BMC West Corp. v. Town Center Courtyard CA4/1 ( 2020 )

Filed 12/28/20 BMC West Corp. v. Town Center Courtyard CA4/1
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
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COURT OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION ONE
STATE OF CALIFORNIA
BMC West Corporation, LLC, D076123
Plaintiff and Respondent,
v. (Super. Ct. No. ECU09255)
TOWN CENTER COURTYARD, LLC,
Defendant and Appellant.
APPEAL from a judgment of the Superior Court of Imperial County, L.
Brooks Anderholt, Judge. Affirmed.
Law Offices of John A. Tkach and John A. Tkach; Timothy G. Scanlon;
Klein, DeNatale, Goldner, Cooper, Rosenlieb & Kimball, Catherine Elizabeth
Bennett and R. Jeffrey Warren for Defendant and Appellant Town Center
Courtyard, LLC.
Finch, Thornton & Baird, Jason Thornton, P. Randolph Finch, Andrea
L. Petray and Christopher D. F. Foster for Plaintiff and Respondent BMC
West Corporation, LLC.
Defendant and appellant Town Center Courtyard, LLC (Town) appeals
from a summary judgment in favor of plaintiff and respondent BMC West
Corporation (BMC) on BMC’s action to enforce a mechanics lien and stop
notice against Town. BMC, a Delaware corporation, filed its lawsuit days
after it had converted to a limited liability company, BMC West, LLC (LLC).
The trial court granted BMC’s motion for summary judgment, ruling BMC
had standing under Delaware law because it and LLC were the same entity,
and Town had not shown triable issues of material fact regarding the sums
due BMC. On appeal, Town contends BMC no longer held a vested interest
in the liens and lacked standing to sue because the liens had transferred to
LLC. Town further contends it presented direct evidence via deposition
testimony and documents showing only 96 percent of BMC’s contract had
been completed, raising a triable issue of fact as to BMC’s entitlement to
damages. We disagree and affirm the judgment.
FACTUAL AND PROCEDURAL BACKGROUND1
Town is the owner of a construction project in the city of El Centro (the
project). It contracted with a general contractor, Patterson Builders, which
subcontracted with BMC to perform rough carpentry, trusses and other work
1 We state the undisputed facts from the parties’ separate statements
submitted in support of and in opposition to BMC’s motion, and state other
facts in the light most favorable to Town as the party opposing the motion,
resolving evidentiary doubts and ambiguities in its favor. (See B.H. v.
County of San Bernardino (2015) 62 Cal.4th 168, 178.) In its opposing
separate statement of material facts, Town purports to dispute virtually
every one of BMC’s asserted undisputed facts, stating they are disputed “to
the extent [the stated fact] implies that BMC West Corporation is the proper
entity to bring suit” and asserting that “BMC West Corporation no longer
exists. It was converted from a Delaware Corporation to a Delaware LLC on
August 1, 2016.” We disregard these portions of Town’s separate statement
which seek to raise disputes as to questions of law, not fact.
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for payment of $1,533,410. BMC, which was licensed with the California
Contractors State License Board, submitted payment applications to
Patterson Builders, which in turn submitted to Town payment applications
encompassing BMC’s applications. Town paid Patterson Builders
$1,345,004.91 for BMC’s work, and Patterson Builders paid BMC
$897,044.45.
In May 2016, BMC recorded a mechanics lien in the sum of
$688,564.15. It recorded an amended lien for the same amount in June 2016.
Thereafter, Town paid BMC $240,081.09. In June 2016, BMC served Town
with a stop payment notice to withhold the sum of $688,564.15.
In August 2016, BMC converted to a limited liability company—BMC
West LLC—pursuant to Section 18-201 of the Delaware Limited Liability
Company Act. The Delaware Secretary of State certified that LLC had a
legal existence as of August 1, 2016, but was formed on October 13, 1987, the
formation date of BMC. Two days later, BMC filed its complaint against
Town to foreclose on its mechanics lien and to enforce a stop payment notice.
While the action was pending, BMC filed partial releases of the lien so that
$447,960.06 was the remaining sum it claimed was owed.
BMC moved for summary judgment or alternatively summary
adjudication of issues. It argued there were no disputes as to all of the
elements of its mechanics lien cause of action; that $447,960.06 was the
undisputed principal amount due for its work on the project based on the
outstanding balance of its subcontract, and that sum was also the amount
allocable to it in Town’s payments to Patterson Builders. BMC argued it
timely recorded its amended mechanics lien and filed suit, meeting the
statutory requirements for such a cause of action. It argued it was
undisputed it complied with the procedural requirements to enforce its stop
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notice. BMC argued it was entitled to prejudgment interest on its claims. It
asked the court to enter judgment in its favor for $538,967.68 for the
principal balance due, $60 in fees for recording the liens and partial releases,
and $90,947.62 in prejudgment interest.
In opposition, Town argued BMC was not entitled to summary
judgment because it had no standing by virtue of being “merged out of
existence” before the complaint was filed. According to Town, the holder of
the lien rights was LLC, which was not a party to the action. Town
maintained the enforceability of the mechanics lien and stop notice ran with
the debt, and under Delaware law, specifically, title 8 of Delaware Code
section 266, subdivision (d) (at times, section 266), an entity’s assets,
including the debt, runs to the new entity so that only LLC had the right to
enforce it and pursue remedies under California’s mechanics lien and stop
notice laws. Town argued once BMC ceased to exist, it was no longer the
proper party to advance the claims at issue. Town additionally argued there
was a triable issue of material fact as to the amount of damages given
evidence that Patterson Builders claimed BMC performed only about 96
percent of the work and was not owed more than $334,949.26, while BMC
contended it was owed $447.960.06.2
As support for its damages contention, Town argued BMC did not
submit admissible evidence of its change orders and in any event the change
orders did not add up to the over $1.5 million that BMC claimed was the
value of its work. Town argued BMC did not meet its summary judgment
burden, as BMC and Patterson Builders disagreed about how much work
2 In opposition, Town filed numerous objections to BMC’s evidence. The
trial court sustained three of the objections and overruled the rest. Town
does not challenge the evidentiary rulings on appeal, so we rely on all the
evidence except that to which objections were sustained.
4
BMC performed; Patterson Builders contended BMC performed only 96
percent of the original contracted scope of work and that BMC’s value added
to the project was only $1,472,075.20. Finally, Town argued it and Patterson
Builders paid BMC $1,137,125.94, leaving only $334,949.26 owed BMC on
the 96 percent of the work it performed. Town presented deposition excerpts
from Dru Patterson to support that proposition.
The trial court granted BMC’s motion. With regard to BMC’s
conversion to an LLC, the court ruled BMC West Corporation and LLC were
the same entity pursuant to Delaware law. It found several of BMC’s facts
related to its causes of action were undisputed and that Town’s evidence in
dispute was “ambiguous at best,” requiring the court to draw inferences that
were not reasonably deducible from any evidence.
Town filed this appeal from the ensuing judgment.
DISCUSSION
I. Summary Judgment Standards
A plaintiff may move for summary judgment on grounds there is no
defense to the action, and the motion “shall be granted if all the papers
submitted show that there is no triable issue as to any material fact and that
the moving party is entitled to a judgment as a matter of law.” (Code Civ.
Proc., § 437c, subds. (a)(1), (c); Merrill v. Navegar, Inc. (2001) 26 Cal.4th 465,
476.) “A plaintiff . . . has met his or her burden of showing that there is no
defense to a cause of action if that party has proved each element of the cause
of action entitling the party to judgment on the cause of action. Once the
plaintiff . . . has met that burden, the burden shifts to the defendant . . . to
show that a triable issue of one or more material facts exists as to the cause
of action or a defense thereto. The defendant . . . shall not rely upon the
allegations or denials of its pleadings to show that a triable issue of material
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fact exists but, instead, shall set forth the specific facts showing that a triable
issue of material fact exists as to the cause of action or a defense thereto.”
(Code Civ. Proc., § 437c, subd. (p)(1); see Los Alamitos Unified School Dist. v.
Howard Contracting, Inc. (2014) 229 Cal.App.4th 1222, 1225.) “In
determining if the papers show that there is no triable issue as to any
material fact, the court shall consider all of the evidence set forth in the
papers, except the evidence to which objections have been made and
sustained by the court, and all inferences reasonably deducible from the
evidence, except summary judgment shall not be granted by the court based
on inferences reasonably deducible from the evidence if contradicted by other
inferences or evidence that raise a triable issue as to any material fact.”
(Code Civ. Proc., § 437c, subd. (c).) “There is a triable issue of material fact if,
and only if, the evidence would allow a reasonable trier of fact to find the
underlying fact in favor of the party opposing the motion in accordance with
the applicable standard of proof.” (Aguilar v. Atlantic Richfield Co. (2001) 25
Cal.4th 826, 850.)
Our review is de novo. (Jacks v. City of Santa Barbara (2017) 3 Cal.5th
248, 273; Hampton v. County of San Diego (2015) 62 Cal.4th 340, 347.) The
lower court’s reasoning is irrelevant; we owe it no deference and review the
ruling not the rationale. (Coral Construction, Inc v. City and County of San
Francisco (2010) 50 Cal.4th 315, 336; Navarrete v. Meyer (2015) 237
Cal.App.4th 1276, 1283.) We assume the trial court’s role and redetermine
the merits of the motion (Pasadena Metro Blue Line Construction Authority v.
Pacific Bell Telephone Co. (2006) 140 Cal.App.4th 658, 663), considering all of
the evidence presented by the parties (except for evidence that the trial court
properly excluded), liberally construing the evidence in support of Town, the
party opposing summary judgment, and resolving all doubts about whether
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triable issues of material fact exist in Town’s favor. (Hughes v. Pair (2009) 46
Cal.4th 1035, 1039; Caliber Paving Company, Inc. v. Rexford Industrial
Realty and Management, Inc. (2020) 54 Cal.App.5th 175, 180.) “Courts
deciding motions for summary judgment or summary adjudication may not
weigh the evidence but must instead view it in the light most favorable to the
opposing party and draw all reasonable inferences in favor of that party.”
(Weiss v. People ex rel. Department of Transportation (2020) 9 Cal.5th 840,
864.)
“While the appellate court must review a summary judgment motion by
the same standards as the trial court, it must independently determine as a
matter of law the construction and effect of the facts presented.” (Pasadena
Metro Blue Line Construction Authority v. Pacific Bell Telephone Co., supra,140 Cal.App.4th at p. 663.)
II. Standing/Real Party in Interest Claim
Town contends the trial court erred when it concluded BMC and LLC
were the same entity. Town repeats the arguments it made below, asserting
that mechanics liens and stop notices are security for debt whose
enforceability runs with the debt, and under section 266 of Delaware law, the
assets and debt run to the new entity, LLC, which was the only entity with
the right to sue on the debt. Town argues that after the conversion, BMC “no
longer existed,” and that under Brown v. Superior Court (2018) 19
Cal.App.5th 1208 and Zloop, Inc. v. E Recycling Systems, LLC (W.D.N.C.
2014) [2014 WL 6977791], BMC was no longer the proper party in interest to
sue, precluding summary judgment in its favor.
To have standing, a party must have a real interest in the controversy,
and be able to demonstrate its interest is concrete and actual, not conjectural
or hypothetical. (County of San Diego v. San Diego NORML (2008) 165
7
Cal.App.4th 798, 814; City of Palm Springs v. Luna Crest Inc. (2016) 245
Cal.App.4th 879, 883; see also Redevelopment Agency of San Diego v. San
Diego Gas & Electric Co. (2003) 111 Cal.App.4th 912, 920-921 [“Only a real
party in interest has standing to prosecute an action, except as otherwise
provided by statute. . . . ‘A real party in interest ordinarily is defined as the
person possessing the right sued upon by reason of the substantive law’ ”].) A
complaint filed by one who is not a real party in interest fails to state a cause
of action. (Redevelopment Agency, at p. 921.)
Delaware law determines whether BMC ceased to exist for purposes of
bringing suit after its conversion. “ ‘[T]he continuing legal existence of a
corporation depends on the law of the state of incorporation.’ ” (The Capital
Gold Group, Inc. v. Nortier (2009) 176 Cal.App.4th 1119, 1127, quoting CM
Record Corp. v. MCA Records, Inc. (1985) 168 Cal.App.3d 965, 967.) “A
corporation that lacks the capacity to sue in its home state based on a lack of
corporate status, also lacks capacity to sue in California, because ‘it has no
greater capacity to sue in California than in its home state.’ ” (Nortier, at p.
1127.)
The Delaware law under which BMC converted to an LLC, section 266,
title 8 of the Delaware Code Annotated, provides in part: “When a
corporation has been converted to another entity or business form pursuant
to this section, the other entity or business form shall, for all purposes of the
laws of the State of Delaware, be deemed to be the same entity as the
corporation. When any conversion shall have become effective under this
section, for all purposes of the laws of the State of Delaware, all of the rights,
privileges and powers of the corporation that has converted, and all property,
real, personal and mixed, and all debts due to such corporation, as well as all
other things and causes of action belonging to such corporation, shall remain
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vested in the other entity or business form to which such corporation has
converted and shall be the property of such other entity or business form, and
the title to any real property vested by deed or otherwise in such corporation
shall not revert or be in any way impaired by reason of this chapter; but all
rights of creditors and all liens upon any property of such corporation shall be
preserved unimpaired, and all debts, liabilities and duties of the corporation
that has converted shall remain attached to the other entity or business form
to which such corporation has converted, and may be enforced against it to
the same extent as if said debts, liabilities and duties had originally been
incurred or contracted by it in its capacity as such other entity or business
form. The rights, privileges, powers and interest in property of the
corporation that has converted, as well as the debts, liabilities and duties of
such corporation, shall not be deemed, as a consequence of the conversion, to
have been transferred to the other entity or business form to which such
corporation has converted for any purpose of the laws of the State of
Delaware.” (Del. Code Ann. tit. 8, § 266(h).)
That statute further provides: “Unless otherwise provided in a
resolution of conversion adopted in accordance with this section, the
converting corporation shall not be required to wind up its affairs or pay its
liabilities and distribute its assets, and the conversion shall not constitute a
dissolution of such corporation.” (Del. Code Ann. tit. 8, § 266(f).)
The Delaware statute is not a model of clarity. On the one hand, it
states that a converting corporation’s rights and debts due it “remain vested”
with the new entity, here LLC. On the other hand, it states that the
corporation’s rights and powers are not deemed transferred to the new entity.
What is clear about the law is that the corporation as an entity does not cease
to exist. Additionally, the Delaware statute provides that the new entity
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shall be deemed to be the same entity as the corporation. This language has
been construed to mean just that: the converting and converted entities are
treated as the same. (See Vanguard Car Rental USA, LLC v. Suttles
(Fla.Dist.Ct.App. 2016) 190 So.3d 672, 676-677 [“similar to Florida law,
Delaware law provides that when one entity converts to another corporate
form, the entities shall be deemed to be the same” and “pre and post-
converted entities are to be treated as the same entity for all purposes”].)
Giving the Delaware statue its plain and commonsense meaning as we must
(Kirzhner v. Mercedes-Benz USA, LLC (2020) 9 Cal.5th 966, 972), it is
apparent that in Delaware, when one entity converts to another corporate
form, the converted entity is the same entity as the original entity; the
original entity is not dissolved or its debts transferred to the new entity.
BMC and LLC were deemed formed on the same date, and are the same
entity “for all purposes” of Delaware law. This means a lawsuit by the
corporate entity is also a lawsuit by LLC, and vice versa. Despite any
possible conflict between the notion of rights vesting with, but not being
transferred to, LLC, we do not view the statute as eliminating BMC’s
concrete interest in enforcing its lien via the action commenced after its
conversion, particularly where BMC still exists as an entity. Given that BMC
and LLC are interchangable and BMC’s rights did not transfer to LLC, we
see no issue with standing, nor can we conclude the action by BMC is
deficient as not brought by the real party in interest.
None of Town’s authorities or arguments convince us otherwise.
Town’s assertion that the “assets (including this debt [the liens as security for
the debt]) run to the new entity” is not supported by either section 266 or by
Zloop, Inc. v. E Recycling Systems, LLC, supra, WL 6977791. In that case,
Zloop, LLC, a Delaware entity, purchased equipment from the defendant.
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(Id. at *1.) When problems arose, a lawsuit against defendant regarding the
transaction was commenced by Zloop, Inc., a Delaware corporation, an entity
that the LLC had converted to in March 2014. (Id. at *1.) On the defendant’s
claim that the corporation did not have standing to sue, the North Carolina
District Court noted that section 265 of Title 8 of the Delaware Code, having
similar language to section 266 here,3 allowed the conversion of the LLC to a
corporation. The court explained: “The statute plainly provides for a change
in corporate form that (1) amounts to a continuation of the former entity and
(2) does not constitute a dissolution, merger, or a transfer of assets.” (Id. at
3 Section 265 of Title 8 of the Delaware Code provides: “When another
entity has been converted to a corporation of this State pursuant to this
section, the corporation of this State shall, for all purposes of the laws of the
State of Delaware, be deemed to be the same entity as the converting other
entity. When any conversion shall have become effective under this section,
for all purposes of the laws of the State of Delaware, all of the rights,
privileges and powers of the other entity that has converted, and all property,
real, personal and mixed, and all debts due to such other entity, as well as all
other things and causes of action belonging to such other entity, shall remain
vested in the domestic corporation to which such other entity has converted
and shall be the property of such domestic corporation and the title to any
real property vested by deed or otherwise in such other entity shall not revert
or be in any way impaired by reason of this chapter . . . . The rights,
privileges, powers and interests in property of the other entity, as well as the
debts, liabilities and duties of the other entity, shall not be deemed, as a
consequence of the conversion, to have been transferred to the domestic
corporation to which such other entity has converted for any purpose of the
laws of the State of Delaware. (Del. Code Ann. tit. 8, § 265(f).) The statute
further provides: “Unless otherwise agreed for all purposes of the laws of the
State of Delaware or as required under applicable non-Delaware law, the
converting other entity shall not be required to wind up its affairs or pay its
liabilities and distribute its assets, and the conversion shall not be deemed to
constitute a dissolution of such other entity and shall constitute a
continuation of the existence of the converting other entity in the form of a
corporation of this State.” (Del. Code Ann. tit. 8, § 265(g).)
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*3.) The defendant had entered into contracts with the LLC, whose existence
was governed by Delaware law (id. at *3, fn. 7), and “according to the laws of
Delaware, ‘Zloop, Inc.’ means ‘Zloop, LLC’ then ‘Zloop, LLC’ will be a proper
party to the current lawsuit and have standing to sue on the contract.” (Id.
at *3.) The court described the LLC as “an entity known as ‘Zloop, Inc.’ ”
(Ibid.)
Just as in Zloop where the entities were the same and the corporation
meant the converting LLC, in this case BMC and LLC are the same entity
such that BMC is LLC, and thus is still a proper party notwithstanding its
change in corporate form. We agree with the Zloop court’s observation that
“allowing a dismissal due to a change in corporate structure would amount to
elevating form over substance.” (Zloop, Inc. v. E Recycling Systems, LLC,
supra, WL 6977791, at *4, fn. 8.) In the other case relied upon by Town,
Brown v. Superior Court, supra, 19 Cal.App.5th 1208, the court addressed a
motion to compel joinder of a corporation as a necessary party, noting in a
footnote that “[m]ore than two years before the motion was filed, [the
corporation] was converted to [an LLC], a Delaware limited liability
company, and, thus, the corporation no longer had a legal existence.” (Brown,
at p. 1215, fn. 7.) The Brown court made that observation without citation to
authority, and it is contrary to Delaware law providing that the converting
corporation is not dissolved by the conversion. (Del. Code Ann. tit. 8, § 266(f);
accord, Browning-Ferris Industries, Inc. & Subsidiaries v. U.S. (Fed.Cir.
2008) 274 Fed.Appx. 904, 908 [Delaware corporation continued to exist after
conversion to LLC for purposes of being qualified to act as an agent for a
consolidated group under treasury regulations].) Brown does not warrant a
different result.
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Town cites Code of Civil Procedure section 368.54 for the proposition
that where a debt has been transferred, the transferee is the only party with
a right to sue on the underlying contract. It argues the transferor may
maintain the action only if the action was commenced before the transfer,
thus BMC cannot rely on that section. Town includes “but see” cites to
Searles Valley Minerals Operations Inc. v. Ralph M. Parsons Service Co.
(2011) 191 Cal.App.4th 1394 and Johnson v. County of Fresno (2003) 111
Cal.App.4th 1087 for the proposition that once a transfer occurs, the assignor
lacks standing to sue on the claim.
Code of Civil Procedure section 368.5 addresses the effect of a “transfer
of an interest in the action or proceeding or . . . any other transfer of an
interest.” (Code Civ. Proc., § 368.5.) As stated however, Delaware’s section
266 makes clear no rights transfer in a corporate conversion, thus the
California statute is inapplicable. Likewise, Searles Valley Minerals
Operations Inc. v. Ralph M. Parsons Service Co., supra, 191 Cal.App.4th 1394and Johnson v. County of Fresno, supra, 111 Cal.App.4th 1087 are inapposite
as both involve assignments of rights that transferred the interests assigned.
(Searles, at p. 1396 [“we conclude that an assignee of contract indemnification
rights stands in the shoes of the indemnitee” for purposes of a cause of action
for express indemnity]; id. at p. 1405; Johnson, at p. 1096 [“An assignment
carries with it all the rights of the assignor. [Citations.] ‘The assignment
merely transfers the interest of the assignor.’ . . . Once a claim has been
assigned, the assignee is the owner and has the right to sue on it. [Citations.]
4 As BMC points out, Town’s brief contains a typographical error,
referring to section 367.5 of the Code of Civil Procedure rather than section
368.5.
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In fact, once the transfer has been made, the assignor lacks standing to sue
on the claim”].)
In reply, Town maintains corporations and LLCs are “not the same
thing” and that Delaware’s section 266 “applies to issues concerning internal
control—not to issues of relations with third parties, particularly in a
different forum.” According to Town, the Delaware law recognizes this “by
limiting the ‘sameness’ to reasons pertaining to ‘the laws of the State of
Delaware.’ ” This “internal control” point appears to be a theory not raised
below that cannot be raised for the first time on appeal, or in a reply brief.
(See DiCola v. White Brothers Performance Products, Inc. (2008) 158
Cal.App.4th 666, 676 [new theory on summary judgment]; Varjabedian v.
City of Madera (1977) 20 Cal.3d 285, 295, fn. 11 [“Obvious reasons of fairness
militate against consideration of an issue raised initially in the reply brief of
an appellant”].) Even if we were to consider the point, we would reject it.
The fact that section 266 operates for purposes of Delaware law does not
change our conclusion, because as stated, California looks to Delaware law to
determine whether an entity has a continued legal existence and capacity to
sue. We see nothing about the Delaware law (or, for that matter, Browning-
Ferris Industries, Inc., supra, 274 Fed.Appx. 904, on which Town relies)
limiting its operation to “internal control.” Delaware recognizes the
converting corporate entity and new LLC are the same entity, resolving the
issue of BMC’s standing for the reasons expressed above.
For the foregoing reasons, we reject Town’s claim that summary
judgment was unwarranted either because BMC lacked standing or was not
the real party in interest.
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III. BMC’s Damages
Town contends that even if BMC has standing to sue, it was not
entitled to summary judgment because Town presented evidence raising
triable issues of material fact about the amount BMC is owed under its
mechanics lien and stop notice. Town asserts the law gives recovery only for
the reasonable value of the work provided or its contract price, whichever is
less, and that Patterson’s deposition testimony, while not a “model of clarity,”
proved BMC had not completed 100 percent of its work. According to Town,
Patterson’s documents and testimony constitute direct evidence that BMC
completed only 96 percent of its work on the project, and it was not the trial
court’s role in addressing a summary judgment motion to assess the
credibility of that evidence. Town distinguishes cases in which summary
judgment was properly granted involving deposition testimony that an
opposing party sought to contradict (Joseph E. DiLoreto, Inc. v. O’Neill (1991)
1 Cal.App.4th 149, 152), or unreasonable or speculative inferences drawn
from evidence (O’Neil v. Dake (1985) 169 Cal.App.3d 1038, 1045; Cothran v.
Town Council of Los Gatos (1962) 209 Cal.App.2d 647, 664; Marshall v.
Parkes (1960) 181 Cal.App.2d 650, 655). Town argues, “If BMC . . . did not
finish this contract, it may not have the entire contract price.”
BMC responds that it presented prima facie evidence it completed its
work by March 18, 2016, as reflected in its amended subcontract, shifting the
burden to Town to present contrary evidence raising an issue of fact for a
jury. It argues Town’s opposing evidence consisting of Patterson’s deposition
testimony as to 96 percent completion and other evidence—payment
applications through November 30, 2015, and February 29, 2016, at which
time BMC concedes it had not completed its work—cannot raise a triable
issue of fact on the matter. BMC acknowledges that Town points to another
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payment application through March 25, 2016, but argues the payment
applications are not conclusive statements of fact regarding the ultimate
completion of BMC’s subcontract and change order work, and additionally,
Patterson, the sole person to authenticate the payment applications, stated
they were inaccurate.
A. Legal Principles
“ ‘A mechanic’s lien is a claim against real property, which may be filed
if a claimant has provided labor or furnished materials for the property and
has not been paid. [Citation.]’ [Citation.] Thus, ‘ “[it] is a procedural device
for obtaining payment of a debt [owed] by a property owner for the
performance of labor or the furnishing of materials used in construction.”
[Citation.]’ [Citation.] [¶] ‘Mechanics’ lien law derives from our state
Constitution . . . . The mechanics’ lien is the only creditors’ remedy stemming
from constitutional command and our courts “have uniformly classified the
mechanics’ lien laws as remedial legislation, to be liberally construed for the
protection of laborers and materialmen.” [Citation.]’ [Citation.] [¶]
‘However, “ ‘[a]lthough mechanic’s lien laws should be liberally construed to
protect those who have contributed skills, services or materials, towards the
improvement of property, it has been recognized that lien laws are for the
protection of owners as well as mechanic’s lien claimants.’ ” ’ ” (Precision
Framing Systems Inc. v. Luzuriaga (2019) 39 Cal.App.5th 457, 464.) A stop
payment notice notifies an owner or lender to withhold money from the
contractor so the materialman or laborer may be paid. (Crosno Construction,
Inc. v. Travelers Casualty and Surety Company of America (2020) 47
Cal.App.5th 940, 950; Flintkote Co. v. Presley of Northern California (1984)
154 Cal.App.3d 458, 462.)
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The parties agree that the amount of a subcontractor’s mechanics lien
is limited to the lesser of the amount stated in the contract between the
claimant and the contractor, or the reasonable value of the labor, services,
equipment and materials furnished. (Civ. Code, § 8430; University Casework
Systems, Inc. v. Superior Court (1974) 41 Cal.App.3d 263, 266.) If the
contract is fully performed, the maximum amount of the lien is the contract
price. (University Casework, at p. 266.) The amount claimed in a stop notice
may include only the amount due the claimant for work provided through the
date of the notice. (Civ. Code, § 8502, subd. (c).)
Mechanics liens are entirely statutory, so claimants must strictly, or at
least substantially, observe and comply with the statute. (Precision Framing
Systems Inc. v. Luzuriaga, supra, 39 Cal.App.5th at pp. 464-465.) Under the
law, a mechanics lien claim filed prematurely—before the scope of work
under a subcontract is completed—is void and cannot be enforced. (Id. at pp.
466-470; McCreary v. Toronto Midway Oil Co. (1918) 38 Cal.App. 17, 20 [lien
claim filed one day before labor terminated was premature and “confers no
right for a lien”].) In Precision Framing, the Court of Appeal upheld a
summary judgment against a framing subcontractor on grounds it had not
yet ceased work when it recorded its mechanics lien claim, making it
prematurely filed. (Id. at p. 460.) Specifically, the court found there were no
triable issues of a fact as to whether repairs were part of the subcontractor’s
work of improvement as the contact called for the subcontractor to provide
design services as well as supply trusses necessary to complete the project,
and because notices of correction as to the trusses were outstanding, the
project could not be completed. (Id. at pp. 468-469.) In view of the contracts
defining the relevant scope of work, the court held the subcontractor’s
opposing evidence—testimony from individuals that the subcontractor had
17
completed its scope of work—was merely factually unsupported legal opinion
by lay witnesses, and not evidence that the truss repair was outside the scope
of work. (Id. at p. 469.)
B. Analysis
We conclude BMC presented sufficient prima facie evidence that it
performed work having a reasonable value of $447,960.06, for which it was
not paid. In support of its motion, BMC presented a declaration from its
market framing manager, John Lewis, who averred that between December
2015 and February 2016, after BMC’s entry into the subcontract, 14 change
orders for $51,676 were submitted and approved, increasing BMC’s contract
price to $1,585.086. Lewis also averred that BMC submitted monthly
payment applications for its work performed, and BMC furnished the labor,
services, equipment and materials for the project for which it has not been
paid on or after October 1, 2015. He stated BMC’s last day of work on the
project was March 18, 2016, at which time BMC was owed $688,564.15, but
after additional payments and BMC’s issuance of partial releases, BMC was
owed the principal balance of $447,960.06. BMC’s general superintendent on
the project averred that BMC “performed all work called for in the
subcontract and subsequent Change Orders numbered 1 through 14 on the
Project.”
The burden thus shifted to Town to present evidence raising a jury
issue concerning the value of BMC’s work or the validity of its lien. As
stated, Town points to Patterson’s deposition testimony as direct evidence
that BMC did not complete its work on the project. In its opposing summary
judgment separate statement, Town pointed to payment applications that
were exhibits to the Patterson deposition, including one application signed by
18
Patterson dated March 29, 2016, for a period ending March 25, 2016, listing
trusses and rough carpentry as 96 percent complete.
We have reviewed the referenced deposition excerpts, construing them
liberally and resolving any ambiguities in them in Town’s favor as we must.
(Hughes v. Pair, supra, 46 Cal.4th at p. 1039; Fernandez v. Alexander (2019)
31 Cal.App.5th 770, 779.) Town is correct that this court is not to weigh the
evidence. (Weiss v. People ex rel. Department of Transportation, supra, 9
Cal.5th at p. 864.) However, the party opposing summary judgment must
still produce admissible evidence raising a triable issue of fact and not
evidence giving rise to mere speculation. (Code Civ. Proc., § 437c, subd. (d);
Fernandez, at p. 779 [that opposing evidence is liberally construed “does not
mean that courts may relax the rules of evidence in determining the
admissibility of an opposing declaration”].) Likewise, mere conclusions of law
or fact are not sufficient to satisfy the evidentiary requirements of the
summary judgment statute. (See California Traditions, Inc. v. Claremont
Liability Ins. Co. (2011) 197 Cal.App.4th 410, 420; Brown v. Ransweiler
(2009) 171 Cal.App.4th 516, 525.) Though summary judgment is improper
where there is a factual issue as to the amount of damages (Paramount
Petroleum Corp. v. Superior Court (2014) 227 Cal.App.4th 226, 243), where
neither the facts nor inferences are in conflict, it is proper to resolve the issue
on summary judgment. (See Caso v. Nimrod Productions, Inc. (2008) 163
Cal.App.4th 881, 889 [dealing with special employment relationship,
normally a question of fact].) Summary judgment is improper, however,
where the evidence gives rise to conflicting inferences, even where the facts
are undisputed. (See 46 v. City of Mountain View (1998) 66 Cal.App.4th 195,
219.)
19
In Patterson’s deposition, Town’s counsel asked Patterson about and
presented him with payment applications reflecting BMC’s work and
percentages of completion during different periods of time. Patterson was
shown an invoice dated November 30, 2015, leading to a back and forth
between Town’s counsel, Patterson and Patterson’s counsel about change
orders. Patterson’s counsel asked Patterson whether “percentages could be
off” if the scope of work in a change order was not “part of the scope of work
being designated as a percentage . . . .” Patterson agreed. He continued:
“And the percentage and the money, you know, was tight on the job at this
point being billed, and there was old invoices due. So, you know, you—and
there’s correction of work. [¶] . . . [¶] . . . So we’re out of whack.” Patterson
testified he could have written a “deductive change order for $250,000 to
[BMC] at this point” but did not.5 Town’s counsel asked: “So the percentage
of completion to date is basically saying, even without additional change
orders, we still aren’t a hundred percent complete with the original contract
amount.” Patterson replied, “Yeah.” Town’s counsel then clarified with
Patterson that it was “as of January 8th, 2016” that he could have issued a
deductive change order to BMC. Patterson explained he did not issue a
deductive change order in October 2015 because he was “waiting—you know,
are walls fixed to our standard.” Patterson blamed his failure to ever issue
the deductive change order on the fact every building was not drywalled and
he had personal family issues.
Town’s counsel then presented Patterson with a payment application
for the period ending in February 29, 2016. Counsel pointed out it showed
5 A deductive change order apparently reflects a reduction in the scope of
work that should reduce the contract price paid. (See, e.g., Fassberg
Construction Co. v. Housing Authority of City of Los Angeles (2007) 152
Cal.App.4th 720, 757-758.)
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both the trusses and rough carpentry at 96 percent completion. Patterson
confirmed that he authorized the document being stamped, but that it was
not notarized. Over objection, Town’s counsel tried to ask Patterson whether
the certification on the form—that the “work covered by this application for
payment has been completed in accordance with the contract documents”—
was a “true statement.” Counsel then asked if this was the “last bill.” At
first Patterson said no, then recalled and changed his answer, also
addressing the payment application: “This was the last-attempt effort to try
to make everybody—well, the changes—whole and thinking that Justin
[Huang, executive director for Town’s parent company] and I were going to
come to some understanding of how to get this caught up. Including the
adjustment, including the overbuilt aspect of this. [¶] So I would say yes,
and then I would say there’s too many—there’s too many variables with the
mess that’s been created for me to vet it to tell you that this is the best that I
can do at the moment to stamp this in good faith to try to get everybody
reconciled. How’s that.?” (Italics added.)
Counsel asked Patterson if he realized that by certifying the payment
application, he was asking for money. Patterson agreed, but said, “I also
know that we’re overbuilt on the job.” Counsel continued:
“[Town’s counsel]: Okay. So if it’s overbuilt and underfunded, the
conclusion is this [payment application] is inaccurate?
“[Patterson’s counsel: Objection.
“[Town’s counsel]: Is that correct?
“[Patterson’s counsel]: Asked and answered.
“[Patterson]: Everything’s inaccurate at this point.” (Italics added.)
Counsel finally presented Patterson with the March 29, 2016 payment
application, and asked: “[Y]our response to this, in terms of the accuracy or
21
inaccuracy of the certification, is the same as with respect to Exhibit 28 [the
February 2016 application], correct?” Patterson responded, “Yes. . . . [¶] . . .
[¶] This is when we walked off—.”
Town argues we should accept Patterson’s deposition testimony about
BMC’s incomplete work and the payment applications showing that BMC’s
work was only 96 percent complete as of March 25, 2016, but disregard
Patterson’s testimony about the accuracy of the payment applications
because “[t]he meaning of any errors is for the trier of fact to discern and
interpret.”
“ ‘An issue of fact can only be created by a conflict of evidence. It is not
created by . . . “cryptic, broadly phrased, and conclusory assertions” [citation],
or mere possibilities [citation]. “Thus, while the court in determining a
motion for summary judgment does not ‘try’ the case, the court is bound to
consider the competency of the evidence presented.” ’ ” (Brown v. Ransweiler,
supra, 171 Cal.App.4th at pp. 525-526; Hope Internat. University v. Superior
Court (2004) 119 Cal.App.4th 719, 739, fn. 9 [“conclusions of fact are not
binding on a summary judgment motion”].) “ ‘It is not enough to produce just
some evidence. The evidence must be of sufficient quality to allow the trier of
fact to find the underlying fact in favor of the party opposing the motion for
summary judgment.’ ” (Andrews v. Foster Wheeler LLC (2006) 138
Cal.App.4th 96, 108.)
We are unable to ascertain where Patterson directly testified with
clarity that BMC did not complete 100 percent of its work. Town cites to the
appellant’s appendix for that proposition but at the cited pages, Patterson
remarks the job was “out of whack” and that he could have written a
deductive change order to BMC for $250,000 “at this point,” which was later
clarified to be in January 2016, well before March 18, 2016, which BMC
22
averred was its last day on the job. Patterson’s testimony does not contradict
BMC’s evidence that as March 18, 2016, it had completed all work called for
in its subcontract and change orders. Further, the payment application
documents in the record do not permit conflicting inferences as to whether
BMC’s work was incomplete. The only witness in the record addressing these
payment applications, Patterson, testified under oath without contradiction
the applications were inaccurate. Though the payment applications contain a
signed “certification,”6 it is not made under penalty of perjury. We cannot
view the payment applications in isolation and divorce them from the
testimony of their signatory asserting under oath they are not accurate.
In sum, Town’s evidence was insufficient to satisfy its burden of
showing the existence of a triable issue of fact as to whether BMC completed
100 percent of its work.
6 The certification signed by Patterson reads: “The undersigned
Contractor certifies that to the best of the Contractor’s knowledge,
information, and belief the Work covered by this Application for Payment has
been completed in accordance with the Contract Documents, that all amounts
have been paid by the Contractor for Work for which previous Certificates of
Payment were issued and payments received from the Owner, and that
current payment shown herein is now due.” Even averments made on
information and belief in a sworn declaration are of no value in a summary
judgment. (Lopez v. University Partners (1997) 54 Cal.App.4th 1117, 1124;
see Bennett v. Hibernia Bank (1960) 186 Cal.App.2d 748, 754.)
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DISPOSITION
The judgment is affirmed.
O’ROURKE, Acting P. J.
WE CONCUR:
AARON, J.
GUERRERO, J.
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