Singh v. Three B Hotels CA2/3 ( 2022 )

Filed 6/22/22 Singh v. Three B Hotels CA2/3
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION THREE
JASBIR SINGH, B308425
Plaintiff and Appellant, Los Angeles County
Super. Ct. No.
v. 19STCV39938
THREE B HOTELS LLC et al.,
Defendants and Respondents.
APPEAL from a judgment of the Superior Court of Los
Angeles County, Susan Bryant-Deason, Judge. Affirmed.
Betty Agawa and Ronald W. Betty for Plaintiff and
Appellant.
Knisbacher Law Offices and Alden Knisbacher for
Defendants and Respondents.
_______________________________________
INTRODUCTION
This litigation concerns two former business partners and
their limited liability company. Plaintiff and appellant Jasbir
Singh and defendant and respondent Manmohan Singh Bhamra
were equal managing partners of Three B Hotels, a Limited
Liability Company (the LLC), which owned and operated a
Holiday Inn Express in Enid, Oklahoma. Singh sued Bhamra in
Oklahoma alleging Bhamra breached the LLC’s operating
agreement in several ways, including by misappropriating funds.
Singh sought to dissolve the LLC and distribute its assets to the
parties. Singh dismissed the Oklahoma lawsuit with prejudice
following a successful mediation and the sale of his interest in the
LLC to Bhamra at an agreed-upon price.
Shortly after completing the sale, Singh initiated the
present litigation against Bhamra and the LLC in the Los
Angeles Superior Court, claiming the LLC owed him a portion of
profits received during 2018 and 2019—the time period between
the mediation and the completion of the sale. Singh had raised
this issue in the Oklahoma lawsuit to no avail. Bhamra and the
LLC therefore demurred on the ground that this litigation is
barred by the parties’ comprehensive releases of legal claims in
connection with the mediation in Oklahoma. The trial court
sustained the demurrer without leave to amend and entered a
judgment dismissing Singh’s lawsuit. We affirm the judgment.
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FACTS AND PROCEDURAL BACKGROUND
1. Oklahoma Litigation1
1.1. Complaint
In March 2018, Singh filed an action against Bhamra in the
district court for Garfield County in Oklahoma (the Oklahoma
lawsuit). Singh filed the action on his own behalf and derivatively
on behalf of the LLC. The complaint alleged that Singh and
Bhamra were equal managing partners of the LLC, which was
then doing business as a Holiday Inn Express in Enid, Oklahoma.
Singh alleged Bhamra had taken total control of the LLC and
was misusing its funds in violation of the LLC’s operating
agreement. Singh asserted causes of action styled as breach of
fiduciary duty, breach of written operating agreement, abuse of
control, corporate waste, unjust enrichment, partition, and
dissolution.
In August 2018, the court entered a stipulated restraining
order and scheduling order. As pertinent here, the parties had
agreed that no distribution of funds should be made to the
members of the LLC until certain conditions were met. They also
agreed to have the hotel owned and operated by the LLC
appraised on or before September 15, 2018, and to mediate the
dispute on or before October 15, 2018. Further, the parties agreed
to “engage Ken Klingenberg as a court appointed expert to assess
the claims of personal use of the funds of [the LLC] and any other
claims of inappropriate use or expenditure of company funds
1The trial court took judicial notice of certain documents filed in the
Oklahoma litigation. We take judicial notice of those documents as
well. (Evid. Code, §§ 452, 459.)
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specifically to include the appropriateness of expenditures for
hotel use, further that each party shall have an equal and fair
opportunity to explain their positions to Mr. Klingenberg and
further each reserves the opportunity to contest any findings by
Mr. Klingenberg before [the Oklahoma] court.”
1.2. Mediation Agreement
The parties mediated the dispute and signed a mediation
agreement on December 20, 2018. Singh agreed to sell his
interest in the LLC to Bhamra for $3.8 million less certain debts
of the LLC. The parties committed to draft a formal settlement
agreement that would include a release of claims (the first
release) as follows: “The Parties shall release one another of all
claims, whether asserted in the Lawsuit or not, related to [the
LLC] or the Holiday Inn Express in Enid, Oklahoma, including
any claims relating to or arising from the operation of [the LLC]
or the Holiday Inn Express in Enid, Oklahoma. The Parties
expressly reserve and do not release any and all other claims
whether asserted or not asserted as of the date of this Mediation
Agreement. The Parties also expressly reserve and retain all
rights arising under this Mediation Agreement and the
Settlement Agreement.”
The parties also agreed that Klingenberg’s findings
regarding any improper use of the LLC’s funds would “be binding
upon them, adopted by the Court, and non-appealable.”
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1.3. Klingenberg’s Report
Klingenberg provided an initial report to the parties in
May 2019 and a final report in August 2019.2 After the initial
report, both Singh and Bhamra submitted lists of concerns to
Klingenberg, and the final report includes Klingenberg’s
resolution of those concerns.
As pertinent here, Klingenberg’s final report noted that the
parties disagreed about the ending date for his inquiry regarding
the potential misuse of LLC funds. Bhamra took the position that
the inquiry should terminate as of December 20, 2018, the date
the mediation agreement was signed and the parties agreed on a
sale price for Singh’s half of the LLC. Singh, by contrast, urged
that the income and expenses of the LLC should be evaluated
through “the most recent date available,” i.e., including the end of
2018 and most of 2019. Klingenberg determined that
December 20, 2018 was the appropriate date, in part because the
parties agreed to the sale as well as the price for the sale on
December 20, 2018. He ultimately concluded that Singh was
owed an additional distribution of $103,644.13 from the LLC,
reduced by half the amount of Klingenberg’s fees.
1.4. Certificate of Sale
In early August 2019, Singh and Bhamra signed a
“Certificate of Sale of Membership Interest” that contained
details of the sale and which included the following release (the
second release): “The Parties shall release one another from all
claims, whether asserted in the lawsuit or not, that are related to
[the LLC] and the Holiday Inn Express in Enid, Oklahoma,
2 Only the final report is included in the appellate record.
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including any claims arising from the operation of [the LLC] and
the Holiday Inn Express in Enid, Oklahoma. The parties also
expressly reserve and retain all rights under the Mediation
Agreement and Settlement Agreement.”
In addition, the Certificate of Sale stated that Singh “shall
file a Dismissal With Prejudice of all claims asserted in the
[Oklahoma lawsuit] within 30 days after receiving the funds [due
to Singh.]”
1.5. Singh’s Request for Profits from 2018 and 2019
Bhamra filed a motion to enforce the mediation agreement
in late August 2019. The motion asserted that Bhamra was ready
to complete the sales transaction and pay Singh all monies owed
according to the terms of the mediation agreement and
Klingenberg’s final report, but that Singh had refused to sign the
closing documents and was raising “issues that were either not
agreed to at mediation, eight months ago, or were not discussed
during the ten hour marathon mediation.”
Singh opposed the motion. He argued, among other things,
that certain aspects of Klingenberg’s findings and calculations
were incorrect, that certain misappropriated funds had not been
accounted for, and that certain assets had not been included in
the appraiser’s valuation. Relevant here, Singh asserted, “In
addition to receipt of the sale price for his interest in [the LLC],
Singh is entitled to his share of the profit or loss attributable to
his 50% interest in [the LLC] for 2018 and 2019.” He requested
that the closing of the sale be delayed so that he could review the
LLC’s accounting and tax records and determine his share of the
profit or loss attributable to his interest in the LLC.
On September 10, 2019, the Oklahoma court heard the
motion to enforce the mediation agreement. The court’s order
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noted that Klingenberg’s calculations were mathematically
correct and, citing the parties’ mediation agreement, the court
adopted Klingenberg’s final report. The court also found the
mediation agreement was valid and enforceable.
1.6. Sale of Singh’s Interest in the LLC and Dismissal
of the Action with Prejudice
On October 25, 2019, Singh and Bhamra signed and
submitted a revised payoff demand to escrow, reflecting that
Singh would be paid $1,365,481.47 upon completion of the sale
transaction. Escrow closed on October 31, 2019.
On November 8, 2019, Singh dismissed the Oklahoma
lawsuit with prejudice.
2. Present Litigation
2.1. Operative Complaint
Singh initiated the present lawsuit in Los Angeles County
Superior Court on November 5, 2019. The operative third
amended complaint names Bhamra and the LLC as defendants
and includes five claims: breach of contract, breach of oral
agreement, breach of fiduciary duty, unjust enrichment, and a
request for an accounting. Singh generally alleges that he agreed,
as part of the mediation agreement signed on December 20, 2018,
to sell his interest in the LLC to Bhamra and that the transaction
was completed on or about October 31, 2019. Singh also asserts
that as part of the mediation agreement, Singh and defendants
“agreed to utilize[ ] [Klingenberg] as the expert to determine
whether and to what extent Bhamra and/or Singh improperly
expended or received any monies of [the LLC.] [Klingenberg] did
not make a determination regarding profits and losses due to
Bhamra or Singh. [¶] [Klingenberg] only reviewed [the LLC] up
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to and including December 20, 2018, and specifically refused to
look at the financial status of [the LLC] after
December 20, 2018.”
The complaint alleges that defendants breached the written
operating agreement for the LLC and breached an oral
agreement by failing to make profit distributions from the LLC to
Singh in 2018 and 2019. Further, Singh alleges that such conduct
unjustly enriched defendants. Finally, Singh alleges defendants
breached their fiduciary duty to him by failing to provide an
accounting of the LLC’s financials and by refusing to pay the
profits owed to him from 2018 and 2019. Singh also requests a
court-ordered accounting to determine the amount of profit owed
to him for 2018 and 2019.
2.2. Demurrer
Defendants filed a demurrer, arguing that Singh’s
dismissal of the Oklahoma complaint with prejudice, together
with the doctrine of res judicata and the full faith and credit
clause of the Constitution of the United States, bars the present
action. Specifically, defendants asserted “[t]he parties mediated
the Oklahoma lawsuit to a successful resolution and signed a
mediation agreement and release of claims. Singh and Bhamra
agreed to allow independent attorney Ken Klingenberg to value
[the LLC], and to determine the buyout price. Klingenberg’s
valuation was final with no right of appeal. Klingenberg rejected
Singh’s bid for [the LLC’s] post-mediation, 2018-2019 profits. [¶]
Singh appealed Klingenberg’s valuation to the Oklahoma trial
court. The Oklahoma court rejected Singh’s attempt to back out
of the mediation agreement, upheld Klingenberg’s valuation, and
rejected Singh’s bid for [the LLC’s] 2018 and 2019 profits. [¶]
Singh then signed a buyout agreement, and another full release,
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Bhamra bought out Singh’s interest in [the LLC] for 1.4 million
dollars, the Oklahoma court entered a final judgment, and Singh
did not appeal.” In light of these undisputed facts, defendants
argued, Singh’s claims in the current action have already been
litigated and are therefore barred.
2.3. Ruling
The court took judicial notice of several documents from the
Oklahoma lawsuit, including the complaint, the mediation
agreement, the motion to enforce the settlement agreement,
Singh’s opposition to that motion, and Singh’s dismissal of the
Oklahoma lawsuit with prejudice. Based on the judicially noticed
records from the Oklahoma lawsuit, the court concluded Singh
had released his claim for 2018 and 2019 profits from the LLC.
Specifically, the court cited the first release, contained in the
mediation agreement, that stated the parties released one
another from “all claims … related to the LLC or the Holiday Inn
Express in Enid, Oklahoma.” And, the court noted, the Oklahoma
court found the mediation agreement was enforceable. The court
also noted that Singh’s claim for half the LLC’s profits in 2018
and 2019 was raised in the Oklahoma lawsuit and resolved
against him, after which time Singh completed the sale and
dismissed the Oklahoma lawsuit with prejudice, as required by
the mediation agreement.
In short, the court found, “The claim for lost profits is
related to [the LLC] and was asserted in the [Oklahoma] lawsuit.
[Singh] has therefore released these claims.” After noting Singh
would be unable to amend his complaint to cure its defects, the
court sustained the demurrer without leave to amend.
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2.4. Judgment and Appeal
The court entered a judgment of dismissal on
August 26, 2020. Singh timely appeals.
DISCUSSION
1. Standard of Review
We independently review a trial court’s order sustaining a
demurrer to determine whether the operative complaint alleges
facts sufficient to state a cause of action. (Ivanoff v. Bank of
America, N.A. (2017) 9 Cal.App.5th 719, 725.) We assume the
truth of all properly-pled factual allegations and matters that are
judicially noticeable. (Ibid.) We also liberally construe the
complaint’s allegations with a view toward substantial justice.
(Quelimane Co. v. Stewart Title Guaranty Co. (1998) 19 Cal.4th
26, 43, fn. 7.) But where facts appearing in attached exhibits or
judicially noticed documents contradict, or are inconsistent with,
the complaint’s allegations, we must rely on the facts in the
exhibits and judicially noticed documents. (Ivanoff, at p. 726.)
When a demurrer is sustained without leave to amend, we
decide whether there is a reasonable possibility that the plaintiff
can amend the pleading to cure the defect. (Blank v. Kirwan
(1985) 39 Cal.3d 311, 318.) If the defect can be cured, the trial
court has abused its discretion and we reverse; if not, there has
been no abuse of discretion and we affirm. (Ibid.) The burden of
proving such reasonable possibility is squarely on the plaintiff.
(Ibid.) Such a showing can be made for the first time on appeal.
(Smith v. State Farm Mutual Automobile Ins. Co. (2001) 93
Cal.App.4th 700, 711; City of Torrance v. Southern California
Edison Co. (2021) 61 Cal.App.5th 1071, 1083–1084.)
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Finally, “ ‘we do not review the validity of the trial court’s
reasoning but only the propriety of the ruling itself. [Citations.]’
[Citation.]” (Align Technology, Inc. v. Tran (2009) 179
Cal.App.4th 949, 958.) Accordingly, we will affirm the “ ‘trial
court’s decision to sustain the demurrer [if it] was correct on any
theory. [Citation.]’ [Citation.]” (Ibid.)
2. The court properly sustained defendants’ demurrer
without leave to amend.
The court found that Singh’s releases in the prior litigation
bar his claims here. We agree that Singh’s claims are barred.
The claim preclusion doctrine, formerly called res judicata,
“prohibits a second suit between the same parties on the same
cause of action.” (Boeken v. Philip Morris USA, Inc. (2010) 48
Cal.4th 788, 792 (Boeken); see also Kim v. Reins International
California, Inc. (2020) 9 Cal.5th 73, 91 (Kim).) “Claim preclusion
arises if a second suit involves (1) the same cause of action
(2) between the same parties (3) after a final judgment on the
merits in the first suit.” (DKN Holdings LLC v. Faerber (2015) 61
Cal.4th 813, 824.) “ ‘Retraxit’ describes the particular application
of claim preclusion to a claim that has been dismissed with
prejudice. [Citation.] A dismissal with prejudice is considered a
judgment on the merits preventing subsequent litigation between
the parties on the dismissed claim. [Citations.]”3 (Kim, at p. 91;
see also Winterhalder v. Burggraf Restoration, Inc., 2011 OK CIV
3 The full faith and credit clause of the federal Constitution obligates a
state to honor judgments from the courts of sister states. (U.S. Const.,
art. IV, § 1; see also 28 U.S.C. § 1738 [federal statute codifying full
faith and credit clause]; and see, e.g., R.S. v. PacifiCare Life & Health
Ins. Co. (2011) 194 Cal.App.4th 192, 198.)
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APP 38, ¶ 14, 256 P.3d 84 [“It has long been the rule in
Oklahoma that: [¶] A dismissal of a suit made after, and based
upon, an agreement between the parties by which a compromise
settlement and adjustment of the subject-matter in dispute is
made, is a dismissal on the merits, and is equivalent to a
judgment of retraxit at common law; and as such would be a bar
to further litigation on the same subject between the parties.
Turner v. Fleming, 1913 OK 155, ¶ 3, 130 P. 551, 552.”].)
Taking the elements of claim preclusion in order, we first
consider whether the Oklahoma lawsuit and the present one
concern the same cause of action. “ ‘In California the phrase
“cause of action” is often used indiscriminately … to mean counts
which state [according to different legal theories] the same cause
of action … .’ [Citation.] But for purposes of applying the doctrine
of res judicata, the phrase ‘cause of action’ has a more precise
meaning: The cause of action is the right to obtain redress for a
harm suffered, regardless of the specific remedy sought or the
legal theory (common law or statutory) advanced. [Citation.] As
we explained in Slater v. Blackwood [(1975)] 15 Cal.3d [791,] 795:
‘[T]he “cause of action” is based upon the harm suffered, as
opposed to the particular theory asserted by the litigant.
[Citation.] Even where there are multiple legal theories upon
which recovery might be predicated, one injury gives rise to only
one claim for relief. “Hence a judgment for the defendant is a bar
to a subsequent action by the plaintiff based on the same injury
to the same right, even though he presents a different legal
ground for relief.” [Citations.]’ Thus, under the primary rights
theory, the determinative factor is the harm suffered. When two
actions involving the same parties seek compensation for the
same harm, they generally involve the same primary right.
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(Agarwal v. Johnson (1979) 25 Cal.3d 932, 954.)” (Boeken, supra,48 Cal.4th at p. 798.)
In the Oklahoma lawsuit, Singh generally alleged Bhamra
had misappropriated funds and misused property belonging to
the LLC. Singh, individually and on behalf of the LLC, sought to
recover misused funds, sell the LLC’s assets, settle its debts and
liabilities, close the business, and distribute the LLC’s assets to
its members. Individually, then, Singh sought to maximize the
value of and liquidate his interest in the LLC. And he did so. In
the settlement agreement, the parties agreed to the terms of
sale–$3.8 million less certain debts of the LLC and adjusted for
misuse of corporate funds as determined by Klingenberg. The
court found the settlement agreement to be enforceable and the
sale of Singh’s interest was eventually consummated.
In the present suit, Singh seeks to vindicate the same
primary right, i.e., to recover the maximum value of his interest
in the LLC. Specifically, he claims in this litigation that he is
entitled to a share of profits generated by the LLC after the
parties signed the settlement agreement but before the sale of his
interest in the LLC was completed. And he asserts Bhamra
violated the LLC’s operating agreement by failing to distribute
profits from 2018 and 2019. Stated slightly differently, Singh
contends in the present litigation that the value of his interest in
the LLC at the time of sale was higher than the $3.8 million
agreed-upon price because he was also entitled to undistributed
profits received by the LLC. As already explained, this issue was
presented and rejected in the Oklahoma lawsuit.
As to the second element of claim preclusion, there is no
question that the parties in the Oklahoma lawsuit and this
lawsuit are the same: Singh, Bhamra, and the LLC.
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Finally, and as to the third element, there is a final
judgment in the Oklahoma lawsuit. “A dismissal with prejudice is
considered a judgment on the merits preventing subsequent
litigation between the parties on the dismissed claim.
[Citations.]” (Kim, supra, 9 Cal.5th at p. 91; see also Consumer
Advocacy Group, Inc. v. ExxonMobil Corp. (2008) 168 Cal.App.4th
675, 694 [“A court-approved settlement acts as a final judgment
on the merits for the purposes of res judicata.”].)
Notably, “ ‘parties may by agreement limit the legal effect
of a dismissal with prejudice by agreement so that it would not
constitute a retraxit and affect their rights in a later pending
action.’ ” (See Legendary Investors Group No. 1, LLC v. Niemann
(2014) 224 Cal.App.4th 1407, 1411.) The parties here did just the
opposite. As the trial court found, Singh signed two releases
during the course of the Oklahoma litigation. Both releases
stated that the parties “release[d] one another from all claims,
whether asserted in lawsuit or not, that are related to [the LLC]
and the Holiday Inn Express in Enid, Oklahoma, including any
claims arising from the operation of [the LLC] and the Holiday
Inn Express in Enid, Oklahoma.” Thus, Singh’s claim of
entitlement to profits received by the LLC is not only barred
under the claim preclusion doctrine, but it plainly falls within the
scope of the parties’ releases.4
4 Because we conclude Singh’s claims are barred, we need not address
his argument that as a dissolved entity, the LLC is unable to defend
itself in this lawsuit.
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DISPOSITION
The judgment is affirmed. Respondents Three B Hotels
LLC and Manmohan Singh Bhamra shall recover their costs on
appeal.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
LAVIN, J.
WE CONCUR:
EDMON, P. J.
EGERTON, J.
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