Republic of Korea v. Ahn

• Decision Date: 15 March 2021
• Docket Number: B302454
• Parties: REPUBLIC OF KOREA, Plaintiff and Appellant, v. JOHN AHN et al., Defendants and Respondents.
• Court: California Court of Appeals Court of Appeals

REPUBLIC OF KOREA, Plaintiff and Appellant, v. JOHN AHN et al., Defendants and Respondents.

B302454

COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION FOUR

March 15, 2021

ORDER MODIFYING OPINION

(CLERICAL ERROR)

[NO CHANGE IN JUDGMENT]

THE COURT:*

It is ordered that the opinion filed March 15, 2021 be modified as follows:

On page 33 of the opinion, first full paragraph and the first sentence, replace "pjudgment" with "post-judgment".

The modification does not change the judgment.

/s/_________

*MANELLA, P. J.

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

(Los Angeles County Super. Ct. No. EC065866)

APPEAL from a judgment of the Superior Court of Los Angeles County, John J. Kralik, Judge. Vacated and remanded with directions.

Fox Rothschild, John J. Shaeffer and Rom Bar-Nissim for Plaintiff and Appellant.

Raines Feldman, Howard K. Alperin and Robert M. Shore for Defendants and Respondents.

INTRODUCTION

The Republic of Korea (ROK) obtained two judgments in Korean courts against respondent John Ahn. Together, the judgments awarded the ROK more than $2 million, plus 20 percent per year in post-judgment interest under Korean law. The ROK then brought this action in California to recognize the Korean judgments under our state's Uniform Foreign-Country Money Judgments Recognition Act (Code Civ. Proc., §§ 1713-1724; the Act).¹ It also sought to avoid allegedly fraudulent transfers of Ahn's assets.

Following discovery, the ROK moved for summary adjudication on its claim for recognition of the Korean judgments, and the trial court (Judge Benny Osorio) granted the motion. The matter then proceeded to a bench trial before another judge (Judge John Kralik) on the fraudulent conveyance claims. Following trial, the court determined that Ahn had engaged in fraudulent conveyances.

The trial court nevertheless believed that the Korean post-judgment interest rate was excessive and violative of the California Constitution's usury provisions. A then-recent Court of Appeal decision in Hyundai Securities Co., Ltd. v. Lee (2015) 232 Cal.App.4th 1379 (Hyundai) had already considered whether the Korean post-judgment interest rate was repugnant to public policy under section 1716 -- a finding that would have supported non-recognition of that element of the foreign judgment -- and determined itwas not. The trial court nevertheless concluded it had discretion to refuse to recognize the Korean post-judgment interest rate and declined to apply it to the judgment.

On appeal, the ROK argues that Hyundai required the trial court to recognize the Korean post-judgment interest rate. It further asserts that Judge Kralik had no power to reconsider Judge Osorio's grant of its motion for summary adjudication, which recognized the Korean judgments in their entirety.

Ahn contends the ROK has waived its right to appeal by accepting the benefits of the judgment (his payment of the trial court's judgment and an injunction the trial court had issued against him). He further argues the trial court properly exercised its discretion to reduce the Korean post-judgment interest rate as repugnant to public policy, and alternatively, that the court could have found that substantial doubt about the Korean court's integrity warranted non-recognition.

Initially, we conclude the ROK has not waived its right to appeal. We further conclude the trial court erred in refusing to recognize the Korean post-judgment interest rate, and hold: (1) whether a judgment is repugnant to public policy is a question of law; (2) the Korean post-judgment interest rate did not meet this demanding standard; and (3) the trial court did not find, and could not have found, that substantial doubt about the Korean court's integrity warranted non-recognition. Accordingly, we vacate the judgment and remand with instructions to recognize and apply the Korean post-judgment interest rate.

BACKGROUND

A. The Korean Actions

In 1999 and 2000, the ROK entered into contracts with Allied-Tech Systems, Inc. and Paragon Systems, LLC, two American companies controlled by Ahn, for the purchase of certain supplies. Ahn jointly guaranteed the companies' obligations under the contracts. The ROK subsequently discovered defects in the goods delivered, applied for arbitration with the Korean Commercial Arbitration Board, and obtained separate damages awards against the companies. The awards were partly conditioned on the ROK's return of the defective goods. The ROK then instituted separate actions in the Seoul Central District Court against Ahn as a joint surety of the contracts between the ROK and the two companies.

1. The First Korean Judgment

In the action concerning Ahn's guarantee of Paragon's obligations, the Seoul Central District Court found in favor of the ROK and awarded it damages. However, the court accepted Ahn's argument that the ROK's right to payment should be conditioned on its return of the relevant goods to Paragon.

In April 2013, the Seoul High Court affirmed the judgment with modifications. Among other changes, the appellate court ruled that the ROK was entitled to payment even without returning the goods, viewing Ahn's contrary contention as an "abuse of right" and merely an attempt to evade his obligations. The court found that return of thegoods by the ROK would be difficult and costly, that the goods would be of minimal benefit to Paragon because they were defective and could not be used for their intended purposes, and that Paragon had failed to cooperate with the ROK to facilitate the goods' return. The court further rejected an apparently new argument by Ahn. Ahn noted that one of his relevant surety agreements originally listed an amount of only about $31,000 and that a Korean official later amended the amount to about $1.2 million (the amount of the relevant contract). He asserted this was done without his consent or knowledge and claimed he should be liable only for the original amount. Based on its review of the evidence, the Seoul High Court concluded the amount was corrected with Ahn's actual or constructive consent.

As modified by the appellate court, the first Korean judgment required Ahn to pay the ROK: (a) about $1.7 million in damages; (b) about $120,000 in pre-judgment interest; and (c) 20 percent per year in post-judgment interest from the date of the modified judgment until it was paid in full.² In July 2015, the Supreme Court of Korea rejected Ahn's final appeal on the merits.

2. The Second Korean Judgment

The ROK's second case, concerning Ahn's guarantee of Allied's obligations, followed a similar track. The SeoulCentral District Court found in favor of the ROK and awarded it damages. It rejected Ahn's claim that the ROK would be entitled to payment only upon its return of the relevant goods to Allied. For essentially the same reasons the Seoul High Court provided in the first case, the Seoul Central District Court concluded Ahn's claim was an "abuse of right" and an attempt to evade his obligations.

In October 2014, the Seoul High Court affirmed the judgment with modifications. The modified judgment required Ahn to pay the ROK: (a) about $227,000 in damages; (b) about $23,700 in pre-judgment interest; and (c) 20 percent per year in post-judgment interest from the date of the modified judgment until it was paid in full. In July 2015, the Supreme Court of Korea rejected Ahn's final appeal on the merits.

B. The ROK's California Action

1. The ROK's Complaint and the Grant of Summary Adjudication on the Claim for Recognition of the Korean Judgments

In November 2016, the ROK filed this California action, seeking recognition of the Korean judgments under the Act. It also alleged that Ahn had engaged in fraudulent conveyances of his assets to evade payment, and soughtavoidance of the transfers and an injunction preventing further transfers of the assets.³

Following discovery, the ROK moved for summary adjudication of its claim for recognition of the Korean judgments under the Act. Ahn opposed the motion, arguing the Act did not apply to those judgments because they were unenforceable fines or penalties for purposes of section 1715. Alternatively, Ahn contended the court should not recognize the Korean judgments because grounds for non-recognition existed under section 1716, subdivisions (c)(1)(F) and (G).⁴ He did not challenge the rate of post-judgment interest under the judgments.

The trial court (Judge Osorio) granted the ROK's motion for summary adjudication, concluding the Korean judgments were entitled to recognition under the Act. The court found the judgments did not represent fines orpenalties, and found no evidence raising doubts about the Korean courts' impartiality or lack of due process in the Korean proceedings that would trigger the relevant grounds for non-recognition under section 1716.

2. The Bench Trial on the Fraudulent Conveyance Claims

Following Judge Osorio's retirement, the matter proceeded to a bench trial before Judge Kralik on the ROK's fraudulent conveyance claims. During Ahn's testimony at trial, he recounted that a company he owned had been involved in litigation against Lockheed Martin concerning the latter's alleged use of bribery and sexual favors to win (and deprive his company of) a large Korean government contract. According to Ahn, Lockheed ultimately agreed to pay his company $15 million. Other testimony presented at trial is not pertinent to this appeal. Following trial, the court found that Ahn had engaged in fraudulent conveyances of his assets with the intent to delay the ROK's recovery as a creditor.

3. Briefing on the Korean Post-Judgment Interest

Notwithstanding Judge Osorio's prior grant of summary adjudication on the ROK's...