Filed 6/24/13 Ramos Oil Co. v. Kang CA3
NOT TO BE PUBLISHED
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
THIRD APPELLATE DISTRICT
(Yolo)
----
RAMOS OIL CO., INC., C068512
Plaintiff, Cross-defendant and (Super. Ct. No.
Respondent, CV080000483)
v.
SARBJIT S. KANG, Individually and as Partner, etc.,
et al.,
Defendants, Cross-complainants and
Appellants.
In this appeal from a judgment for breach of a contract to purchase gasoline,
defendants assert plaintiff Ramos Oil Co., Inc. (Ramos) has unclean hands for selling
them unbranded gasoline. Defendants fail to appreciate the significance of the trial
court‟s two factual findings: (1) that the testimony of Ramos‟s witnesses was credible
and (2) that defendants requested the unbranded gasoline. Defendants also fail to
understand the limited scope of appellate review. On this record, there is substantial
evidence to support the trial court‟s findings, the theory of unclean hands is without
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support, and the trial court did not abuse its discretion by awarding substantial attorney
fees. We affirm.
FACTS
Ramos is a “jobber”: it sells gasoline to retail gas stations. In July 2004
defendants Brentwood American Station (Brentwood), Sarbjit S. Kang (Kang), and
Abolghassem H. Shahidi (Shahidi) submitted a credit application to Ramos to allow them
to purchase gasoline on credit. Kang and Shahidi provided personal guarantees.
Unbeknownst to Ramos, defendant Azad Amiri had been president of defendant Kang
Property, Inc. (Kang Property), owned all the shares, and ran the operation. Amiri is a
very experienced and sophisticated businessman in the petroleum industry. Brentwood
began business as an unbranded gas station.
In January 2005 defendants applied to become a Valero-branded station. They
entered into a 10-year contract to purchase a minimum number of gallons of Valero-
branded gasoline. They agreed the price for branded gasoline would be the prevailing
“rack price” at the time of delivery, plus two cents per gallon and freight charges.
Brentwood did not have a contract with Valero; Ramos did. Under that
agreement, Valero agreed to pay for the purchase and installation of Valero signage and
related image products at the Brentwood station. If, however, Brentwood “debranded”
during the initial 36 months of the 10-year supply contract, Ramos became obligated to
repay Valero. The Ramos-Valero agreement was incorporated into the Ramos-
Brentwood agreement. Pursuant to their agreement, Brentwood was obligated to
reimburse Ramos for the cost of branding and signage if Ramos was required to
reimburse Valero.
Veteran Ramos employee Richard Stockton testified to a long-standing
relationship with Mr. Kang and his affiliated enterprises. Stockton was in charge of fuels
and transportation for Ramos. He explained that Brentwood struggled to pay its bills.
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The credit manager echoed Stockton‟s testimony that Brentwood repeatedly paid its bills
late.
Stockton testified that Brentwood requested him to deliver several loads of
unbranded gasoline after it had become a branded station. Kang, Shahidi, and Amiri
denied making such a request. Stockton admitted that he delivered 18 to 20 loads of
unbranded gasoline as part of an estimated total of 225 loads of gasoline, branded and
unbranded. The unbranded gasoline was cheaper. Asked why he would deliver
unbranded fuel when the Ramos contract with Valero prohibited its stations from selling
unbranded fuel, Stockton stated, “I thought . . . they were having problems. According to
Mr. Kang, that they weren‟t making money. They wanted to be competitive in the
market that they were in. They were not making money with the branded product. I
thought I was doing them a favor when they asked for an unbranded load. So I made the
mistake of doing somebody a favor.” He never supplied unbranded gasoline to any other
branded station. Ultimately, Valero conducted an audit of Ramos.
There is also no dispute that Ramos sent Brentwood daily quotations on the price
of gasoline. Most of Stockton‟s interactions were with Amiri‟s nephew, Ali Amiri. He
testified that he believed Brentwood received the quotations because “They would make
the comment, gas is going up or gas is going down.” Stockton testified there would be a
significant discrepancy between the daily fax communications from Ramos that
Brentwood received identifying the Valero branded fuel price and the unbranded price
that Ramos invoiced Brentwood for the unbranded gas. Nevertheless, Brentwood
remained consistently delinquent in paying its bills. The issue came to a boiling point in
February 2007.
Ramos threatened to suspend delivery of gasoline. Ultimately, Kent Ramos,
president of Ramos; James Wiley, Ramos‟s credit manager; Stockton; and Kang, Amiri,
and Shahidi had a meeting. Kang and Shahidi remained mute. Amiri, the sole
spokesman for Brentwood, complained they were not receiving a facilities credit that
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Valero gave Ramos. According to Wiley, “Mr. Amiri said that he didn‟t care about the
contract, he didn‟t care who signed the contract, he cared nothing about what I had to say.
And what he said is going to be what‟s going to happen.” Ramos insisted then, as it does
on appeal, that it has no contractual obligation to pass on the credit. Nevertheless, it
agreed in the February meeting to the credit for branded gasoline, which at that time
amounted to nearly $20,000. The parties also agreed that Ramos would extend a
maximum credit to Brentwood of two loads of gasoline. The issue of unbranded gasoline
was not discussed.
Over time, Brentwood repeatedly became delinquent. When Ramos gave notice it
would exercise its right to suspend delivery unless the account was brought current,
Brentwood owed Ramos $62,304.33. Brentwood offered to pay $12,500 or $12,600, an
offer Ramos refused. Brentwood covered its Valero signage and resumed selling
unbranded fuel. As a result, Ramos was compelled to pay Valero $30,183.69.
Ramos sued for breach of contract to recover the amount still unpaid for petroleum
products, for failing to meet minimum purchase requirements, and for attorney fees and
interest. Defendants filed a cross-complaint for breach of contract and related claims.
The trial court entered judgment in favor of Ramos and awarded Brentwood
nothing on its cross-complaint. Brentwood raised unclean hands as both a defense and a
cause of action in its cross-complaint based on its theory that Ramos had wrongfully and
unlawfully sold it unbranded gasoline. In its statement of decision, the court rejected
Brentwood‟s theory of unclean hands.
The court explained: “On the issue of Ramos‟ sale of Valero „unbranded‟ gasoline
to Brentwood, Ramos admitted that it sold to Brentwood approximately 20 loads of
Valero unbranded fuel. [Citation.] The court finds that Brentwood had knowledge of the
sales of unbranded fuel, and that Brentwood‟s personnel requested Ramos sell it
unbranded gasoline to save Brentwood money. The court finds that Richard Stockton
and James Wiley were credible on this issue. The court further finds that Ramos did not
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materially benefit, other than possibly receiving a slightly higher margin from the sales [a
fact that was not proven] to sell Brentwood unbranded fuel. Rather, Ramos exposed
itself to potential liability to Valero that resulted in Valero‟s audit of Ramos sales of
Valero branded fuel.”
The court awarded Ramos $137,493.45 in damages for the sale of fuel, branding
fees, and prejudgment interest. The court also awarded Ramos costs and attorney fees.
Defendants Kang, Shahidi, Brentwood, Ameri Oil Co., Amiri, and Kang Property appeal.
DISCUSSION
I
Defendants would have us believe that, contrary to the trial court‟s finding, they
never requested Ramos to deliver unbranded gasoline, and even if they did, they do not
have to pay for the branded gasoline they received because Ramos comes into court with
unclean hands. They insist that Ramos breached its contract with Valero by selling
unbranded gasoline to them, and that breach provides them an affirmative defense to
Ramos‟s breach of contract claim. Defendants torture the doctrine of unclean hands
beyond recognition.
The unclean hands doctrine “demands that a plaintiff act fairly in the matter for
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.] Whether the
doctrine of unclean hands applies is a question of fact.” (Kendall-Jackson Winery, Ltd. v.
Superior Court (1999) 76 Cal.App.4th 970, 978 (Kendall-Jackson).)
The trial court made the factual finding that defendants requested the unbranded
gasoline. That finding is supported by substantial evidence in that Stockton testified
defendants made the request. The trial court expressly found that Stockton and Wiley
provided credible testimony on this as well as all relevant issues in the case. Moreover,
the trial court could reasonably infer it was far more likely that defendants would request
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the cheaper gasoline and Stockton would deliver it to minimize defendants‟ costs as they
struggled to pay their bills than that Stockton would breach the Ramos contract with
Valero and, without request, decide to deliver cheaper unbranded gasoline.
Nevertheless, defendants insist that the integrity of the judiciary must be protected
even if, as the record discloses here, their own integrity is suspect. (Kendall-Jackson,
supra, 76 Cal.App.4th at p. 978.) In their view, Ramos should not be paid because it sold
them unbranded gasoline, whether that gasoline was requested or not. According to
defendants, Ramos cannot be allowed to sully the civil justice system, even if that means
they will enjoy a windfall.
But defendants ignore the central feature of the unclean hands doctrine. “Not
every wrongful act constitutes unclean hands.” (Kendall-Jackson, supra, 76 Cal.App.4th
at p. 979.) The plaintiff‟s alleged misconduct must be the instrumentality of harm.
(Blain v. Doctor’s Co. (1990) 222 Cal.App.3d 1048, 1063.) The unclean hands doctrine
does not apply if the wrongful conduct did not occur within the transaction upon which
the plaintiff is seeking relief. (O’Flaherty v. Belgum (2004) 115 Cal.App.4th 1044,
1060.) “ „The party against whom the unclean hands doctrine is invoked must have
“directly infected” the actual cause of action before the court . . . .‟ ” (Brown v. Grimes
(2011) 192 Cal.App.4th 265, 283 (Brown).)
Here, plaintiff‟s claim for damages is based on defendants‟ breach of the 10-year
fuel supply agreement for branded fuel. The executed oral agreement for 20 loads of
unbranded fuel has no connection to plaintiff‟s claim that defendants failed to bring their
account current for the branded gasoline it delivered and failed to purchase the monthly
minimum quantity of gasoline. They are distinct contracts. Defendants‟ attempt to
corrupt the notion of unclean hands to include plaintiff‟s alleged breach of its contract
with Valero is reminiscent of the vain attempt by a lawyer in Brown, supra,
192 Cal.App.4th 265 to renege on a fee-sharing agreement because he had failed to pay a
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third party, who was not a lawyer, for referrals. The Brown court found the unclean
hands doctrine inapplicable for a number of reasons equally applicable here.
In Brown, a lawyer agreed to share with another lawyer fees arising from a
number of Texas lawsuits. When he attempted to collect on the fee-sharing agreement,
the other lawyer raised unclean hands as an affirmative defense, alleging that the plaintiff
lawyer had entered into an unethical agreement with a former lawyer who had resigned
from the bar and therefore could not share fees. The court found that the fee-sharing
agreement with the former lawyer was attenuated, at best, from the fee-sharing agreement
the plaintiff lawyer sought to enforce.
The court explained: “Grimes had no interest in how Brown fulfilled his promise
to compensate Ross. Brown had an obligation to take care of Ross‟s claims for
compensation, and that obligation did not have to be fulfilled by the alleged fee-splitting
arrangement. Thus, there is no connection between the offending Brown-Ross agreement
and the amount Brown claims from Grimes. The unenforceability of the Brown-Ross
agreement affects only the relationship between Brown and Ross.” (Brown, supra,
192 Cal.App.4th at p. 283.)
Defendants cite to Penal Code sections 350 and 351a as support for their assertion
that Ramos broke the law by selling unbranded gasoline, knowing it would be sold to the
public as branded. Again, they contend this criminal conduct bars plaintiff‟s contractual
recovery for branded gasoline. Preliminarily, we note that there has been no finding that
plaintiff broke the law. The court in Brown rejected a similar argument as follows:
“[T]he illegality of the Brown-Ross agreement or of Ross‟s activities did not directly
affect the Grimes-Brown agreement or make it illegal or otherwise unenforceable.”
(Brown, supra, 192 Cal.App.4th at p. 283.)
And more to the point, the Brown court found that it would not be inequitable to
enforce the contract at issue notwithstanding an illegal contract between the plaintiff
lawyer and the nonlawyer. “Grimes knew of Ross‟s activities and that Ross was to be
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compensated, and Grimes knew about the 90/10 fee split between Ross and Brown before
he received much of his compensation. He was not adversely affected by the nature of
the Brown-Ross agreement.” (Brown, supra, 192 Cal.App.4th at pp. 283-284.) Indeed,
Grimes was a beneficiary of the fee-splitting agreement with the nonlawyer who was the
source of the referrals that generated the millions of dollars of contingent fees.
Similarly, defendants requested unbranded gasoline. They knew they could not
sell unbranded gasoline in their branded station. Like Grimes, they benefited from
Ramos‟s breach of its agreement with Valero. There is simply nothing inequitable about
compensating Ramos for branded gasoline under the written agreement, which was
unrelated to the oral contract to provide a relatively small number of loads of unbranded
gasoline.
Defendants make the somewhat related claim that delivery of unbranded gasoline
constituted a material breach of contract and therefore the trial court erred by awarding
contract damages. They contend there is insufficient evidence to support the trial court‟s
finding that they ordered the unbranded gasoline. As pointed out above, the court‟s
finding is supported by Stockton‟s testimony that defendants requested the unbranded
gasoline. That finding is more than ample support for the award of contract damages for
nonpayment.
II
Defendants object to the award of attorney fees because the invoices attached to
the declaration of plaintiff‟s lawyer have been redacted. They speculate, without any
support, that they may have been charged for fees related to Ramos‟s potential liability to
Valero for selling unbranded gasoline. Although they do not cite to an appropriate
standard of review, they contend the trial court could not have carefully reviewed the fee
request and could not have determined whether the fees were reasonable. We disagree.
We review an award of attorney fees for an abuse of discretion. (Akins v.
Enterprise Rent-A-Car Co. (2000) 79 Cal.App.4th 1127, 1134.) The award will be
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upheld unless “the amount awarded is so large or small that it shocks the conscience and
suggests that passion and prejudice influenced the determination.” (Ibid.) In this case,
the judge who presided over the five-day court trial reviewed the attorney declaration and
the redacted invoices and then declined an invitation to review the unredacted invoices in
chambers. The trial court is in the best position to assess the value of legal services and
is not obligated to explain its rationale unless requested to do so. (See Children’s
Hospital & Medical Center v. Bontá (2002) 97 Cal.App.4th 740, 777; Ketchum v. Moses
(2001) 24 Cal.4th 1122, 1140.)
Attorney declarations alone attesting to the number of hours spent and the hourly
billing rates are sufficient; billing statements are not the only means to provide such
information. (Martino v. Denevi (1986) 182 Cal.App.3d 553, 559.) Plaintiff‟s counsel
provided a declaration under penalty of perjury describing the type of services provided,
including depositions and motions, phone calls, client meetings, review of factual
background and documents, and discussions of trial strategy. Counsel explained how the
case was transformed from a simple collection case to a complicated, time-consuming
case due to defendants‟ litigation strategy, including a bogus motion for a change of
venue, a failed settlement conference, discovery responses vastly expanding plaintiff‟s
financial exposure, and an aggressive cross-complaint. Preparation for trial increased
proportionately.
Of course, the party opposing the fee award is responsible for furnishing an
adequate record on appeal. (Maria P. v. Riles (1987) 43 Cal.3d 1281, 1295-1296.)
Defendants, however, submitted no evidence in opposition to the motion for attorney
fees. We certainly cannot say the trial judge, who presided over the trial and had the
opportunity to personally assess the quality of the representation, the necessity for the
time spent, and the complexity of the case, abused his discretion when defendants have
provided absolutely no specific evidence supporting their allegation that they might have
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been charged for unrelated matters or controverting the evidence presented in support of
the fees.
Moreover, it is proper to redact information from invoices that are protected by the
attorney-client privilege. While the redactions are quite aggressive, in light of the entire
record in this case, including the declaration filed in support of the fees, we cannot say
the trial court abused its discretion.
DISPOSITION
We affirm.
RAYE , P. J.
We concur:
NICHOLSON , J.
DUARTE , J.
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