IIG Wireless, Inc. v. Yi
22 Cal. App. 5th 630
| Cal. Ct. App. 5th | 2018Background
- IIG (formerly Unlimited PCS) is a MetroPCS dealer formed in 2007 by John Yi, Jimmy Hu, and Seung Lee; disputes arose over share allocations and alleged "treasury" shares (10,000 shares allegedly reserved for the company).
- Hu and Lee testified Yi represented MetroPCS required him to be majority shareholder and that they transferred shares to Yi (or to corporate custody at his direction) with an understanding the shares/dividends would later be returned to IIG.
- IIG sued Yi (and Lauren Kim) alleging fraud, promissory fraud, breach of fiduciary duty, conversion, unfair competition, conspiracy, and related claims centered on Yi’s retention of alleged treasury shares, unpaid dividends, payroll conversions to Kim, rent payments, and formation of a competing Colorado company.
- At trial, Kim obtained a nonsuit; the jury awarded IIG $401,860 on claims against Yi and awarded Yi $122,000 on his cross-complaint, yielding a net judgment for IIG. Posttrial motions were denied.
- Appeals: Yi appealed denial of JNOV/new trial and argued insufficient evidence, evidentiary/trial errors, and inadequate cross-complaint damages. IIG cross-appealed the nonsuit as to Kim and evidentiary rulings (expert testimony, amendment denial).
- The Court of Appeal affirmed in full, holding (inter alia) parol‑evidence/fraud exception admissions were properly considered under Riverisland and that substantial evidence supported the fiduciary‑duty/fraud/ conversion-related verdicts; nonsuit as to Kim was proper.
Issues
| Issue | Plaintiff's Argument (IIG or Yi as applicable) | Defendant's Argument | Held |
|---|---|---|---|
| Admissibility of oral evidence contradicting integrated shareholder agreements (parol evidence) | IIG: oral statements by Yi showing fraudulent promise re: treasury shares were admissible under fraud exception to parol evidence rule | Yi: agreements were integrated; parol evidence barred; Riverisland limited to contract‑validity/rescission cases | Court: Riverisland overruled Pendergrass; extrinsic evidence of fraud admissible even if it contradicts an integrated writing; jury could credit Hu/Lee testimony; JNOV properly denied |
| Sufficiency of evidence for breach of fiduciary duty / fraud / conversion | IIG: testimony and documentary evidence supported claim Yi misappropriated/treated treasury shares as personal and caused damages | Yi: evidence contradicted, parol evidence barred, discovery/pleading inconsistencies, and alternate explanations | Court: substantial evidence (credited witness testimony & emails) supported breach and damages; appellate court does not reweigh credibility; affirmed |
| Nonsuit of Kim on conversion / conspiracy / aiding & abetting theories | IIG: payments converted to Kim, formation of Colorado company with Yi/Kim supporting liability; trial evidence showed Kim benefitted/participated | Kim/Yi: insufficient proof Kim knew of or agreed to any wrongful plan or that funds did not belong to Yi when paid | Court: nonsuit proper—no substantial evidence Kim knew of or agreed to tortious scheme; aiding/abetting requires actual knowledge of primary wrong; leave to amend denied |
| Admission and prejudice of expert testimony re: tax liability ($77,000) | Yi: expert testimony supported award; IIG: testimony should have been excluded and was prejudicial | Trial court: both experts admitted and jury to weigh assumptions | Court: even if admission were erroneous, IIG failed to show prejudice or that a different result was probable; affirmed |
Key Cases Cited
- Riverisland Cold Storage, Inc. v. Fresno‑Madera Production Credit Assn., 55 Cal.4th 1169 (Cal. 2013) (overruled Pendergrass; fraud exception permits extrinsic evidence to prove promissory fraud despite an integration clause)
- Pendergrass v. Bank of America etc. Assn., 4 Cal.2d 258 (Cal. 1935) (historical limitation on fraud exception, discussed and overruled by Riverisland)
- Hauter v. Zogarts, 14 Cal.3d 104 (Cal. 1975) (appellate standard: do not reweigh evidence; substantial evidence may be contradicted)
- Cassim v. Allstate Ins. Co., 33 Cal.4th 780 (Cal. 2004) (scope of permissible closing argument and standards for objections/admonitions)
- Banco Do Brasil, S.A. v. Latian, Inc., 234 Cal.App.3d 973 (Cal. Ct. App. 1991) (merger/ integration clauses generally conclusive on integration issue)