Opinion
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of Los Angeles County No. BC344602, Joanne B. O’Donnell, Judge.
Glickman & Glickman and Steven C. Glickman for Plaintiff and Appellant.
Caldwell Leslie & Proctor, Christopher G. Caldwell and Robyn C. Crowther for Defendants and Respondents.
EPSTEIN, P. J.
Boschal Lee appeals from summary judgment entered against him in this legal malpractice action. He claims the court erred in denying his request to file an amended complaint at the time of the summary judgment hearing. We conclude the court should have permitted the amendment, and reverse the judgment.
FACTUAL AND PROCEDURAL SUMMARY
Our statement of facts is drawn primarily from the undisputed facts submitted in support of and in opposition to the motion for summary judgment. Appellant Boschal Lee was a loan officer for Cathay Bank, and Sandra Lee Montgomery was an attorney with the Morrison & Foerster law firm. In December 2004, the two met to discuss Ms. Montgomery’s possible representation of Cathay Bank in a loan transaction involving a company called Solar Integrated Technologies (SIT).
They met again in January 2005 in Morrison & Foerster’s office to review SIT’s loan file, and to discuss and document a transaction extending and increasing SIT’s credit line with Cathay Bank. Appellant told Ms. Montgomery that Cathay would receive stock warrants from SIT as part of its compensation.
At this meeting, appellant showed Ms. Montgomery a document he had prepared under which SIT would grant stock options to Kracksmith, Inc. in consideration for its assistance in establishing contacts for SIT in Asia. Kracksmith is a “shell corporation” owned by appellant’s brother, Allan Lee. It never has done business in Asia, and has done no business in solar technology.
According to Ms. Montgomery, appellant told her he would be receiving securities from SIT through Kracksmith in return for helping SIT obtain additional loans from Cathay Bank. Appellant asserts he never told her he would receive anything from SIT, either directly or indirectly.
Ms. Montgomery consulted with Henry Fields, a regulatory attorney at Morrison & Foerster about whether she had an obligation to tell the firm’s client, Cathay Bank, about its loan officer’s intended transactions with one of its borrowers, SIT. It was Mr. Fields’ opinion that appellant’s transaction with SIT needed to be reported to the bank, under the Sarbanes-Oxley Act (15 U.S.C. §§ 7201-7266). Ms. Montgomery and Mr. Fields called appellant and told him they were required to disclose information to Cathay Bank, but would gave him a day to speak with the bank himself.
The following day, appellant spoke to Cathay Bank’s general counsel. According to appellant, he disclosed that he had discussed personnel issues with Morrison & Foerster concerning his employment by the bank. These included the percentage of SIT warrants appellant was to receive, his bonus and pay increases, and his title. After speaking with appellant, Cathay Bank’s general counsel called Ms. Montgomery and Mr. Fields and asked them to send the SIT loan file and a summary of events to him. Ms. Montgomery sent the file and a lengthy e-mail describing her discussions with appellant.
Cathay Bank then conducted its own internal investigation. It terminated appellant in February 2005. He was told the termination was based on “an issue of trust.”
Appellant sued Cathay Bank for wrongful termination. He also filed this action against Ms. Montgomery, Mr. Fields, and Morrison & Foerster for legal malpractice. He alleged he retained respondents to represent him in an agreement by which he was going to be involved with SIT and Kracksmith, and that he asked Ms. Montgomery to draft an agreement so he “could approach SIT on behalf of Kracksmith to solicit SIT on a consulting opportunity on behalf of Kracksmith.” He alleged Ms. Montgomery did not disclose to him that respondents represented Cathay Bank, although they were aware that the firm represented the bank and that SIT was a customer of the bank.
That case was settled.
Fields was later dismissed from the action. References to “respondents” include both Ms. Montgomery and Morrison & Foerster.
There is a factual dispute whether Morrison & Foerster began representing Cathay Bank with regard to the SIT transaction before or after appellant asked Ms. Montgomery for legal advice.
According to the complaint, Ms. Montgomery assured appellant she had no conflict of interest in representing him. She allegedly gave appellant “specific advice . . . regarding the agreement between Kracksmith and SIT.” Appellant alleged that “[a]t around the same time, [he], acting as a Cathay Bank employee, also employed Defendant MONTGOMERY on behalf of Cathay Bank to document the loan involving SIT. Again, Defendant MONTGOMERY stated that there would be no conflict of interest.” Despite this assurance, soon after appellant retained Montgomery with respect to Cathay Bank’s loan to SIT, she called him and told him she would “have to disclose everything” she and appellant had discussed, which included a dispute appellant had with Cathay Bank as well as the SIT/Kracksmith matter.
Appellant alleged that respondents made various statements to Cathay Bank which violated the attorney-client privilege and that respondents improperly agreed to represent potentially adverse interests, resulting in his termination. He alleged that as a proximate result of this conduct, his contract with SIT was interfered with, causing him to suffer a loss of income from that contract. He also alleged loss of income from his termination. Respondents asserted unclean hands as an affirmative defense.
Respondents moved for summary judgment on the grounds that (1) there was no breach of duty because their disclosures to Cathay Bank were permitted by state and federal law; (2) their conduct did not cause appellant’s damages; and (3) appellant’s claims were barred by the doctrine of unclean hands. The unclean hands theory was that Ms. Montgomery believed appellant was about to solicit stock options from SIT in return for helping SIT obtain financing from Cathay Bank, which would constitute a violation of the federal Bank Bribery Act (18 U.S.C. § 215). Respondents also asserted that the scenario appellant gave during discovery, that he was proposing an arrangement between SIT and his brother’s company, Kracksmith, and that Kracksmith would receive stock options, also left appellant with unclean hands because it violated Cathay Bank’s Code of Conduct, which prohibits a bank officer from allowing a family member to benefit from the bank officer’s relationship with a bank borrower.
In opposition to the summary judgment motion, appellant submitted a declaration stating he never told Ms. Montgomery he would receive any payment for his services in arranging a business relationship between SIT and Kracksmith. He also stated that when he met with Ms. Montgomery about the proposed transaction between SIT and Kracksmith, she looked through the bank’s Code of Conduct and agreed with him that there was nothing in there that would prohibit his conduct.
Hearing on the summary judgment motion was originally set for December 22, 2006, but was continued to January 19, 2007. In their reply in support of the summary judgment motion, filed January 11, 2007, respondents argued that appellant’s claim in his opposition that he never had an agreement with SIT was “doomed” by his allegation in paragraph 15 of his complaint that the damages he suffered as a result of respondents’ conduct included interference with his contract with SIT and the loss of income he would have had from that contract.
On January 18, 2007, with e-mail notice to respondents, appellant moved for leave to file a first amended complaint. The next day, when the matter was called for hearing on the summary judgment motion, appellant argued that he should be permitted to amend to correct the allegation in his complaint that respondents’ conduct interfered with his contract with SIT. Respondents opposed his request to amend. The court took the motion to amend and the summary judgment motion under submission.
When the parties appeared for trial on January 24, 2007, the court realized they had not received notice of its order denying the motion to amend and granting summary judgment. The court announced its ruling, ordered the trial off calendar, and directed respondents to prepare an order and judgment. Judgment was entered, and appellant filed this timely appeal.
DISCUSSION
I
One day before the hearing on respondents’ motion for summary judgment, appellant filed a “Memorandum of Points and Authorities in Support of Application for Leave to File” a first amended complaint. In it he stated:
“Paragraph 15 of the complaint erroneously states:
“‘As a proximate result of the said conduct of the Defendants, and each of them, Plaintiff’s contract with SIT was interfered with and Plaintiff has thus suffered the loss of income he would have had from the contract with SIT which was lost as a direct result of Defendants’ actions.’
“The proposed First Amended Complaint seeks to correct this error as follows (the underlining indicates additions; the strike-out indicates a deletion):
“‘As a proximate result of the said conduct of the Defendants, and each of them, plaintiff’s contract with Cathay Bank to receive a portion of the warrants issued by with SIT was interfered with and Plaintiff has thus suffered the loss of income he would have had from the contract with Cathay Bank to receive a portion of the warrants issued by SIT which was lost as a direct result of Defendants’ actions.’”
The court denied appellant’s application for leave to amend in part because it found the proposed amendment a sham pleading. “Under the sham pleading doctrine, plaintiffs are precluded from amending complaints to omit harmful allegations, without explanation, from previous complaints to avoid attacks raised in demurrers or motions for summary judgment.” (Deveny v. Entropin, Inc. (2006) 139 Cal.App.4th 408, 425.) “[I]nconsistencies with prior pleadings must be explained; if the pleader fails to do so, the court may disregard the inconsistent allegations.” (Vallejo Development Co. v. Beck Development Co. (1994) 24 Cal.App.4th 929, 946.) The doctrine is not intended to prevent an honest plaintiff from correcting an erroneous allegation, or to prevent correction of ambiguous facts. (Deveny v. Entropin, Inc., supra, 139 Cal.App.4th at p. 426.) Where a plausible explanation is given, the sham pleading doctrine does not apply. (Ibid.)
In Deveny, plaintiffs’ counsel provided declarations explaining that he had erred in relying on certain data for the complaint, and had learned that the data was inconclusive through further discovery and consultation with experts. The trial court found that the proposed amendment was a sham pleading and refused to allow it. This was error, requiring reversal because appellant had presented a plausible explanation of the need to amend. (139 Cal.App.4th at pp. 426-427.)
In Savage v. Pacific Gas & Electric Co. (1993) 21 Cal.App.4th 434, 441, the complaint alleged that appellant “‘was at all times relevant hereto, a . . . member of the Redwood Alliance.’” Appellant urged the court to disregard the allegation “‘as a misstatement in the pleadings drafted by [her] attorneys.’” On appeal, the court found the disputed allegation “virtually meaningless; the Redwood Alliance did not require payment of dues, issue membership cards, or maintain any formal accounting of membership. The ‘members’ were only those people who rallied to its activities at a particular time. In light of this evidence, the allegation clearly could be such an inadvertent error as appellant should be allowed to correct.” (Id. at p. 441.)
In this case, the original unverified complaint alleged in paragraph 15 that as a result of respondents’ actions, appellant’s contract with SIT was interfered with, and he suffered the loss of income he would have had from the contract with SIT. In his proposed amendment, appellant omitted reference to having a contract with SIT, and instead alleged he had a contract with Cathay to receive “a portion of the warrants issued by SIT . . . .”
Appellant explained: “It is clear that the original complaint erroneously stated the way Mr. Lee was damaged by the loss of the SIT warrants.” Appellant pointed out that the corrected version of paragraph 15 was consistent with his declaration submitted in opposition to defendants motion for summary judgment as well as his deposition testimony and discovery responses.
The memorandum quoted several portions of appellant’s deposition and interrogatory responses where appellant stated he would not have received any compensation from SIT, and that he was claiming he lost income from Cathay Bank, not from SIT. These included appellant’s deposition testimony on August 1, 2006, when he was asked whether he was seeking damages for interference with his contract with SIT, and whether he lost income from any source other than Cathay Bank. Appellant stated the SIT contract at issue was with Kracksmith, and that he would not have received any compensation, directly or indirectly, from that contract. Asked what income he claimed to have lost, he said it was income he would have received from Cathay Bank, and not from any other sources.
Respondents’ first set of interrogatories, propounded in early September 2006, asked appellant to “State the amount of income from the contract with SIT that YOU contend YOU lost as a result of Defendant’s conduct.” Appellant responded on November 22, 2006: “This amount is unknown. Plaintiff did not have any contract with SIT. Rather, plaintiff was to receive a portion of the warrants issued by SIT to Cathay Bank.”
Respondent Montgomery propounded a similar interrogatory to appellant in early November 2006: “Describe the terms of the proposed transaction that YOU attempted to arrange between Solar Integrated Technologies, Inc. and Cathay Bank, including any benefits to YOU, Kracksmith, Inc., or Allan Lee.” Appellant responded: “Plaintiff did not have any contract with SIT. Rather, plaintiff was to receive a portion of the warrants issued by SIT to Cathay Bank. Cathay Bank would benefit by having a customer with large loan and depository balances. No benefits to me personally; should Kracksmith, Inc. and SIT become partners in the future, there may be benefits to Kracksmith, Inc. Lee would only receive benefit through corporate entity.”
Appellant’s discovery responses all were consistent with the proposed amended pleading; no discovery responses supported the allegation in the unverified complaint that appellant had a contract directly with SIT. In addition, in his opposition to the summary judgment motion, appellant submitted the declaration of Bruce Khouri, president of SIT, who stated in unequivocal terms that neither he nor the company had paid, or promised to pay, cash or stock warrants to appellant. Given the consistent sworn statements disavowing the existence of a contract between appellant and SIT, we disagree with the trial court’s characterization of the requested amendment as a sham pleading. Instead, it appears to be the correction of an actual pleading error. The rule against sham pleadings is intended to discourage untruthful pleadings; it is not intended to prevent honest complainants from correcting erroneous allegations. (Berman v. Bromberg (1997) 56 Cal.App.4th 936, 946.) Amendment to correct what appears to be an inadvertent misstatement should have been permitted under California’s liberal pleading rules. (See Fogel v. Farmers Group, Inc. (2008) 160 Cal.App.4th 1403, 1424.) The trial court abused its discretion in denying leave to amend on this basis.
The court also denied leave to amend based on appellant’s delay in seeking to amend. Unwarranted delay in seeking to amend is a valid reason for denial. (Record v. Reason (1999) 73 Cal.App.4th 472, 486.) Appellant’s counsel sought to explain the delay in his declaration in support of the application for leave to amend: “I first realized that defendants were making an issue relating to the erroneous allegations of paragraph 15 when I reviewed defendant’s reply papers. Upon doing so, I immediately prepared the proposed First Amended Complaint and e-mailed it along with plaintiff’s authorities in support of the amendment to defendants’ counsel.”
Appellant knew as early as March 2006 that respondents were asserting his recovery was barred by the doctrine of unclean hands. But he only became aware of respondents’ reliance on the allegation in paragraph 15 when respondents filed the reply in support of their summary judgment motion. At that point, he acted promptly in seeking leave to amend. (See Fogel v. Farmers Group, Inc., supra, 160 Cal.App.4th at p. 1424.)
Nor was it inappropriate, in these circumstances, to seek leave to amend shortly before the hearing on the summary judgment motion. The policy favoring liberality in permitting amendment applies at any stage of the proceedings where no prejudice is shown to the adverse party. (Atkinson v. Elk Corp. (2003) 109 Cal.App.4th 739, 761.) Respondents did not claim they were or would be prejudiced by the delay. The court found an amended complaint “would require additional motion practice, including another summary judgment motion based on the unclean hands defense.” This is precisely the reason amendment should have been permitted, so that appellant was not deprived of the opportunity to present a full defense to the summary judgment motion. The lateness of the request does not support the court’s denial of leave to amend.
The court also was troubled that appellant did not provide written notice of its motion for leave to amend. Code of Civil Procedure section 473, subdivision (a)(1) authorizes the court, “in furtherance of justice, and on any terms as may be proper, [to] allow a party to amend any pleading . . . by correcting a mistake in the name of a party, or a mistake in any other respect; . . . The court may likewise, in its discretion, after notice to the adverse party, allow, upon any terms as may be just, an amendment to any pleading or proceeding in other particulars; . . .”
Appellant did not—in fact, could not--satisfy the written notice requirement of Code of Civil Procedure section 1005, nor did he seek an order shortening time or present a formal ex parte application. But he promptly notified respondents of his intent to request leave to amend two days before the hearing, and faxed his moving papers to counsel rather than presenting them to counsel at the hearing. The court acted well within its authority in hearing the motion on the merits, rather than rejecting it on this purely procedural ground.
This brings us to the final ground upon which the court ruled: futility. Respondents argue, and the court found, that even if appellant had been granted leave to amend, summary judgment would still have been proper based on the unclean hands defense.
The doctrine of unclean hands “demands that a plaintiff act fairly in the matter for which he seeks a remedy. He must come into court with clean hands, and keep them clean, or he will be denied relief, regardless of the merits of his claim.” (Kendall-Jackson Winery, Ltd. v. Superior Court (1999) 76 Cal.App.4th 970, 978.) The doctrine of unclean hands may be invoked when there has been unconscionable, bad faith, or inequitable conduct by the plaintiff in connection with the matter in controversy. (Fladeboe v. American Isuzu Motors Inc. (2007) 150 Cal.App.4th 42, 56.) “Unclean hands applies when it would be inequitable to provide the plaintiff any relief, and provides a complete defense to both legal and equitable causes of action.” (Ibid.)
The trial court found that “even if plaintiff were permitted to amend his complaint as he desires, the amendment would not deprive defendants of the unclean hands defense that is the basis for summary judgment. Cathay’s Code of Conduct specifically prohibits a staff member from allowing ‘a customer to arrange investments for the account of the staff member or an immediate family member, nor should the staff member become involved in investments sponsored by a customer under the circumstances that may create either a conflict of interest or the appearance of such a conflict.’ In addition, the Code of Conduct prohibits ‘investment activity that parallels or that anticipates investment action by the Bank. . . .’ (LaForcarde Decl., Exh. A.) Plaintiff’s proposed amendment still alleges that he engaged in self-dealing in violation of the Code of Conduct, and defendants’ unclean hands defense would still have merit even if the amendment were permitted.” We disagree.
Appellant alleged that he retained respondents to represent him with respect to an agreement involving SIT and his brother’s company, Kracksmith; that respondents knew appellant was an employee of their client, Cathay Bank, and that SIT was a customer of Cathay Bank; and that respondent Montgomery assured him there was no conflict of interest that would prevent her from working with him. Montgomery allegedly provided advice to appellant about the agreement, and advised him regarding employment issues he had with Cathay Bank. According to the complaint, at approximately the same time respondent Montgomery advised him about the agreement between Kracksmith and SIT, appellant, acting on behalf of Cathay Bank, employed respondents to represent the bank with respect to its loan to SIT. Soon after, respondents contacted appellant and advised him they would have to disclose to Cathay Bank everything appellant had discussed with respondent Montgomery. He alleged that respondents violated the attorney-client privilege and gave false and inaccurate information to Cathay Bank regarding SIT providing consideration to him. Appellant alleged that as a result of those statements, Cathay Bank terminated him, causing him loss of earnings and general damages. He originally alleged that respondents’ conduct interfered with his contract with SIT; his proposed amendment was that respondents’ conduct interfered with his contract with Cathay Bank to receive a portion of the warrants issued by SIT, causing him the loss of income he would have received from the warrants.
The problem with the finding of unclean hands is that appellant allegedly sought advice from respondent Montgomery about that very question -- whether there was anything wrong with pursuing that business arrangement. He also asked Montgomery whether there was any conflict of interest in her advising him about that matter. In his declaration in opposition to summary judgment, appellant stated:
“14. I specifically asked Montgomery to provide her legal advice so I could make sure that there was no conflict of interest issue with Cathay Bank since Kracksmith was my brother’s company and SIT was a Cathay Bank customer. If at any time Montgomery had told me that there was any conflict or any violation of any of Cathay Bank’s rules, I would have gone no further with the Kracksmith/SIT concept.
“15. Before meeting with Montgomery to discuss this preliminary idea of putting Kracksmith and SIT together, I told Montgomery that I was going to be asking for her legal assistance on personal issues and, if she had any conflict of interest, to let me know so I could move on to another attorney. She said not to worry about it and that at a firm she had worked with in the past, ‘all the principals had a number of personal issues that she was assisting them with, so this is nothing.’
“16. Before our lunch meeting in Little Tokyo, I had told Montgomery that one of the issues involved an opportunity to put my brother’s company, Kracksmith, together with SIT, a Cathay Bank customer. She said that I should check the Cathay Bank employee handbook to see if there is anything prohibiting me from doing any activity outside the realm of the bank’s business. I went through the handbook and did not see any prohibition.
“17. I brought the handbook with me to the lunch meeting. Again at lunch, I asked Montgomery if she was ‘okay’ discussing my personal issues with her; she said that there was not [a] problem and she would be happy to advise me.
“18. I told her that I had looked through the handbook and did not see any potential violation; Montgomery then thoroughly looked [through] the handbook and said ‘Yeah, you’re right, there’s nothing in here[,’] indicating that there was no violation.”
Appellant further declared that at a subsequent meeting, he showed Montgomery two rough agreements he had drafted for the Kracksmith/SIT transaction. Attached as Exhibit “E” to his declaration was one of the drafts, with what he stated (and she later admitted) were handwritten notes made by Montgomery. According to appellant, after Montgomery advised him about the changes that would be needed in the agreement, she told him a more formal agreement would need to be drafted, and referred him to another attorney because Morrison & Foerster’s rates would be too high for him to pay. It was shortly after this meeting that Montgomery telephoned appellant and told him she had spoken with her supervisor (Fields), who thought what appellant was doing was illegal, and that he would need to “disclose everything” to Cathay Bank.
Under this presentation of the facts, Montgomery failed to properly advise appellant that the arrangement he proposed between Kracksmith and SIT potentially violated Cathay Bank’s Code of Conduct. According to his declaration, if she had properly advised him of that fact, he would not have pursued the idea, his hands would have remained “clean,” and there would have been no improper conduct to disclose to Cathay Bank. Appellant’s evidence raises a triable issue of fact as to whether Montgomery caused appellant to have, or to at least consider a transaction which would have caused unclean hands.
Notably, under appellant’s version of the facts, supported by his declaration, he sought legal advice as to the propriety of arranging a business relationship between SIT and Kracksmith, and was advised by Montgomery that there was nothing in Cathay Bank’s Code of Conduct to prohibit it. To conclude as a matter of law that a party has unclean hands based on his or her inquiry about the propriety of a proposed business arrangement would defeat the very purpose of seeking legal advice.
Respondents claim this case is much like Blain v. Doctor’s Co. (1990) 222 Cal.App.3d 1048 (Blain) and Peregrine Funding, Inc. v. Sheppard Mullin Richter & Hampton LLP (2005) 133 Cal.App.4th 658 (Peregrine), both cases where legal malpractice claims were found to be barred by the doctrine of unclean hands.
In Blain, a physician was a defendant in a medical malpractice action. He followed the advice of his defense attorney to lie at a deposition. This resulted in the filing of an amended complaint against the physician. The medical malpractice action was later settled for policy limits. The physician then brought a legal malpractice action on the theory that defense counsel’s improper strategy exposed him to greater liability, caused him emotional distress, and precluded him from working as a physician. (Blain, supra, 222 Cal.App.3d at p. 1052.) His complaint included allegations that, in deference to the interests of the insurer, defense counsel failed to represent his interests and improperly advised him to lie at his deposition, and that he followed that advice, resulting in harm to his interests. (Id. at p. 1053.) The trial court granted counsel’s demurrer without leave to amend and dismissed the action. On appeal, the court held that having lied at the deposition, plaintiff was barred by his unclean hands from pursuing a legal malpractice action based on the advice to lie. (Id. at pp. 1060-1063.)
Also at issue in Blain was whether the plaintiff could avoid the damaging allegation in his original complaint that he followed his attorney’s advice to lie at his deposition by alleging in his first amended complaint that he followed his attorney’s “improper” legal advice. The court would not let him suppress the original allegation by omitting it, and instead read the complaints together. (Blain v. Doctor’s Co., supra, 222 Cal.App.3d at p. 1058.)
In Peregrine, the plaintiffs were actively engaged in a Ponzi scheme, and the defendant law firm provided professional advice which assisted plaintiffs in their illegal conduct. As the court explained, “Peregrine and Hillman’s orchestration of the Ponzi scheme that defrauded investors is intimately related to the professional malpractice claims before the court. These claims are based entirely on the assertion that Sheppard’s professional advice and tactics enabled Hillman and Peregrine to perpetuate their fraud on investors.” (Peregrine, supra, 133 Cal.App.4th at p. 681.) This, the court found, was a classic example of the unclean hands defense. (Ibid.)
These cases are inapposite. In the case before us, there is, at minimum, a triable issue of fact whether appellant engaged in any illegal conduct. He stated in his complaint that he sought help on a draft agreement he could use in order to “approach SIT on behalf of Kracksmith . . . .” In his deposition, he explained that he did not believe respondents were referring to the Kracksmith issue when they said they would have to disclose his conversations to Cathay Bank because “this is in exploration stages, so nothing has happened. I mean, the parties don’t even know, you know, my vision of how it was going to be networked. So, I mean, it was nothing. It was an idea.” Respondents did not dispute this. In their motion for summary judgment, they relied on appellant’s deposition testimony that representatives of SIT and Kracksmith had never met before the January 2005 loan transaction was proposed. Unlike the plaintiffs in Blain and Peregrine, appellant had not yet engaged in the conduct respondents claim was illegal or which would violate the Cathay Bank Code of Conduct. Appellant sought Montgomery’s advice about his idea, and she did not tell him she could not discuss the matter with him because her firm represented Cathay Bank, nor did she warn him that it would be improper to proceed.
The fact that Kracksmith was a shell corporation with no experience in solar energy technology does not in itself establish appellant’s unclean hands. Whether or not the arrangement between SIT and Kracksmith that he envisioned ultimately would violate the Sarbanes-Oxley Act, the federal Bank Bribery Act, or the Cathay Bank Code of Conduct, appellant did not have unclean hands if he did nothing more than consult counsel to find out about how, or whether, to proceed.
In addition, under appellant’s version of the facts, he repeatedly asked Montgomery if she had any “problem” representing him personally and representing Cathay Bank. Not only did she erroneously state that there was no conflict of interest, she also provided legal advice to appellant on a draft agreement he prepared that would have directly affected SIT, a Cathay Bank client on whose account she was working. Under this version of facts, had Montgomery properly advised appellant, he would not have informed her of his proposed arrangement between SIT and Kracksmith, and she would not then have been in a position to insist that he disclose it to Cathay Bank.
Given the disputed evidence about whether respondent Montgomery advised appellant that there was nothing in the Cathay Bank Code of Conduct prohibiting his proposed arrangement for SIT and Kracksmith, and whether she told him there was no conflict of interest in her advising him about the proposed arrangement while representing Cathay Bank, we disagree with the court’s conclusion that even under the proposed amendment, appellant’s claim would be barred by the unclean hands defense. Amendment would not have been futile. The trial court erred in denying appellant leave to amend his complaint, and in granting summary judgment in reliance on the original complaint.
Respondents urge us to affirm the grant of summary judgment on the alternative ground of causation—that Cathay Bank terminated appellant based on its own investigation. This ground was not relied on by the trial court. Although in some instances, a reviewing court may affirm the grant of summary judgment on a ground not relied upon by the trial court (Code Civ. Proc., § 437c, subd. (m)(2)), we decline to do so in this case. After leave to amend is granted, respondents will have the opportunity to attack the validity of the amended pleading in other appropriate proceedings. (See Atkinson v. Elk Corp., supra, 109 Cal.App.4th 739, 760.) For this reason, we need not and do not address the merits of the other grounds for respondents’ summary judgment motion.
DISPOSITION
The judgment is reversed. The matter is remanded to the trial court with instructions to grant appellant leave to amend his complaint, as he had proposed in his motion to amend. Appellant is to have his costs on appeal.
We concur: MANELLA, J. SUZUKAWA, J.