Paresh Patel v. Diplomat 1419va Hotels, LLC

Court of Appeals of Georgia·Decided March 16, 2021·No. A20A1672·Published

Opinion

SECOND DIVISION

MILLER, P. J.,

MERCIER, J., and SENIOR APPELLATE JUDGE PHIPPS.

NOTICE: Motions for reconsideration must be physically received in our clerk’s office within ten days of the date of decision to be deemed timely filed.

http://www.gaappeals.us/rules

March 5, 2021

In the Court of Appeals of Georgia A20A1672. PATEL v. DIPLOMAT 1419VA HOTELS, LLC et al.

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

1 Because numerous individuals in this case share the same last name, Patel, we will refer to them by their first names for the sake of clarity.

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 SE2d 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 (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

2 Because RC had filed for bankruptcy in 2016, Paresh did not name him as a defendant in the superior court action.

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

3 Paresh’s complaint also included a claim against Mike for breach of fiduciary duty. Mike is not a party to this appeal.

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