Filed 8/27/26 Lofts on L Street v. Clippinger CA4/3
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FOURTH APPELLATE DISTRICT
DIVISION THREE
LOFTS ON L STREET LLC,
Plaintiff and Respondent, G064746
v. (Super. Ct. No. 30-2020-
01143930)
ROBERT CLIPPINGER et al.,
OPINION
Defendants and Appellants.
Appeal from a judgment of the Superior Court of Orange County,
Nathan R. Scott, Judge. Affirmed.
Alston & Bird, Jeffrey A. Rosenfeld and Jesse Steinbach for
Defendants and Appellants.
Rutan & Tucker, Gerard M. Mooney, Bradley A. Chapin and
Samantha Papuchis for Plaintiff and Respondent.
* * *
In 2012, Robert Clippinger through his company Clippinger
Investment Properties, Inc. (CIP) solicited millions of dollars from real estate
investors in order to purchase and develop a mixed condominium and
commercial site. The investors received either Class A or B memberships in
the Lofts on L Street LLC (Lofts). Clippinger was the Manager.
In 2015, some of the Lofts members discovered that Clippinger
had engaged in self-dealing using Lofts’s finances. Clippinger obligated Lofts
to pay back $1.4 million in undisclosed “Bridge Loans,” which Clippinger had
converted to his own benefit. Clippinger also made intercompany transfers
out of Lofts accounts into his own accounts.
In an attempt to restrict Clippinger’s self-dealing, the members
amended the Lofts operating agreement. One of the provisions established an
“Authorized Representative” who was to monitor Lofts’s financials, keep
track of the monies Clippinger was obligated to repay to Lofts, and approve
any future expenditures or liabilities in excess of $5,000.00.
In 2017, Clippinger withheld distributions to a Class B member,
VWC Lofts, LLC (VWC), which then sued Clippinger, Lofts, and the
Authorized Representative. Lofts’s sales proceeds were frozen pending
resolution of the lawsuit. Clippinger later entered into a settlement
agreement with VWC without the Authorized Representative’s knowledge or
approval. Clippinger personally paid nothing to VWC, and the settlement
amount ($1.465 million) was paid by Lofts using the frozen funds.
In 2020, Lofts’s members formally removed Clippinger as the
Manager, and Lofts (as the LLC) sued Clippinger for breach of contract,
breach of fiduciary duty, and related claims. Clippinger countersued for
breach of contract, an accounting, and declaratory relief.
2
Following a bench trial, the court awarded Lofts just over $2
million in compensatory damages. The court awarded Clippinger nothing on
his cross-complaint. In its statement of decision, the court found Clippinger
lacked credibility, and his expert accountant’s opinion was unreliable. The
court awarded Lofts $6 million in punitive damages after finding that
Clippinger acted “with oppression, fraud, and malice.”
Clippinger claims the trial court erred because: A) the statement
of decision is inadequate; B) the punitive damage award is erroneous because
there is no evidence of his financial condition; and C) the conclusions in the
statement of decision are not supported by substantial evidence.
We affirm the judgment.
I.
FACTS AND PROCEDURAL BACKGROUND1
In 2012, Clippinger formed Lofts on L Street LLC (Lofts), which
purchased a distressed mixed condominium and commercial property in
Sacramento (the Property). The plan was to develop and sell individual
condominiums and commercial space for a profit to benefit Lofts’s members.
Clippinger secured bank loans to purchase the Property, as well as money
from investors.
The investors in Lofts received either “Class A” or “Class B”
memberships. Class B members were to receive a 17 percent preferred return
on their contributions, meaning that they would be paid before any other
members were paid (compounded daily). The Class A members were to
1
We interpret the facts in the light most favorable to the
prevailing party at trial (Lofts); therefore, we credit the testimony and
evidence that best supports the trial court’s statement of decision.
3
receive their distributions after outstanding loans were paid off, and after the
Class B members had been paid off in principal and interest.
According to Lofts’s operating agreement, Class A members were
to receive 80 percent of the profits, Class B members were to receive four
percent of the profits, and Clippinger as Manager was to receive 16 percent of
the profits. The members received documentation of their investment
through a Subscription Agreement.
In 2012, Clippinger determined he needed additional monies
beyond the initial bank loans and the members’ investments to purchase the
Property. Clippinger caused Lofts to borrow those additional monies from
various lenders at 10 percent interest (the Bridge Loans), including (among
others) $375,000 from Paula Boyer (through her trust) and $600,000 from the
Kazarian Family Trust. The promissory notes signed by Clippinger obligated
Lofts to repay the entirety of the Bridge Loans (about $1.4 million).
In 2015, certain Class A members learned of a potential lawsuit
against Lofts by Boyer and Kazarian as a result of Lofts’s failure to repay
their 2012 promissory notes, which were now overdue and accumulating
interest. Clippinger’s actions were costing Class B members to lose
anticipated profits because the Bridge Loans were continuing to accumulate
interest, and it appeared Clippinger was obligating Lofts to repay his own
personal debts.
Lofts members began investigating Clippinger’s management of
Lofts’s financials. The members hired a Certified Public Accountant, Bridget
Sanders, to do an evaluation of Lofts’s finances. Sanders discovered that
Clippinger had purported to “reclassify” the Bridge Loans on Lofts’s books
and to record them as “personal loans,” but Lofts was still obligated to repay
4
the Bridge Loans. Clippinger then treated the Bridge Loan proceeds as his
own “capital contribution” to Lofts in return for which Clippinger purportedly
caused Lofts to grant to himself $1.4 million of Class B membership interests,
although there was no record of Clippinger having a Subscription Agreement.
Sanders discovered that Clippinger had also caused numerous
“Intercompany” transfers from Lofts’s accounts to his own business accounts,
none of which had any discernible legitimate business purpose. Several Lofts
members hired a law firm to pursue litigation against Clippinger. However,
those parties entered into a settlement agreement.
Amended Operating Agreement
On October 15, 2015, Clippinger and the Lofts members executed
an Amended Operating Agreement (AOA), which was designed to impose
restrictions on Clippinger’s management and to provide for the repayment of
monies he owed to Lofts. The AOA provided for the appointment of an
Authorized Representative (Mary Aronson), whose “role and responsibility
. . . is to provide oversight detailed herein in order to ensure compliance with
the Operating Agreement, as amended, so that that interests of the Members
and the Company are protected from any potential self-dealing by the
Manager.” The AOA provided that any successor to Aronson would need to
be “approved by Members holding a Majority Interest.”
The AOA required the Manager (Clippinger) to obtain written
consent from the Authorized Representative (Aronson) before: entering into
or committing to any agreement, contract, commitment, or obligation on
behalf of Lofts involving future payments in excess of $5,000 in the
aggregate; incurring any expense, indebtedness, or liability in excess of
5
$5,000; making any distributions to Lofts’s members; and paying any monies
to the Manager beyond the annual management fees. Clippinger was also
required to provide the Authorized Representative with access to all of Lofts’s
accounts, company files, financial records, documents and other property.
The AOA identified “Bridge Loans” orchestrated by Clippinger,
but that “were not paid as of their maturity date and fell into default for lack
of timely payment.” Clippinger was obligated to indemnify Lofts against any
claims, liabilities, etc. “related to or arising out of (1) the Bridge Loans . . . or
(2) funds paid to Clippinger or his Affiliates (other than authorized
management fees), whether accounted for under the ‘intercompany’ loan
account or otherwise . . . .” Clippinger was personally obligated to pay Lofts
for the Bridge Loan Claims, and the Intercompany Claims, and they were to
“survive any resignation, removal, or any other circumstances whereby
Clippinger ceases (for whatever reason) to continue as Manager. No
distributions of any kind, including Distributable Cash, shall be made to
Clippinger unless and until all Bridge Loan Claims and Intercompany Claims
are satisfied and discharged as required pursuant to this section.”
Events After the AOA
Following the AOA’s execution, accountant Sanders worked with
the Authorized Representative, to further review and monitor Lofts’s
financials. Sanders kept a running tally of Clippinger’s debts to Lofts, which
included the repayment of the Bridge Loans Claims, as well as the
Intercompany Claims, which were unverified transfers of Lofts’s funds to
Clippinger-related entities and accounts for which there was no apparent
legitimate business purpose.
6
Ordinarily, after all of Lofts’s bank loans had been fully paid off,
and when one of the condominium units was sold, that would trigger a
distribution to the investors. Sanders would prepare the distribution, and the
checks were signed by the Authorized Representative (Aronson). However, in
March 2016, Clippinger notified Aronson and Sanders via e-mail that he had
decided (purportedly on the advice of an attorney) to withhold the signed
distribution checks for one of the Class B investors, VWC Lofts LLC (VWC).
Clippinger stated he was a partner in VWC, and he had received no
distributions from that entity. Aronson responded: “As I read this email it is
very concerning to me, I don’t feel you can hold any investors money.”
Nonetheless, Clippinger withheld payment to VWC.
In June 2017, VWC filed a lawsuit against Clippinger, Lofts, and
Aronson for breach of fiduciary duty, breach of the operating agreement and
related claims (the VWC Action). VWC alleged the defendants had breached
their duties to make distributions, and VWC was owed hundreds of
thousands of dollars.
In November 2017, VWC obtained a preliminary injunction
restraining the defendants (Clippinger, Lofts, and Aronson) from distributing
any profits/proceeds from the sale of any real property to Lofts’s members,
including the last remaining unsold portion of the Project (the Broderick
Property). The injunction further required that if Lofts sold any properties it
must deposit the sale proceeds into an interest-bearing escrow account during
the pendency of the VWC Action.
In December 2017, Lofts sold the Broderick Property, and in
compliance with the preliminary injunction, deposited the sale proceeds into
an escrow account (the Escrowed Funds).
7
On January 21, 2020, Aronson resigned her position as
Authorized Representative after she settled her portion of the VWC Action.
On February 12, 2020, the Lofts members elected Jon Menig as
the new Authorized Representative.
On February 21, 2020, Clippinger executed a confidential
settlement of the VWC Action (the VWC Settlement Agreement) that
required Lofts to use the Escrowed Funds to pay VWC $1.375 million on
behalf of both Lofts and Clippinger. Clippinger signed the VWC Settlement
Agreement without notifying or seeking approval of the new Authorized
Representative (Menig), and without notice to Lofts’s members.
On March 20, 2020, after the Lofts members found out about the
VWC Settlement Agreement, the members voted to remove Clippinger as the
Manager. The Lofts members replaced Clippinger with Maureen Reddington,
who tried to get control of the Lofts’s accounts, but Clippinger disputed that
he had been properly replaced.
Court Proceedings
In May 2020, Lofts (as the LLC) filed a complaint against
Clippinger alleging causes of action for contractual indemnification, breach of
fiduciary duty, breach of operating agreement, equitable or implied
indemnification, and declaratory relief.
In September 2022, Clippinger obtained leave to file an amended
cross-complaint alleging causes of action for breach of contract, an order for
an accounting, and declaratory relief.
In September 2023, a bench trial began. Lofts’s witnesses were
Menig (the new Authorized Representative), Reddington (the new Manager),
8
Clippinger (as an adverse witness), and Sanders (Lofts’s accountant).
Clippinger called himself as a witness, and an expert accountant.
In December 2023, the trial court issued its ruling. The court
ordered Clippinger to pay Lofts $2,055,075.76 in compensatory damages and
prejudgment interest. The court found Clippinger was not credible, and his
expert’s opinion was unreliable. The court awarded Clippinger nothing on his
cross-complaint.
In March 2024, the trial court issued a statement of decision (the
proceedings and the statement of decision will be covered more thoroughly in
the discussion section of this opinion).
In July 2024, the trial court awarded Lofts $6 million in punitive
damages (the bifurcated trial proceedings and the court’s ruling will be
covered more thoroughly in the discussion section of this opinion).
II.
DISCUSSION
Clippinger claims the trial court erred because: (A) the statement
of decision is inadequate; B) the punitive damage award is erroneous because
there is no evidence of his financial condition; and C) the conclusions in the
statement of decision are not supported by substantial evidence.
A. Statement of Decision
Clippinger claims that the trial court’s statement of decision is
inadequate. We disagree and find the court fulfilled its statutory duties.
The degree of specificity required in a trial court’s statement of
decision depends on the nature of the case. (Altavion, Inc. v. Konica Minolta
9
Systems Laboratory, Inc. (2014) 226 Cal.App.4th 26, 52.)
Generally, a court’s discretionary decisions are reviewed for an
abuse of discretion. (See, e.g., Sanjiv Goel, M.D., Inc. v. Regal Medical Group,
Inc. (2017) 11 Cal.App.5th 1054, 1060.) “‘Under an abuse of discretion
standard of review, the “trial court’s findings of fact are reviewed for
substantial evidence, its conclusions of law are reviewed de novo, and its
application of the law to the facts is reversible only if arbitrary and
capricious.’”” (Friends of South Fork Gualala v. Department of Forestry &
Fire Protection (2024) 106 Cal.App.5th 1180, 1195.)
In this part of the discussion, we shall: 1) review relevant legal
principles; 2) summarize the trial court proceedings; and 3) analyze the legal
principles as applied to the facts in this case.
1. Legal Principles
Generally, in “superior courts, upon the trial of a question of fact
by the court, written findings of fact and conclusions of law shall not be
required.” (Code Civ. Proc., § 632, subd. (a).) However, a trial “court shall
issue a statement of decision explaining the factual and legal basis for its
decision as to each of the principal controverted issues at trial upon the
request of any party appearing at the trial.” (Ibid.)
“Upon the timely request of one of the parties in a nonjury trial, a
trial court is required to render a statement of decision addressing the factual
and legal bases for its decision as to each of the principal controverted issues
of the case.” (Muzquiz v. City of Emeryville (2000) 79 Cal.App.4th 1106,
1124.) “The trial court need not discuss each question listed in a party’s
request; all that is required is an explanation of the factual and legal basis
10
for the court’s decision regarding the principal controverted issues at trial as
are listed in the request.” (Hellman v. La Cumbre Golf & Country Club (1992)
6 Cal.App.4th 1224, 1230.)
A trial court’s statement of decision “need do no more than state
the grounds upon which the judgment rests, without necessarily specifying
the particular evidence considered by the trial court in reaching its decision.
[Citations.] ‘[A] trial court rendering a statement of decision . . . is required to
state only ultimate rather than evidentiary facts because findings of ultimate
facts necessarily include findings on all intermediate evidentiary facts
necessary to sustain them. [Citation.]’ [Citations.] In other words, a trial
court rendering a statement of decision is required only to set out ultimate
findings rather than evidentiary ones.” (Muzquiz v. City of Emeryville, supra,
79 Cal.App.4th at pp. 1124–1125.)
Findings that are signed by the trial court and fairly disclose the
court’s determination of material issues of fact are sufficient; it is not
necessary for a court to couch its findings in any greater detail or to state
findings in terms requested by defendants. (Security Pacific National Bank v.
Chess (1976) 58 Cal.App.3d 555, 568.) “General findings in the words of the
pleadings are a sufficient compliance with the requirement of making
findings of facts.” (Thomasset v. Thomasset (1953) 122 Cal.App.2d 116, 129,
disapproved on another ground in See v. See (1966) 64 Cal.2d. 773, 785–786.)
“On appeal, a judgment of the trial court is presumed to be
correct.” (Cahill v. San Diego Gas & Electric Co. (2011) 194 Cal.App.4th 939,
956.) If an appealed judgment is supported by the trial court’s findings, any
failure to make additional findings in the statement of decision on
“immaterial” issues – issues that would not affect the ultimate outcome –
11
constitutes harmless error. (Vukovich v. Radulovich (1991) 235 Cal.App.3d
281, 295; F.P. v. Monier (2017) 3 Cal.5th 1099, 1114 [“a trial court’s failure to
make a finding on an issue that ‘could make no possible difference in the
result’ . . . ‘is not error, or at least, . . . not a prejudicial error’”].)
2. Trial Court Proceedings
On December 18, 2023, following the eight-day bench trial, the
court issued a three-page written ruling favoring all of Lofts’s claims and
rejecting all of Clippinger’s counterclaims.
On December 28, 2023, Clippinger filed a request for a statement
of decision addressing 36 purported controverted issues.
On January 8, 2024, Lofts filed a response to Clippinger’s request
for a statement of decision. Lofts argued that Clippinger’s “written request
for a statement of decision is fraught with numerous improper requests that
the Court address issues that are far beyond what is necessary or appropriate
in a statement of decision.”
On January 11, 2024, there was a hearing to set a future trial
date on the bifurcated issue of punitive damages. The trial court noted that it
had received Clippinger’s written request for a statement of decision, and the
court said that its written ruling was intended as a proposed statement of
decision. Based on Clippinger’s request, the court identified additional
controverted issues that needed to be addressed. The court ordered Lofts to
draft a proposed statement of decision.
The trial court said as to “other controverted issues on which
[Clippinger] seeks a further statement of decision, I think the answer is
either express or implied in the ruling I’ve already given, or it probably falls
12
just a little too far toward resolving evidentiary disputes rather than
resolving the principal controverted issues. So that’s what I’m thinking.” The
court heard from the parties, and Clippinger had no objection to the court’s
plan going forward.
On February 2, 2024, the trial court filed a six-page proposed
statement of decision.
On February 20, 2024, Clippinger filed objections to the proposed
statement of decision. Clippinger again repeated his request of the court to
address 36 purported controverted issues.
On March 1, 2024, the trial court filed a final statement of
decision that mirrored the earlier proposed statement of decision.
At the beginning of the statement of decision, the trial court
ruled: “Judgment shall be entered in an amount of $2,055,075.76 plus
interest to be paid by defendants to plaintiff. [¶] The court further finds for
cross-defendant Lofts . . . and against cross-complainant Robert Clippinger on
the cross-complaint, who shall recover nothing on the cross-complaint.”
After an introduction, which served as an overview of the facts
and the procedural posture of the case, the trial court addressed the
allegations in Lofts’s complaint, in part, as follows:
“The court finds plaintiff met its burden on each cause of action of
its complaint. As these claims largely overlap, the court summarize[s] its
ultimate findings.
“First, the court finds defendants unilaterally ‘converted’
unauthorized bridge loans they took out in the Lofts’s name to personal
loans, then purported to ‘contribute’ the loan proceeds to the Lofts in
exchange for unauthorized B Share interests. Second, the court finds
13
defendants made a series of unjustified and unauthorized ‘intercompany
transfers.’ Third, the court finds defendants made an unjustified and
unauthorized decision to withhold distributions to a Lofts member, leading to
the VWC litigation, the freezing of Lofts’s funds into a court-ordered escrow
account, and defendants’ unauthorized settlement of the lawsuit with Lofts’s
funds. As explained below, the compensatory damages awarded to Lofts is
based on the unauthorized disbursement of Lofts funds in connection with
the VWC litigation and the other various debts Mr. Clippinger owed to Lofts
calculated by [Lofts’s accountant] Ms. Sanders. However, the court finds all of
Mr. Clippinger’s improper actions identified above were done with
oppression, fraud, and malice, [citations], and that Mr. Clippinger specifically
engaged in these acts intentionally with the knowledge that the foregoing
conduct was in violation of the law and Lofts’s operating agreement.
[Citations.] The court finds that Mr. Clippinger knowingly engaged in
repeated acts of deceit, concealment, and fraud to perpetuate a years-long
scheme to engage in self-interested financial transactions to the detriment of
Lofts and its members. The court’s finding of oppression, fraud and malice is
particularly strong in this case because of the evidence that Mr. Clippinger
continued to repeatedly engage in such deceit after the parties amended the
operating agreement specifically to curb his history of unauthorized, self-
interested financial transactions using Lofts funds.” (Footnotes omitted.)
The trial court then addressed the allegations in Clippinger’s
cross-complaint:
“The court finds cross-complainant failed to meet his burden of
proof on each cause of action of his cross-complaint. Again summarizing, the
court finds Mr. Clippinger’s testimony concerning loans to Lofts, capital
14
contributions, off-book contributions, and the like was not credible. Even if
Mr. Clippinger had made some sort of financial contribution to Lofts, it would
have been unauthorized and in violation of the governing documents. The
court finds that any irregularities in the Lofts accounting (especially prior to
October 15, 2015) is a result of defendants’ wrongdoing and breach of the
LLC’s operating agreement as defendants (and not plaintiff) had sole control
of the financials at all relevant times. Mr. Clippinger failed to show any basis
for an accounting or declaratory relief and, even if he had, his unclean hands
warrant against his recovering any equitable relief.
“The court finds the defense expert’s opinion to be unreliable.
While her opinion is admissible under Sanchez, it was based on Mr.
Clippinger’s refreshed recollection, and the court finds that recollection to be
unreliable and an insufficient factual basis for the opinion.”
3. Application and Analysis
As far as Lofts’s complaint, the causes of action were for
contractual indemnification, breach of fiduciary duty, breach of operating
agreement, and equitable indemnity.2 In its statement of decision, the trial
court identified three fundamental breaches committed by Clippinger: 1) the
unauthorized Bridge Loans; 2) the unauthorized intercompany transfers to
his own accounts; and 3) the unauthorized decision to withhold distributions
to VWC, which ultimately led to the unauthorized settlement of the VWC
lawsuit with the Lofts funds. In short, we find that the court’s statement of
decision is adequate for purposes of appellate review because it makes clear
2
The declaratory relief claim was dismissed without prejudice
prior to trial.
15
“the factual and legal basis for its decision as to each of the principal
controverted issues at trial.” (Code Civ. Proc., § 632, subd. (a); see also
(Thomasset v. Thomasset, supra, 122 Cal.App.2d at p. 129 [“General findings
in the words of the pleadings are . . . sufficient]”.)
Clippinger claims, in part, that the statement of decision is
inadequate because it “contains no findings as to what provisions of the
Operating Agreement Clippinger supposedly breached.” But Clippinger does
not dispute that the operating agreement and its amendments prevented
Clippinger from making unauthorized loans, unauthorized intercompany
transfers for his own benefit, and an unauthorized payment of $1.375 million
to settle a lawsuit using Lofts funds. Therefore, any failure by the trial court
to identify the particular provisions of the AOA that Clippinger breached is
immaterial and not arguably prejudicial. (F.P. v. Monier, supra, 3 Cal.5th at
p. 1114 [“a trial court’s failure to make a finding on an issue that ‘could make
no possible difference in the result’ . . . ‘is not error, or at least, . . . not a
prejudicial error’”].)
As far as Clippinger’s cross-complaint, the causes of action were
for breach of contract, accounting, and declaratory relief. In its statement of
decision, the trial court found that Clippinger’s testimony was not credible,
and his expert’s testimony was not reliable. These were the only witnesses
Clippinger presented at trial; therefore, we find that court’s statement of
decision is adequate because a statement “need do no more than state the
grounds upon which the judgment rests, without necessarily specifying the
particular evidence considered by the trial court in reaching its decision.”
(Muzquiz v. City of Emeryville, supra, 79 Cal.App.4th at pp. 1124–1125.)
Clippinger claims: “The [statement of decision] is particularly
16
inadequate with respect to Clippinger’s accounting claim.” But the statement
of decision explains that “Clippinger failed to show any basis for an
accounting or declaratory relief and, even if he had, his unclean hands
warrant against his recovering any equitable relief.” Clippinger does not
dispute that as a matter of law the doctrine of unclean hands prohibits
declaratory relief. (See Fladeboe v. American Isuzu Motors Inc. (2007) 150
Cal.App.4th 42, 56 [“‘The [unclean hands] doctrine 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’”].) Therefore, we find the statement of decision as
to Clippinger’s accounting claim to be adequate.
In sum, it appears that Cippinger’s purported challenges to the
trial court’s statement of decision are more properly interpreted as objections
to the substance of the trial court’s factual findings, rather than to the
adequacy of the written statement of decision. The substance of the trial
court’s factual findings are, of course, evaluated under the highly deferential
substantial evidence standard of review: a trial court’s “findings must be
sustained if they are supported by substantial evidence, even though the
evidence could also have justified contrary findings.” (Yield Dynamics, Inc. v.
TEA Systems Corp. (2007) 154 Cal.App.4th 547, 557, 560 [“we emphatically
reject any suggestion that the standard of review is affected by supposed
deficiencies in the statement of decision”].)
As to Clippinger’s specific challenges to the trial court’s factual
findings in the statement of decision, we find substantial evidence in the
record to support those findings as we shall explain later in this opinion.
17
B. Punitive Damages
Clippinger claims the trial court’s punitive damages award “was
erroneous because there was no evidence of Clippinger’s financial condition.”
(Capitalization & underlining omitted.) We disagree. Clippinger has forfeited
this claim on appeal because he disobeyed the court’s discovery order by
providing incomplete information about his financial condition.
When reviewing a punitive damages award, the “substantial
evidence standard of review applies, in which all presumptions favor the trial
court’s findings[,] and we view the record in the light most favorable to the
judgment.” (Kelly v. Haag (2006) 145 Cal.App.4th 910, 916.)
In this part of the discussion, we shall: 1) review relevant legal
principles; 2) summarize the trial court proceedings; and 3) analyze the legal
issues as applied to the facts in this case.
1. Legal Principles
“In an action for the breach of an obligation not arising from
contract, where it is proven by clear and convincing evidence that the
defendant has been guilty of oppression, fraud, or malice, the plaintiff, in
addition to the actual damages, may recover damages for the sake of example
and by way of punishing the defendant.” (Civ. Code, § 3294, subd. (a).)
“The court shall, on application of any defendant, preclude the
admission of evidence of that defendant’s profits or financial condition until
after the trier of fact returns a verdict for plaintiff awarding actual damages
and finds that a defendant is guilty of malice, oppression, or fraud in
accordance with Section 3294.” (Civ. Code, § 3295, subd. (d).)
“An act such as breach of fiduciary duty may be both a breach of
18
contract and a tort.” (Kangarlou v. Progressive Title Co., Inc. (2005) 128
Cal.App.4th 1174, 1178.) “The purpose of punitive damages is . . . to punish
wrongdoing and deter future misconduct by either the defendant or other
potential wrongdoers.” (Stevens v. Owens-Corning Fiberglas Corp. (1996) 49
Cal.App.4th 1645, 1658.) The “criteria for making that determination [are]:
(1) the reprehensibility of the defendant’s misdeeds; (2) the [relationship to
the] amount of compensatory damages, though there is no fixed ratio for
determining whether punitive damages are reasonable in relation to actual
damages; and (3) the defendant’s financial condition.” (Ibid.)
Generally, it is the plaintiff’s duty to show evidence of the
defendant’s financial condition. (Soto v. BorgWarner Morse TEC, Inc. (2015)
239 Cal.App.4th 165, 194.) However, the “defendant is in the best position to
know his or her financial condition, and cannot avoid a punitive damage
award by failing to cooperate with discovery orders.” (Fernandes v. Singh
(2017) 16 Cal.App.5th 932, 942.)
“A number of cases have held that noncompliance with a court
order to disclose financial condition precludes a defendant from challenging
the sufficiency of the evidence of a punitive damages award on appeal.”
(Fernandes v. Singh, supra, 16 Cal.App.5th at p. 942; see Corenbaum v.
Lampkin (2013) 215 Cal.App.4th 1308, 1337–1338 [“A defendant who fails to
comply with a court order to produce records of his or her financial condition
may be estopped from challenging a punitive damage award based on lack of
evidence of financial condition to support the award”]; Caira v. Offner (2005)
126 Cal.App.4th 12, 40–41 [“assuming there is any insufficiency in the record
as to [defendant’s] financial condition, such insufficiency would be
attributable solely to [defendant’s] failure to comply with a court order”];
19
StreetScenes v. ITC Entertainment Group, Inc. (2002) 103 Cal.App.4th 233,
243–244 [“it may not be a defendant’s burden to prove its net worth, but if it
is ordered to produce that evidence it is under an obligation to do so”].)
2. Trial Court Proceedings
In June 2023, prior to the bench trial, Lofts served Clippinger
with a subpoena duces tecum (SDT) for the production of documents to show
Clippinger’s “financial condition and net worth for the purposes of the finder
of fact assessing punitive damages.”
The SDT sought: “Documents sufficient to show Robert
Clippinger’s financial condition and net worth, as required by Civil Code
section 3295, which may include, without limitation: any personal balance
sheet or statement of net worth; financial statement or schedule showing the
value of Robert Clippinger’s ownership interests in Clippinger Investment
Properties, Inc. or any other company; year-end statements for the years
ending 2017 through 2022, and most recent monthly statements, for all bank
accounts and brokerage/investment accounts in which Robert Clippinger
maintains assets; most current statements for any pension plan(s), 401k
account(s), or IRA account(s) in which Robert Clippinger has an ownership
interest; federal tax returns for 2017 through 2022, and appraisals for any
real property owned in whole or part by Robert Clippinger.”
On January 11, 2024, after issuing its ruling on the merits, the
trial court held a trial setting conference to schedule a punitive damages
phase. Lofts told the court it had served Clippinger with the STD, but Lofts
had not received any financial records. The trial ordered: “[Clippinger] shall
produce financial documents pursuant to [Lofts’s] subpoena no later than
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Monday, [February 26, 2024].”
On June 18, 2024, the trial court presided over the punitive
damages phase of the trial. Lofts called as witnesses Menig and Clippinger.
Menig testified he had been involved in two other property investments in
which Clippinger was the Manager. In those investments, Menig said that
Clippinger had manipulated the books and stolen company funds. Clippinger
called no witnesses.
Clippinger’s testimony largely focused on whether he had
adequately responded to the trial court’s order as to his financial information.
Clippinger testified he was the president and sole shareholder of
Clippinger Investment Properties (CIP). Clippinger testified CIP’s primary
business purpose was to find investment properties for third parties, buy the
property, and then manage the property by selling it, or indefinitely
managing it. Clippinger estimated that CIP had managed about 70 or 80
properties over the course of about 35 years, and was still in business and
actively looking for new investors. Clippinger said CIP typically invests its
own money alongside other investors.
Clippinger testified that he had never before had a financial
evaluation done on CIP as a business, but he admitted that a profit-and-loss
statement and a tax return would be the kind of documents needed to do so.
When asked why he had not produce such documents in response to the SDT,
Clippinger responded, “I put down the detail of everything I own.” Clippinger
admitted that CIP keeps a profit-and-loss statement, but when asked why he
did not provide that document he said, “There -- I don’t -- look, I don’t believe
there’s really any -- much -- much value there.” When asked why he had not
produced any documents showing any other investments, Clippinger said, “I
21
don’t have any other investments.”
Clippinger testified that he had produced some bank records in
relation to certain entities, but during his testimony he claimed that he did
not have an ownership interest in those entities. When asked why he had
provided bank records for entities that he had no ownership interest in,
Clippinger responded, “You asked for bank records, so I sent them to you.”
Clippinger was confronted with a three-year-old financial
statement in which he claimed to have over $28 million in assets, and had an
income over $32,000 a month. The statement showed that Clippinger owned
real property and several vehicles including a Ford truck, a Mustang, a
Bentley, two Porsches, and a Lincoln Navigator. Clippinger claimed he was
now in bankruptcy and foreclosure. When asked why he had not produced
any bankruptcy records in response to the SDT, Clippinger said, “I gave you
the information as far as the value on the -- you know, the statement. If you
want the bankruptcy records, I’m happy to send this to you, certainly.”
Clippinger claimed that he only currently owned the Porsche and the
Bentley, and that he had lost over $28 million dollars in three years.
On July 11, 2024, the trial court issued a ruling as to punitive
damages. The court’s ruling addressed: 1) Clippinger’s reprehensibility; 2) the
relationship between actual damages and punitive damages; and 3)
Clippinger’s financial condition.
“(1) Reprehensibility. The court finds defendants’ conduct to be
significantly reprehensible. Defendants took advantage of investors who were
vulnerable to abuse because they had no control over the Lofts’s operation.
Defendants engaged in a years-long pattern and practice of intentionally
using the investors’ funds as their own and then covering it up. Worse,
22
defendants continued to do so after the investors tried to rein in the abuses.
[Citation.] Plaintiff also offered evidence of defendants’ misconduct managing
other investments and properties, which is admissible and relevant.
[Citation.] [¶] It is true defendants’ conduct caused only economic harm and
posed no health or safety issues. But the economic harm was substantial,
exceeding $2 million. . . .
“(2) Reasonable Relationship. California courts ‘have adopted a
broad range of permissible ratios – from as low as one to one to as high as 16
to 1 – depending on the specific facts of each case.’ [Citation.] ‘Where
intentional acts of fraud are involved, ratios of at least 3 to 1 appear to be
called for,’ which is consistent with the typical triple-damage remedy for
fraud. [Citations.]”
“(3) Financial Condition. Defendants correctly note that the
record lacks evidence of defendants’ current assets and liabilities. [Citation.]
The absence is fairly attributed to defendants.
“‘A defendant is in the best position to know his or her financial
condition, and cannot avoid a punitive damage award by failing to cooperate
with discovery orders.’ [Citation.] ‘[I]t may not be a defendant’s burden to
prove its net worth, but if it is ordered to produce that evidence it is under an
obligation to do so.’ [Citation.] For this purpose, ‘a subpoena is equivalent to a
court order.’ [Citation.]
“Here, plaintiff subpoenaed ‘[d]ocuments sufficient to show
Robert Clippinger’s financial condition and net worth . . . .’ [Citation.] And
the ‘Court ordered Clippinger to produce documents responsive to the
Subpoena.’ [Citation.] Clippinger cannot rely upon his own incomplete
disclosure to avoid paying punitive damages. Nor does the court find
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Clippinger’s testimony of his dire finances to be credible.
“Given the high level of defendants’ responsibility, the significant
compensatory damages already awarded to plaintiff, and defendants’
indeterminate financial condition, a punitive damages award of
approximately 3 times the compensatory damages is reasonable and
appropriate.”
3. Application and Analysis
A defendant’s failure to obey a court order to produce records of
his financial condition forfeits an appellate challenge to a punitive damage
award. (Mike Davidov Co. v. Issod (2000) 78 Cal.App.4th 597, 609 (Davidov).)
In Davidov, after the trial court awarded compensatory damages, plaintiff
requested and the court ordered defendant to produce records regarding its
net worth, prior to the punitive damages phase of trial. (Id. at p. 603.)
Defendant did not comply, and plaintiff argued the trial court could
nevertheless award punitive damages. The trial court agreed and awarded
plaintiff approximately four times the compensatory damages award. (Id. at
p. 604.) On appeal, defendant argued the trial court erred because the
plaintiff did not produce any evidence of his financial condition. (Id. at p.
605.) The appellate court disagreed and affirmed the judgment. (Id at p. 610.)
The Davidov court held that “defendant was ordered to produce
his financial records so that the trial court could make an evaluation of
whether any particular punitive damage award would have the required
deterrent effect without being overly burdensome. This order was never
rescinded, nor has defendant argued on appeal that it was improper.
Therefore, by failing to bring in any records which would reflect his financial
24
condition, despite being ordered to do so, and by failing to challenge that
ruling on appeal, defendant has waived any right to complain of the lack of
such evidence.” (Davidov, supra, 78 Cal.App.4th at pp. 608–609.)
Here, similar to the defendant in the Davidov, Clippinger argues
the “award of punitive damages was erroneous because no evidence–let alone
clear and convincing evidence–of [his] financial condition was admitted at
trial.” But similar to the court’s holding in Davidov, we find that Clippinger
failed to obey the trial court’s order to produce sufficient records of his
financial condition (e.g., a profit and loss statement). Thus, Clippinger has
forfeited this appellate challenge on appeal. (See Davidov, supra, 78
Cal.App.4th at p. 600 [“As defendant failed to obey a court order requiring
him to produce records of his financial condition, he is estopped to object to
the absence of such evidence”].)
Clippinger also argues the “punitive damages award is
independently erroneous because it lacks any indication that the trial court
applied the heightened standard of proof–clear and convincing evidence.”
But Clippinger did not object on these grounds in the trial court. Thus, under
the doctrine of implied findings, we presume the court applied the correct
legal standard. (See Marriage of Arceneaux (1990) 51 Cal.3d 1130, 1133 [only
if a party makes timely and sufficient objections to the proposed statement of
decision will the presumption of implied findings not apply].)
In sum, we reject defendant’s claim that the trial court’s award of
punitive damages—a little less than three times the award of compensatory
damages—was somehow erroneous. (See Bardis v. Oates (2004) 119
Cal.App.4th 1, 24 [California courts typically impose treble damages for
25
fraudulent and bad faith conduct].) 3
C. Substantial Evidence
Clippinger characterizes several of the trial court’s factual
rulings as legally “erroneous,” but he is fundamentally claiming that the trial
court’s conclusions are not supported by substantial evidence. We disagree
and shall succinctly address each claim.
When an appellant contends the evidence is insufficient to
support a judgment, we apply the substantial evidence standard of review.
“Where findings of fact are challenged on a civil appeal, we are bound by the
‘elementary, but often overlooked principle of law, that . . . the power of an
appellate court begins and ends with a determination as to whether there is
any substantial evidence, contradicted or uncontradicted,’ to support the
findings below. [Citation.] We must therefore view the evidence in the light
most favorable to the prevailing party, giving it the benefit of every
reasonable inference and resolving all conflicts in its favor in accordance with
the standard of review so long adhered to by this court.” (Jessup Farms v.
Baldwin (1983) 33 Cal.3d 639, 660.)
An appellate court also presumes in favor of the judgment or
order all reasonable inferences. (Kuhn v. Department of General Services
(1994) 22 Cal.App.4th 1627, 1632–1633.)
If there is substantial evidence to support a finding, an appellate
3
Clippinger also argues that the trial court’s computation of
compensatory damages was in error, but he did not raise this claim in a new
trial motion; therefore, this claim has similarly been forfeited for purposes of
appeal. (Greenwich S.F., LLC v. Wong (2010) 190 Cal.App.4th 739, 759 [“‘A
claim of excessive or inadequate damages cannot be raised on appeal unless
appellant first urged the error in a timely motion for new trial’”].)
26
court must uphold that finding even if it would have made a different finding
had it presided over the trial. (Rupf v. Yan (2000) 85 Cal.App.4th 411, 429–
430, fn. 5.) An appellate court does not reweigh the evidence or evaluate the
credibility of witnesses, but rather defers to the trier of fact. (Lenk v. Total–
Western, Inc. (2001) 89 Cal.App.4th 959, 968.) “The substantial evidence
[standard of review] applies to both express and implied findings of fact made
by the superior court in its statement of decision rendered after a nonjury
trial.” (SFPP v. Burlington Northern & Santa Fe Ry. Co. (2004) 121
Cal.App.4th 452, 462.)
1. The trial court’s finding of fraud, malice, and oppression is
supported by substantial evidence.
Clippinger surreptitiously used Lofts funds for his own personal
benefit over a period of years. This is supported by Lofts’s documentary
evidence, as well as the testimonial evidence Lofts presented at trial: Menig
(the current Authorized Representative); Reddington (the current Manager);
Clippinger (as an adverse witness); and Sanders (the Lofts’s accountant).
Indeed, Clippinger essentially admitted his fraudulent conduct when he
signed the AOA, which made clear that the agreement was the Lofts’s
members’ attempt to stop Clippinger from his continued “self-dealing.”
Clippinger argues: “Lofts failed to establish any reprehensible
conduct rising to the level of ‘extreme indifference’ to Lofts’ rights, fraudulent
behavior, or a blatant violation of law or policy.” We disagree.
The trial court specified in its statement of decision: “The court’s
finding of oppression, fraud and malice is particularly strong in this case
because of the evidence that Mr. Clippinger continued to repeatedly engage
27
in such deceit after the parties amended the operating agreement specifically
to curb his history of unauthorized, self-interested financial transactions
using Lofts funds.”
In a substantial evidence review, we do not reweigh the evidence.
(See Lenk v. Total–Western, Inc., supra, 89 Cal.App.4th at p. 968.) We find
substantial evidence to support the court’s ruling, so we must affirm. (See
Rupf v. Yan, supra, 85 Cal.App.4th at pp. 429–430, fn. 5.)
2. The trial court’s finding that Clippinger was liable for the
repayment of the Bridge Loans is supported by substantial evidence.
In 2015, some of the Lofts members became aware of the “Bridge
Loan” debts, and they further became aware that Clippinger had failed to pay
at least two of them off. These Bridge Loan lenders were on the verge of suing
Lofts to recover on their 2012 promissory notes that were supposed to be
short term loans. The members also learned Clippinger had “converted” the
loans (on Lofts’s books) to reclassify them as personal loans made to
Clippinger in exchange for a B Share interest in the name of Clippinger’s
family trust. The evidence showed that this self-dealing was done without
notifying the Lofts members and without documenting Clippinger’s purported
“capital contributions” with a subscription agreement as had been done with
all the other investments by Lofts members.
On appeal, Clippinger argues that the AOA “was intended to
resolve Lofts’s dispute with him regarding the Bridge Loans by requiring Mr.
Clippinger to pay Lofts for the payments made on behalf of the Bridge
Loans.” But Clippinger cites no such provision in the AOA, and under its
terms, Clippinger was personally obligated to pay Lofts in connection with
28
the Bridge Loan claims, and they were to “survive any resignation, removal,
or any other circumstance whereby Clippinger ceases (for whatever reason) to
continue as Manager.”
Further, in support of this argument, Clippinger cites his own
trial testimony, which the trial court found not to be credible. Again, it is the
trial court’s role to evaluate the credibility of witnesses, and we are not going
to second guess those determinations. (See Lenk v. Total–Western, Inc., supra,
89 Cal.App.4th at p. 968.)
3. The trial court’s finding that Clippinger was liable for the
unauthorized Intercompany Claims is supported by substantial evidence.
Following the execution of AOA, the Authorized Representative
(Aronson), worked with Lofts’s accountant Sanders to determine the extent of
Clippinger’s misuse of Lofts’s funds. Sanders kept a running tally of
Clippinger’s debts to Lofts, including unverified transfers of Lofts’s money to
Clippinger-related entities and to his other accounts for which there was no
apparent legitimate business purpose. According to Sanders, Clippinger did
not contemporaneously challenge these intercompany calculations. Moreover,
as part of the AOA, Clippinger explicitly agreed to repay Lofts “all sums
necessary (1) to satisfy and discharge the Intercompany Claims and (2) to
return funds paid to Clippinger or his Affiliates pursuant to the
intercompany loan account or otherwise.”
Clippinger argues that it is “undisputed” that the intercompany
transfers were not wrongful. But that argument is belied by the record, and is
based on selective quotations from the record. As to the intercompany
transfers, Lofts’s accountant Sanders testified “there was some amount of
29
money that was deemed to be not business expense related, and therefore, it
was reflected as an intercompany, and that was added to what I’m calling the
tally.” Sanders also testified that “it’s not uncommon to have this
intercompany going between entities.” Those last 10 words are the portion of
Sanders’ testimony that Clippinger directly quoted in his opening brief. But
Sanders more completely testified that “it’s not uncommon to have this
intercompany going between entities, but a lot of, you know, most of the time
it’s paid back quite quickly.” In short, Sanders never testified that
Clippinger’s intercompany transfers that were not business related—
transfers that were presumably used for his own benefit—were not wrongful.
Once again, under the substantial evidence standard of review,
we interpret “the evidence in the light most favorable to the prevailing party,
giving it the benefit of every reasonable inference and resolving all conflicts
in its favor in accordance with the standard of review so long adhered to by
this court.” (Jessup Farms v. Baldwin, supra, 33 Cal.3d at p. 660.)
4. The trial court’s finding that Clippinger was responsible for the
damages caused by the VWC lawsuit is supported by substantial evidence.
The evidence established that Clippinger entered into a
settlement with VWC Lofts, and authorized the distribution of $1.465 million
of Lofts’s funds (that were in escrow), without the prior, express, written
approval of the Authorized Representative as required under the terms of the
AOA. Clippinger was asked, “So the entirety of the settlement was to be paid
with Lofts’ funds; correct?” And Clippinger responded, “Correct.” Clippinger
was also asked, “So just to be clear, you never received express written
consent from any authorized representative to use the money in escrow to
30
settle the VWC Lofts litigation, did you?” And Clippinger responded, “No.”
Clippinger claims he is entitled to indemnity by Lofts for the
VWC litigation under the Corporations Code. We disagree.
“A limited liability company shall reimburse for any payment
made and indemnify for any debt, obligation, or other liability incurred by a
member of a member-managed limited liability company or the manager of a
manager-managed limited liability company in the course of the member’s or
manager’s activities on behalf of the limited liability company, if, in making
the payment or incurring the debt, obligation, or other liability, the member or
manager complied with the duties stated in Section 17704.09.” (Corp. Code, §
17704.08, subd. (a), italics added.)
Corporations Code section 17704.09 specifies that managers and
members owe a fiduciary duty to their limited liability companies. As already
discussed, there is substantial evidence in the record to support the trial
court’s factual finding that Clippinger breached his fiduciary duties, so the
indemnity provision of the Corporations Code does not apply to him.
Clippinger also claims he is entitled to indemnity for the VWC
litigation under the Lofts operating agreement. We disagree.
Section 9.1 of the operating agreement provides that Lofts shall
indemnify the Manager “to the fullest extent permitted by applicable law in
effect on the date hereof.” But as we have already discussed, Clippinger was
not entitled to indemnification under the “applicable law” by virtue of his
breaches of his fiduciary duty. (See Corp. Code, § 17704.08, subd. (a).) Thus,
Clippinger is not entitled to indemnification under the plain terms of the
Lofts operating agreement.
To reiterate and conclude, there is substantial evidence to
31
support the trial court’s findings that Lofts proved each of its causes of action.
III.
DISPOSITION
The trial court’s judgment in favor of plaintiff Lofts on L Street
LLC is affirmed. Costs on appeal are to be paid by defendants Robert
Clippinger and Clippinger Investment Properties, Inc.
MOORE, ACTING P. J.
WE CONCUR:
DELANEY, J.
GOODING, J.
32