Case details

Property sold with known health code violations: plaintiffs

SUMMARY

$957247.01

Amount

Verdict-Plaintiff

Result type

Not present

Ruling
KEYWORDS
emotional distress, mental, psychological
FACTS
In the summer of 2013, plaintiff Edward Kim, 65, a contractor, his wife, plaintiff Ginnie Cho, 65, a real estate agent, and plaintiff Seung Kang, an acquaintance investor, purchased a 1920s, 28-unit apartment building, near Koreatown, from Young Hee Kim and her daughter, Helen Lee. Young Hee Kim and Lee had purchased the property at an auction in March 2013. They hired Edward Kim in April 2013 to fix a number of code violations from the Los Angeles Housing + Community Investment Department. Since the property was under a city program called the Rent Escrow Account Program, the tenant rents were reduced by half and the rents collected were withheld until all code-violation cases were closed. After being hired, Edward Kim worked through the summer of 2013 to make all of the requested repairs to the building, including purchasing materials and labor, in an attempt to resolve the housing-code violations. Young Hee Kim and Lee then offered the building to Edward Kim, Cho and Kang, who purchased it. However, after purchasing the property, Edward Kim discovered that the building had undisclosed code violations from the Los Angeles County Department of Public Health. While the health-code violations, themselves, were not apparent by visual inspection at the time of sale to Edward Kim, Cho and Kang, as the pest infestations had been exterminated, the health-code violation case remained open because more inspections and repairs were required to confirm that there would be no further re-infestations before the case could be closed. Edward Kim, Cho, Kang, and Edward Kim and Cho’s property management company, GNE Property Management Inc., sued Young Hee Kim and Helen Lee. Young Hee Kim and Lee filed a counterclaim against the plaintiffs and third-party claim against their own agent. The trial included all Korean-speaking parties. The plaintiffs’ retired health-department inspector testified that she had face-to-face contact with the agent of Young Hee Kim and Lee, informing the agent that there was a health-code violation case open on the property during their ownership. Plaintiffs’ counsel argued that as a result, Young Hee Kim and Lee knowingly sold the plaintiffs the building without disclosing the health-code violation case and that this action constituted fraud. Counsel also argued that Young Hee Kim and Lee failed to pay Edward Kim the balance owed on the construction contract and that this failure constituted a breach of contract. In addition, plaintiff’s counsel introduced detailed monthly expenses for material and labor used for the work performed on the undisclosed health-code case after the plaintiffs’ purchase of the property. Throughout the trial, plaintiff’s counsel interjected a claim of intentional concealment of evidence based on an incident that occurred during depositions. However, defense counsel maintained that the claim had nothing to do with the issues in the subject case and was not litigated as part of the trial. Defense counsel denied Young Hee Kim or Lee knew of any health-code violations with the building, asserting that the agent did not tell Young Hee Kim or Lee about any Health Code violations. Counsel also argued that Young Hee Kim and Lee had no duty to disclose all information on sale because the buyers should have known about the undisclosed code-violation cases, as Edward Kim had done repairs on the property and was a contractor. Defense counsel further contested whether the alleged agent was actually the agent of the defendants. In addition, counsel contended that Edward Kim, Cho and Kang signed a purchase agreement with “own investigation,” “no broker,” and “as is” clauses in July 2013 and that there was no written contract. In response, plaintiffs’ counsel argued that an invoice alleged to have been sent by Edward Kim should be considered a contract and that because the defendants did not stop the plaintiffs from performing additional work, the defendants agreed to a contract., Edward Kim and Cho owned a mom-and-pop real estate management company, GNE Property Management Inc. Kim was also a noted contractor in Koreatown, while Cho was a cancer survivor at the time of the alleged fraud. They sought recovery of damages for their emotional distress as a result of the incident. After buying the property, Kim, Cho and Kang paid over $800,000 in out-of-pocket expenses for repairs, in addition to the normal mortgage and property maintenance expenses. At the same time, they collected $0 in rent from 2013 to 2016 due to the property being under the REAP program, which reduced the tenant rents by half and withheld the rents collected until all code violation cases, including the Health Code case, were closed. As a result, Kim, Cho and Kang sought recovery for the costs for the repairs and expenses required to close the Health Code case. They also sought lost rents for the building after they made the repairs, as they claimed they were prevented from collecting any rent until 2016. Defense counsel noted that Edward Kim lived in the United States for approximately 20 years as a licensed contractor and that Kim reads and understands English, Spanish, and German. Kim also passed two contractors exams in California in English and has been doing business in Los Angeles, including the management of his several apartment buildings, since that time.
COURT
Superior Court of Los Angeles County, Los Angeles, CA

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