Opinion
H029402
5-22-2007
REBECCA GUTTIERRES-ROQUE, etc., et al. Plaintiffs and Appellants, v. DEL ANDRES, etc. Defendant and Respondent.
NOT TO BE PUBLISHED
Rebecca Guttierres-Roque individually and dba RG Enterprises and Nico Roque individually and dba RG Enterprises appeal from a judgment against them and in favor of Del Andres individually and dba as Genex Engineering (Genex) following jury trial and special verdicts. While an engineer at KLA Tenor (KLA), Roque learned of a business opportunity to provide subcontracting work for Immecor, an existing KLA vendor. The work involved integrating special components into computers. Roque promoted the idea to Andres, who began a business called Genex to do that subcontracting work for Immecor. The complaint and cross-complaint arose from a dispute regarding the financial obligations between Andres and Roque and his wife Rebecca Guttierres-Roque.
Following a trial, the jury rejected the Guttierress breach of contract claims against Andres, which had been predicated on an alleged agreement entered on December 4, 2000. The jury found Andres was entitled to fraud damages of $131,911.40 on his cross-complaint. The jury also awarded $130,000 in punitive damages in favor of Andres.
On appeal, appellants Guttierres-Roque and Roque challenge the jurys finding of fraud on several grounds and also assert that the award of punitive damages must be reversed because there are no fraud damages. We reject appellants claims and affirm.
A. Procedural History
On October 18, 2002, Guttierres-Roque dba RG Enterprises filed a complaint for damages alleging two contract causes of action against Andres individually and dba Genex. In the first cause of action it was alleged that, on or about December 4, 2000, Guttierres-Roque dba RG Enterprises and Andres dba Genex entered a written agreement that provided that Genex "would provide certain electronic component assembly services for the assembly of certain electronic components for sale" to Immecor. It averred that Genex breached the contract by not forwarding all monies received from Immecor to RG Enterprises, less the five percent to which it was entitled under their agreement, and by not paying certain expenses.
A third cause of action, involving an alleged oral agreement between Guttierres-Roque dba RG Enterprises and Immecor for engineering services, averred that Immecor had breached the oral agreement by not paying "the reasonable price" as agreed by the parties for "reasonable services." Damages of $63,267 were sought. Apparently, this cause of action was dismissed.
The second cause of action alleged that Guttierres-Roque dba RG Enterprises and Andres dba Genex entered into an oral agreement that RG Enterprises would advance certain sums of money to Genex "pending receipt of monies" from Immecor. It stated that Genex had breached the oral agreement by not repaying those advances, which totaled $29,206.
In addition to filing an answer to the complaint, Andres individually and dba Genex filed a cross-complaint alleging fraud. The cross-complaint averred that Guttierres-Roque and Roque had falsely represented that Roque and/or RG Enterprises was able to guarantee that Immecor Corporation would utilize Genexs services exclusively and Genex would have to "pay an equal share of the gross receipts to two other individuals" as well as to Roque and/or RG Enterprises, through RG enterprises, to accomplish this result. The cross-complaint further alleged that Roque and RG Enterprises did not have the ability to ensure exclusivity, "the silent partners to the joint venture did not exist," and RG Enterprises "intended to retain an improper share of gross receipts." It indicated that in justifiable reliance, Andres individually and dba Genex obtained contracts from Immecor, performed work for Immecor, and provided the cross-defendants "with unearned money." The cross-complaint alleged in a separate cause of action for "intentional tort" that Guttierres-Roque "falsely and fraudulently produced invoices" in Genexs name "without consent," which caused damage to Andres individually and dba Genex and to his reputation. This cause of action further alleged that Roque, "while breaching his fiduciary duty falsely and fraudulently represented as facts information which he knew to be false with the intent to defraud, embezzle, convert and otherwise obtain money to which he was not entitled."
B. Evidence and Verdict
Nico Roque and his wife Rebbecca Guttierres-Roque were both born and raised in the Phillipines. Roque obtained a bachelors of science degree in electronics engineering there, moved to the United States, and has lived here in this country continuously since 1987. In 1997, he was hired by an agency called Advanced Technical Resources and he was contracted out to KLA, whose main product was then software. While working at KLA, Roque learned that KLA was looking for "some subcontractor vendor to put together, assemble a test and integrate their software to the computers and deliver these computers as a finished product . . . ."
At KLA, Roque was introduced to Jason Lai, who represented Immecor. Immecor was already one of KLAs existing vendors and Lai was interested in having Immecor do the integration work. By the time of trial in 2005, Lai had been Immecors executive vice-president for five or six years. Immecor made a presentation to a KLA panel as part of the process of becoming an approved "turnkey" vendor. Roque was not one of the panel members deciding whether to grant approval. He had no authority in KLA to assign outside contracts and Immecor did not need his approval to obtain work from KLA.
According to Roque, Lai wanted his help interpreting KLAs engineering documentation and producing a prototype product that would pass KLAs quality testing and inspection. The work producing that initial product was done in KLAs facility and Roque had no discussions with Lai at that time about being paid for his contributions. The new product was called Intel Express Box and KLA approved it and placed an initial purchase order with Immecor.
Roque told Lai that he knew people who could help Lai with assembly and integration. Roques nephew Louie Bernardo helped Roque put together the first computers.
Roque recruited his nephew Dennis Agoncillo to work on KLAs second product order placed with Immecor. Production work continued to be done at the KLA facility. Agoncillo was trained by KLA technicians and engineers in the KLA facility.
Roque meanwhile discussed with Andres, his nieces husband, the business opportunity of building industrial PCs with Agoncillo, Andress brother-in-law. At the time, Andres was working as the front office assistant manager of the Park Hyatt Hotel in San Francisco. Roques proposition required Andres to set up his own company. According to Roque, the deal was that Andress business would perform the integration work, collect the money from Immecor, and then move the funds to RG Enterprises, a business that he and his wife Guttierres-Roque had set up in 1993.
Roque obtained a business license and a fictitious business name for RG Enterprises in 1993. Guttierres-Roque testified that, at some point in 1994, she began working full time from her home as a buyer for RG Enterprises. Her job was to take orders for electronic parts from various electronics companies, find a supplier, and purchase and then sell the parts to client companies. Guttierres-Roque claimed that sometime in 1996, RG Enterprises began selling travel services. In 1999, Roque filed a fictitious business name statement for RG Enterprises dba Travel Perks. Also in 1999, Roques name was taken off RG Enterprisess business license and Guttierres-Roques name put on it. Roque testified that the change was requested by Lai to protect them in case somebody ever thought "what [they were] doing [was] not right."
Andres set up Genex and obtained a business license at his own expense. Roque introduced Lai to Genex. Immecor contracted with Genex as a subcontractor to integrate special components into computers and then test the computer systems with those components loaded.
Agoncillo had worked for Immecor for a short time when Andres arrived. Agoncillo did not receive compensation "until Genex came to work." Agoncillo trained Andres.
KLA provided Immecor with the written instructions and procedures for doing the integration work. Andres and Agoncillo performed the Genex subcontract work at night at the KLA facility after completing their day jobs. Andres usually drove from his home in Hercules to San Francisco for a 7:00 a.m. shift, finished working at 5:00 p.m. and then drove to San Jose to do the Genex work, and drove home around 11:00 or 11:30 p.m.
After Andres and Agoncillo had filled a work order placed by Immecor, Genex would send an invoice for the completed work to Immecor, which then paid Genex on a per unit basis. After being paid, Andres would send RG Enterprises a check.
In the beginning there was "a 50/50 split" under which Andres and Agoncillo kept 50 percent of the money collected from Immecor and the other 50 percent was sent to RG Enterprises. Initially, Andres, with a bit of help from his wife, did Genexs bookkeeping and accounting. Andres paid the taxes for the business.
Andres understood that Roque was getting a percentage because he put the deal together and could ensure that they obtained work. Roque told Andres that "he needed to pay people within KLA to insure that the work would be given to Immecor so that then in turn Genex would get some work, continue to get work." He said "he had to cover" "a number of people within KLA. At some unspecified point while Genex was still doing business and Andres and Agoncillo were at KLA, Roque handed a wad of hundred dollars bills to somebody and then told them, " See, thats who Im taking care of. " Roque did not do any of the integration work and did not supervise Andress or Agoncillos work. Agoncillo understood that RG Enterprises was getting a percentage because Roque was "bringing work to Immecor," which in turn subcontracted the work to Genex. At some point, Andres began sending Roque copies of the Immecor checks because Roque wanted to make sure he was receiving 50 percent.
At trial, Roque claimed to have entered into an oral agreement with Immecor providing for "payment to be routed through Genex" and his team or group would be paid based upon the product "assembled and delivered to Immecor." Roque indicated that he personally provided the "manufacturing engineering" services to Immecor, which included defining and interpreting the procedures needed to assemble the product. He indicated that he used KLA proprietary information to do the "engineering work" but stated he received it from Immecor. He admitted that KLA provided Immecor with the "written procedures and instructions for the integration work Genex was performing in its capacity of subcontractor for Immecor."
Lai testified to the contrary that Immecor had no oral or written agreement with Roque or RG Enterprises. Lai had not, on behalf of Immecor, asked Roque to perform computer engineering services in his individual capacity. Lai agreed that it was common practice for KLAs engineers to interface with Immecors engineers to help produce a product for KLA. Roque did tell Lai that he was part owner of Genex but Lais understanding was that Andres was Genexs owner at least on paper. Immecor made payments to only Genex.
In January 1999, Andres began working for Logitech. In 1999, Sundeepa Colombage, one of Roques engineering colleagues at KLA, began doing outside engineering work for Roque relating to different custom computer products that Immecor was providing to KLA. Colombage was paid by RG Enterprises.
Copies of checks issued by RG Enterprises that were admitted at trial showed that Colombage was paid over $200,000 between December 28, 1999 and October 12, 2001. 1099 miscellaneous income forms show that RG Enterprises paid Colombage $156,117 in compensation in the year 2000 and $71,720 in the year 2001.
At some point, Immecor leased a facility in Santa Clara and Genexs integration work moved there. Lai did not see Roque working with Genex staff at Immecors facility after Genexs production moved there.
Genexs work orders shifted from the Intel Express Box to various other products. Roque provided Genex with the KLA procedure manuals to do the work. Colombage was the engineer for these products. There were occasional meetings with Roque, Colombage, Andres, and Agoncillo in a conference room at KLA. Each type of product had a set unit price that was paid by Immecor. Andres and Agoncillo continued to retain a percentage of each product produced.
When production at Genex ramped up in 2000, Andres and Agoncillo sometimes worked until 5:00 a.m. During 2000, three daytime workers (one of whom had been Roques car mechanic at one time) began doing the integration work at an hourly rate for Genex.
Roque was laid off by KLA in about early 2000 but rehired in March 2000. He continued to work at KLA for about another year. There was evidence that as part of working at KLA, he signed confidentiality agreements by which he agreed to preserve the confidentiality of proprietary, technical, and business information. The agreement signed in March 2000, forbid Roque from making any use of confidential information or "other information of the Company relating to products, processes, know how, designs, formulas, test data or other matter pertaining to any business of the company . . ." except for KLAs benefit or as it had consented in writing. In the March 2000 agreement, Roque certified that he was "not engaged in any other business relationship or consulting services" and agreed to "advise the Company in writing and obtain the written consent from an officer of the Company prior to accepting any other consulting services." Roque further agreed in the March 2000 agreement that he would "not solicit or encourage . . . any of the Companys employees to work elsewhere." Roque understood that he was supposed to abide by the terms of this employment agreement. He agreed that, nevertheless, he was working elsewhere and Colombage was working for him.
In about May of 2000, Andres stopped participating in the production work because he and his wife were having a second child and he wanted to focus more on his family. Agoncillo expressed his discontent with the financial arrangements to Roque. According to Roque, in about in May 2000 Andres, Agoncillo, and he began "trying to devise a formula [regarding] how [they were] going to manage the even sharing versus in reference to [their] workload."
Problems arose with invoicing and about mid-year Guittierres-Roque took over the job of invoicing Immecor. Andres, who wanted to pursue his career at Logitech, began discussing the possibility of shutting down Genex with Roque, who was angered and threatened Andres and his family.
In about June of 2000, Immecor began withholding payment on invoices because Genex lacked product liability insurance. Roque-Guttierres acknowleged that Immecor did not look to RG Enterprises to provide liability insurance. Andres believed his responsibility for Genex during the period of July through November 2000 was to maintain work flow, assume financial responsibility for the business, and look for possible insurance carriers.
RG Enterprises paid advances to Andres and Agoncillo on overdue invoices and apparently paid Andres and Agoncillo monthly salaries of $2,500 for several months, beginning in August 2000. RG Enterprises also paid the three hourly workers when Genex could not. A document prepared by Roque and admitted at trial showed payments totaling $29,206 were made to Andres and Agoncillo in the year 2000.
After months of stress between the families, on December 4, 2000, Roque met with Andres and Agoncillo at Andress house late at night to discuss the division of the money received from Immecor for Genexs integration work. At that time, Andres still believed that Roque needed to pay others although he had suspicions. At this point, unpaid Immecor invoices totaled $ 436,195.
During their meeting, Roque drew out a pie chart showing a division of revenue: 25 percent for Genex (to be divided between Andres and Agoncillo), 25 percent for RG Enterprises, 25 percent for Colombage, 25 percent for "royalties or entities at KLA." When Agoncillo asked Roque about the percentages, Roque explained to him that Colombage had come "aboard because hes the one thats bringing most of the system in the end" and the royalties covered Roques payments to "some people inside the KLA" that Agoncillo and Andres had never met.
The December meeting resulted in a document, dated December 4, 2000, which was written out mainly by Agoncillo on Andress kitchen table and signed by Roque, Andres, and Agoncillo. Roque essentially dictated the terms.
The handwritten document specified that it was effective December 1, 2000. It stated that "Genex receives 25% of gross check" and "[t]otal payroll will [be] devided [sic] by 3." At this point, interlineated in Roques handwriting is the statement that the "[p]eriod [of] duration of this agreement is from Dec. 2000 to June 2001." Roque acknowledged he had added the duration provision for the benefit of any lawyer who might be asked to formalize the agreement. The document then provided: "5% of the gross check will be to cover Genex share on sub-contractors manpower/payroll, excess amount will be totaled over the year and will be devided [sic] between Genex and RG (50/50)." Andres understood that the provision allowing Genex to retain five percent of the gross check had been based on an estimate of the amount needed for "possible new employees or staffing." Following this, interlineated in Roques handwriting, was the statement: "This includes necessary workers compensation insurance."
The document further provided that Genex would "handle" and, in different handwriting, "expense" all necessary and required attorney fees, liabilities, and liability insurance. It also stated: "Genex will work towards converting to LLC or corporation."
In regard to amounts already payable by Immecor, the document read: "Genex will receive Immecor outstanding payables from Jan. to Nov. 2000 for the completed work orders. Genex retains 5% of the gross check. Max =100K for YR 2000 & rest will be 2001." Roque explained at trial that he believed he was entitled to 100 percent of unpaid invoices for the period of January to November 2000 because he had made advances but he was willing give up five percent to give Andres an incentive to collect the money from Immecor.
Andres recalled that the meeting ended around 1:00 a.m. and he only signed the document because Roque would not leave until he signed and he was tired and he understood that the document was not official and would be finalized with an attorney later. A couple of days later Andres told Roque that he was unhappy with the arrangement.
A written memorandum, confirming an oral agreement reportedly reached on January 5, 2001 between Immecors chief financial officer and Andres, stated that Immecor would set up a special liability coverage account using amounts owed to Genex to cover potential product liability and Genex would provide Immecor with a five million dollar product liability insurance policy and proof of workmans compensation insurance. Lai testified that he never believed Roque or RG Enterprises had liability for these things.
Genex meanwhile continued to fill work orders for Immecor. The unpaid invoices for December 2000 and January 2001 totaled $ 208,293. Immecor stopped paying Genexs invoices at the end of January. Additional work was still done for Immecor after January 31, 2001.
In February 2001, Andres received a $54,000 payment from Immecor but did not tell Guttierres-Roque about it.
A written memorandum, confirming an oral agreement reportedly reached in April 2001 between Immecor and Andres, stated that a new agreement had replaced their previous agreement. It stated that Immecor owed Genex $590,488 and provided for $35,302 to be deducted from the debt for the purchase of product liability insurance by Immecor and it established a payment schedule based on specified criteria. The agreement provided that "[a]ny claim by Genex for invoices after 01-31-01 were waived and are cancelled, Genex has no recourse or claim to these monies."
Andres had informed Guittierres-Roque that he "needed a final total . . . for all payables from Immecor to Genex" and she had given him "the final total since she was handling the books." Although at trial appellants claimed not to know of the April agreement, an e-mail sent to Andres by Guttierres-Roque on April 11, 2001 stated: " Del, yesterday, all parties have agreed to the final total of $590,488 less liability insurance of $ 35,302 that comes up to a total of $555,186. " At trial, Roque confirmed that he was seeking to obtain his percentage share of $82,343, the money that Andres allegedly would have collected on work orders completed from February 2001 until early April 2001 had Andres not waived collection. When asked if those work orders involved warranty work or repair work, Roque responded that he was "not sure if its all repairs."
Genex stopped doing integration work for Immecor. Immecor recruited two of Genexs former hourly workers to work directly for Immecor.
A final revised written memorandum, dated June 17, 2001 and signed, restated the April agreement. The document stated that Immecors debt to Genex was $555,186 and provided that Immecor would purchase product liability insurance for $35,304, which amount would be "deducted from all invoices presented to 01-31-01." It reiterated: "Any claim by Genex for invoices after 01-31-01 are waived and are canceled, Genex has no recourse or claim to these monies." It provided for an initial payment of $100,000, which Genex received shortly after the agreement was signed.
Eventually a family meeting was held at which Roque, Roques older brother Norman Roque, Andres, and Agoncillo were present. "Uncle Norman," who was the head of the family, wanted to settle matters between them because their conflict was affecting the family. At the end of the meeting, there was a settlement regarding percentages. Roque would receive 80 percent and Genex would keep 20 percent of the amounts collected from Immecor by Genex. Roque promised not to sue Andres if Andres paid him as agreed. Uncle Norman subsequently set up a proposed payment schedule based upon the total amount to be collected from Immecor of $609,758, which was faxed to Andres with a cover sheet from "Tito Norman" dated August 23, 2001 and a fax date stamp of August 24, 2001. The schedule provided that Roque would receive $487,806.40 (80 percent) and "Del/Andres" would keep $121,951.60 (20 percent).
On November 1, 2001, Andres received an e-mail from Colombage that indicated that he was owed over $100,000 in the "joint venture." This e-mail made him believe that Roque was telling him the truth that Colombage was receiving 25 percent.
A 1099 miscellaneous income form for the year 1999 showed that Immecor paid Andres dba Genex $47,988.50. Andres indicated that he paid 50 percent of that amount to Roque.
A 1099 miscellaneous income form for the year 1999 shows that Andres dba Genex paid Roque dba RG Eneterprises $25,359.50 that year. Exactly 50 percent of $47,988.50 would have been $ 23,994.25 but the appellate record does not explain the discrepancy.
A corrected 1099 miscellaneous income form for the year 2000 showed that Immecor paid Andres dba Genex $504,626. Andres stated that he paid 80 percent of that amount to Roque. When asked why Roques percentage increased, Andres explained that Roque "needed to pay more individuals at KLA to insure that we have continuous work." Andres accepted Roques representation because Roque was their uncle and he believed Roque would not steer them wrong. He explained that in the Philippine culture, "elders are usually the people that direct the younger individuals in the right direction."
A 1099 miscellaneous income form for the year 2000 shows that Andres dba Genex paid Roque dba RG Eneterprises $401,472 that year. Exactly 80 percent of 504,626 would have been $403,700.80.
A 1099 miscellaneous income form for the year 2001 indicated that Immecor paid Genex $574,000. A 1099 miscellaneous income form for the year 2002 stated that Immecor paid Genex $35,186. Thus, the total paid by Immecor to Genex during 2001-2002 was $609,186.
Andres never collected the full $609,758 reflected on Uncle Normans payment schedule but only $609,186 ($555,186 based upon his agreement with Immecor plus the prior payment of $54,000). Nevertheless, he eventually paid Roque dba RG Enterprises $ 487,806.40 (80 percent of $609,758), the total required to be paid under that schedule. Guttierres-Roque indicated that those payments from Genex covered engineering, invoicing, and administrative services provided by RG Enterprises.
The 1099 miscellaneous income forms for 2001 and 2002 showed total reported compensation of $487,348.80 paid to Roque by Genex for those years. The discrepancy between reported compensation for those years and the acknowledged receipt of $487,806.40 is not explained by the record.
At trial, Andress counsel argued in closing that Roque had knowingly misrepresented many facts and that fraud damages amounted to the $487,806 that Andres had paid Roque but that appellants had done nothing to earn. In the special verdict filed June 21, 2005, the jury found that Guitterres-Roque dba RG Enterprices did not enter into an agreement with Andres dba Genex on or about December 4, 2000. The jury found that Roque made a false representation of an important fact to Andres and he either knew the representation was false or made "the representation recklessly and without disregard [sic] for its truth." It found that Roque intended that Andres rely on the representation and Andres did reasonably rely on the representation. The jury further found Andress reliance on Roques representation was a substantial factor in causing harm to Andres. It concluded the damages for past economic loss, including lost profits, were $131,911.40. The jury found that Guttierres-Roque individually and dba RG Enterprises and Roque individually and dba RG Enterprises had engaged in the wrongful conduct with malice, oppression, and fraud. In a second special verdict filed June 21, 2005, the jury found that Andres was entitled to $130,000 in punitive damages.
C. Falsity of Representation
Appellants maintain that respondent Andress fraud claim must fail because Andres did not present evidence showing that Roques representation that he needed 25 percent of Immecor revenues to pay bribes to KLA employees was false. This argument is without merit.
Proof of fraud gives rise to the tort action for deceit. (Lazar v. Superior Court (1996) 12 Cal.4th 631, 638.) "In an action for damages for deceit, the fraudulent representation relied upon must be as to a material fact which is false and known to be false by the maker, or is recklessly made or made without reasonable grounds for believing its truth. It must be made with intent to induce action by the other party and it must have been relied upon by the other party with justification. It must result in damage or injury to the party so relying. The absence of any one of these elements will preclude recovery. [Citations.]" (Gonsalves v. Hodgson (1951) 38 Cal.2d 91, 100-101.)
In this case, the representation to be proved false was that Roque needed 25 percent of Genexs proceeds from Immecor to pay royalties or entities at KLA, not that Roque needed that percentage to pay bribes. Roque never testified that he used the term "royalties" as a euphemism for "bribes" and Andres did not testify that he understood "royalties" to mean "bribes."
Even though no direct evidence of falsity was presented (see Evid. Code, § 410), the jury could reasonably infer from circumstantial evidence that Roques representation that a percentage of the Immecor payments were needed for payment of royalties or entities at KLA was false. (See Evid. Code, § 600, subd. (b) [defining "inference"]; Assem. Com. on Judiciary, com., 29B Wests Ann. Evid. Code (1995 ed.) foll. § 600, p. 4 ["an inference is not itself evidence; it is the result of reasoning from evidence"].) "While fraud must be clearly proved, direct evidence is not necessary for this purpose . . . ." (Herdan v. Hanson (1920) 182 Cal. 538, 546.) "In all cases it is permissible to prove fraud by circumstances, and in most cases it is the only evidence available." (Maxson v. Llewelyn (1898) 122 Cal. 195, 198.) "Further, the fact that evidence is circumstantial does not mean that it cannot be substantial. Relevant circumstantial evidence is admissible in California. (Evid. Code, § 351.) Moreover, the jury is entitled to accept persuasive circumstantial evidence even where contradicted by direct testimony. [Citations.]" (Hasson v. Ford Motor Co. (1977) 19 Cal.3d 530, 548, disapproved on another ground in Soule v. General Motors Corp. (1994) 8 Cal.4th 548, 580.)
In this case, there was circumstantial evidence from which the jury could reasonably infer that Roque had misrepresented that he had to pay others in addition to Colombage and Roque was not paying royalties or others in KLA. When asked at trial why Genex was paying Roque or RG Enterprises a percentage of the revenue from Immecor, appellants indicated they had contributed engineering services, invoicing, and administrative services to Genexs business endeavor. No mention was made of any additional expenses incurred by Roque or RG Enterprises on behalf of Genex. Although the evidence at trial showed RG Enterprises issued a number of checks to Colombage totaling a substantial sum, Colombage took part in occasional meetings at KLA with Roque, Andres, and Agoncillo, and Colombage was understood by Agoncillo to be the engineer involved in some products integrated by Genex, neither Roque nor his wife claimed to have hired an engineer or any individual other than Colombage to assist in the completion of work orders placed by Immecor. Additional evidence, impliedly believed by the jury, indicated that Roque had not testified truthfully regarding having a contractual relationship with Immecor, Roque had violated his employee obligations of confidentiality and loyalty to KLA, and Roque had not honored his agreement with Andres not to sue to him. It could be reasonably inferred from circumstantial evidence that Roque had lied about the necessity to pay additional money to undisclosed others at KLA.
"[W]hen a verdict is attacked as being unsupported, the power of the appellate court begins and ends with a determination as to whether there is any substantial evidence, contradicted or uncontradicted, which will support the conclusion reached by the jury. When two or more inferences can be reasonably deduced from the facts, the reviewing court is without power to substitute its deductions for those of the trial court. [Citations.]" (Crawford v. Southern Pac. Co. (1935) 3 Cal.2d 427, 429.) On appeal, "all conflicts [in the evidence] must be resolved in favor of the respondent, and all legitimate and reasonable inferences indulged in to uphold the verdict if possible." (Ibid.) Sufficient evidence establishes the falsity of Roques representation regarding the payment of unnamed others.
D. Justifiable Reliance
Justifiable reliance is one of the elements of fraud required to be proved. (Lazar v. Superior Court, supra, 12 Cal.4th 631, 638.) The jury in its special verdict concluded that Andres reasonably relied upon Roques representation. Appellants now assert that justifiable reliance, one of the elements of fraud, was not established because Andres had relied upon Roques representation that he needed Immecor revenues to bribe KLA employees and such reliance was not justifiable as a matter of law. He maintains that the transaction was illegal and Andres was in pari delicto and had unclean hands.
"Traditionally the doctrine of unclean hands is invoked when the one seeking relief in equity has violated conscience, or good faith, or other equitable principle, in his prior conduct. [Citation.]" (General Elec. Co. v. Superior Court In and For Alameda County (1955) 45 Cal.2d 897, 899-900.) Even assuming that the defense of unclean hands may be interposed in a legal action (see Kendall-Jackson Winery, Ltd. v. Superior Court (1999) 76 Cal.App.4th 970, 978 ["defense is available in legal as well as equitable actions"]), "the unclean hands doctrine is not a legal or technical defense to be used as a shield against a particular element of a cause of action." (Id. at p. 985.) "Unclean hands . . . is not the equivalent of unreasonableness." (Fuller-Austin Insulation Co. v. Highlands Ins. Co. (2006) 135 Cal.App.4th 958, 1005.) "Rather, it is an equitable rationale for refusing a plaintiff relief where principles of fairness dictate that the plaintiff should not recover, regardless of the merits of his claim." (Kendall-Jackson Winery, Ltd. v. Superior Court, supra, 76 Cal.App.4th at p. 985.)
Likewise, in pari delicto is a doctrine allowing a court to withhold relief regardless of the merit of a claim. "[T]he general rule [is] that the courts will deny relief to either party who has entered into an illegal contract or bargain which is against public policy. (Moore v. Moore, 130 Cal. 110 . . . , and the many cases which have since followed that authority.)" (Tri-Q, Inc. v. Sta-Hi Corp. (1965) 63 Cal.2d 199, 216, see Bank of Orland v. Harlan (1922) 188 Cal. 413, 422.) The rule does not "necessarily apply to both parties to the agreement unless both are truly in pari delicto." (Tri-Q, Inc. v. Sta-Hi Corp., supra, 63 Cal.2d at p. 218.)
Appellants did not argue below that, even if Andres had been defrauded, their bargain was illegal and they were in pari delicto and, therefore, the court should not provide relief but leave the parties where it found them. This is understandable since appellants wished the jury to find the alleged December 4, 2000 contract valid and enforceable. Appellants counsel asserted in closing argument that the case was "fairly simple" in that there was contract and Andres breached it. As to the fraud allegations, appellants counsel stated that "Mr. Andres is attempting to persuade you . . . that Mr. Roque came to him and said, well, I have to bribe a bunch of people at KLA Tencor and I need a lot of money to do it." Counsel maintained that "Mr. Roque did not go to Mr. Andres and say, look, I need the lion share of the money because Ive got to go out and bribe some people, just didnt happen."
We recognize that "parties may advance new theories on appeal when the issue posed is purely a question of law based on undisputed facts, and involves important questions of public policy. [Citations.]" (Fisher v. City of Berkeley (1984) 37 Cal.3d 644, 654, fn. 3.) Ordinarily, however, an appellant may not present a new theory if it "contemplates a factual situation the consequences of which are open to controversy and were not put in issue or presented at the trial . . . . [Citations.]" (Panopulos v. Maderis (1956) 47 Cal.2d 337, 341.)
The evidence in this case does not unequivocally demonstrate that that there was an illegal bargain involving bribery to which Andres was a party or that Andres knowingly participated in, authorized, or ratified bribery. Although appellants now insist that Andress theory of fraud involved the crime of commercial bribery (see Pen. Code, § 641.3, subd. (a)), the evidence regarding Roques demand for an increased percentage based upon the payment of "royalties" was ambiguous and undeveloped. It did not establish that Roque meant, or that Andres understood, "royalties" to mean "bribes." The existing record does not provide a sound basis for withholding judicial relief from respondent Andres based upon the doctrine of unclean hands or in pari delicto.
Penal Code section 641.3, subdivision (a), provides: "Any employee who solicits, accepts, or agrees to accept money or any thing of value from a person other than his or her employer, other than in trust for the employer, corruptly and without the knowledge or consent of the employer, in return for using or agreeing to use his or her position for the benefit of that other person, and any person who offers or gives an employee money or any thing of value under those circumstances, is guilty of commercial bribery."
Appellants do not suggest that there was insufficient evidence to establish justifiable reliance as a matter of fact. "Reliance exists when the misrepresentation or nondisclosure was an immediate cause of the plaintiffs conduct which altered his or her legal relations, and when without such misrepresentation or nondisclosure he or she would not, in all reasonable probability, have entered into the contract or other transaction. [Citations.] Except in the rare case where the undisputed facts leave no room for a reasonable difference of opinion, the question of whether a plaintiffs reliance is reasonable is a question of fact. [Citations.]" (Alliance Mortgage Co. v. Rothwell (1995) 10 Cal.4th 1226, 1239.) "[T]he issue is whether the person who claims reliance was justified in believing the representation in the light of his own knowledge and experience." (Gray v. Don Miller & Associates, Inc. (1984) 35 Cal.3d 498, 503; see Seeger v. Odell (1941) 18 Cal.2d 409, 415.) It is no defense that a defrauded party was "more credulous than the average person." (Seeger v. Odell, supra, 18 Cal.2d 409 at pp. 415-416.)
In this case, the jury could reasonably conclude that Andres was justified in his reliance upon Roques representation that royalties or other entities or persons in KLA needed to be paid. Andres had been working as a hotel assistant manager prior to the establishment of Genex. Roque occupied a position of trust as an older family member from whom Andres was taking direction. Roque had the engineering experience and was working for KLA and, consequently, was in a position to have superior information. There was no evidence showing that Andres disbelieved Roques representation regarding the need for a higher percentage to pay royalties or entities at KLA other than Colombage. The evidence is sufficient to support the jurys finding of reasonable reliance.
E. Damages
Appellants assert that respondent failed to prove any damages and, therefore, his fraud claim must fail. They argue that "[t]he $131,911.40 figure [did] not appear in the record until it showed up in the jurys verdict" and no evidence supports an award of damages in that amount. Respondent Andres is also baffled by how the jury arrived at this number but argues that the evidence would have supported an even higher award in that, over the course of Genexs business, Roque dba RG Enterprises received far in excess of the damages award even taking into account the documented advances of $329,188.50 as shown by the 1099 forms but he did "nothing for Genex (other than his ordinary, daily, compensated activities for KLA)."
In closing argument at trial, however, Andress counsel focused on the pie chart allegedly made by Roque in December 2000 and stated that pie chart was important because it established "the reason why RG Enterprises was getting all this money," which was that "they had to pay all these other entities." Although counsel complained in closing that Andres and Agoncillo were the ones doing all the work and Andres was the only one financially and legally at risk for Genex and Roque abused his authority as a family elder, counsel did not argue he was entitled to recover in fraud damages all amounts paid to Roque on the ground that the original 50-50 bargain was the result of fraud. At the end of closing argument, before the question of fraud was submitted to the jury, Andress counsel told the jury that "damages are real simple" and were "the $487,806 that he paid to Mr. Roque and his wife" "because they didnt earn it."
The jurys damages award of $131,911.40 indicates that jury determined that the entire amount paid to Roque pursuant to Uncle Normans schedule did not constitute damages proximately caused by fraud. The jury impliedly found that $355,895 of that $487,806.40 that was ultimately paid to Roque dba RG Enterprises was not induced by fraud.
The jury impliedly used the original 50-50 bargain as a starting point and found that Andress agreement to the original 50-50 bargain was not induced by fraud. The jury implicitly found that the fraud involving inducing Andres to pay more than 50 percent of the anticipated total revenues from Immecor as set forth in Uncle Normans schedule. It impliedly determined that Andress payment of $304,879, 50 percent of the anticipated revenues of $609,758, was not induced by fraud. A list prepared by Roque and admitted at trial indicated that RG Enterprises had advanced $29,206 to Andres and Agoncillo pending Immecors payment of the unpaid invoices and the jury impliedly determined that Andress repayment of that sum was not induced by fraud. That list also showed that RG Enterprises had paid the three hired workers about $21,780 in 2001 and the jury impliedly also determined that repayment of that sum was not induced by fraud. The total of those amounts equals $355,865, a figure very close to the amount the jury impliedly determined had been paid to appellant not as a result of fraud. Although we cannot decipher the jurys exact calculations or determine whether the 30 dollar difference in appellants favor was a mere mathematical error, the jurys award of $131,911.40 is within the range of damages suggested by substantial evidence.
Roques list of payments also indicated that RG Enterprises had paid the three hired Genex workers $43,579 in the year 2000. As stated above, Immecors corrected 1099 miscellaneous income for the year 2000 showed it had paid Genex $504,626 that year and Genexs 1099 form for the year 2000 showed that it had paid Roque $401,472 that year. If those claimed worker payments are taken into account, then it appears that Roque received 71 percent of Immecor revenues received by Genex in the year 2000. At trial, Andres did not argue that he was entitled to fraud damages for any part of the Immecor revenues handed over to Roque in 2000.
"A reviewing court must uphold an award of damages whenever possible (Seffert v. Los Angeles Transit Lines (1961) 56 Cal.2d 498, 508 . . .) and all presumptions are in favor of the judgment (Torres v. City of Los Angeles (1962) 58 Cal.2d 35, 43 . . . ; Leming v. Oilfields Trucking Co. (1955) 44 Cal.2d 343, 356 . . . .)" (Bertero v. National General Corp. (1974) 13 Cal.3d 43, 61.) Since our review is governed by the substantial evidence test (Crawford v. Southern Pacific Co. (1935) 3 Cal.2d 427, 429), we must reject appellants argument that the award of damages was without evidentiary support.
F. Punitive Damages
Appellants final contention is that the award of punitive damages cannot stand since "actual damages are an absolute predicate for an award of exemplary or punitive damages. (See Civ. Code, § 3294; Mother Cobbs Chicken T., Inc. v. Fox (1937) 10 Cal.2d 203, 205 . . . ; Hilliard v. A.H. Robins Co. (1983) 148 Cal.App.3d 374, 391 . . . ; compare Rest.2d Torts, § 908, com. c.)" (Kizer v. County of San Mateo (1991) 53 Cal.3d 139, 147.) Since we have rejected appellants attack on the damages award, this argument is without merit.
The judgment is affirmed. Appellants shall bear costs on appeal.
We concur:
RUSHING, P. J.
PREMO, J.