Opinion
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
APPEAL from a judgment of the Superior Court of Los Angeles County. Morris B. Jones, Judge. Los Angeles County Super. Ct. No. BC357037.
Smyth Law Office and Andrew E. Smyth for Appellants.
Henry M. Lee, Law Corporation and Henry M. Lee for Respondent.
ZELON, J.
Defendants and Appellants Chun Hee Kim and Tae Woon Kim appeal from a judgment entered after trial by jury. Finding substantial evidence to support the jury’s verdict, we affirm.
SUBSTANTIVE AND PROCEDURAL HISTORY
The complaint in this matter was filed by Hee Ok Jung on August 15, 2006, with the operative First Amended Complaint filed on October 27, 2006. Jung sought damages, an accounting, and declaratory relief on claims of breach of fiduciary duty, fraud, breach of contract, and unlawful business practices. In addition to the Kims, who are husband and wife, the complaint sought relief from Paul Kim, an unrelated individual.
The claims arose from the sale of a one-half interest in the Kim’s massage therapy business, the “Oriental Spa.” At the time of the purchase by Jung, the Kims owned the business, with Mr. Kim also owning the real property at which the business was operated; Paul Kim held the license required to operate the business. Jung alleged that she agreed to purchase a 50 percent interest, and become a partner in the business, for a contribution of $350,000, based on representations by the Kims that the business, which operated on a cash basis, generated profits of $30,000 per month, was compliant with all laws, and had no claims pending against it.
Prior to trial in the matter, Paul Kim successfully moved for summary judgment on the grounds that he was not a party to the agreement and had not participated in the representations made to Jung prior to purchase, or at any time. That judgment was not appealed, and is not at issue here.
The case was tried to the jury in October 2007. Jung testified that she first met Mrs. Kim in September 2005; they were introduced by a church friend, Mr. Ba. At that meeting, Mrs. Kim told her that she had to sell the business, but that there were no problems and it generated good money; the meeting took between two and three hours. They met again later in September. Jung expressed her decision to purchase the business, and Mrs. Kim told her she could expect income of $30,000 per month. On October 4, 2005, they met again, signed a handwritten document in Korean that provided that Jung was purchasing a 50-percent interest in the business, and Jung gave Mrs. Kim $50,000. At that time, according to Jung, she had no knowledge that a former employee had previously filed suit against the business. Had she known, she testified, she would not have made the investment. The lawsuit had been served on August 31.
Mrs. Kim testified that she told Jung she would be able to recoup her investment in eight months. She also confirmed that she told Jung there were no problems with the business.
After the October 4 meeting, Mr. Kim presented Jung with a lease for the business premises, on which she was to be the sole lessee. Jung testified she signed the lease on October 15; Mr. Kim testified she did not sign until November 4. The partnership agreement, in English, which was dated October 17, 2005, was also presented to her by Mr. Kim.
The evidence was disputed as to the actual date on which Jung signed the agreement in front of a notary. While the Kims presented evidence that she did not sign until November, after she had learned of the pending litigation by the prior employee, Mrs. Kim also testified that they became partners in early October.
Jung found out about the lawsuit in November 2005, after she had paid her entire investment in the partnership. Although Mrs. Kim indicated she would take care of the lawsuit, she also stated that, as a result, they would need to find a new license holder for the business. Jung identified a licensed individual, who had agreed to allow her license to be used, but Mrs. Kim never agreed. Mrs. Kim testified instead that she had signed the necessary documents, but that the county would not accept the application. Mr. Kim testified that, while he had to agree to a new license holder under the lease, he had not done so.
In April 2006, the business was served with a search warrant based on alleged illegal operations prior to the sale; according to Jung, Mrs. Kim told her that the investigation stemmed from a letter written by the former employee. While initially Jung had received payments of approximately $30,000 per month from the business, the number of customers, and earnings, decreased after the warrant was served. In August, 2006, as a result of the fact that Paul Kim failed to renew his license, and no new license holder had been identified, the business was closed. Mr. Kim later sued Jung, by cross-complaint in this action, for the unpaid portion of the lease; the jury found for Jung on this claim.
The jury found breach of fiduciary duty, fraud and breach of contract and awarded Jung compensatory damages of $430,000; on the fraud claim, they awarded punitive damages of $500,000. The court entered judgment on November 2, 2007 and the Kims timely appealed.
DISCUSSION
On appeal, the Kims argue that: Jung failed to establish that there was a material misrepresentation that caused the damages awarded by the jury; the punitive damages must be reversed because the fraud claim cannot stand; there was no breach of contract, as the closure of the business was due to the failure of Paul Kim, who was not a party to the contract, to renew his license; and collateral estoppel bars the assertion of the breach of contract claims.
1. The Jury’s Verdict on Fraud is Supported by Substantial Evidence
The prima facie elements of a cause of action for fraud are (1) a misrepresentation (false representation, concealment, or nondisclosure), (2) knowledge of falsity, (3) intent to defraud, i.e., to induce reliance, (4) justifiable reliance, and (5) resulting damage. (Lazar v. Superior Court (1996) 12 Cal.4th 631, 638.) The Kims correctly assert that there must be a causal relationship between the alleged misrepresentation and the damages alleged to have occurred.
“In fraud, the pleading must show a cause and effect relationship between the fraud and damages sought; otherwise no cause of action is stated.” (Zumbrun v. University of Southern California (1972) 25 Cal.App.3d 1, 12.) However, they incorrectly limit the evidence of misrepresentations to the fact of the lawsuit by the former employee; in fact, Jung presented evidence of a series of representations concerning the business, including the fact that there were no problems, which, if believed by the jury, was sufficient to establish the causal relationship.
“A challenge in an appellate court to the sufficiency of the evidence is reviewed under the substantial evidence rule. [Citations.] ‘“Where findings of fact are challenged on a civil appeal, we are bound by the ‘elementary, but often overlooked principle of law, that . . . the power of an appellate court begins and ends with a determination as to whether there is any substantial evidence, contradicted or uncontradicted,’ to support the findings below. [Citation.] We must therefore view the evidence in the light most favorable to the prevailing party, giving it the benefit of every reasonable inference and resolving all conflicts in its favor in accordance with the standard of review so long adhered to by this court.” [Citation.]’ [Citations.]” (Lenk v. Total-Western, Inc. (2001) 89 Cal.App.4th 959, 968.)
As set forth above, Jung presented testimony that, at the time of her meetings with Mrs. Kim, Mrs. Kim was aware of the fact that the former employee had filed a lawsuit but nonetheless asserted that there were no problems with the business. In fact, as the evidence established, that lawsuit, and the related actions by the employee, led to a police raid on the business, a resulting loss of revenue, the decision of Paul Kim not to renew his license, and the eventual closure of the business itself. Viewing that evidence, as we must, in the light most favorable to the jury’s findings, the verdict must be affirmed.
Because we affirm the verdict for fraud, we also affirm the punitive damages award, as the appeal rested solely on the asserted insufficiency of the fraud claim.
2. The Breach of Contract Finding is Also Supported by Substantial Evidence
Contrary to the Kim’s arguments, the breach of contract claim does not rest solely on the decision of Paul Kim to refuse to renew his license. In fact, Jung testified that she identified a new potential licensee, and presented documentation to Mrs. Kim, which Mrs. Kim refused to sign. While Mrs. Kim denied that refusal, it was within the jury’s province to assess the credibility of the conflicting evidence. Moreover, it was the uncontradicted evidence of Mr. Kim that, as landlord, his approval of a new licensee was required by the lease; it was also his uncontradicted testimony that he never gave that approval. The evidence was sufficient to support the verdict.
To state a cause of action for breach of contract, a plaintiff must plead (1) the existence of a valid contract, (2) the plaintiff’s performance of the contract or excuse for nonperformance, (3) the defendant’s breach, and (4) resulting damage. (Careau & Co. v. Security Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1388.)
In this case, the only dispute is whether breach was shown. The contract defined a default as a “failure to act in the best interests of the Business.” Moreover, in any contract, there is an obligation of good faith and fair dealing which requires each party “not to do anything which will deprive the other parties thereto of the benefits of the contract. [Citations.] This covenant not only imposes upon each contracting party the duty to refrain from doing anything which would render performance of the contract impossible by any act of his own, but also the duty to do everything that the contract presupposes that he will do to accomplish its purpose. [Citations.]” (Harm v. Frasher (1960) 181 Cal.App.2d 405, 417.) Jung presented evidence from which the jury could conclude that Mrs. Kim had failed to act in the best interests of the business by refusing to approve the new licensee; moreover, in so doing, she not only deprived Jung of the benefits of the agreement, but also rendered the continued operation of the agreement, and the business, impossible. By the same token, the evidence that Mr. Kim failed to approve the new licensee could appropriately be viewed by the jury as a breach of his obligation of good faith under the lease agreement.
This evidence of breach by the Kims also renders irrelevant to our review any claims concerning collateral estoppel. As the evidence fully supports a claim of breach by each of Mr. and Mrs. Kim, any assertions related to the actions, or inactions, of Paul Kim are immaterial.
DISPOSITION
The judgment is affirmed. Respondent is to recover her costs on appeal.
We concur: PERLUSS, P. J., JACKSON, J.