Filed 12/2/22 Harouche v. The Wilshire Corp. CA2/5

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California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not 

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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION FIVE

MICHEL HAROUCHE,

Plaintiff and Respondent,

v.

THE WILSHIRE CORPORATION, 

et. al,

Defendants and Appellants.

B313745 c/w B315865

(Los Angeles County Super.

Ct. No. SC124859)

APPEAL from a judgment of the Superior Court of Los 

Angeles County, Elaine W. Mandel, Judge. Affirmed.

James S. Link, Kelly F. Ryan, Jillian M. Reyes, and the 

Ryan Law Firm for Defendants and Appellants.

Stephen S. Smith for Plaintiff and Respondent.

__________________________
2

INTRODUCTION

This is the second appeal arising out of a contract to build

Plaintiff Michel Harouche’s Malibu home. In 2008, Harouche 

hired defendant Stephen Sisca and Sisca’s company, defendant 

The Wilshire Corporation (TWC), to oversee and manage the 

construction of Harouche’s multi-million-dollar residence. Sisca 

surreptitiously conditioned the award of the construction contract 

on kickbacks from the general contractor, John Finton and his 

company, Finton Construction, Inc. (FCI).

1 Midway through the 

construction, Sisca and FCI fraudulently increased the cost of 

change orders for the project and split the profit from the 

marked-up amounts. Harouche sued FCI and Sisca. Harouche 

settled with FCI, disposing of Harouche’s claims against FCI and 

FCI’s cross-complaint against Harouche for an allegedly unpaid 

$608,000 for construction services and costs. 

In the first appeal (Harouche I, appellate case No. B297364, 

2020 WL 6736044) we reduced the judgment against Sisca to 

$802,993.72, and remanded for the trial court to determine under 

Code of Civil Procedure, section 877 whether the damages should 

be offset by the alleged $608,000 value of FCI’s cross-complaint.2 

On remand, the trial court found that Sisca failed to prove the 

value of the cross-complaint, and declined to offset the award. 

On appeal, Sisca argues no substantial evidence supports the 

trial court’s denial of the offset. We affirm.

1 Unless the context indicates otherwise, we subsequently 

refer to Sisca and TWC collectively as Sisca, and Finton and FCI 

as FCI. 

2 All subsequent statutory references are to the Code of Civil 

Procedure unless indicated otherwise.
3

FACTUAL AND PROCEDURAL BACKGROUND

We do not rehash the details of the fraud explained in our 

unpublished opinion in Harouche I. Suffice it to say, Sisca 

leveraged his position as Harouche’s representative and

conspired with FCI to obtain financial kickbacks at Harouche’s 

expense. For purposes of this appeal, we discuss FCI’s crosscomplaint, the damages awarded to Harouche, and Sisca’s motion 

to offset the damages award. Much of subsections 1 and 2 are 

taken from the Facts and Procedural Background section in 

Harouche I. 

1. FCI’s Cross-Complaint

After Harouche sued FCI and Sisca, FCI filed a crosscomplaint against Harouche, claiming Harouche had failed to pay

“payment application #57,” another outstanding balance, and an 

insurance deductible. FCI sought damages of $608,000.3 While 

the case was pending, FCI filed for bankruptcy. Apparently with 

the bankruptcy trustee’s approval, Harouche and FCI reached a 

settlement, where FCI stipulated to a $1,100,000 judgment in 

favor of Harouche. FCI agreed to dismiss its cross-complaint for 

$608,000, and to admit to facts demonstrating that the $1.1 

million judgment against FCI was non-dischargeable under 

sections 523(a)(2)(A) and (a)(6), title 11 of the United States 

Code. Because FCI was still in bankruptcy, Harouche agreed to 

forbear from collecting the judgment all at once, and in return,

3 Sisca also filed a cross-complaint against Harouche. Sisca 

asserted claims for breach of contract and “common count,” 

claiming Harouche owed Sisca $104,000 under the project 

management agreement. Following the bench trial, the court 

found against Sisca on its cross-complaint. The trial court’s 

ruling is not before us on appeal.
4

FCI made small monthly payments to Harouche, commencing 

upon approval of its bankruptcy plan of reorganization. Only at 

the end of the plan period would FCI be obligated to pay the 

balance of the judgment. 

In January 2017, Harouche and FCI filed an application 

with the trial court to determine that their settlement was 

entered into in good faith. Sisca contested the motion for the 

good faith settlement. Harouche filed an opposition, explaining 

why the settlement was reasonable. On May 25, 2017, the trial 

court approved the good faith settlement and entered “Judgment 

Pursuant to Settlement” against FCI. We have summarized the 

good faith settlement proceedings because of their connection to 

Sisca’s offset argument in the present appeal.

2. Trial, Judgment, and Appeal in Harouche I

Some eight months later, in January 2018, the bench trial 

in Harouche I took place. Because of the good faith settlement, 

only Harouche’s claims against Sisca were tried. On June 12, 

2018, the court issued its proposed statement of decision, finding 

in favor of Harouche and against Sisca. The parties then filed 

objections to the proposed decision. Sisca argued the trial court 

should have offset the damages awarded to Harouche by 

$608,000 – the value of FCI’s cross-complaint against Harouche

that had been released by the good faith settlement.

On August 14, 2018, the trial court issued its final 

statement of decision in Harouche I. The trial court found that 

Sisca had committed fraud and breached fiduciary duties to 

Harouche. Sisca renewed its objections regarding the lack of an 

offset based on the settlement between FCI and Harouche.

The March 2019 judgment awarded Harouche 

$1,962,837.72 in damages against Sisca, plus prejudgment 
5

interest of $990,486.45.

4 The court reserved “jurisdiction to 

calculate and award offset credits to [Sisca] for any future 

settlement payments that are made to Harouche by [FCI].” 

In the first appeal, we found errors in the calculation of the 

fraudulent change order damages and modified the judgment 

against Sisca to $802,993.72. We also remanded the case for the 

trial court to recalculate prejudgment interest and rule on Sisca’s 

motion to offset the judgment by $608,000 (the amount of FCI’s 

settled cross-complaint). 

3. Remand 

Following remand, Sisca moved for a $608,000 offset (the 

entire amount alleged in FCI’s cross-complaint). Pursuant to 

section 877, subdivision (a), Sisca argued FCI’s dismissal of its 

cross-complaint constituted payment of consideration to 

Harouche equal to the $608,000 in damages alleged in the crosscomplaint. Sisca relied on the FCI settlement dismissing the 

cross-complaint for $608,000, and on testimony from Harouche 

that he had not paid pay application #57 (which was part of the 

$608,000).

Harouche opposed the offset motion on several grounds. 

First, Sisca had failed to sustain its burden to show that the 

release of FCI’s cross-complaint was worth $608,000. Second, 

Harouche did not owe the amounts alleged in FCI’s crosscomplaint because he had never approved the underlying work 

4 After the trial court issued the final statement of decision, 

but before judgment was entered against Sisca, FCI paid 

Harouche $18,000 under the bankruptcy plan of reorganization. 

On March 5, 2019, Harouche filed notice of the payment and 

requested an offset of $18,000 to the judgment. On March 19, 

2019, the court signed a revised judgment, decreasing damages 

by $18,000.
6

associated with the final payment application. Third, FCI could 

not have enforced the construction contract with Harouche due to 

FCI’s material breach of it. In sum, Harouche asserted the crosscomplaint lacked merit, and thus, FCI’s dismissal of it was not 

consideration paid to Harouche.

In reply, Sisca asserted “Harouche made a judicial 

admission in his opposition to the Sisca Defendants’ Motion to 

Contest the Good Faith Settlement that the negotiated 

settlement of $1,100,000 included a resolution of FCI’ s crosscomplaint which included the full amount of damages requested -

$608,000.” Harouche’s opposition to Sisca’s motion to contest the 

settlement stated: “FCI had a cross-complaint against Harouche 

for $608,000. So, for example, if the Finton Defendants were 

found liable for 50% of the $2.6 million in alleged damages and 

assessed a punitive damages award of 50% of that amount, the 

total award would be $1.9 million. After subtracting $608,000 for 

the cross-complaint, Harouche would receive $1.3 million. To 

Harouche’s counsel’s thinking, $1.1 million was ‘close enough’ to 

make the compromise ‘reasonable,’ especially given that victory is 

never guaranteed and, in the absence of a settlement agreement, 

Harouche risked receiving nothing due to the bankruptcies.”

On April 15, 2021, in a minute order, the trial denied

Sisca’s motion for the $608,000 offset. The trial court observed 

that Sisca sought the entire amount alleged in FCI’s crosscomplaint without addressing whether the cross-complaint was 

meritorious. The trial court explained that “defendants do not 

address arguments regarding the cross-complaint’s lack of merit 

or present evidence to allow the court to calculate a true value for 

the cross-complaint. Thus, Sisca fails to meet the burden under 

Conrad[v. Ball Corp. (1994) 24 Cal.App.4th 439, 444]. [¶] 
7

Because there is no basis for the court to decide the value of the 

cross-complaint, the court cannot apply an offset for the value of 

the release.”

Sisca appealed.

DISCUSSION

Sisca argues the court erred by denying the motion to offset 

the damages by $608,000.

1. Standard of Review and Applicable Law

“We generally review a ruling granting or denying a section 

877 settlement credit under the deferential abuse of discretion 

standard. [Citation.] To the extent that we must decide whether 

the trial court’s ruling was consistent with statutory 

requirements, we apply the independent standard of review.” 

(Wade v. Schrader (2008) 168 Cal.App.4th 1039, 1044.) “The trial 

court’s determination of the value of the consideration paid will 

be upheld on appeal if supported by substantial evidence.” 

(Franklin Mint Co. v. Superior Court (2005) 130 Cal.App.4th 

1550, 1558 (Franklin Mint).)

“Section 877 specifies circumstances under which an award 

of economic damages against a defendant may be offset by a 

codefendant's settlement. . . . Section 877 promotes the recovery 

of damages, the settlement of litigation, and the equitable 

apportionment of liability among tortfeasors, while limiting the 

double recovery of damages.” (LAOSD Asbestos Cases (2018) 

28 Cal.App.5th 862, 877-878.) Section 877 provides: “Where a 

release, dismissal with or without prejudice, or a covenant not to 

sue or not to enforce judgment is given in good faith before 

verdict or judgment to one or more of a number of tortfeasors 

claimed to be liable for the same tort, or to one or more other coobligors mutually subject to contribution rights . . . it shall reduce 
8

the claims against the others in the amount stipulated by the 

release, the dismissal or the covenant, or in the amount of the 

consideration paid for it, whichever is the greater.” (§ 877, 

subd. (a).)

“Under subdivision (a) of section 877, the amount of the 

setoff is, in the absence of a stipulation, ‘the amount of the 

consideration paid for [the release or dismissal].’ But the amount 

of consideration paid within the meaning of section 877, 

subdivision (a) is not necessarily the amount of money paid. 

Often ‘the amount of the offset is clouded by injection of noncash 

consideration into the settlement.’ ” (Franklin Mint, supra,

130 Cal.App.4th at p. 1557, fn. omitted.)

In determining the amount of an offset, the trial court 

engages in an equitable undertaking (Abbot Ford, Inc. v. Superior 

Court (1989) 43 Cal.3d 858, 873-874 (Abbott Ford)), taking into 

account the goals of good faith settlements, i.e. “the equitable 

sharing of costs among the parties at fault and the 

encouragement of settlements . . . as well as another important 

public policy: ‘ “the maximization of recovery to the plaintiff for 

the amount of . . . injury to the extent that negligence or fault of 

others has contributed to it.” [Citation.] Thus, while the 

nonsettling defendant is entitled to a fair setoff, the injured 

plaintiff also has a right that the setoff not be excessive.’ ”

(Franklin Mint, supra, 130 Cal.App.4th at pp. 1556–1557.)

Although there is some authority that the party seeking the 

offset has the burden of proof (see Conrad v. Ball Corp., supra, 

24 Cal.App.4th at p. 444), it may be more accurate to say that the 

parties jointly share the burden. “[T]he court should not be 

burdened with the obligation to determine the actual value of such 

an agreement. . . . Rather, the parties to such an agreement, since 
9

they are in the best position to place a monetary figure on its 

value, should have the burden of establishing the monetary 

value.” (Franklin Mint, supra, 130 Cal.App.4th at p. 1557; citing 

Abbott Ford, supra, 43 Cal.3d at p. 879.)

“Thus, in moving under section 877.6 for a good faith 

settlement determination, the moving party must set forth the 

value of the consideration paid and an evidentiary basis for that 

valuation, and must demonstrate that the valuation ‘was reached 

in a sufficiently adversarial manner to justify the presumption 

that a reasonable valuation was reached.’ [Citations omitted]. . . .

A nonsettling defendant may then challenge the settlement by 

‘attempt[ing] to prove that the parties’ assigned value is too low 

and that a greater reduction in plaintiff's claims against the 

remaining defendants is actually warranted.’ (Abbott Ford, supra, 

43 Cal.3d at p. 879, 239 Cal.Rptr. 626, 741 P.2d 124.).” (Franklin

Mint, supra, 130 Cal.App.4th at p. 1558.)5

2. The Trial Court Did Not Abuse Its Discretion Denying 

the $608,000 Offset

Sisca sought an offset equal to all the damages alleged in 

FCI’s cross-complaint: (1) $446,000 due under payment 

application #57, (2) a “general liability insurance deduction” of 

$80,000, and (3) a “remaining balance to bill of $82,000.00.” In 

its moving papers, to prove the offset, Sisca relied on: the 

allegations in FCI’s cross-complaint; the settlement agreement; a 

document that defense counsel stated was payment application 

5 Following our remand to the trial court, it was Sisca who 

moved to determine the offset. Thus, the parties were in the 

opposite procedural position than the parties in Franklin Mint, 

supra, 130 Cal.App.4th at pp. 1554-1555. 
10

#57; and Harouche’s and Harouche’s employee’s testimony that 

Harouche did not pay payment application #57.

The evidence established that FCI previously sought

$608,000 from Harouche, and Harouche had not paid the final 

payment application of $446,000. However, the evidence did not 

show Harouche actually owed any amount to FCI or that the 

cross-complaint for $608,000 had merit and, therefore, its 

dismissal was consideration paid to Harouche. 

Sisca provided no evidence showing whether payment 

application #57 or the bill for a remaining balance of $82,000 

identified work that was part of the original contract or a change 

order. The evidence did not show that Harouche had approved 

the work (either under the original contract or via change order) 

identified in payment application #57 or the outstanding $82,000 

bill. Sisca’s evidence itself called into question the charges listed 

in the payment application. In the deposition testimony attached 

to the motion, Harouche testified he did not pay payment 

application #57, and that “A lot of [payment application #57] was 

bogus because everything was thrown into a pot, like I'll charge 

you for everything, like, including a chair that was missing.”

Sisca did not submit declarations, testimony, or 

documentation showing the work accounted for in payment 

application #57 was completed by FCI. Although Harouche 

received a certificate of occupancy (which indicates the job was 

substantially completed), the certificate does not address the 

approval and completion of items in pay application #57 or the 

other remaining balance. Sisca produced no evidence that

countered Harouche’s testimony that he was not liable for the

$80,000 “general liability insurance deduction” or the $82,000.00 

balance.
11

Sisca asserts that Harouche is “bound by his judicial 

admission valuing the non-cash component of the settlement at 

$608,000.” The statement that Sisca relies on is found in 

Harouche’s opposition to Sisca’s motion contesting the good faith 

settlement determination:

“[The settlement amount] took a long time to 

resolve. The discussions went well into the night. 

Finton and his counsel argued vehemently for a low 

settlement amount. Harouche’s counsel argued 

vehemently for a high settlement amount. With 

respect to the fraud, Harouche’s counsel argued that 

Harouche was entitled to: (a) the $235,000 kickback 

to TWC; (b) the difference in cost between the actual 

change orders and the forged change orders, which 

was many hundreds of thousands of dollars; (c) the 

undisclosed payment to TWC of 4% of the Contract 

Sum paid by Harouche ($546,697.24); (d) interest on 

these sums from the date Harouche made the 

payments ($300,000-$500,000); and (e) punitive 

damages. Harouche’s counsel also argued that the 

Finton Defendants were responsible for attorney’s 

fees, unpaid insurance premiums which were FCI’s 

responsibility under the Construction Contract, and 

the insurance deductible paid by Harouche for the 

construction defect claim. [Citation.]

“Finton and his counsel fought these 

arguments vociferously. Finton express [sic] deep 

concern that a large settlement would cripple his 

ability to conduct business after the bankruptcy, 

especially given the non-dischargeable judgment. 
12

Finton’s counsel also argued repeatedly that the 

settlement should be lessened because of FCI’s 

$608,000 cross-complaint. The discussions became so 

heated that, at one point, Harouche’s counsel ended 

the discussions and left the conference room. After 

ten minutes or so, Finton’s counsel tracked him down 

and convinced him to continue the conversation. 

[Citation.] 

“At the end of the meeting, Harouche agreed to 

accept $1.1 million because: (a) there is always some 

chance of not prevailing, (b) even assuming he did 

prevail, there was a wide range of potential damages, 

(c) there was a significant risk of obtaining only a 

dischargeable judgment, and (d) there was a very 

large possibility of being unable to collect even if the 

judgment was non-dischargeable because the Finton 

Defendants are currently insolvent, and there is no 

guarantee they will ever be solvent again. [Citation.] 

“In addition, as noted above, FCI had a crosscomplaint against Harouche for $608,000. So, for 

example, if the Finton Defendants were found liable 

for 50% of the $2.6 million in alleged damages and 

assessed a punitive damages award of 50% of that 

amount, the total award would be $1.9 million. After 

subtracting $608,000 for the cross-complaint, 

Harouche would receive $1.3 million. To Harouche’s 

counsel’s thinking, $1.1 million was ‘close enough’ to 

make the compromise ‘reasonable,’ especially given 

that victory is never guaranteed and, in the absence 
13

of a settlement agreement, Harouche risked receiving 

nothing due to the bankruptcies.” (Italics added.)

In considering the “admission” quoted above in italics, the 

trial court implicitly found that Harouche only acknowledged his 

overall recovery could possibly be reduced by FCI’s $608,000 

cross-complaint, not that he agreed the $608,000 was lawfully 

owed. Harouche made this statement when analyzing the 

reasonableness of the $1,100,000 settlement. Although the trial 

court could have reasonably concluded that Harouche attributed

some value to the possibility of the cross-complaint’s success

(using the “for example” language), the trial court was not

obligated to find Harouche had admitted the cross-complaint was 

worth face value. 

The quoted language also showed that it was Harouche’s 

position that FCI was the one responsible for the insurance 

deductible paid by Harouche for a construction defect claim. 

Harouche’s statement in his opposition to Sisca’s motion 

contesting the good faith settlement determination did not, as a 

matter of law, diminish Harouche’s evidence that the crosscomplaint was worthless. The trial court reasonably found that 

Harouche credibly showed the value of the claim was worth less 

than $608,000, if it had any value at all. Given the gaps in 

Sisca’s evidence, the trial court “may not [have been] able to more 

than make its best estimate.” (Franklin Mint, supra, 

130 Cal.App.4th at p. 1561.) Considering the significant latitude 

the trial court had in the offset valuation, we will not second 

guess the court’s finding that the value of the cross-complaint 

was at most negligible and that no offset needed to be awarded.
14

DISPOSITION

The judgment is affirmed. Plaintiff Michel Harouche is

awarded costs on appeal.

RUBIN, P. J.

WE CONCUR:

BAKER, J.

MOOR, J.