Optional Capital v. DAS Corp. CA2/1 ( 2021 )

Filed 11/8/21 Optional Capital v. DAS Corp. CA2/1
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for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.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION ONE
OPTIONAL CAPITAL, INC., B301524
Plaintiff and Appellant, (Los Angeles County
Super. Ct. No. BC474472)
v.
DAS CORPORATION,
Defendant and Appellant.
APPEAL from a judgment of the Superior Court of Los
Angeles County. Michelle Williams Court, Judge. Reversed and
remanded with directions.
LTL Attorneys, James M. Lee, Joedat H. Tuffaha,
Prashanth Chennakesavan for Defendant and Appellant.
Rogari Law Firm, Ralph Rogari; Law Offices of Mary Lee,
Mary Lee for Plaintiff and Appellant.
___________________________________
This case involves two creditors’ competing claims to stolen
money.
In 2000, Kyung Joon Kim stole $14 million from DAS, a
Korean corporation.
In 2001, Kim stole more than $15 million from Optional
Capital, Inc., a corporation he controlled, spending heavily on
luxury items and transferring money to several accounts.
One of those transfers included $12.6 million that Kim
deposited in a Swiss bank account.
DAS sued Kim.
Optional sued Kim.
In 2010, DAS settled its lawsuit against Kim for $12.6
million and in 2011, with Kim’s permission, withdrew that
amount from Kim’s Swiss account.
In 2013, Optional obtained a default judgment against
Kim.
Finding Kim’s Swiss account basically empty, Optional
thereupon sued DAS for conversion, fraudulent transfer and
receipt of stolen property, claiming DAS knew that the $12.6
million it withdrew from the account in 2011 belonged to
Optional.
A jury largely rejected the claim. It found that DAS did not
knowingly or intentionally take possession of Optional’s funds,
did not transfer property with the intent to defraud its creditors,
and did not engage in conduct constituting malice, oppression or
fraud.
The jury nevertheless found that DAS received funds that
had been stolen from Optional, knowing the property to have
been stolen. The trial court therefore entered judgment for
Optional.
2
DAS appeals, contending the judgment was unsupported by
substantial evidence because no evidence supported the jury’s
finding either that the $12.6 million belonged to Optional or that
DAS knew that it did.
We conclude that no substantial evidence supported the
finding that DAS knew the $12.6 million belonged to Optional.
Accordingly, we reverse the judgment.
Optional cross-appeals, contending the trial court erred in
excluding evidence of deposition testimony taken in a related
forfeiture action and of the default judgment entered in that
action. Optional also contends the judgment should be enhanced.
We reject these contentions.
BACKGROUND
A. Misappropriations and Transfers
1. Misappropriation from DAS
In 2000, Kyung Joon Kim and others controlled BBK
Investment Advisors Co. Ltd., an investment fund with
substantial investors, and MAF Fund, a related entity.
DAS, a Korean corporation that manufactures and
distributes auto parts, invested approximately $19 million in
BBK.
In 2001, DAS demanded that Kim return its invested
amounts. Kim returned approximately $5 million, but then
stopped responding to DAS’s letters and calls demanding
repayment of the remaining $14 million.
2. Misappropriation from Optional
In April 2001, Kim and others purchased a little over 50
percent of New Vision Venture Capital Company Ltd., a defunct,
insolvent Korean venture capital firm that later became known
as Optional Capital, Inc.
3
Also in 2001, Kim falsified corporate charters for fictitious
companies and opened bank and securities accounts in their
names. He used New Vision/Optional to funnel funds acquired
from others, transferring approximately $38.6 million from the
falsified entities into Optional’s accounts in exchange for
corporate stock issued to himself.
Kim then deposited funds taken from Optional into his own
bank accounts at United Commercial Bank in Rowland Heights,
California.
3. Transfers to Alexandria Investments
In February 2002, Kim created Alexandria Investments,
Inc. (Alexandria), a California corporation, and transferred
money taken from Optional into Alexandria’s United Commercial
Bank account. Kim used some of the money to purchase
expensive automobiles and real property in Beverly Hills, and
ultimately transferred the remainder to Alexandria’s Credit
Suisse bank accounts in Geneva, Switzerland.
(We have greatly simplified the transactions hereby
related, which spanned three continents and involved several
individuals and entities, and dozens of accounts and transfers.)
B. Four Prior Legal Actions Against Kim
1. Cooperation Agreement
In 2003, DAS and Optional began collaborating to
determine the scope of Kim’s misconduct and to trace the funds
taken out of Optional, both coordinating with the FBI and the
United States Attorney’s Office for the Central District of
California. Optional and DAS entered into a “Cooperative
Prosecution Agreement” to identify and recover funds and divide
any net recovery equally.
4
Optional terminated the cooperative prosecution agreement
in 2004, after which DAS and Optional pursued their respective
claims independently.
2. 2003 DAS’s State Lawsuit Against Kim
In 2003, DAS sued Kim and his associates in Los Angeles
Superior Court to recover $12.6 million it had invested. In
August 2010, the court entered judgment in DAS’s favor against
two Kim entities for $31 million.
DAS and Kim then participated in a mediation with the
Honorable John Zebrowski (Ret.) that resulted in a November 30,
2010 settlement agreement in which the Kim parties agreed to
settle all of DAS’s claims for 14 billion won, approximately $12.6
million at the then-current exchange rate.
3. 2004 Optional’s Federal Lawsuit Against Kim
In 2004, Optional filed a lawsuit against the Kim parties
and Alexandria in the United States District Court, seeking
damages for fraud and conversion based on the looting of
Optional (Optional Capital, Inc. v. Kim (C.D.Cal., Aug. 1, 2008,
No. CV 04-3866 ABC (PLAx)) 2008 U.S.Dist. Lexis 71750). On
February 4, 2008, the jury returned a verdict finding that the
Kim parties and Alexandria converted approximately $15.5
million from Optional.
4. 2004 United States Forfeiture Proceedings
In 2004, the United States government commenced
forfeiture proceedings against Kim and his associates in the
United States District Court for the Central District of California
and seized property, including Kim’s automobiles and the
Alexandria funds held at Credit Suisse in Switzerland. At a
request of the United States government pursuant to the Mutual
Legal Assistance Treaty (MLAT), the Swiss government froze the
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Credit Suisse account. Both Optional and DAS filed claims to
various assets in the forfeiture action, including to the monies in
the Credit Suisse account.
In 2007, the court extinguished the United States
government’s forfeiture claim, leaving only Optional and DAS as
claimants.
At some point thereafter, the Swiss government removed
the freeze on the Credit Suisse account even though DAS and
Optional were still prosecuting the forfeiture action.
On April 4, 2011, DAS withdrew its claims in the forfeiture
proceeding pursuant to the November 30, 2010 settlement
agreement in the state lawsuit.
On November 17, 2011, DAS was dismissed from the
forfeiture action.
5. 2007 DAS’s Swiss Criminal Proceedings Against
Kim
By 2007, all funds at issue were located in the Credit
Suisse account in Switzerland under the name of Alexandria
Investment LLC, and had been frozen by order of the Canton of
Geneva. In April 2007, DAS instituted criminal proceedings in
Switzerland against Alexandria and a Kim associate, thereby
obtaining a second freeze on the Credit Suisse funds.
In December 2010, the Swiss magistrate investigating
DAS’s criminal action learned about the November 30, 2010
state-lawsuit settlement agreement between DAS and Kim, and
held a hearing on the matter.
6. February 1, 2011 Wire Transfer to DAS
On February 1, 2011, the Prosecutor’s Office for the Canton
of Geneva lifted DAS’s freeze on “the account held by
ALEXANDRIA INVESTMENT LLC with Credit Suisse,” and
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ordered Credit Suisse to “immediately transfer the exchange
value in US dollars of [14 billion Korean won] to the account of
DAS Corporation at Korea Exchange Bank” in Korea. Credit
Suisse complied with that order, and sent DAS a wire transfer in
an amount equivalent to $12.6 million.
On April 4, 2011, DAS withdrew its claims in the United
States forfeiture actions and dismissed the Swiss criminal action.
Optional demanded that DAS give Optional the funds it
received from Switzerland, but DAS refused.
7. United States Forfeiture Proceedings: 2013
Default Judgment in Favor of Optional
In 2013 in the United States forfeiture proceedings, the
Central District entered a default in rem judgment in Optional’s
favor, finding Optional possessed a constructive trust with
respect to “All funds in Credit Suisse Private Banking Account
No. 0251-844548-6 in the name of Alexandria Investment, LLC
as of August 8, 2005.”
In issuing its Findings of Fact and Conclusions of Law, the
court expressly adopted a lower standard than it otherwise would
have applied had DAS not been dismissed as a party to the
Forfeiture Action. The court stated that “Optional’s tracing
burden is minimal,” and noted that the standard would be
different if there was a competing claim by another creditor.
The 2013 judgment directed that the funds in the Credit
Suisse account be released to Optional, and the court retained
jurisdiction to ensure compliance.
C. Instant Lawsuit
Although by 2013 Optional had a default judgment against
Kim and a constructive trust on Kim’s Swiss account, DAS had
removed $12.6 million from the account in 2011.
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On December 1, 2011, Optional filed this action against
DAS and Kim for that $12.6 million, alleging conversion,
fraudulent transfer, and receipt of stolen property in violation of
Penal Code section 496. (Optional and Kim ultimately settled,
and Optional thereafter proceeded only against DAS.)
Optional alleged that commencing in July 2001, Kim
converted Optional’s property by transferring its funds to
accounts at United Commercial Bank, and ultimately transferred
over $15 million belonging to Optional to Alexandria’s account at
Credit Suisse. Optional asserted that its ownership of the funds
derived from the fact that they originally came from its corporate
accounts.
Optional alleged that beginning in 2008, DAS conspired
with the Kim parties in “a concerted course of action designed to
hinder, delay and prevent OPTIONAL from recovering the
moneys defendants owed,” converting $13 million belonging to
Optional. It alleged that the fruit of this conspiracy was the 2011
settlement agreement between DAS and Kim, which led to DAS’s
withdrawal of $12.6 million from the Swiss account.
Optional alleged that DAS’s receipt of $12.6 million from
Alexandria’s Swiss account pursuant to the order of the
Prosecutor’s Office for the Canton of Geneva constituted a
fraudulent transfer.
Finally, Optional alleged that DAS received approximately
$14 million from Alexandria “knowing those funds were stolen,”
which constituted a violation of subdivision (a) of Penal Code
section 496. It sought treble damages pursuant to subdivision (c)
of Penal Code section 496.
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1. Four Res Judicata Proceedings
Optional claimed four times in two forums that the 2013
Central District default judgment, which granted it a
constructive trust in “[a]ll funds” in Alexandria’s Credit Suisse
account “as of August 8, 2005,” was res judicata as to ownership
of the $12.6 million that DAS received from the account in 2011.
a. 2011 Central District
Optional first asserted this claim in a motion in the Central
District in 2011, moving for a contempt order against DAS on the
basis that by instituting criminal proceedings in Switzerland and
obtaining funds from the Credit Suisse account, DAS bypassed
the Central District’s in rem jurisdiction over the account. The
court disagreed. Although it found DAS’s conduct to be
“troubling,” and acknowledged that transfer of the Credit Suisse
funds to DAS “diminish[ed] the value of the res,” rendering any
future decision by the court on Optional’s competing claim “a
merely academic exercise,” the court found that DAS had violated
no express court order.
b. First Assertion in the Instant Action
Optional next asserted its res judicata claim in this action,
moving for summary judgment against DAS on the ground that
the 2013 default judgment established DAS’s ownership interest
in the $12.6 million. The superior court denied the motion on the
ground that “at the time the [2013] judgment was entered, DAS
was not a party to the forfeiture action” and was not “in privity
with any party.”
c. 2018 Central District
In 2018, Optional again asserted its res judicata claim
before the Central District, moving for a contempt order against
DAS on the basis that DAS violated the 2013 judgment by failing
9
to turn over the $12.6 million to Optional. The Central District
again denied the motion, finding Optional failed to show that
DAS violated the 2013 judgment because that judgment “simply
stated the Credit Suisse account belonged to Optional and should
be turned over to Optional. Optional’s proposed interpretation of
the judgment, arguing it required DAS to return the funds it
received from the Credit Suisse account in 2011, requires a
tortured reading.” In 2019, Optional moved for reconsideration of
this ruling, which the Central District court denied.
d. Second Assertion in the Instant Action
Finally, Optional again asserted its res judicata claim in
the instant action in opposition to DAS’s motion for judgment on
the pleadings. The trial court found it could not “be determined
that DAS’s interest in the [2013] default judgment was in privity
with any defendant at the time of entry of the judgment” because
DAS “obtained funds from the Swiss account[] on February 1,
2011, over two years prior to the judgment[,] and DAS was
dismissed from the forfeiture action [on] November 17, 2011.”
2. Motions in Limine
Before trial, Optional sought permission to introduce as
evidence: (1) its judgment in the 2004 state action against Kim
and a lien it had obtained in connection with that action; and (2)
the 2013 forfeiture default judgment.
The trial court excluded the 2013 judgment, finding “there
is no res judicata effect of [the] judgment,” which “was entered
two years after the alleged wrong act by DAS in this case.”
The court admitted the state judgment for a limited
purpose: The jury was “to consider [the] document only as
between the rights between Optional Capital on one side and [the
10
Kim parties], and not concerning DAS Corporation. And this
judgment is only as of February 7, 2011.”
The court excluded evidence of any lien.
3. Trial
It was undisputed at trial that Kim had misappropriated
funds from both DAS and Optional, and that DAS received $12.6
million from Alexandria’s Credit Suisse account. The only
pertinent issue on appeal is whether DAS knew that the $12.6
million belonged to Optional.
Optional called Hwan Ook Yang, a stockbroker with
degrees in economics and international finance who joined
Optional in 2004. He testified that Kim misappropriated
approximately $33 million from Optional’s accounts, transferred
the funds to several of his own accounts, and used the funds to
purchase a home in Beverly Hills and several cars. Ultimately,
Kim transferred funds to Alexandria’s account in Rowland
Heights, and from there to Alexandria’s Credit Suisse account in
Geneva.
Both parties called Jason Engel, an accountant retained by
DAS in 2006 to conduct a tracing. Engel testified that neither he
nor Yang knew for certain the origin of any particular funds
originally deposited into Optional’s accounts. However, Engle
had been able to trace the Credit Suisse funds back to an
investment DAS had made into BBK.
Like Yang, Engle testified that Kim withdrew millions of
dollars from Optional’s accounts and transferred them to
accounts he controlled, including a March 16, 2002 transfer to
Alexandria’s Rowland Heights account in the amount of
$18,493,825, and from there a transfer to Alexandria’s Credit
Suisse account in the amount of $14.6 million.
11
4. Special Verdict
The jury was given a special verdict form covering
Optional’s three causes of action for conversion, fraud, and
receipt of stolen property.
a. Conversion
With respect to Optional’s conversion claim, the jury found
that DAS did not “substantially interfere with [Optional’s]
property by knowingly or intentionally taking possession of the
funds.”
b. Fraudulent Transfer
With respect to Optional’s fraudulent transfer claim, the
jury found that Alexandria did not “transfer property with the
intent to hinder, delay, or defraud one or more of its creditors.”
c. Receipt of Stolen Property
With respect to Optional’s claim for receipt of stolen
property in violation of Penal Code section 496, the special
verdict form asked four questions:
“14. Did DAS CORPORATION buy or receive funds from
Alexandria Investments LLC that had been stolen or that had
been obtained in any manner constituting theft or extortion from
OPTIONAL CAPITAL knowing the property to be so stolen or
obtained?
“____YES ____ NO
“Please answer question 15.”
The jury answered YES.
“15. Did DAS CORPORATION conceal, sell, withhold, or
aid in concealing, selling, or withholding the funds from
OPTIONAL CAPITAL knowing the property to be so stolen or
obtained?
“____ YES ____ NO”
12
The jury answered NO.
“If your answer to question 14 or question 15 is YES, then
answer question 16.” (Italics added.)
“If you answered NO to question 14 and question 15, please
proceed to SECTION 4.”
The jury answered NO.
“16. Was OPTIONAL CAPITAL, INC. harmed?
“____ YES ____ NO”
The jury answered YES.
“17. Did [Optional] file this lawsuit within 3 years after
[DAS] bought or received funds from [Alexandria] that had been
stolen or that had been obtained in any manner constituting theft
. . . from [Optional] knowing the property to be so stolen or
obtained or within 3 years after [Das] . . . withheld . . . the funds
from [Optional] knowing the property to be so stolen or obtained?
“____ YES ____ NO”
The jury answered YES.
Section 4 of the special verdict form asked in question 18
what damages Optional suffered.
The jury answered “$2 million.”
Section 5, titled “Punitive Damages,” asked in question 19
whether DAS engaged in conduct constituting malice, oppression
or fraud.
The jury answered NO.
5. Judgment and Post-Judgment Proceedings
The trial court entered judgment for Optional in the
amount of $2 million.
DAS filed a motion to enter judgment notwithstanding the
verdict (JNOV) or alternatively to set aside the verdict, arguing
that liability for receipt of stolen property was not supported by
13
substantial evidence. The trial court denied the motion,
concluding without elaboration that “[a]fter reviewing the record,
the court finds there is substantial evidence to support the jury’s
verdict.”
DAS also moved for a new trial on the ground of attorney
misconduct. The court denied the motion, finding DAS failed to
show any misconduct.
Optional moved to modify or vacate the damages portion of
the judgment and enter judgment in its favor for $12 million, or
in the alternative to treble the $2 million judgment. The court
concluded, without elaboration, that “there is substantial
evidence to support the jury’s findings concerning damages,” and
denied the motion.
DAS appeals and Optional cross-appeals.
DISCUSSION
I. DAS’S APPEAL
DAS contends that no substantial evidence established that
Optional owned the $12.6 million or that DAS knew the funds
were stolen. Accordingly, DAS argues, the trial court erred in
denying its JNOV motion. We conclude that no substantial
evidence supports the jury’s finding that DAS knew the Swiss
funds belonged to Optional.
A. Judgment on a Special Verdict
Subdivision (a) of Penal Code section 496, provides in
pertinent part: “Every person who . . . receives any property that
has been stolen or that has been obtained in any manner
constituting theft or extortion, knowing the property to be so
stolen or obtained, . . . shall be punished by imprisonment in a
state prison, or in a county jail for not more than one year.”
14
“Thus, to sustain a conviction for receiving stolen property,
the prosecution must prove (1) the property was stolen; (2) the
defendant knew the property was stolen; and (3) the defendant
had possession of the stolen property.” (People v. Land (1994) 30
Cal.App.4th 220, 223.) Knowledge that property was stolen may
be inferred from circumstantial evidence. (People v. Schroeder
(1968) 264 Cal.App.2d 217.)
Subdivision (c) of Penal Code section 496 provides that
[a]ny person who has been injured by a violation of subdivision
(a) . . . may bring an action for three times the amount of actual
damages . . . .”
Here, by answering the special verdict form’s Question 14
in the affirmative, the jury found that DAS (1) received funds
stolen from Optional, (2) knowing them to have been stolen. The
question is whether substantial evidence supported both findings.
B. Sufficiency of the Evidence
A trial court must grant a JNOV motion if there “is no
substantial evidence in support” of the verdict. (Sweatman v.
Department of Veterans Affair (2001) 25 Cal.4th 62, 68.)
When a plaintiff’s verdict is challenged for lack of
substantial evidence, we must determine whether there is
evidence that is “ ‘ “reasonable in nature, credible, and of solid
value; [constituting] ‘substantial’ proof of the essentials which the
law requires in a particular case.” ’ ” (DiMartino v. City of
Orinda (2000) 80 Cal.App.4th 329, 336.) To do so, we first resolve
all explicit conflicts in the evidence and presume all reasonable
inferences in favor of the verdict. (Kuhn v. Department of
General Services (1994) 22 Cal.App.4th 1627, 1632.) We then
determine whether evidence supporting the verdict is
substantial. “[T]his does not mean we must blindly seize any
15
evidence in support of the respondent in order to affirm the
judgment. The Court of Appeal ‘was not created . . . merely to
echo the determinations of the trial court. A decision supported
by a mere scintilla of evidence need not be affirmed on review.’
[Citation.] ‘[I]f the word “substantial” [is to mean] anything at
all, it clearly implies that such evidence must be of ponderable
legal significance. Obviously the word cannot be deemed
synonymous with “any” evidence. It must be reasonable . . . ,
credible, and of solid value . . . .’ ” (Id. at p. 1633.) “The ultimate
determination is whether a reasonable trier of fact could have
found for the respondent based on the whole record. [Citation.]
While substantial evidence may consist of inferences, such
inferences must be ‘a product of logic and reason’ and ‘must rest
on the evidence’ [citation]; inferences that are the result of mere
speculation or conjecture cannot support a finding.” (Ibid.)
Where a verdict is supported only by inferences that are
contrary to “clear, positive, uncontradicted . . . [evidence] of such
a nature that it cannot rationally be disbelieved,” the inferences
do not constitute substantial evidence supporting the verdict.
(Teich v. General Mills, Inc. (1959) 170 Cal.App.2d 791, 799.)
Here, the jury’s verdict is founded on a crucial inference for
which there was no evidentiary support and which was
contravened by clear, positive, uncontradicted evidence: That
DAS knew that the funds in the Swiss account belonged to
Optional.
To the contrary, however, Engel testified, and it was
undisputed, that Kim used his control of Optional to
misappropriate millions of dollars from both Optional and DAS.
This fraud against DAS as well as Optional was undisputed when
16
the parties entered into a cooperative prosecution agreement in
2003, and was well corroborated at trial.
No evidence suggested that the money Kim deposited in
Optional’s accounts belonged solely to Optional.
Although Yang traced funds from Optional’s accounts,
finally locating them in Switzerland, he did nothing to establish
the original ownership of those funds. Only Engel testified that
funds in the Credit Suisse account could be traced to any owner,
and that was to DAS.
That the funds were at one point held in Optional’s account
did not establish that they belonged to Optional. If ownership of
an account equated to ownership of funds in the account,
Optional would have no claim against Alexandria’s Swiss
account.
There was therefore no evidence that DAS knew that all
the funds in Alexandria’s Swiss account belonged to Optional,
and concomitantly no evidence that DAS knew the funds it
received from Credit Suisse were stolen.
The trial court therefore should have granted DAS’s motion
for JNOV.
Optional argues that the 2013 federal forfeiture judgment
established as a matter of law that all the Credit Suisse funds
belonged to Optional, and the trial court’s erroneous exclusion of
evidence of that judgment precluded Optional from proving DAS
knew the Credit Suisse funds were stolen. We disagree.
1. Res Judicata
The doctrine of res judicata operates to bar multiple
litigation “arising out of the same subject matter of a prior action
as between the same parties or parties in privity with them.”
(Gates v. Superior Court (1986) 178 Cal.App.3d 301, 308; see also
17
Frommhagen v. Board of Supervisors (1987) 197 Cal.App.3d
1292, 1299.)
The doctrine has two effects. “First, where the causes of
action and the parties are the same, a prior judgment is a
complete bar in the second action. This is fundamental and is
everywhere conceded.” (Sutphin v. Speik (1940) 15 Cal.2d 195,
201.)
It is well established that such a judgment is binding not
only as to a claim actually raised but also as to those matters
that might have been raised in support of the claim actually
raised. (E.g., Price v. Sixth Dist. Agricultural Ass’n (1927) 201
Cal. 502, 511; Pacific Mut. Life Ins. Co. of Cal. v. McConnell
(1955) 44 Cal.2d 715, 724-725; Amin v. Khazindar (2003) 112
Cal.App.4th 582, 590.) “In other words, when an issue has been
litigated all inquiry respecting the same is foreclosed, not only as
to matters heard but also as to matters that could have been
heard in support of or in opposition thereto.” (Price, at p. 511.)
“If the matter was within the scope of the action, related to the
subject-matter and relevant to the issues, so that it could have
been raised, the judgment is conclusive on it despite the fact that
it was not in fact expressly pleaded or otherwise urged. The
reason for this is manifest. A party cannot by negligence or
design withhold issues and litigate them in consecutive actions.
Hence the rule is that the prior judgment is res judicata on
matters which were raised or could have been raised, on matters
litigated or litigable.” (Sutphin v. Speik, supra, 15 Cal.2d at p.
202.)
Here, it is undisputed that DAS was neither a party nor in
privity with a party to the 2013 judgment, and the causes of
18
action litigated in the federal forfeiture proceedings were not the
same as the Penal Code section 496 cause of action litigated here.
2. Collateral Estoppel
“In its secondary aspect res judicata has a limited
application to a second suit between the same parties, though
based on a different cause of action. The prior judgment is not a
complete bar, but it ‘operates as an estoppel or conclusive
adjudication as to such issues in the second action as were
actually litigated and determined in the first action.’ (Todhunter
v. Smith [(1934)] 219 Cal. 690, 695 [28 P.2d 916].) This aspect of
the doctrine of res judicata, now commonly referred to as the
doctrine of collateral estoppel, is confined to issues actually
litigated.” (Clark v. Lesher (1956) 46 Cal.2d 874, 880; see also
Sutphin v. Speik, supra, 15 Cal.2d at pp. 201-202.)
“First, the issue sought to be precluded from relitigation
must be identical to that decided in a former proceeding. Second,
this issue must have been actually litigated in the former
proceeding. Third, it must have been necessarily decided in the
former proceeding. Fourth, the decision in the former proceeding
must be final and on the merits. Finally, the party against whom
preclusion is sought must be the same as, or in privity with, the
party to the former proceeding.” (Lucido v. Superior Court (1990)
51 Cal.3d 335, 341.) This means that “the circumstances must
have been such that the party to be estopped should reasonably
have expected to be bound by the prior adjudication.” (Clemmer
v. Hartford Insurance Co. (1978) 22 Cal.3d 865, 875.)
Collateral estoppel does not apply when “the factual finding
in the prior proceeding was arrived at based on a lower standard
of proof than the one required in the subsequent proceeding.”
19
(The Grubb Co., Inc. v. Department of Real Estate (2011) 194
Cal.App.4th 1494, 1503.)
Again, by 2013, DAS was neither party to nor in privity
with a party to the forfeiture proceedings. Moreover, the federal
court lowered the burden of proof in those proceedings (which
after DAS’s departure amounted to no more than a prove up) to a
“minimal” standard that it expressly stated would have been
higher had there been any competing creditor. Therefore,
collateral estoppel does not apply.
Further, the specific issue that Optional seeks to preclude–
–that it, and not DAS, was the exclusive owner of the $12.6
million––was never adjudicated in the forfeiture action.
Although in 2013 the Central District found that Optional
possessed a constructive trust as to “[a]ll funds in Credit Suisse
[account] as of August 8, 2005,” the court had earlier, in 2011,
acknowledged that the $12.6 million transfer to DAS
“diminish[ed] the value of the res,” rendering any future decision
by the court on the competing claims case “a merely academic
exercise.”
A fair reading of the 2013 judgment is that
notwithstanding the court’s reference to funds in the Swiss
account “as of” 2005, the judgment included only funds currently
in the account, i.e., as of 2013. Had the court intended the res to
include the $12.6 million DAS withdrew in 2011 it would have
said so. It said the opposite, that the $12.6 million transfer to
DAS diminished the res.
3. Conclusion
Even if the 2013 default judgment established that
Optional owned the $12.6 million DAS withdrew from
Alexandria’s Swiss account in 2011, it would not establish that
20
DAS knew two years before the judgment that the funds belonged
Optional.
C. Exclusion of Other Evidence
1. 2013 Judgment
Optional argues the trial court erred in refusing to admit
the 2013 judgment as prima facie (as opposed to conclusive)
evidence that Optional owned all the Credit Suisse funds. We
disagree.
Absent a statutory exception, relevant evidence is
admissible. Evidence is relevant if it has any tendency in reason
to prove or disprove any disputed fact of consequence to the
determination of an action. (Evid. Code, § 210.) Nevertheless,
relevant evidence should be excluded if the trial court, “in its
discretion[, determines that] its probative value is substantially
outweighed by the probability that its admission will (a)
necessitate undue consumption of time or (b) create substantial
danger of undue prejudice, of confusing the issues, or of
misleading the jury.” (Evid. Code, § 352.)
“[T]he trial court enjoys broad discretion in assessing
whether the probative value of particular evidence is outweighed
by concerns of undue prejudice, confusion or consumption of time.
[Citation.] . . . [I]ts exercise of that discretion ‘must not be
disturbed on appeal except on a showing that the court exercised
its discretion in an arbitrary, capricious or patently absurd
manner that resulted in a manifest miscarriage of justice.’ ”
(People v. Rodrigues (1994) 8 Cal.4th 1060, 1124.)
Here, Optional’s theory of the case was that all the funds in
all the accounts that were eventually funneled into the Credit
Suisse account belonged exclusively to Optional. The 2013
judgment was only minimally probative on this issue. As we and
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two trial courts concluded, the 2013 judgment tended to show
only that Optional owned funds remaining in the Swiss account
as of 2013, more than a year after DAS withdrew the $12.6
million at issue.
On the other hand, the 2013 judgment had great potential
to sew confusion with the jury because it constituted a federal
court proclamation that Optional possessed a “constructive trust”
in the Credit Suisse funds “as of” 2005,” which to a lay person
would suggest (and Optional insists) reaches beyond the parties
and issues before the forfeiture court, into the instant
proceedings. Optional attempted several times to make this very
argument at trial even without the 2013 judgment, requiring
DAS to make repeated objections that were all sustained.
Given the minimal probative value of the 2013 judgment
and the great risk it would confuse the jury, we conclude its
probative value was substantially outweighed by the risk of jury
confusion. Accordingly, the trial court acted within its discretion
in shielding the jury from the fine points of res judicata law by
excluding the 2013 judgment.
2. Deposition Testimony from Other Cases
The trial court excluded deposition testimony taken in the
forfeiture action from Jin Young Lee and Sung Woo Kim
concerning various aspects of Optional’s operations and DAS’s
investment into BBK, reasoning that the testimony was hearsay
to which no exception applied.
Specifically at issue was the hearsay exception found in
Evidence Code section 1291, subdivision (a)(2), which excepts
former testimony from the hearsay rule if “[t]he party against
whom the former testimony is offered was a party to the action or
proceeding in which the testimony was given and had the right
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and opportunity to cross-examine the declarant with an interest
and motive similar to that which he has at the hearing.” (Evid.
Code, § 1291, subd. (a)(2).) The court concluded the exception did
not apply because DAS did not have a similar interest in the
forfeiture action to its interest here.
Optional argues the trial court erred, and in doing so made
it “more difficult for Optional to re-try a case it had already won.”
We disagree.
In the forfeiture action DAS and Optional were for a time
cooperating co-claimants, even sharing legal representation and
jointly seeking to recover funds that Kim stole from them.
Here, DAS and Optional are adversaries.
DAS therefore had no opportunity or right in the
cooperative forfeiture action to cross-examine Lee and Sung Woo
Kim with an interest and motive similar to that which it
possesses in these adversarial proceedings.
Moreover, Optional offers no explanation how Lee’s or Sun
Woo Kim’s deposition testimony would have assisted it at trial
other than to establish that Optional prevailed in the forfeiture
action, which as discussed above is undisputed and immaterial.
D. DAS’s Further Arguments
DAS further contends that: (1) By answering “no” to
Question 15 the jury found that DAS did not know the Credit
Suisse funds were stolen; (2) Penal Code section 496 does not
apply to money; (3) Penal Code section 496 does not apply when
the property is received from a state actor; (4) Penal Code section
496 does not apply to out-of-state conduct; (5) all alleged
wrongdoing constituted protected petitioning activity; and (6)
Optional’s trial counsel committed prejudicial misconduct.
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Given the above discussion and conclusion, we need not
address these contentions.
II. OPTIONAL’S APPEAL
In its appeal, Optional contends (1) treble damages are
mandatory under Penal Code section 496; (2) the 2013 judgment
is entitled to preclusive res judicata effect; (3) the trial court
erred in excluding the 2013 judgment for other than res judicata
purposes and for excluding the testimony taken in the forfeiture
proceeding of Lee and Sung Woo Kim; (4) the damages award
should be increased to $12.6 million, and then trebled; and (5)
any proceedings on remand should include a new trial on the
issue of constructive fraud.
For reasons given in our resolution of DAS’s appeal, we
reject these contentions.
DISPOSITION
The judgment is reversed and the matter remanded with
directions to enter a new judgment for DAS. DAS is to recover its
costs on appeal.
NOT TO BE PUBLISHED
CHANEY, J.
We concur:
ROTHSCHILD, P. J.
BENDIX, J.
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