V&C Investments v. Fusion Hospitality Corp. CA4/1 ( 2024 )

Filed 2/27/24 V&C Investments v. Fusion Hospitality Corp. CA4/1
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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
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COURT OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION ONE
STATE OF CALIFORNIA
V&C INVESTMENTS, LLC et al., D081251
Plaintiffs, Cross-defendants and
Respondents,
(Super. Ct. No. 37-2019-
v.
00057744-CU-BC-CTL)
FUSION HOSPITALITY
CORPORATION et al.,
Defendants, Cross-complainants
and Appellants.
APPEAL from a judgment of the Superior Court of San Diego County,
Richard S. Whitney, Judge. Reversed.
Cate Legal Group and Allan Cate for Defendants, Cross-complainants
and Appellants.
Jeffrey B. Singer for Plaintiffs, Cross-defendants and Respondents.
Fusion Hospitality Corporation and Denny Bhakta (collectively,
Fusion) appeal from a judgment entered against them after an order for
judgment on the pleadings in favor of V&C Investments, LLC and Vishal
Patel (collectively, Vishal). In entering judgment, the trial court held that
“the whole case hinges on . . . one issue,” that that issue was identical to an
issue that had been adjudicated against Fusion in a different lawsuit, and
that Fusion should be precluded from relitigating that issue in this lawsuit.
Fusion contends the trial court erred in concluding that the issues in the two
lawsuits were identical. We agree with Fusion. Hence we reverse the
judgment.
I.
FACTUAL AND PROCEDURAL BACKGROUND
A. The Two Lawsuits, and the Two Settlement Agreements
The two lawsuits are grounded in disputes that arose between Fusion
and members of the Patel family (including Mukesh Patel and Vishal Patel)
who dealt with Fusion as investors and/or lenders.
In the first lawsuit (the Mukesh Lawsuit), Mukesh Patel and an
affiliate named MP1959 Investment, LLC (collectively, Mukesh) sued Fusion
for breach of contract. This lawsuit seemingly resolved, six months later,
when Mukesh and Fusion entered into a settlement agreement (the Mukesh
Settlement Agreement).1
1 Our description of proceedings in the Mukesh Lawsuit is drawn from
the following documents on file with the superior court in that lawsuit
(Mukesh Patel v. Fusion Hospitality Corporation, Super. Ct. San Diego
County, No. 37-2019-00006221-CU-BC-CTL): ROA No. 1 (original complaint,
filed February 1, 2019); ROA No. 25 (papers in support of motion for entry of
judgment, filed October 31, 2019), excluding declaration of counsel and
exhibits; ROA No. 30 (papers in opposition to motion for entry of judgment,
filed February 3, 2020), excluding declaration of counsel and exhibits; ROA
No. 35 (minute order, filed February 21, 2020); ROA No. 40 (original
judgment, filed March 2, 2020); ROA No. 394 (remittitur with opinion of the
Court of Appeal, filed October 14, 2021); and ROA No. 436 (amended
judgment, filed February 1, 2022). We take judicial notice of these seven
documents on our own motion, and we deny Fusion’s motion to augment the
record with the following 22 documents on file with the superior court in the
Mukesh Lawsuit: ROA Nos. 1, 10, 11, 16, 25, 30-31, 33-35, 37-38, 40, 49, 61,
92, 95, 132, 143, 154, 186, 394.
2
Then, a few weeks after having entered into the settlement agreement
with Mukesh, Fusion entered into a second settlement agreement (the Vishal
Settlement Agreement) to avoid litigation with Vishal. But the Vishal
Settlement Agreement did not put an end to the disputes between Vishal and
Fusion; and Vishal then initiated their own lawsuit against Fusion (the
Vishal Lawsuit).
The two settlement agreements were alike in some respects. For
example, each included Fusion and a member of the Patel family among its
parties, and each referred to shares of stock in Fusion and to loans made to
Fusion. But they differed in other respects. For instance, Vishal was neither
a party to nor mentioned in the Mukesh Settlement Agreement. Nor was
Mukesh a party to or mentioned in the Vishal Settlement Agreement. And
whereas the Vishal Settlement Agreement consisted of 14 recitals plus 32
separately enumerated provisions spanning nine pages of printed text, the
Mukesh Settlement Agreement included no recitals and consisted of just
seven separately enumerated provisions that spanned only three pages of
mostly handwritten text.2
Among aspects of the Vishal Settlement Agreement that did not have
an analog in the provisions of the Mukesh Settlement Agreement was a
recital that appears to have been intended to furnish Fusion some measure of
comfort regarding the attribution of payments that Fusion had received from
2 The brevity and informality of the Mukesh Settlement Agreement is
attributable in part to the fact that it was executed with an expectation that
“a long-form settlement agreement” would supersede it. In anticipation of
the possibility that the parties might not be able to agree on a more detailed
form to supersede it, however, the Mukesh Settlement Agreement also
provided that “this settlement agreement is binding and enforceable even if a
long-form settlement agreement is not executed.”
3
or through an entity named ARMPVC Investment LLC (ARMPVC).3 That
recital read in its entirety as follows:
“WHEREAS, Vishal will provide documentation from the
other members of ARMPVC Investment LLC stating that
the contribution to ARMPVC Investment LLC is accurately
represented and that the other members of ARMPVC agree
that the contribution to Fusion is equivalent to that made
to ARMPVC Investment LLC. The document produced by
Vishal’s counsel is considered sufficient.”
We will refrain from speculating as to the precise meaning of this recital. So,
too, will we refrain from relying in any way on Vishal’s assertion that “[t]he
acronym ARMPVC stands for the first initials of three couples” comprised of
“Andy Patel and his wife (thus, A and R), Mukesh Patel and his wife (thus, M
and P), and Vishal Patel (the Plaintiff herein) and his wife (thus, V and C).”4
We will, however, note that, somewhere along the way, Fusion began
asserting that a lack of transparency into the affairs of ARMPVC had
resulted in uncertainty, at least on the part of Fusion, as to which if any of
3 ARMPVC is not mentioned in the complaint. The paragraph quoted is
the only reference to it in the Vishal Settlement Agreement. Neither
ARMPVC nor any representative of it was a party to the Vishal Settlement
Agreement.
4 The evidentiary record on appeal is scant, even when supplemented
with the documents as to which we are taking judicial notice. Thus we have
seen no evidence corroborating the quoted assertion. Nor have we seen
evidence (apart from fragmentary indications in settlement agreements)
shedding light: (a) on the purpose, organization, membership, management,
capitalization, debt structure, or third-party business dealings of Fusion
Hospitality Corporation, ARMPVC, MP1959 Investment, LLC, or V&C
Investments, LLC; (b) on who transferred funds to Fusion for what purpose
and how; or (c) on the extent to which terms governing transfers of funds to
Fusion by one person might have differed from terms governing such
transfers by another person.
4
the funds that had been transferred to it by or through ARMPVC should be
deemed to have come from Mukesh versus from Vishal versus from other
sources. According to Fusion, this uncertainty was stymying Fusion in its
efforts to achieve a consensus as to how payments contemplated to be made
under the two settlement agreements should be allocated.
B. Adjudication of Mukesh Settlement Agreement’s Enforceability
After some back and forth with Fusion regarding the allocation issue
discussed above, Mukesh filed—in the Mukesh Lawsuit—a motion pursuant
to Code of Civil Procedure section 664.6 to enforce the Mukesh Settlement
Agreement. Fusion opposed this motion, arguing inter alia that that the
Mukesh Settlement Agreement was unenforceable because its material terms
had not been finalized.
One ground on which Fusion contended the Mukesh Settlement
Agreement’s material terms had not been finalized involved the allocation
issue described above. In support of this contention, Fusion argued: that
Mukesh was “taking credit for principal monies contributed not by [Mukesh],
but by third parties”; that, until a consensus could be achieved as to who—
among Mukesh, Vishal, ARMPVC, and others—should be credited with
having made which payments to Fusion, there was a risk that Fusion would
overpay Mukesh; and that, absent documentation indicating to whom
transfers of funds to Fusion should be attributed, Fusion “cannot reliably
complete the transaction and settlement agreement.”
Citing the Vishal Settlement Agreement in support of this argument,
Fusion further argued:
“The settlement agreement between [Vishal] and [Fusion]
contained terms requiring [Vishal] to provide
documentation to [Fusion] to support the breakdown of
contributions made to Fusion by 1) V&C [Investments,
LLC], and 2) by [Mukesh], through . . . ARMPVC. . . .
5
These documents needed to clearly state which member
had contributed what amount, so there would be no
disagreements later, in which one member would accuse
Fusion of over-paying one member at the expense of
another.”
But, Fusion argued, far from generating certainty as to what amounts were
attributable to which sources, discrepancies in the documentation supplied to
Fusion had served only to generate uncertainty and suspicion.
A second ground on which Fusion contended the Mukesh Settlement
Agreement had not been finalized involved allocation of a different sort—
specifically, how payments contemplated to be made by Fusion to various
persons under the Mukesh Settlement Agreement should be characterized, as
between principal and interest, for tax purposes. In support of this
contention, Fusion argued: that the parties to the Mukesh Settlement
Agreement had not agreed on such an allocation; that “what amount is
principal and what amount is interest . . . [c]learly . . . are material terms”;
and that “[w]ithout an agreement on how the payments would be categorized
for tax purposes, the agreement would be unenforceable.” Furnishing an
explanation for why the Mukesh Settlement Agreement did not address this
allocation issue, Fusion argued that it was not until after Mukesh made a
post-agreement “attempt to pass fraudulent documents as genuine” that “it
became clear that the classification of the funds for tax purposes is a
necessary and material term of any proposed settlement agreement.”
The trial court rejected Fusion’s contention that the Mukesh
Settlement Agreement had not been finalized and was not enforceable. It
ruled that “a contract [had been] formed between the parties in which they
agreed to the material terms of a settlement agreement;” and, on the basis of
this ruling, it entered judgment in favor of Mukesh and against Fusion.
6
On appeal, Fusion continued to maintain its position that the Mukesh
Settlement Agreement was “too uncertain to be enforceable” (Patel v. Fusion
Hospitality Corporation (Aug. 12, 2021, D077569, D077726) [nonpub. opn.]
(Patel)), but on this point a panel of this court agreed with the trial court.5
“As evidence of uncertain and thus unenforceable terms,
Fusion states that after entering into the [Mukesh
Settlement] Agreement, disputes arose about allocating
funds between principal and interest . . . . But after an
enforceable contract is entered into, it is not uncommon for
parties to disagree about such things. That there is a
dispute does not necessarily indicate the [Mukesh
Settlement] Agreement is too uncertain; it may simply
mean it has been breached.”
Hence, the Court of Appeal concluded that the Mukesh Settlement
Agreement “is sufficiently certain to be enforced.” (Ibid.)
Following remittitur, the trial court issued an amended judgment (to
correct several line items in the original judgment with which our colleagues
on the Court of Appeal had taken issue). No appeal was taken from the
amended judgment, and the amended judgment became final.
C. Adjudication of Vishal Settlement Agreement’s Enforceability
After the amended judgment in the Mukesh Lawsuit had become final,
Vishal filed—in this lawsuit (the Vishal Lawsuit)—a brief, unaccompanied by
a motion, that was titled Plaintiffs’ Brief Re Issue Preclusion Addressing
Defendants’ ARMPVC Defense (the moving brief). The moving brief did not
identify by number which of the 21 affirmative defenses enumerated in
Fusion’s answer it was intended to target; however, there is only one such
5 The panel reversed the judgment on a different point. (See Patel,
supra, D077569, D077726.)
7
defense that pertains to ARMPVC. That defense states in pertinent part
that:
“[Vishal] breached the [Vishal Settlement Agreement] prior
to any alleged breach by [Fusion], and [Fusion was]
excused from performance due to [Vishal’s] breach. . . .[The
Vishal Settlement Agreement] required [Vishal] ‘to produce
documentation from the other members of ARMPVC
Investment LLC stating that the contribution to ARMPVC
Investment LLC is accurately represented[.]’ [Vishal] did
not produce an accurate document. This failure was a
material breach of the [Vishal Settlement] Agreement.”
In the moving brief, Vishal argued that the doctrine of issue preclusion
should operate “to bar [Fusion’s] manufactured defense re[garding] the
irrelevant entity ‘ARMPVC’ ” because “the so-called ARMPVC defense/issue”
was “conclusively and permanently defeated in the companion victim’s case”
(the Mukesh Lawsuit) and because Vishal Patel and Mukesh Patel both were
managers of ARMPVC6 and thus “had/ha[ve] the exact same interest and
position regarding this issue” as one another.
In opposition to this moving brief, Fusion argued: that the ARMPVC
issue that was presented in the Vishal Lawsuit was not identical to the
ARMPVC issue that had been adjudicated in the Mukesh Lawsuit; that the
manner in which the issue had been presented to the trial court was
procedurally defective; that “there is no record or evidence to support the
relief requested”; and that the phraseology of the above-quoted recital in the
Vishal Settlement Agreement was “confusing at best . . . and does not clearly
entitle [Vishal] to a determination that there is nothing in the subject
contract that can be disputed.”
6 See fn. 4, ante.
8
Fusion also asserted that enforcement of the Vishal Settlement
Agreement and the Mukesh Settlement Agreement “would risk . . . double-
dipping” because “they’re seeking a judgment for the same money that’s
already been [awarded] in the earlier case.” Vishal for their part vehemently
denied this assertion, arguing “there’s no evidence” that Vishal and Mukesh
“are trying to get the same ARMPVC money” because “it’s not true.”7
At the behest of Vishal during oral argument, the trial court treated
the matter as a motion for judgment on the pleadings. It then granted the
motion and entered judgment for Vishal and against Fusion. Whereupon
Fusion timely appealed.
II.
DISCUSSION
On appeal, Fusion contends the judgment must be reversed because the
ARMPVC issue that it pleaded but was precluded from litigating as a defense
in this lawsuit differs from the ARMPVC issue that was adjudicated against
it in the Mukesh Lawsuit.
A. Standard of Appeal
In addressing Fusion’s contention, we begin by observing that the type
of issue preclusion with which we are presented on this appeal is offensive (as
distinguished from defensive) issue preclusion, and that authorities are
mixed as to the appropriate standard under which decisions premised on this
type of issue preclusion should be reviewed. (Roos v. Red (2005)
130 Cal.App.4th 870, 878.) Some authorities “suggest[ ] the appellate court
should give deference to the lower court’s decision” as to the preclusive effect
to be accorded to an issue adjudicated in a different lawsuit. (Ibid.) Other
authorities indicate such a decision should be reviewed de novo. (Ibid.
7 See fn. 4, ante.
9
[concluding de novo review is the “predominate view”].) Additionally, a trial
court’s entry of judgment on the pleadings is reviewed de novo. (Alameda
County Waste Management Authority v. Waste Connections US, Inc. (2021)
67 Cal.App.5th 1162, 1173.) But we need not examine differences among
potentially applicable standards of review on this appeal because, irrespective
of the standard to be applied, we conclude (for reasons discussed in the next
section of this opinion) that the trial court erred in precluding Fusion from
litigating its ARMPVC defense in this case.
B. Issue Preclusion Analysis
Issue preclusion, also known as collateral estoppel, is a doctrine that
“precludes relitigation of issues argued and decided in prior proceedings.”
(Lucido v. Superior Court (1990) 51 Cal.3d 335, 341; accord DKN Holdings
LLC v. Faerber (2015) 61 Cal.4th 813, 824.) For the doctrine to apply, “five
‘threshold requirements [must be] fulfilled.’ ” (Thompson v. Crestbrook Ins.
Co. (2022) 81 Cal.App.5th 115, 124.)
“First, the issue sought to be precluded from relitigation
must be identical to that decided in a former proceeding.
Second, this issue must have been actually litigated in the
former proceeding. Third, it must have been necessarily
decided in the former proceeding. Fourth, the decision in
the former proceeding must be final and on the merits.
Finally, the party against whom preclusion is sought must
be the same as, or in privity with, the party to the former
proceeding.”
(Lucido, supra, at p. 341; accord Thompson, supra, at p. 124.) The burden of
establishing these five requirements for the application of issue preclusion is
borne by the party asserting issue preclusion. (Lucido, at p. 341.)
Here, we conclude that Vishal cannot establish requirement one,
because, simply stated, the ARMPVC issue that Vishal seeks to prevent
10
Fusion from litigating in this lawsuit is not identical to the ARMPVC issue
that was decided against Fusion in the Mukesh Lawsuit.8
The ARMPVC issue that was decided against Fusion in the Mukesh
Lawsuit was whether the Mukesh Settlement Agreement was sufficiently
certain to be enforced as is—e.g., without any need for its terms to be
modified to address allocation issues. The ARMPVC issue that Vishal seeks
to prevent Fusion from litigating in this lawsuit, by contrast, is whether
performance by Fusion of its obligations under the Vishal Settlement
Agreement was excused due to a breach by Vishal of Vishal’s obligations
under that agreement (the alleged breach being a claimed failure on the part
of Vishal to supply Fusion with accurate documentation pertaining to
ARMPVC).9 And though each may be rooted in a concern that was expressed
in both lawsuits (i.e., allocation), and each may trigger a response that was
the same in both lawsuits (i.e., it’s a red herring), that does not make these
entirely different issues identical.10
8 Because the first threshold requirement is not met, we need not
address the remaining requirements.
9 As noted ante, one of the recitals in the Vishal Settlement Agreement
references documentation pertaining to ARMPVC. But it does so in a manner
that arguably is internally inconsistent or ambiguous, depending on how the
phrases “will provide documentation” and “[t]he document produced . . . is . . .
sufficient” are construed. Presumably, evidence and arguments bearing on
the interpretation/reconciliation of these phrases will be addressed on
remand.
10 Even if the ARMPVC issue presented in the Vishal Lawsuit were
“closer” to the ARMPVC issue presented in the Mukesh Lawsuit—e.g., even if
the issue in the Vishal Lawsuit were a matter not of performance having
been excused, but rather of terms being sufficient—the issues still would not
be identical, because of the ways in which the two agreements themselves are
so different.
11
In arriving at this conclusion, we express no view regarding the merits
of Fusion’s ARMPVC defense; nor do we express a view as to any other
defenses (or claims or crossclaims) that may remain in this case. Vishal will
still be afforded the opportunity to advocate for enforcement of the Vishal
Settlement Agreement—just not in a way that circumvents the need to deal
with Fusion’s ARMPVC defense on the merits.11
III.
DISPOSITION
The judgment is reversed. Fusion is entitled to costs on appeal.
KELETY, J.
WE CONCUR:
HUFFMAN, ACTING P. J.
O’ROURKE, J.
11 Vishal expresses several grievances and arguments relating to matters
other than issue preclusion and augmentation or sufficiency of the appellate
record. (See, e.g., Respondents’ Brief, argument nos. IV-VII and IX). Having
examined Vishal’s presentation regarding these matters, however, we
conclude that (to the extent not forfeited or waived) each such matter exceeds
the scope of this appeal or is trivial, irrelevant, or not supported by the record
with which we have been presented.
12