PACIFICA COMPANIES LLC v. PATEL

No. D066885.

PACIFICA COMPANIES LLC et al., Plaintiffs, Cross-defendants and Appellants, v. SHAILESH "SUNNY" PATEL et al., Defendants, Cross-complainants and Appellants; CHHATRALA INDIA HOTEL GROUPS et al., Defendants and Appellants.

Court of Appeals of California, Fourth District, Division One.


Attorney(s) appearing for the Case

Vantage Law Group, Michael H. Riney ; Law Office of Johanna S. Schiavoni and Johanna S. Schiavoni for Plaintiffs, Cross-defendants and Appellants Pacifica Companies LLC, et al.

Vivoli Saccuzzo, Michael W. Vivoli ; Dentons US and Charles A. Bird for Defendants, Cross-complainants and Appellants.


NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

McCONNELL, P. J.

INTRODUCTION

This case involves a dispute about a letter of intent agreement between Shailesh "Sunny" Patel and Chhatrala Business House (India) Private LTD (together Business House) and Deepak Israni and Pacifica Companies, LLC (together Pacifica) related to a development project for a property in India. Pacifica contended Business House breached fiduciary duties under the agreement by obtaining an order from the Supreme Court of India awarding Patel the property under a separate memorandum of understanding (MOU) with the government of the state of Gujarat, India. Business House contended the letter of intent agreement applied only if the property was acquired by the joint venture through a bidding process. After a five-week trial, a jury determined a joint venture existed between Business House and Pacifica, but neither Patel nor Business House acted against Pacifica's interests in connection with the project or on behalf of a party whose interests were adverse to Pacifica in connection with the project. The court entered judgment in favor of all defendants1 on Pacifica's breach of fiduciary duty and alter ego causes of action. It entered judgment in favor of Pacifica on Business House's cross-complaint for declaratory relief, which sought to invalidate or rescind the letter of intent agreement based upon fraud, misrepresentation, or mistake.

On appeal, Pacifica contends (1) the court's judgment failed to include a declaration of rights, duties, and obligations of the parties under the letter of intent agreement as requested by Business House's cross-complaint; and (2) the court's severance of the alter ego claims regarding nonsignatory defendants from the first phase of trial was tantamount to an improper nonsuit. We conclude Pacifica is estopped from asserting error in the judgment related to the scope of the letter of intent agreement because Pacifica invited any error by resisting Business House's efforts to obtain a special verdict on this issue. We also conclude the court did not err in bifurcating and reserving until a later phase of trial issues related to the nonsignatory defendants. In the cross-appeal, Business House contends the court erred in denying it attorney fees under the terms of the letter of intent agreement. We agree with Business House. Accordingly, we affirm the judgment, but reverse the order denying attorney fees and remand with directions to enter a new order awarding attorney fees to all defendants along with fees and costs incurred in this appeal.2

BACKGROUND

A

Patel, a real estate developer, became interested in a property in Surat India, the city in which Patel grew up. Patel entered into a MOU in February 2005 on behalf of Chhatrala India Hotel Group with the government of Gujarat to obtain an allotment to 65,000 square meters of land (the property) to develop "Project Surat" as part of a plan by the State of Gujarat to obtain foreign investment to develop business opportunities in Surat.

An allotment is the term for when a governmental agency in India deeds a property for a specific purpose. When the government gives an allotment, it imposes deed restrictions to ensure the property is used for the purpose intended. Among these restrictions, the government may preclude the entity receiving the allotment from conveying an interest in the property without consent.

B

Ashok Israni,3 another real estate developer from San Diego, met with Patel in August 2005. Israni knew Patel had obtained an allotment from the Vibrant Gujarat Conference for a project in Surat. Israni said Patel and Hemant Chhatrala showed him drawings, pro formas, and a profit picture.

Israni visited the site in 2005 when he was in India to visit his ill father. He said Patel showed Israni and his nephew, Rakesh "Rocky" Israni, the town and the project.4 The site looked easy to develop because it was a flat piece of land, level with the street, and had utilities around it. However, there was no discussion with Patel about the terms of a potential partnership or joint venture. Israni was interested in the project and asked Rocky to explore the market.

Israni exchanged e-mails in January 2006 with Rocky about the increasing land prices in Surat. Rocky suggested talking to Patel about a partnership for the project. Israni testified he understood Patel wanted him to be a partner in the project. They had previously discussed Patel's project, but Israni did not ask what kind of partnership Patel had in mind. Patel denied suggesting a partnership with Israni.

There were news reports in February 2006 stating the government cancelled Patel's land allotment in Surat and the government was looking for partners to develop the property. When Israni received news the land would be put up for auction, the idea of forming a partnership with Patel became more compelling. There was time pressure to put together a qualifying bid.

Patel, acting personally and on behalf of Business House, and Deepak, another nephew of Israni, acting personally and on behalf of Pacifica Companies, LLC, executed a legally binding letter of intent in March 2006 setting forth the terms for a joint venture to acquire and develop property in Surat. The letter of intent, prepared by Deepak on behalf of Pacifica, stated it was regarding "Guj[a]rat Industrial Development Corporation Bid for Development 65,000 sq. meters near Ghoddod Road, Surat, India." The letter of intent did not mention Patel's MOU. The parties agreed the partnership for the joint venture would be held 50 percent by Business House and 50 percent by Pacifica.

Patel testified Israni understood the MOU was Patel's and the joint venture was for the bid only. Patel understood if the joint venture did not get the property by bid, Patel could pursue the MOU separately.

Pacifica and Business House submitted their bid in April 2006.5 Business House performed its obligations in connection with submitting the bid. Pacifica never prepared a more comprehensive joint venture agreement.

C

A public interest lawsuit, filed by farmers who had historically farmed the land, stayed the bid process and prevented the bids from being opened. Patel joined the litigation to enforce his MOU regarding the allotment of the property. Patel testified Rocky said Patel was on his own with regard to enforcing the MOU because Pacifica did not want to fight the government.

When the public interest litigation, including Patel's joinder therein, was dismissed by a lower court, Patel petitioned the Supreme Court of India. Pacifica was aware of Patel's involvement in the litigation in India. Rocky periodically sent Patel articles about the status of the case and would say Patel could not win against the government.

D

In May 2009, three years after Pacifica and Business House submitted their bid, the Gujarat Industrial Development Corporation notified them the auction was cancelled due to delay related to the litigation. The bid was returned unopened to an agent of Pacifica. No new bid was submitted by Pacifica or the joint venture.

E

On February 8, 2010, the Supreme Court of India issued an order upholding Patel's MOU. The order directed the government to take steps to transfer the property to Patel.

After Patel prevailed at the Supreme Court, Israni and Rocky congratulated him and asked how they could work together on the project. Patel reminded them they were not part of the MOU. He did the MOU on his own. Patel received correspondence from Pacifica essentially threatening to interfere with the allotment process if Patel did not allow Pacifica to participate in the project.

Pacifica never paid any portion of the attorney fees incurred by Patel in connection with the India litigation or took the position they were partners in the litigation during the litigation. Israni offered to pay half of the litigation expenses only after the Supreme Court of India issued the order granting Patel the property.

Patel revoked and cancelled the power of attorney granted to Pacifica to perform any actions related to Project Surat. Since the auction was cancelled and the bids were returned, the purpose of the power of attorney did not survive. According to Patel, the letter of intent related to acquiring the property through the bid process and no MOU existed for the joint venture.

Thereafter, Pacifica petitioned the India Supreme Court to revoke the order giving Patel the property under the MOU. The Supreme Court of India denied Pacifica's request. Patel still does not have the property, despite his efforts to obtain it.

F

Pacifica filed a complaint against Patel, Business House and the nonsignatory defendants for breach of contract, breach of fiduciary duty, and declaratory relief regarding alter ego liability of nonsignatory defendants. Business House cross-complained for declaratory relief seeking a judicial declaration the cross-defendants had no rights to participate in the project development under the letter of intent. Business House filed an amended cross-complaint for declaratory relief and rescission seeking a judicial declaration Pacifica had no contractual rights in the project because conditions precedent did not occur and the contract was entered into based upon fraud, misrepresentation or mistake.

The court bifurcated the trial. Pacifica's legal claims for breach of contract, breach of fiduciary duty, and whether or not Business House engaged in malice, fraud, or oppression would be tried in phase I to a jury. Phase II would determine the amount of punitive damages, if any. Phase III would be a court trial regarding the alter ego theory and any equitable remedies, as well as claims asserted by Business House's cross-complaint for declaratory relief and rescission. Pacifica dismissed its breach of contract claim during motions in limine.

The jury found there was a joint venture, but also found Business House did not knowingly act against Pacifica's interests in connection with the project or on behalf of a party whose interests were adverse to Pacifica in connection with the project. The court found the jury's verdict addressed the issues raised in Business House's cross-complaint and adopted the factual findings made by the jury. As a result, the court entered judgment against Pacifica on its causes of action for breach of fiduciary duty and declaratory relief regarding alter ego as to nonsignatory defendants. The court entered judgment in favor of Pacifica on the cross-complaint for declaratory relief and rescission.

The court denied Pacifica's motion to vacate or amend the judgment to declare the rights, duties, and obligations of the parties with respect to the joint venture pursuant to Business House's cross-complaint and also denied Business House's motion to dismiss its cross-complaint. The court concluded it did not have jurisdiction to modify the judgment and, even if it did, the judgment on the cross-complaint did not result in an award of relief to Pacifica so it would not issue a declaration of rights. The court noted the cross-complaint's request for declaratory relief asserted the letter of intent was invalid or unenforceable based upon fraud, misrepresentation or mistake. This issue was adjudicated by the jury's special verdict, which found there was a valid joint venture.

DISCUSSION

I

Pacifica's Appeal

A

Pacifica contends the court erred in omitting from the judgment a declaration of rights, duties, and obligations of the parties to the letter of intent agreement with respect to Business House's cross-complaint for declaratory relief contending the jury's verdict and the court judgment "recognized the joint venture, but also the potential for a future breach of fiduciary duty." Business House contends Pacifica should be estopped from making this argument because it invited any error in this regard when it opposed Business House's repeated efforts to have the jury render a special verdict regarding the scope of the letter of intent agreement and whether it included any rights under the MOU. We agree with Business House.

"Where a party by his conduct induces the commission of error, he is estopped from asserting it as a ground for reversal. This application of the estoppel principle is generally known as the doctrine of invited error." (Horsemen's Benevolent & Protective Assn. v. Valley Racing Assn. (1992) 4 Cal.App.4th 1538, 1555.) The invited error doctrine rests on the purpose of the estoppel principle, "which is to prevent a party from misleading the trial court and then profiting therefrom in the appellate court." (Norgart v. Upjohn Co. (1999) 21 Cal.4th 383, 403.) The doctrine of invited error may be applied when a party proposes or urges error in the language of a special verdict form. (Myers Building Industries, Ltd. v. Interface Technology, Inc. (1993) 13 Cal.App.4th 949, 960, fn. 8, & 962 [failure to propose an appropriate special verdict and opposition to attempts to clarify a special verdict may constitute invited or waived error]; Mesecher v. County of San Diego (1992) 9 Cal.App.4th 1677, 1685-1687 [a party that participated in preparing a verdict form allowing for an inconsistent verdict may be precluded from asserting error based on invited error doctrine and waiver].)

Business House repeatedly asked for a special verdict question regarding the scope of the joint venture agreement. Pacifica's proposed special verdict form did not include a question regarding the scope of the joint venture and the court noted Pacifica's objection to Business House's request. When Business House proposed asking the jury if the joint venture extended to or included rights under the MOU, Pacifica objected saying "[t]hat would be a complete distortion of the relevant law."

The court denied Business House's request stating although there was "no reasonable dispute that a joint venture exists . . ., the [c]ourt does not want to do anything directly or indirectly that may suggest to the jury the scope of the joint venture. They may decide that there was a joint venture but at the same time agree with the defense that the scope of it did not extend as broadly as plaintiff asserts. So asking them to decide whether or not there was a joint venture does not by any means suggest the scope."

The court declined Business House's request to modify the second and third questions to ask the jury whether the joint venture includes rights under the MOU. The court stated, "They've received all of the evidence, and they're going to decide, based upon the conflict in the evidence the scope of the joint venture." The court went on to explain if the jury agreed with the defense theory that the joint venture was limited to the bid, they would answer "no" to the second question about whether the defendants knowingly acted against plaintiffs' interests in connection with Project Surat. Similarly, "if the jury concludes that the defendants' duty was limited to bid and not as more broadly argued by the plaintiff" then the court expected the jury to answer "no" to the third question about whether the defendant acted on behalf of a party whose interests were adverse to plaintiffs in connection with the project. The court concluded by saying it did not know how "the jury could get to no if they [did not] accept the defense's theory of this case."

The jury answered "no" to both the second and the third questions about whether Patel and Business House acted against the interests of Pacifica, apparently accepting the defense theory the letter of intent was limited to a project if the property was acquired through the bid process. Contrary to Pacifica's contention, the court did not make a factual finding that the jury's verdict meant there was "no breach yet" and suggesting a breach could occur in the future. The passage cited by Pacifica was from a post-trial hearing discussing proposals for the judgment and was part of the court's rumination about what might be left of the cross-complaint as it was considering Business House's proposal to file a request for dismissal without prejudice as to any remaining issues in its cross-complaint.

The court ultimately denied Business House's request for dismissal in the final judgment. In entering the judgment, the court adopted the jury's factual findings and determined the jury's verdict entirely resolved the issues of the cross-complaint. The court's judgment is entirely consistent with its earlier comment during trial that negative responses to questions about breach of fiduciary duty meant the jury agreed with the defense theory that the letter of intent was limited to the bid. The judgment determined Pacifica prevailed only to the extent the cross-complaint alleged the letter of intent should be invalidated or rescinded based upon fraud, misrepresentation, or mistake. It did not imply Pacifica had prevailed on a theory the joint venture agreement involved any rights to the property acquired through the MOU rather than the bid process. Such an implication would be contrary to the jury's verdict finding Patel and Business House did not breach any fiduciary duties with respect to pursuing the property by asserting its rights under the separate MOU.

Given Pacifica's objection to Business House's attempts to ask the jury directly about the scope of the letter of intent agreement, Pacifica is now estopped from asserting any ambiguity in the judgment with respect to the parties' rights under the letter of intent.

B

Pacifica also contends the court erred and essentially granted nonsuit in favor of the five nonsignatory defendants when it severed them from the first phase of trial. We do not agree.

During trial the court determined the complaint asserted claims against these defendants based upon alter ego and single enterprise, but rejected Pacifica's argument the complaint asserted direct claims of breach of fiduciary duty by these entities. It did not grant a nonsuit in favor of these defendants. It merely severed the alter ego issues alleged in the complaint for decision by the court after the first phase of trial was complete. After the jury's verdict finding no breach of fiduciary duty by the signatory defendants, the court entered judgment against Pacifica on the causes of action for declaratory relief regarding alter ego and breach of fiduciary duty.

The jury rejected Pacifica's claim Patel or Business House breached fiduciary duties to Pacifica arising from the letter of intent. Even if Patel was acting on behalf of one or more of these entities, as outlined in the opening brief, the jury determined there was no breach. Pacifica does not explain how the nonsignatory defendants could be held liable for breach of fiduciary duty under any theory when the jury found no breach as to the signatory defendants. Therefore, we conclude there was no prejudicial error in severing the nonsignatory defendants from the first phase of trial. (Code Civ. Proc., § 475.)

II

Defendants' Cross-Appeal

A

After entry of judgment, all of the defendants moved for an award of $2,453,977.50 as the prevailing parties pursuant to the letter of intent agreement. Pacifica opposed the motion asserting there was no contractual basis for an attorney fee award because the reference to attorney fees in the letter of intent agreement was merely an agreement to agree to such a provision in the future. Pacifica did not challenge the reasonableness of the amount of fees requested. The court denied Business House's motion for attorney fees concluding the language in the letter of intent agreement did not provide for recovery of attorney fees, "but instead contemplates future agreements including such a provision." The court did not reach the issue of the reasonableness of the fees requested.

B

The defendants contend the court erred in denying its motion for attorney fees. We independently interpret the terms of a contractual agreement where there is no conflict in the evidence (Parsons v. Bristol Development Co. (1965) 62 Cal.2d 861, 865-866), including whether or not a contractual provision warrants an award of attorney fees (Carver v. Chevron U.S.A., Inc. (2002) 97 Cal.App.4th 132, 142). "We must interpret a contract so as to give effect to the mutual intent of the parties at the time the contract was formed. (Civ. Code, § 1636.) `The language of a contract is to govern its interpretation, if the language is clear and explicit, and does not involve an absurdity.' (Civ. Code, § 1638.) Courts must also endeavor to give effect to every part of a contract, `if reasonably practicable, each clause helping to interpret the other[s].' (Civ. Code, § 1641.)" (Thrifty Payless, Inc. v. Mariners Mile Gateway, LLC (2010) 185 Cal.App.4th 1050, 1060.)

The opening paragraph of the letter of intent states the agreement serves as a legally binding letter of intent setting forth "the terms of the agreement in principle." Within the agreement, under a section entitled "Standard Contract Clauses," the agreement states the "comprehensive contracts contemplated under this [letter of intent] shall all have standard contract clauses including . . . the following: [¶] . . . [¶] Attorneys fees to prevailing party in any legal dispute." The closing paragraph states the parties expressly agree it is a legally binding letter of intent and the parties "agree to negotiate in good faith the terms of a comprehensive Joint Venture Agreement but, if definitive terms on all issues are not reached, the terms set forth herein shall nevertheless be binding on the parties and may be enforced in a court of law."

Considering the language of the letter of intent as a whole, we conclude the attorney fee provision is sufficiently certain to be applicable and enforceable in connection with this dispute between the parties regarding the scope of the letter of intent. (Moncada v. West Coast Quartz Corp. (2013) 221 Cal.App.4th 768, 777 ["`"[a]ll agreements have some degree of indefiniteness and some degree of uncertainty. . . ."' [Citation.] Moreover, `"[t]he law leans against the destruction of contracts because of uncertainty and favors an interpretation which will carry into effect the reasonable intention of the parties if it can be ascertained"'"]; see Robinson & Wilson, Inc. v. Stone (1973) 35 Cal.App.3d 396, 407, 409-410 [a contract may be enforceable if essential elements are ascertainable]; Copeland v. Baskin Robbins U.S.A. (2002) 96 Cal.App.4th 1251, 1256 [a contract to negotiate a contract in good faith may be enforceable].)6

As the prevailing parties, all defendants are entitled to their fees, including the nonsignatory defendants who were exposed to litigation under alter ego claims. (Reynolds Metals Co. v. Alperson (1979) 25 Cal.3d 124, 129.) Pacifica did not challenge the reasonableness of the amount of fees sought or the parties seeking the fees. Therefore, we remand the matter with direction to enter an order awarding the defendants the requested attorney fees together with fees incurred on appeal. (Security Pacific National Bank v. Adamo (1983) 142 Cal.App.3d 492, 498.)

DISPOSITION

The judgment is affirmed. The order denying defendants' motion for attorney fees is reversed. The matter is remanded to the trial court to enter a new order awarding attorney fees to the defendants in the requested amount of $2,453,977.50 along with reasonable fees and costs incurred on appeal.

HUFFMAN, J. and NARES, J., concurs.

FootNotes


1. Pacifica also sued defendants who were not parties to the letter of intent agreement under an alter ego theory. These entities and one individual included: Chhatrala India Hotel Groups, Chhatrala India Hotel Group, Hemant Chhatrala, The Chhatrala Group, and Chhatrala Hotel Group, Inc. We refer to these defendants as the nonsignatory defendants, as they were referred to in the trial.
2. We deny Pacifica's request for judicial notice filed on December 16, 2016, seeking judicial notice of postjudgment pleadings related to a lawsuit entitled Hemant Chhatrala, et al. v. Ward & Hagen, LLP (Super. Ct. San Diego County, No. 37-2015-00012688-CU-PN-CTL) and Pacifica's request for judicial notice filed January 4, 2016, seeking judicial notice of postjudgment printouts of web pages from the Chhatrala Group.
3. Because many of the parties share common surnames, we refer to Shailesh Patel and Ashok Israni as Patel and Israni respectively as they were the primary parties to the negotiation. For clarity, we refer to other family members by their first names after initial introduction. No disrespect is intended.
4. Patel denied giving Israni a tour, but said they shared tea and snacks at Patel's home in India.
5. The bid stated Pacifica held 51 percent equity and Business House held 49 percent equity in the consortium bidding for the property. Patel testified he did not notice the difference in the bid from the 50-50 agreement in the letter of intent.
6. We disagree with Pacifica that the laws of India have any applicability to the attorney fee provision in the letter of intent. The only reference to the laws of India are in the paragraph describing how Pacifica and Business House will "form a new legal entity . . . pursuant to the laws of India" in which they would both have 50 percent interest.

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