Court Opinion

ID: 4089325
Source: CourtListenerOpinion
Date Created: 2016-10-13 15:45:28.164048+00
Date Added: 2024-06-11T14:34:05.620632
License: Public Domain

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                                              )        UNPUBLISHED OPINION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.
No. 33870-3-111
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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Summit Leasing v. Chhatra/a Edes, LLC

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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Summit Leasing v. Chhatrala Edes, LLC

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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Summit Leasing v. Chhatrala Edes, LLC

       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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Summit Leasing v. Chhatrala Edes, LLC

       •   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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Summit Leasing v. Chhatrala Edes, LLC

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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No. 33870-3-111
Summit Leasing v. Chhatrala Edes, LLC

       "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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     Summit Leasing v. Chhatrala Edes, LLC

     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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No. 33870-3-111
Summit Leasing v. Chhatrala Edes, LLC

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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No. 33870-3-111
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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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No. 33870-3-III
Summit Leasing v. Chhatrala Edes, LLC

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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No. 33870-3-111
Summit Leasing v. Chhatrala Edes, LLC

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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No. 33870-3-III
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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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