Falk v. Catron















Filed 2/15/13
Falk v. Catron CA1/5











NOT TO BE
PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts
and parties from citing or relying on opinions not certified for publication or
ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for
publication or ordered published for purposes of rule 8.1115>.







IN THE COURT OF
APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE
DISTRICT

DIVISION FIVE









YIN FALK,



Plaintiff and
Respondent, A131786



v. (>San Francisco> County

Super.
Ct.> No. CGC09486921)

LINDA S. CATRON et al.,



Defendants and
Appellants.

____________________________________/



This action
arises out of a $250,000 loan plaintiff Yin Falk made to defendant Linda S.
Catron. After Catron failed to repay the
loan, Falk sued Catron and her agent, Richard E. Warren, Jr. (collectively,
defendants) for, among other things, fraud.
The trial court granted Falk’s motion for href="http://www.fearnotlaw.com/">summary adjudication. The court also granted Falk’s motion for an
order permitting discovery of defendants’ financial information pursuant to
Civil Code section 3295.href="#_ftn1"
name="_ftnref1" title="">[1] After a trial on punitive damages, the court
ordered defendants to pay Falk $750,000 in punitive damages.

Defendants
appeal. Catron claims the court erred by
granting summary adjudication on Falk’s fraud claims. Catron also challenges the punitive damages
award. She claims there was href="http://www.mcmillanlaw.com/">insufficient evidence she intended to
deprive Falk of property or otherwise injure her as required by section
3294. She also argues substantial
evidence does not support the finding that she can afford to pay the punitive
damages award.

Warren
contends the punitive damages award must be reversed because it is
disproportionate to his ability to pay and because there was href="http://www.fearnotlaw.com/">insufficient evidence of his financial
condition to support the award. Warren
also claims his conduct does not justify an award of punitive damages and that
the court misapplied the doctrine of respondeat superior.

We affirm.

FACTUAL AND
PROCEDURAL BACKGROUND

Falk was born in 1960.href="#_ftn2" name="_ftnref2" title="">[2] She lived in Taiwan
until the early 1990’s, when she moved to the United
States.
Falk’s native language is Mandarin; English is her second language. After moving to the United
States, Falk worked two jobs for several
years and eventually saved enough money to buy a house in Mill
Valley. In 2006, Falk purchased a condominium in San
Francisco’s North
Beach neighborhood. Falk was unable to sell her Mill
Valley house, so she rented it out
to help pay the mortgage and lived in her North
Beach condominium. Falk is a physical therapist; she has no
training in real estate or investing.

Catron —
who has an undergraduate degree from Mills
College and masters and Ph.D.
degrees from the University of North
Carolina and the University
of California, San
Francisco, respectively — began investing in real
estate in 1985, when she inherited property and other assets worth
approximately $1.5 million dollars.
Catron began buying apartment buildings and other properties; by 2008 or
early 2009, she owned 28 or 29 properties and had an extensive net worth. Catron met Warren
in 1988. Warren
worked as Catron’s loan broker and helped her obtain financing for several
properties, including financing for a building she purchased at 1554
Greenwich Street in San
Francisco.

In 2007, Falk decided to purchase a
$1.5 million dollar condominium in Rincon
Towers in San
Francisco’s South
Beach neighborhood. She put down a deposit on the
condominium. Later, however, she backed
out of the escrow agreement because she could not sell her Mill
Valley house and could not afford
to purchase the condominium. Falk met Warren
in 2007; some time thereafter, they began dating. Warren
told Falk he owned Redwood Financial Group and was a loan broker.href="#_ftn3" name="_ftnref3" title="">[3] Falk went to several parties at Warren’s
house, a large home with a tennis court and pool. Warren
told Falk he owned the home and rented it out for $20,000 per month.

In 2008, Warren
suggested Falk loan $250,000 to Catron.
He explained it was an investment opportunity for Falk because Catron
would repay the money in three months, along with interest of 10 percent per
month, and would secure the loan with a deed of trust on Catron’s Greenwich
Street property.
Warren told Falk that Catron
owned “lots of propert[ies]” in Lake Tahoe, Woodside,
and San Francisco. Warren
later introduced Catron and Falk.

In late June 2008, Falk and Catron
met at a grocery store. They walked to a
nearby Starbucks, where Falk talked with Catron and gave her a check for
$50,000. Falk did not receive a
promissory note or a deed of trust.href="#_ftn4"
name="_ftnref4" title="">[4] Shortly thereafter, Falk met Catron outside
of a South Beach
apartment building where Falk was visiting her friend. Falk gave Catron a check for $200,000. Because she felt “very uncomfortable” with
the transaction, Falk asked Catron to sign a $200,000 promissory note and
Catron complied. Falk also asked Catron,
“‘How are we going to . . . put my name onto the deed’” and Catron “said she
[would] take care of that and . . . let [Falk] know.” Warren
also told Falk a title company was “working” on the property Catron was going
to use to secure the loan.

To make the loan, Falk used her
life savings of $50,000 and borrowed $200,000 from her home equity line of
credit. The $250,000 she loaned Catron
was “all [her] equity.” Catron did not
repay the loan.

The Complaint

In April 2009, Falk sued defendants
and others for intentional and negligent misrepresentation, false promise,
reformation of the promissory notes, money had and received, and conspiracy.href="#_ftn5" name="_ftnref5" title="">[5] The operative first amended complaint sought
compensatory and punitive damages, reformation of the promissory notes,
interest, and attorney fees. Falk
alleged Warren — acting as Catron’s
agent — solicited Falk to loan $250,000 to Catron by representing the loan
would be secured by the equity of Catron’s real estate portfolio and by
promising Falk that Catron would repay the loan within three months with 10
percent monthly interest. Falk further
alleged Catron executed two promissory notes prepared by Warren
wherein she agreed to repay the $250,000 plus 10 percent interest within three
months but Catron never repaid the loan, never secured the promissory notes
with any of her real property, and never intended to repay the principal or the
interest on the loan. Each defendant
answered the complaint in propria persona.

Discovery

Falk served form
interrogatories, requests for admission, and requests for production of
documents on defendants. Catron did not
respond to the discovery requests and Falk moved to compel responses to the
interrogatories and requests for production.
She also sought an order deeming requests for admission admitted. The court granted Falk’s unopposed motion and
ordered Catron to respond to the interrogatories and document demands within 15
days. The court also deemed the requests
for admission admitted and imposed monetary sanctions.

Catron did not comply with the
order and Falk moved for an order compelling responses to the interrogatories
and document requests and for monetary sanctions. Catron hired an attorney and opposed the
motion. The court ordered Catron to
respond to the discovery requests and to pay monetary sanctions. Catron responded to the form interrogatories
and requests for production, but the responses were inadequate, prompting Falk
to move for a further order striking Catron’s affirmative defenses and imposing
monetary sanctions. The court granted
the motion, struck Catron’s affirmative defenses and awarded sanctions. The court made similar orders with respect to
Warren: it deemed the requests for
admission admitted, struck Warren’s
affirmative defenses, and imposed monetary sanctions.

Falk’s Motion for
Summary Adjudication

Falk moved
for summary adjudication on her claims for intentional misrepresentation, false
promise, fraud, reformation of the promissory notes, and money had and
received. Falk argued the order deeming
the requests for admission admitted conclusively established: (1) Warren was
acting as Catron’s agent when he solicited the loan; (2) Warren induced Falk to
loan Catron the money by telling her the loan would be “short term” and that
Catron would pay back the loan within three months; (3) Warren represented the
loan would be safe because it “would be secured in the equity of several pieces
of improved real estate owned by . . . Catron[;]” (4) Warren told Falk the 10
percent interest rate was legal and that he “had years of experience in the
loan brokerage business and possessed expert knowledge of the lending laws and
the preparation of legally enforceable promissory notes and other loan
documents[;]” (5) Warren prepared two promissory notes, one for $50,000 and
another for $200,000; (6) Catron “failed to pay . . . any amount of principal
or interest on the loans[;]” (7) when Falk loaned Catron the money, Catron did
not intend to secure the loan in her real property and did not secure the loan;
(8) when Falk made the loan, Catron “intended to accuse [Falk] of usury to
avoid paying [her] any amount of interest[;]” (9) when Falk loaned Catron the
money, Warren knew Catron did not intend to repay the money, secure the loan in
her real property, or pay interest on the loan; and (10) Catron owes Falk
$250,000 plus interest.

Falk
submitted a declaration in support of the motion averring Warren
introduced himself to her as “an experienced loan broker” and told her he
“owned a company called Redwood Financial Group” specializing in “making loans
secured in real estate.” Warren
also told Falk that Catron owned “numerous real properties in California”
and needed a “‘bridge’ loan for three months pending long term financing that
was currently in process.” Falk averred
she relied “exclusively” on Warren’s
advice and loaned Catron $250,000. Falk
explained she relied on Warren
because he said “he was an experienced loan broker and [was] knowledgeable
about the lending laws and securing these types of loans in real
property.” Falk further stated she
trusted Warren and did not know he
was “lying” to her or that he was “not licensed to arrange this loan and that
he was breaking the law by acting as a loan broker.” Falk averred that if she “had known the
truth, [she] would never have trusted . . . Warren
and would never have loaned the money to . . . Catron.”

In their
joint opposition to the motion, defendants asserted they were barred “from
disputing [Falk’s] allegations” by the court’s orders striking their
affirmative defenses and deeming the requests for admission admitted. Defendants did not file a separate statement
of material facts or submit any evidence in opposition to the motion. Instead, they “respectfully request[ed] that
the Court deny [Falk’s] motion on the basis that [they] cannot effectively
respond to the undisputed facts, and as a result have no defense to this suit
involving a large amount of money. . . .”


The court granted summary
adjudication for Falk on her claims for intentional misrepresentation, false
promise, reformation of the promissory notes, and money had and received. The court denied the motion for summary
adjudication on Falk’s punitive damages claim, concluding “[t]he granting or
awarding of punitive damages pursuant to . . . section 3294 is properly
reserved for the jury or finder of fact at trial and is not for determination
by the Court in a motion for summary adjudication.”

>Discovery of Defendants’ Financial
Information Pursuant to Section 3295

While the
motion for summary adjudication was pending, Falk moved for an order permitting
discovery of defendants’ financial information pursuant to section 3295,
subdivision (c).href="#_ftn6" name="_ftnref6"
title="">[6] The court granted the motion, concluding
there was a substantial probability Falk would prevail on her punitive damages
claims.

Falk then
propounded special interrogatories and requests for production of documents
relating to defendants’ financial condition.
Catron provided untimely, unverified, and evasive responses to the
discovery requests.href="#_ftn7" name="_ftnref7"
title="">[7] For example, in response to each special
interrogatory, Catron stated: “Defendant’s investigation is ongoing and this
interrogatory will be amended and provided once more information is obtained.” To each request for production, Catron
responded, “See Master Documents #1.”
Catron produced 76 pages consisting of: (1) eight pages of summaries of
information on her real properties; (2) seven months of account statements for
a bank account at Borel Private Bank & Trust Company from 2009 to 2010; and
(3) four pages of notes on a copy of document demands to Warren.

After Falk moved to compel further
responses, Catron provided verified supplemental responses to the special
interrogatories. The supplemental
responses listed a car Catron owned, a mineral lease, LLC’s with “zero
value[,]” and a trust holding title to two properties. Catron did not name the trust. The supplemental responses also listed real
property owned by Catron but did not provide the estimated value of those
properties. In her supplemental
responses to the requests for production, Catron stated she was unable to
locate any additional documents in addition to those already produced but she
then produced 30 pages of documents including deeds to three pieces of real
property, a 2008-2009 secured property tax bill for 849 Haight Street, a 2010
mineral lease, and a July 2010 list of Catron’s real properties with
information on projected income per property and loan balances.

The court granted Falk’s motion to
compel further responses from Catron, concluding her initial and supplemental
responses were “inadequate, evasive and incomplete.” The court ordered Catron to provide
supplemental responses to the request for production seeking documents relating
to trusts in which Catron was a beneficiary or held a legal or equity interest,
and supplemental responses to the special interrogatories seeking information
about Catron’s business entities and trusts.
A few days later, Catron produced 50 additional pages of documents.

In late October 2010, Falk served
Catron with a Code of Civil Procedure section 1987, subdivision (c) notice to
appear and produce documents, including Catron’s tax returns, additional
materials relating to her LLCs and trusts, and additional materials relating to
the valuation of her real estate holdings.
Falk also moved for an order pursuant to section 3295, subdivision (d)
requiring Catron to produce “complete records of her financial condition at
trial, including her tax returns.” Falk
argued Catron had withheld information about her financial condition and had
selectively produced documents to “lead the Court to the false conclusion that
she has a negative net worth.” Falk also
moved in limine for an order waiving the requirement that she provide evidence
of Warren’s financial condition at
trial. Falk claimed Warren
did not respond to the requests for production or produce documents and had
provided an unsigned, undated, and unverified “response” the special
interrogatories.

On November 15, 2010, the day before trial, Catron produced
additional material, including broker opinions and appraisal reports for
several properties, two months of bank statements for the True Light Trust, and
a “real estate schedule” updated in July 2010.
The next day, the court held a hearing on Falk’s motions. Counsel for Falk explained he was seeking tax
returns and “statements or ledgers showing the amounts held in trust by
[Catron’s former attorneys] and others” and noted Catron “still has not
produced all the documents.” In
response, counsel for Catron stated it would take “several days” to get the
documents Falk requested. Counsel
explained Catron could produce “a list of the amounts she owes on loans. . . .
Most of her loans are currently in foreclosure or in default, so she’s not
receiving current balance statements.
I’m not sure how we can handle that particular item if she’s not
receiving statements from the bank.”
Counsel continued, “we did produce a lot of documents yesterday showing
broker opinions on how much some of these properties are worth. There was also included . . . two appraisals
from 2009. . . . [¶] As far as a
restructuring plan, she has no written documentation showing that.”

The court
ordered Catron to produce the documents, noting “there’s a long history of
failures to comply with discovery obligations in this case. . . . I think the
lion’s share of even the list that [Falk] provided today has already been
requested. To the extent that they
haven’t been produced in time for this trial, these requests have been
outstanding for many months and we’ll deal with the consequences of the failure
to produce the documents as the law provides.”
The court stated, “[t]hese documents should have been produced a long
time ago. If they can’t be produced by 4 o’clock today, then the consequences that the
law provides for will ensue.”

The court
denied Falk’s motion to waive the requirement that she provide evidence of Warren’s
financial condition but granted the motion requiring him to produce evidence of
his current financial condition at trial.
The court ordered Warren to
produce responsive documents by 4:00 p.m.
that day, noting the “history of failures to comply with discovery obligations
by Mr. Warren.”

After the first day of trial, Catron
produced draft profit and loss statements for 2006 through 2008, and “an
assortment of bank statements for . . . Catron, as well as . . . notes from her
regarding her conversation with Bank of America yesterday regarding various
loan balances . . . due under several loans.”
She did not produce documents relating to her LLCs or trusts. Warren
produced a “Uniform Residential Loan Application” he prepared in October 2010
for the purpose of showing his financial condition at trial. In it, Warren
stated his rent was $1,900 a month and his income was approximately $4,000 per
month. Warren also produced two
title documents and bank statements for an account at Bank of America for the
year preceding the trial.

Punitive Damages Trial

1.
Evidence
Regarding Catron’s Financial Condition

During her
nearly 25-year career as a real estate investor, Catron purchased and renovated
many properties in the Bay Area. In
Summer 2008, Catron owned 28 or 29 properties.
None were in foreclosure. She had
“perfect credit . . . and . . . a significant . . . net worth.” By 2009, however, Catron was in “serious
economic trouble” and “foreclosures were happening” on some of her
properties. At that time, she authorized
her then-attorneys to form six LLCs on her behalf; she also created the “True
Light Trust.” Catron’s previous
attorney, Richard Sinclair, apparently told counsel for Falk that he and his
partner “would save [Catron’s] assets so [she] would have a net worth after
they were done of 4 to $5 million.”
Catron planned to put that money into the LLCs.

At the time of trial, Catron owned
nine properties in Woodside, San Francisco,
San Rafael, and in the Lake
Tahoe area. Catron
estimated she had lost “two thirds of [her] properties” and was “struggling” to
keep the remainder. She conceded,
however, that she decided which properties to keep and which properties to
surrender to foreclosure and admitted she survived the recession in the 1990’s
and expanded her portfolio of properties.href="#_ftn8" name="_ftnref8" title="">[8]

Catron paid her attorneys with income
generated by her rental properties. She
paid one of her former attorneys, Richard Sinclair, at least $150,000. She planned to sell “collectibles” in her
house to retain the Page and Haight Street
properties. She acknowledged that she
had “pulled out about a million dollars of equity” from a property she owned on
Page Street in San
Francisco. She
had also pulled about $3.5 million dollars out of the Woodside property and
about $4.5 million out of the a property in the Lake Tahoe Area.

Catron blamed her failure to
produce documents on her poor recordkeeping system, but she also blamed one of
her former attorneys, Sinclair, for failing to produce documents she had given
him.href="#_ftn9" name="_ftnref9" title="">[9] Catron acknowledged she did not disclose
information regarding a trust and an LLC she controlled, nor did she produce
statements for bank accounts set up by a former attorney. She conceded she did not produce a “crucial”
email supposedly demonstrating her intent to repay Falk with a funding source
she expected to receive. She admitted
she falsely answered at least one interrogatory about property she owned and
conceded she merely “glanced” at interrogatory responses she verified. Finally, Catron admitted she did not produce
a trust agreement with Cydney Sanchez, a woman to whom Catron had apparently
transferred title to two properties.

2.
Evidence
Regarding Warren>’s Financial Condition

Warren
received an undergraduate degree in electrical engineering from Purdue
University. He attended an M.B.A. program at the University
of Chicago and worked on “Wall
Street” advising institutional investors and for Standard Oil of Indiana. He began working in real estate finance in
the late 1980’s; he acquired real estate in San Francisco
and Napa in the late 1990’s. Warren
had a real estate broker’s license from 1991 to 2005.

Warren
testified he “receives . . . income” of approximately $37,500 annually. He rents a house called “Monkswell Manor” in Napa
for $1,900 or $2,000 per month. He
sublets the house for approximately $15,000 per month.href="#_ftn10" name="_ftnref10" title="">[10] Warren
pays for upkeep, maintenance, and capital improvements on the house but keeps
all profits associated with subletting the house. Warren
admitted he does not pay rent to the property owner: he pays “operating
expenses” averaging approximately $1,900 per month, which he considers his
“rent.” Warren
acknowledged it was a “very complicated situation” for him to occupy the
property, pay the expenses, and keep any rental income above the cost of
maintaining the property.

He testified he grosses approximately
$50,000 annually by renting out the property and spends $25,000 annually on
upkeep. Warren,
however, could only account for about $5,000 of expenses in 2010. He admitted he does not always deposit rental
income in his bank account; often he cashes the check because he has “IRS and
Franchise Tax Board liens and . . . other liens, county liens, against my –
against me, they can sweep my accounts at any day.” Although he initially denied taking
vacations, Warren later admitted he
spent an entire month hiking and camping instead of attending a mandatory
settlement conference in the case. Warren
also admitted traveling in Utah, Nevada
and Colorado.

Warren
holds three accounts at Bank of America; two of the accounts have a combined
total of fewer than $25 dollars. He
admitted transferring $3,600 out of his primary bank account in March 2010 but
claimed he could not remember any details about the transaction. Warren
conceded making numerous deposits into his primary bank account, including one
deposit of $42,000 and another of $10,000.href="#_ftn11" name="_ftnref11" title="">[11] In spite of these deposits, Warren
lamented, “I’ve lost everything. I have
no assets. I have a judgment against me
for over $300,000. Because of the fraud
nature of the judgment, I can’t hold a real estate license any longer . . . I
can’t hold a securities license. . . . I can’t hold a commodities . . .
license. I cannot own any real estate
the rest of my life.”

Statement of Decision
and Judgment

In its
statement of decision and judgment, the court determined punitive damages were
appropriate and that $750,000 was a “just amount.” First, the court concluded defendants acted
reprehensibly when they defrauded Falk — an unsophisticated immigrant — of her
life savings. Next, the court determined
the proposed 3:1 ratio between punitive and compensatory damages was
appropriate.

Third, the court found defendants
“waived any complaint about deficient evidence of their financial
condition.” The court determined
defendants’ “egregious breaches of their obligations during punitive damages
discovery deprived . . . Falk of information she could have used in proving
their financial condition.” The court
noted defendants “had months to respond to Falk’s punitive damages discovery” but
declined to respond in a meaningful way.
According to the court, “Catron testified to possessing ‘a sea’ of
relevant financial documents, but she had produced only a relative handful
during punitive damages discovery. Warren
produced no discovery documents at all.
(Defendants each finally disgorged a few financial document during the .
. . trial, forcing Falk’s counsel to react on the fly.)”href="#_ftn12" name="_ftnref12" title="">[12] The court explained defendants admitted
concealing assets: “Catron admitted to evading creditors by temporarily
transferring her Victorian mansion in San Francisco’s
Pacific Heights
and her house in leafy Woodside to a ‘Cydney Sanchez.’ Warren
admitted to keeping cash out of his bank account to avoid ‘sweeps’ by the IRS
and other tax authorities. Thus, even
had [d]efendants complied with their discovery obligations by producing
financial documents to Falk, those documents would likely have portrayed their
wealth falsely.”

Next, the
court concluded “despite [d]efendants’ stonewalling of discovery and
concealment of assets, there is adequate evidence in the trial record to
support a $750,000 punitive damages award.”
The court noted Catron “retained ownership of nine properties valued in
the several millions” and Warren
rents out a Napa Valley
mansion and “gets to keep the rent he collects.” The court rejected defendants’ argument that
their negative net worth precluded an award of punitive damages. The court explained that net worth was only
one measure of financial condition and was a “particularly unhelpful measure
when [d]efendants’ discovery stonewalling and concealment of assets render
their true net worth difficult to discern.”
Finally, the court noted a high likelihood defendants would “‘gain more
wealth in the future’” given their education, intellect, and previous real
estate success.

The court entered judgment for Falk
on her intentional misrepresentation claim against defendants. It also entered judgment for Falk on her
claims against Catron for promise without intent to perform and reformation of
the promissory notes. The judgment ordered
Catron to pay Falk $250,000 in compensatory damages, plus interest, attorney
fees of $60,340, and Falk’s costs. The
judgment further ordered defendants to pay punitive damages jointly and
severally in the amount of $750,000 .

DISCUSSION

The Court Properly
Granted Summary Adjudication on Falk’s Fraud Claims

Catron
concedes the court determined Falk made the necessary showing of reasonable
reliance but claims it erred by granting summary adjudication in Falk’s favor
on her fraud claims “[b]ecause the finder of fact would have been free to
reject . . . Falk’s claim of justified reliance. . . .” To support this argument, Catron relies on
Falk’s testimony at the punitive damages trial.href="#_ftn13" name="_ftnref13" title="">[13]

Catron’s
novel argument — raised for the first time on appeal — has no merit. It is well settled “the party moving for
summary judgment bears an initial burden of production to make a prima facie
showing of the nonexistence of any triable issue of material fact; if he
carries his burden of production, he causes a shift, and the opposing party is
then subjected to a burden of production of his own to make a prima facie
showing of the existence of a triable issue of material fact.” (Aguilar
v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850.)

Here, the court properly granted
summary adjudication on Falk’s fraud claims because there was no triable issue
of material fact. Defendants did not —
and could not — show the existence of a triable issue of material fact, because
Falk averred she relied “exclusively” on Warren’s
advice when she made the loan. She also
testified she trusted Warren and
did not know he was “lying” to her and, had she “had known the truth, [she]
would never have trusted . . . Warren
and would never have loaned money to . . . Catron.” Falk therefore created an inference her
reliance was reasonable. In addition,
the court had previously deemed the requests for admission admitted, including
the request that Warren induced
Falk to make the loan and represented it would be “safe.”

Moreover, defendants did not oppose
the motion for summary adjudication in any meaningful way. They did not submit evidence in opposition to
the motion, nor did they file a separate statement of material facts. Instead, they admitted the facts were
undisputed and that they had “no defense to this suit involving a large amount
of money. . . .” The court properly
granted summary adjudication for Falk on her fraud claims, concluding her
reliance on defendants’ misrepresentations was reasonable.

The Court Made the
Necessary Findings to Award Punitive Damages

Catron contends the court erred by
awarding punitive damages because Falk did not establish — and the court did
not find — “Catron intended to deprive [her] of her property or otherwise
injure her. . . .” The problem with this
argument is — in Catron’s own words — that trial counsel “didn’t specify this
issue as a controverted factual matter in either of his trial briefs, he never
requested a statement of decision, and he made no mention of this issue in his
objections to the tentative statement of decision. Not surprisingly, the lack of a finding on
this issue was not ‘brought to the attention of the trial court either prior to
entry of judgment or in conjunction with a motion under [Code of Civil
Procedure] [s]ection 657 or 663. . . .’ (Code Civ. Proc., § 634.)” Catron has failed to articulate a reasoned
argument or cite any authority for the proposition that this court should
correct a perceived oversight or omission by her own counsel at trial.

>Warren>’s Conduct Was Sufficiently Reprehensible
and the Court Did Not Misapply the Respondeat Superior Doctrine

A plaintiff may recover punitive
damages “[i]n 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. . . .” (§ 3294, subd. (a).) “Fraud in the context of punitive damages
means ‘an intentional misrepresentation, deceit, or concealment of a material
fact known to the defendant with the
intention on the part of the
defendant of thereby depriving a person of property or legal rights or >otherwise causing injury.’” (Fariba
v. Dealer Services Corp. (2009) 178 Cal.App.4th 156, 175, quoting § 3294,
subd. (c)(3).)

Warren
claims his conduct was not sufficiently reprehensible to support an award of
punitive damages. To determine “the
degree of reprehensibility of the defendant’s misconduct,” the United States
Supreme Court has “instructed courts to consider whether ‘[1] the harm caused
was physical as opposed to economic; [2] the tortious conduct evinced an
indifference to or a reckless disregard of the health or safety of others; [3]
the target of the conduct had financial vulnerability; [4] the conduct involved
repeated actions or was an isolated incident; and [5] the harm was the result
of intentional malice, trickery, or deceit, or mere accident.’” (Roby
v. McKesson Corp. (2009) 47 Cal.4th 686, 712-713 (Roby), quoting State Farm
Mut. Automobile Ins. Co. v. Campbell (2003) 538 U.S.
408, 419 (State Farm).)

Here, the court found defendants
engaged in reprehensible conduct justifying an award of punitive damages
because “[t]wo highly intelligent real estate investors defraud[ed] an
unsophisticated immigrant of her life savings. . . . Indeed, even Warren
admits that Falk was his ‘then-girlfriend’ and that the circumstances of the
loan were ‘ethically questionable.’” Warren’s
conduct was reprehensible under State
Farm, supra, 538 U.S.
at page 419, because he knew Falk was a financially vulnerable and
unsophisticated investor and because he repeatedly solicited loans without the
proper license. In addition, Warren’s
admission of “‘ethically questionable’” conduct creates an inference that Warren
purposefully exploited Falk’s trust and that his “‘conduct evinced an
indifference to or a reckless disregard of the health . . . of others.’” (Roby,
supra, 47 Cal.4th at p. 713, quoting State
Farm, supra, 538 U.S. at p.
419.) Falk was not, as Warren
suggests, required to prove she sustained physical harm or that she “sustained
any recoverable damages for her emotional distress in the loss of $250,000 that
she lent to Catron.”

Warren
claims the court “expressly found that [at] all times [he] was acting as the
agent for his principal, Catron.”
According to Warren, the
court misapplied the respondeat superior doctrine and “committed a clearly
erroneous and reversible error by charging [him] with implied or constructive
knowledge of many of the specific acts of fraud and intentional
misrepresentation engaged in by his principal, Catron.” This argument fails for several reasons. First, Warren
has waived the argument by not supporting it with citations to the record. “‘It is the duty of a party to support the
arguments in its briefs by appropriate reference to the record, which includes
providing exact page citations.’
[Citations.] If a party fails to
support an argument with the necessary citations to the record, that portion of
the brief may be stricken and the argument deemed to have been waived.” (Duarte
v. Chino Community Hospital (1999) 72 Cal.App.4th 849, 856, quoting >Bernard v. Hartford Fire Ins. Co. (1991)
226 Cal.App.3d 1203, 1205.)

Second, the
only case Warren cites to support
his argument — Pacific Mutual Life
Insurance Co.> v. Haslip (1991) 499 U.S.
1 (Haslip) — does not assist
him. In that case, the United States
Supreme Court held that an insurance company could be responsible for its
employee’s acts and that imposing liability on the insurance company under the
respondeat superior doctrine was not fundamentally unfair. (Id.
at pp. 11, 13.) Warren
has not demonstrated Haslip applies
here and has not demonstrated the court erred by determining Catron was liable
for his punitive damages under the respondeat superior doctrine.

>Defendants Forfeited Any Complaints
Regarding Deficient Evidence of Their Financial Condition

On appeal, Catron contends the
court erred by awarding punitive damages because she did not forfeit her right
to insist on adequate evidence of her ability to pay and because there is
insufficient evidence she can afford to pay the award.

Warren similarly
claims there is insufficient evidence of his financial condition to support the
punitive damages award.

A plaintiff may recover punitive
damages “for the sake of example and by way of punishing the defendant.” (§ 3294, subd. (a).) “An award of punitive damages hinges on three
factors: the reprehensibility of the defendant’s conduct; the reasonableness of
the relationship between the award and the plaintiff’s harm; and, in view of
the defendant’s financial condition, the amount necessary to punish him or her
and discourage future wrongful conduct.”
(Kelly v. Haag (2006) 145
Cal.App.4th 910, 914.) A plaintiff
seeking punitive damages must introduce meaningful evidence of the defendant’s
financial condition. The rationale for
this rule is the punitive damages award should be sufficient to deter future
misconduct without being so disproportionate to the defendant’s ability to pay
that it is excessive. (>Adams v. Murakami (1991) 54 Cal.3d 105,
110-112; Simon v. San Paolo U.S. Holding
Co., Inc. (2005) 35 Cal.4th 1159, 1185.)
A plaintiff typically proves ability to pay with evidence of a
defendant’s net worth; “evidence of liabilities should accompany evidence of
assets, and evidence of expenses should accompany evidence of income.” (Baxter
v. Peterson (2007) 150 Cal.App.4th 673, 680.)

There is an
exception to this rule: a defendant who fails to comply with a trial court
order to produce records of his or her financial condition may be estopped from
challenging that award on grounds of the lack of evidence of financial
condition. (Mike Davidov Co. v. Issod (2000) 78 Cal.App.4th 597, 608-609 (>Davidov).) Davidov
is instructive. There, the jury rendered
a verdict for plaintiff on his fraud claim.
The trial court granted the plaintiff’s request to conduct discovery on
the defendant’s financial condition and ordered him to produce “all records
regarding his net worth” by the following day.
(Id. at p. 603.) The defendant failed to comply and the court
awarded the plaintiff $96,000 in punitive damages. (Id. at
p. 604.)

The
defendant appealed, contending the plaintiff had failed to produce sufficient
evidence of his financial condition. (>Davidov, supra, 78 Cal.App.4th at p.
605.) The Second District Court of
Appeal rejected this argument and held the defendant waived his right to
complain about the lack of evidence by disobeying the trial court’s order to
produce records reflecting his financial condition. (Id.
at pp. 608-609.) As the >Davidov court explained, the
“defendant’s records were the only source of information regarding his
financial condition available to plaintiff.
By his disobedience of a proper court order, defendant improperly
deprived plaintiff of the opportunity to meet his burden of proof on the
issue. Defendant may not now be heard to
complain about the absence of such evidence.
As defendant has not called our attention to anything in the record
which otherwise reflects that the punitive damage award is excessive, we will
affirm the award.” (Id. at p. 609.)href="#_ftn14"
name="_ftnref14" title="">[14]

Defendants
concede the court ordered them to produce documents reflecting their financial
condition but they contend Davidov is
distinguishable “for the simple reason that the defendant in that case never
produced a single document.” Catron
claims she complied with the court order by producing 250 pages of documents
“detailing every piece of real estate, every business entity, and every bank
account in which she’d had any interest in the previous several years.” Warren
makes a similar argument: he contends he “substantially complied in good faith
with the trial court’s . . . discovery order on the first day of trial.”

The first problem with defendants’
argument is they read Davidov too
narrowly. As the Second District Court
of Appeal explained in Streetscenes,
“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. [Citation.]
Once the court makes the order there is no justification for not >specifically following that order. [Citation.]”
(Streetscenes, supra, 103
Cal.App.4th at pp. 243-244, italics added.)
Davidov applies when the
defendants fail to make a full, good faith disclosure regarding financial
condition despite a proper order to do so. (See Davidov, supra, 78 Cal.App.4th at pp. 608-609.)

Here, defendants did not make a
good faith disclosure of documents regarding their financial condition. Catron’s initial and supplemental responses
to the interrogatories and requests for production concerning her financial
condition were, in the words of the court, “inadequate, evasive and
incomplete.” For example, in her
supplemental responses to the requests for production, Catron stated she was
unable to locate additional responsive documents, but she then produced 30
pages of documents. The court repeatedly
ordered Catron to produce additional documents, noting the “requests have been
outstanding for many months” and that the requested documents “should have been
produced a long time ago.”

At trial, Catron admitted she made
little or no effort to produce the requested information during discovery. Catron acknowledged she did not disclose
information regarding a trust she controlled, and did not produce bank accounts
set up by a former attorney. She
conceded she did not produce a “crucial” email regarding her intent to repay
Falk. She admitted falsely answering at
least one interrogatory about property she owned and merely “glanc[ing]” at
interrogatory responses she verified.
And Catron admitted she did not produce a trust agreement with Cydney
Sanchez, a woman to whom Catron had apparently transferred title to two
properties. Catron failed to produce
these documents, which were under her exclusive control and which would have
provided Falk with substantial information concerning Catron’s financial
condition.

Despite having “almost two . . .
rooms” filled with documents relating to her real estate holdings, Catron
produced only 250 pages of documents in a piecemeal fashion. Catron’s production of documents just before
trial and the production of additional documents after trial began does not
constitute “specifically following”
the court’s order. (Streetscenes, supra, 103 Cal.App.4th at p. 243, italics added.) As the court aptly observed, “the purpose of
pretrial discovery is to get the evidence out so that the other side can take
depositions or get more documents . . . which they can’t do when something’s
produced right at trial.” Moreover,
Catron’s attempt to blame her former attorney for failing to produce documents
relating to her financial condition was unconvincing, particularly because
Catron brought “boxes” of documents to her tax preparer before trial about a
week after the tax preparer requested them.
The court was well within its discretion to conclude Catron waived any
objection to the requirement that Falk produce evidence of Catron’s financial
condition. (See County of San Bernardino
v. Walsh (2007) 158 Cal.App.4th 533, 547 [defendants “intentionally
concealed their assets, testified falsely regarding many factual issues, and
were, at best, evasive and nonresponsive in answering questions as to their
financial condition. This conduct gave
the court wide latitude to make inferences from the evidence unfavorable to”
defendants].)

Warren
similarly failed to make a good faith effort to produce meaningful evidence of
his financial condition. He did not
respond to the requests for production and his “response” to the special
interrogatories consisted of an unverified email to counsel for Falk. Warren
eventually produced a smattering of self-serving documents, including a Uniform
Residential Loan Application he prepared shortly before trial to illustrate his
financial condition. At trial, Warren
gave evasive answers and unconvincing explanations for activity in his bank
accounts. For example, he could not
explain why he transferred large sums of money out of his bank account; he also
admitted he cashed checks instead of depositing them to prevent the Internal
Revenue Service and Franchise Tax Board from collecting money he owed.

Warren’s
tactics made it impossible for the court to determine his financial condition,
and implies he sought to conceal his financial condition from the trier of
fact. Counsel for Falk expressed
frustration at his inability to trace Warren’s
money: “you’re testifying here today . . . that you have no money. . . . But
you introduced all this evidence that says that at one point you had three very
valuable pieces of property. So I’m
trying to track down what you did with the properties. . . . In particular I am
interested in if you refinanced the property and pulled out equity, what you
did with the money. . . . So that’s why I’m asking these questions. And I’m not talking about small amounts of
money. I’m taking about very large
amounts of money, $700,000.”

As in Davidov, defendants’ refusal to produce relevant documents in a
timely fashion and their eventual meager production of documents “improperly
deprived [Falk] of the opportunity to meet [her] burden of proof on the issue”
of defendants’ financial condition. (See
Davidov, supra, 78 Cal.App.4th at p.
609.) Substantial evidence supports the
court’s conclusion that defendants did not make a full, good faith disclosure
regarding their financial condition and thereby waived any claim of error by
their repeated failure to comply with the court’s orders to produce financial
records.

Having reached this result, we need
not address Falk’s contention that defendants are barred from raising the issue
of the propriety of awarding punitive damages because they failed to move for
new trial. We also need not address
defendants’ contention that they are unable to pay the punitive damages award.

DISPOSITION

The
judgment is affirmed. Falk is entitled
to costs on appeal.









_________________________

Jones,
P.J.





We concur:



_________________________

Simons, J.



_________________________

Needham, J.