THE GREENE ROOM: Keep Your Writs About You

Litigation is costly, slow, and stressful. Ken Greene explains how two powerful legal tools, writs of possession and attachment, can give creditors a faster path to resolution and real leverage before trial.

I have been advising clients for 45 years that litigation is a lose-lose proposition. Even settlements, which are presumably acceptable to the parties, are often unsatisfying as everyone feels compromised. But in reality, a decent settlement will take less time and cost less than protracted litigation. It can also spare you from a great deal of stress and aggravation (we call it agita in my family). In California, we have several excellent remedies that can greatly assist a lender or lessor in bringing about a favorable settlement without the delay of awaiting trial, and the costs and risks attendant thereto. My two favorites are the time-tested writ of possession and writ of attachment.

The Writ of Possession

 California Code of Civil Procedure (CCP §512.010 et seq) authorizes this prejudgment remedy. It is a powerful tool, particularly if the collateral or leased equipment is essential to your customer’s business. A party seeking a writ of possession files an application (essentially, a motion) with the court for claim and delivery (aka replevin) of its leased equipment or collateral.

To qualify, the party seeking the writ must allege:

1. That they are entitled to possession. In the case of a lease or equipment finance agreement, that generally means a written contract which shows that the lessor/lender owns or has a security interest in the equipment/collateral;
2. That the lessee/borrower is wrongfully retaining the equipment/collateral i.e., is not making payments, properly insuring or maintaining the equipment, or otherwise not complying with the contract;
3. A description of the property and its value;
4. A statement that the property is within a private place and that there is probable cause to believe the property is located there; and
5. A statement that the property has not been taken for a tax, assessment or fine, or seized under an execution against the property of the lessee/borrower.

The court will grant the writ of possession if the following conditions are met:

1. Plaintiff’s claim is “probably valid.” This means that Plaintiff is more likely than not to prevail in the lawsuit and has the right to immediate possession of the equipment, or collateral, generally pursuant to the lease or EFA default and remedy provisions.
2. Plaintiff files an undertaking. The law requires an undertaking equal to “twice the value of defendant’s interest in the property.” However, if the defendant has no interest in the property, as in a true or operating lease, or an EFA where the debt exceeds the fair market value of the property, the Court may waive the undertaking requirement.

The Writ of Attachment

California Code of Civil Procedure (CCP §483.010 et seq) allows a creditor to secure a pre-judgment lien on a debtor’s assets. This is also an incredibly powerful mechanism in that it can create a lien on assets of the debtor, and perhaps even the guarantor, apart from leased equipment or collateral. These liens can increase the odds that you, as a creditor, will be able to satisfy the eventual judgment. Since it may take years to get to trial, the attachment lien provides some insurance policy that the litigation is worth pursuing.

To apply for a writ of attachment, a creditor must show the following:

1. The claim is based on a contract, and the debt is at least $500;
2. The claim arises out of a commercial transaction;
3. The claim is not secured, or is undersecured;
4. Attachment is not sought for any purpose other than recovery on the claim sued upon;
5. A description of the personal property of any natural person sought to be attached; and
6. A statement that the property is not exempt from attachment.

The remedy is available against a personal guarantor, but the creditor must show that the guarantor “occupied himself to a substantial degree and on a continuing basis in promoting his own profit through provision of credit or management  of the primary obligor.” You probably won’t be able to get a writ of attachment against a PG who is not involved in the business. Advance Transformer Co. vs. Superior Court 44 Cal App. 3d 128 (1974).

The Court will grant a writ of attachment if:

1. The claim is one upon which an attachment may be issued (see above);
2. The claim is “probably valid,” i.e., more likely than not to succeed.
3. The property to be attached is not exempt from attachment.
4. Plaintiff files an undertaking, generally $10,000. Note that the debtor may file an undertaking to release the attachment, but that undertaking must be in an amount equal to the value of the property attached and serves as a substitute for the attachment lien. This still provides some amount of comfort that a victory in the lawsuit will not be Pyrrhic.

In conclusion, when faced with a defaulting lessee or borrower, be sure to keep your writs about you. Possession truly can be 9/10 of the law, and although Buddhists may say that attachment is a key cause of suffering, in certain situations, it can also bring you pleasure.

Ken Greene is an attorney at his SoCal firm, the Law Office of Kenneth Charles Greene. In his regular column, The Greene Room, he brings clarity to complex, high-stakes issues that matter to our readers, exploring the ever-evolving intersection of finance and law. Stay tuned to Monitor for more ongoing, timely insights from Greene.

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