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Patel v. Shah

Supreme Court of Alabama

September 30, 2019

Dahyalal H. Patel
v.
Ashish Shah, individually and in his capacity as president, treasurer, director, and controlling shareholder of Subway No. 43092, Inc.;Ramesh Shah, individually and in his capacity as secretary of Subway No. 43092, Inc.; and Subway, Inc.

          Appeal from Madison Circuit Court (CV-12-901307)

          PARKER, CHIEF JUSTICE.

         Dahyalal H. Patel filed an action seeking to enforce his ownership rights as a shareholder in Subway No. 43092, Inc. ("the corporation"), against shareholder Ashish Shah ("Shah"); Shah's father, Ramesh Shah ("Ramesh"); and the corporation (hereinafter referred to collectively as "the Shah defendants"). The Madison Circuit Court entered a summary judgment in favor of the Shah defendants. Patel appeals. We affirm in part and reverse in part.

         I. Facts and Procedural History

         In 2007, Shah, the owner of eight Subway restaurants in and around Madison County, prepared to open a ninth Subway restaurant in Huntsville ("the restaurant"). In July 2008, Shah formed the corporation for the purposes of owning and operating the restaurant. Shah owned 90 percent of the stock of the corporation and Ramesh owned 10 percent.

         In 2008, Patel met with Shah about Shah's plan to open the restaurant. At some point, Patel and Shah orally agreed that Patel would purchase a 25 percent ownership interest in the corporation. Because Shah estimated that start-up costs for the restaurant would be $240, 000, Patel agreed to purchase a 25 percent interest in the corporation for $60, 000, payable in monthly installments.[1] After the restaurant opened in December 2008, Shah began making periodic distributions of profits to Patel.

         In April 2009, Shah orally agreed to sell Patel an additional five percent interest for $12, 000, which Patel paid that month. In December 2009, Patel began making the monthly payments on the purchase price for his original 25 percent interest, and he eventually paid the $60, 000. Accordingly, Patel owned a 30 percent interest in the corporation, and he continued to receive distributions of profits of the restaurant.

         In September 2012, Patel sued the Shah defendants, alleging that Shah had misrepresented the start-up costs for the restaurant in calculating the price of Patel's 25 percent interest. Patel alleged that the actual start-up costs were $140, 000 rather than $240, 000, as Shah had represented. Accordingly, Patel alleged that he either overpaid for his interest or acquired more than a 50 percent interest in the corporation. Patel further alleged that the distributions of profits he received were not proportional to his interest, even assuming that his interest was 30 percent. In addition, he claimed that Shah had withheld Patel's share of franchise- sales commissions that the corporation received from its franchisor, Doctor's Associates, Inc. Finally, Patel alleged that Shah had engaged in illegal business practices such as hiring illegal immigrants and filing false tax returns. Patel's complaint asserted claims of breach of contract and unjust enrichment. Patel also asserted several tort claims, including claims of shareholder oppression, civil conspiracy, breach of fiduciary duties, fraudulent suppression, misrepresentation, conversion, waste, statutory violations, [2]and fraud. The Shah defendants asserted several counterclaims against Patel. The circuit court consolidated Patel's case with cases filed by other persons against Shah relating to the ownership and operation of other restaurants. The restaurant was subsequently sold to a third party in 2016, and the proceeds were placed in escrow pending final resolution of Patel's action.

         The Shah defendants moved for a summary judgment in Patel's case based on their affirmative defense that Patel's breach-of-contract claim was barred by the Statute of Frauds, § 8-9-2, Ala. Code 1975. The Shah defendants also argued that Patel's tort claims were barred by the applicable statutes of limitations and that, if they were not time-barred, there were no genuine issues of material fact as to those claims. The circuit court granted the motion for a summary judgment. The circuit court later dismissed the Shah defendants' counterclaims on August 20, 2018. Patel filed his notice of appeal on October 1, 2018. The other consolidated cases remain pending in the circuit court.

         II. Standard of Review

         We review a summary judgment de novo. McClendon v. Mountain Top Indoor Flea Market, Inc., 601 So.2d 957, 958 (Ala. 1992).

"'A summary judgment is proper when there is no genuine issue of material fact and the moving party is entitled to a judgment as a matter of law. Rule 56(c)(3), Ala. R. Civ. P. The burden is on the moving party to make a prima facie showing that there is no genuine issue of material fact and that it is entitled to a judgment as a matter of law. In determining whether the movant has carried that burden, the court is to view the evidence in a light most favorable to the nonmoving party and to draw all reasonable inferences in favor of that party. To defeat a properly supported summary judgment motion, the nonmoving party must present "substantial evidence" creating a genuine issue of material fact -- "evidence of such weight and quality that fair-minded persons in the exercise of impartial judgment can reasonably infer the existence of the fact sought to be proved."'"

Pritchett v. ICN Med. Alliance, Inc., 938 So.2d 933, 935 (Ala. 2006) (quoting Capital Alliance Ins. Co. v. Thorough-Clean, Inc., 639 So.2d 1349, 1350 (Ala. 1994)).

         III. Discussion

         A. Jurisdiction

         Before addressing the merits of Patel's appeal, we first address this Court's jurisdiction to consider the appeal while the other consolidated cases remain pending below. By granting the Shah defendants' summary-judgment motion and dismissing the Shah defendants' counterclaims against Patel, the circuit court resolved all the claims and disposed of all the parties in Patel's case. At that time, Patel could not immediately appeal the judgment in his case without an order from the circuit court certifying the judgment as final under Rule 54(b), Ala. R. Civ. P. See Hanner v. Metro Bank & Protective Life Ins. Co., 952 So.2d 1056, 1061 (Ala. 2006) (holding that "a trial court must certify a judgment as final pursuant to Rule 54(b), Ala. R. Civ. P., before a judgment on fewer than all the claims in a consolidated action can be appealed").

         However, 11 days after the circuit court dismissed the counterclaims, after having earlier entered the summary judgment, in Patel's case, this Court overruled Hanner in Nettles v. Rumberger, Kirk & Caldwell, P.C., [Ms. 1170162, August 31, 2018]___So. 3d___ (Ala. 2018). We held that, "[o]nce a final judgment has been entered in a case, it is immediately appealable, regardless of whether it is consolidated with another still pending case." Nettles, __ So.3d at___. After Nettles was released, Patel filed his notice of appeal in his case. Hence, this case presents the question whether Patel was entitled to appeal under Nettles or was required to wait under Hanner for the disposition of the other cases that had been consolidated with his.

         In overruling Hanner, we noted that "we are overruling clear precedent on which other litigants may have relied -- in determining, for example, if and when a notice of appeal is due. In such a case, we think a prospective-only application of today's decision is appropriate." Nettles, ___ So.3d at___ n.1 (emphasis added). In light of our reliance-based declaration that Nettles would be prospective only, Nettles applies only to cases in which (a) the judgment was entered after Nettles was released or (b) the appellant filed a timely notice of appeal under Rule 4, Ala. R. App. P., after Nettles was released. Here, Patel did the latter; he did not rely on Hanner. Therefore, Nettles applies to Patel's appeal, which was properly filed without waiting until the circuit court resolved the other consolidated cases. Accordingly, this Court has jurisdiction over Patel's case.

         B. Analysis

         In support of the motion for a summary judgment, the Shah defendants asserted that Patel's breach-of-contract claim was barred by the Statute of Frauds because the claim was based on oral agreements to purchase stock. The Shah defendants also argued that Patel's tort claims were barred by the applicable statutes of limitations and that, if they were not time-barred, there was no genuine issue of material fact as to those claims. Patel contends that his claims were not barred by the Statute of Frauds or by a statute of limitations and that there were genuine issues of material fact as to his tort claims.

         1. Statute of Frauds

         Patel's breach-of-contract claim was based on his status as a shareholder in the corporation. Thus, his claim hinges on the enforceability of his two oral stock-purchase agreements with Shah.

         Regarding stock-purchase agreements, the Statute of Frauds provides:

"In the following cases, every agreement is void unless such agreement or some note or memorandum thereof expressing the consideration is in writing and subscribed by the party to be charged therewith or some other person by him thereunto lawfully authorized in writing:
"....
"(8) ... [E]very agreement for the sale or purchase of securities other than through the facilities of a national stock exchange or of the ...

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