Filed 3/19/20 Kang v. ASI Computer Technologies, Inc. CA1/4

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION FOUR

SEOK KANG, as Trustee, etc.,

Plaintiff and Respondent,

v.

ASI COMPUTER TECHNOLOGIES, INC.,

Defendant and Appellant.

A156627, A157481

(Alameda County

Super. Ct. No. RG16818221)

Defendant ASI Computer Technologies, Inc. (ASI) appeals a $31 million judgment entered in favor of plaintiff Seok Kang, as trustee on behalf of KT Engcore Corporation (KT) for breach of contract. The action arises out of a fraud scheme perpetrated by a third party that caused the substantial loss to either ASI or KT, each of whom accused the other of having conspired with the perpetrator. ASI contends there is no substantial evidence to support the jury’s verdict which burdened it with the loss, and that the jury was not properly instructed. We find no error and shall affirm the judgment.

FACTUAL AND PROCEDURAL BACKGROUND

KT is a South Korean company whose business involves, among other things, exporting commercial goods. ASI is a distributor of consumer electronics whose principal place of business is in Fremont, California.

In early 2007, ASI agreed to distribute home theater personal computers manufactured by Moneual, Inc. (Moneual), a South Korean corporation. Shortly thereafter, KT contracted with ASI and Moneual to serve as an exporter for transactions between ASI and Moneual. KT’s evidence established the roles of the three companies as follows: ASI would issue a purchase order to KT for the purchase of home theater computers. KT would then order those computers from Moneual. After KT completed the necessary export paperwork, Moneual would ship the computers to ASI’s designated destination. Once Moneual and ASI confirmed delivery, KT transferred to Moneual the receivable owed by ASI. In exchange for a share of the proceeds, KT agreed that Moneual could factor with a Korean bank the accounts receivable. Moneual assigned the receivables to the Korean bank and the bank paid Moneual a percentage of the amount that KT owed Moneual for the purchase of the computers. KT thus became obligated to the bank for payment of the amount owed for the computers purchased for ASI. While it was contemplated that ASI would pay KT for the computers and KT would then pay the bank, KT owed the bank the full amount of the purchase orders when they became due, whether or not it received payment from ASI.

It was undisputed that between March 2007 and May 2013, ASI submitted 380 purchase orders to KT and paid for each shipment without complaint. Between July and December 2013, KT received and processed an additional 50 purchase orders that ASI did not pay within the time required by the purchase orders and KT was nonetheless required to make payments to the Korean bank. All of the unpaid purchase orders called for shipment of the computers to an unspecified “designated destination” and it was undisputed that either no computers were in fact shipped or received or that the shipments contained “worthless” computer casings. However, KT presented evidence that for each purported shipment, ASI advised KT that the computers had been received. When KT sought payment from ASI, ASI offered to pay the amount owing in three installments. When ASI failed to complete the installment payments, KT filed the present action.

KT’s second amended complaint alleged against ASI causes of action for breach of the unpaid purchase orders, breach of ASI’s promise to pay the outstanding debt by installments, and an open book account. KT alleged that it was unaware until after ASI’s breach that the computers supposedly being exported by Moneual were “worthless or non-existent” and that the entire arrangement had been a “Ponzi scheme.” KT claimed that it was brought into the scheme by Moneual and ASI so that Moneual could use KT’s higher export limit and good credit rating to secure more financing from Korean banks. KT alleged that under its agreement with Moneual it had no responsibility for the physical movement of the computers and that its obligations were purely financial.

At trial, KT introduced a letter dated March 30, 2007, in which ASI expressly agreed that it “will not claim any kind of quality or other issues” from KT regarding Moneual’s products and that it “will consider [KT] as financial solution provider for [Moneual].” The letter concludes, “Please consider this letter as [a] formal agreement between ASI and KT.” For each of the orders processed between May and December 2013, KT introduced the ASI purchase order, the corresponding invoice from Moneual, trucking waybills from the logistics provider, packing lists specifying the contents of each shipment, letters confirming ASI’s receipt of the computers, and the factoring agreement with the Korean bank. In closing argument, KT argued that because its contractual obligations were purely financial, it had fully performed under the contract regardless of whether the computers were actually delivered.

In response, ASI disputed that it was a participant in the fraud perpetrated by Moneual. It relied on evidence that the Korean government had concluded that the documents upon which KT relied to establish the shipping and delivery of the computers were forged. It contended that a KT employee, not ASI, was involved in the fraudulent scheme with Moneual. ASI argued that it did not know that the products were worthless or non-existent because the products were shipped directly by Moneual to ASI’s customers who, in turn, were participating in the fraud with Moneual. ASI claimed that it was its practice to pay KT only after it was paid by its customers and that it did not get paid by its customer for the outstanding purchase orders “because the Moneual scandal fell apart.” ASI argued there was no breach of contract because there was no actual shipment of goods—that is, KT failed to perform its antecedent obligation to deliver the ordered products, so that it had no obligation to make payment.

Following a nearly four-week trial, the jury returned its verdict in favor of KT on all three causes of action and the court entered a judgment in favor KT for approximately $31 million. Thereafter the court denied ASI’s motions for judgment notwithstanding the verdict or a new trial. ASI timely filed a notice of appeal.

DISCUSSION

1. Substantial evidence supports the jury’s verdict on the first cause of action.
2.
The jury was instructed on the first cause of action as follows, “[KT] claims that it and ASI entered into purchase order contracts for the purchase and sale of home theater personal computers” and that “ASI breached these contracts by failing to pay for the home theater personal computers it ordered from [KT] when those payments became due.” The jury was instructed that to recover damages from ASI for breach of contract, KT must prove all of the following: (1) That KT and ASI entered into a contract; (2) That KT did all, or substantially all, of the significant things that the contract required it to do; (3) That all conditions required by the contract for ASI’s performance occurred; (4) That ASI failed to do something that the contract required it to do; (5) That KT was harmed; and (6) That ASI’s breach of contract was a substantial factor in causing KT’s harm. The jury was instructed that KT had the burden to prove, among other things, that “the contract terms were clear enough that the parties could understand what each was required to do” and that “the parties agreed to the terms of the contract.” As to what the words of a contract mean to the parties, the jury was instructed that it “may consider how the parties acted after the contract was created but before any disagreement between the parties arose.” In its special verdict, the jury found that KT and ASI “enter[ed] into a series of purchase order contracts regarding home theater personal computers” and that “all the conditions that were required for ASI’s performance occur[ed].”

ASI contends there is no substantial evidence that KT performed all, or substantially all, of the significant antecedent steps that the contract required it to perform because KT admitted that the computers purportedly delivered to ASI were “worthless or non-existent.” But ASI mischaracterizes the terms of the contract that KT alleged it breached. While ASI contended that its agreement with KT was for the purchase of home theater personal computers and that KT delivered “worthless or non-existent” products, KT’s contention was that it agreed only to act as a financial intermediary for ASI’s purchase of the computers from Moneual. While ASI’s obligation to pay was based on its submission of the purchase orders, KT alleged that under the terms of its agreement with ASI it had no responsibility for “the physical movement of the products.”

To support its claim that the terms of its agreement did not require KT to do anything other than to provide “financial services” to facilitate the sale, KT presented the March 30, 2007 “agreement letter” and evidence of the parties’ practice for seven years. In denying ASI’s motion for a new trial, the trial court agreed that ASI’s argument “is based on an erroneous characterization of the agreements at issue.” The court explained, “[ASI] has failed to establish that the validity of its agreement with [KT] was dependent upon the shipment of home theater personal computers from Moneual or its affiliates to [ASI] or its affiliates. The evidence presented by the parties at trial disclosed that Moneual and [ASI] had not been engaged in the distribution of actual home theater personal computers for several years prior to [ASI’s] default under the purchase orders. [ASI] nevertheless paid [KT] approximately $210 million to satisfy the purchase orders until it defaulted in 2014. In short, the jury was not under the erroneous impression that [ASI’s] obligation to pay was based on the actual delivery of actual product from Moneual . . . .”

The jury was tasked with determining the terms of the agreement and whether KT performed what the jury found to be its contractual obligations. Substantial evidence supports the jury’s implied finding that delivery of the product was not a condition of ASI’s obligation to pay the amount of its purchase orders. And ASI’s related argument that the breach of contract cause of action fails because “independent of KT’s judicial admissions . . . there is no evidence of delivery,” lacks merit for the same reason. Because the jury necessarily found that the contract was not dependent on delivery of the goods, KT was not required to establish that the products were delivered. ASI does not dispute that the evidence established that KT performed its “financial services” obligations.

Accordingly, substantial evidence supports the jury’s verdict on the first cause of action.

3. Substantial evidence supports the jury’s verdict on the second cause of action.
4.
Although the jury’s verdict on the first cause of action is sufficient to uphold the judgment, we nonetheless address ASI’s attack on the verdict on the second cause of action, which is also sufficient to sustain the judgment.

The jury was instructed with regard to the second cause of action, “[KT] claims that it and ASI entered into a separate contract for ASI to pay [KT] $32,005,000 in three installments for the products [KT] alleges ASI had ordered pursuant to the purchase orders. [¶] [KT] claims that ASI breached this contract by failing to make the promised payments in August 2014 and October 2014.” The jury was instructed on the elements of a breach of contract claim as set out above and further instructed, “Both an offer and an acceptance are required to create a contract. ASI contends that a contract was not created because the offer was never accepted. To overcome this contention, [KT] must prove both of the following: [¶] 1.That [KT] agreed to be bound by the terms of the offer. If [KT] agreed to be bound only on certain conditions or if it introduced a new term into the bargain, then there was no acceptance; and [¶] 2. That [KT] communicated its agreement to ASI. [¶] An acceptance is not invalidated by the fact that it is ‘grumbling’ or that the offeree makes some simultaneous request.”

KT presented evidence that on May 12, 2014, Jongtae Kwak, the KT employee responsible for KT’s business with ASI, emailed Bill Chen, ASI’s Vice President of Finance, seeking payment of the 50 purchase orders ASI issued to KT between July and December 2013. On June 10, after a series of emails in which Chen reassured Kwak that ASI would pay as soon as possible, Chen explained that ASI would pay KT the $32 million owed in three installments if KT agreed to waive an insurance claim it had filed on the unpaid purchase orders. Kwak responded by email on June 12 that reads, “Received your message well. Thank you for your favorable word. Your suggestion was reported to our board members, and here are their comments. [¶] – We understand that the payment will be done by 3 times in order. To make it clear, we need specific henceforth schedule of the payment (both exact amount of money and date). [¶] – As we know, the last informable date to KTIC (Korea Trade Insurance Corporation) is 30th of June. [¶] – For making accurate reporting to KTIC, the 1st payment should be done before 30th of June. [¶] – As soon as the deposit confirmed on our side, we are going to report to KTIC that we got paid from ASI.” On June 14, Chen “confirmed that [ASI was] able to wire $9,853,750.00 by the end of this month” and that the “next two payments will be [by] the end of August and October.” Kwak testified that he and the CEO accepted this payment plan. On June 17, Kwak emailed Chen “reconfirm[ing] that the 1st payment of 9,853,750.00 USD will be done by the end of this month” and requesting that the remainder ($22,151,250.00 USD) “clear . . . by the end of August ([even in] July & August will be grateful).” Chen responded, “I have been doing my best to clear up the payment. As this is an urgent issue I will try to pay off as earlier [sic] as possible.”

On July 1, 2014, ASI paid KT $9,853,750.00, in two wire transfers. The wire transfers referenced 15 of the 50 purchase orders that ASI issued to KT between July and December 2013. Kwak testified that in return, as promised, KT notified the insurance company that it received payment from ASI and therefore did not file the insurance claim. When ASI failed to make the final two installments, KT filed the present action.

In its special verdict, the jury found that ASI and KT “enter[ed] into a contract through an exchange of emails regarding ASI’s payment of $32,005,000 in exchange for [KT’s] waiver of its insurance claim” and that ASI breached that contract. On appeal, ASI contends that no reasonable trier of fact could find that KT accepted ASI’s offer for installment payments. We disagree. The emails were presented to the jury and KT’s witness testified that they accepted the offer. Although a jury might have interpreted Kwak’s June 17 response as a counter offer, it can also be interpreted as simply a request that ASI pay sooner than agreed, if possible.

ASI contends that there is no substantial evidence that KT offered “new and valuable consideration sufficient to support a binding obligation.” It argues that “Chen’s alleged promise to pay did not constitute consideration on ASI’s side of the bargain” because a “commitment to perform a preexisting contractual obligation has no value,” and “KT’s failure to submit a worthless and potentially fraudulent [insurance] claim cannot constitute consideration.”

The absence of “new and valuable” consideration was not argued to the jury, nor was an instruction requested or given other than the jury must find that “the parties agreed to give each other something of value (a promise to do something or not to do something may have value).” Regardless of forfeiture of the issue, the record contains substantial evidence of mutual consideration.

Civil Code section 1605 defines consideration as “[a]ny benefit conferred, or agreed to be conferred, upon the promisor, by any other person, to which the promisor is not lawfully entitled, or any prejudice suffered, or agreed to be suffered, by such person, other than such as he is at the time of consent lawfully bound to suffer, as an inducement to the promisor . . . .” ASI cites the rule that “[g]enerally speaking, a commitment to perform a preexisting contractual obligation has no value. In contractual parlance, for example, doing or promising to do something one is already legally bound to do cannot constitute the consideration needed to support a binding contract.” (Auerbach v. Great Western Bank (1999) 74 Cal.App.4th 1172, 1185; 1 Witkin, Summary of Cal. Law (11th ed. 2017) Contracts, § 228, p. 257.) Consideration exists, however, even if the performance due “ ‘consists almost wholly of a performance that is already required and that this performance is the main object of the promisor’s desire [if] . . . some small additional performance is bargained for and given.’ [Citation.] [¶] ‘[It is sufficient] if the act or forbearance given or promised as consideration differs in any way from what was previously due.’ ” (House v. Lala (1963) 214 Cal.App.2d 238, 243; Rest.2d Contracts, § 73, p. 179 [“Performance of a legal duty owed to a promisor which is neither doubtful nor the subject of honest dispute is not consideration; but a similar performance is consideration if it differs from what was required by the duty in a way which reflects more than a pretense of bargain.”].) Here, the evidence established that ASI and KT renegotiated the terms of payment. KT agreed to accept payment beyond the dates payments were due under the purchase orders and ASI agreed to make the payments on the revised schedule. The revised promises constituted consideration from both parties. Substantial evidence supports the jury’s verdict on count 2.

5. The jury was properly instructed on the necessary elements of KT’s claims.
6.
ASI concludes its opening brief with a perfunctory argument that it did not receive a fair trial because “the jury was not properly instructed.” ASI does not contend that the court’s instructions discussed above incorrectly informed the jury of the elements necessary to prove KT’s causes of action. ASI asserts that by having told the jury that ASI and KT “entered into a contract founded upon purchase orders,” the court “ma[de] it sound as though there was only one contract,” so that by instructing that partial performance of a contract does not excuse full performance, the court thereby told the jury “that if ASI paid one purchase order, it was obligated to pay all of the purchase orders.” Aside from the fact that no objection was made to the instructions on this ground, it is inconceivable that the instructions as a whole could have been so understood. Certainly the arguments of neither counsel made any such suggestion.

ASI also argues that the court failed to give certain of its proffered instructions, referring only to the failure to give CACI No. 311, relating to the termination of an offer to enter into a contract by rejection of the offer. The court did give other unchallenged instructions relating to the formation of a contract (e.g., CACI Nos. 302, 307, 309). ASI develops no argument that the additional instruction was necessary or that its omission was prejudicial. Absent a showing of prejudice, instructional errors are not reversable. (Code Civ. Proc. § 475; Pool v. City of Oakland (1986) 42 Cal.3d 1051, 1069 [“[T]he existence of instructional error alone is insufficient to overturn a jury verdict. A defendant must also show that the error was prejudicial . . . and resulted in a ‘miscarriage of justice.’ ”].)

DISPOSITION

The judgment is affirmed. Plaintiff shall recover its costs on appeal.

POLLAK, P. J.

WE CONCUR:

STREETER, J.

BROWN, J.

Appendix

A156627, A157481