Tae H. Kim v. Ji Sung Yoo

18‐1447
Tae H. Kim v. Ji Sung Yoo
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A
SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED
BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT=S LOCAL RULE 32.1.1.
WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY
MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE
NOTATION ASUMMARY ORDER@). A PARTY CITING TO A SUMMARY ORDER MUST SERVE A
COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.
At a stated term of the United States Court of Appeals for the Second
Circuit, held at the Thurgood Marshall United States Courthouse, 40 Foley
Square, in the City of New York, on the 3rd of June, two thousand nineteen.
PRESENT:
DENNIS JACOBS,
PIERRE N. LEVAL,
Circuit Judges,
JESSE M. FURMAN,*
District Judge.
________________________________________________
TAE H. KIM, YOUNG M. CHOI, DONG M. JU,
HONG S. KIM, YOON C. KIM, CHUL G. PARK, JIN
H. PARK, EUTEMIO MORALES, ZHE Y. SHEN,
JONG H. SONG, AND R. JULIAN VENTURA,
Plaintiffs–Appellees,
‐v.‐ 18‐1447
JI SUNG YOO, aka JI S. YOO, aka JAY YOO,
SANDRA YOO, aka SANDRA YEAR KUM YOO, aka
YEAR KUM YOO, SAMUEL D. YOO, CAROLYN
YOO,
*Judge Jesse M. Furman, of the United States District Court for the Southern District of
New York, sitting by designation.
Defendants‐Appellants.
________________________________________________
FOR PLAINTIFFS‐APPELLEES: Jackson Chin, Latin Justice/PRLDEF, New
York, NY, (with Kenneth Kimerling, Asian
American Legal Defense and Education
Fund, New York, NY and Adam Goldstein,
Sherman & Sterling LLP, New York, NY,
on the brief).
FOR DEFENDANTS–APPELLANTS: Kenneth Foard McCallion (with Kristian
Karl Larsen on the brief), McCallion &
Associates LLP, New York, NY.
Appeal from a judgment of the United States District Court for the
Southern District of New York (Sweet, J.).
UPON DUE CONSIDERATION, IT IS HEREBY ORDERED,
ADJUDGED, AND DECREED that the judgment of the district court is
AFFIRMED.
The plaintiffs, former employees at a restaurant owned by Ji Sung Yoo,
obtained a $2.6 million judgment against Mr. Yoo for violations of the Fair Labor
Standards Act (“FLSA”). In this ancillary enforcement action, the plaintiffs seek
to set aside Mr. Yoo’s conveyances to members of his family of interests in a
home, a condominium, and a commercial property. The plaintiffs bring
fraudulent conveyance claims under New York Debtor and Creditor Law
(“DCL”) §§ 273, 275, and 276 against Mr. Yoo, as well as against his wife and two
of his children.
After a two‐week bench trial, the United States District Court for the
Southern District of New York (Sweet, J.) found that the conveyances were
fraudulent because they (i) were made without fair consideration and had
rendered Mr. Yoo insolvent; and/or (ii) were made with fraudulent intent. The
court ordered that the transfers be voided, and additionally entered a money
judgment against Mrs. Yoo to satisfy mortgages that she placed on two of the
properties after the transfers. We assume the parties’ familiarity with the
2
underlying facts, the procedural history, and the issues presented for review.
1. The defendants challenge subject matter jurisdiction over the claims
against Mrs. Yoo and the two Yoo children, because the family members are not
personally liable for the FLSA judgment, and the parties are not diverse. This
argument is meritless. An ancillary action to collect a judgment does not
require an independent basis for jurisdiction, unless the suit seeks to impose
liability for the underlying action on a third‐party. See Epperson v. Entm’t
Express, Inc., 242 F.3d 100, 104 (2d Cir. 2001). The plaintiffs do not seek to hold
the family members personally liable for the FLSA judgment; they seek an order
voiding the transfer of property from Mr. Yoo to his family members and
imposing liability on Mrs. Yoo for sums needed to rectify her diminution of the
value of the properties by placing mortgages on them. Id. at 106. The money
judgment against Mrs. Yoo does not impose liability for the FLSA judgment; it
ensures the removal of the encumbrance she placed on the properties after they
were fraudulently transferred to her. Accordingly, subject matter jurisdiction
exists.
2. The defendants argue that this case must be dismissed for failure to
join the mortgagees of the three properties as indispensable parties. See Fed. R.
Civ. P. 19(a). This argument is unpersuasive. A party that complains of failure
of the adversary to join an indispensable party is required by Rule 19 to explain
why the objecting party did not itself bring the indispensable party into the
litigation. Federal Rule of Civil Procedure 19(c) requires that a party requesting
relief must “plead . . . the reasons for nonjoinder” by stating “(1) the name, if
known, of any person who is required to be joined if feasible but is not joined;
and (2) the reasons for not joining that person.” Defendants have not complied
with this requirement. Nor have they carried their burden of persuasion under
Rule 19(b) of showing that (1) joinder of the mortgagees is not feasible, and (2)
considerations of “equity and good conscience” weigh in favor of dismissal
rather than proceeding in the absence of the necessary parties. See Fed. R. Civ.
P. 19(b); 7 Charles A. Wright, Arthur R. Miller, Mary Kay Kane, Federal Practice
and Procedure § 1609, at 129‐30 (3d ed. 2019).
Mrs. Yoo also points out that if, pursuant to the judgment, she pays the
plaintiffs the amount necessary to satisfy the mortgages, and the plaintiffs use
3
the money otherwise than to satisfy the mortgages, she will be subject to double
recovery as she will remain liable to repay the mortgage loans. But Mrs. Yoo
can avoid this result by simply paying back the mortgagees and thus satisfying
the mortgages. Because the money judgment was entered against Mrs. Yoo only
“as necessary to satisfy the mortgages,” App’x 1177, if Mrs. Yoo pays the
outstanding balance on the mortgages to the mortgagees, she will not be liable to
the plaintiffs for any money judgment. This will ensure that Mrs. Yoo is not at
risk of double liability.
3. The district court found that Mr. Yoo did not receive fair consideration
in exchange for the properties. This finding was not clear error.
The deeds for the condominium, home, and commercial property list sale
prices of $0 and consideration of $10. Moreover, Mr. Yoo filed a federal gift tax
return stating that the commercial property and home were a gift to his wife and
son. Under circumstances in which there was no tangible consideration for an
intrafamily transfer, the burden of proving that they paid fair consideration falls
on the grantees. See United States v. McCombs, 30 F.3d 310, 325 (2d Cir. 1994).
The defendants have not sustained that burden.
The defendants argue that Mr. Yoo gave the properties to Mrs. Yoo in
repayment of a $1 million antecedent debt, lent by Mrs. Yoo from an inheritance
to help him start the restaurants. But the district court reasonably rejected this
argument because Mrs. Yoo had previously testified at her deposition that the $1
million was actually given to Mr. Yoo by her family. Moreover, there was
substantial evidence that the Yoos had co‐mingled assets at the time of the
alleged loan, and that they considered the $1 million used to start the restaurants
as marital property, not as a loan from one spouse to the other.
The defendants argue that Mrs. Yoo gave consideration for the
condominium by assuming Mr. Yoo’s mortgage obligations. But, as the district
court pointed out, there is no evidence to support this self‐serving assertion.
Neither the deed nor any document reflects Mrs. Yoo’s assumption of Mr. Yoo’s
liability to pay the mortgage obligation or commitment to indemnify him after
his payment of that liability. See id. at 315 (finding adequate consideration
where the deed provided that the purchasers “assume[d] and agree[d] to pay”
4
the unpaid principal and interest on the mortgages “as part of the consideration
for this conveyance”). Tellingly, on appeal, the defendants provide no record
citation to support this assertion.1
Accordingly, the district court did not clearly err in finding that the
properties were transferred without fair consideration.
4. The defendants argue that, in calculating Mr. Yoo’s total assets at the
time of the transfers (for the purposes of determining insolvency), the court
failed to consider the value of his two restaurants.
The court reasonably concluded that it had insufficient evidence to
determine the value of the restaurants because the defendants offered evidence
only of book value, not their saleable value. See N.Y. DCL § 271 (“A person is
insolvent when the present fair salable value of his assets is less than the amount
that will be required to pay his probable liability . . . .” (emphasis added)). In
the absence of any evidence regarding how the book value related to the salable
value, the district court correctly determined that the defendants had not met
their burden of showing the restaurants’ salable value. See In re Roblin Indus.,
Inc., 78 F.3d 30, 36 (2d Cir. 1996) (noting that, although book values “are, in some
circumstances, competent evidence from which inferences about a debtor’s
insolvency may be drawn,” such values “are not ordinarily an accurate reflection
of the market value of an asset”); see also Atateks Foreign Trade, Ltd. v. Private
Label Sourcing, LLC, 402 F. Appʹx 623, 627 (2d Cir. 2010) (“[B]ook value . . . is
‘not ordinarily an accurate reflection of the market value of an asset.’”).
Furthermore, even if the book value of the restaurants could be deemed a fair
approximation of the saleable value, Mr. Yoo would still have been insolvent at
1 While not cited on appeal, the defendants argued at trial that a “Consolidation,
Extension, and Modification Agreement” transferred the obligation to pay the mortgage
from Mr. Yoo to Mrs. Yoo and Carolyn Yoo (his daughter). App’x 1422. However,
the agreement defines the “Borrower” as Mr. Yoo, Mrs. Yoo, and Carolyn Yoo, and
states that the borrowers agree “to take over all the obligations under the Notes and
Mortgages as consolidated,” totaling $729,750. Id. at 1423. The modification
agreement refutes Mr. Yoo’s assertion that Mrs. Yoo took on his obligation to satisfy the
mortgage, because it states that all three of them (Mr. Yoo, Mrs. Yoo, and Carolyn) are
liable for the condo’s mortgage.
5
the time of the transfers.
Accordingly, the district court did not clearly err in calculating Mr. Yoo’s
assets at the time of the transfers.
5. The defendants argue that the district court clearly erred in
determining Mr. Yoo’s probable liability on his existing debts at the time of the
transfers. Specifically, they argue that‐‐for the purposes of DCL § 273‐‐Mr.
Yoo’s debts should have been calculated based on his subjective belief of his
liabilities, not his actual liabilities.
However, DCL § 271, which defines insolvency for the purposes of
DCL § 273, sets forth an objective standard: “A person is insolvent when the
present fair salable value of his assets is less than the amount that will be
required to pay his probable liability on existing debts as they become absolute
and matured.” DCL § 271(1). Nothing in this definition allows for subjective
assessment. Moreover, DCL § 273 states that a conveyance made without fair
consideration is fraudulent if it renders a person insolvent “without regard to his
actual intent.” DCL § 273 (emphasis added).
The defendants contend that Lippe v. Bairnco Corp., 249 F. Supp. 2d 357
(S.D.N.Y. 2003), aff’d on other grounds, 99 F. App’x 274 (2d Cir. 2004), endorsed
a subjective view of insolvency under DCL § 273. As the district court observed,
the court in Lippe did not explain its apparent reference to the debtor’s subjective
beliefs regarding its probable liabilities. Nor did it make clear that such analysis
pertained to § 273 as opposed to § 276, which was also at issue and under which
subjective intent is relevant. In any event, that case is not binding on this Court,
and we find no support for the defendants’ arguments in the statute.
Accordingly, the district court did not clearly err in declining to determine
Mr. Yoo’s liabilities at the time of the transfers based on Mr. Yoo’s subjective
assessment.
6. The defendants’ brief also argues that Mr. Yoo did not “intend[] or
believe[] that he [would] incur debts beyond his ability to pay as they mature”
when he transferred his interests in the home and commercial property in
November 2011, such that those transfers were not violations of § 275. This
6
argument fails to affect the result for two reasons. First, the district court found
as a factual matter that Mr. Yoo was well aware that he would be insolvent
subsequent to those conveyances. In any event, Mr. Yoo’s state of mind cannot
change the result because the court found the conveyances fraudulent under
§ 273 as well as § 275, and under § 273 his subjective beliefs are irrelevant.
We have considered the defendants’ remaining arguments and find them
to be without merit. For the foregoing reasons, we AFFIRM the judgment of the
district court.
FOR THE COURT:
Catherine O’Hagan Wolfe, Clerk of Court
7