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Haah v. Kim

June 22, 2009

STEPHAN HAAH ET AL., PLAINTIFFS AND RESPONDENTS,
v.
DONGHYUK KIM, DEFENDANT AND APPELLANT.



APPEAL from a judgment of the Superior Court for Los Angeles County, James C. Chalfant, Judge. Affirmed. (Los Angeles County Super. Ct. Nos. BS111925 and BS112791).

The opinion of the court was delivered by: Willhite, J.

CERTIFIED FOR PUBLICATION

Under Corporations Code section 709 (section 709), "any shareholder or . . . any person who claims to have been denied the right to vote" may bring an action to invalidate the appointment or election of directors of a corporation. Stephan Haah and Jang Woo Lee brought such an action to invalidate the appointment or election of Donghyuk Kim (D. Kim), Won B. Keh (W.B. Keh), and Young S. Keh (Y.S. Keh) as directors of Galleria Plus, Inc. (GPI). The trial court granted Haah's and Lee's petition, and D. Kim appeals from the judgment. He challenges the trial court's ruling on a demurrer, its finding that Haah and Lee had standing to bring an action under section 709, and its appointment of directors. We hold that D. Kim forfeited his contentions regarding the demurrer ruling and the appointment of directors. As to his contention that Haah and Lee did not have standing, we hold that section 709 allows persons who have entered into subscription agreements to file an action challenging the election of directors, and therefore Haah and Lee had standing to bring the present action. Accordingly, we affirm the judgment.

BACKGROUND

Many of the facts regarding the formation and operation of GPI were hotly contested in the trial court. The trial court did not expressly resolve many of those disputes, and we do not intend by our recitation of the facts to resolve them. We set forth only those facts relevant to the issues on appeal.

A. The Creation of GPI

Sometime in 2005, Francis Key (Key) approached Haah, who was a well- known developer in the mid-Wilshire area of Los Angeles known as Koreatown, about the possibility of owning and operating a supermarket at the Equitable City Center Building under development in Koreatown. Haah worked with Key to develop and execute the market concept.*fn1 As part of the plan, Key formed a corporation, GPI, for the purpose of owning and operating the supermarket.

On June 13, 2005, Key, accompanied by Se Heon Yoon (S.H. Yoon) met with Yoon Han Kim (Y.H. Kim). Key asked Y.H. Kim, an attorney, to prepare and file Articles of Incorporation for GPI and a Statement of Information naming S.H. Yoon as the sole director and officer of GPI. Y.H. Kim prepared the documents as requested, and signed the Articles of Incorporation as the incorporator; S.H. Yoon signed the Statement of Information. Y.H. Kim assumed that Key had another attorney assisting him who would prepare the necessary documents to appoint S.H. Yoon as director. No such documents were prepared.

B. Key's Alleged Agreement With D. Kim

In April 2006, S.H. Yoon left GPI and returned to Korea. At around that time, D. Kim became involved in GPI, assuming responsibility for running GPI's business operations, including opening and managing GPI's bank accounts. On April 27, 2006, Key and D. Kim went to Y.H. Kim's office, and Key asked Y.H. Kim to prepare a Statement of Information listing D. Kim as the sole director and officer of GPI.*fn2 D. Kim signed the Statement of Information. Both D. Kim and Y.H. Kim understood at that time that Key was the sole owner of GPI.

D. Kim asserts that he and Key then agreed that they would be equal partners in GPI, but that D. Kim would "legally" hold all of the shares of GPI. There is no written documentation of this alleged agreement.

C. Key's Agreements With Haah And Others

There is, however, written documentation of several agreements Key entered into with Haah and other individuals. After Key secured a lease for the supermarket project in September 2006, he was unable to raise sufficient money to continue funding the company, so he enlisted Haah's assistance.

He agreed to give Haah 25 percent of GPI's outstanding shares in exchange for Haah's assistance in securing a $1.5 million loan for GPI. He entered into a written agreement to that effect on October 10, 2006, individually and on behalf of GPI. The agreement warranted that Key was the owner of 100 percent of the shares of GPI. According to Haah, Key modified the agreement shortly thereafter to provide that Haah was to secure at least $2 million in cash rather than a $1.5 million loan. Although there is no writing evidencing this modification, the subsequent conduct of the parties is consistent with the alleged modification.

Haah, alone and with the assistance of James Seo, identified several potential investors for GPI. Two of them entered into contracts with Key: Christine Chung (C. Chung), who invested $500,000 in exchange for 20 percent of all outstanding shares on October 19, 2006, and Won B. Keh (W.B. Keh), who invested $1 million in exchange for 17.5 percent of the outstanding shares in December 2006. In each contract Key, ...


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