Filed 7/16/26 Vaghashia v. Vaghashia CA2/8
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION EIGHT
GOVIND R. VAGHASHIA et al., B352446
Plaintiffs and Appellants, (Los Angeles County
Super. Ct. No. 25STCV11089)
v.
PRASHANT VAGHASHIA et al.,
Defendants and Respondents.
APPEAL from a judgment of the Superior Court of
Los Angeles County. Jon R. Takasugi, Judge. Reversed and
remanded with directions.
Moskovitz Appellate Team, Myron Moskovitz, Jason R.
Marks; Fagelbaum & Heller and Jerold Fagelbaum for Plaintiffs
and Appellants.
Shah Attorney Group, Earth A. Shah; M. Cris Armenta and
M. Cris Armenta for Defendants and Appellants.
_________________________________
INTRODUCTION
Plaintiffs Govind R. Vaghashia, Sonal G. Vaghashia,
Sundeep G. Vaghashia, and Graphics RSCH Properties, LLC
(Govind Parties) appeal from the judgment of dismissal entered
after the trial court sustained without leave to amend defendants
Prashant Vaghashia and Mita Vaghashia’s demurrer to the
Govind Parties’ complaint.1 On appeal, the Govind Parties argue
that the court engaged in improper factfinding to negate the
allegations in their complaint and erred in finding all their
claims are barred by either the doctrine of judicial estoppel or a
release of liability clause included in a settlement agreement
between the parties. We agree and reverse the court’s order
sustaining the demurrer.
BACKGROUND
1. Family history and prior lawsuits
Govind and Prashant are brothers who were born and
raised in India. Govind moved to the United States in the 1970’s
and started a career investing in real estate and managing
hotels. Several years later, Prashant moved to the United States
and acquired interests in some of Govind’s real estate and
businesses.
After Govind and Prashant’s relationship deteriorated,
Prashant and his wife Mita sued Govind, his wife Sonal, and
other parties. Prashant and Mita claimed a 50 percent interest
in a business portfolio that they claimed they built with Govind
and others. Govind later sued Prashant and a company that
Govind and Prashant owned together, alleging Prashant
1 Because they share the same last name, we refer to the
individual Vaghashia parties by their first names.
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mismanaged the company. Prashant and Mita filed a cross-
complaint in Govind’s lawsuit, again asserting a 50 percent
interest in the business portfolio at issue in their own lawsuit.
In June 2022, the parties entered a settlement agreement,
through which Govind, Sonal, and others agreed to pay Prashant
and Mita $35 million. After disputes arose over the
interpretation of the agreement, Govind and Prashant filed
competing motions to enforce it. In December 2022, the trial
court entered an order enforcing the settlement agreement
largely in the manner requested by Prashant, while rejecting the
proposed interpretations of the agreement offered by Govind.
In January 2023, Govind moved to vacate the settlement
agreement on numerous grounds, including unilateral and
mutual mistakes about the parties’ understanding of the legality
of certain terms included in the agreement. The trial court
denied Govind’s motion, finding, among other things, that Govind
was judicially estopped from challenging the settlement
agreement after he moved to enforce it.
In October 2024, a different panel from this division
affirmed the trial court’s order in a published decision, Vaghashia
v. Vaghashia (2024) 106 Cal.App.5th 188 (Vaghashia), on the
grounds that Govind was judicially estopped from challenging the
settlement agreement. Among other things, we concluded that
all the facts on which Govind sought to vacate the settlement
agreement were known to him before the court issued its order
enforcing the agreement. (Id. at p. 197.)
After we issued the remittitur in Vaghashia, Prashant tried
to collect payments on the appellate bonds that Govind posted.
Govind objected to Prashant’s requests for payment. The trial
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court overruled Govind’s objections and granted Prashant’s
requests for payments on the appellate bonds.
2. The current lawsuit
On April 15, 2025, the Govind Parties filed this lawsuit
against Prashant and Mita, asserting causes of action for
(1) rescission of the settlement agreement; (2) fraud; (3) breach of
fiduciary duty; and (4) intentional infliction of emotional distress.
As to the first cause of action, the Govind Parties sought an order
rescinding the settlement agreement, an order requiring, among
other things, Prashant and Mita to repay all sums paid to them
under the agreement, and an award of exemplary and punitive
damages. As to the remaining causes of action, the Govind
Parties sought general, special, exemplary, and punitive
damages.
With respect to the first three causes of action, the Govind
Parties alleged that Prashant and Mita intentionally concealed
material facts to induce the Govind Parties to sign the
agreement. First, the Govind Parties alleged that before the
settlement agreement was executed, Prashant represented that
he had the authority to sign the agreement on behalf of two
companies that were parties to it—Graphics Research, Inc. (GRI),
a California corporation, and Empire Hospitality Inc. (Empire),
an Arkansas corporation—even though both of those companies’
corporate statuses were suspended when the agreement was
signed. The Govind Parties further alleged that Prashant and
Mita were aware, but intentionally failed to disclose, that GRI’s
and Empire’s corporate statuses were suspended. Second, the
Govind Parties alleged that before the settlement agreement was
executed, Prashant used, without Govind’s knowledge or
permission, Govind’s name and other identifying information to
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obtain federal loans on GRI’s behalf. The Govind Parties alleged
that they did not become aware of these facts, including
Prashant’s and Mita’s roles in concealing them, until sometime in
2025, and that they would not have signed the settlement
agreement had they been aware of these facts at the time the
agreement was executed.
As to the fourth cause of action, the Govind Parties alleged
that before the settlement agreement was executed, Prashant
engaged in extreme and outrageous conduct that caused Govind
to suffer humiliation and mental and physical distress, including
concealing the facts discussed above, forging Govind’s signature
to fabricate an agreement between Govind and Prashant, stealing
documents from Govind’s office, and surreptitiously recording
conversations between Govind and Prashant.
Prashant and Mita demurred to the Govind Parties’
complaint. They argued that the first cause of action for
rescission of the settlement agreement was barred by judicial
estoppel. They argued that the second through fourth causes of
action were barred by a clause in the settlement agreement
releasing them from liability for any conduct occurring before the
agreement was executed. Although Prashant and Mita asserted
in their notice of demurrer that the second through fourth causes
of action are also barred by judicial estoppel, they did not develop
any arguments in the demurrer’s memorandum of points and
authority to support that assertion. Prashant and Mita did not
raise in their demurrer any other grounds for challenging the
complaint.
In support of their demurrer, Prashant and Mita filed a
request for judicial notice of numerous documents from the
parties’ prior lawsuits, including Govind and Sonal’s motion and
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ex parte application to enforce the settlement agreement, their
motion to vacate the settlement agreement, their opening brief in
Vaghashia, and this division’s opinion in Vaghashia.
The Govind Parties opposed the demurrer. They asked the
court to take judicial notice of a letter from the United States
Small Business Administration addressed to Govind and the
reporter’s transcript from a hearing in a related lawsuit.
In support of their reply, Prashant and Mita filed a request
for judicial notice of a screenshot from the California Secretary of
State’s website showing that GRI was suspended by California’s
Franchise Tax Board in September 2021 and a screenshot from
the Arkansas Secretary of State’s website showing Empire was in
good standing. The screenshot from the Arkansas Secretary of
State’s website does not show, however, on what date the site was
accessed or as of what date Empire was deemed to be in good
standing.
The trial court sustained Prashant and Mita’s demurrer
without leave to amend. The court found that the Govind Parties’
first cause of action for rescission of the settlement agreement
was barred by judicial estoppel. The court rejected the allegation
that Prashant and Mita intentionally concealed that GRI’s
corporate status was suspended to induce Govind to sign the
settlement agreement, and instead found the Govind Parties
were aware of GRI’s status before Govind and Sonal moved to
enforce the settlement agreement. In making that finding, the
court relied on a document included in the record from the
parties’ prior appeal, which was not included in any of the
parties’ requests for judicial notice concerning Prashant and
Mita’s demurrer in this case. That document is an October 13,
2022 e-mail sent by one of Govind and Sonal’s attorneys to
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Prashant’s attorney, in which Govind’s attorney stated, “[w]e now
understand from the secretary of the state of California that GRI
was never dissolved in compliance with the law and GRI remains
as a suspended corporation in the state of California.”
To the extent the Govind Parties’ rescission cause of action
was based on the allegation that Prashant and Mita intentionally
concealed Empire’s corporate status to induce Govind to sign the
agreement, the trial court found that claim lacked merit because
Empire’s operating status had since been restored. The court did
not explain what evidence it relied on to find Empire’s corporate
status had been restored.
The trial court also found that the Govind Parties’ claims
were barred by the settlement agreement’s release clause because
all the alleged conduct giving rise to their claims occurred before
the agreement was executed.
Finally, applying principles of collateral estoppel, the court
found that to the extent some of the Govind Parties in this
lawsuit were not parties to Govind and Sonal’s efforts to enforce
the settlement agreement, those parties were in privity with
Govind and Sonal such that they were judicially estopped from
challenging the settlement agreement.
The court entered judgment dismissing the Govind Parties’
complaint with prejudice. The Govind Parties appeal.
DISCUSSION
The Govind Parties contend that the trial court erred when
it sustained without leave to amend Prashant and Mita’s
demurrer to their complaint by relying on judicial estoppel
principles and a release clause contained in the parties’
settlement agreement. Because those are the only grounds that
were raised in Prashant and Mita’s demurrer and relied on by
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the court in sustaining the demurrer, we limit our analysis to
whether judicial estoppel and the settlement agreement’s release
clause bar the Govind Parties’ claims. (See TracFone Wireless,
Inc. v. County of Los Angeles (2008) 163 Cal.App.4th 1359, 1363
(TracFone Wireless) [a reviewing court may affirm judgment of
dismissal only on grounds raised in demurrer].) As we explain,
the trial court erred in sustaining the demurrer on both of those
grounds.
1. Standard of review
We independently review a trial court’s order sustaining a
demurrer to determine whether the operative complaint alleges
facts sufficient to state a cause of action. (Ivanoff v. Bank of
America, N.A. (2017) 9 Cal.App.5th 719, 725.) We assume the
truth of all properly pled factual allegations and matters that are
judicially noticeable, and we liberally construe the complaint’s
allegations with a view toward substantial justice. (Ibid.;
Quelimane Co. v. Stewart Title Guaranty Co. (1998) 19 Cal.4th
26, 43, fn. 7.)
2. At the demurrer stage, judicial estoppel does not bar
the Govind Parties’ claims
Judicial estoppel is an equitable doctrine designed to
prevent fraud on the courts. (Thomas v. Gordon (2000)
85 Cal.App.4th 113, 118.) The doctrine “precludes a party from
relying upon a theory in a legal proceeding inconsistent with one
previously asserted.” (Nist v. Hall (2018) 24 Cal.App.5th 40, 48.)
Judicial estoppel “ ‘applies when “(1) the same party has
taken two positions; (2) the positions were taken in judicial or
quasi-judicial administrative proceedings; (3) the party was
successful in asserting the first position (i.e., the tribunal adopted
the position or accepted it as true); (4) the two positions are
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totally inconsistent; and (5) the first position was not taken as a
result of ignorance, fraud, or mistake.” ’ ” (Vaghashia, supra,
106 Cal.App.5th at p. 195, quoting Aguilar v. Lerner (2004)
32 Cal.4th 974, 986–987 (Aguilar).) Although cases applying
judicial estoppel “have generally been decided after a fact-finding
or evidence-reviewing proceeding of some sort” (Cloud v.
Northrop Grumman Corp. (1998) 67 Cal.App.4th 995, 1019),
a trial court may sustain a demurrer on judicial estoppel grounds
if the pleaded and judicially noticed facts indicate as a matter of
law that the doctrine should apply. (The Swahn Group, Inc. v.
Segal (2010) 183 Cal.App.4th 831, 844.)
The Govind Parties do not dispute that the first four
elements of judicial estoppel are satisfied here. Instead, they
contend factual issues exist as to the fifth element—i.e., whether
the first of two inconsistent positions that they took with respect
to the enforceability of the settlement agreement resulted from
fraud, ignorance, or mistake. They also contend that the trial
court engaged in impermissible factfinding to conclude, as a
matter of law, that the fifth element was satisfied in this case.
These arguments have merit.
One of the grounds for rescission of the settlement
agreement alleged in the Govind Parties’ complaint is that
Prashant and Mita fraudulently concealed that GRI’s and
Empire’s corporate statuses were suspended at the time the
agreement was executed to induce the Govind Parties to sign the
agreement. The Govind Parties alleged that they would not have
signed the agreement had they been aware that both companies’
corporate statuses were suspended. The Govind Parties also
alleged that they did not discover that the companies’ corporate
statuses were suspended until February 2025, over two years
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after Govind and Sonal moved to enforce the agreement. These
allegations, on their face, support a finding that Govind and
Sonal took their first inconsistent position—i.e., seeking to
enforce the settlement agreement—before they became aware of
facts that they claim would have prevented them from signing
the agreement and later seeking to enforce it.
The trial court, however, found that Govind and Sonal were
aware of GRI’s corporate status before they sought to enforce the
settlement agreement based on evidence included in the
appellate record from Vaghashia. Specifically, the court relied on
the content of an e-mail that one of Govind and Sonal’s attorneys
sent to Prashant’s attorney several days before Govind and Sonal
moved to enforce the agreement. As we noted above, Govind and
Sonal’s attorney stated in the e-mail that “[w]e now understand
from the secretary of the state of California that … GRI remains
as a suspended corporation in the state of California.” Based on
this statement, the court found that when they moved to enforce
the agreement, Govind and Sonal were aware that GRI’s
corporate status was suspended at the time the agreement was
executed. In other words, the court found that when they first
sought to enforce the settlement agreement, Govind and Sonal
were not ignorant of the facts that the Govind Parties now rely on
to challenge the agreement. (See Aguilar, supra, 32 Cal.4th at
p. 987.) This finding was improper at the demurrer stage.
The trial court erred by relying on extrinsic evidence—i.e.,
the contents of an e-mail from one of Govind and Sonal’s
attorneys—to make an adverse factual finding that contradicts
the complaint’s allegations. It is well settled that “the ‘demurrer
tests the pleading alone and not the evidence or other extrinsic
matters which do not appear on the face of the pleading or cannot
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be properly inferred from the factual allegations of the complaint.
This principle means that if the pleading sufficiently states a
cause of action, the demurrer cannot be granted on the basis of a
showing of extrinsic matters by inference from attached exhibits,
affidavits or otherwise except those matters which are subject to
judicial notice.’ ” (Bach v. McNelis (1989) 207 Cal.App.3d 852,
864.)
In any event, the contents of the e-mail sent by Govind and
Sonal’s attorney do not support the court’s finding. As the
Govind Parties point out, the attorney noted only that “GRI
remains as a suspended corporation in the state of California.”
The attorney did not state when GRI’s corporate status was
suspended or that it was suspended at the time the settlement
agreement was executed. Thus, the contents of the e-mail,
without more, do not support a finding that when they moved to
enforce the settlement agreement, Govind and Sonal were aware
that GRI’s corporate status was suspended at the time the
settlement agreement was executed.
The court also erred when it concluded that the rescission
cause of action lacks merit to the extent it relies on allegations
that Empire’s corporate status was suspended when the
settlement agreement was executed. In reaching this conclusion,
the court found that Empire’s corporate status has since been
restored. The court reasoned that once Empire’s corporate status
was restored, the agreement would be enforceable as to that
company even if its corporate status had been suspended when
the agreement was executed.
Although the trial court did not explain what evidence it
relied on to find Empire’s corporate status has since been
restored, it presumably relied on the screenshot from the
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Arkansas Secretary of State’s website that Prashant and Mita
included in one of their requests for judicial notice. That
screenshot states that Empire’s corporate status was in “good
standing,” and Prashant and Mita relied on that screenshot to
argue as much below. But, as we noted above, the screenshot
does not indicate when it was taken, when the Arkansas
Secretary of State’s website was accessed, or as of what date
Empire’s corporate status was deemed to be in “good standing.”
Thus, even assuming it was proper for the court to rely on the
screenshot to contradict the complaint’s allegations, the
screenshot does not, without more, establish Empire’s corporate
status is currently in good standing.
In sum, the allegations in the Govind Parties’ complaint
support a finding that Govind and Sonal took their first
inconsistent position—seeking to enforce the settlement
agreement—before they became aware of facts that form the
basis for their rescission claim, and nothing in the record
conclusively negates those allegations. The trial court, therefore,
erred in finding that judicial estoppel bars that cause of action to
the extent it is based on allegations that Prashant and Mita
fraudulently concealed GRI’s and Empire’s corporate statuses
when the settlement agreement was executed. Because Prashant
and Mita’s demurrer challenges the first cause of action on
judicial estoppel grounds only, the trial court should have
overruled the demurrer as to that claim. (See TracFone Wireless,
supra, 163 Cal.App.4th at p. 1363.) To the extent the court found
that judicial estoppel bars the Govind Parties’ claims for fraud
and breach of fiduciary duty, which are based on the same factual
allegations as their claim for rescission of the settlement
12
agreement, that finding too was error for the reasons we just
discussed.
3. The settlement agreement’s release clause does not bar
the Govind Parties’ claims at demurrer
The Govind Parties contend that the trial court erred in
finding their claims are also barred by the settlement
agreement’s release clause because they alleged that Prashant
and Mita fraudulently induced them to enter the agreement by
intentionally misrepresenting facts that were material to the
agreement’s formation. According to the Govind Parties, a
contractual release of liability like the one included in the
settlement agreement is unenforceable if the party challenging
the contract containing the release can show that the contract
was fraudulently induced. This argument has merit.
Paragraph 15 of the settlement agreement, entitled “Full,
General Release—Govind Parties,” provides in relevant part that
the Govind Parties “release and absolutely discharge” Prashant
and Mita from “any and all claims, … suits, actions and causes of
action, of every kind and nature whatsoever, at law or in equity,
known or unknown, suspected or unsuspected, from the
beginning of time up through the execution of this Agreement.”
Paragraph 17 of the agreement states that all the parties to the
agreement waive any rights that may be conferred to them under
Civil Code section 1542, which provides that a general release
does not extend to claims that the releasing party does not know
or suspect at the time the agreement was executed. Because the
allegations supporting the Govind Parties’ causes of action all
occurred before the settlement agreement was executed, the court
found that the release clause barred those claims.
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Civil Code section 1668 provides, however, that “[a]ll
contracts which have for their object, directly or indirectly, to
exempt anyone from responsibility for his own fraud, or willful
injury to the person or property of another, or violation of law,
whether willful or negligent, are against the policy of the law.”
As other courts have explained, “[i]t is well established in
California that a party to a contract is precluded under [Civil
Code] section 1668 from contracting away his or her liability for
fraud or deceit based on intentional misrepresentation.”
(Manderville v. PCG&S Group, Inc. (2007) 146 Cal.App.4th 1486,
1500 (Manderville).) That is, a party to a contract “ ‘cannot
escape liability for his own fraud or false representations by the
insertion of provisions’ ” that release that party from liability for
those representations. (Ibid.) A release or waiver provision will
“ ‘be ignored, and parol evidence of misrepresentations will be
admitted, for the reason that fraud renders the whole agreement
voidable, including the waiver provision.’ ” (Id. at p. 1501.)
Here, the Govind Parties alleged that they were
fraudulently induced to sign the settlement agreement because
Prashant and Mita intentionally misrepresented facts that were
material to the agreement’s formation, such as the corporate
status of two of Prashant’s companies that are parties to the
agreement. The Govind Parties alleged that but for those
misrepresentations, they would not have entered the agreement.
If the Govind Parties were to prove that the agreement was
fraudulently induced, the agreement, including its release clause,
would be voidable and subject to rescission. (Manderville, supra,
146 Cal.App.4th at pp. 1500–1501.)
Prashant and Mita argue that the trial court properly
invoked the settlement agreement’s release clause to sustain
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their demurrer because the Govind Parties could have verified
GRI’s and Empire’s corporate statuses through publicly available
information, such as via the California Secretary of State’s and
the Arkansas Secretary of State’s websites, before they signed the
agreement. Consequently, Prashant and Mita argue, it was
unreasonable for the Govind Parties to rely on any intentional
misrepresentations about those companies’ corporate statuses
because the true facts could have been discovered with
reasonable diligence. We disagree.
As our Supreme Court has explained, “[n]egligence on the
part of the plaintiff in failing to discover the falsity of a statement
is no defense when the misrepresentation was intentional rather
than negligent. … The fact than an investigation would have
revealed the falsity of the misrepresentation will not alone bar
[the plaintiff’s] recovery [citation], and it is well established that
[the plaintiff] is not held to constructive notice of a public record
which would reveal the true facts.” (Seeger v. Odell (1941)
18 Cal.2d 409, 414–415.) Here, the Govind Parties alleged that
Prashant and Mita intentionally misrepresented or concealed
facts that were material to the settlement agreement’s formation.
Thus, whether the Govind Parties could have discovered those
facts through reasonable diligence does not mean that they are
precluded, as a matter of law, from relying on them as a basis for
their fraud and other claims. (Ibid.)
Finally, we note that the Govind Parties’ fourth cause of
action for intentional infliction of emotional distress does not
challenge the validity of the settlement agreement and arises
solely out of conduct that would fall within the scope of the
release clause. Ordinarily, that claim would be barred by the
settlement agreement’s release clause. However, should the
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Govind Parties succeed in rescinding or voiding the agreement
through their other causes of action, the release clause would not
preclude their claim for intentional infliction of emotional
distress. Because Prashant and Mita challenged the claim for
intentional infliction of emotional distress only based on the
agreement’s release clause, and because the Govind Parties have
asserted causes of action that, if successful, would render the
agreement and the release clause voidable, the court should not
have dismissed the claim for intentional infliction of emotional
distress.
DISPOSITION
The order sustaining the demurrer without leave to amend
is reversed. The matter is remanded to the trial court with
directions to enter a new order overruling the demurrer. The
Govind Parties shall recover their costs on appeal.
VIRAMONTES, J.
WE CONCUR:
STRATTON, P. J.
WILEY, J.
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