In re Crescent Associates, LLC

Filing 28

MEMORANDUM AND OPINION RE APPEAL FROM ORDER OF THE BANKRUPTCY COURTGRANTING SUMMARY JUDGMENT by Judge John W. Holcomb. For the foregoing reasons, this Court AFFIRMS the order of the bankruptcy court granting summary judgment in favor of Crescent and against EPCO. IT IS SO ORDERED. (See document for further details) (yl)

Case 2:20-cv-07298-JWH Document 28 Filed 09/07/21 Page 1 of 9 Page ID #:187

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UNITED STATES DISTRICT COURT

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FOR THE CENTRAL DISTRICT OF CALIFORNIA

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IN RE CRESCENT ASSOCIATES,
LLC,

Case No. 2:20-cv-07298-JWH

Debtor,
EPCO CONSULTANTS, INC.,
Appellant,
v.
CRESCENT ASSOCIATES, LLC,
Appellee.

MEMORANDUM OPINION RE
APPEAL FROM ORDER OF THE
BANKRUPTCY COURT
GRANTING SUMMARY
JUDGMENT

Case 2:20-cv-07298-JWH Document 28 Filed 09/07/21 Page 2 of 9 Page ID #:188

I. INTRODUCTION

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Appellant EPCO Consultants, Inc., appeals the order of the bankruptcy

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court granting the motion of Debtor-Appellee Crescent Associates, LLC, for

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summary judgment.1 For the reasons set forth below, this Court AFFIRMS.
II. BACKGROUND

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This bankruptcy appeal concerns the validity of two mechanics’ liens filed

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by EPCO for services that it performed in relation to the construction of two

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single-family homes commonly known as 3548 and 3548 1/2 Multiview Drive,

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Los Angeles, CA, 90068 (the “Properties”).2 On June 15, 2016, EPCO

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recorded the following two mechanics liens:

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against the real property located at 3548 1/2 Multiview Drive Los

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Angeles, CA, 90068 (the “3548 1/2 Property”) in the total amount of

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$139,813.45, claimed for “labor, services, equipment or materials, consulting,

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engineering, land-use planning, and project management”;3 and
2.

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against the real property located at 3548 Multiview Drive Los

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Angeles, CA, 90068 (the “3548 Property”) in the total amount of $140,292.35,

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claimed for “labor, services, equipment or materials, consulting, engineering,

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land-use planning, and project management.”4

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See Notice of Appeal and Statement of Election (the “Notice”) [ECF
No. 1]; Appellant’s Opening Br. (the “Appellant’s Brief”) [ECF No. 17].
References to documents filed in Crescent’s bankruptcy case, In re Crescent
Associates, LLC, No. 2:18-bk-20654-WB, are cited herein as “BK ECF No.”
followed by the document number on the bankruptcy court’s docket.
References to documents filed in the underlying bankruptcy adversary
proceeding, Crescent Associates LLC v. EPCO Consultants Inc.,
No. 2:19-ap-01199-WB, are cited herein as “ADV ECF No.” followed by the
document number on the adversary proceeding docket.
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See Appellee’s Reply Br. (the “Appellee’s Brief”) [ECF No. 24] at 4.
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See Claim of Mechanics Lien (3548 1/2 Property) [ADV ECF No. 27-1 at
ECF pp. 64–67].
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See Claim of Mechanics Lien (3548 Property) [ADV ECF No. 27-2 at
ECF pp. 3–6].
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In May of 2018, Crescent purchased the Properties at a foreclosure sale

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held after the former owners, MJK 18, LLC and ADY Properties, LLC,

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defaulted on loans that they received to finance their development of the

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Properties.5
On September 12, 2018, Crescent filed a petition under Chapter 11 of the

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Bankruptcy Code in the U.S. Bankruptcy Court for the Central District of

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California,6 thereby commencing bankruptcy case No. 2:18-bk-20654-WB.7 On

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July 2, 2019, Crescent filed a Complaint8 against EPCO, thereby commencing

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adversary proceeding No. 2:19-ap-01199-WB (the “Adversary Proceeding”).

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Through its Complaint, Crescent sought a judicial determination of the validity,

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priority, or extent of the liens claimed by EPCO against the Properties pursuant

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to Rule 7001(2) of the Federal Rules of Bankruptcy Procedure.9
Crescent moved for summary judgment in the Adversary Proceeding on

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April 7, 2020.10 In its Motion, Crescent identified seven potential bases for

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summary judgment.11 EPCO timely opposed,12 and Crescent timely replied.13

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The bankruptcy court conducted a hearing on June 23, 2020,14 and granted the

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Motion, holding that (1) EPCO did not satisfy the criteria for filing a mechanics

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Id.; see also Trustee’s Deed Upon Sale [ADV ECF No. 27-6 at ECF p. 74].
Unless otherwise indicated, all chapter and section citations refer to the
Bankruptcy Code, 11 U.S.C. §§ 101–1532.
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See Chapter 11 Voluntary Pet. [BK ECF No. 1].
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See Compl. (the “Complaint”) [ADV ECF No. 1].
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See id. ¶¶ 7 & 8; see also Appellee’s Brief at 4.
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See Pl.’s Mot. for Summ. J. (the “Motion”) [ADV ECF No. 21].
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See generally id.
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See Def.’s Opp’n to the Motion (the “Opposition”) [ADV ECF No. 30].
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See Pl.’s Reply in Supp. of the Motion [ADV ECF No. 34].
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See Tr. of Proceedings Jun. 23, 2020 (the “Transcript”) [ADV ECF
No. 38]. The Court notes that counsel for EPCO did not appear at the hearing
until after the bankruptcy court made its oral ruling on the Motion, and, thus,
the bankruptcy court declined to hear further oral argument from EPCO’s
counsel. See id. at 17:18–18:15.
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lien under California law;15 and (2) EPCO was judicially estopped from claiming

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that a debt was owed to EPCO.16 On August 6, 2020, the bankruptcy court

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entered a written order granting the Motion17 and concurrently entered

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judgment in favor of Crescent.18
EPCO timely appealed the bankruptcy court’s order.19 The appeal is fully

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briefed, and the Court finds this matter appropriate for resolution without a

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hearing. See Fed. R. Bankr. P. 8019(b)(3); L.R. 7-15.

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III. JURISDICTION

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The bankruptcy court had jurisdiction over Crescent’s bankruptcy case

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and the related Adversary Proceeding, including the motion that is the subject of

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this appeal, pursuant to 28 U.S.C. §§ 1334 & 157(b)(2)(K). This Court has

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jurisdiction over this appeal under 28 U.S.C. § 158(a).
IV. ISSUES

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The issues on appeal, as presented by the parties, are as follows:20

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1.

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satisfy the criteria for a mechanics lien;
2.

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whether the bankruptcy court erred in its application of the judicial

estoppel doctrine; and
4.

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whether the bankruptcy court erred in finding that there was no

debt owing to EPCO by Crescent;

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whether the bankruptcy court erred in finding that EPCO failed to

whether the bankruptcy court’s errors constitute clear error

mandating reversal of judgment.

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See id. at 4:21–24 & 8:4–12:4.
See id. at 4:24–5:7 & 12:5–17:2.
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See Order Granting Motion [ADV ECF No. 45].
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See Judgment [ADV ECF No. 46].
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See generally Notice.
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See Appellant’s Brief at 2; Appellee’s Brief at 2 (agreeing with EPCO’s
statement of issues).
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V. STANDARD OF REVIEW

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This Court reviews a bankruptcy court’s grant of summary judgment de

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novo. See In re Bullion Reserve of N. Am., 922 F.2d 544, 546 (9th Cir. 1991)

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(citation omitted). Under that standard, the Court “must determine, viewing

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the evidence in the light most favorable to the nonmoving party, whether there

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are any genuine issues of material fact and whether the [trial] court correctly

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applied the relevant substantive law.” Id. (citations omitted). In other words,

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the Court considers “only whether summary judgment was proper, and not the

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precise reasoning of the trial court.” In re Gertsch, 237 B.R. 160, 166 (B.A.P. 9th

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Cir. 1999). “On a motion for summary judgment, all reasonable inferences are

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drawn in favor of the non-moving party.” In re Slatkin, 525 F.3d 805, 810 (9th

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Cir. 2008) (citation omitted). The Court “may affirm the grant of summary

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judgment on any basis supported by the record.” Id. (citation omitted).
VI. DISCUSSION

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A.

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Mechanics-Lien-Criteria Issue
The bankruptcy court determined that Crescent was entitled to summary

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judgment because EPCO did not satisfy the criteria to be eligible for a mechanics

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lien under California law.21 EPCO contends that the bankruptcy court’s finding

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was erroneous.22

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California law provides, in pertinent part, the following:

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A person that provides work authorized for a work of improvement,

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including, but not limited to, the following persons, has a lien right

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under this chapter:

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(a) Direct contractor.

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(b) Subcontractor.

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See Transcript 4:21–24 & 8:4–12:4.
See Appellant’s Brief 5–8.
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(c) Material supplier.

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(d) Equipment lessor.

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(e) Laborer.

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(f) Design professional.

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Cal. Civ. Code § 8400.23 California law defines the term “work” in this context

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to mean “labor, service, equipment, or material provided to a work of

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improvement.” Id. § 8048. “‘Labor, service, equipment, or material’ includes,

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but is not limited to, labor, skills, services, material, supplies, equipment,

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appliances, power, and surveying, provided for a work of improvement.” Id.

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§ 8022. “Work of improvement” means, in relevant part, “[c]onstruction,

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alteration, repair, demolition, or removal, in whole or in part, of, or addition to, a

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building . . . .” Id. § 8050(a)(1). Put succinctly, “[a] ‘mechanic’ in this context

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is one who has supplied materials or labor for the improvement of real property

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. . . .” Howard S. Wright Construction Co. v. BBIC Investors, LLC, 136

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Cal. App. 4th 228, 237 (2006). The burden is on the lien claimant to establish

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the validity of its lien. See id. at 237–38; see also Sukut Constr., Inc. v. Rimrock CA

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LLC, 199 Cal. App. 4th 817, 834 (2011), superseded by statute on other grounds

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Cal. Civ. Code § 3060, amended by 2012 Cal. Stat. ch. 263, § 2.
In its Opposition filed in the bankruptcy court, EPCO argued that the

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services that it performed in relation to the construction of the Properties satisfy

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the criteria for a mechanics lien.24 In support of that argument, EPCO

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submitted a declaration by Ben B. Safyari, the owner of EPCO, with

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documentary exhibits. For the reasons explained below, this Court concludes

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that EPCO’s evidence was not sufficient to show that it was entitled to a

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mechanics lien.

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The terms set forth in Subsections (a)-(f) of Cal. Civ. Code § 8400 are
defined in Cal. Civ. Code §§ 8014–8046.
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See Opposition 4:1–7:1.
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Safyari testified, in pertinent part, that:

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EPCO is a consulting, expediting and project management firm, that

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has employed and contracted with licensed civil engineer, Shahriar

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Yadegari, who is an officer of EPCO , to perform the civil engineering

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services incidental to its services. EPCO is not an engineering or

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architectural firm.25

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This Court concludes, as the bankruptcy court did below, that Safyari’s

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testimony is “conclusory” in that it fails to explain “what it was that Safyari did

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and [EPCO] did with respect to the project.”26 Nor is there any apparent

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connection between Yadegari and the construction of the Properties. Safyari

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merely states that EPCO employed Yadegari to perform services incidental to

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EPCO’s services, but Safyari does not explain what Yadegari’s services were nor

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how Yadegari performed those services in relation to the construction project.

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Nor is the Court persuaded by EPCO’s argument—that Safyari’s

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testimony that EPCO incurred out-of-pocket expenses and subconsultants fees

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in connection with EPCO “consulting, engineering, land-use planning and

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project management services for the Multiview Project”27—supports a finding

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that EPCO qualified for a mechanics lien. The fact that EPCO incurred fees and

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expenses in connection with its services does not, by itself, mean that EPCO

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qualifies for a mechanic’s lien. See Primo Team, Inc. v. Blake Construction Co., 3

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Cal. App. 4th 801, 810 (1992) (rejecting lien claimant’s argument that it was

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entitled to reimbursement of funds advanced in connection with a work of

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improvement). Thus, in the absence of additional evidence establishing that the

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Decl. of Ben B. Safyari in Supp. of the Opposition (the “Safyari Decl.”)
[ADV ECF No. 32] ¶ 2.
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Transcript 11:16–18.
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Safyari Decl. ¶ 6.
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nature of EPCO’s services qualifies it for a mechanic’s lien, the evidence

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showing that EPCO incurred out-of-pocket expenses is not enough.
In this regard, the documentary evidence that EPCO submitted generally

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shows that EPCO’s “consulting” and “project management” services were

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administrative. For example, the majority of EPCO’s invoices state something

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to the effect of: “Organized/Prepared Plans, and documents for meeting with

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City Department of Building & Safety Officials and prepared modified

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Documents to obtain the building permits for the proposed Single Family

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Dwelling.”28 But those administrative services do not qualify as “work”

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performed for “a work of improvement” under the mechanic’s lien statute. See

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Contractors Lab. Pool, Inc. v. Westway Contractors, Inc., 53 Cal. App. 4th 152, 158–

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160 (1997); Primo Team, 3 Cal. App. 4th at 807–811. Indeed, even if the services

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that EPCO performed were generally beneficial to the project, there is no

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evidence showing that the services provided were “bestowed on the work of

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improvement within the contemplated purpose of the mechanic’s lien law.”

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Primo Team, 3 Cal. App. 4th at 810–811 (emphasis in original).
In sum, EPCO failed to satisfy its burden to show that the services that it

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provided qualified as “work” (i.e., “[l]abor, service, equipment, or material,”

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Cal. Civ. Code § 8022) performed “for” the construction of the Properties. See

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Cal. Civ. Code § 8400; Primo Team, 3 Cal. App. 4th at 810–811. Accordingly,

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this Court AFFIRMS the bankruptcy court’s grant of summary judgment in

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favor of Crescent and against EPCO.

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B.

Other Issues

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In view of the foregoing, the Court need not consider the remaining

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questions raised in this appeal. See In re Slatkin, 525 F.3d at 810 (the court

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See Def.’s Req. for Judicial Notice in Supp. of the Opposition (the
“Opposition Evidence”) [ADV ECF No. 33] at ECF p.5; see generally id. at ECF
pp. 6–63 (EPCO invoices).
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“may affirm the grant of summary judgment on any basis supported by the

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record”).
VII. DISPOSITION

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For the foregoing reasons, this Court AFFIRMS the order of the

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bankruptcy court granting summary judgment in favor of Crescent and against

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EPCO.

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IT IS SO ORDERED.

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Dated: September 7, 2021

John W. Holcomb
UNITED STATES DISTRICT JUDGE

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