Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_05-cv-01548/USCOURTS-casd-3_05-cv-01548-3/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:1332 Diversity-Insurance Contract

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1 The Court notes that Blackburn is not a defendant in this action; instead, he is a

counterclaimant along with 350. Blackburn was a defendant in the underlying action in state

court. For ease of reference, the Court will refer to both 350 and Blackburn as “defendants” in

this action.

05cv1548

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

CENTURY SURETY COMPANY,

Plaintiff,

v.

350 W.A., LLC, et al.,

Defendants.

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Civil No. 05-CV-1548-L(LSP)

ORDER GRANTING APPLICATION

FOR TEMPORARY PROTECTIVE

ORDER, RIGHT TO ATTACH

ORDER AND WRIT OF

ATTACHMENT [doc. #60]

Century Surety Company (“Century” or “plaintiff”) seeks a temporary protective order

and pre-judgment attachment to secure a judgment in Century’s favor to which the parties

agreed. Plaintiff contends in the absence of both remedies, David Blackburn1

 (“Blackburn”) and

other Blackburn entities, which executed and guaranteed the stipulated judgment and the

obligations attached thereto, are likely to transfer assets in avoidance of the stipulated judgment. 

Blackburn and 350 W.A., LLC (“350")(collectively “defendants”) oppose Century’s application. 

The application has been fully briefed. The Court’s decision is based upon the following

discussion.

/ / /

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2 The California Court of Appeals noted that the trial court “made an arithmetic error in calculating the judgment; the correct damage total is $504,826.44.” (Plaintiff’s Exh. A

at 3).

2 05cv1548

Factual Background

Blackburn purchased a building at 350 West Ash Street in San Diego. Jacqueline Helleis

(“Helleis”) was leasing space in the building for her business, Flagship Research. During

escrow, the building sustained significant damage due to multiple flooding incidents. 

Nevertheless, Blackburn completed the purchase and immediately thereafter transferred the

property to 350. Due to environmental and fire safety concerns, among other problems with the

building, on May 15, 2003, Blackburn advised the building tenants he was terminating their

leases. On June 12, 2003, Helleis filed a complaint against 350 and David Blackburn in the San

Diego Superior Court (“underlying action”). Ultimately the case included causes of action for

breach of contract, breach of the covenant of good faith and fair dealing, breach of the covenant

of quiet enjoyment, constructive eviction, nuisance, and declaratory relief. 

The Helleis bench trial concluded on June 27, 2005. The court dismissed the causes of

action for nuisance and declaratory relief. Blackburn was exonerated on all claims, but Helleis

was successful in the remaining causes of action against 350. The trial court awarded Helleis

damages in the amount of $504,826.44, and attorneys’ fees of $295,902.2

 On July 8, 2005, 350

tendered a claim for defense and indemnity to Century. (Complaint at 8) 

Four days after the tender of a claim, the state court entered judgment against 350. On

July 27, 2005, Century sent 350 notice it would defend the company in post-judgment and

appellate proceedings under a reservation of rights. (Complaint at 8) Century then filed the

above-captioned case on August 3, 2005, to obtain a declaratory judgment and reimbursement of

attorney’s fees and costs. Plaintiff seeks a declaration of its rights and duties under the policy it

issued to 350, and contends it had no obligation to defend or indemnify. (Complaint at 8) 350

filed an answer on October 3, 2005. (Answer, doc. #8) 350 and Blackburn filed a counterclaim

for declaratory relief, breach of written contract, and breach of the implied covenant of good

faith and fair dealing on October 3, 2005. (Counterclaim, doc. #9)

Case 3:05-cv-01548-L-BGS Document 66 Filed 09/07/07 Page 2 of 9
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3 In the state court appeal, 350 claimed the trial court erred in both its interpretation

and application of the lease provisions, and its finding that 350 breached the lease. 350 also

contended the damage award was improperly calculated and was not based on substantial

evidence. 

4 These entities are 350 W.A. LLC; B&H Property Systems, Inc.; 350 West Ash

Urban Homes, Inc.; and the David A. Blackburn Family Trust. (Plaintiff’s Exh. C, Appeal Bond

Agreement at 4, ¶ 7)

3 05cv1548

350 filed an appeal in the underlying action.3 In an effort to obtain an appeal bond to

protect 350's assets from execution by the judgment creditor Helleis, Century and Blackburn,

350 and other entities4

 associated with Blackburn (the “Blackburn entities”) entered into a Bond

Agreement whereby Century would provide, for a six-month period, collateral as security for the

appeal bond and after that time period expired, 350 and Blackburn would substitute their

collateral as security for the appeal bond. Under the parties’ Bond Agreement, in the event

defendants did not substitute their collateral within the six-month period, a Stipulated Judgment

would be entered in Century’s favor against Blackburn and the Blackburn entities. 

After the six-month period expired along with several extension of time, defendants failed

to provide collateral for the appeal bond. Plaintiff eventually advised Blackburn’s counsel that it

would be filing an application for entry of judgment – the Stipulated Judgment – in accordance

with the parties’ Bond Agreement. Plaintiff alleges that once notified of its intent, Blackburn

attempted to hide his assets by transferring multiple parcels of real property from his individual

or community property ownership to his personal trust. Plaintiff asserts the transferred assets

had an assessed value in excess of three million dollars.

The California Court of Appeal affirmed the Helleis trial court in its entirety on July 11,

2007. On September 11, 2007, the judgment creditor will have the right to collect the judgment

from the bonding company which will use Century’s collateral unless defendants pay the

judgment. Century contends that it is highly unlikely that defendants will pay the judgment or

substitute their own collateral prior to September 11; therefore, plaintiff seeks a prejudgment

writ of attachment against Blackburn and the Blackburn entities to secure the stipulated

judgment and to be free from the financial responsibility for defendants’ liability to plaintiff in

the underlying Helleis action.

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4 05cv1548

DISCUSSION

1. Legal Standard for Writ of Attachment

A writ of attachment allows a plaintiff, who has applied for an attachment, followed the

statutory guidelines and established a prima facie claim to have a defendants’ assets seized and

held until final adjudication. Whitehouse v. Six Corp., 40 Cal. App. 4th 527, 532 (1995)(citing

Randone v. Appellate Department, 5 Cal.3d 536, 543 (1971)). A plaintiff who suspects that the

defendant has wrongfully transferred assets in order to become judgment proof may enforce its

claim against the transferred property by way of a writ of attachment. CIV. CODE § 3439.07

(a)(2), (b); see also SCHWARTZ AND AHART, CAL. PRACTICE GUIDE-ENFORCING JUDGMENTS

AND DEBTS 1 (The Rutter Group 1994) 3:342, p. 3-70.5, and ¶ 4:96, p. 4-20. 

California Code of Civil Procedure section 483.010(a), provides: “Except as otherwise

provided by statute, an 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) exclusive of costs, interest, and attorneys fees.” 

Prior to an attachment order being issued, the court must find (1) the claim on which the

attachment is based is one on which an attachment may be issued; (2) the applicant has

established the “probable validity” of the claim on which the attachment is based; (3) the

attachment is not sought for a purpose other than the recovery on the claim on which the request

for attachment is based; and (4) the amount to be secured by the attachment is greater than zero.

CIV. PRO. CODE § 484.090. The plaintiff bears the burden of demonstrating that the claim is one

on which an attachment may be issued and the claim's probable validity. Id. Attachment

requires a court to make a preliminary determination of the merits of a dispute. Lorber

Industries v. Turbulence, Inc., 175 Cal. App.3d 532, 535 (1985). A claim has “probable

validity” within the meaning of the attachment statute where it is more likely than not the

plaintiff will obtain a judgment against the defendant or cross-defendant on its claim. CIV. CODE

§ 481.190.

Statutory attachment procedures are subject to strict construction. Hobbs v. Weiss, 73

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5 The Court notes that defendants do not address and therefore, concede that the

claim on which the attachment is based is one on which an attachment may be issued; the

attachment is not sought for a purpose other than the recovery on the claim on which the request

for attachment is based; and the amount to be secured by the attachment is greater than zero. 

Therefore, the Court will focus on the factor of whether the applicant has established the

“probable validity” of the claim on which the attachment is based. See Civ. Code § 484.090. 

6 The Court has considered the arguments of the parties and evidence submitted in

the present application. Further, the Court has reviewed the arguments and evidence presented

by the parties in support of and in opposition to plaintiff’s motions for summary judgment. 

7 Defendants contend that their default was not voluntary. (Opp. at 5)

5 05cv1548

Cal. App. 4th 76, 79 (1999)(citing Vershbow v. Reiner, 231 Cal. App. 3d 879, 882 (1991). “The

declarations in the moving papers must contain evidentiary facts, stated ‘with particularity,’ and

based on actual personal knowledge with all documentary evidence properly identified and

authenticated.” Hobbs, 73 Cal. App. 4th at 79-80 (citing § 482.040). “In contested

applications, ‘the court must consider the relative merits of the positions of the respective parties

and make a determination of the probable outcome of the litigation.’” Id. at 80 (quoting Loeb &

Loeb v. Beverly Glen Music, Inc., 166 Cal. App. 3d 1110, 1120 (1985).

2. “Probable Validity”5

Under Code of Civil Procedure section 481.190, “[a] claim has ‘probable validity’ where

it is more likely than not that the plaintiff will obtain a judgment against the defendant on that

claim.” CIV. PROC. CODE §481.190. In considering an application for right to attach order, the

court must assess the sufficiency of plaintiff’s evidence and weigh it against defendants'

evidence on the issues presented.6

 Loeb, 166 Cal. App.3d at 1120. 

Plaintiff contends that the Stipulated Judgment (Pl.’s Exh. D), the Bond Agreement (Pl.’s

Exh. C), the Guaranty Agreements (Pl.’s Exh. E), and the Indemnity Agreements (Pl.’s Exh. F)

are valid and enforceable against Blackburn, 350 and the Blackburn entities. Plaintiff notes that

Blackburn and the Blackburn entities do not contend that their duly appointed representative

signed the relevant contractual agreements and that each of the entities failed to perform under

the agreements.7

 As discussed above, the Bond Agreement required 350 and Blackburn to

provide collateral within six months of the issuance of the appeal bond in place of the collateral

plaintiff had posted to secure the appeal bond. Further, the Indemnity and Guaranty

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8 Defendants have not provided admissible evidence to support their contention that

the surety would not accept real property as collateral.

6 05cv1548

Agreements required Blackburn and the Blackburn entities to guarantee the obligations found in

the Bond Agreement if there was a default. Finally, plaintiff contends that Blackburn and the

Blackburn entities agreed to submit to a Stipulated Judgment in the event defendants did not

timely substitute their own collateral for the appeal bond. Based on plaintiff’s evidence, it has

demonstrated the probable validity of its claims because defendants have defaulted on the

various agreements.

A. Impossibility or Frustration of Purpose as Excusing Performance

But defendants contend that any default on their part was excused because of the

doctrines of impossibility and/or frustration of purpose with respect to the Bond Agreement

because the bonding company that plaintiff selected would not accept real property as collateral

for the appeal bond. Defendants contend plaintiff knew prior to obtaining the appeal bond that

defendants planned to post real property as collateral for the appeal bond.

 The doctrine of impossibility concerns situations in which performance is or becomes

either illegal, physically impossible or extremely impracticable. See Mitchell v. Ceazan Tires,

25 Cal.2d 45, 48 (1944). Further, California Civil Code § 1511 sets forth causes excusing

performance:

The want of performance of an obligation, or of an offer of performance, in whole

or in part, or any delay therein, is excused by the following causes, to the extent to

which they operate: 

. . .

2. When it is prevented or delayed by an irresistible, superhuman cause, or by the

act of public enemies of this state or of the United States, unless the parties have

expressly agreed to the contrary; . . .

CIV. CODE § 1511.

Defendants argue that the surety, selected by plaintiff, would not allow real property

collateral to be used to secure the appeal bond and this is what caused defendants’ default and

excuses that default. Although the surety allegedly required defendants to provide non-real

property as collateral,8

 defendants cannot demonstrate that the type of collateral required for the

bond was a basic assumption of the contract, or that it caused the performance of their

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7 05cv1548

contractual obligations to be impossible. Facts that may make performance more difficult or

costly than contemplated when the agreement was executed do not constitute impossibility.

Butler v. Nepple, 54 Cal.2d 589, 599 (1960). 

Acknowledging that impossibility is unlikely to excuse defendants’ performance (Opp. at

7), defendants also argue that Century’s action in selecting a surety that would not accept real

property as collateral frustrated their performance of the Bond Agreement. The frustration of

purpose doctrine applies when performance is possible but a supervening, fortuitous event has

virtually destroyed the value of the consideration to be provided. Lloyd v. Murphy, 25 Cal.2d

48, 53 (1944). The Restatement section on frustration of purpose provides: 

Where, after a contract is made, a party's principal purpose is substantially

frustrated without his fault by the occurrence of an event the non-occurrence of

which was a basic assumption on which the contract was made, his remaining

duties to render performance are discharged, unless the language or circumstances

indicate the contrary.

RESTATEMENT (SECOND) OF CONTRACTS § 265. The defense of frustration of purpose “arises

when a change in circumstances makes one party's performance virtually worthless to the other,

frustrating his purpose in making the contract.” Id. at cmt. a; see also Federal Leasing

Consultants v. Mitchell Lipsett Co., 150 Cal. Rptr. 82, 84 (Cal. Ct. App. 1978) (lessor of burglar

alarm system could rely on defense of frustration of purpose when, subsequent to installation of

the system, the government prohibited use of that kind of system).

Plaintiff argues that defendants were not precluded from performing under the Bond

Agreement because the surety would not accept real estate as collateral. As plaintiff correctly

notes, defendants have failed to offer admissible evidence that they were capable of performing

if the surety had agreed to accept real estate as an acceptable form of collateral. Further, even if

defendants were capable of providing sufficient equity in real estate to support the $1.2 million

bond, defendants fail to offer admissible evidence that would explain why their assets could not

be converted to a form of collateral acceptable to the surety. (Reply at 4).

Here, there was no frustration in making the contract even assuming defendants’

assertions are true. Defendants have not provided evidence to support an excuse of performance

under the Bond Agreement. Accordingly, “it is more likely than not that the plaintiff will obtain

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8 05cv1548

a judgment against the defendant on [its] claim.” CIV. PROC. CODE §481.190. 

B. Lack of Consideration

Defendants also argue that there was no consideration for the Bond Agreement and

therefore, their performance was excused because plaintiff was required under the Insurance

Policy to provide a bond pending appeal, i.e., that plaintiff obtained the appeal bond because it

was legally obligated to do so. Thus, according to defendants, there could be no consideration

provided by plaintiff to defendants for the Bond Agreement. 

The question of whether plaintiff was obligated under the Policy was contested at the time

the Bond Agreement was entered into by the parties, and remains contested as a significant part

of the current litigation. As noted in the “Agreement to Procure Appeal Bond”:

Disagreements have arisen between the Insureds and Century Surety as to whether

Century Surety is obligated under the Policy or otherwise to procure a bond to

release attachments of the Insureds’ assets pending appeal of the Judgment. 

Despite their good faith disagreements on this point, the Insureds and Century

Surety now wish to settle and resolve all issues pertaining to the procurement of an

appeal bond, while reserving any and all other issues between them to resolution at

a later time.

(Plaintiff’s Exh. C at 2, ¶ H (emphasis added)). Thus, there was no determination of plaintiff’s 

obligation to provide an appeal bond when the Bond Agreement was formed. 

Accordingly, because plaintiff provided the cost of and collateral for an appeal bond for a

period of six months in order for defendants to be able to avoid execution of the judgment in the

Helleis action during the appeal and to allow time for defendants to arrange to substitute their

collateral under the bond, there does not appear to be a failure of consideration. Further,

defendants have not provided admissible evidence that the Bond Agreement lacked

consideration at the time of its formation. It appears, therefore, that plaintiff will likely succeed

on its claim.

CONCLUSION

Based on the record presented, the Court finds plaintiff has sufficiently demonstrated that

its claim is one on which attachment could issue, its claim has probable validity, it did not seek

attachment for any other reason other than to secure recovery on the claim and the amount to be

secured by the attachment is greater than zero. Accordingly, plaintiff’s applications for a

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9 05cv1548

temporary protective order, a right to attach order and writ of attachment in the sum of

$1,201,088.16 is GRANTED.

IT IS SO ORDERED.

DATED: September 7, 2007

M. James Lorenz

United States District Court Judge

COPY TO: 

HON. LEO S. PAPAS

UNITED STATES MAGISTRATE JUDGE

ALL PARTIES/COUNSEL

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