Kabayan v. Yepremian, CV 94-1454 RAP. Bankruptcy No. LA 93-14276-RA. Adv. No. AD 93-02091.

• Decision Date: 08 December 1995
• Docket Number: No. CV 94-1454 RAP. Bankruptcy No. LA 93-14276-RA. Adv. No. AD 93-02091.,CV 94-1454 RAP. Bankruptcy No. LA 93-14276-RA. Adv. No. AD 93-02091.
• Citation: 190 BR 389
• Court: U.S. District Court — Central District of California
• Parties: Estepan KABAYAN, Appellant, v. Nerces YEPREMIAN; Elize Yepremian; and Sanwa Bank California, Appellees.

190 B.R. 389 (1995)

Estepan KABAYAN, Appellant, v. Nerces YEPREMIAN; Elize Yepremian; and Sanwa Bank California, Appellees.

No. CV 94-1454 RAP. Bankruptcy No. LA 93-14276-RA. Adv. No. AD 93-02091.

United States District Court, C.D. California.

December 8, 1995.

COPYRIGHT MATERIAL OMITTED

Andre E. Jardini, Kevin J. Stack, Shahen Hairapetian, Diron Ohanian, Knapp, Petersen & Clarke, Glendale, California, for Appellant.

Richard C. Field, Cadwalader, Wickersham & Taft, Los Angeles, California, for Appellees.

MEMORANDUM

PAEZ, District Judge.

I INTRODUCTION

Appellant, Estepan Kabayan ("Kabayan"), has appealed from a summary judgment of the bankruptcy court in favor of appellees, Sanwa Bank California ("Sanwa"). Kabayan brought an adversary action against debtors, Nerces and Elize Yepremian, and creditor, Sanwa, in the bankruptcy court. The complaint sought (1) a determination of the amount of the claim and non-dischargeable status, and (2) imposition of an equitable lien and determination of its priority over Sanwa's recorded interest in certain real property. After determining that there were no genuine issues of material fact, the bankruptcy court granted Sanwa's motion for summary judgment.

We affirm the bankruptcy court's Summary Judgment. Although there may be a genuine issue of material fact regarding Kabayan's alleged equitable interest in the property, there is no genuine issue regarding Sanwa's notice of any prior unrecorded equitable interest. As Sanwa took without notice, Sanwa's recorded interest is superior to Kabayan's interest, and Sanwa is entitled to judgment as a matter of law.

II RELEVANT FACTUAL BACKGROUND

In 1988, Nerces and Elize Yepremian ("debtors") obtained property at 680 East Alosta Ave., Azusa, California ("the property"). Debtors approached Sanwa Bank regarding obtaining construction loan in the fall of 1989. On March 7, 1990, Kabayan entered into a Joint Venture Agreement ("Agreement") with the debtors involving the Alosta property. Kabayan contends that he was fraudulently induced to contribute $420,000 to the Joint Venture.

The Joint Venture Agreement provided, in relevant part:

The Venturers agree that they have undivided interests in the Venture and shall share in the profits or losses of the Venture and in all distributions of assets of the Venture (except as otherwise specifically provided in this Agreement) as follows: Yepremian 75%, Kabayan 25%.

Article IV, Section 4.01, Joint Venture Agreement. The contributions made to the venture by Yepremian and Kabayan were set forth in the Agreement:

Yepremian shall contribute to the Venture (i) his right and opportunity to proceed with the Project on his Property, and all plans, concepts and other intangible property related thereto, at an agreed fair market value of $900,000, . . . It is expressly understood and agreed by the parties hereto that Yepremian has retained exclusive fee simple ownership of the property in his individual capacity and that, except to the limited extent set forth above, any rights appurtenant thereto have not been contributed to the Venture.

Article IV, Section 4.02, Joint Venture Agreement. The Agreement also refers to "the Venture's interest in the property owned in fee simple by Yepremian." Article I, Section 1.02, Joint Venture Agreement. Also, the Agreement provides:

This Agreement contains the entire agreement between the parties hereto relative to the formation of the Venture.

Article VII Section 7.03, Joint Venture Agreement. The Agreement was never recorded with the County Recorder's Office.

In late 1989, debtors received conditional loan approval from Sanwa, contingent upon them obtaining clear title and granting a first priority deed of trust to Sanwa. In order to gain clear title, debtors had to clear a lis pendens recorded against the property by their previous partner, Luke Nahabedian. Kabayan provided debtors with $141,000 to clear the lis pendens. On August 6, 1990, Sanwa obtained an interest in the property when it recorded a deed of trust against the property as security for payment of its loan to the debtors.

Kabayan contends that before Sanwa gained any interest in the property, they were informed of the joint venture and were offered a copy of the Agreement to review, but Sanwa's agent, Kris Klinger, refused to review the Agreement or to consider additional information.¹

Kabayan also contends that Sanwa had notice of the debtors' financial condition and lack of funds, and knew that debtors would have to obtain the necessary money from other partners or associates. Record on Appeal, Klinger's deposition, November 19, 1995, p. 1951:16-22. In addition, Kabayan asserts that Klinger testified at his deposition that he knew that debtors were Armenian, that foreign investors usually have partners, and that these debtors had at least one other former partner, Luke Nahabedian. Appellant's Brief, p. 12-13; Klinger's Deposition, November 19, 1995, p. 1926:13-17.

In October 1990, Kabayan filed a state court action against debtors and their agents alleging fraud, misrepresentation, and unjust enrichment. He also recorded a lis pendens against the property. Shortly thereafter debtors commenced this bankruptcy proceeding. Kabayan then filed an adversary complaint in bankruptcy court requesting that the court impose an equitable lien on the property and determine that his equitable interest has priority over Sanwa's recorded interest.

On December 17, 1993, Sanwa moved for summary judgment on the grounds that Kabayan could not prove that Sanwa had notice of the prior unrecorded interest. Kabayan opposed the summary judgment motion on the grounds that there were genuine issues of material fact regarding the nature of his equitable interest and whether Sanwa had notice of Kabayan's interest.

In support of its motion for summary judgment, Sanwa principally relied on the depositions of Kris Klinger, Nerces Yepremian, and Vatche Yepremian and pointed to the absence of any evidence showing that Sanwa had notice of Kabayan's alleged equitable interest. In his opposition, Kabayan relied on the same three depositions to establish a genuine issue of material fact regarding Kabayan's interest and Sanwa's knowledge of Kabayan's equitable interest. On January 18, 1994, the bankruptcy court, without explanation, granted Sanwa's motion and entered judgment in favor of Sanwa.²

III DISCUSSION

A Standard of Review

"Conclusions of law made by a bankruptcy court are reviewed de novo." In re Wolverton Assoc., 909 F.2d 1286 (9th Cir.1990). "De novo standard of review is appropriate for all issues presented on appeal, because they constitute either pure questions of law or mixed questions of law and fact." Baldwin Park Inn Assoc. v. Baldwin Park (In re Baldwin Park Inn Assoc.), 144 B.R. 475, 477-78 (C.D.Cal.1992).

Under a de novo standard of review, the reviewing court does not "defer to the lower court's ruling but freely considers the matter anew, as if no decision had been rendered below." United States v. Silverman, 861 F.2d 571, 576 (9th Cir.1988). "We review a grant of summary judgment de novo. The appellate court must determine, viewing the evidence in the light most favorable to the nonmoving party, whether there are any genuine issues of material fact and whether the lower court correctly applied the relevant substantive law." Premier Communications Network, Inc. v. Fuentes, 880 F.2d 1096, 1102 (9th Cir.1989) (citations omitted); Self Directed Placement Corp. v. Control Data Corp., 908 F.2d 462, 463 (9th Cir.1990).

In considering a summary judgment motion, the bankruptcy court, when assessing whether the non-moving party has raised a genuine material issue, must believe the nonmovant and draw all justifiable inferences in his favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 2513-14, 91 L.Ed.2d 202 (1986), citing Adickes v. S.H. Kress and Company, 398 U.S. 144, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970). Nonetheless, "the mere existence of a scintilla of evidence" is insufficient. Id. at 252, 106 S.Ct. at 2512. As the Court explained in Matsushita:

When the moving party has carried its burden under Rule 56(c), its opponent must do more than simply show that there is some metaphysical doubt as to the material facts. . . . Where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no "genuine issue for trial."

Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986).

B Analysis

1. Kabayan's Interest in the Property

a. Equitable Lien

An equitable lien may be imposed "where the claimant's expenditure has benefitted another's property under circumstances entitling the claimant to restitution. . . . A specific application of the doctrine occurs when a lender advances money which benefits the land of another in mistaken reliance upon an imperfect mortgage or lien upon that land." Jones v. Sacramento Savings and Loan Assoc., 248 Cal.App.2d 522, 529-30, 56 Cal.Rptr. 741 (1967) (citations omitted); Lockie v. Co-operative Land Co., 207 Cal. 624, 627, 279 P. 428 (1929).

The basic purpose of an equitable lien is "to identify and impress upon certain property the beneficial rights that have arisen in an innocent party who in some way contributed to the acquisition, protection or improvement of that property. . . ." Holder v. Williams, 167 Cal.App.2d 313, 315, 334 P.2d 291 (1959).

An equitable lien "is enforceable against the property in the hands not only of the original contractor, but of . . . purchasers or encumbrancers with notice." Holder v. Williams, 167 Cal.App.2d at 315, 334 P.2d 291 (quoting Nau v. Santa Ana Sugar Co., 79 Cal.App. 685, 691(1), 250 P. 705, 707 (1926)).

Kabayan contends that he was induced to contribute money to the debtors for improvement of the property as a result of Nerces Yepremian's fraudulent misrepresentations. It may...