Patel v. Diplomat 1419VA Hotels, LLC

• Decision Date: 05 March 2021
• Docket Number: A20A1672
• Citation: 856 S.E.2d 340,358 Ga.App. 732
• Parties: PATEL v. DIPLOMAT 1419VA HOTELS, LLC et al.
• Court: Georgia Court of Appeals

358 Ga.App. 732

856 S.E.2d 340

PATEL

v.DIPLOMAT 1419VA HOTELS, LLC et al.

A20A1672

Court of Appeals of Georgia.

March 5, 2021

Scott Michael Ratchick, Atlanta, for Appellant.

Sherri G. Buda, Bryan Moy Knight, for Appellee.

Phipps, Senior Appellate Judge.

This case concerns Vimla Patel's investment in Diplomat 1419VA Hotels, LLC ("Diplomat 1419VA"). After her death, her son, Paresh Patel, filed suit against Diplomat 1419VA; Mukesh ("Mike") Patel; Diplomat Companies, LLC; 218 Capital Partners, LLC; JMS Family, LP; Chelsea Capital Partners, LLC; Stamford Bridge Capital, LLC; RM Kids, LLC; RM Hotels, Inc.; Shama Patel; and Jay Patel, setting forth numerous claims regarding the alleged mismanagement of Vimla's investment. Paresh¹ appeals from the trial court's order granting summary judgment to the defendants, contending that the court erred in granting summary judgment on his claims for (1) fraud; (2) fraudulent transfers; (3) breach of contract; (4) conspiracy; and (5) equitable relief and attorney fees. Because the defendants are entitled to judgment as a matter of law on all of Paresh's claims, we affirm the trial court's order.

A party is entitled to summary judgment "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law[.]" OCGA § 9-11-56 (c). A defendant may prevail

by showing the court that the documents, affidavits, depositions and other evidence in the record reveal that there is no evidence sufficient to create a jury issue on at least one essential element of plaintiff's case. If there is no evidence sufficient to create a genuine issue as to any essential element of plaintiff's claim, that claim tumbles like a house of cards. All of the other disputes of fact are rendered immaterial.

Patterson v. Kevon, LLC , 304 Ga. 232, 235, 818 S.E.2d 575 (2018). On appeal, this Court conducts a de novo review, "construing the evidence in the light most favorable to the nonmovants and drawing every reasonable inference in their favor." Id. at 236, 818 S.E.2d 575 (citation omitted).

Viewed in the light most favorable to Paresh, the record shows that in 2000 or 2001, Mike and Rajesh C. Patel ("RC") created Diplomat 1419VA, a Georgia limited liability company. RC and Vimla had known each other for many years, and in June 2001, Vimla, her husband, Surendra Patel, and one of their daughters met with Mike, RC, and RC's wife, Shama, to discuss investing in a hotel near the Atlanta airport. Mike, RC, and Shama all represented that Diplomat 1419VA would purchase, own, and operate the hotel.

Paresh, who was not at the 2001 meeting, but nevertheless advised his parents on the investment, testified that that his parents relied on these representations in investing in Diplomat 1419VA. Ultimately, Vimla invested $450,000 in Diplomat 1419VA, equal to a 10.5 percent ownership interest.

In fact, Diplomat 1419VA did not purchase the hotel. Rather, in order to avoid tax liability, RM Hotels, Inc., a different entity in which Mike and RC had an interest, purchased the hotel in January 2002. Diplomat 1419VA leased the hotel from RM Hotels, and a third entity, Diplomat Hotel Corporation, with which Mike was also affiliated, managed the hotel.

In 2010, RM Hotels learned that Delta Air Lines did not intend to renew a lucrative contract for rooms, and, as a result, RM Hotels filed for bankruptcy. In December 2011, RM Hotels sold the hotel to Surrey Capital, LLC, an entity controlled by Jay Patel, RC and Shama's son. Delta Air Lines continued to buy rooms from the hotel for several years, but ultimately ceased doing so and revenues from the hotel dropped precipitously. Surrey Capital ultimately filed for bankruptcy, and it no longer owns the hotel.

Although Diplomat 1419VA never owned or operated the hotel, it nevertheless made the following interest payments to Vimla in accordance with its operating agreement: in 2002, it made payments totaling $36,000; in 2003, it made payments totaling $10,500; in 2004, it made no payments; in 2005, it made payments totaling $12,000; and in 2006, it made payments totaling $36,000.

Vimla passed away in July 2006. After her death, Diplomat 1419VA continued to make payments on her behalf to Paresh and his sisters. In 2007, 2008, and 2009, Diplomat 1419VA made payments of $36,000 each year on behalf of Vimla. In 2010, Diplomat 1419VA made payments of $12,000; in 2012, it made payments totaling $25,500. Diplomat 1419VA made no payments on behalf of Vimla in 2011, the year the hotel was sold to Surrey Capital, or in 2013, 2014, and 2015. In 2015, the Diplomat 1419VA corporation was terminated. Between 2002 and 2012, Diplomat 1419VA made payments to Vimla and her family members totaling $240,000.

By 2012, Paresh had become unhappy with the investment. In 2013, he filed suit in federal court against various defendants, including Diplomat 1419VA, Mike, and RC. The federal district court initially dismissed Paresh's underlying claims for civil conspiracy, fraud, breach of fiduciary duty, alter ego/piercing the corporate veil, fraudulent transfers, and breach of contract, and it rejected his request for equitable remedies and attorney fees. But in an unpublished opinion, the 11th Circuit Court of Appeals reversed the district court's decision because the district court failed to grant Paresh leave to amend his complaint. Patel v. Diplomat 1419VA Hotels, LLC , No. 14-10948 (11th Cir. June 3, 2015). On remand, the federal district court again dismissed Paresh's claim for fraud, finding that he had failed to allege the claim with specificity, but otherwise denied the defendants’ motion to dismiss. However, in November 2016, the federal district court dismissed Paresh's complaint for lack of subject matter jurisdiction.

In 2017, Paresh, suing in his individual capacity, filed the instant action in Gwinnett County Superior Court, setting forth claims against the defendants² for breach of contract, fraud, fraudulent transfers, and conspiracy. The complaint sought alter ego/piercing of the corporate veil, an interlocutory injunction, a constructive trust, an accounting, appointment of a receiver, and attorney fees. The trial court entered a default judgment against Mike.³ The remaining defendants (collectively, "the defendants") filed a motion for summary judgment, and, following a hearing, the trial court granted summary judgment on all of Paresh's claims.

Specifically, the trial court granted summary judgment on the fraud claims, finding that Paresh could not show that he relied on any misrepresentations made by Mike, Shama, or RC because he made no investment in Diplomat 1419VA. The court further found that Paresh did not have standing to assert a claim for fraud against Vimla because such claims were not assignable, and, even if fraud claims were assignable, Vimla had not assigned any claims to him. Similarly, the court found that Paresh did not have standing to assert any claims for fraudulent transfers that occurred prior to his mother's death and that he failed to identify any specific transfers after her death that he alleged were fraudulent. The court also granted summary judgment on Paresh's claim for breach of contract. Because it granted summary judgment on Paresh's underlying claims, the trial court granted summary judgment on his claims for civil conspiracy and his requests for equitable relief and attorney fees. Paresh appeals.

1. Paresh contends that the trial court erred in granting summary judgment on the fraud claims against Mike, Shama, and Diplomat 1419VA.⁴

"In all averments of fraud or mistake, the circumstance constituting fraud or mistake shall be stated with particularity." OCGA § 9-11-9 (b). In his complaint, Paresh alleged that Mike, Shama, and Diplomat 1419VA made misrepresentations to induce him, Vimla, and Surendra⁵ to invest in the hotel, and they relied on these misrepresentations in making an investment in the hotel in Vimla's name.

(a) In two related claims of error, Paresh contends that he has standing to maintain the fraud claims because he inherited Vimla's interest in Diplomat 1419VA and the trial court erred in ruling to the contrary. We disagree.

"A trial court's decision with respect to standing will not be reversed absent clear error, although we review de novo any questions of law inherent in that decision." Harden v. Banks County , 294 Ga. App. 327, 328 (1), 670 S.E.2d 133 (2008) (footnote omitted).

In Vimla's will, she gave "any interest in any property located in the United States, specifically including but not limited to, partnership interests in U.S. partnerships ... in equal shares" to Paresh and his sisters. In 2012, Paresh's sisters transferred their interests in Diplomat 1419VA to Paresh. Thus, following Vimla's death and the transfers, Vimla's prior interest in Diplomat 1419VA became Paresh's interest.⁶ But contrary to Paresh's argument, Vimla's bequest of her interest in Diplomat 1419VA to him does not confer upon him standing to assert a claim that Vimla was defrauded.

Pursuant to OCGA § 44-12-24, "a right of action is assignable if it involves, directly or indirectly, a right of property. A right of action for personal torts, for legal malpractice, or for injuries arising from fraud to the assignor may not be assigned." Consistent with the plain language of the statute, federal and state courts construing OCGA § 44-12-24 have held that fraud claims are not assignable. See Villanueva v. First American Title Ins. Co. , 292 Ga. 630, 631, 740 S.E.2d 108 (2013) ("The common law recognizes assignment of property damage claims but not personal injury claims, and OCGA § 44-12-24 codifies these principles."); Couch v. Crane , 142 Ga. 22, 29 (8), 82 S.E. 459 (1914) ("A right of action for injuries arising from fraud [cannot] be assigned."); In re Pittard , 358 B.R. 457, 461 (I) (N.D. Ga. 2006) (...