Fakheri v. Rubinstein CA2/5

Filed 9/8/21 Fakheri v. Rubinstein CA2/5
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION FIVE

PARVIZ FAKHERI, B297422

Plaintiff and Respondent, (Los Angeles County
Super. Ct. No. BC659534)
v.

ARTURO RUBINSTEIN et al.,

Defendants and Appellants.

APPEAL from a judgment of the Superior Court of Los
Angeles County, Randolph M. Hammock, Judge. Affirmed.
Tesser │Grossman, Brian M. Grossman and Gina Marie
Simas, for Defendants and Appellants.
Cohen & Cohen, Barry L. Cohen and Kerry A. Cohen, for
Plaintiff and Respondent.
 I. INTRODUCTION

Arturo Rubinstein (Rubinstein) and Fab Rock Investments
LLC (Fab Rock) (together, defendants) and Yoram Yehuda, doing
business as Malibu Development and Construction, (Yehuda)
orally agreed to purchase, renovate, and sell a residential
property. When the property was sold, defendants did not pay
Yehuda what he believed was his share of the proceeds and he
brought an action against them. Following a bench trial, the trial
court found that defendants breached their oral agreement with
Yehuda and awarded him $866,171 plus prejudgment interest.1
Defendants appeal, contending that the court abused its
discretion in failing to apply their unclean hands affirmative
defense to Yehuda’s action and erred in considering in its decision
two notices of judgment liens that were filed in this case, but not
admitted in evidence at trial. We affirm.

1 After the judgment was entered, Yehuda transferred his
entire interest in the judgment to Parviz Fakheri. On
May 3, 2021, we granted Fakheri’s motion to be substituted for
Yehuda as a party to this appeal.

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 II. BACKGROUND2

A. Yehuda’s Complaint

In his complaint,3 Yehuda alleged that in June 2013, he
and defendants entered into an oral joint venture to purchase,
renovate, and sell the residence at 19107 Wells Drive in Tarzana
(Wells Drive joint venture). Defendants and Yehuda agreed that
each would contribute 50 percent of the purchase price and would
share equally in all expenses, liabilities, and profits from the
Wells Drive joint venture. Title to the Wells Drive property was
taken in the name of Fab Rock, Rubinstein’s alter ego, to be held
for the benefit of the Wells Drive joint venture.
On June 18, 2013, the parties purchased the Wells Drive
property for $998,000. Of that purchase price, Yehuda
contributed $601,154 and defendants contributed $396,846. On
April 30, 2015, the parties sold the Wells Drive property for
$1,678,500, and the proceeds were deposited into Rubinstein’s
bank account 19111 Wells Dr. LLC. After the parties paid off a
loan on the Wells Drive property, $1,010,000 remained from the
sale. Although Yehuda’s 50 percent share of that sum was
$505,000, defendants paid him only $190,000.

2 Except for facts necessary for context, we limit our
recitation of facts to those necessary to resolve defendants’
unclean hands affirmative defense and claim of evidentiary error.

3 Yehuda alleged eight causes of action in his complaint. The
trial court found defendants liable under Yehuda’s third cause of
action for breach of contract.

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B. Trial Evidence

1. Evidence of Yehuda’s Creditors

Attorney Howard Goodman represented Golnaz and
Michael Davoodifar and Michelin and Guy Roche in a judgment
collection matter against Yehuda. The judgment predated the
Wells Drive joint venture. Yehuda had not made any payments
toward satisfying the judgment. At the time of trial, Yehuda
owed $1.7 million on the judgment.
Attorney Michael Berke represented Jacob Tikosky in a
judgment collection matter against Yehuda. That judgment was
entered in 2003—prior to the Wells Drive joint venture. In 2005,
following an appeal, the trial court awarded Tikosky attorney
fees, increasing the judgment to $643,000. Thereafter, the
judgment accrued interest until Berke began his representation
in 2007. Since 2007, Yehuda had not made any payments on the
judgment.

2. Yehuda’s Financial Contributions to the Wells Drive
Joint Venture

In response to a special interrogatory admitted at trial,
Yehuda claimed he made two $300,000 contributions to the
purchase of the Wells Drive property. The first contribution
came from Yehuda’s Malibu Development bank account. The
second contribution came from Fab Rock’s bank account. Yehuda
explained that his contribution from the Fab Rock account
“belonged to him by virtue of deposits that had been made into
that account, which were credited to him . . . .” Yehuda then

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identified seven deposits totaling $908,102.47. At trial,
apparently in reference to Yehuda’s first contribution, the parties
stipulated that Yehuda provided three cashier’s checks totaling
$300,000 for the purchase of the Wells Drive property.
In response to another special interrogatory admitted at
trial, Yehuda claimed that the parties used the 19111 Wells Dr.
LLC bank account to pay the Wells Drive joint venture’s
expenses. Twelve deposits totaling $456,667.54 were made on his
behalf into that account.

C. Statement of Decision

In its Statement of Decision, the trial court found that the
parties orally agreed to purchase and renovate the Wells Drive
property. Under the agreement, the parties were to divide costs
and profits on a 50/50 basis. The court rejected Rubinstein’s
argument that he and Yehuda modified the oral agreement so
that Rubinstein and Fab Rock became the sole owners of the
Wells Drive property, with Yehuda receiving back his alleged
$300,000 investment and receiving 10 percent of the construction
costs as a fee for overseeing the construction. The court found
Rubinstein’s argument “absurd” and likely made up “out of thin
air.”
The trial court found that Yehuda contributed $625,000 of
the purchase price of the Wells Drive property and Rubinstein
contributed $372,000. As for construction costs, the court found
that Yehuda contributed $378,725 and Rubinstein contributed
$38,948. After accounting for other expenses, the court awarded
Yehuda $866,171 plus prejudgment interest for defendants’
breach of contract.

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 As for defendants’ unclean hands affirmative defense, the
trial court found “that the evidence does, in fact, support a
potential finding of unclean hands by Yehuda, in that the
evidence did preponderate that Yehuda’s actions during the
relevant time periods were designed to hide his true assets and to
hinder and/or delay the collection of his outstanding judgments
by his judgment creditors. For example: it was clear that the
manner in which Yehuda obtained the monies (which were
utilized to purchase and to improve the subject property) through
various and alleged ‘loans’ without supporting documentation,
and the manner in which he transferred monies throughout
various bank accounts, vis-à-vis various legal entities, was
designed to essentially make himself ‘judgment proof,’ and
designed to hinder, delay or prevent the collection of these
outstanding and considerable money judgments against him.”
The trial court also found that, to some degree, Yehuda’s
“unclean hands” conduct was directly connected to the subject
matter of his lawsuit as the funds he contributed toward the
purchase and renovation of the Wells Drive property were funds
he had hidden from his creditors. Nevertheless, any finding of
unclean hands by Yehuda did not result in a successful
affirmative defense because Rubinstein also had unclean hands.
The court found that Rubinstein knew of and “was an active and
willing participant in Yehuda’s scheme to defraud his creditors
. . . .” That is, Rubinstein had allowed Yehuda to use various
Rubinstein bank and credit card accounts to hide assets. The
court observed, “It would seem axiomatic, that a party who
wishes to assert an unclean hands defense, should not have
unclean hands himself.”

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 The trial court rejected Rubinstein’s argument that if the
court failed to apply defendants’ unclean hands affirmative
defense, it would be an accessory to Yehuda’s unclean hands.
The court noted that two notices of judgment liens apparently
had been filed in the case and the attorney for one of Yehuda’s
judgment creditors testified in trial and so was aware of the
possibility of a judgment in Yehuda’s favor. It doubted “that
Yehuda [would] be able to ‘complete’ his fraud by means of this
particular case.”
The trial court further found that the money Yehuda
invested in the Wells Drive joint venture was his personal
property.

III. DISCUSSION

A. Unclean Hands

Defendants claim the trial court abused its discretion in
failing to apply their unclean hands affirmative defense to
Yehuda’s action. Yehuda’s hands were unclean, they argue,
because Yehuda used the Wells Drive joint venture to conceal
money from his creditors.

1. Standards of Review

“When an appellant contends the evidence is insufficient to
support a judgment, order, or factual finding, we apply the
substantial evidence standard of review. ‘Where findings of fact
are challenged on a civil appeal, we are bound by the
“elementary, but often overlooked principle of law, that . . . the

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power of an appellate court begins and ends with a determination
as to whether there is any substantial evidence, contradicted or
uncontradicted,” to support the findings below. [Citation.] We
must therefore view the evidence in the light most favorable to
the prevailing party, giving it the benefit of every reasonable
inference and resolving all conflicts in its favor in accordance
with the standard of review so long adhered to by this court.’
[Citation.] ‘Substantial evidence’ is not synonymous with ‘any’
evidence; rather, it means the evidence must be of ponderable
legal significance, reasonable, credible, and of solid value.
[Citation.] An appellate court presumes in favor of the judgment
or order all reasonable inferences. [Citation.] If there is
substantial evidence to support a finding, an appellate court
must uphold that finding even if it would have made a different
finding had it presided over the trial. [Citations.] An appellate
court does not reweigh the evidence or evaluate the credibility of
witnesses, but rather defers to the trier of fact. [Citations.]”
(Cahill v. San Diego Gas & Electric Co. (2011) 194 Cal.App.4th
939, 957–958 (Cahill).)
We review a trial court’s decision whether to apply the
doctrine of unclean hands for an abuse of discretion. (Aguayo v.
Amaro (2013) 213 Cal.App.4th 1102, 1109.) A trial court abuses
its discretion when it applies the wrong legal standard. (Costco
Wholesale Corp. v. Superior Court (2009) 47 Cal.4th 725, 733.)

2. Legal Principles

“The defense of unclean hands arises from the maxim, ‘“‘He
who comes into Equity must come with clean hands.’”’ [Citation.]
The doctrine demands that a plaintiff act fairly in the matter for

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which he seeks a remedy. He must come into court with clean
hands, and keep them clean, or he will be denied relief,
regardless of the merits of his claim. [Citations.] The defense is
available in legal as well as equitable actions. [Citations.]”
(Kendall-Jackson Winery, Ltd. v. Superior Court (1999) 76
Cal.App.4th 970, 978 (Kendall-Jackson).)
“‘The essence of the “clean hands” doctrine is not that the
plaintiff’s hands are dirty but “that the manner of dirtying
renders inequitable the assertion of such rights against the
defendant.”’ [Citation.] ‘It is not every wrongful act, nor even
every fraud, which prevents a suitor in equity from obtaining
relief.’ [Citation.] ‘It is settled that the act upon which equity
may refuse relief to a plaintiff because he does not come into
court with clean hands must prejudicially affect the rights of the
person against whom the relief is sought so that it would be
inequitable to grant such relief.’ [Citation.] ‘It must have been
conduct which, if permitted, inequitably affects the relationship
between the plaintiff and the defendant.’ [Citations.]” (Martin v.
Kehl (1983) 145 Cal.App.3d 228, 239, fn. 1 (Martin); Brown v.
Grimes (2011) 192 Cal.App.4th 265, 283 (Brown) [“‘If he [the
wrongdoer] is not guilty of inequitable conduct toward the
defendant in that transaction, his hands are as clean as the court
can require.’ (2 Pomeroy, A Treatise on Equity Jurisprudence
(5th ed. 1941) § 399, p. 97; see Bradley Co. v. Bradley (1913) 165
Cal. 237, 242, . . . [citing Pomeroy and stating, ‘His misconduct
must be so intimately connected to the injury of another with the
matter for which he seeks relief, as to make it inequitable to
accord him such relief’]”].)

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 3. Analysis

a. Defendants’ unclean hands

Defendants contend the trial court declined to apply the
unclean hands doctrine based on an erroneous view of the law—
that a defendant’s unclean hands are relevant to the defense. For
the proposition that a court may not consider a defendant’s
unclean hands, they rely on the following statement in Precision
Instrument Mfg. Co. v. Automotive Maintenance Machinery Co.
(1945) 324 U.S. 806 (Precision): “[the unclean hands doctrine] is
a self-imposed ordinance that closes the doors of a court of equity
to one tainted with inequitableness or bad faith relative to the
matter in which he seeks relief, however improper may have been
the behavior of the defendant.” (Id. at p. 814, italics added; see
also Thomas v. Gordon (2000) 85 Cal.App.4th 113, 123 [quoting
Precision]; Camp v. Jeffer, Mangels, Butler & Marmaro (1995) 35
Cal.App.4th 620, 638 [same]; Burton v. Sosinsky (1988) 203
Cal.App.3d 562, 573–574 [same].)
Defendants misconstrue Precision’s holding. The “improper
behavior” the Supreme Court referred to is the behavior
underlying a lawsuit that brings a defendant before a court, not
“unclean hands” behavior by a defendant. That is, the unclean
hands doctrine may apply regardless of how meritorious a
plaintiff’s claim or how serious a defendant’s contractual breach
or other asserted liability. (See Kendall-Jackson, supra, 76
Cal.App.4th at p. 978 [citing Precision, supra, 324 U.S. at pages
814 to 815 for the proposition that a plaintiff “must come into
court with clean hands, and keep them clean, or he will be denied
relief, regardless of the merits of his claim” (italics added)].)

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 Moreover, a trial court “must consider the material facts
affecting the equities between the parties” in deciding whether to
exercise its discretion to apply the unclean hands doctrine.
(Dickson, Carlson & Campillo v. Pole (2000) 83 Cal.App.4th 436,
447; see also Cortez v. Purolator Air Filtration Products Co.
(2000) 23 Cal.4th 163, 180 [“A court cannot properly exercise an
equitable power without consideration of the equities on both
sides of a dispute”].)
Defendants further argue that there was “little, if any,
compelling evidence that Rubinstein was aware of Yehuda’s
concealment of assets from his creditors.” The trial court found,
“There can be no reasonable doubt, in this Court’s mind, that
Rubinstein himself had actual knowledge that Yehuda was
[hiding assets] and in fact, Rubinstein allowed Yehuda to utilize[]
Rubinstein’s various bank or credit card accounts . . . to
perpetuate this fraud against Yehuda’s creditors. This includes
giving Yehuda complete unfettered access to the Fab Rock bank
account by means of literally signing 100 [plus] of blank checks in
advance. In short, Rubinstein was an active and willing
participant in Yehuda’s scheme to defraud his creditors in this
manner.”
Defendants contend that Yehuda was truthful when he
testified that the money in the 19111 Wells Dr. LLC bank
account and the 100 plus pre-signed checks were used to pay
construction costs.4 Also, Rubinstein testified that the only
access he gave Yehuda to any of his bank accounts was the 100

4 Although it appears the trial court was mistaken when it
identified the Fab Rock bank account as the source of the checks,
which bank account was the source of these checks is immaterial
to any issue on appeal.

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plus pre-signed checks from the 19111 Wells Dr. LLC account.
Accordingly, defendants argue, there was no substantial evidence
that Rubinstein knew of or participated in Yehuda’s scheme to
defraud his creditors.
Defendants’ argument is unavailing. At a time when
Yehuda had large judgment debts and pursuing creditors,
defendants allowed him to deposit large sums of money—over
$1.3 million—into the Fab Rock and 19111 Wells Dr. LLC bank
accounts. Yehuda used the monies in those accounts to finance
the Wells Drive joint venture—the vehicle Yehuda used to
defraud his creditors. Yehuda’s and Rubinstein’s conduct was
reasonable, credible, and solid evidence that Rubinstein knew
about and assisted in Yehuda’s fraudulent conduct. (Cahill,
supra, 194 Cal.App.4th at p. 958.)

b. Yehuda’s unclean hands

Because Yehuda’s unclean hands conduct—concealing
money from his creditors—was not directed at defendants and
did not prejudice them, the trial court did not abuse its discretion
in denying defendants’ unclean hands affirmative defense.
(Martin, supra, 145 Cal.App.3d at p. 239, fn. 1; Brown, supra, 192
Cal.App.4th at p. 283; see also, Jay Bharat Developers, Inc. v.
Minidis (2008) 167 Cal.App.4th 437, 445, quoting Kendall-
Jackson, supra, 76 Cal.App.4th at p. 979 [“‘The misconduct must
“‘“prejudicially affect . . . the rights of the person against whom
the relief is sought so that it would be inequitable to grant such
relief”’”’”]; 2 Schwing, Cal. Affirmative Defenses (2021) § 45:3 (2d
ed.) [“courts have ruled that the party seeking to invoke the
unclean hands doctrine must have been injured by the alleged

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wrongful conduct”].) Yehuda’s concealment of money from his
creditors in the Wells Drive joint venture was not directed at and
did not prejudice defendants. Instead, his concealment was
directed at his judgment creditors and only benefited
defendants—the property was sold at a profit and defendants
shared in that profit.

B. The Notices of Judgment Liens

Defendants contend the trial court erred in considering two
notices of judgment liens filed in this case because the notices
were not admitted at trial. By failing to object below, defendants
have forfeited appellate review of this issue.
As noted above, the trial court rejected in its Statement of
Decision Rubinstein’s argument that it should not allow Yehuda
to use the judicial system to complete his fraud on his creditors
by returning to him money he had hidden from those creditors. It
stated, “There apparently have been two separate Notice of
Judgment Lien’s [sic] filed by such creditors in this case.[Fn.
omitted.] Indeed, the attorney representing one of the major
judgment creditors . . . actually testified in this case at trial. One
could conclude that he is aware of these proceedings and the
possibility of a judgment in this case in favor of Yehuda. Hence,
this Court doubts that Yehuda will be able to ‘complete’ his fraud
by means of this particular case.” In the omitted footnote, the
court identified notices of judgment liens filed on
August 21, 2017, and December 5, 2018.5

5 Defendants’ claim that “the record is devoid of any evidence
of such liens” is meritless as their own appendix on appeal
contains a notice of judgment lien attorney Berke filed on behalf

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 In response to the trial court’s Statement of Decision,
defendants filed Defendants’ Specification of Controverted Issues
on Which Defendants Request a Statement of Decision objecting
to parts of the court’s Statement of Decision. Those objections did
not include an objection to the court’s reference to or reliance on
the notices of judgment liens. By failing to object, defendants
forfeited appellate review of their claimed error. (Ticor Title Ins.
Co. v. Rancho Santa Fe Assn. (1986) 177 Cal.App.3d 726, 729 [a
claim that the trial court erred in relying in its decision on
documents contained in the record but not admitted at trial was
forfeited by the failure to object in the trial court].)

of Tikosky on August 30, 2017, and a judgment lien attorney
Goodman filed on behalf of the Davoodifars and Roches on
December 5, 2018.

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 IV. DISPOSITION

The judgment is affirmed. Fakheri is awarded his costs on
appeal.

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

KIM, J.

We concur:

RUBIN, P. J.

MOOR, J.

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