Sugarman v. IRZ Consulting, LLC

• Court: United States Bankruptcy Court, E.D. California
• Decided: November 10, 2022
• Docket: 19-01033
• Status: Unknown

Opinion

1 UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF CALIFORNIA 2 FRESNO DIVISION

4 In re ) Case No. 18-11651-B-11 ) 5 GREGORY JOHN te VELDE, ) ) 6 Debtor. ) ) 7 ) ) 8 RANDY SUGARMAN, Ch. 11 Trustee, ) Adv. Proceeding No. 19-1033 ) (Consolidated by order (Doc. 9 Plaintiff, ) #94) for trial purposes only) ) 10 v. ) DCN: MB-3 ) 11 IRZ CONSULTING, LLC (aka) IRZ ) Date: October 26, 2022 Construction Division LLC, ) Time: 11:00 a.m. 12 ) Place: U.S. Courthouse Defendant. ) 2500 Tulare Street 13 ) Courtroom 13, 5th Floor ) Fresno, California 14 ) Judge: Hon. René Lastreto II IRZ CONSULTING, LLC ) 15 (aka) IRZ Construction Division ) LLC, ) 16 ) Third-Party Plaintiff, ) 17 ) v. ) 18 ) U.S. FARM SYSTEMS; 4 CREEKS, ) 19 INC., JOHN FAZIO (dba Fazio ) Engineering); DARI-TECH, INC.; ) 20 LASER LAND LEVELING, INC.; MAAS ) ENERGY WORKS, INC.; GEORGE ) 21 CHADWICK (dba George Chadwick ) Consulting); VALMONT NORTHWEST, ) 22 INC.; NUCOR BUILDING SYSTEMS ) UTAH LLC, ) 23 ) Third-Party Defendants. ) 24 ) ) 25

26 REPORT AND RECOMMENDATION ON PLAINTIFF RANDY SUGARMAN’S FIRST MOTION FOR PARTIAL SUMMARY JUDGMENT 27

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2 John MacConaghy, MacCONAGHY & BARNIER, PLC, Sonoma, CA, for chapter 11 trustee Randy Sugarman, Plaintiff. 3 Benjamin P. Tarczy, MILLER NASH LLP, Portland, OR, for IRZ 4 Consulting, LLC, Defendant/Third-Party Plaintiff.

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6 RENÉ LASTRETO II, Bankruptcy Judge: 7 8 INTRODUCTION 9 Summary judgment should not be granted unless the moving 10 party shows both that there is no genuine dispute as to any 11 material fact and that movant is entitled to judgment as a 12 matter of law.1 Civ. Rule 56 (Rule 7056) (emphasis added). Here, 0F 13 the plaintiff chapter 11 liquidating trustee asks for partial 14 summary judgment on the objection to claim allegations of his 15 adversary complaint because the defendant was an unlicensed 16 contractor who is therefore barred from perfecting liens and 17 suing for sums owed. The defendant disagrees, insisting that the 18 party named in the underlying contracts is its construction 19 division, thus enjoying the benefits and protections of its 20 contractor’s license. 21 Finding material factual disputes remain, the court 22 recommends the motion for partial summary judgment be DENIED. 23 /// 24 /// 25

1 Unless otherwise indicated, references to: (i) “Civ. Rule” will be to 26 the Federal Rules of Civil Procedure; (ii) “Rule” will be to the Federal Rules of Bankruptcy Procedure; (iii) “FRE” will be to the Federal Rules of 27 Evidence; (iv) “LBR” will be to the Local Rules of Practice for the United States Bankruptcy Court, Eastern District of California; and (v) all chapter 28 1 PROCEDURAL HISTORY 2 Chapter 11 liquidating trustee Randy Sugarman (“Plaintiff”) 3 moves for partial summary judgment on the first claim for relief 4 of his complaint against IRZ Consulting, LLC (“Defendant” or 5 “IRZ”). Pl.’s Mot. Summ. J., Doc. #424. That claim is an 6 objection to Defendant’s Proof of Claim No. 19 filed June 4, 7 2018, in the amount of $347,057.56. Cf. Compl., Doc. #1. 8 Defendant objects to Plaintiff’s evidence and opposes 9 summary judgment. Def.’s Evid. Objs. & Mem. P. & A., Docs. #459 10 & #461. 11 Plaintiff replied and submitted its own evidentiary 12 objections.2 Pl.’s Reply & Evid. Objs., Docs. #473 & #475. 1F 13 This motion for summary judgment was filed on 42 days’ 14 notice as required by LBR 7056-1 and in conformance with Rule 15 7056 and Civ. Rule 56. This matter was originally scheduled to 16 be heard on October 26, 2022. Notice, Doc. #425. The court took 17 the matter under submission and indicated that it would 18 subsequently issue a report and recommendation to the District 19 Court. Civ. Mins. (Oct. 26, 2022), Doc. #520. 20 These are the court’s findings and recommendations for de 21 novo consideration by the District Court as to Plaintiff’s 22 motion for partial summary judgment. The rulings on the 23 evidentiary objections will be included at the end of this 24 report. 25 /// 26 /// 27 2 The court granted Plaintiff’s request for an extension of time to 28 1 REQUEST FOR JUDICIAL NOTICE 2 Plaintiff requests the court take judicial notice of 3 certain documents filed in the underlying chapter 11 bankruptcy 4 case, Bankr. Case No. 18-11651 (“Bankr”). RJN, Doc. #431. The 5 court may take judicial notice of all documents and other 6 pleadings filed in this adversary proceeding, the underlying 7 bankruptcy case, filings in other court proceedings, and public 8 records. FRE 201; Bank of Am., N.A. v. CD-04, Inc. (In re Owner 9 Mgmt. Serv., LLC), 530 B.R. 711, 717 (Bankr. C.D. Cal. 2015). 10 The court takes judicial notice of the requested documents, as 11 well as the pleadings filed in this adversary proceeding, and 12 the underlying chapter 11 bankruptcy case, but not the truth or 13 falsity of such documents as related to findings of fact. In re 14 Harmony Holdings, LLC, 393 B.R. 409, 412-15 (Bankr. D.S.C. 15 2008). 16 17 JURISDICTION 18 The United States District Court for the Eastern District 19 of California has jurisdiction of this adversary proceeding 20 under 28 U.S.C. § 1334(b) because this adversary proceeding 21 arises in and is related to a case under title 11 of the United 22 States Code. Under 28 U.S.C. § 157(a), the District Court has 23 referred this matter to this court. Part of this proceeding – 24 the claim objection - is “core” under 28 U.S.C. § 157(b)(2)(B). 25 Furthermore, the District Court denied an early motion to 26 withdraw the reference under 28 U.S.C. § 157(c)(1) and allowed 27 this court to supervise discovery, rule on non-dispositive 28 motions, and issue a Report and Recommendation for de novo 1 review to the District Court on dispositive motions.3 Venue is 2F 2 proper in this district pursuant to 28 U.S.C. §§ 1408 and 3 1409(a). 4 5 BACKGROUND 6 On September 30, 2015, Gregory te Velde (“Debtor”) and “IRZ 7 Construction Division, an Oregon limited liability company” 8 (“ICD”) executed a Work Order (“Work Order”) providing that ICD 9 would provide certain construction design services to Debtor for 10 the “Willow Creek Dairy” on a time and material basis. Work 11 Order, Doc. #463, Ex. A. The price was not to exceed 12 $100,000.00. Id. The Work Order was signed by Debtor and Fred 13 Ziari, as an agent of ICD. Id. at 3. 14 On or about November 17, 2015, Debtor and Ziari executed a 15 new agreement entitled Design, Engineer, and Project Management 16 Services for Greg Tevelde Willow Creek Dairy Construction 17 Project November 2015 (“Contract”), generally providing that 18 Defendant would perform 21 separate construction related tasks 19 for the Willow Creek Dairy. Id., Ex. B; Docs. #427, Ex. 6. Ziari 20 signed as President of “IRZ Consulting, LLC (d/b/a IRZ 21 Construction Division through Wayne Downey as Director of 22 Construction)[,]” which is a duly licensed Oregon contractor and 23 a duly organized Oregon limited liability company. Id. at 15. 24 Debtor defaulted on his obligation to timely pay for 25 Defendant’s services. Downey Decl., Doc. #462, ¶ 9. On July 12, 26 2017, ICD and Defendant stopped their work on the project. Ibid. 27 3 See Order Denying Defendant’s Motion to Withdraw Reference, Doc. #162; 28 cf. 1 Defendant recorded an Oregon form Construction Claim of Lien on 2 the project, alleging that it “furnished labor, equipment, 3 material, services, supervision, and plans, drawings and surveys 4 actually used in the construction of improvements” on the 5 subject real property “. . . commencing on or about September 6 30, 2015.” Id. at ¶ 10; Constr. Claim of Lien, Doc. #463, Ex. C. 7 On November 2, 2017, Defendant filed a Complaint (Construction 8 Lien Foreclosure; Breach of Contract; Quantum Meruit) in Morrow 9 County, Oregon Circuit Court against Debtor and others, seeking 10 the principal sum of $393,476.81 for the cost of “labor, 11 equipment, material, services, supervision, plans, drawings, and 12 surveys . . . used for the benefit of the Property” from 13 “September 30, 2015, through August 3, 2017.” Id., Ex. D. The 14 state court complaint includes the Work Order and Contract as 15 exhibits. 16 Debtor filed chapter 11 bankruptcy on April 26, 2018. Pet., 17 Doc. #432, Ex. 1 (Bankr. Doc. #1). On June 4, 2018, Defendant 18 filed its Proof of Secured Claim in the amount of $347,057.56, 19 attaching its mechanics’ lien complaint as an exhibit. Id., Ex. 20 2 (Bankr. Claim 19). 21 On February 11, 2019, Plaintiff sold the property subject 22 to Defendant’s claim of lien pursuant to an Order Authorizing 23 Sale of Real Property Free and Clear of Liens. Order, id., Ex. 3 24 (Bankr. Doc. #1607). The court directed Plaintiff to disburse 25 most of the sales proceeds of the Lost Valley Farm to various 26 parties in interest; however, the court directed Trustee to hold 27 back funds to provide “adequate protection” to Defendant on 28 account of its disputed secured claim (the “Holdback Fund”). 1 Stip. Order, id., Ex. 4 (Bankr. Doc. #1799). The current balance 2 of the Holdback Fund is approximately $659,323.00. Sugarman 3 Decl., Doc. #428. 4 Plaintiff filed this instant action against Defendant on 5 March 8, 2019. The adversary complaint alleges claims for 6 (1) disallowance of Claim 19; (2) damages for breach of 7 contract; (3) damages for negligence; and (4) avoidance of 8 fraudulent transfers. Compl., Doc. #1. The first claim for 9 relief is the subject of this motion: Plaintiff seeks to 10 disallow Defendant’s Claim 19 in full. Mot., Doc. #424. 11 12 DISCUSSION 13 I. Summary Judgment Standard 14 Civ. Rule 56, as incorporated by Rule 7056, applies in 15 adversary proceedings. Under Civ. Rule 56(a), summary judgment 16 should be granted only if the movant shows that there is no 17 genuine dispute as to any material fact and that the movant is 18 entitled to judgment as a matter of law. 19 When considering a motion for summary judgment, facts must 20 be viewed in the light most favorable to the nonmoving party 21 only if there is a “genuine” dispute as to those facts. Civ. 22 Rule 56(c); Scott v. Harris, 550 U.S. 372, 380, 127 S. Ct. 1769, 23 1776 (2007). “[T]he mere existence of some alleged factual 24 dispute between the parties will not defeat an otherwise 25 properly supported motion for summary judgment; the requirement 26 is that there be no genuine issue of material fact.” Anderson v. 27 Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S. Ct. 2505, 28 2509-10 (1986). 1 “Where the record taken as a whole could not lead a 2 rational trier of fact to find for the nonmoving party, there is 3 no ‘genuine issue for trial.’” Matsushita Elec. Indus. Co. v. 4 Zenith Radio Corp., 475 U.S. 574, 587, 106 S. Ct. 1348, 1356 5 (1986). “As to materiality, the substantive law will identify 6 which facts are material. Only disputes over facts that might 7 affect the outcome of the suit under the governing law will 8 properly preclude the entry of summary judgment.” Anderson, 477 9 U.S. at 248, 106 S. Ct. at 2510. “[W]hile the materiality 10 determination rests on the substantive law, it is the 11 substantive law’s identification of which facts are critical and 12 which facts are irrelevant that governs.” Ibid. 13 The movant may not argue that its evidence is the most 14 persuasive or “explain away” evidence unfavorable to its 15 defenses; rather, it must show that there are no material facts 16 in dispute, or which can be reasonably resolved by a fact 17 finder. Id. at 250-51, 106 S. Ct. at 2511; Davis v. Team Elec. 18 Co., 520 F.3d 1080, 1089 (9th Cir. 2008) (“Summary judgment is 19 not appropriate” if a reasonable jury could find in the 20 plaintiff’s favor.) (emphasis added). 21 As the movant here, the burden of proof is on Plaintiff. 22 The court must draw all reasonable inferences in the light most 23 favorable to the non-moving party, and therefore in favor of 24 denying summary judgment. Anderson, 477 U.S. at 255, 106 S. Ct. 25 at 2513-14. Further, the non-moving party’s evidence is to be 26 believed, and all justifiable inferences are to be drawn in its 27 favor. Hutchins v. TNT/Reddaway Truck Line, Inc., 939 F. Supp. 28 721, 723 (N.D. Cal. 1996). 1 If a summary judgment motion is properly submitted, the 2 burden shifts to the opposing party to rebut with a showing that 3 there is a genuine issue of material fact. Henderson v. City of 4 Simi Valley, 305 F.3d 1052, 1055-56 (9th Cir. 2002). “The 5 nonmoving party ‘may not rely on denials in the pleadings but 6 must produce specific evidence . . . to show that the dispute 7 exists.’” Barboza v. New Form, Inc. (In re Barboza), 545 F.3d 8 702, 707 (9th Cir. 2008), quoting Bhan v. NME Hosps., Inc., 929 9 F.2d 1404, 1409 (9th Cir. 1991). 10 Ultimately, the court must grant summary judgment if the 11 movant shows that the record, taken as a whole, could not lead a 12 rational trier of fact to find for the nonmoving party as to any 13 fact that might affect the outcome of the suit under the 14 governing law, and the nonmovant does not meet their burden of 15 proof to refute the movant’s claims. 16 17 II. Enforceability of Defendant’s Claim and Lien 18 A. 19 First, Plaintiff argues that Defendant’s claim and lien are 20 unenforceable because they were not continually licensed 21 throughout its performance of work for the Debtor. Pl.’s Mem. P. 22 & A., Doc. #429. Since ICD performed services for the Debtor 23 without a valid contractor’s license, Plaintiff urges that Or. 24 Rev. Statute (“ORS”) § 701.131(1) bars Defendant from enforcing 25 its lien on the Holdback Fund, and bars it from recovering any 26 sums on its proof of claim.4 Id., citing Pincetich v. Nolan, 252 3F

27 4 ORS § 701.131 provides, in relevant part, that “a contractor may not perfect a construction lien, . . . or commence . . . a claim in a court of 28 1 Or. App. 42, 285 P.3d 759 (2012) (barring a contractor’s claim 2 because of a 14-day suspension in contractor’s license due to 3 lapse in insurance); Stellar J. Corp. v. Smith & Loveless, 580 4 F. App’x 604 (9th Cir. 2014) (barring subcontractor, a Kansas 5 corporation, from pursuing its monetary claim and rejecting all 6 theories raised to avoid the bar because it did not have an 7 Oregon contractor’s license when it provided labor and 8 materials). 9 The core of Plaintiff’s argument relies on the alleged fact 10 that, as of September 30, 2015, ICD was an independent entity 11 performing construction services without being duly organized as 12 a limited liability company, nor having a contractor’s license 13 issued by the State of Oregon. Pl.’s Mem. P. & A., Doc. #429, 14 citing MacConaghy Decl., Docs. ##426-27, Exs. 1-3. 15 In response, Defendant claims that ICD is a division of 16 Defendant and an assumed business name of Defendant, so it 17 performed services under Defendant’s contractor’s license. 18 Def.’s Stmt. Undisp. Facts, Doc. #460, citing Downey Decl., 19 Doc. #462, ¶¶ 5-6. Plaintiff relies on ICD being named in the 20 Work Order and Contract, but ICD is not and has never been a 21 separate legal entity from Defendant. Since Plaintiff has 22 conceded that Defendant is a duly licensed Oregon contractor and 23 a duly organized Oregon limited liability company, and Defendant 24 recorded a lien and filed a complaint related to the project, 25 Defendant argues that ORS § 701.131 does not apply to its lien, 26 complaint, and claim because it was in fact a duly licensed 27 of any contract for work that is subject to this chapter, unless the 28 1 contractor and duly organized limited liability company under 2 Oregon law at the time it performed services for Debtor. 3 Defendant distinguishes Pincetich and Stellar as being 4 inapplicable: both involved contractors who acknowledged that 5 they lacked an active, valid contractor’s license, but Defendant 6 here was a licensed Oregon contractor at all relevant times. 7 Def.’s Mem. P. & A., Doc. #461. Defendant alternatively argues 8 that neither the Work Order nor the Contract required it to 9 construct, alter, repair, add to, subtract from, improve, 10 inspect, move, wreck or demolish any structure at all, so its 11 services did not fall within the scope of the work of a 12 “contractor” as defined in ORS § 701.005(5).5 So even assuming, 4F 13 arguendo, that Defendant was not a licensed contractor at all 14 relevant times, it insists that this motion should be denied 15 because its services on this project did not fall within the 16 scope of those performed by a “contractor” under ORS 17 § 701.005(5). 18 Plaintiff’s reply argues (1) Defendant’s effort to 19 substitute a new contracting party into the Work Order is barred 20 by the parol evidence rule, (2) Defendant cannot avail itself of 21 the “mistake” exception to the parol evidence rule, and (3) 22 Defendant is judicially estopped from claiming that the work it 23 allegedly performed did not require an Oregon contractor’s 24 license. Pl.’s Reply, Doc. #473. 25

5 ORS § 701.005(5) defines a “contractor” as: “[a] person that, for 26 compensation or with the intent to sell, arranges or undertakes or offers to undertake or submits a bid to construct, alter, repair, add to subtract from, 27 improve, inspect, move, wreck or demolish, for another, a building, highway, road, railroad, excavation or other structure, project, development or 28 1 Parol Evidence Rule 2 Plaintiff relies on the parol evidence rule as codified 3 under Oregon law: 4 When the terms of an agreement have been reduced to writing by the parties, it is to be 5 considered containing all of those terms, and therefore there can be, between the parties 6 and their representatives or successors in interest, no evidence of the terms of the 7 agreement, other than the contents of the writing, except where a mistake or im- 8 perfection of the writing is put in issue by the pleadings or where the validity of the 9 agreement is the fact in dispute. However this section does not exclude other evidence of 10 circumstances under which the agreement was made, or to which it relates, as defined in 11 ORS 42.220, or to explain an ambiguity, intrinsic or extrinsic, or to establish 12 illegality or fraud. The term “agreement” includes deeds and wills as well as contracts 13 between the parties. 14 ORS § 41.740. 15 Since Oregon courts routinely bar the admission of parol 16 evidence, Plaintiff maintains that Defendant cannot substitute 17 itself into the Work Order using parol evidence. Pl.’s Reply, 18 Doc. #473, citing Abercrombie v. Hayden Corp., 320 Or. 279, 883 19 P.2d 845 (1994) (barring admission of evidence of an oral 20 agreement to extend the time to close on the sale of commercial 21 properties because the purchase agreement and written extensions 22 were unambiguous and fully integrated); Morton & Assocs., LLC v. 23 McCain Foods USA, Inc., 226 Or. App. 532, 204 P.3d 167 (2009) 24 (affirming summary judgment after concluding that brokerage 25 agreements were completely integrated, and the plaintiff’s 26 claims relied on barred extrinsic evidence). 27 Plaintiff also contends that Defendant cannot avail itself 28 of the “mistake” exception contained in ORS § 41.740 because the 1 mistake was derived from Defendant’s pre-printed form and wholly 2 unilateral. Reformation of a fully integrated, unambiguous 3 contract based on unilateral mistake may only occur in two 4 circumstances: (1) the mistake must have been known to the other 5 party; or (2) the other party has acted inequitably. Pl.’s 6 Reply, Doc. #473, citing Gardner v. Meiling, 280 Or. 665, 572 7 P.2d 1012 (1977) (rejecting an alleged unilateral mistake 8 because there was no evidence that the defendants were aware of 9 such mistake, or that a reasonable person would have known of 10 the mistake); Foster v. Gibbons, 177 Or. App. 45, 33 P.3d 329 11 (2001) (rejecting a claimed mutual mistake because reformation 12 would be inequitable after six years of performance without 13 objection). 14 Judicial Estoppel 15 Lastly, Plaintiff maintains that Defendant is judicially 16 estopped from claiming that the work it allegedly performed did 17 not require an Oregon contractor’s license because Defendant 18 recorded a mechanics’ lien (or “construction lien” under Oregon 19 terminology) and filed a state court action to foreclose it. 20 Under ORS § 701.131, the only entity who can enforce a 21 construction lien is a contractor. Thus, under the doctrine of 22 judicial estoppel, Defendant must be barred from claiming that 23 it was not really acting as a contractor after all. Pl.’s Reply, 24 Doc. #473, citing Hamilton v. State Farm Fire & Cas. Co., 270 25 F.3d 778 (9th Cir. 2001). 26 /// 27 /// 28 /// 1 B. 2 ORS § 41.740 incorporates ORS § 42.220, which states “[i]n 3 construing an instrument, the circumstances under which it was 4 made, including the situation of the subject and of the parties, 5 may be shown so that the judge is placed in the position of 6 those whose language the judge is interpreting.” This language 7 “permits the judge to consider circumstances under which the 8 instrument was executed and the relative situations of the 9 parties.” United States Nat’l Bank v. Guiss, 214 Or. 563, 593, 10 331 P.2d 865, 879 (1958). 11 Plaintiff’s evidence seems to prove that IRZ Consulting, 12 LLC has been licensed by the Oregon Construction Contractors 13 Board (“CCB”) since 2011. Def.’s CCB License, Doc. #427, Ex. 5. 14 The November 2015 Contract identifies the contracting parties as 15 Debtor TeVelde and IRZ Construction Division “a division of IRZ 16 Consulting LLC.” Contract, Id., Ex. 6 at 15. Defendant’s 17 position on ICD’s status is not ideal. The earlier Work Order 18 between the parties identified ICD as “IRZ Construction 19 Division, an Oregon limited liability company.” Work Order, 20 Doc. #463, Ex. A. But it apparently was not a limited liability 21 company when the Work Order was signed. ICD’s CCB License 22 Doc. #427, Ex. 2. 23 There is a genuine factual dispute on this material issue: 24 is ICD an independent entity performing activities requiring a 25 contractor’s license or an assumed business name and division of 26 Defendant that is legally performing services under Defendant’s 27 contractor’s license? Since the record itself contains 28 conflicting information, it cannot be said that “no reasonable 1 jury” would find one classification more believable than the 2 other. 3 The answer to the disputed factual issue may impact the 4 admission of evidence concerning at least the Work Order under 5 the parol evidence rule, but the court need not reach that issue 6 since factual disputes exist as to the license status of ICD. 7 The same is true for Plaintiff’s judicial estoppel argument 8 raised in reply. Whether Defendant is barred by judicial 9 estoppel from claiming an Oregon contractor’s license was 10 unnecessary will depend, in part, on ICD’s license status. See 11 also, New Hampshire v. Maine, 542 U.S. 742, 753, 121 S. Ct. 12 1808, 1816 (2001) (“It may be appropriate to resist application 13 of judicial estoppel ‘when a party’s prior position was based on 14 inadvertence or mistake.’”), quoting John S. Clark Co. v. 15 Faggert & Frieden, P.C., 65 F.3d 26, 29 (4th Cir. 1995). 16 Another impediment to finding an absence of a material 17 factual dispute are the terms of the “integration clauses” in 18 both the Work Order and Contract. Work Order & Contract, 19 Docs. #463, Ex. A at 5 & Ex. B at 21. As relevant here, the 20 provisions state that “[t]his writing is the full and complete 21 agreement between the parties concerning ICD’s services to 22 (CLIENT/OWNER) for the above services and work” (emphasis 23 added). So, the subject of the integration is limited to ICD’s 24 services to Debtor Te Velde for those “services and work” 25 described in both agreements. The integration clause by its 26 terms is limited to ICD’s performance under the agreements. The 27 clause includes nothing more. 28 /// 1 Since it is disputed whether ICD was performing unlicensed 2 contractor activities, or whether it was doing business under 3 Defendant’s valid contractor’s license, the court is unable to 4 recommend granting this motion. 5 6 CONCLUSION 7 Plaintiff has not demonstrated that ICD was performing 8 unlicensed contractor’s services, so this court recommends that 9 | this motion for summary judgment be DENIED. The court will issue 10 a subsequent order setting deadlines for objections to this 11 proposed report and recommendation. The rulings on the parties’ 12 evidentiary objections begins on the following page. 13 14 15 Dated: Nov 10, 2022 By the Court 16 Z / a“ 17 Cra ené Lastreto II, Judge 18 United States Bankruptcy Court 19 20 21 22 23 24 25 26 27 28

1 RULINGS ON EVIDENTIARY OBJECTIONS 2 IRZ’s Objections to the Declaration of John H. MacConaghy Grounds for 3 Material Objected To: Objections: Court’s Ruling: 1. “Attached to this 1a. Lacks personal 1a. Sustained as to lack 4 Declaration and labeled knowledge. FRE of personal knowledge of Exhibit 1 is a correct copy 602. IRZ Construction 5 of the Westlaw database Division, LLC’s and/or printout indicating that IRZ 1b. Best evidence IRZ Consulting, LLC’s 6 Construction Division, LLC rule. FRE 1002-04. status as an Oregon was not organized as an limited liability 7 Oregon limited liability company. company until May 31, 2017.” 8 MacConaghy Decl., Doc. #426 1b. Sustained. The at ¶ 3, Lines 2:9-11. Westlaw corporate 9 records and business registration search 10 result is not an official government 11 source and cannot be used in place of an 12 original writing, recording, or 13 photograph, and therefore cannot be used 14 to prove its content.

15 2. “Attached to this 2a. Lacks personal 2a. Sustained as to lack Declaration and labeled knowledge. FRE of personal knowledge of 16 Exhibit 2 is a correct copy 602. IRZ Construction of the “license search” Division, LLC’s and/or 17 database maintained by the 2b. Best evidence IRZ Consulting, LLC’s Oregon Construction rule. FRE 1002-04. status as an Oregon 18 Contractors Board indicating limited liability that there is no record of company. 19 IRZ Construction Division, LLC ever being a licensed 2b. Overruled. The 20 contractor in the State of printout from the Oregon Oregon.” Id. at ¶ 4, Lines Construction 21 2:12-16. Contractors’ license database can be used to 22 prove whether “IRZ Construction Division 23 LLC” is a licensed contractor. 24 25 Doc. #459. 26 /// 27 /// 28 /// 1 Plaintiff’s Objections to the Declaration of Wayne Downey Grounds for 2 Material Objected To: Objections: Court’s Ruling: 1. “Defendant entered into a 1a. Parol evidence 1a. Overruled. License 3 short-form, 3-page work order rule. status of ICD is still (the “Work Order”) with in dispute. Also, the 4 Gregory John te Velde. . .” 1b. Best evidence integration clause may Downey Decl., Doc. #462 at rule. FRE 1002-04. have limited effect. 5 ¶ 2, Lines 2:18-19. Doc. #463.

6 1b. Overruled. A copy of the Work Order has been 7 filed as an exhibit, which can be used to 8 prove its contents.

9 2. “The Work Order did not 2a. Parol evidence 2a. Overruled. call for Defendant to rule. Integration clause may 10 arrange, undertake, offer to have limited effect. undertake, or submit a bid to 2b. Best evidence Doc. #463. 11 construct, alter, repair, add rule. FRE 1002-04. to, subtract from, improve, 2b. Sustained. 12 inspect, move, wreck or demolish any structure for 13 Debtor.” Id. at ¶ 2, Lines 2:23-25. 14 3. “The Contract provided 3a. Parol evidence 3a. Overruled. Statement 15 that Defendant act as rule. is not inconsistent with “Project Manager” to perform terms of contract. 16 review, oversight, design, 3b. Best evidence and engineering tasks, with rule. FRE 1002-04. 3b. Overruled. No 17 Debtor to act as General question raised as to Contractor for the project. authenticity of 18 The Contract did not call for duplicate. Otherwise, Defendant to arrange, sustained. 19 undertake, offer to undertake, or submit a bid to 20 construct, alter, repair, add to, subtract from, improve, 21 inspect, move, wreck or demolish any structure for 22 Debtor.” Id. at ¶ 3, Lines 2:1-5. 23 24 /// 25 /// 26 /// 27 /// 28 /// 1 . : Grounds for . Material Objected To: □ Court’s Ruling: Objections: 2 4. The Work Order mistakenly 4a. Lacks 4a. Overruled. Wayne names “IRZ Construction foundation/personal | Downey is the Director 3 Division,” as opposed to the knowledge. FRE 602. | of Construction at IR4Z correctly named “IR4Z and signed as Director 4 Construction Division (ICD) 4b. Parol evidence on behalf of ICD in the (a division of IRZ Consulting | rule. Contract. Mr. Downey has LLC)” named in the Contract, personal knowledge as as party to the Work Order.” 4c. Best evidence director and as IRZ’s 6 Id. at 5, Lines 2:8-10. rule. FRE 1002-04. agent to know about the accuracy of the Work 7 Order. 8 4b. Overruled. ICD license status is a 9 disputed fact. Also, integration clause may 10 have limited effect. 11 4c. Overruled. No genuine question as to 12 authenticity. FRE 1003 13 5. “At all times, the parties | 5. Lacks 5. Overruled as to IRZ’s understood the Work Order and | foundation/personal | understanding because 14 Contract to be between knowledge. FRE 602. | Wayne Downey, as Defendant and Debtor.” Id. at director and as an agent 15 1 5, Lines 2:10-11. of IRZ, has personal knowledge of IRZ’s 16 understanding of the Work Order and Contract. 17 Sustained as to Debtor’s understanding of the 18 Work Order and Contract. 19 20 | Doc. #475. 21 Dated: Nov 10, 2022 By the Court

heise tec 24 ené Léstreto II, Judge 55 United States Bankruptcy Court

26 27 28

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19 Shanon J Slack Slack Law Group APC 20 2030 Main Street Suite 1300 21 Irvine, CA 92614-7220

22 Randy Sugarman 583 1st St W 23 Sonoma, CA 95476-6638

24 Benjamin P. Tarczy US Bancorp Tower 25 111 SW Fifth Avenue, Suite 3400 Portland, OR 97204 26 Duncan C. Turner 27 Badgley Mullins Turner PLLC 19929 Ballinger Way NE #200 28 Seattle, WA 98155-8208 1 Scot M. Tyler Moore & Van Allen PLLC 2 100 N. Tryon St #4700 Charlotte, NC 28202-4003 3 Kurt F. Vote 4 265 E. River Park Circle, Suite 310 Fresno, CA 93720-1580 5 Riley C. Walter 6 265 E. River Park Circle Suite 310 Fresno, CA 93720-1580 7 Neal L. Wolf 8 425 Market St 26th Fl San Francisco, CA 94105 9

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