How do you tie up the defendant’s assets and secure your right to payment before you actually get your judgment? If you are owed more than $500.00 and your right to payment is based on a contract the answer is the Writ of Attachment.
The Writ of Attachment is a prejudgment remedy that allows sureties, contractors and suppliers to secure their right to payment of amounts owed and collateral prior to obtaining a judgment.
Governed primarily by statute from Code of Civil Procedure section 481.010, the attachment statutes allow a surety, contractor or supplier who is owed more than $500.00 on a contract to file an application for a right to attach order and to obtain a right to attach order by showing the probable validity of their claim i.e. it is more likely than not the surety, contractor or supplier will prevail if the case goes to trial. (Goldstein v. Barak Const. (2008) 164 Cal.App.4th 845, 852.)
The application for a right to attach order requires detailed information in the form of declarations setting forth the amount that is owed as well as documentation, including copies of contracts, invoices, pay applications, and emails and other written correspondence supporting the amount owed.
The Application for Writ of Attachment also gives the surety, contractor or supplier an invaluable opportunity early on in the litigation to evaluate the merits of its case and obtain a determination from the Court on the strengths and weaknesses of its evidence.
If the Court agrees the surety, contractor or supplier is more likely than not to prevail, the Court will grant the right to attach order and issue a Writ of Attachment. The Writ of Attachment is used to levy on bank accounts which freeze and tie up the defendant’s funds, record liens on the defendant’s property and secure collateral and the right to payment prior to obtaining the judgment.
Once defendants are told by the Court that they are likely to lose and get their assets tied up, defendants tend to quickly settle and pay.
The Writ of Attachment is not limited to just the actual contact balance either. As one defendant of a Lanak & Hanna client recently found out, the Writ of Attachment also encompasses amounts owed on change orders. In the case, Lanak & Hanna’s client was owed not only a subcontract balance but also hundreds of thousands of dollars in disputed change orders. In order to secure its client’s right to payment, Lanak & Hanna sought a Writ of Attachment on both the contract balance and the change orders. The Court granted the Writ of Attachment for nearly $500,000.00, including almost all of the change orders.
The Writ of Attachment is also available against individuals whose debt arises out of their conduct in a trade, business or profession. This is extremely helpful when you have a guarantor or an individual indemnitor as it gives a second set of assets you can tie up to secure an eventual judgment. When seeking a Writ of Attachment against an individual and an entity you should file two separate applications to avoid denial of one prejudicing the other.
The ability to obtain a Writ of Attachment starts with well documented records. The Writ of Attachment application asks the Court, before trial and usually before all the evidence is disclosed, to determine that it is more likely than not you will prevail at trial. This is a high standard. To succeed, especially if you are including change orders, the contractor or supplier should make sure to have documentation to support the balance owed, including documentation for each change order, and to have complied with all contractual prerequisites. Failure to comply with contractual prerequisites or maintain documentation significantly decreases the likelihood of obtaining the Writ of Attachment.
If you have complied with all of the contract requirements for payment and have well documented and organized records, the Writ of Attachment is one of the strongest weapons available to ensure you get paid and get paid quickly.
Once you have your Writ of Attachment and before or after you levy and secure the defendant’s assets, the defendant can post a release bond pursuant to the requirements of Code of Civil Procedure section 489.310 et. seq. The penal sum of the release bond is based on the value of the property that was levied. The bond simply substitutes in the place of the levied property and upon entry of judgment in your favor, you would be paid from the bond as opposed to the asset levied upon. Where the asset you have levied upon is real property, the release bond substitutes for the property and eliminates the time and costs associated with selling the property to satisfy your judgment.
Whether or not the Writ of Attachment is granted, simply filing and seeking the Writ of Attachment provides an additional hidden benefit most are unaware of. To attempt to defeat a Writ of Attachment the defendant must put forth sufficient evidence to show the “more likely than not” burden has not been met. In order to do this, the defendant must lay out its evidence and defenses in declarations under the penalty of perjury as well as produce its documentation to support these defenses.
Simply by seeking the Writ of Attachment you now know the specifics related to the defendant’s defenses as well as what documentation the defendant has to support them, all without having conducted any formal discovery. All told, the Writ of Attachment is one of the best tools available to help sureties, contractors and suppliers secure their right to payment and collateral and ensure they get paid and get paid quickly.