Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_04-cv-01978/USCOURTS-cand-3_04-cv-01978-1/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Other Contract

---

United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

For the Northern District of California

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

INTERNATIONAL FIDELITY INSURANCE

COMPANY,

Plaintiff,

v

DIAMOND OAKS CONSTRUCTION COMPANY

et al,

Defendants.

 /

No C-04-1978 VRW

ORDER 

On May 19, 2004, plaintiff International Fidelity

Insurance Company (“IFIC”) filed this diversity action against

Diamond Oaks Construction Company (“Diamond Oaks”), its President

James Pelletier, Janice Pelletier (collectively “Pelletiers”) and

the Pelletier Family Living Trust (“PFLT”) for allegedly breaching

an indemnity agreement. Doc #1. To ensure recovery, IFIC filed an

ex parte application on June 24, 2005, asking the court to issue a

right to attach order and order for issuance of writ of attachment

on the assets of Diamond Oaks or in the alternative, to issue a

temporary protective order (“TPO”). Doc ##19, 23. On July 26,
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

2

2005, the court issued a TPO that applied until a hearing held on

September 8, 2005. Doc #28. At the hearing, the court issued

another TPO and requested a supplemental declaration, which IFIC

filed on October 17, 2005. See Doc ##30, 31, 32. For the reasons

stated below, the court GRANTS the application for a right to

attach order and order for issuance of writ of attachment.

I

IFIC is a New Jersey corporation that was qualified to

issue contract and license bonds as a surety in California. Doc #1

at 1:21-24. IFIC issued public works performance and payment bonds

on behalf of Diamond Oaks for three California public works

projects. IFIC Br (Doc #23) at 2:17-3:2. As a surety, IFIC was

required to cover for any breach by Diamond Oaks on contracts in

connection with these projects. Bragg Decl (Doc #24), Exs 2-4. 

IFIC also issued a California contractors license bond on behalf of

Diamond Oaks. IFIC Br at 3:3-4. In keeping with customary

practice, Diamond Oaks, the Pelletiers and PFLT executed an

indemnity agreement in favor of IFIC in which they agreed to 

exonerate, indemnify, and keep indemnified [IFIC]

from and against any and all liability for losses

and/or expenses * * * (including but not limited to,

interest, court costs and counsel fees) * * * (1) By

reason of having executed or procured the execution

of the Bonds, (2) By reason of the failure of

[Diamond Oaks, the Pelletiers or PFLT] to perform or

comply with the covenants and conditions of this

Agreement or (3) In enforcing any of the covenants

and conditions of this Agreement.

Bragg Decl, Ex 1.

IFIC alleges that Diamond Oaks abandoned one of its

projects and did not pay for various subcontractors and materials,
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

3

forcing IFIC to investigate, litigate and settle thirty-two claims

totaling $2,650,878.76. IFIC Br at 4-6; Lum Decl (Doc #32) at 2. 

Additionally, IFIC claims attorneys’, consultant and accountant

fees totaling $84,092.80. Lum Decl at 2. In a letter dated March

1, 2004, IFIC demanded that the defendants provide indemnification,

which they have not done. Bragg Decl, Ex 45; IFIC Br at 7:6-10.

II

Under FRCP 64, state law governs prejudgment attachments: 

At the commencement of and during the course of an

action, all remedies providing for seizure of person

or property for the purpose of securing satisfaction

of the judgment * * * are available [as] provided by

the law of the state in which the district court is

held * * *. 

As a preliminary matter, California law requires an applicant for a

right to attach order to submit an affidavit showing that the

applicant is entitled to a judgment on the claim. Cal Code Civ Pro

§ 484.030. IFIC accomplishes this by providing evidence of payment

to Diamond Oaks’ obligees and evidence indicating that defendants

are liable under a valid indemnity agreement. Bragg Decl ¶¶ 5, 8,

10, 13, Exs 15-44; Lum Decl, Exs 1-2. 

California law also requires that before issuing a writ

of attachment, a plaintiff must file an undertaking of at least

$10,000 to pay a defendant in case the attachment was wrongful. 

Cal Code Civ Pro §§ 489.210, 489.220. IFIC’s filing meets this

requirement. Doc #27.

Additionally, a right to attach application must: (1)

show the underlying asserted contract claim alleges at least

$500.00 in ascertainable money damages; (2) state the exact amount
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

4

sought; (3) state that the purpose of seeking attachment is only to

ensure recovery on the claim; (4) state that the claim is not

discharged in bankruptcy and (5) describe the property to be

attached and state that the property is subject to attachment based

on applicant’s information and belief. Cal Code Civ Pro

§§ 484.020(a)-(e), 483.010.

Here, IFIC’s application satisfies these five

requirements. IFIC’s application states that the debt is readily

ascertainable, totals $2,734,971.56 and is based on an indemnity

agreement. IFIC Br at 9; Lum Decl at 2. IFIC’s attorney Brian

Bragg declares that he believes the claim has not been discharged

or stayed in a bankruptcy proceeding and that the application is

“not given for any purposes other than to protect IFIC’[s] rights

in connection with its claim in this action and facilitate its

recovery * * *.” Bragg Decl at ¶¶ 19, 22. The application also

includes a description of the property to be attached and states

that IFIC believes that the assets remain available for attachment. 

Id at ¶¶ 18, 21. Accordingly, IFIC’s application satisfies all of

the technical requirements of California law.

Additionally, the argument for issuing a writ of

attachment is especially strong here because Diamond Oaks could

have -- but did not -- oppose issuance of the writ. Cal Code Civ

Pro § 484.050(e). In fact, Diamond Oaks did not assert that its

property is exempt from attachment or even appear at the September

8, 2005, hearing. Nonetheless, before attaching Diamond Oaks’

assets, California law requires the court to find that: (1) the

attachment is sought on a claim in which attachment is allowed; (2)

the plaintiff’s claim is probably valid; (3) the purpose of seeking
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

5

attachment is only for recovery on the claim and (4) the amount to

be attached is greater than zero. Id § 484.090(a).

The court finds that issuing a right to attach order and

order for issuance of writ of attachment is appropriate here. 

First, because IFIC bases this action on an indemnity contract and

seeks more than $500 in damages, an attachment may be issued on

IFIC’s claims. IFIC Br at 9.

Second, the court finds that it is “more likely than not

that the plaintiff will obtain a judgment against the defendant on

that claim.” Cal Code Civ Pro § 481.190. IFIC argues that the

defendants breached a valid indemnity agreement when they refused

to repay IFIC what it paid to obligees. IFIC Br at 11:1-2. IFIC

includes in its application a copy of the executed indemnity

agreement, the bonds, the complaints from subcontractors’ lawsuits

naming IFIC as a party, the checks that IFIC issued to the

claimants and a letter seeking indemnification. The agreement is

clear as to Diamond Oaks’ liability, stating that the indemnifiers

will “exonerate, indemnify, and keep indemnified the surety from

and against any and all liability for losses and/or expenses.” 

Bragg Decl, Ex 1. Moreover, the agreement states that evidence of

IFIC’s payment, which IFIC has provided through copies of checks

paid to third-party obligees, shall be prima facie evidence of the

fact and amount of defendants’ liability. Id, Ex 1 at ¶ 2, Exs 15-

44; Lum Decl, Exs 1-2. Accordingly, IFIC has shown that its claim

is probably valid.

Third, the court finds that based on IFIC’s unopposed

application and supporting documents, the attachment is sought only

for the recovery of the claim. And finally, IFIC claims
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

6

$2,734,971.56, which clearly exceeds zero. Because IFIC has met

all these requirements, the court GRANTS IFIC’s application for a

right to attach order and order for issuance of writ of attachment. 

IT IS SO ORDERED.

 

VAUGHN R WALKER

United States District Chief Judge