Julie Park v. Nmsi, Inc.

96 Cal.App.5th 346

314 Cal.Rptr.3d 306

Julie PARK et al., Plaintiffs, Cross-defendants and Respondents,

v.NMSI, INC., Defendant, Cross-complainant and Appellant.

B323063

Court of Appeal, Second District, Division 7, California.

Filed October 12, 2023

Lee, Hong, Degerman, Kang & Waimey, Eric D. Olson, Los Angeles, and Soojin Youn for Defendant, Cross-complainant and Appellant.

Kingfisher Law, Nithin Kumar ; Cohen Williams, Marc S. Williams, Alyssa D. Bell and Martin J. Christopher Santos for Plaintiffs, Cross-defendants and Respondents.

PERLUSS, P. J.

At the request of plaintiffs and cross-defendants Julie Park and Danny Chung, the trial court issued prejudgment right to attach orders (RTAO) in the aggregate amount of $7,192,607.16 against their former employer, NMSI, Inc. Appealing the orders as authorized by Code of Civil Procedure section 904.1, subdivision (a)(5),¹ NMSI contends Park and Chung failed to establish the probable validity of their claims because, contrary to the allegations in their first amended complaint, the agreements underlying their breach of contract causes of action had been modified through an exchange of emails, as well as by the parties’ subsequent conduct. NMSI also contends the amounts to be attached were not readily ascertainable and the court erred in considering documents incorporated by reference into the applications for a writ of attachment. We affirm.

FACTUAL AND PROCEDURAL BACKGROUND

1. Park's and Chung's Revenue-sharing Agreements

NMSI is a residential mortgage lender licensed in 26 states with six regional fulfillment centers in this country and a foreign branch in Korea. NMSI funded loans exceeding $5.5 billion in 2020 and $5.6 billion in 2021.²

Park and Chung were both employed in NMSI's Brea office. Chung was the company's chief marketing officer; Park was the executive vice president. In January 2019 Chung and Park entered into almost identical, but separate, branch manager/sales manager employment agreements with NMSI (2019 agreements). Pursuant to their 2019 agreements, Park and Chung were both responsible for the operation of the branch, including hiring and paying operating expenses. In consideration Park and Chung were jointly entitled to 75 percent of the net revenue generated by loans originated by their branch office provided the net revenue of the office was greater than $90,000. Under the terms of the 2019 agreements, revenue included loan origination fees, discount points, rebates, processing fees, any other fees charged to the borrower at the time of closing, branch margin built-in on top of NMSI's wholesale rate sheet, net premiums gained through the sale of branch loans in the secondary market and any net revenue gained on the lender's fee. Expenses included rent, utilities, taxes and payroll.

The 2019 agreements were fully integrated and provided they could be modified only by the written agreement of the parties. Section 24.5 of each agreement stated, "This agreement constitutes the entire understanding between the parties hereto ... and shall not be terminated ... or amended, except in a writing executed by the parties hereto." Section 24.13 reiterated that "[t]his agreement may be modified only by a further writing that is duly executed by both parties."

2. The October 2019 Proposed Modification

In September 2019 Jae Chong, NMSI's chief executive officer, first proposed a change to the compensation structure in the 2019 agreements.

According to Chong, Chung orally agreed to the terms of the modifications, which were then confirmed in an email Chong sent Chung on October 22, 2019. The subject line of the email (in Korean) stated, "[R]e: what we discussed yesterday." The body of the email purported to summarize the terms of the modified agreement and, in particular, that the share of branch net revenue paid to Chung and Park would be reduced from 75 percent to a range between 25 percent and 40 percent based on what was described as a sliding scale proportionate revenue sharing model. On October 23, 2019 Chung emailed (also in Korean) stating, "All agreed. What you said about the profit sharing starting in January next year means that the loan purchase date in the P&L [profit and loss] will be January, right?"

Beginning in January 2020 NMSI paid Park and Chung according to the October 2019 sliding scale model. Chung promptly notified NMSI's accounting department that neither he nor Park had agreed to modify their compensation structure. Nevertheless, the reduced compensation continued; and, as Park and Chung have alleged in this lawsuit, in August 2020 NMSI reduced their compensation even further by refusing to share revenues generated by loan servicing and the sales of servicing rights.

On January 14, 2021 Park and Chung were advised that NMSI was terminating their employment. Thereafter, NMSI allegedly began withholding commissions owed to two other NMSI loan originators (Mike Koh and Ryan Kim) "for no apparent reason other than their long-time association" with Park and Chung.

3. The Operative First Amended Complaint

Park, Chung, Koh and Kim sued NMSI and Chong on November 18, 2021 and filed a verified amended complaint on January 7, 2022 alleging causes of action for breach of contract, failure to pay wages, breach of fiduciary duty, accounting and violation of California's unfair competition law ( Bus. & Prof. Code, § 17200 et seq. ). As to Park and Chung, the amended complaint alleged, "[I]f the proper 75% split had been applied to the net revenue amounts calculated by NMSI for 2020 and 2021, [they] would have received over $9 million additional dollars.... Of that amount, $7.5 million should have been paid ... in 2020, and $1.8 million should have been paid in 2021." The amended complaint attached as exhibits the 2019 agreements.

4. The Right To Attach Order and Writs of Attachment

On February 2, 2022 Park filed an ex parte application for writ of attachment. Park's application included a declaration describing NMSI's breach of the 2019 revenue sharing agreements and asserted that she and Chung were owed past compensation totaling $9,624,329.39. The declaration detailed Park's calculation of the amount due and was supported by what purported to be NMSI's profit and loss statements for 2019, 2020 and the first half of 2021. The trial court, finding no exigency, denied the ex parte application without prejudice to filing a regularly noticed motion.³

On May 27, 2022 Park and Chung filed new applications for an RTAO, seeking to attach $9,624,329.39 (divided equally between Park and Chung) on the ground they had established the probable validity of their breach of contract claims. They argued, "NMSI breached Plaintiffs’ branch manager agreements by failing to apply the proper compensation formula to the net revenues generated in 2020 and 2021, as well as by failing to pay any share of other revenues that were excluded from the profit[ ] and loss statements."

The application was supported by declarations from Park and Chung. In his declaration Chung denied he had been acting on behalf of Park when discussing the proposed October 2019 modification, and insisted it was his understanding that "NMSI would be sending written agreements containing the exact details of the proposed modification, at which point Ms. Park and I would be able to negotiate further before signing the agreements. I never intended to waive the requirement in my branch manager agreement that any modifications to the agreed-upon terms be made only pursuant to an executed written agreement, nor did I ever sign anything in the writing modifying my branch manager agreement." Park's declaration similarly denied modification and asserted she had "repeatedly informed Jae Chong that Mr. Chung was not authorized to negotiate on my behalf." Park also reaffirmed her February 2, 2022 declaration, submitted with the ex parte application, which "remains true and accurate and is incorporated by reference as if set forth herein."

NMSI opposed the motion, arguing Park and Chung "have not and cannot establish the ‘probable validity’ of their claims or that their damages are in a ‘readily ascertainable’ amount because the very formula for calculating those purported damages is the central issue in dispute in this case. Moreover, Plaintiffs claim for themselves a purported right to attach over $9.6 million as purported damages that differs from the amount of damages claimed in the verified complaint, and which were calculated by combining the claims of all plaintiffs," including Koh and Kim who were not parties to the motion for writ of attachment. Finally, Chong contended in his declaration that his email exchange with Chung confirmed they had agreed to the modified revenue sharing, a modification that was also confirmed by Park's and Chung's subsequent conduct. Chong also asserted "it was common practice for Chung to communicate ... on both his and Park's behalf."

The trial court on July 26, 2022 found Park and Chung had established the probable validity of their breach of contract claims and issued right to attach orders and authorized writs of attachment on behalf of Park and Chung for $3,596,303.58 each (a combined total of $7,192,607.16). The court concluded (using the probable validity standard) the 2019 agreements had not been modified as argued by NSMI, finding that Chung "did not insert an electronic signature or other symbol showing intent to sign a modified agreement by his email" and, in addition, Chung did not have authority to enter into any modification agreement on behalf of Park. The court also found the 2019 agreements had not been modified by the subsequent conduct of Park and Chung.

In setting the amount to be attached, the court, after concluding there was sufficient evidence NMSI had breached the 2019 revenue sharing agreement, found that Chung and Park had submitted "undisputed evidence that they jointly suffered damage of $6,681,150.82." The court noted that NMSI did "not provide any...