Court Opinion

ID: 9891152
Source: CourtListenerOpinion
Date Created: 2023-10-17 17:04:13.335998+00
Date Added: 2024-06-11T13:39:12.331203
License: Public Domain

Filed 10/17/23 Center for Healthcare Education and Research v. Sacaris CA4/1

                   NOT TO BE PUBLISHED IN OFFICIAL REPORTS
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 This opinion has not been certified for publication or ordered published for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.

                 COURT OF APPEAL, FOURTH APPELLATE DISTRICT

                                                       DIVISION ONE

                                              STATE OF CALIFORNIA

 CENTER FOR HEALTHCARE                                                        D080838
 EDUCATION AND RESEARCH, INC.,

      Plaintiff, Cross-defendant and
 Appellant,                                                                   (Super. Ct. No. 37-2017-
                                                                              00004475-CU-BC-CTL)
 MARK SACARIS,

            Cross-defendant and Appellant,

            v.

 INTERNATIONAL CONGRESS FOR
 JOINT RECONSTRUCTION, INC.,

      Defendant, Cross-complainant
 and Respondent.

          APPEAL from a judgment of the Superior Court of San Diego County,
Kenneth J. Medel, Judge. Affirmed.
          Law Offices of Stephen B. Morris and Stephen B. Morris for Plaintiff,
Cross-defendant, and Appellant Center for Healthcare Education and
Research, Inc. and Cross-defendant and Appellant Mark Sacaris.
      No appearance for Defendant, Cross-complainant, and Respondent
International Congress for Joint Reconstruction, Inc.

      This appeal follows our reversal of a prior judgment and subsequent
retrial to determine the appropriate amount of disgorgement for a single
cause of action for breach of fiduciary duty. The litigation arose after the
International Congress for Joint Reconstruction, Inc. (ICJR) discovered its
contractor, the Center for Healthcare Education and Research, Inc. (CHE),
was overbilling for the service of producing medical education conferences
and taking advantage of ICJR in other ways.
      After the initial bench trial, the court found CHE had breached the
fiduciary duty it owed to ICJR by failing to disclose its charges, but concluded
disgorgement of profits was not available because ICJR did not prove it
suffered monetary harm. On appeal from that ruling, we held that ICJR was
not required to show harm to obtain disgorgement and that ICJR had “met
its burden to establish a reasonable approximation of the amount” that CHE
profited by its misconduct. (Center for Healthcare Education and Research,
Inc. v. International Congress for Joint Reconstruction, Inc. (2020) 57
Cal.App.5th 1108, 1115 (Center).) We reversed the portion of the judgment
finding in CHE’s favor on ICJR’s breach of fiduciary duty claim, remanded
the matter to the trial court for the limited purpose of conducting “further
proceedings to determine the amount to be awarded to ICJR,” and otherwise
affirmed the judgment. (Id. at p. 1133.)
      After remand, the trial court held a one-day retrial on the amount of
profits CHE was required to disgorge. Based on the testimony of ICJR’s
witnesses, the trial court concluded that CHE had obtained $1,281,012 in
secret profits as a result of its breach of fiduciary duty and ordered that

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amount as an offset to the breach of contract damages CHE was awarded
after the initial trial. The court subsequently entered a modified judgment
reflecting the disgorgement award. CHE now appeals, asserting the award
was barred by the doctrine of unclean hands. ICJR has not responded to the
appeal. As we explain, CHE’s appeal fails because our limited remand did
not leave open the issue of ICJR’s conduct for additional consideration, CHE
forfeited the argument by not raising it in the initial trial, and the argument
lacks merit. Accordingly, we affirm the modified judgment.
               FACTUAL AND PROCEDURAL BACKGROUND
A. General Background
      The history of the dispute between ICJR and CHE is set forth in great
detail in Center. We provide a brief overview of that history here.
      ICJR was formed in 2008 by a small number of prominent orthopedic
surgeons to provide accredited continuing medical education conferences on
the subject of joint reconstruction. (Center, supra, 57 Cal.App.5th at p. 1115.)
The organization had a volunteer board, whose members had “active medical
practices” and “lacked the time and business expertise” to produce
conferences. (Ibid.) In 2009, the board’s president, Dr. William Scott, met
Mark Sacaris, who was the president of CHE and managed its operations.
(Id. at p. 1116.)
      In June of 2009, Scott hired Sacaris to coordinate and manage ICJR’s
medical conferences. Scott and Sacaris did not enter into a written contract,
and Scott never requested details about the cost of services. (Center, supra,
57 Cal.App.5th at p. 1116.) Sacaris provided services through CHE.
However, ICJR was not aware of CHE until the parties’ relationship later
soured. (Ibid.) Sacaris was given full control over ICJR’s bank accounts for
payment of invoices and expenses associated with its medical conferences. As

                                       3
a result of this control, “Sacaris had the ability to prepare and adjust his own
bill as manager of CHE, and then approve payment of CHE’s bill on behalf of
ICJR, without the knowledge or approval of ICJR’s board of directors.” (Id. at
p. 1117)
      To turn a profit, CHE’s employees billed their services by the hour for
each conference and the firm’s accountant would prepare internal worksheets
stating the hours billed, the employees’ hourly rates, and the number of
hours billed for each employee. (Center, supra, 57 Cal.App.5th at p. 1117.)
Sacaris “would then increase the employees’ hourly rates by between 17 and
20 percent to reimburse CHE for its overhead expenses” and “add an
additional markup of up to 80 percent of the employees’ hourly rates . . . .”
(Ibid.) “Sacaris did not disclose to ICJR that he was profiting by marking up
[CHE’s] labor costs.” (Ibid.)
      Once Sacaris determined the amount to bill, CHE’s accountant would
create an invoice, and then Sacaris would approve payment on behalf of
ICJR. (Center, supra, 57 Cal.App.5th at p. 1117.) ICJR was “kept ‘completely
blind to the amounts billed by CHE for services and expenses as no invoice or
billing information was ever submitted to any of the ICJR Board of Directors,
including its president and treasurer.’ ” (Ibid.)
      Sacaris eventually expanded the services CHE provided to ICJR into
three new areas. He hired CHE to develop and maintain ICJR’s website,
work that CHE was not experienced in providing. (Center, supra, 57
Cal.App.5th at p. 1118.) Sacaris also formed a new company, Live Surgery,
to provide audiovisual services for live-streaming surgeries during
conferences, a service that CHE previously outsourced. “The quality of Live
Surgery’s broadcasts was poor, which led conference attendees to complain
and harmed ICJR’s reputation.” (Ibid.) Finally, Sacaris granted

                                        4
pharmaceutical companies the ability to conduct symposia at the conferences
to promote their products in exchange for a significant honoraria to ICJR,
and arranged for CHE to run the symposia. (Ibid.)
      In 2013, ICJR made Sacaris its chief of operations and a nonvoting
member of the board of directors. This did not change Sacaris’s practice of
paying CHE without notifying anyone else involved with ICJR. (Center,
supra, 57 Cal.App.5th at p. 1118.) At times, ICJR did not have sufficient
cash to pay CHE. When this occurred, CHE would advance the invoices with
the expectation of later payment. As a result, over time, ICJR’s outstanding
debt to CHE grew. “Despite grossing $20 million over the course of its
relationship with Sacaris, ICJR began to operate at a loss.” (Ibid.)
      In February 2016, Sacaris informed the ICJR board that CHE was
owed $2 million, and demanded payment. “Not long after, a CHE employee
shared concerns about CHE’s billing practices with members of the board.”
(Center, supra, 57 Cal.App.5th at pp. 1118‒1119.) In response, ICJR
investigated CHE’s billing practices, discovered Sacaris’s malfeasance, and
terminated its relationship with CHE without payment. (Id. at p. 1119.)
B. Initial Trial and Appeal
      On February 3, 2017, CHE brought suit against ICJR asserting a single
claim of breach of contract and seeking $2.4 million in damages. (Center,
supra, 57 Cal.App.5th at p. 1119.) ICJR then filed its cross-complaint against
CHE and Sacaris asserting claims for breach of fiduciary duty, fraud,
negligence, conversion, unfair competition, constructive trust, and
accounting. (Ibid.) ICJR sought damages, as well as disgorgement and
restitution of all illegally obtained profits. (Ibid.)
      The bench trial took place in January 2019. ICJR did not dispute the
breach of contract claim, except for an item of costs that was duplicated.

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(Center, supra, 57 Cal.App.5th at p. 1119.) Rather, it focused on offsetting its
damages through its cross-claims. “ICJR identified four ways in which CHE
and Sacaris had allegedly breached their duties to ICJR under the cross-
claims and sought disgorgement of the undisclosed profits recovered through
each form of misconduct. These four categories of wrongdoing and associated
relief were: (1) the profits CHE and Sacaris earned from the management
services provided to ICJR, on the theory that their failure to disclose the
amounts they were charging or compensating themselves for their services
breached their fiduciary duties to ICJR; (2) the amount by which CHE and
Sacaris overbilled ICJR for managing and developing ICJR’s websites,
without disclosing their fees or their employees’ lack of necessary website
development experience; (3) the amount by which CHE and Sacaris profited
by assisting pharmaceutical companies with midconference symposia,
without disclosing this arrangement to ICJR; and (4) the amount by which
Sacaris profited by running ICJR’s live surgery broadcasts through Live
Surgery, while actively concealing his interest in Live Surgery from ICJR.”
(Id. at pp. 1119–1120.)
      After the trial, the court issued a tentative statement of decision and
conducted a hearing to consider ICJR’s objections to the tentative ruling.
(Center, supra, 57 Cal.App.5th at p. 1120.) The court then issued its final
decision, finding in favor of CHE on its breach of contract claim and awarding
it $2,299,259.42 in damages. (Ibid.) The court rejected two of ICJR’s four
theories of liability. It concluded that ICJR’s claim for breach of fiduciary
duty based on CHE and Sacaris’s failure to disclose the amounts they were
charging or compensating themselves for their services failed because ICJR
did not adequately “prove it was overcharged and thus suffered economic
damages from the breach.” (Id. at p. 1121.) The court also rejected ICJR’s

                                        6
claim based on CHE and Sacaris’s failure to disclose and profit from
management of the pharmaceutical symposia, finding this was not an
opportunity ICJR would have taken itself. The court, however, agreed with
ICJR that CHE and Sacaris breached their fiduciary duties by failing to
disclose their charges for website development and their lack of experience in
the work, and by concealing Sacaris’s interest in Live Surgery. The court
awarded ICJR $800,000 for the former claim and $73,310 for the latter for a
total damages offset of $873,310. (Id. at pp. 1121‒1122.)
      The court entered judgment in August 2019, and ICJR appealed the
trial court’s rejection of its first theory of liability. Specifically, ICJR argued
the trial court “erred as a matter of law when it held ICJR was required to
present evidence that it suffered monetary harm or loss from the breach [of
fiduciary duty] in order to recover.” (Center, supra, 57 Cal.App.5th at
p. 1124.)
      We agreed with ICJR and reversed the trial court’s finding that ICJR
had not established its claim for breach of fiduciary duty based on CHE and
Sacaris compensating themselves from ICJR’s accounts without adequate

disclosure or board approval.1 We held that, “while ‘[t]he elements of a cause
of action for breach of fiduciary duty are the existence of a fiduciary
relationship, its breach, and damage proximately caused by that breach’
[citation], a principal seeking disgorgement of a fiduciary’s wrongful gains is
not required to prove it suffered economic damage from the breach in order to
recover.” (Center, supra, 57 Cal.App.5th at p. 1126.) Rather, we held that,
“ ‘[w]here a person profits from transactions conducted by him as a fiduciary,
the proper measure of damages is full disgorgement of any secret profit made

1      ICJR also unsuccessfully appealed the trial court’s rejection of its claim
as it related to the pharmaceutical symposia.
                                         7
by the fiduciary regardless of whether the principal suffers any damage.’ ”
(Ibid.) Secret profits, we held, “consist of all benefits an agent acquires from
the agency in excess of the agent’s agreed compensation.” (Id. at p. 1127.)
      Further, we concluded that ICJR had sustained its “burden to prove a
‘reasonable approximation’ of the benefit CHE and Sacaris gained from the
breach of their fiduciary duties . . . .” (Center, supra, 57 Cal.App.5th at
p. 1128.) We stated that “ICJR submitted uncontradicted evidence in the
form of its expert accountant’s testimony establishing that CHE’s and
Sacaris’s undisclosed charges for management services earned them
$1,430,260 in profits from ICJR between 2013 and 2016,” the four-year period
for which they sought recovery. (Id. at p. 1130.) ICJR asked this court to
remand the matter with directions to modify the judgment to award that
amount. However, because the “trial court possesses substantial discretion to
balance the equities and fashion the award it deems appropriate,” we
remanded for the trial court to “conduct such further proceedings as it deems
necessary to enable it to exercise its direction . . . and determine the amount
of profits to be disgorged from CHE and Sacaris.” (Ibid.)
C. Current Proceedings
      On remand, the trial court conducted an evidentiary hearing to

determine the appropriate remedy.2 The parties submitted trial briefs in
advance of the hearing and also stipulated that the evidence received during
trial could be considered by the court. ICJR presented the testimony of its
trial expert, economist Robert Taylor, who reiterated the opinion he
expressed at trial that ICJR was entitled to $1,430,260, which was the

2     CHE and Sacaris have not provided transcripts for the hearing to this
court. Thus, our summarization of the proceeding is taken from the trial
court’s subsequent order that CHE and Sacaris challenge on appeal.
                                        8
amount CHE billed ICJR in excess of its costs. Taylor defined costs as the
hourly payroll rate for employees, benefits paid to employees, and typical
overhead costs. Taylor then subtracted this figure from the amount CHE
billed ICJR to arrive at the cost of service. Taylor also adjusted Sacaris’s
billing rate—which Sacaris had increased from $109 in 2013 to $250 in
2016—to a constant $150, equating to an annual salary of $300,000.
      ICJR also introduced the testimony of an expert in the management of
medical conferences, who testified that the number of hours billed by CHE for
its conferences was excessive. He stated that, in his opinion, CHE
overcharged ICJR by $1,393,799. Finally, ICJR introduced a former
employee of CHE, Jason Heath, who was the company’s president of
operations from 2014 to 2017. Heath testified there were no changes to the
work performed by CHE for ICJR to justify the increases in hours billed over
the relevant time period.
      Sacaris testified on behalf of CHE and himself. He told the court his
rates were justified by his expertise and because that was what the market
could bear. He also stated that he charged ICJR less than other clients.
CHE’s accountant’s videotaped trial testimony was presented. She stated the
total profit for the years in question was only $1,058,007, which included
increases in hourly billing rates that Taylor reduced. In addition, in their
trial brief, CHE and Sacaris asserted ICJR was not entitled to disgorgement
of any profit under the doctrine of unclean hands because it had admittedly
breached its agreement with Sacaris.
      After the proceeding, the trial court issued its final decision, ordering
CHE and Sacaris to disgorge an additional $1,281,012 in ill-gotten profit.
The court ordered the additional disgorgement award to be offset against the
contract damages awarded to CHE. The trial court rejected CHE and

                                        9
Sacaris’s unclean hands doctrine argument, finding the argument was
forfeited because it was not raised during the initial trial, was outside the
scope of the limited remand issued by this court, and was meritless because
ICJR stopped payment only once it discovered CHE and Sacaris’s improper
conduct. After additional litigation over the form of the judgment, the trial
court entered a modified judgment awarding ICJR $1,281,012 to be set off
against the contract damages owed to CHE. CHE and Sacaris timely
appealed from that judgment.
                                  DISCUSSION
      As noted, CHE and Sacaris assert the court “erred in awarding
equitable relief to ICJR in relation to the same contract which ICJR
breached.” ICJR has not responded to the appeal. “However, we do not treat
the failure to file a respondent’s brief as a ‘default’ (i.e., an admission of error)
but independently examine the record and reverse only if prejudicial error is
found.” (Kennedy v. Eldridge (2011) 201 Cal.App.4th 1197, 1203; Cal. Rules
of Court, rule 8.220(a)(2).)
                                          I
      This appeal is governed by the law that applies after a reversal by the
Court of Appeal that is accompanied by directions requiring specific
proceedings on remand. “ ‘A reviewing court has authority to “affirm,
reverse, or modify any judgment or order appealed from, and may direct the
proper judgment or order to be entered, or direct a new trial or further
proceedings to be had.” (Code Civ. Proc., § 43.) The order of the reviewing
court is contained in its remittitur, which defines the scope of the jurisdiction
of the court to which the matter is returned.’ [Citations.] ‘The trial court is
empowered to act only in accordance with the direction of the reviewing
court; action which does not conform to those directions is void.’ ” (Ayyad v.

                                         10
Sprint Spectrum, L.P. (2012) 210 Cal.App.4th 851, 859 (Ayyad); see Hampton
v. Superior Court in and for Los Angeles County (1952) 38 Cal.2d 652, 655
[“When there has been a decision upon appeal, the trial court is reinvested
with jurisdiction of the cause, but only such jurisdiction as is defined by the
terms of the remittitur. The trial court is empowered to act only in
accordance with the direction of the reviewing court; action which does not
conform to those directions is void.”] (Hampton).)
      “[T]he rule requiring a trial court to follow the terms of the remittitur is
jurisdictional in nature. [Citation.] The issues the trial court may address in
the remand proceedings are therefore limited to those specified in the
reviewing court’s directions, and if the reviewing court does not direct the
trial court to take a particular action or make a particular determination, the
trial court is not authorized to do so.” (Ayyad, supra, 210 Cal.App.4th at
pp. 859–860.) “On remand, the trial court must adhere to the reviewing
court’s directions even if the lower court is convinced the appellate court’s
decision is wrong or has ‘been impaired by subsequent decisions[.]’ . . . In
short, when an appellate court remands a matter with directions governing
the proceedings on remand, ‘those directions are binding on the trial court
and must be followed. Any material variance from the directions is
unauthorized and void.’ ” (Id. at p. 860.)
      “Whether the trial court has correctly interpreted an appellate opinion
is an issue of law subject to de novo review. In interpreting the language of a
judicial opinion, the appellate court looks to the wording of the dispositional
language, construing these directions ‘in conjunction with the opinion as a
whole.’ ” (Ducoing Management, Inc. v. Superior Court (2015) 234
Cal.App.4th 306, 313.) Further, only if the trial court’s variance from this

                                       11
court’s directions is “material,” is reversal appropriate. (In re Candace P.
(1994) 24 Cal.App.4th 1128, 1131.)
      In addition, new theories of liability or defense are generally not
properly considered on appeal. “It is well established that appellate courts
will ordinarily not consider errors that ‘could have been, but were not raised
below.’ ” (Findleton v. Coyote Valley Band of Pomo Indians (2018) 27
Cal.App.5th 565, 569.) “ ‘The policy behind the rule is fairness.’ [Citation.]
‘Appellate courts are loath to reverse a judgment on grounds that the
opposing party did not have an opportunity to argue and the trial court did
not have an opportunity to consider. [Citation.] In our adversarial system,
each party has the obligation to raise any issue or infirmity that might
subject the ensuing judgment to attack. [Citation.] Bait and switch on
appeal not only subjects the parties to avoidable expense but also wreaks
havoc on a judicial system too burdened to retry cases on theories that could
have been raised earlier.’ ” (Ibid.)
                                       II
      In support of their argument that the unclean hands doctrine bars
damages for ICJR’s breach of fiduciary duty claim, CHE and Sacaris rely on
DeGarmo v. Goldman (1942) 19 Cal.2d 755 (DeGarmo). However, DeGarmo
held only that the trial court erred by excluding evidence of a corporate
president claimant’s own wrongdoing in relation to his shareholder claims of
corporate malfeasance. (Id. at pp. 758, 764‒765.) To avoid forfeiture, CHE
and Sacaris assert that their answer to ICJR’s complaint contained the
doctrine of unclean hands as an affirmative defense. However, they did not
argue or present evidence on the defense during the initial trial, and first
argued the doctrine barred recovery in a letter submitted to this court under

                                       12
California Rules of Court, rule 8.254 just days before oral argument.3 We
addressed the issue in a footnote, stating DeGarmo, which was published in
1942, fell outside the scope of rule 8.254, and that CHE and Sacaris had
forfeited the argument by not raising it before the judgment was entered.
(Center, supra, 57 Cal.App.5th at p. 1129, fn. 9.)
      On remand, CHE and Sacaris asked the trial court to consider the
unclean hands defense. The trial court rejected the argument for three
reasons. Like this court, the trial court found the issue was forfeited by CHE
and Sacaris’s failure to raise the defense during trial or during the litigation
of the final statement of decision. In addition, the trial court found the issue
was not within the narrow parameters of our remand. The court explained
its task was to determine “what amount of secret profit should be the subject
of the disgorgement remedy,” and concluded the question of unclean hands

3     Rule 8.254, titled “New Authority,” provides:
      “(a) Letter to court
      If a party learns of significant new authority, including new
      legislation, that was not available in time to be included in the
      last brief that the party filed or could have filed, the party may
      inform the Court of Appeal of this authority by letter.
      (b) Form and content
      The letter may provide only a citation to the new authority and
      identify, by citation to a page or pages in a brief on file, the issue
      on appeal to which the new authority is relevant. No argument or
      other discussion of the authority is permitted in the letter.
      (c) Service and filing
      The letter must be served and filed before the court files its
      opinion and as soon as possible after the party learns of the new
      authority. If the letter is served and filed after oral argument is
      heard, it may address only new authority that was not available
      in time to be addressed at oral argument.”

                                       13
was not within the scope of our directions. Finally, the trial court concluded
that even if it were to consider the defense, it would not preclude relief since
the breach by ICJR was caused by its discovery of Sacaris’s breach of
fiduciary duty and not any dishonesty, malice, or other improper motive on
the part of ICJR.
      We agree with the trial court that this issue falls outside the scope of
our prior remand. For this reason alone, affirmance of the trial court’s
decision is appropriate. As discussed, after a limited remand, the trial court’s
jurisdiction is restricted. (Hampton, supra, 38 Cal.2d at p. 655.) The “court
is empowered to act only in accordance with the direction of the reviewing
court,” and actions that do “not conform to those directions [are] void.” (Ibid.)
In this case, we directed the trial court to exercise its discretion “to balance
the equities and fashion the award it deems appropriate,” and remanded for
the court to “conduct such further proceedings as it deems necessary to
enable it to exercise its discretion in the first instance and determine the
amount of profits to be disgorged from CHE and Sacaris.” (Center, supra, 57
Cal.App.5th at p. 1130.)
      We also provided guidance to the trial court on how to determine an
appropriate amount of disgorgement damages. We reminded the trial court
that the remedy is meant “to have a deterrent effect and ensure fiduciaries
are held to a standard ‘ “stricter than the morals of the marketplace.” ’ ”
(Center, supra, 57 Cal.App.5th at p. 1130.) We noted specifically that
“denying ICJR a recovery altogether would fail to recognize the seriousness of
their wrongdoing and would fall short of achieving the goal of deterring
future misconduct.” (Id. at p. 1131.) In addition, our opinion made clear that
it was CHE and Sacaris that were to “bear the burden to present evidence
demonstrating the reasonableness of the amounts they charged ICJR for

                                        14
their management services,” and that any uncertainty in “the reasonableness
of their charges [was to] be resolved in favor of ICJR.” (Ibid.)
      This directive made clear that the trial court’s only task on remand was
to determine the appropriate amount of a disgorgement award. Thus, CHE
and Sacaris’s request to reopen the question of liability for their breach of
fiduciary duty by considering the question of unclean hands was outside the
scope of our limited remand and the trial court’s jurisdiction.
      In addition, we agree with the trial court that CHE and Sacaris
forfeited their argument by failing to raise it before the initial judgment was
entered. It is well-established that new theories of defense cannot be raised
for the first time on appeal. (Findleton, supra, 27 Cal.App.5th at p. 569.) The
reason for this rule is fairness. ICJR had no ability to contest the defense,
which involves factual questions, since it was not raised during trial. Our
earlier decision concluding the argument was forfeited was proper, and the
limited remand did not reopen the cause of action in a manner that would
permit the issue to be litigated in the trial court after it regained jurisdiction
after the initial appeal. Accordingly, in addition to being foreclosed by the
limited remand, the issue was forfeited.
      Finally, even if we were to reach the merits of CHE and Sacaris’s
argument, we would agree with the trial court that it lacks merit. “ ‘ “The
unclean hands doctrine ‘closes the doors of a court of equity to one tainted
with inequitableness or bad faith relative to the matter in which he seeks
relief.’ ” ’ ” (Quick v. Pearson (2010) 186 Cal.App.4th 371, 380.) “The doctrine
of unclean hands rests on the maxim that ‘ “he who comes into equity must
come with clean hands.” ’ . . . The decision whether to apply the unclean
hands defense is a matter within the trial court’s discretion. [Citation.] In
exercising this discretion, the court ‘must consider the material facts

                                        15
affecting the equities between the parties . . . .’ ” (Farahani v. San Diego
Community College Dist. (2009) 175 Cal.App.4th 1486, 1495–1496; see also
Stine v. Dell’Osso (2014) 230 Cal.App.4th 834, 844 [the doctrine “ ‘is available
to protect the court from having its powers used to bring about an inequitable
result in the litigation before it.’ [Citation.] By the same token, ‘ “[w]henever
an inequitable result would be accomplished by application of the ‘unclean
hands’ doctrine the courts have not hesitated to reject it.” ’ ”].)
      Thus, to foreclose relief to a claimant based on the doctrine of unclean
hands, the opposing party must show bad faith or otherwise inequitable
conduct relative to their own conduct. CHE and Sacaris have not made such
a showing. As the trial court explained, the reason ICJR breached its
agreement to pay CHE and Sacaris for their services was ICJR’s shock and
confusion when Sacaris “arrived at a yearly ICJR Board meeting, with a
bombshell announcement” that CHE had “been routinely advancing
conference costs and expenses [o]n behalf of ICJR when ICJR’s checking
account was low or empty,” and that ICJR owed CHE over $2 million. In
response, ICJR breached its unwritten agreement with Sacaris so that it
could determine the actual amount it owed, “which ultimately required Court
intervention.”
      As the trial court found, there was “no evidence suggesting dishonesty,
malice or any other inappropriate motive on behalf of ICJR as its reason for
not paying the management fees.” Rather, ICJR stopped paying because it
discovered misconduct on the part of Sacaris and CHE. Accordingly, the trial
court’s determination that the doctrine of unclean hands does not bar ICJR’s
recovery was not an abuse of discretion.

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                             DISPOSITION
     The modified judgment is affirmed.

                                           McCONNELL, P. J.

WE CONCUR:

IRION, J.

DO, J.

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