sandbag.” To the extent that Plaintiff wishes to offer additional argument or evidence in response to the reply, she may make an offer of proof at the hearing on this motion, and the Court will consider whether additional briefing is appropriate.

Discussion

Defendants Heesook Kim and Hyun Kim move for an order disqualifying attorney Jeff Katofsky and his law firm Katofsky Law from continuing to represent Plaintiff Hyun Jou Park in this action.

As an initial matter, the Court addresses Plaintiff’s argument that this motion to disqualify is moot because attorney Gary Salomons substituted in as Plaintiff’s counsel on November 30, 2020. The Court finds that this substitution does not appear to moot the motion. As Defendants’ point out in their Reply, Gary Salomons of Salomons Law Group, LLC is listed as a member of Katofsky Law. (See Reply Declaration of Amy Nashon, ¶ 2, Exh. E [Katofksy Law website].) Defendants’ attorney Amy Nashon also states that all letters that Defendants’ counsel has received from Katofsky law in this matter have Salomons’ name listed on the letterhead as “of counsel.” (Nashon Decl., ¶ 3.) Indeed, in the September 16, 2020 letter sent by Katofsky, the letterhead lists Gary Salomons as “of counsel.” (Bloom Decl., Exh. D.) Attorneys who are “of counsel” relative to a law firm are subject to imputed disqualification. (People ex rel. Dept. of Corporations v. SpeeDee Oil Change Systems, Inc. (1999) 20 Cal.4th 1135, 1144-56). As such, the Court will proceed to address the motion on the merits.

Defendants argue that earlier this year, attorney Katofsky represented the Kim Defendants and Plaintiff Park together as buyers in connection with a 1031 exchange transaction, and Katofsky now represents one of his clients (Park) in litigation against his other clients (the Kims) with respect to the exact same 1031 exchange transaction.

Regarding a successive representation conflict of interest where the attorney’s contact with the former clients was direct, the California Supreme Court has provided the following guidance:

[The] enduring duty to preserve client confidences precludes an attorney from later agreeing to represent an adversary of the attorney's former client unless the former client provides an “informed written consent” waiving the conflict. (Rules Prof. Conduct, rule 3-310(E).) If the attorney fails to obtain such consent and undertakes to represent the adversary, the former client may disqualify the attorney by showing a “ ‘substantial relationship’ ” between the subjects of the prior and the current representations. (Citation omitted.) To determine whether there is a substantial relationship between successive representations, a court must first determine whether the attorney had a direct professional relationship with the former client in which the attorney personally provided legal advice and services on a legal issue that is closely related to the legal issue in the present representation. (Citation omitted.) If the former representation involved such a direct relationship with the client, the former client need not prove that the attorney possesses actual confidential information. (Citation omitted.) Instead, the attorney is presumed to possess confidential information if the subject of the prior representation put the attorney in a position in which confidences material to the current representation would normally have been imparted to counsel. (Citations omitted.) When the attorney's contact with the prior client was not direct, then the court examines both the attorney's relationship to the prior client and the relationship between the prior and the present representation. If the subjects of the prior representation are such as to “make it likely the attorney acquired confidential information” that is relevant and material to the present representation, then the two representations are substantially related. (Citations omitted.) When a substantial relationship between the two representations is established, the attorney is automatically disqualified from representing the second client. (Citations omitted.)

(City and County of San Francisco v. Cobra Solutions, Inc. (2006) 38 Cal.4th 839, 847.)

Here, attorney Katofsky was a named plaintiff in this action until October 14, 2020 when he dismissed his claims against Defendants. In the original Complaint filed on August 19, 2020, attorney Katofsky alleged as follows: Defendants specifically requested Katofsky to perform significant legal work to protect the 1031 exchange and prepare for the closing of the Moorpark transaction, and agreed to pay for such, which services cost $32,800.00. (Original Complaint, ¶ 11; Exh C.) Katofsky alleges that he had an oral agreement with Defendants whereby Defendants requested and received legal fees. (Id. at ¶ 15.) Defendants breached the agreement by failing to pay for such legal services. (Id. at ¶ 17.)

Although these allegations are not conclusive judicial admissions because they are contained in a pleading which has since been superseded by amendment, such allegations are rebuttable evidentiary admissions. (Walker v. Dorn (1966) 240 Cal.App.2d 118, 120.) The Court gives much weight to Katofsky’s allegations in the original Complaint as evidentiary admissions.

We turn now to the effect of the pleadings as admissions. Both parties referred to superseded pleadings, and argued the effect of them interchangeably with the effect of the pleadings upon which the case went to trial. In doing so they failed to distinguish between evidentiary admissions and judicial admissions. The distinction is succinctly stated in Witkin, California Evidence, section 224, page 251. As to a judicial admission by pleading he elucidates as follows: "A judicial admission in a pleading (either by affirmative allegation or by failure to deny an allegation) is entirely different from an evidentiary admission. The judicial admission is not merely evidence of a fact; it is a conclusive concession of the truth of a matter which has the effect of removing it from the issues. . . . "It should be remembered that no judicial admission results from the permissible use of inconsistent counts or defenses unless they involve contradictions of fact in a verified pleading." As to a superseded pleading he states: "An allegation or failure to deny in a pleading superseded by later amendment is of course not a judicial admission. The majority view nevertheless treats it as any other prior statement of a party, i.e., as an evidentiary admission. . . ." (See Meyer v. State Board of Equalization, 42 Cal.2d 376, 384 [267 P.2d 257].) Defendant argues that the pleadings in his answer, upon which the case went to trial, merely constituted inconsistent defenses and therefore not admissions. However, we agree with the trial court that the verified pleadings present contradictions of fact within the rationale of judicial admissions, conclusively conceding defendant's tenancy under a written lease as pleaded by plaintiffs.

(Walker v. Dorn (1966) 240 Cal.App.2d 118, 120 [bold emphasis and underlining added].)

Although attorney Katofsky stated in a letter dated September 16, 2020—after the Complaint had been filed—that he “represented, and still represent[s], the Park Family, never the Kims,” (Declaration of Aaron Bloom, Exh. D), this statement is puzzling and of questionable weight when considered in the context of the allegations in the Original Complaint, in which Katofsky sought to recover fees for legal work performed on behalf of Defendants.

Moreover, Defendant Hyun Kwon Kim states that Katofsky advised him and his mother (Defendants), as trustees of the Trust to use approximately $9.7 million in sale proceeds to purchase two pieces of real estates. (Kim Decl., ¶ 5.) Katofsky also advised the Trustees with respect to the purchase of property in Burbank for approximately $6 million, and with respect to the planned purchase of property located at 13257-9 Moorpark Avenue, Sherman Oaks, CA 91423. (Id. at ¶ 6.) On May 29, 2020, Defendants, as Trustees of the Trust, and Plaintiff Park—all three as buyers—entered into a Purchase and Sale Agreement with Joint Escrow Instructions (“PSA”) with Double Play, LLC (of which Katofsky was the sole member and manager), with the PSA prepared by Katofsky. (Id. at ¶ 7.) The transaction was later changed so that only Defendants, as Trustees of the Trust, would be purchasing the Moorpark Property. (Id.)

Katofsky also prepared, and had Defendants execute, another PSA dated June 15, 2021, pursuant to which Defendants, as Trustees of the Trust, were to sell the Moorpark Property to an entity named MoreMoorPark, LLC for $2,010,000. (Id. at ¶ 9.) After Defendant Hyun Kwon Kim became aware of Katofsky’s role as seller in the Moorpark Transaction, Defendants became concerned that going forward with the Moorpark Transaction would amount to tax fraud, and they cancelled the transaction, thereby forfeiting the $175,000 deposit Defendants had made in connection with the transaction. (Id. at ¶ 10.)

Kim states that during the course of Katofsky’s representation of Defendants, he obtained confidential information from Defendants about their real estate transactions, tax planning, and trust administration and used the information to advise them and prepare documents on their behalf. (Id. at ¶ 12.)

In his Declaration, Jeff Katofsky claims that he did not represent Defendants in any capacity, but instead prepared the first draft of the transaction documents and that the buyer would pay the legal costs of document preparation. (Id. at ¶ 3.) To the extent Katofsky implies that he was simply seeking to recover from Defendants the cost of document preparation in the original Complaint, Defendants persuasively point out that $32,800 for document preparation is excessive. The inference is that Katofsky was seeking to recover for legal advice rendered to Defendants, not simply their share of document preparation fees. Although Katofsky claims that Defendants had their own legal counsel and accountants, to whom the draft documents were circulated (Katofsky Decl., ¶¶ 6, 8), he does not include any proof that Defendants were represented by their own legal counsel in connection with the Moorpark transaction.

“Except for those situations where an attorney is appointed by the court, the attorney-client relationship is created by some form of contract, express or implied, formal or informal. (Citations omitted.)” (Fox v. Pollack (1986) 181 Cal.App.3d 954, 959.) Thus, the fact that there is no written retainer agreement between Katofsky and Defendants does not preclude the existence of an attorney-client relationship between them.

In light of the foregoing evidence, especially the allegations Katofsky made as Plaintiff in the original Complaint, the Court finds that Katofsky represented Defendants in connection with the underlying Moorpark transaction, which forms the basis of Plaintiff Park’s claims against Defendants. (See, e.g., 1AC, ¶¶ 9 – 13, 17.) As such, access to confidential information is presumed, and disqualification of Katofsky is mandatory. (O'Gara Coach Co., LLC v. Ra (2019) 30 Cal.App.5th 1115, 1125.)

The disqualification standards applicable in these cases of successive representation “focus on the former client's interest ‘in ensuring the permanent confidentiality of matters disclosed to the attorney in the course of the prior representation.’” (Charlisse C., supra, 45 Cal.4th at pp. 159–160; see Neal v. Health Net, Inc. (2002) 100 Cal.App.4th 831, 840 [123 Cal. Rptr. 2d 202] [“at the core of California's disqualification jurisprudence is a concern for the confidentiality of lawyer-client communications”].) Disqualification is required if the current representation involves the legal services performed by the attorney for the former client (e.g., Henriksen v. Great American Savings & Loan (1992) 11 Cal.App.4th 109, 111 [14 Cal. Rptr. 2d 184]; Dill v. Superior Court (1984) 158 Cal.App.3d 301, 306 [205 Cal. Rptr. 671]) or, even if not the same matter, if a substantial relationship exists between the former representation and the current representation (SpeeDee Oil, supra, 20 Cal.4th at p. 1146 [“[w]here an attorney successively represents clients with adverse interests, and where the subjects of the two representations are substantially related, the need to protect the first client's confidential information requires that the attorney be disqualified from the second representation”]; Flatt v. Superior Court (1994) 9 Cal.4th 275, 283 [36 Cal. Rptr. 2d 537, 885 P.2d 950] [“[w]here the requisite substantial relationship between the subjects of the prior and the current representations can be demonstrated, access to confidential information by the attorney in the course of the first representation (relevant, by definition, to the second representation) is presumed and disqualification of the attorney's representation of the second client is mandatory”]; M'Guinness v. Johnson (2015) 243 Cal.App.4th 602, 614 [196 Cal. Rptr. 3d 662]).

(O'Gara Coach Co., LLC v. Ra (2019) 30 Cal.App.5th 1115, 1125 [bold emphasis added].)

While Katofsky has been substituted out as Plaintiff’s counsel, the question then becomes whether such disqualification is imputed to attorney Salomons, who substituted in as Plaintiff’s counsel on November 30, 2020. As noted above, in the September 16, 2020 letter sent by Katofsky, the letterhead lists Gary Salomens as “of counsel.” (Bloom Decl., Exh. D.) Moreover, both Katofsky and Salomons admit that Salomons is listed as “of counsel.” (Katofksy Decl., ¶ 13; Salomons Decl., ¶¶ 12-13[1].) When an attorney holds out another attorney as “of counsel,” the attorney is making a affirmative representation to the client that the services of that attorney is available to the clients of the firm. (People ex rel. Dept. of Corporations, supra, 20 Cal.4th at 1153.) “Notwithstanding the variations to be expected across the nation on any point of law, the prevailing view is that for purposes of disqualification, the of counsel attorney is considered to be affiliated with a firm so that the disqualification of one from representation must be imputed to the other.” (Id. at 1155.) Disqualification is imputed to the attorney designated “of counsel” because of the public designation of that relationship, and of counsel attorneys are to be regarded the same as partners, associates and members of law firms for conflict of interest issues. (Id. at 1155-56.)

“It is now firmly established that where the attorney is disqualified from representation due to an ethical conflict, the disqualification extends to the entire firm [citations] at least where an effective ethical screen has not been established [citation].” (Citations omitted.) (California Self-Insurers' Security Fund v. Superior Court (2018) 19 Cal.App.5th 1065, 1072.) In proper circumstances, presumed imputed knowledge may be refused by “evidence that ethical screening will effectively prevent the sharing of confidences in a particular case.” (Kirk v. First American Title Ins. Co. (2010) 183 Cal.App.4th 776, 801.)

Once the moving party in a motion for disqualification has established that an attorney is tainted with confidential information, a rebuttable presumption arises that the attorney shared that information with the attorney’s [*810] law firm. The burden then shifts to the challenged law firm to establish “that the practical effect of formal screening has been achieved. The showing must satisfy the trial court that the [tainted attorney] has not had and will not have any involvement with the litigation, or any communication with attorneys or []employees concerning the litigation, that would support a reasonable inference that the information has been used or disclosed.” (In re Complex Asbestos Litigation, supra, 232 Cal.App.3d at p. 596.)

The specific elements of an effective screen will vary from case to case, although two elements are necessary: First, the screen must be timely imposed; a firm must impose screening measures when the conflict first arises. It is not sufficient to wait until the trial court imposes screening measures as part of its order on the disqualification motion. (Klein v. Superior Court, supra, 198 Cal.App.3d at pp. 906, 913–914; see also Hitachi, Ltd. v. Tatung Co. (N.D.Cal. 2006) 419 F.Supp.2d 1158, 1165 [“The time to have moved the matter [to another office] would have been when the ethical conflict was discovered, not after losing a motion to disqualify.”].) Second, it is not sufficient to simply produce declarations stating that confidential information was not conveyed or that the disqualified attorney did not work on the case; an effective wall involves the imposition of preventive measures to guarantee that information will not be conveyed. (SpeeDee Oil, supra, 20 Cal.4th at pp. 1142, 1151–1152 & fn. 5.) “To avoid inadvertent disclosures and to establish an evidentiary record, a memorandum should be circulated warning the legal staff to isolate the [tainted] individual from communications on the matter and to prevent access to the relevant files.” (In re Complex Asbestos Litigation, supra, 232 Cal.App.3d at p. 594.)

“The typical elements of an ethical wall are: [(1)] physical, geographic, and departmental separation of attorneys; [(2)] prohibitions against and sanctions for discussing confidential matters; [(3)] established [*811] rules and procedures preventing access to confidential information and files; [(4)] procedures preventing a disqualified attorney from sharing in the profits from the representation; and [(5)] continuing education in professional responsibility.” (Henriksen, supra, 11 Cal.App.4th at p. 116, fn. 6.) . . . We stress, however, that the inquiry before a trial court considering the efficacy of any particular ethical wall is not to determine whether all of a prescribed list of elements (beyond timeliness and the imposition of prophylactic measures) have been established; it is, instead, a case-by-case inquiry focusing on whether the court is satisfied that the tainted attorney has not had and will not have any improper communication with others at the firm concerning the litigation.

(Kirk v. First American Title Ins. Co. (2010) 183 Cal.App.4th 776, 809-11 [bold emphasis and underlining added].)

The Declarations of Jeff Katofsky and Gary Salomons fail to address the factors which courts consider in deciding whether an ethical wall will impose an effective screen. As such, Plaintiff has not met her burden of rebutting the presumption of imputed knowledge which requires disqualification.

Based on the foregoing, the Court does not address Defendants’ additional argument that Katofsky had a significant personal financial interest on behalf of the seller in the same transaction that he represented the Kims as buyers, and Katofsky never disclosed the conflict of interest in writing or obtained the clients’ informed written consent. Moreover, a violation of a Rule of Professional Conduct does not necessarily compel disqualification. (In re Marriage of Murchison (2016) 245 Cal.App.4th 847, 853-54.)

Accordingly, the motion to disqualify attorneys Jeff Katofsky and Gary Solomons as counsel for Plaintiff is GRANTED.


[1] Salomons’ admission at 13 of his Declaration that his “of counsel” designation “is for all practical purposes meaningless in terms of any involvement I have, or have had, with Katofsky’s firm” is an admission that there is an ethical violation regarding the “of counsel” designation.

The minimum requirements for designating an attorney in California as being of counsel to a firm are found among the standards for communications that presumptively violate the prohibition against false or deceptive communications: "(8) A 'communication' which states or implies that a member or law firm is 'of counsel' to another lawyer or a law firm unless the former has a relationship with the latter (other than as a partner or associate, or officer or shareholder pursuant to  Business and Professions Code sections 6160–6172) which is close, personal, continuous, and regular." (Rules Prof. Conduct, rule 1-400(E), std. (8), italics added.)

(People ex rel. Dept. of Corporations v. SpeeDee Oil Change Systems, Inc. (1999) 20 Cal.4th 1135, 1153.)

related-case-search

Dig Deeper

Get Deeper Insights on Court Cases


Latest cases where LA DEPOSITIONS INC. is a litigant

Latest cases represented by Lawyer SALOMONS GARY K. ESQ.