Patel v. Patel

252 A.3d 1221

Vikash PATEL et al.

v.Rasikbhai PATEL et al.

No. 2019-144-Appeal.

KC 18-309

Supreme Court of Rhode Island.

June 22, 2021

Zachary W. Berk, Esq., for Plaintiffs

Robert G. Flanders, Jr., Esq., Timothy K. Baldwin, Esq., for Defendants

Present: Suttell, C.J., Goldberg, Robinson, Lynch Prata, and Long, JJ.

Justice Lynch Prata, for the Court.

The defendants, father and son Rasik and Rakesh Patel, appeal from a judgment entered in the Superior Court after a jury found in favor of the plaintiffs, brothers-in-law Vikash and Andy Patel, as well as from an order of the Superior Court denying the defendants’ motion for a new trial.¹ On appeal, the defendants contend that the trial justice erred in permitting consideration of prior oral agreements under the parol evidence rule, that the justice impermissibly allowed for enforcement of an illegal scheme, that the trial justice abused his discretion by admitting a recording they allege was illegally made to impeach a witness's testimony, and, finally, that the trial justice erred in denying their motion for a new trial. For the reasons set forth in this opinion, we affirm the judgment and order of the Superior Court.

Facts and Travel

Before this Court are two versions of a tale regarding a joint venture to purchase and operate Big River Spirits, a liquor store located at 6 Nooseneck Hill Road in West Greenwich, Rhode Island. All parties to the loan to purchase the store agree that, on May 4, 2017, they arrived at the offices of counsel for Rockland Trust Company (Rockland) to sign the closing documents. There is also no dispute that, during the closing, the ownership percentages for the two named partners, plaintiff Vikash and defendant Rasik, were altered by hand to reflect different shares, shifting from 50/50 to 80/20 in favor of Rasik. However, at trial plaintiffs alleged that this alteration was intended as a temporary adjustment to satisfy the lender's closing requirements and that all parties agreed that they would later revert to the percentages earlier settled upon. The defendants argued that the altered ownership shares should stand, because that is what the written agreement states. A proper examination of the instant matter thus requires that the Court briefly recount the history of the deal.

At trial, Andy testified that Rakesh, an old friend from New York, reached out to him in August or September 2016, looking for a partner to purchase Big River Spirits. According to defendants Rakesh and his father Rasik, however, the entire deal was the result of Rasik's dream of owning a liquor store. While Rakesh also testified that he had been the one who contacted Andy about the deal, he claimed that Andy signed the initial offer to purchase Big River Spirits simply as a friend who was helping Rakesh out. An attorney hired by Rakesh and Andy then drafted purchase agreements that listed Andy and Rakesh's father, Rasik, as the buyers.² When the agreements were signed, Andy testified, he and Rakesh had agreed that they would split the ownership 50/50.

Andy testified that he performed a number of tasks in preparation for the closing: assisting with the loan; transferring the liquor, cigarette, and lottery licenses; coordinating and paying for the environmental testing of the property; and paying for the appraisal. When Rakesh had difficulty securing financing due to his father's limited income, Andy recommended Rockland, with whom he had done business before.

According to Andy, Sergio DoRego, a vice president of commercial lending at Rockland, later told them that, due to the outstanding debt Andy had with Rockland from his other business ventures, if he was listed as owning 20 percent or more of Big River Spirits, their loan would have to undergo a much stricter approval process. As a result, according to Andy, he and Rakesh orally agreed that the loan application would be submitted with Rakesh's father Rasik listed as owning 85 percent and Andy owning 15 percent, although the actual ownership percentages would remain 50/50. DoRego testified that he understood that the 85/15 split did not reflect the final ownership percentages and that he had informed his supervisor that it might change later. According to Andy, due to Rasik's limited income, his son Rakesh had to provide collateral in the form of the convenience store located at 360 Main Street in East Greenwich, Rhode Island, which was owned by Rakesh and Rasik through an entity named "360 Shreeji, Inc."³

At that point, Andy testified, he and Rakesh began looking for someone to manage Big River Spirits. Andy suggested that they reach out to his brother-in-law, Vikash. Vikash was living in New Jersey; but, after driving to Rhode Island and visiting the store, he told his brother-in-law Andy that he would be interested in relocating to manage the store if he could be a 60-percent owner. After some negotiation, during which the three agreed that Vikash would own 50 percent, Rakesh then asked for a greater ownership percentage, and Andy agreed to give 5 percent of his share to Rakesh. The final ownership percentages agreed to by the parties, according to Andy, were 50 percent for Vikash, 30 percent for Rakesh, and 20 percent for Andy.⁴

Rakesh next questioned why only his father, Rasik, was providing a guarantee for the loans. Although Vikash met with DoRego and filled out a personal financial statement, DoRego ultimately advised Vikash that adding him to the loan would require reprocessing and could delay the closing, which had already been rescheduled once. According to Vikash, everyone agreed to proceed with the loan under the previously drafted agreements and change the ownership percentages after closing, not wanting to jeopardize the purchase. Two separate Rhode Island limited liability companies would own the business and real estate.⁵ Their attorney drafted operating agreements for the companies, listing Vikash and Rasik as each owning 50 percent of the companies, again purportedly to placate Rockland, because Rasik was the only approved guarantor of the loan.

Present at the closing on May 4, 2017, were Vikash, Andy, Rakesh, Rasik, the seller, DoRego, and Stanley Sheer, the real estate broker who had the listing, as well as attorneys for the seller, purchasers, and Rockland. Andy testified that because the closing occurred in a small conference room, he, Rakesh, and Sheer sat just outside in the lobby, only sometimes going into the room while the closing took place.

Vikash, Andy, and their attorney all testified that, during the closing, Rockland's counsel explained that the bank needed the ownership percentages to change from 50/50 to 80/20 in favor of Rasik in order to close, because Vikash was not a guarantor at that time. According to plaintiffs, at that point Rakesh, Rasik, DoRego, Andy, and Vikash stepped outside of the conference room to consult with each other about going forward. Rasik testified that he never left the table during the closing.

Vikash and Andy testified that DoRego told them they could change the percentages back to the previously agreed split a few months after closing.⁶ The brothers-in-law also testified that Rakesh explained all of this to his father Rasik in his native language, Gujarati, due to his limited English, and that both of them agreed.⁷ According to Andy, the change was necessary because they needed to close on May 4, 2017: the seller was buying a house three days later on May 7, so there could be no further delay. Andy testified that, after the parties had all agreed that they would change the ownership split back in a few months, Vikash and Rasik returned to the conference room to initial the changes to the ownership percentages.

At trial, Rakesh testified that he did not know why the ownership percentages on the operating documents were changed from 50/50 to 80/20 in favor of his father, and that he did not remember the discussion outside of the conference room. He claimed that his father told him that the changes were made because of "collateral," and Rasik later testified that the ownership percentages were changed to 80/20 at the closing because Vikash had not offered property as collateral for the loans. Eventually, Rakesh admitted in his testimony that the changes occurred because Vikash had not been a guarantor for the loans, acknowledging that the changes had been made at Rockland's request.

After the closing, Vikash began working full-time as manager of the store, completing several credit applications with liquor distributors on behalf of the business. Rakesh also worked there, manning the cash register. His father, Rasik, never worked at Big River Spirits.

Three weeks after the closing, Vikash began the process of trying to have the agreements modified to show a 50/30/20 ownership division, emailing DoRego at Rockland, who consented to the change by letter. Vikash also requested that an attorney draft revised operating agreements to reflect these percentages. However, defendants Rakesh and Rasik refused to modify the documents. Consequently, Vikash testified, he attempted to add his father Mahendra's name to the business, as Mahendra no longer trusted Rakesh.⁸

Andy and Mahendra testified that, at a July 2017 meeting, Mahendra asked Rakesh to modify the ownership percentages, but Rakesh claimed it did not make sense for Vikash to change it, for tax reasons, eventually saying that "there won't be any changes" and that "[w]hat it was on the paper, they were bound to that." Andy also testified that, at that meeting, Rakesh eventually told them: "I'm not going to change it. Do whatever you got to do. On the paper it says 80% I'm owner and 20% Vikash owner, you can't do nothing to me." Later that year, there was another meeting during which Rakesh again told Andy, "[W]e are 80% on the paper. You are 20%. You can't do nothing to us." On October 8, 2017, Andy sent Rakesh a text message, asking him to honor the prior agreement, but Rakesh only responded, "Hi."

In January 2018...