Chung v. Lee ( 2022 )

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
SUSAN CHUNG )
Plaintiff, )
V. ) C.A. No.: N18C-12-236 SKR
SANG SOO LEE AND JUNG SOOK )
LEE, )
Defendants. )
)
DECISION AFTER TRIAL
Albert H. Manwaring, IV, Esquire, Philip M. Casale, Esquire, Kirsten A.
Zeberkiewicz, Esquire, Barnaby Grzaslewicz, Esquire, Morris James LLP,
Attorneys for Plaintiff.
Douglas A. Shachtman, Esquire, The Shachtman Law Firm, Attorney for
Defendants.
1. FACTUAL AND PROCEDURAL BACKGROUND
This is a breach of contract action in which Plaintiff Susan Chung (“Chung”)
seeks damages from Defendants Sang Soo Lee and Jung Sook Lee (“the Lees”) for
a series of loans made from 2001 to 2011. These loans were not conventional but
rather originated from a unique system that is traditional in the Korean
communities known as a Kye. A Kye is a cash-based lending system that enables
individuals without traditional loan opportunities to gain access to funds that
wouldn’t normally be accessible. Kyes have a fixed number of members who all
make a fixed monthly contribution for a set number of months; then each member
collects a lump sum distribution of the contributions plus interest for a designated
month. Kye members can also make one-to-one personal loans which may or may
not involve contributions or distributions. Members may also act as intermediaries,
who facilitate and guarantee loans between lenders and lendees inside or outside of
the Kye.
Chung and the Lees met in 1995.' They were part of the same neighborhood
community in Wilmington, Delaware. Chung’s dry-cleaning business and the
Lees’ grocery store, EZ Market, were on the same block.’ At one point, the Lees
moved one block away from Chung. Mrs. Lee and Chung described their
relationship as “close friends” or “sisters.”? After moving closer to Chung, Mrs.
Lee joined two Kyes led by Chung.4
! Trial Tr. July 27, 2021, 17:15-17.
* Id.
3 Jd., 23:21-23; Trial Tr. July 28, 2021, 105:13-14.
* One Kye provided a mid-month distribution, and the other was at the end of the month. Trial
Tr. July 28, 2021, 107:7-14.
Chung orchestrated several Kyes in her community to enable fellow Korean
immigrants to access funds and start their own businesses.” The Kyes in question,
where Chung was organizer and Mrs. Lee was a member, included 21 members in
total.© Each member made a fixed contribution of $1,500 each month for 21
months.’ Each month, one member of the Kye collected $30,000, which
represented a single lump sum distribution of the total monthly contributions, in
addition to the accumulated interest for that month.®
From 2001 to 2011, Chung alleges that she personally made approximately
20 loans from the Kye network to the Lees.” Over this period of time, she alleges
that she loaned $350,000 to the Lees, of which the Lees repaid $210,000.!° Chung
claims that the last principal payment received in connection with the outstanding
debt was on November 1, 2010,'' and the last interest payment was received in
2016.'? As a result, Chung confronted the Lees in 2018 about the outstanding loans
and subsequently filed a lawsuit.'?
On December 21, 2018, Chung sued the Lees for the outstanding loans,
alleging that she was owed $140,000 plus unpaid interest accruing at 12% per
annum from March 2016 to the present, plus attorneys’ fees, costs and other
expenses.'* On January 31, 2019, the Lees filed an Answer and Amended
> Trial Tr. July 27, 2021: 22:5-9.
8 Td., 18:19-19:5, 22:5-9.
7 Id.,21:2-6.
8 Each Kye distribution came with an additional $80 of interest per $10,000. E.g., Id, 19:20-
20:4.
” For some of these loans, Chung personally loaned the money. For other loans, she served as an
intermediary, soliciting funds from other Kye members to provide to Mrs. Lee as a loan. Jd,
23:1-24:17.
'© Plaintiff's Trial Exhibit 3.
"! Trial Tr. July 27, 2021, 55:3-6.
'? Td., 54:10-16.
'3 Td, 68:1-3.
'4 Complaint at 6.
iyo
Counterclaim, asserting that the relevant “dealings” did not involve Defendant
Sang Soo Lee (“Mr. Lee’), and that Chung was acting intentionally and
maliciously by including him in the lawsuit.!°
Il. THE TRIAL
The Court held a two-day bench trial from July 27-28, 2021. The case was
deemed fully submitted for decision after the parties submitted their post-trial
briefing.
During trial, the Court heard from and considered the testimony of the
following witnesses:
Susan Chung Young Wha Suh
Suk Hyun Pak Sang Soo Lee
Young Yim Jung Sook Lee
Youn Choi
Ill. STANDARD OF REVIEW
The Court is the finder of fact in a bench trial.!° The plaintiff must prove each
element of a claim by a preponderance of the evidence, meaning that the Court shall
find in favor of the party upon whose side “the greater weight of the evidence is
'> Answer and Amended Counterclaim at 4. The Lees’ original Answer and Counterclaim
asserted that it was Jung Sook Lee (“Mrs. Lee”) who was not involved in the dealings. Answer,
412, 15. On June 17, 2019, the Lees filed a Motion for Summary Judgment, in which they
contended that the loans were not enforceable pursuant to Delaware law. They argued that
Chung did not satisfy the lender licensing requirements of 5 Del. C. § 2202 and thus, the loans
are illegal pursuant to 5 Del. C. § 2240(a). Chung contended that Title 5, Chapter 22 is not
applicable to her conduct. On September 3, 2019, the Court denied the Motion for Summary
Judgment. The Court held that the record was not sufficiently complete to support a resolution by
summary judgment. The ruling was made prior to the completion of discovery.
'6 Pencader Associates, LLC v. Synergy Direct Mortg. Inc., 2010 WL 2681862, at *2 (Del.Super.
June 30, 2010).
found.”!” Since the Court is the finder of fact, it is up to the Court to weigh the
credibility of witnesses and resolve conflicts in witness testimony.'®
IV. ANALYSIS
A. Assessment of the Parties’ Conduct.
The litigation of this case has been riddled with evidentiary incongruities,
mistranslations, miscommunication, and confusion from both sides, paving the
way for a number of ancillary claims. Both parties accuse the other of bad faith and
seek attorneys’ fees as damages. Each party also seeks an adverse inference that
missing documents from the other party would have proven to be unfavorable to
their case. The Court will grant wide latitude in judging the parties’ conduct, due to
the unique circumstances of this case. The parties’ dispute stems from an unusual
and rather informal financial lending structure based on trust and credibility, which
serves to bolster Delaware Korean immigrants’ access to capital. And the
corresponding customs and English language barriers of the parties lead to a
somewhat murky evidentiary record.
i. Bad Faith Assertions by The Parties
At the outset, the Court will address and resolve the parties’ assertions of
bad faith against each other. In her assertion of bad faith, Chung points to the Lees’
shifting statements regarding receipts of personal loans, sources of repayment,
receipts of Kye distributions, and a failure to produce records relating to payments
to Chung.!? The Lees allege bad faith against Chung, claiming that (1) Chung
'’ Id. (quoting Pouls v. Windmill Estates, LLC, 2010 WL 2348648, at *4 (Del.Super. June 10,
2010)).
18 Td at *3.
'? Chung specifically alleges that in Mrs. Lee’s responses to interrogatories, she claims that she
did not receive any loans from Chung, then at trial, admits that she did. Plaintiffs Trial Exhibit
23, Trial Tr. July 28, 2021, 121:4-7. Chung asserts that Mrs. Lee’s recounting of repaid Kye
5
falsified Korean to English translations of her bookkeeping to include Mr. Lee
when the true translation did not include him, (2) misquoted Mr. Lee’s statements,
and (3) misstated that Chung’s accounting ledger was something she documented
at the time of the transactions when in reality, it was documented for the purposes
of trial.”°
Delaware recognizes that there is no single standard of bad faith that
warrants an award of attorneys’ fees.?! Specific examples do include unnecessarily
prolonged or delayed litigation, falsified records, or knowingly asserted frivolous
claims.”* However, the party seeking a fee award bears the stringent evidentiary
burden of producing “clear evidence” of bad-faith conduct.”°
The Court does not find that the parties’ actions in this litigation are due to
bad faith. Instead, the Court will consider the parties’ inconsistencies in weighing
the reliability of evidence. None of the parties — Mr. Lee, Mrs. Lee, and Mrs.
Chung -- speak fluent English, and each used translators while testifying at trial.
All three individuals were inconsistent both in pre-trial statements** and trial
distributions and sources of repayment are inconsistent. Plaintiff's Post-Trial Br. at 18-21. Chung
further asserts that Mrs. Lee produced no records in connection to the personal loans, yet Mrs.
Lee claimed that she kept records of the amounts repaid to Mrs. Chung, but not the amounts that
she owed. Trial Tr. July 28, 2021, 124:22-125:1; 126:12-127:3.
20 The Lees specifically allege that Chung falsely translated her bookkeeping to state that loans
were to “Michelle’s household” when the official translations stated that the loans were to
“Michelle’s mom.” Amended Complaint, Plaintiff's Exhibit 2. Michelle is the daughter of Mr.
and Mrs. Lee. In Korean culture, apparently it is “[customary] to refer to a mother by her eldest
daughter’s first name[.]” Trial Tr. July 28, 2021, 104:17-22. The Lees allege that Chung
misquoted Mr. Lee in her opening brief, by stating that Mr. Lee admitted that he borrowed
money from Chung. Defendant’s Post-Trial Reply Br. at 22-24. The Lees allege that Chung
claimed in her Complaint that Exhibit A was a contemporaneous ledger, when in reality it was
not. Complaint, Plaintiff's Trial Exhibit 3.
21 Beck v. Atl. Coast PLC, 868 A.2d 840, 851 (Del. Ch. 2005).
2 Td.
23 Td.
*4 The Lees had shifting statements about a number of debt-related issues, Chung misquoted Mr.
Lee’s statements, and Chung incorrectly stated when she completed her accounting ledger. As to
6
testimony.”> While these inconsistencies have led to a lack of trust between the
parties, they do not support “clear evidence” of bad faith conduct under the
circumstances. Thus, the Court will not attribute bad faith to either party’s conduct,
and will not shift attorneys’ fees.”°
ii. Adverse Inference Requests
In addition to language barriers, the informal nature of the Kye lending
structure has led to some confusion and gaps in evidence. Both parties request an
adverse inference ruling in regards to missing or withheld evidence. Chung asserts
that she is entitled to an inference “that the evidence withheld by the Defendants
regarding payments made to Mrs. Chung” supports the notion that her
contemporaneous notes are accurate.”’ Conversely, the Lees assert that Chung’s
alleged destruction of previous Kye records is relevant and material to the dispute,
and supports an adverse inference that they did pay off the balance.
the inclusion of Mr. Lee in Chung’s bookkeeping in a pretrial exhibit, Chung concedes that this
was an unofficial translation of the document and does not seek to have it admitted into
evidence; instead, Chung asks the Court to rely on the official translations of the bookkeeping
which do not include Mr. Lee. Plaintiff’s Trial Exhibit 2.
*° For example, Mrs. Lee was confused about the meaning of the word “payout” and whether it
meant that she was receiving money or whether it was being applied to her Kye distributions.
Trial Tr. July 28, 2021, 137:1-18. Mr. Lee contradicted himself about whether he was aware that
Chung loaned his wife money. He testified, “I’m not aware of whether [Mrs. Lee] borrowed the
money or not. J am not aware of that at all.” /d., 96:1-2. Then later, he testified that he was aware
and thought that the question was about whether he was included in the loans. Mrs. Chung
testified that the Lees signed a contract for the loans, then shortly thereafter stated, “we only did
it verbally.” Trial Tr. July 27, 2021, 24:22-23. When Defense Counsel questioned Chung about
whether the accounting ledger was made in preparation of litigation or not, Chung became
confused and struggled to answer the question. Jd., 75:1 — 79:3. At one point, Chung directed the
cross-examiner to “please talk to my lawyer” because she could not answer the question.
°° Maurer v. Int’l Re-Insurance Co., 95 A.2d 827, 830 (Del. 1953) (“We start with the general
principle that, apart from statute or contract, a litigant must pay his counsel fees.”)
27 Plaintiff's Post-Trial Br. at 31.
Before finding spoliation, a trial court must determine that a party acted
willfully or recklessly in failing to preserve evidence.”* The Court does not find
that to be the case for either party. The Lees did not destroy evidence; they simply
do not possess evidence.”? Meanwhile, Chung’s decision to destroy records was
not related to the Lees or this trial.7° The Court is also persuaded by the fact that
Mrs. Lee acknowledged that she was aware that there is a dearth of documents that
support the transactions.*’ Thus, the Court finds no evidence of either party acting
intentionally or recklessly to destroy evidence. For that reason, the Court will not
grant an adverse inference ruling against either party.
While the Court will not hold the parties’ informalities against them in these
ancillary claims, it will ascribe due weight to the inconsistencies in the record to
determine whether Chung has met her burden of establishing her breach of contract
claim by a preponderance of evidence. This case boils down to accounting and
credibility. The Court must determine (1) if Chung’s loans to Mrs. Lee created a
legally enforceable contract, (2) if there was a breach, and (3) the proper
calculation of damages.
*8 Seats, Roebucks and Co v. Midcap, 893 A.2d 542, 548 (Del. 2006).
* Mrs. Lee testified that she kept track of what was owed through her memory and did not keep
any contemporaneous documents at the time of the debts. Trial Tr. July 28, 2021, 121:4-22.
°° Chung testified that she would delete records of previous Kyes at the conclusion of their 21-
month term. She would “keep it for some time, and then if it seemed to be unnecessary,” she
would delete it. Trial Tr. July 27, 2021, 22:21-23:6. In addition, Chung testified that even if she
did not have Kye records, she would still document whether payments went towards repayment
of personal loans. She claimed that she would notate that Mrs. Lee paid off some of the loans
with the money that was received from the Kye. Jd, 97:7-10.
3! During trial, Defense Counsel asked Mrs. Lee if she had the records of the Kyes in which she
participated and made contributions. He inquired, “Would that have helped you in preparing to
defend this lawsuit?” Mrs. Lee responded: “Actually we trust each other, so if she instead of a
written record if we just say well, after I receive that distribution amount and then forward if she
just credit toward the debt money owed. And so transaction records were just orally. We just
knew each other [sic].” Trial Tr. July 28, 2021, 117:17-118:2.
8
B. The Parties Had a Legally Enforceable Contract.
The parties do not contest whether Chung loaned Mrs. Lee money. Mrs. Lee
conceded this at trial. When asked specifically if she received personal loans from
Mrs. Chung, Mrs. Lee answered, “Yes.” *? In addition, Chung testified that she
made personal loans to the Lees “rough [sic] speaking over 20 times.”*? She
provided documentation of the personal loan amounts, which were noted on old
calendars.** When asked how the loans were made, Chung testified, “[W]e only
did it verbally. Then each time I would remind her how much the remaining
balance was and then Mrs. Lee used to [sic] agree to the amount.”*°
The Court must resolve whether these oral arrangements for loans, as part of
a Kye financial lending system, create a legally enforceable contract between the
parties. *° The burden is on the Plaintiff to prove by a preponderance of evidence
the existence of a contract to which Defendant is a party.*” The three elements
necessary to prove the existence of an enforceable contract are (1) the intent of the
parties to be bound by agreement, (2) sufficiently definite terms, and (3)
consideration.*® To prove the existence of an oral contract, Plaintiff must prove that
the contract was clear and precise.*?
3? Td, 120:23 — 121:2.
3 Trial Tr. July 27, 2021, 23:15- 24:17.
*4 Plaintiff's Post-Trial Br. at 22, Trial Tr. July 27, 2021, 25:3-5, Plaintiffs Trial Exhibit 2.
> Trial Tr. July 27, 2021, 24:22-25:2.
°° The Lees previously raised this issue at summary judgment, claiming that Chung’s conduct
falls squarely within the business of lending money, and thus must satisfy the lender licensing
requirements of 5 Del. C. §2202. At the time, the Court ruled that it was premature to decide this
issue because discovery was still ongoing. Subsequently, neither party raised this issue at trial or
in post-trial briefings. Thus, the issue is not before the Court for a legal determination.
>? Carlson v. Hallinan, 925 A.2d 506, 524 (Del. Ch. 2006).
38 Td.
39 Id.Pursuant to Delaware law, an intention to be bound by an agreement may be
evidenced by continued performance in accordance with an agreement’s terms.*”
The test is whether a reasonable person would, based on the objective
manifestation of assent, and all of the surrounding circumstances, conclude that the
parties intended to be bound by contract.*! Circumstances that the Court may
consider are: “the course and substance of the negotiations, prior dealings between
the parties, customary practices in the trade or business involved and the formality
and completeness of the document (if there is a document) that is asserted as
culminating and concluding the negotiations.”
The Court finds a clear manifestation of assent by Mrs. Lee in her continued
performance with Chung. Mrs. Lee started participating in Kyes with Chung
around 2001, and received her last loan from Chung around 2011. She
acknowledges that she participated in approximately nine Kyes with Chung.** She
was also aware of the sufficiently definite terms of the Kye system and loan
structure, including the number of members of the Kye, the monthly contribution
of $1,500, and the distribution, of $30,000 per month. And she chose to continue
participating for a number of years.** She repeatedly made her contributions to
Chung and received her distributions at designated times. She received loans from
Chung and made interest payments. Chung kept her apprised of how much she
owed.
Further, the Court finds that Mrs. Lee intended to be bound by this Kye
lending system, even without a concrete system of bookkeeping. Suk Hyun Pak, a
© BAE Sys. Info. & Elec. Sys. Integration, Inc. v. Lockheed Martin Corp., 2009 WL 264088, at
*4 (Del. Ch. Feb. 3, 2009).
“| Leeds v. First Allied Conn. Corp., 521 A.2d 1095, 1101 (Del. Ch.1986).
2 Td. at 1102.
3 Trial Tr. July 28, 2021, 109:19-21.
“4 Td, 106:19-107:8.
10
longtime Kye participant, testified that it was customary that there would be no
“contract or receipt in paper form” for the loans.*? Mr. Yim, another Kye
participant who loaned money on behalf of Mrs. Lee, testified, “We go by the
word.”46 Mrs. Lee herself testified that “transaction records were just orally [sic].
We just knew each other.” The Court finds that Chung and Mrs. Lee had a valid
oral contract for the loans made by Chung and repayment of money by Mrs. Lee,
primarily based on the admitted existence of these personal loans.
C. Chung Acted as Guarantor of the Loans.
The Lees further challenge Chung’s right to enforce the repayment of the
loans. They assert that it is unclear whether the money in question is owed to
Chung, or alternatively, if Chung acted as a guarantor for the loans from others. As
the Lees acknowledge, Kye members at times act as intermediaries, facilitating and
guaranteeing loans between lenders inside or outside of the Kye with whom they
have a relationship of trust.*8 The Lees claim that “there was an unknown factor of
whose [sic] money Mrs. Lee was receiving and who was entitled to bring a claim
for it.”“? They argue that initially Chung stated that she made cash disbursements
to the Lees, but now claims that she is an intermediary who guaranteed the
personal loans for members of her Kyes.”°
The Court recognizes that the Kye acts as a revolving door in which
members are constantly engaging as both creditors and debtors. Pak testified that
she loaned Chung $100,000 to give to “those who need money”, of which Chung
Td, 69: 1-5.
46 Td, 33: 8-9.
“7 Id. 118:1-2.
“8 Defendant’s Post-Trial Reply Br. at 4.
” Td. at 3.
°° Id.
1]
was then personally responsible to ensure that the loans were repaid with interest.”!
Pak further testified that Chung ultimately repaid the entire balance.*? Yim loaned
Chung $40,000 to give to Mrs. Lee. Chung also repaid Yim the entire balance.»
Plaintiff asserts that if the Lees don’t pay her back, then Chung is the one “left
holding the proverbial bag.”
It is clear from the record that Chung served as guarantor for several of the
loans at issue, and because she repaid the loans on behalf of Mrs. Lee, Chung now
stands in the shoes of the individuals that provided the loans.
D. Mrs. Lee Breached the Contract.
While the parties agree that Chung made loans to Mrs. Lee, they disagree as
to whether money is still owed. Chung alleges that Mrs. Lee still owes her
$140,000. Lee claims that she has repaid the entire balance.
The party seeking enforcement of a contract bears the burden to prove
breach of the contract by a preponderance of evidence.*° Chung argues that the trial
record demonstrates that between 2001 and 2011, she loaned the Lees $350,000,
and that the Lees repaid $210,000, resulting in a $140,000 principal balance.°°
Chung testified: “This didn’t happen over one transaction. Sometimes I issued [a]
loan to Mrs. Lee after borrowing that money from someone else and then in
[certain] situation[s] ... we had to repay that amount to the person who loaned the
money, [because] Mrs. Lee could not pay back at that time [sic].”°’
>! Trial Tr. July 28, 2021, 80:8-81:11.
>? Td., 78: 8-20.
°3 Td, 31:8-10.
4 Plaintiff's Post-Trial Reply Br. at 1.
>> Zimmerman v. Crothall, 62 A.3d 676, 691 (Del. Ch. 2013).
°6 Plaintiff's Trial Exhibit 3.
>? Trial Tr. July 27, 2021, 50:2-6.
12
To support this claim, Chung offered two central forms of evidence:
contemporaneous bookkeeping documenting the loans, and witness testimony.
Chung also offers two specific examples of loans to the Lees to bolster the
accuracy of accounting: the transaction for City Grocery and four checks issued by
Ms. Choi.
Mrs. Lee contends that she repaid Chung through her Kye distributions and
in cash.>® Lee testified that her $30,000 distributions were applied to loans that she
had with Chung. She however claims that she never received any documentation of
the amount she borrowed and how much she repaid in any given month.°’ Lee
states that she kept no records of the money that she repaid, but instead relied upon
her memory.” She could not remember how many loans she received nor whether
she was provided any accounting for the loans.°! She claimed that she made a
mental recording of the loans once Chung sued.” She stated that while she did not
specifically remember how much she received, she did remember how much she
repaid Chung.”
In order to determine if Chung has satisfied her burden by a preponderance
of evidence that Mrs. Lee still owes her $140,000, or whether Mrs. Lee has
successfully demonstrated that she paid off the loans with her Kye distributions,
the Court will carefully review the record evidence and assess the parties’
credibility.
°8 Trial Tr. July 28, 2021, 127:6-128:20.
9 Td., 109:5- 110:1.
60 Td, 121:13-18.
6! Td 121:4-11.
62 Td., 121:16-18.
83 Td... 125:19-21.
13
i. Chung’s bookkeeping
Chung, as leader of the Kyes, was responsible for keeping track of the
distributions and personal loans made by members. Chung recorded her personal
loans with Mrs. Lee starting in January 2001. She alleges that she loaned money
before this date, but 2001 was when she first started recording the debts.® She
testified that she started recording “not because I didn't trust Mrs. Lee; however, I
wanted to keep a record so I could remember things.”°° Chung asserts that she kept
contemporaneous and chronological records of the loans with the Lees in two
forms: old calendars used for Kye member loans®’ and a list that noted Kye
distributions and loans to the Lees whenever she loaned them money.® Chung
testified that she made these notes “each day” that she received money from or
paid money to the Lees.® They were recorded in Korean, but were later translated
to English by a translation service for purposes of trial. They were transferred into
an organizing ledger for the same purpose.”
The Lees challenge Chung’s accounting on two fronts: 1) Chung’s improper
bookkeeping methods and 2) the discrepancies in the accounting.”!
4 Td., 84:17-20.
6° The money sought for the purposes of this trial starts with the recorded loans in 2001. Trial Tr.
July 27, 2021, 86:23-87:3.
6 Jd. 83:13-15.
87 Plaintiff's Trial Exhibit 3.
68 Plaintiff's Trial Exhibit 4.
6° Trial Tr. July 27, 2021, 26:6-12.
” Plaintiff's Trial Exhibit 2, Chung151 — TransPerfect certified that these were translated to
English on December 3, 2020.
7! The Lees also challenge Chung’s memory. They argue that Chung has memory issues based
on a number of inconsistent statements she made and thus, her bookkeeping should not be
trusted. However, as previously addressed, the Court will grant wide latitude in what it views as
English language and translation issues.
14
As to Chung’s bookkeeping methods, the Lees argue that recording the debts
in old calendars includes “none of the indicia of reliability that sometimes occur
when people memorialize an event.” The Lees state that these records were made
“on random pages” of the calendars from different years. The Lees question the
veracity of the records because “the entries do not relate back to prior entries.””
They also argue that Chung’s credibility should be questioned because she only
started recording Mrs. Lee’s debts in 2001, even though there were loans before
this date.
The Court finds little merit in these arguments. A close review of the
calendars demonstrates that there is sufficient information to indicate how much
was borrowed and how much was owed. Chung testified that she made her notes in
old calendars, even though they did not correspond to the proper year, because she
did not want to waste the calendar paper.’* Although it is unconventional to make
calendar entries under the wrong date, the dates printed on the top of recycled
calendar pages are irrelevant. More importantly, the calendar records contain all of
the relevant information: the dates of the transaction, the amount of money that
was owed or paid back, from who, to whom, and other pertinent details such as a
sum of money coming from a Kye distribution or given towards the transaction for
City Grocery.”° The validity of these debts should not be diminished because of the
stationary on which it was recorded or the form in which it was recorded. Further,
even though Chung did not start to document the Mrs. Lee’s loans until 2001, there
is no dispute about loans made prior to that time. Moreover, it bears repeating that
” Defendant’s Post-Trial Reply Br. at 8.
73 Td.
4 Trial Tr. July 27, 2021, 26:13-17.
” In March of 2006, Mrs. Lee purchased a grocery store called City Grocery for $200,000. See
infra p. 18.
15
the custom and structure of the Kye system lends itself to this type of informal
recordkeeping.
Next, the Lees contend that discrepancies in Chung’s accounting diminishes
her credibility. The Lees’ main issues with the accounting are directed towards the
secondary documents prepared for trial which were not admitted into evidence.
The Lees point to Trial Exhibit M, an entry in Chung’s calendar, that was
translated into English. It shows a $10,000 loan on November 15, 2003, that is not
recorded in Chung’s ledger.’’ Similarly, this entry shows a $5,000 loan on October
20, 2005, but there is no corresponding entry recorded in the ledger.”* The Lees
argue that this demonstrates a lack of reliability in Chung’s records. Chung
explains that these versions of the calendar were incorrectly translated as they were
being prepared in anticipation of litigation. They differ from the final corrected
version of the translated calendar, which was certified by TransPerfect and
admitted into evidence at trial. The Lees’ argument is unavailing. An improperly
translated version of Chung’s calendar entries, which was not admitted into
evidence at trial, will not be considered by the Court in its decision, and
consequently has no bearing in this litigation.
Further, the Lees point out that a list created by one of Chung’s attorneys in
preparation of trial contains a $30,000 repayment entry for “end of July”, but there
is no corresponding entry shown in the ledger.”? The Court finds the “end of July”
entry on the attorney list to be an inadvertent reference to the August 30, 2007
78 Indeed, Chung stated concerning the retention of records in the Kye system, “the money was
collected and distributed. It was concluded.” Trial Tr. July 27, 2021, 83:11-13. Chung testified
that she did not keep records of personal loans with other Kye members because everything
“cleared with them.” /d., 83:14-17.
" Tefendant’s Trial Exhibit M. Plaintiffs Trial Exhibit 3.
78 Defendant’s Trial Exhibit M, Chung43.
” Plaintiff's Trial Exhibit 12, Chung055.
16
repayment entry listed in the ledger. Indeed, the description in the attorney’s list
notes “from final week of August Kye.”®?
There are also typographical errors in the ledger. The Lees point out a
disparity in a January 15, 2005 entry in the calendar which was entered as January
15, 2006 in the ledger. They also note that in one calendar, there is a recording for
May 31, and in the ledger, it is entered as May 13. These disparities are
typographical errors rather than issues of substance, and they do not impact the
calculation of the outstanding balance.*!
ii. Witness Testimony
Chung also offered witness testimony to corroborate and confirm some of
the loans made to the Lees. Suk Hyun Pak and Young Yim testified that Chung
served as an intermediary to borrow money from each of them and subsequently
loan it to the Lees. Pak loaned a total of $100,000 to Chung to give to Mrs. Lee. *
Yim loaned $40,000 to Chung to give to Mrs. Lee. ® Pak testified that she knew
she was ultimately loaning this money for the benefit of Mrs. Lee, and even met
with Mrs. Lee to tell her this.*4 Yim also testified at trial that he knew he was
loaning money to Chung to in turn give to Mrs. Lee.® He recalls giving $20,000 to
Chung on two separate occasions for a total of $40,000.°°
80 Td
8! The Lees raise two additional discrepancies between the calendar notes and the ledger. On
November 15, 2003, there is a $10,000 loan to the Lees in the calendar but not in the final ledger.
On October 20, 2005, there is a $5,000 loan to the Lees in the calendar but not in the final ledger.
Chung did not include those amounts in her calculation of the outstanding loans against the Lees.
Thus, the Court will not include those amounts in its calculation of damages.
82 Trial Tr. July 27, 2021, 50: 9-11.
88 Id., 50: 19 — 51:3.
84 Trial Tr. July 28, 2021, 74:13-75:20.
8 Td., 30:11-16.
86 Td., 30:17-23.
17
iii. City Grocery transaction
Chung cites the purchase of City Grocery as additional evidence of the
accumulation of the running list of loans made to the Lees that were not repaid. In
March of 2006, Young Wha Suh sold City Grocery to Mrs. Lee for $200,000.%’
The transaction took place at Chung’s house.®* Chung claims that she loaned
$60,000 to the Lees to partially pay the down payment for the grocery store for the
Lees.*? Suh testified that he remembers Mrs. Lee paying him $60,000 that day in
cash. ”? Chung asserts that she was responsible for that amount if the Lees failed to
pay her back.”! Chung testified that the Lees paid another $60,000 through two of
Mrs. Lee’s Kye distributions.” The records do not indicate that there was an
exchange of cash but presumably an arrangement to pay Suh through Mrs. Lee’s
Kye distributions. Suh testified that he recalled receiving these Kye payments later
that year. > The remaining $80,000 was accounted for and repaid by the Lees
selling the EZ Market, a smaller grocery store that they had previously owned and
operated. 4
Mrs. Lee contends that she satisfied her obligation in full for the City Market
loan through Kye distributions. She alleges that Chung covered the balance of the
purchase of the City Grocery store for $120,000.” Mrs. Lee testified, “[m]y only
involvement was paying my balance through the [Kye] system to Mrs. Chung.”
8? Trial Tr. July 27, 2021: 39: 8-12, Trial Tr. July 28, 2021, 55:1-S.
88 Trial Tr. July 28, 2021, 55: 6-17.
89 Trial Tr. July 27, 2021, 39:17-21.
© Trial Tr. July 28, 2021, 56:8-16.
*! Trial Tr. July 27, 2021, 40:2-5.
2 Td., 40:6-11.
3 Trial Tr. July 28, 2021, 57: 1-7.
°4 Td, 5711-21, 111:6-22.
> This testimony conflicts with Chung’s testimony that $60,000 of the payment was paid
directly to Suh via Kye distributions and Suh’s testimony that he received payment via Kye
distributions later that year.
18
She alleges that she paid two Kye distributions to Mrs. Chung in 2006: one
$30,000 payment in May and one $30,000 payment in June. She alleges that she
also paid two later Kye distributions to Chung: one payment in June 2007 for
$30,000 and the other payment of $30,000 in February 2008. Lee alleges that by
this time, “the total remaining balance of $120,000 was paid off for the purchase of
City Grocery.”*° Contrary to Mrs. Lee’s testimony, Chung’s records show that
Mrs. Lee’s May and June 2006 Kye distributions were applied towards paying
Young Wha Suh, which Suh acknowledged receiving.”’ As for the later
distributions, Chung’s records show that Lee paid back $30,000 in July 2007, but
nothing in February 2008.”8 Thus, there is still a $30,000 discrepancy in repayment
of the City Market loan that Chung made to Mrs. Lee.
iv. The Four Checks written to Mrs. Lee
Chung also points to four checks issued by a member of her Kye, Youn
Choi, as further evidence of the Lees’ debt obligation.”” Ms. Choi owed Chung
$40,000 which she repaid in the form of four checks.!°? Chung asked Choi to write
the checks to Mrs. Lee who was waiting to obtain a loan. Choi testified, “I put Lee
and then so I wrote all these checks to [sic] on behalf of Mrs. Chung for
$40,000.”'°! These checks were issued in 2009 through Wilmington Trust, and
correspond with Choi’s bank statement.!°
*6 Plaintiff's Trial Exhibit 25.
7 Plaintiff's Trial Exhibit 5.
*8 Plaintiff's Trial Exhibit 5.
°° Plaintiff's Trial Exhibit 20 and 21.
100 Trial Tr. July 28, 2021, 40:1-8.
101 Tq, 41:1-3.
102 Plaintiff's Trial Exhibits 20 and 21.
19
v. Total Damages
The evidence in the record does not support the Lees’ defense that they paid
the outstanding loan balance in full. Mrs. Lee kept no records of repayments. She
relies solely on her memory of loans made over a decade ago. Thus, the Court is
left without any tangible evidence to support her claim.
On the other hand, even though Chung’s records contain some gaps, they
provide the only documentary evidence in the record of loans made to Mrs. Lee
and payments credited against those loans. When cross reference is made between
Chung’s documentary evidence, the Court is satisfied that loans were made to Mrs.
Lee over the period 2001 — 2011 and the repayments were properly credited
leaving a balance of $133,520. The record evidence consists of calendars listing 23
loans made to the Lees, and a corresponding 11 entries of repayment by the
Lees.' Chung’s calendar entries are supplemented by witness testimony which
affirms the issuance of loans for the benefit of the Lees, checks specifically made
payable to the Lees, and a City Market transaction.
In addition to the record evidence presented by Chung and the absence of
any records from the Lees to support the assertion that the loans were repaid in
full, the Court also weighed the credibility of the parties. Chung has been a Kye
leader for decades. As Mrs. Lee herself said of Chung: “She’s famous to [sic]
lending money, so a lot of people know about her.”!°4 Chung testified that she
never had any financial discrepancies with other Kye members other than the
Lees.'® The Court gives significant weight to Chung’s lending record as well as
'3 Plaintiff omits that Mrs. Lee repaid $3,480 from a $10,000 loan on March 30, 2004, and that
Mrs. Lee repaid an additional $3,000 on November 1, 2010. Plaintiff's Trial Exhibit 2, Chung
135 & 149.
104 Trial Tr. July 28, 2021, 107: 13-14.
'5 Trial Tr. July 27, 2021, 23: 7-14.
20
the other evidence produced at trial. And while the Court has no specific reason to
doubt Mrs. Lee’s truthfulness, her reliance on her memory is insufficient to
overcome the documentary evidence in the record of specific disbursements and
partial repayment of the loans. Therefore, based on the documentary evidence in
the record, the Court finds that Mrs. Lee owes Chung a balance of $133,520 as
principal remaining on the loans.
The Court also finds that Mrs. Lee owes Mrs. Chung some interest in
addition to the principal balance. The obligation to pay interest on loans made
among Kye members is not clear or precise. Trial testimony was conflicting as to
the requirement to pay interest; some Kye members paid interest while others
deemed it unnecessary. Mrs. Pak testified “Most of the time, yes, you pay the
interest, unless you are really, really [sic] close relationship and they do not charge
interest.”!°’ Mr. Yim testified that he was content to receive his principal back
from Chung with no interest.!
Moreover, the record is unclear as to which loans in the ledger were
personally funded by Chung and which ones were facilitated by Chung from a
third party, who may or may not have required interest. Chung asserts that Mrs.
Lee owes $1,400 a month in interest for the $140,000 principal, but ignores the fact
that Mr. Yim had already forgiven the interest on his $40,000 loan.!”
The informality of the Kye system coupled with the lack of clarity in the
record on interest obligations makes it difficult to calculate the correct amount of
interest due in this case. In navigating this quagmire, the Court will require Mrs.
'°6 The Court need not rule on Chung’s claim for unjust enrichment because it has found Mrs.
Lee liable for the $133,520 loan balance under a theory of contract.
107 Trial Tr. July 28, 2021, 68:13-15.
108 Td., 34:2-10.
109 Td
21
Lee to pay only that amount of interest that has been proven by a preponderance of
evidence. Here, the record is clear that Mrs. Lee paid interest to Chung at 1% of
the outstanding loan balance per month. In fact, she was making interest-only
payments of $1,400 per month from 2011 through approximately February of
2016.'!° Thereafter, she stopped making her interest payments.
Mrs. Pak testified that at that point, Chung made the $1,000 interest
payment “out of her own pocket” for two months on the $100,000 principal
loan.!!! Mrs. Pak then agreed to cut the interest payment in half requiring only
$500 per month.'!* Chung and Mrs. Lee subsequently negotiated to allow Mrs. Lee
to pay $300 of that interest amount per month with Chung paying the $200
difference to Mrs. Pak.'!? Notwithstanding this arrangement, Mrs. Lee stopped
making her interest payments in December 2016. Ultimately, Chung repaid Mrs.
Pak’s loan.''* Chung paid $20,000 to Mrs. Pak in 2018 and the remaining $80,000
in 2020.''° There is no indication in the record that Chung paid any interest to Mrs.
Pak in connection with loan repayments in 2018 and 2020, or any time after Mrs.
Lee stopped paying in 2016.!'°
110 Presumably, $1,000 of this amount went to Mrs. Pak as 1% of her $100,000 loan and $400
went to Yim as 1% interest on his $40,000 loan.
‘1! Trial Tr. July 28, 2021, 77:19-78:4.
112 Id.3 Trial Tr. July 27, 2021, 57:6-9. Chung also made a contemporaneous note of the agreement to
pay $300 a month, which states “Has not paid interest since March 2016... Gave $300 per
month from May 2016 to December 2016... Said that (she) would get mortgage and pay back
in a few months[.]” Plaintiff's Trial Exhibits 13 and 14.
'14 Chung also repaid Mr. Yim. Chung paid $10,000 to Mr. Yim in 2016, then $10,000 in 2017,
and the remaining $20,000 in 2020. Trial Tr. July 28, 2021, 6:9-12, 31:8-10. Chung did not pay
any interest, and Yim said that he was not expecting it. He was simply happy that he was repaid
his principal. Jd., 34: 8-10.
'!S Trial Tr. July 28, 2021, 5:16-22, 78:5-12.
'16 Tt is not clear whether Mrs. Pak forgave the remaining interest due post-2016 when Chung
personally repaid the balance, similar to what Mr. Yim did on his $40,000 loan.
22
Further, there is no clear evidence in the record from which the Court can
calculate how much of the outstanding loans comprised personal loans from Chung
to Mrs. Lee as opposed to third parties, and how much was due as interest. Thus,
the only clear evidence from which the Court can readily calculate interest due
from Mrs. Lee and payable to Chung is Mrs. Pak’s agreement to cut the interest in
half. Pak reduced the interest payment to $500 per month as of May 2016.!!’
Chung paid $200 to Mrs. Pak on behalf of Mrs. Lee from May to December 2016,
at which point Mrs. Lee ceased all payments. The record is silent as to whether any
further interest was paid to Mrs. Pak since that time or whether she forgave the
remaining interest obligation. Accordingly, the record supports an award of interest
to Chung from Mrs. Lee in the amount of $3,600.!18
E. Mr. Lee is Excluded from the Loan.
Chung filed this claim against both Mr. and Mrs. Lee, alleging that Mr. Lee
is also a party to the loan agreements. Chung claims that (1) Mr. Lee was aware
that these loans were for both he and his wife, '!? (2) custom dictates that Mr. Lee
is a party to the deal,'”° (3) Mr. Lee was “involved” with the loans and (4) both
Defendants benefitted from the loans, specifically through City Grocery. !”!
The Lees do not dispute that Mr. Lee was aware of the loans. Mr. Lee
testified that he was aware of his wife’s participation in the Kye, and he was aware
that she had borrowed money; but he did not actually witness the transactions. !7?
"7 See Plaintiff's Trial Exhibits 13 & 14.
''8 The Court has determined that Mrs. Lee owes Chung for her two $1,000 interest payments, in
March/April of 2016 plus the supplemental $200 interest payments that she made from May to
December 2016 to Mrs. Pak.
"9 Plaintiff's Post-Trial Br. at 8-9.
120 Trial Tr. July 27, 2021: 99:21 — 100:1.
"21 Trial Tr. July 28, 2021, 13:17-20.
122 Td. 97:4-15.
Mr. Lee testified that he was never part of any Kye, nor did he ever borrow money
from Chung.'”? There is no evidence in the record other than Chung’s word that
Mr. Lee acknowledged the loans were for both he and his wife. Indeed, Chung’s
own records controvert this allegation. The notes and calendars on which Chung
conducted her accounting only refer to “Michelle’s Mom”,!™ a reference to Mrs.
Lee, rather than both spouses. There are no documents that implicate Mr. Lee in
these loans.
Chung points to Mr. Lee’s involvement in his wife’s purchase of City
Grocery as evidence that he is a party to the loan agreements. The Defendants
agree that Mr. Lee was present at Chung’s house the day of the City Grocery
transaction. However, Mrs. Lee testified that her husband was only there for a
“short period of time” then left.'”° Suh testified that Mr. Lee was “out in the living
room” while he, Mrs. Lee, and Mrs. Suh executed the transaction in the kitchen.!7°
Suh testified that Mr. Lee was not part of the discussions “with regard to selling
99127
City Grocery.
Further, the documentary evidence demonstrates that Mr. Lee was not a
party to the City Grocery transaction. Mrs. Lee’s name is the only name on the
contract to purchase City Grocery.!”® The Registration of Trade, Business &
Fictitious Name Certificate, filed with the Delaware Superior Court Prothonotary,
indicates that City Grocery is solely owned by Mrs. Lee.'*? The commercial lease
123 Td, 91:11-18.
124 Michelle is Mrs. Lee’s first-born daughter. See fn 21.
125 Trial Tr. July 28, 2021, 110: 21-111:4.
2 Gl, Som WO-17.
127 Tq. 61:8-17.
128 Td, 112:6-9.
129 Defendant’s Trial Exhibit E.
24
only lists Mrs. Lee’s name.'?? The state net profits tax return only lists Mrs. Lee.!?!
The bank account used for City Grocery only lists Mrs. Lee as an account
holder.'** Mr. Lee did not sign any agreement to be bound, nor did he sign to any
secondary agreement around City Grocery which would obligate him to this debt.
The Court recognizes that Mr. Lee was involved in his wife’s life, and
naturally benefitted from these loans. Mr. Lee himself testified that he helped out
in the operation of the store. '3? But he did not receive any income after Mrs. Lee
purchased City Grocery. He received a stipend from his wife, and the two shared a
bank account.'** However, this is the nature of a marital relationship. It does not
infer an agreement to be bound by a contract. There is no presumption of agency in
marital relationships. !*°
Chung also suggests that it is customary for a husband to be included in this
type of loan under the Kye system. She alleges that it is a part of Korean custom
that even when a husband is involved, the wife physically receives the loan. !°°
Suh testified that he believed the Lees “operated together” because they were
husband and wife.'3’ However, no testimony, expert or otherwise, was proffered to
show other examples within a Kye of a husband being bound to a loan agreement
made solely with his wife. While industry custom is a consideration in reviewing
the existence and enforcement of contractual agreements, it is only one of many
considerations. The weight of the record evidence tilts significantly in favor of
130 Defendant’s Trial Exhibit F.
'3! Defendant’s Trial Exhibit G.
!32 Defendant’s Trial Exhibit H.
'33 Trial Tr. July 28, 2021, 92:5-8.
134 Td, 100:23-102:17.
135 Wilson v. Pepper, 1995 WL 562235 at *3 (Del. Super. Aug. 21, 1995), aff'd, 676 A.2d 909(Del. 1996).
136 Trial Tr. July 27, 2021: 99:21 — 100:1.
'37 Trial Tr. July 28, 2021, 56: 2-4.
25
extricating Mr. Lee as an obligor or beneficiary of the subject loans made to Mrs.
Lee.!38 The record does not contain sufficient evidence to obligate Mr. Lee for the
personal loan to purchase City Grocery or any of the other loans through the Kye
system.
F. The Statute of Limitations Does Not Bar The Claim.
The Lees argue that 10 Del. C. §8106(a) bars Chung’s claim because this
action was filed more than three years from the accrual of the cause of action. They
contend that, based on Chung’s assertion that no payments have been made on the
principal since 2010, Chung was required to file her lawsuit in 2013. Because
Chung filed suit on December 21, 2018, the Lees argue that the action is time
barred.
Chung contends that the loans could be called at will, and that the default did
not occur until there was a demand. Chung asserts that she did not make a demand
for repayment until 2017 at which time she attempted to have the Lees sign
promissory notes. She filed this lawsuit in December 2018 which she contends was
well within the limitation period which ran from the point of demand.
138 The Lees assert in their Counterclaim that Chung is aware that Mr. Lee was not a part of these
dealings, and that she is “using the legal process of filing suit in this court against Sang Soo Lee
for purposes not intended by law.” Amended Counterclaim, § 14. They allege that Chung is
acting intentionally and maliciously. They seek to enter a judgment against her for the damage
that will occur in defending this action. The Court finds the record is devoid of evidence of
malice by Chung. For the Lees to prove a claim for malicious prosecution, they must prove “1)
institution of civil proceedings; 2) without probable cause; 3) with malice; 4) the termination of
the proceedings in the aggrieved party’s favor; and 5) damages which were inflicted upon the
aggrieved party.” Nevins v. Bryan, 2005 WL 2249520, at *1 (Del. Super. Sept. 8, 2005), aff'd,
A.2d 120 (Del. 2006). While the Court disagrees that Mr. Lee was a part of these dealings,
Chung’s inclusion of Lee in the lawsuit does not rise to the level of intentional and malicious
conduct. Chung has posited reasonable, albeit unsuccessful, reasons for bringing Mr. Lee into the
action. Thus, the Lees’ malicious prosecution claim against Chung fails.
26
The Court agrees with Chung’s summation of the applicable statute of
limitations. The Lees erroneously conclude that the cause of action commenced
when they stopped paying the principal. However, Chung is correct that there is no
specified maturity date for these loans. Witness testimony demonstrates that there
was no specific time frame by which the loans had to be repaid. Instead, the loans
are payable on demand in the Kye system.'*? For a breach of contract claim, the
cause of action accrues “at the time the contract is broken, not at the time when
actual damage results or is ascertained.”!“° For that reason, the Court finds that the
statute of limitations does not bar this claim.
G. Conclusion
For the reasons set forth above, the Court finds that Mrs. Lee owes the
$133,520 principal balance and an additional $3,600 in interest to Mrs. Susan
Chung, together with any post-judgment interest. IT IS SO ORDERED, this 31st
day of March, 2022.
Sheldon K: Rennie, Judge
'39 See Trial Tr. July 28, 2021, 20:16-34:10, 51:15-64:16, 65:1-86:6 (“They were giving it tome
like [sic] I don’t know how long[.]”) (“I’m not expecting it. If she give me[sic], good; but if it’s
not, it’s not.””)
149 Worrel v. Farmers Bank of Del., 430 A.2d 469, 472 (Del.1981).
27