Lee v. Shim

• Decision Date: 12 July 2011
• Docket Number: No. A11A0063.,A11A0063.
• Citation: 713 S.E.2d 906,310 Ga.App. 725
• Parties: LEE et al.v.SHIM et al.
• Court: Georgia Court of Appeals

310 Ga.App. 725

713 S.E.2d 906

11 FCDR 2357

LEE et al.

v.SHIM et al.

No. A11A0063.

Court of Appeals of Georgia.

July 12, 2011.

David Charles Ates, Atlanta, for appellants.Kevin Trent Moore, for appellees.ADAMS, Judge.

The purchasers of a sports bar brought suit against the sellers and others, raising breach of contract and other claims in connection with their inability to obtain, in their own name, the proper licenses and permits necessary to run the establishment. The relevant agreements included protection for the purchasers for just such an event. The defendants denied liability, and a bench trial ensued. The trial court held in favor of the purchasers. The defendants now appeal.

The factual findings of a court following a bench trial “shall not be set aside unless clearly erroneous”; in other words, the factual findings will be upheld if there is any evidence to support them. Gooch v. Tudor, 296 Ga.App. 414, 674 S.E.2d 331 (2009). Decisions on questions of law are reviewed de novo. Id. And the evidence shall be construed in favor of the trial court's findings of fact. Realty Lenders, Inc. v. Levine, 286 Ga.App. 326, 326–327, 649 S.E.2d 333 (2007).

So construed, the evidence shows the following: Daniel Lee, the primary defendant, is the son of Ran and Gamillo Lee. As of 2004, both of his parents owned corporations that owned entertainment establishments: Ran Lee owned RLee, Inc., which owned the “Impacto Sport Bar & Grill” located in Jonesboro; and Gamillo Lee owned a corporation named Jonesboro Billiards, Inc., which owned the “Corona Restaurant & Billiards.” Daniel Lee ran those businesses for his parents, who can neither read nor write in English, and who knew nothing more about the businesses than that Daniel would ask them to sign documents from time to time. In a finding that has not been appealed, the trial court pierced both corporate veils and held that “Ran Lee, individually, RLee, Inc., Gamillo Lee, individually, and Jonesboro Billiards, Inc. were merely business conduits for their son's fraudulent business behavior.”

As a part of creating and operating Impacto in February 2004, Daniel Lee obtained all the necessary operational permits and licenses, including a dance floor permit, which was required by Clayton County. Only five or so months later in 2004, Daniel Lee orchestrated the sale of Impacto for $1.2 million to S.M.L. Entertainment, Inc., a company solely owned by Sean Sang Lee (no relation). Daniel Lee even testified that Sean Lee “purchased the business from me.” Sean Lee, however, could not get a liquor license in his own name, and so, all the business licenses remained in the name of Ran Lee or her company RLee, Inc. for the nine months or so that Sean Lee operated Impacto.

Eventually, plaintiffs Jung Souk Shim and Myung Sook Kim approached Sean Lee and Daniel Lee about purchasing Impacto. On March 15, 2005, Shim and Kim entered into a “Purchase and Sale Agreement” in which they agreed to purchase the bar for $1.2 million, the same price Sean Lee had agreed to pay. On April 12, 2005, Shim and Kim's corporation—Eiffel, Inc.—(together, the purchasers) purchased the sports bar for $700,000 paid on or before that day, plus $500,000 to be paid at a later time. Shim and Kim were concerned about their ability to obtain the licenses and permits necessary to operate the business, and they desired protection from the sellers for that contingency. Accordingly, the transaction was documented in several related agreements that reflect that the sellers induced the purchasers to close without licenses but with the defendants' guarantee to return all sale proceeds in the event the purchasers could not obtain them.

First, “Special Stipulation (c)” of the “Memorandum of Sale” dated April 12, 2005, provides that S.M.L. Entertainment would refund to Eiffel all of its payments, and the sale would be declared void, if Eiffel was unable to obtain all necessary licenses and permits:

The Closing is contingent upon Purchaser obtaining all licenses and permits necessary to operate the business, including without limitation, business license and alcohol license, from the appropriate City, County, and/or State of Georgia. In the event Purchaser is unable to obtain said licenses or permits without its faults including DUI and criminal records, all payments shall be returned to Purchaser, and this Agreement shall be null and void, and Seller and Purchaser shall have no further claims against each other.

That repayment provision was backed up by three tiers of guarantees executed by two individuals and three corporations. In a separate April 12, 2005 agreement, Daniel Lee, Danvi Enterprises, Inc. (Daniel Lee's corporation), Sean Sang Lee, S.M.L. Entertainment, Inc., and Jonesboro Billiards, Inc. first acknowledged that they “induced [Eiffel] to consummate the sale of the Business with contingency of [Eiffel] obtaining business and alcohol licenses after the closing (hereinafter referred to as ‘Licenses').” (Emphasis supplied.) Accordingly, they agreed “to guarantee to reimburse to [Eiffel] the sale proceeds in the event [Eiffel] fails to obtain the Licenses after the closing.” The specifics of the guarantee show that Danvi and S.M.L. first promised to return the sale proceeds “within ten (10) days after [Eiffel's] notice of its failure to obtain the Licenses.” Daniel Lee and Sean Sang Lee then personally guaranteed Danvi and S.M.L.'s performance:

Daniel Lee and Sean Sang Lee personally guarantee to [Eiffel] the reimbursement of the Sale Proceeds including note payments of Danvi Enterprises, Inc. and S.M.L. Entertainment, Inc. Both agree to reimburse the Sale Proceeds including note payments in the event that Danvi Enterprises, Inc. and S.M.L. Entertainment, Inc. fail to reimburse the Sale Proceeds to Purchaser.

In a third layer of protection, Jonesboro Billiards, Inc. (Daniel Lee's father's company) backed up both of those guarantees with the promise to give Eiffel the other bar—the Corona—in the event the first four guarantors did not perform:

Jonesboro Billiards, Inc. agrees to transfer to Purchaser at no additional cost to Purchaser the business known as “Corona Restaurant & Billiards” ... in the event that Danvi Enterprises, Inc., S.M.L. Entertainment, Inc., Daniel Lee and Sean Sang Lee fail to reimburse to Purchaser the Sale Proceeds including note payments.

Finally, in another April 12, 2005 agreement, Daniel Lee agreed to work as a consultant for Eiffel and agreed “to cooperate with [Eiffel] to obtain such licenses and permits and agrees to execute such reasonable documentation, as may be necessary for [Eiffel] to obtain such licenses and permits.”

From that day forward, Daniel Lee knew that Shim, Kim, and Eiffel were attempting to get licenses and permits in their own name but that they never succeeded.

First and foremost, the alcohol license and dance floor permit remained in RLee's name the entire time of the events relevant to this lawsuit; in fact, Daniel Lee continued to renew them in RLee, Inc.'s name after Eiffel's purchase. In addition, Lee admits he knew in April 2005 that the purchasers could not even get a business license until the landlord of the premises agreed to an assignment of the lease from RLee, Inc. to Eiffel, Inc. This assignment was not obtained until July 1, 2005.

Then, later in July, Shim and Kim hired lawyer Thomas Choi to help with liquor licensing. Thereafter, Choi learned that, in addition to other licenses, the purchasers needed a dance floor permit from Clayton County, and he recommended obtaining a lawyer from that county. Daniel Lee admitted that in August 2005, he was aware of these events; he learned from Choi's firm that the purchasers were having trouble getting necessary licenses. Kim also told Lee at that time that they could not get licenses. Daniel Lee attempted to assist by referring the purchasers to a Clayton County attorney named Steven Frey. Kim and Shim paid Frey $28,000 in fees for him to help them obtain the necessary licenses, and it was Frey who first informed Kim that a dance floor permit was required. Kim testified that Frey applied for the necessary licenses but that the applications were unsuccessful. During this period, Kim told Daniel Lee two or three times a month that they could not obtain the necessary licenses.

On September 16, 2005, Kim and Shim formally notified Sean Sang Lee and S.M.L. Entertainment, Inc., in writing, that the permits necessary to operate the business could not be obtained. They invoked Special Stipulation (c) of the Memorandum of Sale and demanded the return of all sale proceeds and the cancellation of all obligations between the parties. They received no response.

Nevertheless, Kim and Shim continued to attempt to obtain licensure. In November 2005, they hired another attorney, Keith Martin, to obtain a business license, a liquor license, and a dance floor permit. Based on that lawyer's investigation of the facts, he determined that the purchasers would not be able to obtain a dance floor permit at all, which was essential to the business. He advised Kim and Shim that the only way to continue operating would be to transfer a small portion of Eiffel stock to RLee, Inc., which still held all licenses and permits, so that RLee's permits could be used for the time being. Accordingly, as Daniel Lee was well aware, the parties entered into an additional agreement in January 2006 to do exactly that. Indeed, Daniel Lee admitted that the January 2006 transaction was necessary so that the purchasers could continue to operate using RLee's business license, liquor license, and dance floor permit.

The January 2006 transaction included an obligation on the purchasers that they again attempt to obtain the necessary licensing in their own name. If that could be accomplished, the January transaction would essentially be undone. Immediately thereafter, Kim and Shim, with Martin's assistance, took steps to obtain the...