Ramos Oil Co. v. Kang

 

 

 

 

 

 

 

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NOT TO BE PUBLISHED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opinion has not been certified for publication or ordered published for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)

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>

RAMOS OIL CO., INC.,                           Plaintiff, Cross-defendant and Respondent,               v.   SARBJIT S. KANG, Individually and as Partner, etc., et al.,                           Defendants, Cross-complainants and Appellants.

C068512   (Super. Ct. No. CV080000483)

 

            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 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.  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 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
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 href="http://www.fearnotlaw.com/">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 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 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 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 href="http://www.mcmillanlaw.com/">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 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 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.