Filed 11/17/20 Harouche v. The Wilshire Corp. CA2/5

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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.

B297364

(Los Angeles County

Super. Ct. No. SC124859)

APPEAL from a judgment of the Superior Court of Los 

Angeles County, Nancy L. Newman, Judge. Affirmed in part; 

reversed in part and remanded. 

The Ryan Law Firm, James S. Link, Kelly F. Ryan and 

Jillian M. Reyes for Defendants and Appellants.

Law Offices of Stephen S. Smith and Stephen S. Smith for 

Plaintiff and Respondent.

__________________________
2

INTRODUCTION

Plaintiff Michel Harouche hired defendant Stephen Sisca 

and Sisca’s company, defendant The Wilshire Corporation (TWC) 

to serve as his agents, overseeing and managing the construction 

of Harouche’s multi-million dollar residence in Malibu (the 

project). Without Harouche’s knowledge or consent, Sisca and 

TWC conditioned the award of the construction contract on the 

general contractor’s agreement to kickback $235,000 of 

Harouche’s first $350,000 payment to the contractor, plus an 

additional 4 percent of all other money Harouche would pay the 

contractor.1 General contractor John Finton agreed to these 

terms in writing on behalf of his company, Finton Construction, 

Inc. (FCI or contractor), and paid Sisca and TWC the kickbacks 

accordingly. About a third of the way into the seven-year project, 

Sisca proposed and Finton agreed to fraudulently increase the 

cost of change orders for the project, and split the profit from the 

marked up amounts.2

After learning of the kickbacks and fraud from a third 

party, Harouche sued Sisca, TWC, Finton, and FCI. Harouche 

settled with Finton and FCI for $1,100,000 in damages. 

Following a bench trial, the court found Sisca and TWC liable for 

breach of fiduciary duty and fraud. The court awarded 

$1,980,837.72 in damages against Sisca and TWC. That number 

consisted of three amounts: (1) $235,000 from the initial

1 The contract Harouche signed allowed for TWC to receive 

2.5 percent of all monies Harouche paid to the general contractor. 

Thus, this side agreement between Sisca and the contractor gave 

TWC an additional undisclosed 1.5 percent of the payments 

Harouche made to the contractor. 

2 Change orders are the mechanism within the construction 

contract for modifying the project and increasing the cost of it. 
3

kickback, (2) $205,011.46 from the 1.5 percent kickback of all 

amounts Harouche paid FCI, and (3) $1,540,826.26 from

fraudulent change orders.

On appeal, Sisca and TWC do not challenge the trial court’s 

liability findings. Rather, they make three arguments about 

damages. First, they assert the damages based on change orders 

were not supported by substantial evidence. Second, they argue 

the trial court failed to consider “special circumstances” that

justified their receipt and retention of the initial $235,000 

kickback. Third, they argue the trial court was required to award 

them an offset of $608,000 due to FCI’s release of its crosscomplaint in that amount as part of its settlement with 

Harouche. We conclude the trial court erred in calculating the 

change order damages. We modify the amount of those damages 

and remand for the trial court to recalculate prejudgment 

interest and rule on the $608,000 offset.

FACTS AND PROCEDURAL BACKGROUND

Although there were many witnesses who testified and 

many subcontractors who worked on the project, three people are 

at the center of this appeal:

1. Harouche – the owner of the residence 

2. Sisca and his company TWC – the project manager

3. Finton and his company FCI – the contractor

Several formal contracts and informal arrangements 

among these people drive the analysis of the parties’ dispute. We 

start our factual synopsis with those agreements.

1. Project Management Agreement Between Harouche 

and TWC

In September 2008, Harouche and TWC entered into a 

project management agreement, in which TWC agreed to act as 

Harouche’s project manager on the project. TWC was responsible 

for managing “all aspects of the pre-construction and construction 
4

process,” including “interviewing negotiating and hiring a general 

contractor” and “management of general contractor.” The 

agreement stated TWC had been acting in this capacity on behalf 

of Harouche since April 1, 2008 and would continue to act on 

Harouche’s behalf until project completion. Harouche agreed to 

pay TWC a project management fee of $200,000, plus $1,600 for 

each trip Sisca made to California to manage the project. 

Pursuant to this agreement, Harouche eventually paid Sisca and 

TWC fees totaling $262,000, plus travel expenses of $63,400.

2. Construction Contract Between Harouche and FCI

On August 6, 2008, Harouche entered into a “Stipulated 

Sum Construction Agreement” with FCI. FCI agreed to construct 

the project for $10,265,218.31, which included the contractor’s 

fee. The contractor’s fee was 12.75 percent of the contract, which 

included “2.50% to Sisca.”

3 The construction contract provided

that “The Contract Sum may be changed only by a written 

Change Order Addendum.” 

3. Kickback Agreement

Unbeknownst to Harouche, on the same day that Harouche 

and FCI entered into the construction contract, TWC and FCI 

entered a side agreement for the project. As a condition of being 

awarded the construction contract, FCI agreed to pay TWC 

additional amounts that were not provided for in the contracts 

executed by Harouche. First, FCI agreed to pay TWC a $235,000 

3 In addition to the fees set out in the project management 

agreement, Harouche agreed in the construction contract that 

TWC would receive 2.5 percent of the entire construction contract 

cost. FCI effectively received a contractor fee of 10.25 percent of 

the contract after TWC took its cut of the contractor fee. (At 

trial, the parties disagreed on whether Harouche was aware of 

the provision for the 2.5 percent payment from FCI to Sisca, but 

the trial court found that at least Harouche’s financial advisor 

was aware of it.)
5

project “referral fee” out of the initial $350,000 payment that 

Harouche was to make to FCI under the Construction Contract. 

Second, FCI agreed to pay TWC 4 percent of all monies that 

Harouche paid FCI under the Construction Contract, rather than 

the 2.5 percent that the Construction Contract provided.

In accordance with this kickback agreement, FCI paid TWC 

$235,000 “within one day of Harouche making his first payment 

to FCI” under the Construction Contract. FCI paid TWC 4

percent of the $13,667,431.81 that Harouche paid FCI, rather 

than the 2.5 percent that had been recited in the construction 

contract. The extra 1.5 percent amounted to $205,011.46. 

4. Fraudulent Change Orders 

During the first third of the project, Sisca suggested to 

Finton that they use the change order process from the 

construction contract to make extra money for themselves. Sisca 

proposed that they increase the amounts due to subcontractors

for the change orders, submit the inflated subcontract payments

to Harouche, and then split the profit 50/50. In an April 2011 

email, Sisca wrote Finton: “On a separate note I’m looking to 

make us some more money on the Harouche Job. Please confirm 

you are good with a 50/50 split on anything I can get us on 

extras/change orders.” Finton replied via email that he agreed to 

the arrangement. Sisca told Finton that Harouche would never 

find out about the altered change orders.

Thereafter, Finton transmitted to Sisca the subcontracts 

that FCI had entered into with subcontractors for the change 

order work. Sisca then altered the subcontracts to increase the 

cost of the work. The “falsified subcontracts” were submitted to 

Harouche for payment.

Harouche introduced into evidence nine subcontracts that 

had been forged to reflect an unearned increased price for the 

work. The evidence included both the original and the altered 
6

subcontract for the same work. Finton later attested that the 

original subcontracts he gave to Sisca to alter were “real” and 

reflected the “true cost” of the change order work described in 

those subcontracts. Sisca provided each of the inflated

subcontracts to Harouche for payment.

Finton testified that he did “not recall the total, collective 

inflated amounts and the total collective amount of money FCI 

paid to TWC under this scheme.” But, he did recall that “TWC’s 

50% plus 4% of FCI’s 50% added up to a minimum of many 

hundreds of thousands of dollars.”

By the time the project was completed in 2015, Harouche 

had paid FCI $13,667,431.81. That amount was $3,042,213.50 

above the original construction contract. 

5. Harouche Sues Sisca/TWC and Finton/FCI

On October 13, 2015, Harouche filed a complaint against 

Sisca, TWC, Finton, and FCI. He asserted claims for breach of 

contract, fraud, negligent misrepresentation, breach of fiduciary 

duty, and negligence, and sought damages of $2.6 million. FCI 

filed a cross-complaint against Harouche, claiming Harouche

failed to pay FCI the last “payment application #57” under the 

Construction Contract. FCI sought damages of $608,000.

Sisca and TWC also filed a cross-complaint against 

Harouche. They asserted claims for breach of contract and 

“common count.” They claimed that Harouche owed them 

$104,000 under the project management agreement.

During the pendency of this case, FCI and Finton filed for 

bankruptcy. Apparently with the approval of the bankruptcy 

trustee, Harouche then reached a settlement with FCI and 

Finton, where Finton and FCI stipulated to a $1,100,000 

judgment in favor of Harouche. Finton and FCI also agreed to 

dismiss their cross-complaint, and to admit to facts 

demonstrating that the judgment against them was non-
7

dischargeable under sections 523(a)(2)(A) and (a)(6), title 11 of 

the United States Code. Those facts were set forth in Finton’s

declaration, which was attached to the settlement agreement.

Although Finton and FCI stipulated to a judgment of 

$1,100,000, the settlement did not require them to pay that 

amount immediately. Instead, because of the bankruptcy, 

Harouche agreed to forbear from collecting the judgment in 

return for FCI making small monthly payments, commencing 

upon approval of its bankruptcy plan of reorganization. Only at 

the end of the plan period would FCI and Finton be obligated to 

pay the rest of the judgment.

In January 2017, Harouche, Finton, and FCI filed an 

application with the trial court to determine that their settlement 

was entered into in good faith. Sisca and TWC contested the 

motion for the good faith settlement. On March 8, 2017, the 

bankruptcy court approved the settlement agreement between 

FCI and Harouche. On May 25, 2017, the trial court approved 

the good faith settlement and entered “Judgment Pursuant to 

Settlement” against FCI and Finton.

6. Trial and Judgment

In January 2018, the court held a bench trial for the claims 

against Sisca and TWC and on their cross-complaint. The parties 

filed posttrial briefs in March and April 2018. On June 12, 2018, 

the court issued its proposed statement of decision, finding in 

favor of Harouche. The parties objected to certain aspects of the 

decision. Sisca and TWC argued that the court miscalculated the 

damages associated with the fraudulent change orders. They 

also argued that the trial court should have offset their damages 

by the amount FCI’s released cross-complaint against Harouche.

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

statement of decision and reserved punitive damages for further 
8

proceedings.4 The court found “[t]he contract between Sisca and 

Harouche obligated Sisca to act as Plaintiff’s agent with respect 

to the construction project.” The court determined Sisca 

breached his fiduciary duty to Harouche “by participating in a 

scheme with Finton to make additional money off of the 

construction project at the expense of Harouche.” The court 

stated that Sisca violated his fiduciary duty by receiving 

undisclosed fees from Finton while advocating for Finton to 

receive the contract, and by arranging to increase the 

subcontractors’ pricing and splitting the increase with Finton.

The court also found Sisca and TWC committed fraud, based on

the additional 1.5 percent of monies that Sisca and TWC received 

from Finton and the altered change orders.5

In total, the court found the following damages, broken into 

three categories: (1) $235,000 from the initial kickback (“referral 

fee”), (2) $205,011.46 from the 1.5 percent kickback on all 

amounts Harouche paid FCI, and (3) $1,540,826.26 from 

fraudulent change orders. The court retained jurisdiction to 

award Sisca and TWC an offset if and when FCI and Finton 

made a payment to Harouche under the settlement agreement.

Sisca and TWC renewed their objections on the calculation 

of damages for the change orders and the offset of the settlement 

between FCI and Finton and Harouche.

7. Entry of Judgment 

After the trial court issued the final statement of decision, 

but before judgment was entered against Sisca and TWC, FCI

paid Harouche $18,000 under the bankruptcy plan of 

4 On November 15, 2018, the court issued a separate 

statement of decision denying punitive damages. 

5 The court ruled against Harouche on his breach of contract 

and negligent representation causes of action.
9

reorganization. On March 5, 2019, Harouche filed notice of the 

payment and requested an offset of $18,000 from the judgment.

On March 19, 2019, the court signed a revised judgment, 

reducing damages by $18,000. The revised judgment awarded

Harouche $1,962,837.72 in damages against Sisca and TWC, plus 

prejudgment interest of $990,486.45. The court awarded 

Harouche costs as the prevailing party, and stated Sisca and 

TWC “shall take nothing by their Cross-Complaint.”

6 The court 

reserved “jurisdiction to calculate and award offset credits to 

[Sisca and TWC] for any future settlement payments that are 

made to Harouche by defendants Finton Construction, Inc. and/or 

John Finton.”

Sisca and TWC filed a timely notice of appeal.

DISCUSSION

Sisca and TWC argue (1) the damages based on change 

orders were not supported by substantial evidence, (2) the trial 

court failed to consider “special circumstances” that justified 

defendants’ receipt and retention of the initial $235,000 kickback, 

and (3) the trial court was required to award defendants an offset 

of $608,000 due to FCI’s release of its cross-complaint in that 

amount as part of its settlement with Harouche. We address 

each in turn.

1. The Damages for the Fraudulent Change Orders Were 

Miscalculated

In its statement of decision, the court awarded damages on 

nine change orders. The first eight fraudulent change orders 

corresponded to eight invoices from seven subcontractors. The 

ninth fraudulent change order corresponded to four subcontracts 

submitted by subcontractor Solar Electrical. Sisca and TWC 

6 The original judgment included the following: “FCI shall 

take nothing by its Cross-Complaint.” 
10

argue that the $1,540,826.26 in damages attributed to fraudulent 

change orders was not supported by substantial evidence, and 

that the damages for the fraudulent inflation of change orders 

amounted only to $250,324. Specifically, Sisca and TWC argue 

the damages for the first eight change orders were miscalculated. 

Sisca and TWC also argue the court erred in awarding any 

damages for the Solar Electrical change order because Harouche 

never paid the fraudulent marked up amount. 

“In reviewing a judgment based upon a statement of 

decision following a bench trial, we . . . apply a substantial 

evidence standard of review to the trial court’s findings of fact. 

[Citation.] Under this deferential standard of review, findings of 

fact are liberally construed to support the judgment and we 

consider the evidence in the light most favorable to the prevailing 

party, drawing all reasonable inferences in support of the

findings. [¶] A single witness’s testimony may constitute 

substantial evidence to support a finding. [Citation] It is not our 

role as a reviewing court to reweigh the evidence or to assess 

witness credibility. [Citation] ‘A judgment or order of a lower 

court is presumed to be correct on appeal, and all intendments 

and presumptions are indulged in favor of its correctness.’ 

[Citation] Specifically, ‘[u]nder the doctrine of implied findings, 

the reviewing court must infer, following a bench trial, that the 

trial court impliedly made every factual finding necessary to 

support its decision.’ ” (Thompson v. Asimos (2016) 6 Cal.App.5th 

970, 981 (Thompson).)7

7 Harouche cites Seffert v. Los Angeles Transit Lines (1961) 

56 Cal.2d 498, 507, and Bertero v. National General Corp. (1974) 

13 Cal.3d 43, 61, for the proposition that a damage award can 

only be reversed if it was the result of passion or prejudice. 

These cases address arguments about excessive nonpecuniary 

damage awards in jury trials, and are inapt here. 
11

a. The Court Miscalculated Damages on the First Eight 

Change Orders

Sisca and TWC explain that the trial court indicated in the 

Statement of Decision that it intended to award damages equal to

the difference between the original eight subcontracts and the

corresponding fraudulent versions that were submitted in the 

change orders to Harouche for payment. They assert that the 

court inadvertently awarded damages for the entire price of the

altered subcontracts, not just the fraudulent portion. We agree. 

In its Statement of Decision, the court made the following 

findings on the fraudulent change orders: 

“Paragraph 9 of the contract required Harouche 

to pay money above the stipulated sum only if it was 

part of a legitimate change to the scope of the 

construction of the residence requiring a change 

order. It was established at trial that Harouche 

continued to add items onto the project which 

resulted in a significant number of change orders. 

The number of change orders varied among the 

witnesses who testified, but it does appear that there 

were a significant number of change orders.

“The change orders appear to be legitimate; 

however, the agreement that Sisca and Finton 

reached with respect to marking up the amount 

provided by the subcontractor was a fraudulent act 

causing harm to Harouche. Finton’s declaration 

indicates that he transmitted to Sisca the real 

subcontracts that FCI had entered with the 

subcontractors to perform the change order work. 

Unbeknownst to Harouche those subcontracts were 

altered to increase the cost of the work substantially 

above the true cost of that work. Sisca was fully 
12

aware of this fact. Sisca submitted those falsified 

contracts to Harouche for payment of the inflated 

amount of the cost of the work. Harouche then would 

pay that inflated amount to FCI. Finton would take 

that payment and divide the inflated amount fiftyfifty between FCI and TWC. FCI then paid to TWC 

its 50 percent, plus its 4 percent of FCI’s 50 percent 

of the inflated amount. Although Finton never saw 

the forged contract, Sisca told him that he altered the 

subcontracts. It is noted that Sisca denies he altered 

the subcontracts.”

In its analysis of damages attributable to these fraudulent 

change orders, the trial court stated: 

“Sisca argues that the subcontract amount is 

not relevant to the damages claim because the 

change orders were based on various subcontract 

approvals. However, in the Court’s view, the clearly 

inflated and altered subcontracts is where the fraud 

occurred. Although Sisca denies forging the 

subcontracts, the court doubts his credibility.

Further, it is clear he was aware of this process. 

Finton testified that Sisca was responsible for the 

alterations and that they were done at his 

suggestion.

“There were eight subcontracts presented by 

plaintiff as evidence of the inflated amounts which 

were to be split by Finton and Sisca.

“The difference between the original invoices 

noted above and the amount submitted to Harouche 

totals $1,427,425. The eight original subcontracts 

were admitted into evidence by stipulation. Mr. 

Clark testified that he received corresponding 
13

contracts for differing amounts and submitted those 

contracts to Harouche for payment.

“The Court is basing its damages award 

relative to the solar contract on the testimony of Mr. 

Johanson and his declaration (Exhibit 91) of Solar 

Electrical Systems. Mr. Johanson testified that he 

prepared four subcontracts for his work on the 

residence. The total of those contracts was 

$133,157.74. Mr. Clark [Harouche’s employee tasked 

with paying invoices from the contractor] received an 

invoice for $245,819 which he submitted to Harouche. 

The difference is $112,661.26.

“The total damages awarded to the Plaintiff for 

the inflated subcontracts is $1,540.826.26. Subject to 

the good faith settlement deduction noted below, the 

Court will make an award to Plaintiff.” (Emphasis 

added.)

The court’s findings reflect that Harouche requested many 

changes in the project and that the change orders corresponded to 

legitimate work. The court found that the fraud occurred solely 

where Sisca altered the subcontracts to charge Harouche more 

money for the same work. Contrary to what Harouche argues on 

appeal, the court singled out this portion of the change orders as 

the basis for fraud damages – not the entire amount of each 

change order. 

The trial court stated that it had evidence of both the eight 

original subcontracts and the corresponding eight altered 

versions of those subcontracts. The court calculated the damages

to be the “difference between the original invoices noted above 

and the amount submitted to Harouche.” We set forth those 

amounts in the table below.

 
14

Subcontract Original 

Invoice

Amount 

Submitted to 

Harouche

Difference 

(Resulting 

Damages)

Apollo Glazing 

Contractors –

October 19, 2011

$395,000 $450,000 $55,000

Chris Ryan Wall 

Covering & Paint –

March 21, 2014

$8,340 $13,000 $4,660

Chris Ryan Wall 

Covering & Paint –

March 21, 2014

$115,000 $163,600 $48,600

Grand Heating –

November 23, 2011

$119,305 $132,516 $13,211

Kruger Electrical –

January 17, 2013

$150,322 $204,000 $53,678

LC Pools –

June 30, 2011

$196,430 $255,380 $58,950

Preferred

Contractors –

October 31, 2011

$143,300 $149,500 $6,200

X-Tech Security –

March 11, 2013

$49,404 $59,429 $10,025

TOTALS $1,177,101 $1,427,425 $250,324

The final, right-hand column of the table reflects the 

$250,324 difference between the original accurate invoices and 

amounts charged to and paid by Harouche for the eight 

subcontracts. The trial court was mistaken when it concluded 

the difference amounted to $1,427,425. 

Harouche argues that the trial court intended to award the 

full amount of the altered subcontracts. He cites Bardis v. Oates
15

(2004) 119 Cal.App.4th 1, 13 (Bardis), in arguing “the trial court 

was free to decide that all of the eight Forged Subcontracts 

should be disallowed because the evidence overwhelmingly 

proved that [Sisca and TWC] acted fraudulently and in breach of 

their fiduciary duty regarding those subcontracts.” In Bardis, the 

appellate court concluded the jury was entitled to give no weight 

to the fiduciary’s post hoc explanation that the money he 

fraudulently took from the principal was for legitimate overhead 

costs. (Id. at pp. 12-13.)

Bardis is inapt: the trial court here determined that the 

“change orders appear to be legitimate” and were based on the 

many changes requested by Harouche during the project. In 

finding the change orders were not entirely fraudulent, the court 

rejected Harouche’s claim of $3,042,213.50 in damages that 

represented the amount he paid in excess of the stipulated sum 

in the Construction Contract. The court found that the markup 

on “the amount provided by the subcontractor was a fraudulent 

act causing harm to Harouche.” The trial court’s statement of 

decision explicitly stated that it did not intend to award the full 

amount of the altered subcontracts, but rather it was awarding 

the “difference between the original invoices noted above and the 

amount submitted to Harouche.”

8

Harouche also asserts the court’s $1,427,425 damages 

finding must stand because Sisca and TWC “never cited any 

evidence showing that any portion of the Contract Prices found in 

the eight Forged Subcontracts was true. The fact that Sisca 

8 We do not address whether the trial court could properly 

have awarded as damages the entire amount of the change orders 

fraudulently issued or used some other calculation. The trial 

court stated that it was not making such an award, and the issue 

before us is whether the trial court made a calculation error in 

determining the amounts necessary to effect its award.
16

altered real subcontracts to create the Forged Subcontracts does 

not mean that some amounts in the Forged Subcontracts were 

‘real.’ ” We disagree with this characterization of the record. 

At trial, plaintiff introduced statements from Finton, who

attested that all the change orders were based on legitimate work 

and that Sisca marked up the cost of the subcontractor’s 

legitimate work to make a profit. The court found “Finton to be a 

credible witness who has declared under penalty of perjury to 

statements against his own interest.” In making its decision, the 

court referenced the exhibits of both the original and the altered 

subcontracts. This substantial evidence supported the court’s 

conclusion that the original invoices were “real” and explained 

that the court did not intend to award damages for the 

nonfraudulent portion of the change order.

To the extent Harouche seeks affirmance based on Finton’s 

declaration that Sisca received “hundreds of thousands of dollars”

from the “forged subcontracts,” the trial court did not find this

argument or the conclusory statements persuasive. The court 

found damages for the nine change orders that Harouche 

introduced into evidence at trial. We do not reweigh the evidence 

on appeal. (Thompson, supra, 6 Cal.App.5th at p. 981.)

We conclude that the record supports only $250,324 in 

damages for the eight fraudulent change orders. 

b. Solar Electrical Fraudulent Change Orders Were 

Properly Included in the Calculation of Damages

The ninth change order was for work provided by Solar 

Electrical. The testimony at trial was that it was confusion over 

this subcontract that ultimately led to Harouche’s discovery of 

Sisca and Finton’s entire change order fraud scheme. It is 

undisputed that Harouche was billed $245,819 by Sisca in a 

change order for Solar Electrical’s work dated July 16, 2012. Yet, 

Solar Electrical had only actually invoiced $133,160.74 in four 
17

separate invoices ($17,650, $50,443.74, $57,467, and $7,600). 

The trial court found that the difference between the original 

invoices and the amount submitted to Harouche was 

$112,661.26.

9 

Citing testimony from one of Harouche’s employees, Sisca 

and TWC argue the record indicates that Harouche never paid 

the additional $112,661.26 that constituted the fraud. Sisca and 

TWC misconstrue the testimony.

Witness John Clark, an employee of Harouche’s whose job 

it was to make payments on the construction contract, testified 

that he directly contacted Solar Electrical to ascertain how much 

Harouche owed on the subcontract, as it was unclear from their 

records. Clark testified that the Solar Electrical office manager 

told him there was a remaining balance that had to be paid for 

Solar to turn on the system it had installed. Clark obtained 

copies of the four invoices from Solar Electrical, which totaled “in 

the 130,000 range” and compared them to the contract he had 

received from Sisca, which was “$240-some thousand.” 

Referencing his emails with Sisca (exhibit 76), Clark testified 

that he confronted Sisca about the substantial discrepancy 

between what Solar Electrical had charged for the work, and 

what Sisca had billed Harouche. In the email, Clark wrote, “If 

you account for everything paid to date including monies to the 

previous companies prior to everything consolidating with Solar 

Electrical we have already paid approximately 225.4k, yet their 

services only total 135k.” Sisca responded via email, instructing

Harouche to pay the remaining balance directly to Solar 

9 The trial court appears to have miscalculated the amount: 

the difference is actually $112,658.26. 
18

Electrical so that Solar Electrical would turn on the system. 

Clark stated he paid the balance to Solar Electrical.

10

The testimony and emails evidence that Harouche paid 

more than $225,400 for the Solar work. We conclude the trial 

court reasonable found that the damages associated with the 

Solar subcontract was the difference between the original 

invoices and the amount submitted to Harouche, i.e. $112,658.26.

c. Reduction in Damages for the Inflated Subcontracts

The trial court awarded $1,540,826.26 in damages for the 

inflated subcontracts. Based the record, the damages for the

inflated subcontracts were actually $362,982.26 ($250,324 for the 

first eight subcontracts and $112,658.26 for the Solar Electrical

contract). “When the evidence is sufficient to sustain some but 

not all alleged damages, we will reduce the judgment to the 

amount supported by the evidence.” (Behr v. Redmond (2011) 

193 Cal.App.4th 517, 533 (Behr).) We modify the judgment to 

reduce the amount of damages on the nine inflated subcontracts

to $362,982.26 ($1,540,826.26 - $1,177,844).

2. $235,000 Damages was Properly Awarded for the 

“Referral Fee”

Sisca and TWC argue the trial judge erred when it awarded 

Harouche the $235,000 “referral fee,” the amount TWC required 

FCI to pay upon receiving the construction contract. Citing 

Savage v. Mayer (1949) 33 Cal.2d 548, 551 (Savage), Sisca and 

TWC assert the court failed to consider special circumstances 

underlying the payment by FCI to TWC, that should permit TWC 

to keep $235,000. We apply the aforementioned substantial 

evidence standard of review in reviewing the trial court’s decision 

on this factual issue. (Thompson, supra, 6 Cal.App.5th at p. 981.)

10 Clark testified using round estimates. The court found the 

true amounts were slightly different based on the actual invoices.
19

Savage does not assist Sisca and TWC. “An agent, 

however, is not permitted to make any secret profit out of the 

subject of his agency. [Citations.] All benefits and advantages 

acquired by the agent as an outgrowth of the agency, exclusive of 

the agent’s agreed compensation, are deemed to have been 

acquired for the benefit of the principal, and the principal is 

entitled to recover such benefits in an appropriate action. 

[Citation.] In the absence of special circumstances, moneys 

received by one in the capacity of agent are not his, and the law 

implies a promise to pay them to the principal on demand. 

[Citation.] It follows that the principal’s right to recover does not 

depend upon any deceit of the agent, but is based upon the duties 

incident to the agency relationship and upon the fact that all 

profits resulting from that relationship belong to the principal.”

(Savage, supra, 33 Cal.2d at p. 551.) 

Sisca and TWC rely on the italicized quoted language above 

in asserting there were special circumstances that “permitted the 

payment of the referral fee to TWC.” Sisca and TWC admit

“there are no cases that we can find—in or out of state— defining 

‘special circumstances,’ ” but nonetheless assert that their 

circumstances allowed them to retain the referral fee.11

Sisca and TWC characterize these “special circumstances”

as follows: “The $235,000 referral fee is just compensation for 6 

months’ work without any payment . . . .” They assert, “It was 

Harouche who took advantage of Sisca in asking him to 

undertake due diligence on the purchase of the Malibu property 

for which there was no renumeration.” Whether intended or not, 

Sisca and TWC essentially argue that they were entitled to 

11 We have found no appellate authority that applies Savage’s 

“special circumstances” exception to allow an agent to retain a 

secret profit through the agency relationship, unbeknownst to the 

principal. 
20

commit fraud because Harouche did not pay them fairly for their 

services in the six months from April 1, 2008 to September 23, 

2008. The trial court was not persuaded; nor are we.

The contract between Harouche and Sisca/TWC, dated 

September 23, 2008 stated: “TWC has been acting in this 

capacity on behalf of Harouche since April 1, 2008. TWC will 

continue to act diligently on behalf of Harouche until such time 

the Project is completed and ready for occupancy. . . . In 

consideration for the services of TWC, Harouche will pay TWC a 

Project Management Fee of Two Hundred Thousand Dollars 

($200,000).” This provision reflects the parties’ explicit 

agreement that the $200,000 project management fee was, in 

part, for the services Sisca had been providing “since April 1, 

2008.” The trial court found that Harouche “ultimately paid 

Sisca and TWC “much more than” the $200,000 project 

management fee contained in the contract. Harouche actually 

paid Sisca and TWC a project management fee of $262,000, plus 

travel expenses of $63,400. Sisca and TWC also received 2.5

percent of the construction contract payments from FCI. If Sisca 

and TWC believed they were entitled to additional compensation, 

they should have said so in the negotiations leading up to the 

September 23, 2008 contract. Self-help was not a lawful option.

Sisca was Harouche’s agent and fiduciary and was thus 

“not permitted to make any secret profit out of the subject of his 

agency.” (Savage, supra, 33 Cal.2d at p. 551.) To the extent 

there is a “special circumstances” exception to this rule, 

substantial evidence supports the trial court’s implied finding 

that no “special circumstances” existed that allowed Sisca and 

TWC to pocket the undisclosed fee. 
21

3. Remand Is Necessary to Allow the Trial Court to 

Make Express Findings on the Claimed $608,000 

Offset for FCI’s Released Cross-Complaint

Sisca and TWC argue the trial court erred in failing to 

offset the judgment pursuant to Code of Civil Procedure section 

877 by $608,000, the amount of FCI’s cross-complaint against 

Harouche, which was released as part of FCI’s settlement with 

Harouche.12 The record does not indicate that the trial court 

made an express finding on this issue even though it was 

litigated by the parties. Accordingly, we remand to allow the 

trial court to make that determination.

a. Section 877 Settlement Valuation for Codefendants’

Damages Offset

“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 (LAOSD Asbestos).) 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 co-obligors mutually subject to contribution rights . . .

it shall reduce 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).) 

12 All subsequent statutory references are to the Code of Civil 

Procedure unless indicated otherwise. 
22

At issue here is the trial court’s valuation of the Finton/FCI 

settlement for Sisca/TWC’s damages offset under section 877. 

“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 Co. v. 

Superior Court (2005) 130 Cal.App.4th 1550, 1557, fn. omitted 

(Franklin Mint).) 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.’ ” (Id. at p. 1558.) “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.’ ” (Ibid.) “A 

defendant seeking an offset against a money judgment has the 

burden of proving the offset.” (Conrad v. Ball Corp. (1994) 

24 Cal.App.4th 439, 444.)

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), 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 
23

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.) “The trial court’s 

determination of the value of the consideration paid will be 

upheld on appeal if supported by substantial evidence.” (Id. at

p. 1558.)

b. Application of Section 877

Harouche, Finton, and FCI moved for a good faith 

settlement determination, asserting that the settlement was 

worth $1,100,000, i.e. the amount of consideration Finton and 

FCI agreed to pay in installments for their dismissal from the 

litigation. In their opposition filed on February 21, 2017, Sisca 

and TWC did not argue that the $608,000 alleged in the 

Finton/FCI cross-complaint should be credited toward the value 

of the settlement. In fact, their argument that Finton should 

proportionately bear more liability for the damages than 

Sisca/TWC was largely premised on the concern that the offset 

would only be $1,100,000 of the potential $3,042,213.50 in 

damages possible at trial.

It was not until June 27, 2018, Sisca and TWC argued in 

their objections to the trial court’s proposed statement of decision 

that the offset should include the amount the cross-complaint’s

for $608,000. They explained that in FCI’s cross complaint, FCI 

alleged Harouche owed $608,000, the amount outstanding on the 

final pay application associated with the construction contract. 

Sisca and TWC argued: “The outstanding amount of this final 

pay application and unbilled amounts as alleged in the CrossComplaint and to which Harouche and Finton both testified at 

trial as being unpaid are costs avoided by Harouche and therefore 

the value of these amounts inures to the benefit of Harouche. 

Consequently, the value of the released FCI Cross Complaint 

should be considered part of the settlement amount ‘stipulated by 
24

the release.’ The amount avoided is an additional $608,000.00[.] 

Therefore, the net monetary effect of the good faith settlement by 

FCI and Finton to Harouche is $1,708,000.00. It is from this 

amount that the Plaintiff’s claims against Sisca must be reduced 

pursuant to Code [Civil Procedure section] 877, not the 

$1,100,000.00 in the Proposed Statement.”

The court’s ruling on whether it should offset the judgment

by the settlement was primarily limited to the following language 

from its statement of decision: “The Court will not assess an 

offset at this time; however, the Court retains jurisdiction to 

award the Sisca Defendants an offset when and if the Finton 

Defendants make a payment to Harouche under the settlement 

agreement.”

The first part of the sentence refers to an offset in general 

terms and could be interpreted to include the $608,000. But 

what follows—the court’s statement that it will consider an offset 

if the “Finton Defendants make a payment” – appears only to 

refer to the periodic $18,000 payments FCI was to make under 

the settlement agreement and bankruptcy plan of 

reorganization.13 In any event, the trial court did not expressly 

13 The $608,000 was part of the claim that FCI and Finton 

made against Harouche in its cross-complaint. In its statement 

of decision, the court stated: “A cross-complaint was filed by 

defendants for breach of contract and common count for goods 

and services rendered. Neither party addressed the crosscomplaint in their closing arguments. The Court finds against 

cross complainant on the cross complaint.” It is unclear whether 

the court’s adjudication of the cross-complaint was intended to 

encompass a finding that there was no merit to the $608,000, and 

hence nothing additional to overset. Harouche asserts that Sisca 

and TWC were not entitled to an offset because “Harouche never 

sought the $608,000 at issue in FCI’s cross-complaint as damages 

in his complaint, and the trial court never held the Sisca 
25

find whether to offset the judgment by $608,000 or any other

amount. Nor can we apply the doctrine of implied findings to 

conclude the trial court denied any offset because the issue was 

controverted.

“When a statement of decision does not resolve a 

controverted issue, or if the statement is ambiguous and the 

record shows that the omission or ambiguity was brought to the 

attention of the trial court either prior to entry of judgment . . . , 

it shall not be inferred on appeal . . . that the trial court decided 

in favor of the prevailing party as to those facts or on that issue.”

(§ 634.) Given the procedural posture of the case and the 

equitable nature of the offset inquiry, we remand for the trial 

court to consider and rule on the $608,000 offset.

4. Prejudgment Interest Must be Recalculated Based on 

the Modified Judgment

The trial court awarded Harouche $990,486.45 in 

prejudgment interest, based on its total damages award of 

$1,962,837.72. We hold in part 1 that the trial court erred in 

calculating the fraudulent change order damages. Instead, the 

true damages for the inflated subcontracts was $362,982.26 

($250,324 for the first eight subcontracts and $112,658.26 for the 

solar contract). In part 2, we affirmed the trial court’s award of 

$235,000 in damages for the “referral fee.” Also, and 

unchallenged on appeal, we affirm the trial court’s award of 

$205,011.46 in damages for the 1.5 percent kickback of all 

amounts Harouche paid FCI. Based on the foregoing, we modify 

the judgment to award Harouche $802,993.72 ($362,982.26 + 

Defendants liable for such amounts.” He misses the point. Sisca 

and TWC argue it is FCI’s release of a valid $608,000 claim that 

Harouche allegedly owed FCI that constitutes an additional 

economic benefit to Harouche under the settlement agreement, 

and its value should be included in the offset.
26

$235,000 + $205,011.46) in damages. (See Behr, supra,

193 Cal.App.4th at p. 533 [“When the evidence is sufficient to 

sustain some but not all alleged damages, we will reduce the 

judgment to the amount supported by the evidence.”].) 

We remand the matter for the trial court to modify the 

award of prejudgment interest based on the correct damages of 

$802,993.72. (See Wallis v. PHL Associates, Inc. (2013) 

220 Cal.App.4th 814, 817 [modification of the judgment “as to the 

jury verdict and remand for recalculation of prejudgment 

interest.”].)

DISPOSITION

The judgment is modified to reduce the damage award to

Harouche to $802,993.72. The matter is remanded to the trial 

court with directions to (1) recalculate the prejudgment interest

on the $802,993.72 in damages; (2) rule on Sisca and TWC’s claim 

of a $608,000 offset; and (3) prepare an amended judgment. In 

all other respects the judgment is affirmed. The parties shall 

bear their own costs.

RUBIN, P. J.

WE CONCUR:

BAKER, J.

KIM, J.