Summit Leasing, Inc. v. Chhatrala Edes, LLC ( 2016 )

FILED
OCTOBER 13, 2016
In the Office of the Clerk of Court
WA State Court of Appeals, Division III
IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
DIVISION THREE
SUMMIT LEASING, INC., a Washington )
corporation, ) No. 33870-3-111
)
Respondent, )
)
V. )
) UNPUBLISHED OPINION
CHHATRALA EDES, LLC, a limited )
liability company; SHIVA )
MANAGEMENT, INC., a corporation; )
ASHISH PATEL, an individual; the )
marital community of ASHISH PATEL & )
JANE DOE PATEL, husband and wife; )
JENISH PATEL, an individual; and the )
marital community of JENISH PATEL & )
JANE DOE PATEL, husband and wife, )
)
Appellants. )
SIDDOWAY, J. - Summit Leasing, Inc. was granted an early summary judgment in
this collection action, in which it seeks to recover amounts owed under an equipment
finance agreement with Chhatrala Edes, LLC (Edes), Shiva Management, Inc. (Shiva),
Ashish Patel, and Jenish Patel.
Ashish 1 contends his signature appearing on the finance agreement was forged,
and the entities have challenged Jenish's and Ashish's authority to contract on their
1
We refer to Ashish and Jenish Patel by their first names to avoid confusion. We
intend no disrespect.
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Summit Leasing v. Chhatrala Edes, LLC
behalf. Ashish and the entities submitted declarations demonstrating disputes over these
material facts. Summit nonetheless persuaded the trial court that their declarations were
conclusory, self-serving, and otherwise insufficient. We disagree, reverse the order
granting summary judgment against Ashish and the two entities, and remand for further
proceedings.
FACTS AND PROCEDURAL BACKGROUND
Summit Leasing, Inc. brought this collection action for amounts that remained
owing on equipment financed under a November 2013 written agreement with four
"customers": Chhatrala Edes, LLC, Shiva Management, Inc., Ashish Patel, and Jenish
Patel. Clerk's Papers (CP) at 12. Over $120,000 was owed. Summit sought to recover
that amount, net of any proceeds of sale of the equipment it had repossessed, together
with prejudgment interest and attorney fees.
A notice of appearance was filed in the action by attorneys for "Defendants." CP
at 17. Two months later, a "Defendants' Answer" was filed. The defense lawyers later
filed an amended notice of appearance that included a notice of withdrawal from any
representation of J enish.
Summit soon moved for summary judgment. It filed a declaration of Ken Mears, a
Summit employee and custodian of its records, authenticating the equipment finance
agreement and establishing the default and the amount owed. He also authenticated, as
"related agreement documents" provided to Summit, a limited liability company
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resolution for Edes that bears signatures of Jenish and Ashish as members, and a
corporate resolution for Shiva that bears signatures of Jenish and Ashish as corporate
officers. CP at 30-38.
The defendants other than Jenish-the present appellants-responded by
contending that Jenish alone had procured the finance agreement, that he procured it for
his own benefit, and that he, or someone else, had forged Ashish's signature. According
to Edes, Shiva, and Ashish, Jenish was not authorized to enter into the finance agreement
on behalf of Edes or Shiva.
The evidence submitted in opposition to the summary judgment motion included a
declaration by Ashish, which stated in relevant part:
I do not recall the equipment finance agreement as Plaintiff alleges (Exhibit
1 to Mr. Mears' declaration). To the best of my knowledge, I did not enter
into that agreement, which would make little sense for me to do so for the
reasons stated below.
To my knowledge, I was not presented that document and if my
signature is on it, it was forged or the result of fraud. I also have no
recollection signing the limited liability and corporate resolutions attached
as Exhibits 2 and 3 to Mr. Mears' declaration. I did not sign those, and if
my signature is on those documents, it was forged, or the result of fraud. I
am not Vice-President of Shiva Management, Inc. or a member of
Chhatrala Edes, LLC.
CP at 57.
The defendants also submitted a declaration of Hemant Chhatrala, who stated he
was the president of Shiva as well as the managing member of the entity that was the
managing member of Edes. He stated that Jenish, his nephew, "was not (and is not)" a
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corporate officer or member of Shiva. CP at 60. He stated that Jenish was "never" the
president or a member of Edes. Id. He asserted that Jenish had "created a phony
operating agreement stating he was the managing member" of Edes. Id. He also stated
that Ashish "was not (and is not) a member or Managing Member or Vice-Pres[id]ent of
Shiva or Edes" and "did not have authority to enter into resolutions of any kind on Edes
and Shiva's behalf." CP at 61.
In reply, Summit's lawyer filed a supplemental declaration to which he attached
what he said were true and correct copies of documents produced by the California
secretary of state in response to a request for all corporate documents filed by Edes and
Shiva. 2 They consisted of the following:
• A Statement of Information for Shiva filed in November 2011 that identified
the corporation's officers and registered agent. Ashish was not identified as an
officer or agent. Jenish was identified only as agent for service of process.
Hemant Chhatrala was identified as chief executive officer.
• A Statement of Information for Shiva filed in October 2014 in which Hemant
Chhatrala was now identified as having replaced other family members in all
officer positions and as agent for service of process.
• An Application to Register a Foreign Limited Liability Company filed in
September 2012 that indicated that Edes had been formed in Delaware days
before and that identified Jenish as its agent for service of process.
• A Statement of Information for Edes filed in October 2014, that identified
Hemant Chhatrala as its sole manager as well as its agent for service of
process.
2
The equipment financed was to be used and would be located in a project in
Oakland, California.
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Finally, in reply, Summit submitted a declaration of Craig Kupp, another of its
employees, who stated that before entering into equipment finance agreements, Summit
performs due diligence on customers that includes reviewing state corporation records
and requiring its customers to present documents establishing the authority of the
individuals who will be signing on their behalf. He authenticated documents from
Summit's due diligence files on the Edes/Shiva/Patel financing that collectively portrayed
Edes and Shiva as part of a group of hospitality corporations initially owned and
controlled by three brothers-Hemant Chhatrala, Ashvin Patel, and Shailesh Patel-but
some ownership and management of which was now held by a second generation:
Ashvin's sons Jenish and Sarjan Patel, and Shailesh's son Ashish. Mr. Kupp
authenticated the following documents from Summit's due diligence file on the
Edes/Shiva/Patel financing:
• Screen shots from the California secretary of state's website taken shortly
before the finance agreement was executed, showing Jenish as agent for
service of process;
• Corporate resolutions of Shiva and Edes purporting to reflect changes in
ownership of the two entities, with Ashish and Janesh acquiring ownership
interests within the year prior to the Summit finance transaction;
• An investment opportunity packet for a project being undertaken by the
"Chhatrala Group," characterizing the related entities as involving two
generations of the family, with Jenish serving as chief investment officer and
Ashish serving as chief development officer;
• A certificate of liability insurance showing Shiva, Edes, and Jenish as insureds
under a multi-million dollar policy covering the project for which equipment
was being financed; and
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• A copy of a check drawn on an Edes account provided to Summit for
automatic payment purposes, bearing the signature of Jenish.
At the hearing on summary judgment, Summit characterized the declarations of
Ashish and Hemant Chhatrala as self-serving, conclusory and otherwise insufficient to
raise a genuine issue as to forgery or unauthorized execution on behalf of Edes and Shiva.
It argued that the defense declarations could not overcome an admission in the
defendants' answer or the authority of Jenish and Ashish reflected in the due diligence
materials in Summit's files. It argued that the defendants had failed to "prove" their
assertions about Jenish's and Ashish's lack of authority with supporting documents.
Report of Proceedings (RP) at 6.
For their part, Edes, Shiva, and Ashish challenged Mr. Kupp's authentication of
the due diligence documents, since he had no personal knowledge of the Chhatrala
entities' ownership and control at relevant times.
After hearing the argument of counsel, the court granted summary judgment to
Summit against all of the defendants. Only Edes, Shiva, and Ashish appeal.
ANALYSIS
An order granting summary judgment is reviewed de novo, "considering the
evidence and all reasonable inferences from the evidence in the light most favorable to
the nonmoving party." Keck v. Collins, 184 Wn.2d 358,370,357 P.3d 1080 (2015).
Summary judgment is appropriate where there is no genuine issue of material fact and the
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moving party is entitled to judgment as a matter oflaw. CR 56(c). "[W]hen reasonable
minds could reach but one conclusion, questions of fact may be determined as a matter of
law." Hartley v. State, 103 Wn.2d 768, 775, 698 P.2d 77 (1985).
The evidence presented with Summit's reply demonstrates that Jenish and/or
Ashish might have had the actual or apparent authority to bind Edes and Shiva to the
equipment finance agreement. Edes, Shiva, and Ashish argue that Mr. Kupp lacked the
personal knowledge required to authenticate the corporate and LLC resolutions attached
to his declaration and that the court erred in considering them-an argument we turn to
first, and reject in part.
I. The corporate and LLC resolutions attached to Mr. Kupp 's
declaration were admissible for a limited purpose
Edes, Shiva, and Ashish argue that the corporate and LLC resolutions attached to
Mr. Kupp's declaration as exhibits 3, 4, and 5 are inadmissible because Summit did not
properly authenticate them.
Documents submitted through an affidavit must be authenticated under ER 901 to
be admissible. Int'/ Ultimate, Inc. v. St. Paul Fire & Marine Ins. Co., 122 Wn. App. 736,
745, 87 P.3d 774 (2004). Under ER 901(b)(l), "[a] document can be authenticated with
the testimony of a witness with knowledge that the document is what it claims to be."
Burmeister v. State Farm Ins. Co., 92 Wn. App. 359, 366, 966 P.2d 921 (1998).
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"Statements in a declaration based on a review of business records satisfy the
personal knowledge requirement of CR 56(e) if the declaration satisfies the business
records statute, RCW 5.45.020." Barkley v. GreenPoint Mortg. Funding, Inc., 190 Wn.
App. 58, 67,358 P.3d 1204 (2015), review denied, 184 Wn.2d 1036 (2016). Mr. Kupp's
authentication of exhibits 3, 4, and 5 satisfies RCW 5.45.020 because his declaration
meets the statute's requirement that he testify to the identity and mode of preparation of
Summit's due diligence file and that it was prepared in the regular course of business, at
or near the time of the finance transaction.
"A business record is admissible only in so far as it represents a record of a
contemporaneous act, condition or event." Young v. Liddington, 50 Wn.2d 78, 84, 309
P.2d 761 (1957). Exhibits 3, 4, and 5 are admissible only insofar as they represent a
portion of Summit's record of documents it obtained in its due diligence process. They
are not admissible as true records of Edes and Shiva or as evidence of the events they
purport to record. The trial court did not abuse its discretion if it considered the
resolutions for this limited purpose, and we consider them only for this limited purpose in
our de novo review.
II. The appellants' opposition materials were not insufficient
If Ashish's signature was forged, he is not liable. And if Ashish and Jenish lacked
actual or apparent authority to enter into the equipment finance agreement on behalf of
Edes and Shiva, then those entities are not bound. Summit recognizes this in theory, but
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advances several arguments why the defense evidence comes too late or is insufficient.
We reject its arguments.
A. The defendants' answer did not make a binding admission that
the agreement was authorized or that the signatures were valid
CR 56(c) provides that summary judgment "shall be rendered forthwith" if, among
other matters, "the pleadings ... and admissions on file ... 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." Summit contends that the defendants' answer to paragraph 3.2 of its
complaint is a binding admission that Ashish signed the finance agreement. Summit
alleged:
3.2 On or about November 1, 2013 [Edes, Shiva, Ashish, and
Jenish, among others], as borrowers, entered into an equipment finance
agreement ... with Summit for the purchase of certain commercial
equipment.
CP at 4. The defendants answered:
3.2 Admit the agreement attached as Exhibit 1 was signed,
however, it was signed October 30, 2013. As to the terms, the agreement
speaks for itself. Any allegations not admitted herein are denied.
CP at 21.
As Edes, Shiva and Ashish point out, the defendants' answer admits only that the
agreement "was signed," it does not admit that they signed it. They did not admit the
critical allegation of paragraph 3 .2 that "Defendants, as borrowers, entered into an
equipment finance agreement ... with Summit." CP at 4 (emphasis added). Rather, they
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said, "Any allegations not admitted herein are denied." CP at 21. Fairly read, the
defendants' admission is only to the fact that the agreement was signed by someone-an
unhelpful and undisputed fact.
Summit also argues that the claim of forgery came suspiciously late. The fact that
the defendants did not claim a forgery earlier may be cross-examination material, but as a
fact that bears on credibility, it is not a basis for summary judgment.
B. Ashish 's declaration was not "conclusory" and
thereby insufficient
Summit contends Ashish's declaration asserting his signature on the Summit
agreement and supporting resolutions was forged is conclusory and thereby insufficient
to avoid summary judgment. In meeting its summary judgment burden, a nonmoving
party must "set forth specific facts that sufficiently rebut the moving party's contentions
and disclose that a genuine issue as to a material fact exists." Seven Gables Corp. v.
MGMIUA Entm 't Co., 106 Wn.2d 1, 13, 721 P.2d 1 (1986); CR 56(e). "Ultimate facts or
conclusions of fact are insufficient. Likewise, conclusory statements of fact will not
suffice." Grimwood v. Univ. ofPuget Sound, Inc., 110 Wn.2d 355, 359-60, 753 P.2d 517( 1988) (citation omitted).
"Conclusory" is defined as "[ e]xpressing a factual inference without stating the
underlying facts on which the inference is based." BLACK'S LA w DICTIONARY 351 (10th
ed. 2014 ). For a person to say only that his signature appearing on a document is a
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forgery, without explaining why he knows or believes that to be true, is conclusory. But
Ashish made additional statements of underlying fact. He stated, "I do not recall the
equipment finance agreement"; "To the best of my knowledge, I did not enter into that
agreement"; "To my knowledge, I was not presented that document"; and "I did not sign
[the limited liability and corporate resolutions] attached as Exhibits 2 and 3 to Mr. Mears'
declaration." CP at 57. The fact that Ashish does not always express certainty is not
fatal; a question of fact can be raised by a recollection that is not absolutely certain.
The underlying facts contained in Ashish's declaration are sufficient to raise a
genuine issue of material fact as to whether the signatures are his. Cf Stahly v. Emonds,
184 Wash. 207,210, 50 P.2d 908 (1935) (whether the plaintiffs name was forged
"presents purely a question of fact").
C. Mr. Chhatrala 'sand Ashish 's declarations were not
deficiently "self-serving"
The trial court appears to have been persuaded to grant summary judgment
principally by Summit's argument that the defendants' "self-serving" declarations about
Jenish's and Ashish's lack of authority could not overcome the documentation in
Summit's due diligence file. RP at 2. Summit relied below and continues to rely on
appeal onMarshallv. AC&S, Inc., 56 Wn. App. 181,782 P.2d 1107 (1989).
In Marshall, medical records established that the plaintiffs physicians had
determined in 1982 that his respiratory illness had been caused by exposure to asbestos
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and that plaintiffs claim for worker's compensation indicated he became aware of his
illness in 1982. When deposed, the plaintiff
stated unequivocally that he had been told he suffered from asbestosis by a
doctor at Harborview [Medical Center] on his first trip there. The only
uncertainty he expressed concerned the date of that visit, which he stated
was in"' 82 or '83."
Id. at 183 (internal quotation marks omitted). Later, however, and faced with a motion
for summary judgment on statute of limitations grounds, the plaintiff submitted an
affidavit in which he now contended that he was not told he had an asbestos related
disease until 1985. Id The appellate court affirmed summary judgment, citing the
principle that "' [w ]hen a party has given clear answers to unambiguous [deposition]
questions which negate the existence of any genuine issue of material fact, that party
cannot thereafter create such an issue with an affidavit that merely contradicts, without
explanation, previously given clear testimony." Id at 185 (second alteration in original)
(quoting Van T. Junkins & Assocs. v. U.S. Indus., Inc., 736 F.2d 656, 657 (11th Cir.
1984)).
This case is distinguishable. Jenish's and Ashish's authority to bind Edes and
Shiva presents an issue of agency, and an agent's authority to bind his principal may be
of two types: actual or apparent. King v. Rive/and, 125 Wn.2d 500, 507, 886 P.2d 160( 1994 ). The summary judgment record in this case does not include undisputed,
admissible documentary evidence of actual or apparent agency or any prior sworn
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admissions by Edes and Shiva that are now merely contradicted, without explanation, by
Ashish's and Mr. Chhatrala's declarations.
On the issue of actual authority, the entities have presented evidence of a genuine
issue of disputed fact. "Actual authority may be express or implied. Implied authority is
actual authority, circumstantially proved, which the principal is deemed to have actually
intended the agent to possess." Id. Mr. Chhatrala's declaration states he is the principal
executive for both Edes and Shiva. His testimony as to Ashish's and Jenish's lack of
authority to contract for the entities is sufficient to defeat summary judgment.
On the issue of apparent authority, the apparent authority of Ashish and Jenish to
bind Edes and Shiva will be established only if the representation to Summit that they
had authority was made by someone authorized to act for Summit.
An agent has apparent authority to act for a principal only when the
principal makes objective manifestations of the agent's authority to a third
person. . . . Manifestations of authority by the purported agent do not
establish apparent authority to act.
Ranger Ins. Co. v. Pierce County, 164 Wn.2d 545, 555, 192 P.3d 886 (2008) (citations
omitted) (internal quotation marks omitted). Mr. Kupp's declaration is silent as to who
provided Summit with the records in its due diligence file. If Summit can establish
beyond dispute that the documents were provided by, say, Hemant Chhatrala, apparent
authority might be demonstrable. If it can establish only that the documents were
provided to it by, say, Jenish, then questions of fact remain.
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Both parties request attorney fees under RAP 18.l(a) and under paragraph 15.0 of
the equipment finance agreement, which provides for Summit's recovery of attorney fees
in the event of default. Such provisions are made bilateral by RCW 4.84.330. Because
any award of attorney fees to the prevailing party must await the final outcome of the
parties' dispute, both parties' requests are denied. Wash. Prof! Real Estate, LLC v.
Young, 163 Wn. App. 800,819,260 P.3d 991 (2011).
A majority of the panel has determined this opinion will not be printed in the
Washington Appellate Reports, but it will be filed for public record pursuant to RCW
2.06.040.
?7dbw~,~-
siddoway, J.
WE CONCUR:
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