Defendant’s Cross-Claim Must Meet Probable Validity Test to Offset Amount of Plaintiff’s Writ of Attachment
Lydig Construction, Inc. v. Martinez Steel Corporation
Court of Appeal, Fourth Appellate District, Division One
No. D066854, 2015 WL 798557 (Cal. Ct. App. Feb. 26, 2015)
Lydig Construction, Inc. (“Lydig”), the general contractor on a California public works project, terminated a subcontractor, Martinez Steel Corporation (“Martinez”) for default, and sued Martinez for the costs incurred (approximately $200,000) by Lydig to complete Martinez’s scope of work. Lydig also applied for a writ of attachment to freeze Martinez’s assets in the amount of Lydig’s claim while the litigation was pending. Lydig’s writ application included declarations and documentation to support its claim. Martinez opposed the writ application and filed a cross-complaint, alleging that Lydig breached the subcontract and owed Martinez close to $600,000; Martinez therefore argued that the amount to be secured by Lydig’s attachment was less than zero and as a result, Lydig failed to establish the probably validity of its claim, a requirement for obtaining a writ of attachment. Martinez’s opposition to the writ application was supported by a declaration. The trial court found that Martinez did not establish the probable validity of its cross-claim and granted Lydig’s application and issued writs of attachment in the amount of $203,315.
Martinez appealed, arguing that it did not have to establish the probable validity of its cross-claim in order to offset the amount to be secured by the writ of attachment. Code of Civil Procedure section 483.015(b)(2) provides that the amount to be secured by an attachment shall be reduced or offset by any amount the plaintiff owes the defendant as claimed by the defendant in a cross-complaint, if the claim is one upon which an attachment could be issued. Martinez argued that it did not have to establish the probable validity of its cross-claim in order to meet this requirement, but rather only had to satisfy the four elements of Code of Civil Procedure section 483.010 (a claim for money on a contract in an amount over $500 that is not secured by real property).
In a case of first impression in California, the Court of Appeal disagreed with Martinez and affirmed the trial court’s orders in full, holding that as a matter of law, Martinez was required to establish the probably validity of is cross-claim in order to obtain the offset permitted by Code of Civil Proceduresection 483.015, and that Martinez failed to do so. The Court noted that if a defendant could offset a plaintiff’s claim with a cross-claim that was not probably valid, a defendant could always and easily defeat a plaintiff’s right to prejudgment attachment, and that this was not what was intended by the Legislature.
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