JOHN S. CARROLL 649-0 810 Richards Street, Suite 810 Honolulu, Hawaii 96813 Telephone No. (808 526-9111 Attorney for Plaintiffs IN THE CIRCUIT COURT OF THE FIRST CIRCUIT STATE OF HAWAII ERNEST Y. INADA and VIRTUAL GOLF HAWAII LLC, vs. Plaintiffs, MICHAEL K. SMITH; COLDWELL BANKER COMMERCIAL PACIFIC PROPERTIES LLC; ALLEN M. YAMAGUCHI; CHANEY, BROOKS & COMPANY LLC dba NAI CHANEYBROOKS; WON MO YI aka FRANK LEE, Individually and dba WONDER PRODUCTIONS, INC. and M & I PRODUCTIONS; and DOE DEFENDANTS 1-10, Defendants. CIVIL NO. [NON-MOTOR VEHICLE TORT] COMPLAINT; EXHIBITS 1" - 3"; DEMAND FOR JURY TRIAL; SUMMONS COMPLAINT COME NOW PLAINTIFFS ERNEST Y. INADA and VIRTUAL GOLF HAWAII LLC, by and through their undersigned counsel, and for causes of action against Defendants above named, allege and aver as follows: 1. At all times material herein, Plaintiff Ernest Inada has been a resident of the City & County of Honolulu, State of Hawaii. 2. At all times material herein, Plaintiff Virtual Golf Hawaii LLC ( Plaintiff VGH
has been a Hawaii limited liability company. At all relevant times, Plaintiff Ernie Inada was the sole member of Plaintiff VGH and its member-manager. 3. Upon information and belief, at all times material herein Defendant Michael K. Smith ( Defendant Smith has been a resident of the City and County of Honolulu, State of Hawaii. 4. Upon information and belief, at all times material herein Defendant Coldwell Banker Commercial Pacific Properties LLC ( Defendant Coldwell Banker has been a Hawaii limited liability company. At all times relevant to the events described in this Complaint, Defendant Smith was a broker, employee, agent and/or representative of Defendant Coldwell Banker. All acts and omissions of Defendant Smith described in this Complaint and performed in connection with the events described in this Complaint were performed within the course and scope of his brokerage, employment, agency or representation of Defendant Coldwell Banker. Defendant Coldwell Banker is accordingly liable for the conduct of Defendant Smith under the doctrine of respondeat superior. 5. Upon information and belief, at all times material herein Defendant Allen M. Yamaguchi ( Defendant Yamaguchi has been a resident of the City and County of Honolulu, State of Hawaii. 6. Upon information and belief, at all times material herein Defendant Chaney, Brooks & Company LLC dba NAI Chaneybrooks ( Defendant Chaney Brooks has been a Hawaii limited liability company. At all times relevant to the events described in this Complaint, Defendant Yamaguchi was a broker, employee, agent and/or representative of Defendant Chaney Brooks. All acts and omissions of Defendant Yamaguchi described in this Complaint and 2
performed in connection with the events described in this Complaint were performed within the course and scope of his brokerage, employment, agency or representation of Defendant Chaney Brooks. Defendant Chaney Brooks is accordingly liable for the conduct of Defendant Yamaguchi under the doctrine of respondeat superior. 7. Upon information and belief, at all times material herein Defendant Won Mo Yi aka Frank Lee ( Defendant Yi was a resident of the City and County of Honolulu, State of Hawaii. At all times material herein, Defendant Yi purported to be the principle of, and do business as, Wonder Promotions, Inc. and M & I Productions. The Business Registration Division of the Department of Commerce and Consumer Affairs, State of Hawaii, does not recognize, nor has it ever recognized, any business entity known as Wonder Promotions, Inc. or M & I Productions. To the extent that Wonder Promotions, Inc. and/or M & I Productions conducted business in Hawaii, they did so as sole proprietorships of Defendant Yi. At all times relevant to the events described in this Complaint, Defendant Yi was a principle, employee, agent and/or representative of Defendants Wonder Promotions, Inc. and M & I Productions. When referred to herein, Defendant Yi refers to Defendant Won Mo Yi aka Frank Lee, Individually and dba Wonder Promotions, Inc. and M & I Productions. 8. DOE DEFENDANTS 1 through 10 are PERSONS, CORPORATIONS, PARTNERSHIPS, JOINT VENTURES, GOVERNMENTAL ENTITIES, and/or OTHER ENTITIES and are sued herein under fictitious names for the reason that their true names and identities are unknown to the Plaintiffs, except that they may be connected in some manner with Defendants and may be agents, servants, employees, employers, representatives, co-ventures, associates, or independent contractors of the Defendants and/or were in some manner presently 3
unknown to Plaintiffs engaged in the activities alleged herein and/or were in some manner responsible for the injuries and damages to the Plaintiffs and their true names, identities, capacities, activities and/or responsibilities are presently unknown to Plaintiffs or their attorney. Plaintiffs pray for leave of this Court to amend this Complaint once the true names, identities, capacities, activities, and/or responsibilities of said DOE DEFENDANTS are ascertained. 9. Unless stated otherwise, all events described herein took place in the City & County of Honolulu, State of Hawaii, and within the territorial jurisdiction of this Court. 10. At all times material herein, Plaintiff VGH was a tenant under a commercial lease for property situate at 1837 Kapiolani Boulevard, Honolulu, Hawaii 96815 (hereafter, the Subject Property. Between and November 2011, the Plaintiffs operated a restaurant and nightclub known as Clubhouse Honolulu. Before November 2011, Clubhouse Honolulu had been profitable. However, the Plaintiffs desired to enter into a joint venture with another party with experience in restaurant operation and management. For this purpose Plaintiff VGH retained Defendants Smith and Coldwell Banker. Plaintiff VGH s retention of Defendants Smith and Coldwell Banker was memorialized in an October 15, 2011 Exclusive Right to Sell Co-Listing Agreement (the Listing Agreement. A true and correct copy of the Listing Agreement is attached hereto as Exhibit 1. Under the terms of the Listing Agreement, the Property listed for sale was A 50% interest in the restaurant and nightclub operations of Clubhouse Honolulu. Further under the terms of the Listing Agreement, Defendants Smith and Coldwell Banker were only entitled to commission compensation upon the closing of a sale or if Broker finds a buyer who is ready, 4
willing and able to pay the sales price.... The interest in Clubhouse Honolulu initially offered by the Plaintiffs was a 50% ownership interest in Clubhouse Honolulu under which the joint venture partner would manage and operate the restaurant component of Clubhouse Honolulu, Plaintiffs would continue to manage and operate the bar and nightclub component of Clubhouse Honolulu, and the parties would split the net income of Clubhouse Honolulu equally. In exchange, the joint venture partner would pay the Plaintiffs $350,000.00. On or before October 24, 2011, Defendant Smith communicated with Defendant Yamaguchi, who had received the Listing Agreement, and claimed to represent a prospective buyer. The prospective buyer was Defendant Yi. On November 1, 2011, Defendants Yamaguchi and Chaney Brooks communicated a counter-offer to Defendants Smith and Coldwell Banker. Under the terms of the counter-offer, Defendant Yi would pay the Plaintiffs the sum of $200,000.00 in exchange for 50% of the net profit of Clubhouse Honolulu, but with the additional term that Defendant Yi would separately be responsible for, and pay, all expenses of Clubhouse Honolulu. On November 3, 2011, Defendants Smith, Coldwell Banker, Yamaguchi and Chaney Brooks communicated with each other and determined that in the event of a closing of the prospective sale relating to the Clubhouse Honolulu and Defendant Yi, the commission of $20,000.00 would be split equally between Defendants Smith/Coldwell Banker and Defendants Yamaguchi/Chaney Brooks. On November 17, 2011 Defendants Smith, Yamaguchi, Yi and Plaintiff Inada met at the Subject Property. 5
On November 19, 2011, Defendant Yi came to the Subject Property by himself and proposed a new offer to Plaintiff Inada. Under the terms of Defendant Yi s November 19, 2011 offer, Defendant Yi would pay the Plaintiffs $100,000.00 in exchange for a 50% ownership interest in Plaintiff VGH. Further under the terms of Defendant Yi s November 19, 2011 offer, Defendant Yi would pay all expenses of Clubhouse Honolulu, and Defendant Yi and the Plaintiff Inada would manage Clubhouse Honolulu jointly, with all net profit split equally between the parties. During the same November 19, 2011 meeting, Defendant Yi informed Plaintiff Inada that he wanted to begin the joint operation of Clubhouse Honolulu because of what Defendant Yi described as the imminent arrival of vast numbers of Korean clientele in Honolulu for a concert. Defendant Yi claimed that he could bring many of these visitors to Clubhouse Honolulu, which would see sales far above average as a result. Defendant Yi and Plaintiff Inada executed a Letter of Intent containing the terms of Defendant Yi s November 19, 2011 offer on November 22, 2011. A true and accurate copy of the November 22, 2011 Letter of Intent is attached hereto as Exhibit 2. A closing date of December 1, 2011 was set, but with the agreement that Defendant Yi could begin his part in the joint operation of Clubhouse Honolulu before then to plan for and accommodate the Korean visitors. On November 20, 2011, Defendant Yi changed his mind and informed Plaintiff Inada that Defendant Yi wanted to make his sister, Hye Yi an additional member of Plaintiff VGH. Defendant Yi therefore made a new proposal under which Plaintiffs would be paid $200,000.00, Plaintiff Inada, Defendant Yi and Hye Yi would be equal owners of Plaintiff VGH, Defendant Yi 6
would pay all expenses of Clubhouse Honolulu, and all net profits would be divided equally between Defendant Yi, Hye Yi and Plaintiffs. The Plaintiffs were interested in Defendant Yi s November 20, 2011 offer, but demanded that Defendant Yi pre-pay three months of operating expenses. The parties ultimately agreed that the combined total of the purchase price of $200,000.00 and three months of operating expenses would be paid in three monthly installments as follows: (1 $161,300.00 on December 1, 2011; (2 $161,300.00 on January 1, 2012; and (3 $61,300.00 on February 1, 2012. The parties executed a Letter of Intent containing terms of the November 20, 2011 agreement on November, 2011. A true and accurate copy of the, 2011 Letter of Intent is attached hereto as Exhibit 3. In accordance with the terms of the November, 2011 Letter of Intent, Defendant Yi gave Plaintiff Inada a check payable to Plaintiff VGH for the first installment payment of $161,300.00, but asked Plaintiff Inada to wait until December 1, 2011 to negotiate the check because Defendant Yi needed to transfer money to the account on which the check was drawn. On November 21, 2011, Defendant Yi began working at Clubhouse Honolulu. He brought dozens of Korean workers, and changed the menu, which had consisted of American, Japanese and local fare, to Korean food. On November 28, 2011, Defendant Smith presented Plaintiff Inada with an invoice for $10,000.00, representing the 10% commission due for the $100,000.00 partial payment of the sales price due on December 1, 2011. On December 1, 2011 Plaintiff Inada attempted to negotiate the $161,300.00 check from Defendant Yi, and was informed that Defendant Yi s account had insufficient funds to pay the 7
check. Plaintiff Inada attempted to cash Defendant Yi s check on December 2, 2011, and again on December 3, 2011. In each instance, he was informed that Defendant Yi s account had insufficient funds to pay the check. Defendant Yi s check never cleared, and by December 30, 2011, Defendant Yi could not be found. Investigation conducted by Plaintiff Inada revealed that Defendant Yi is being sought by law enforcement agencies of the United States for fraud and deportation. Upon information and belief, at no time did Defendants Smith, Coldwell Banker, Yamaguchi or Chaney Brooks conduct sufficient due diligence with respect to Defendant Yi to determine his bona fides, nor did they otherwise take sufficient steps to determine Defendant Yi s background. By the time of Defendant Yi s disappearance, he had failed to pay over one month of operating expenses of Clubhouse Honolulu. The Plaintiffs attempted to resume their original operations, but the accumulated debt was insurmountable, and Clubhouse Honolulu failed and ceased doing business. In addition to incurring liability for operating expenses not paid by Defendant Yi, the Plaintiffs incurred a $100,000.00 liability to the landlord of the Subject Property. As a direct and proximate result of the events described above, and the acts and omissions of the Defendants, jointly and severally, Plaintiffs have suffered damages which include but are not limited to lost profits, lost revenue, undeserved debt, lost or diminished earning capacity, lost wages, lost income, loss of enjoyment of life, severe emotional distress, and other physical and economic injuries and damages to be proven at the time of trial, and which are in excess of the 8
minimum jurisdictional amounts of this Court. CAUSES OF ACTION AGAINST DEFENDANT YI Count I: Conversion Defendant Yi failed to pay to the Plaintiffs monies owed to them as joint venturers, and as such exercised dominion and control, and stole, monies belonging to the Plaintiffs. As a direct and proximate result of Defendant Yi s conversion, the Plaintiffs have suffered the injuries and damages described herein. Count II: Unjust Enrichment Defendant Yi was unjustly enriched by receiving monies from revenue of Clubhouse Honolulu without paying operational expenses or sums owed to Plaintiffs. Defendant Yi should be made to disgorge all sums by which he has been unjustly enriched. CAUSES OF ACTION AGAINST DEFENDANTS SMITH AND COLDWELL BANKER Count III: Breach of Contract Plaintiffs and Defendants Smith and Coldwell Banker entered into a valid, enforceable contract, and by their actions Defendants Smith and Coldwell Banker are in breach of contract for failing to adequately perform their obligations under the contract, and for breaching the implied 9
duty of good faith and fair dealing. As a direct and proximate result of Defendants Smith and Coldwell Banker s breaches of contract, Plaintiffs have suffered the injuries and damages described herein. Count IV: Breach of Fiduciary Duty As the Plaintiffs retained real estate professionals, Defendants Smith and Coldwell Banker owed to Plaintiffs a duty of fiduciary care. By their actions described herein, Defendants Smith and Coldwell Banker breached their fiduciary duties owed to the Plaintiffs. As a direct and proximate result of Defendants Smith and Coldwell Banker s breaches of fiduciary duties, Plaintiffs have suffered the injuries and damages described herein. CAUSES OF ACTION COMMON TO ALL DEFENDANTS Count V: Negligence All Defendants owed to the Plaintiffs a duty of reasonable care. By their acts and omissions described herein, including but not limited to Defendants Smith, Coldwell Banker, Yamaguchi and Chaney Brooks failing to conduct sufficient due diligence to adequately assess Defendant Yi s ability as a buyer, Defendants breached their duties of care owed to the Plaintiffs. As a direct and proximate result of Defendants negligence, jointly and severally, Plaintiffs 10
have suffered the injuries and damages described herein. Count VI: Intentional and/or Negligent Misrepresentation Defendants misrepresented Defendant Yi s ability as a buyer to the Plaintiffs in a business and/or commercial setting. Defendants misrepresentations of Defendant Yi s qualifications and ability as a buyer were made with scienter and/or with wilful ignorance of the truth or falsity of the truth, and with intent to induce reliance. As a direct and proximate result of Defendants intentional and/or negligent misrepresentation, jointly and severally, Plaintiffs have suffered the injuries and damages described herein. Count VII: Fraud Defendants made false representations to the Plaintiffs concerning Defendant Yi s qualifications and ability as a buyer. The Defendants made the false representations to the Plaintiffs concerning Defendant Yi with knowledge of their falsity or without knowledge of their truth or falsity. The Defendants made the false representations to the Plaintiffs concerning Defendant Yi when they knew, or should have known, that Plaintiffs would rely on the representations made by Defendants. 11
Plaintiffs relied on the false representations made by the Defendants. The acts and omissions of Defendants described herein constitute fraud. As a direct and proximate result of Defendants fraud, jointly and severally, Plaintiffs have suffered the injuries and damages described herein. Count VIII: Punitive Damages In performing all of the acts and omissions described herein, all Defendants acted wantonly, oppressively or with such malice as implies a spirit of mischief or of criminal indifference of their civil obligations, or with such gross negligence or willful misconduct demonstrating an entire want of care so as to raise the presumption of a conscious indifference to the consequences of their acts or omissions, and Defendants are therefore liable to the Plaintiffs for punitive damages in amounts to be proven at the time of trial. WHEREFORE, Plaintiffs pray for judgment in their favor and against Defendants, jointly and severally, as follows: A. For general damages in such amounts as the jury may award; B. For special damages in amounts to be proven at trial; C. For punitive damages; and D. For attorneys fees, costs of suit, prejudgment interest, and such other and further relief, both legal and equitable, as the Court deems just and proper. DATED: Honolulu, Hawaii, April, 2012. 12
JOHN S. CARROLL Attorney for Plaintiffs 13