Opinion
F073858
04-12-2018
RAFAEL RODRIGUEZ et al., Plaintiffs and Respondents, v. PETERANGELO VALLIS et al., Defendants and Appellants.
McCormick, Barstow, Sheppard, Wayte & Carruth and Scott M. Reddie for Defendants and Appellants. Merl Ledford III for Plaintiffs and Respondents.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. VCU253501)
OPINION
APPEAL from a judgment of the Superior Court of Tulare County. Bret D. Hillman, Judge. McCormick, Barstow, Sheppard, Wayte & Carruth and Scott M. Reddie for Defendants and Appellants. Merl Ledford III for Plaintiffs and Respondents.
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Plaintiff Rafael Rodriguez supplied grapes to defendant Empire Grape Company. After a dispute arose over the terms of their agreement, Rodriguez sued Empire and its owner, defendant Peterangelo Vallis, for breach of contract and fraud. A jury returned a defense verdict on breach of contract but awarded compensatory damages of $204,463.30 against Empire for fraud, and found that Empire and Vallis both acted with fraud, oppression or malice. After a bench trial, the court awarded $50,000 in punitive damages against Empire and Vallis.
Empire and Vallis now argue that the compensatory and punitive awards were unsupported by sufficient evidence, and the punitive award was based on errors of law. We disagree and affirm the judgment.
FACTS AND PROCEDURAL HISTORY
Rodriguez (doing business as Richgrove Produce) filed his complaint in the trial court on September 18, 2013. As defendants, the complaint named Empire, Vallis, and Mark Rodriguez (whom we will refer to as Mark, to avoid confusion). Like Vallis, Mark was described in the complaint as an agent of Empire. As will be seen, however, no judgment was entered against Mark, and he is not a party to the appeal.
According to the complaint, Rodriguez and Mark met on July 12, 2013, and entered into an oral agreement by which Rodriguez would pack his grapes in several different styles and deliver them to Empire at specified prices per unit. The agreement was never reduced to writing. The price schedule was to be as follows:
| Packing style | $/unit |
|---|---|
| Box of clamshell packages | 19.55 |
| Princess AA package | 16.35 |
| A pouch bag | 14.55 |
| AA pouch bag | 16.55 |
| A 19 lb. bag | 16.55 |
| B 19 lb. bag | 12.55 |
Mark told Rodriguez these would be the net prices actually paid to him. By August 7, 2013, according to the complaint, Rodriguez had made deliveries to Empire of grapes with a total value, at these prices, of $613,945. As of the same date, Empire had paid $201,945, in the form of interim advances.
On that day, August 7, 2013, Vallis allegedly told Rodriguez that Empire did not intend to purchase the grapes already delivered, and would instead sell them to buyers on a consignment basis. Empire would pay Rodriguez the price paid by the buyer less a sales commission and costs.
In its first cause of action, the complaint alleged breach of contract based on Empire's stated refusal to pay the agreed price. In its second cause of action, the complaint alleged that Empire committed fraud by misrepresenting its intention to sell the grapes on commission instead of purchasing them at an agreed price. The complaint prayed for compensatory damages, lost profits, punitive damages, and interest.
A jury trial commenced on June 1, 2015. In his testimony, Rodriguez explained his business. It was his practice, toward the end of the grape-growing season, to purchase from growers the right to complete the last month or two of cultivating the crop and then to harvest, package, and sell it. Growers sell their unfinished crops to operations like Rodriguez's in order to avoid the risk associated with uncertain weather conditions in the late season.
Rodriguez testified that in July 2013, he met with Mark at one of Rodriguez's growing locations so that Mark could see the grapes. Mark offered Rodriguez $19.55 per box for 1,300 boxes of clamshell packs. This would be the net price received by Rodriguez. Empire would supply packing material and pallets and Rodriguez would provide transportation to Empire's cold storage facility in Kingsburg. Thinking the price was good, Rodriguez told Mark, "'For that price, I'll deliver to LA if you want to.'" Mark delivered packing materials on July 16, 2013, and Rodriguez began packing grapes for Empire the same day.
Rodriguez also spoke with Vallis on July 16, 2013. They had a further discussion about prices and terms. They reached an agreement that Empire would pay Rodriguez an advance of $5 per box. Rodriguez had been getting an advance of $6.50 per box from another client, but he agreed to take $5 from Empire because the sale price was high. Vallis confirmed a price of $19.55 per box cash to Rodriguez, and never mentioned consignment.
Rodriguez delivered grapes to Empire every weekday from July 16, 2013, to August 7, 2013. Invoices admitted into evidence for each delivery showed prices for various packing styles, matching the prices alleged in the complaint as indicated above. The invoices also indicated credits of $5 per box for the advance payment. Rodriguez testified that no one from Empire ever questioned the invoices or the prices they showed. Mark quoted prices for the various packing styles to Rodriguez each morning as time went on.
Rodriguez spoke with Vallis around August 1, 2013. Empire had not paid the first invoice, from the delivery on July 16, and Rodriguez told him payment was overdue under the 14-day terms to which they had agreed. Vallis asked for a seven-day extension, and Rodriguez agreed. Vallis did not challenge the invoice or say he had taken the grapes on consignment.
On August 6, 2013, Rodriguez had a conversation with Steve Moore, who had been buying Rodriguez's grapes from Empire. Moore mentioned that he was paying $19.55 per box for clamshell packs. Since this meant Empire would have no margin if it paid Rodriguez the same price, Rodriguez became suspicious. He "had a feeling that it was a scam."
Rodriguez testified that he met with Vallis and Mark the next day. He asked them how they could be selling the clamshell packs at $19.55 per box when that was the same price at which they had agreed to buy from him. Vallis replied, "'No, we—we're—consign with you.'"
Rodriguez immediately called his labor contractors to order them to stop packing for Empire. The last delivery from Rodriguez to Empire was the same day, August 7, 2013.
On August 8, 2013, Mark called Rodriguez and said he had never heard any mention of a consignment deal before the meeting the previous day. Mark said the problem was Vallis's fault and he would back Rodriguez up in the dispute.
Rodriguez met with Vallis and Mark on August 9, 2013. Vallis began to talk about consignment agreements and tried to give Rodriguez some papers to sign. Rodriguez refused to take them and said there was never any consignment agreement. Mark did not back Rodriguez. When Mark stepped away, Vallis said the problem was all Mark's fault. Later, after Rodriguez filed his complaint, Mark told Rodriguez he would testify to the truth only if Rodriguez dismissed him from the suit.
Rodriguez testified that he felt Vallis had tricked him. He said he did not really feel tricked by Mark, however, because Mark was only following his boss's orders.
Other than the advances of $5 per box shown on the invoices, Rodriguez received only one other check from Empire, for $14,814.17. Rodriguez testified that because of his losses on the deal with Empire, he was essentially unable to fund his operations the following season. After earning about $250,000 every year for eight years, Rodriguez had enough capital to earn only about $2,000 in 2014. Rodriguez and his wife, Marivel Rodriguez (who did bookkeeping for the business), both testified that the total invoiced price of the grapes delivered to Empire was $621,067.60 and that Empire paid a total of $233,724.17, leaving an unpaid balance of $387,343,43.
Vallis testified that he was a co-owner of Empire, and he employed Mark as a "field man" whose job was to find sellers from whom to buy grapes. Vallis said that his first meeting with Rodriguez was on July 17 or 18, 2013, and that there was no discussion of price or terms of payment. Instead, he told Rodriguez, "'Hey, the market's a little questionable, but, you know, hey, you're doing a nice job, so we should be able to do well with them.'" He met with Rodriguez again on July 26, 2013, when Rodriguez asked when he would get paid for grapes that had been delivered. Vallis replied that some of them had been sold and he would pay Rodriguez when the money came in. They met again on August 1, 2013, but there was no discussion about payment. On August 7, 2013, they had a discussion about the cost of packing materials that ended with Vallis telling Rodriguez not to pick or deliver any more grapes until the matter could be resolved. At the final meeting on August 9, 2013, according to Vallis's testimony, Vallis showed Rodriguez an accounting of the sales of his grapes, by which Rodriguez was disappointed. Vallis asked whether Rodriguez wanted Empire to continue selling his grapes; Rodriguez said yes and indicated that he had nowhere else to send them. They discussed the possibility of Rodriguez selling some of them elsewhere, but agreed they could continue doing business with each other. Rodriguez said he needed money. Vallis was unwilling to advance any more, but said when he sold more grapes he would send the money as quickly as possible.
Vallis testified about invoices he received from Rodriguez. The point of this testimony appears to be that the invoices he received were not the same as the invoices Rodriguez testified about and entered into evidence, or that he received more than one version of some invoices. Some of the documents to which his testimony referred were admitted into evidence but not included in the appellate record, so our ability to assess these remarks is limited. Vallis said he paid a total of $302,979.79 to Rodriguez, and that this represented all that was due for the grapes. When questioned on cross-examination about one of Rodriguez's invoices he received, showing the price of $19.55 per box for grapes packed in clamshell packages, Vallis indicated that he had not understood it. He testified that he was "under no impression whatsoever of what these numbers meant."
Mark testified that when he met Rodriguez to discuss supplying grapes to Empire, he told Rodriguez that Empire would be selling the grapes to its buyers at $19.55 per box for the clamshell packs. Mark believed Rodriguez understood that $19.55 was the price Empire would be receiving from buyers, not the price Empire would be paying to Rodriguez. He did not hear that Rodriguez had a different understanding until after the litigation began. Mark also testified that, under circumstances like his initial meeting with Rodriguez, a price quoted would normally be understood by people in the business to refer to the price at which the produce was to be subsequently sold to a third party. When Mark and Rodriguez had later discussions about prices during the period when Rodriguez was delivering grapes to Empire, Mark was always referring to the prices Empire expected to receive from buyers, not the prices Empire would pay to Rodriguez.
In his closing argument, Rodriguez's counsel maintained that the defendants breached an oral contract to buy the grapes at stated prices. He also argued that the defendant committed fraud by making a promise to pay the stated prices while intending not to keep the promise. Counsel asked the jury to award damages in the following amounts: (1) for the grapes not paid for, $387,343.43; (2) for profits lost in the following two seasons, $400,000; and (3) for noneconomic damages based on Rodriguez's mental suffering over being unable to provide for his family during the time of the losses, an amount equal to the economic damages, i.e., $787,343.43.
Defense counsel argued that Rodriguez concocted his claims because he needed money to pay a counterparty to another transaction. He contended that the invoices to Empire that Rodriguez was using to support his claims were "bogus," "entirely a scam," and created for purposes of litigation. In his rebuttal argument, Rodriguez's counsel suggested it was defendants who had fabricated documents that appeared to support their contentions.
On the verdict form, the jury was asked first whether it found in favor of Rodriguez or Empire on the breach of contract claim. It found in favor of Empire. Next, it was asked whether it found in favor of Rodriguez or defendants on the fraud claim. It found in favor of Rodriguez, and awarded him damages of $204,463.30.
The next question on the form was as follows:
"Assign liability for your award separately as to each Defendant.
"___ EMPIRE GRAPE COMPANY LLC
"___ PETERANGELO VALLIS
"___ MARK RODRIGUEZ"
The jury entered $204,463.30 on the line for Empire and $0 each on the lines for Vallis and Mark.
Finally, for the purpose of determining punitive damages liability, the verdict form directed the jury as follows:
"If you have awarded Fraud Damages, please answer the following question:
"Do you also find that a Defendant was guilty of oppression, fraud, or malice toward Plaintiff by clear and convincing evidence? Answer separately as to each Defendant.
"YES NO
"___ ___ EMPIRE GRAPE COMPANY LLC
"___ ___ PETERANGELO VALLIS
"___ ___ MARK RODRIGUEZ"
The jury marked "yes" for Empire and Vallis and "no" for Mark.
A bench trial followed to determine the amount of the punitive damages. The evidence presented pertained mostly to the net value of Empire, of which Vallis testified he was a 50 percent shareholder. His wife owned the other 50 percent. According to Vallis's testimony, the business had negative equity of approximately $769,000. Rodriguez presented expert testimony by an accountant, who reviewed Empire's records and found it had positive equity of at least $779,000.
The trial court issued a written order after the bench trial. The court began by rejecting Vallis's argument that when the jury assigned him $0 of the compensatory damages liability on the fraud cause of action, this meant he committed no tort and caused no injury—despite the jury's further finding that he did commit oppression, fraud, or malice—so it would be improper to impose any punitive damages on him. Noting that it was obliged to try to resolve any inconsistency in the jury verdict, the court wrote:
"It is undisputed that the jury found both Vallis and Empire guilty of the oppression, fraud and malice that would warrant an award of exemplary damages under Civil Code § 3294, and independently found that defendant Mark Rodriguez's conduct did not justify the imposition of punitive damages under § 3294 against him. [¶] [T]here is no logic to defendant Vallis' position that when the jury rendered a verdict in favor of Rafael Rodriguez on his fraud cause of action against Mr. Vallis[, it also] intended to then relieve Mr. Vallis of any liability for damages that Rafael Rodriguez sustained as a result of this fraud. [¶] The testimony offered to the jury consistently established that the contracts and transactions that Empire entered into were at the discretion and direction of Vallis, that Mr. Vallis directed the sales staff and spoke for the business if and when there was any dispute. [¶] ... [¶] [T]he jury's findings could only have
been predicated on their conclusion that Vallis entered into the alleged contract with Rodriguez with no intent to fulfill that contract, or with the undisclosed and fraudulent intent to later try and recast the deal as a consignment.... [¶] ... [¶] That the jury relieved defendant Mark Rodriguez of any liability for fraud indicates that they felt this fraudulent plan was concocted solely by Mr. Vallis."
The trial court also found there was an adequate evidentiary basis for calculating punitive damages against Vallis even though the financial data presented pertained mainly to Empire and little of it to Vallis personally, except to the extent of his half ownership of the company. The court stated that the value of the company and "the net worth of Vallis are inextricably linked. He and his spouse owned all shares of that business and there was little evidence that Empire operated as anything but a convenient name for his individually directed business." Further, the testimony at trial showed "that Empire did not observe normal corporate formalities, did not have regular meetings, did not pass or retain corporate resolutions and had no evidence stock was ever issued." If Rodriguez had argued that Empire was Vallis's alter ego, the court would have agreed "unequivocally."
The trial court found the testimony of Rodriguez's expert "far more credible" than Vallis's testimony about the value of Empire. It considered this value as well as the reprehensibility of the fraudulent conduct and the difference between the jury award and the contract damages that would have been incurred had a contract been formed ($387,000). Based on all the evidence, and applying the clear-and-convincing-evidence standard, it awarded $50,000 in punitive damages against Vallis and Empire.
Judgment was entered on February 19, 2016. The defendants' motions for judgment notwithstanding the verdict and for a new trial were denied.
DISCUSSION
I. Sufficiency of evidence to prove compensatory damages
Vallis and Empire argue that the evidence was insufficient to prove Rodriguez's compensatory damages. When considering a challenge to the sufficiency of the evidence to support a judgment, we review the record in the light most favorable to the judgment and decide whether it contains substantial evidence from which a reasonable finder of fact could make the necessary finding beyond a reasonable doubt. The evidence must be reasonable, credible and of solid value. We presume every inference in support of the judgment that the finder of fact could reasonably have made. We do not reweigh the evidence or reevaluate witness credibility. We cannot reverse the judgment merely because the evidence could be reconciled with a contrary finding. (People v. D'Arcy (2010) 48 Cal.4th 257, 293.)
In their opening brief, the defendants' argument is based solely on the notion that Rodriguez was required to prove his damages based on the cost to him of producing the grapes for which he was not fully paid, rather than their fair market value. They say the evidence was insufficient because Rodriguez did not present any evidence of his costs. This notion is mistaken.
Civil Code section 3343, subdivision (a), provides in part: "One defrauded in the purchase, sale or exchange of property is entitled to recover the difference between the actual value of that with which the defrauded person parted and the actual value of that which he received." This provision applies to the fraud damages in this case. This measure of damages, which is sometimes referred to as "'out of pocket' loss," is equal to "the difference between what [the defrauded plaintiffs] received for their property and the fair market value of same at the time of the transfer." (Channell v. Anthony (1976) 58 Cal.App.3d 290, 314.)
In accordance with CACI No. 1922, the jury was correctly instructed that the measure of damages included "[t]he difference between the fair market value of the property at the time of the sale and the amount Rafael Rodriguez received." The jury was also correctly instructed that "[f]air market value is the highest price a willing buyer would pay to a willing seller, assuming that [there was] no pressure on either side to buy or sell and that the buyer and seller knew all the uses and purposes for which the grapes were reasonably capable of being used."
The jury heard testimony from which it could infer that the prices on which Rodriguez based his claim were the prices Empire was receiving in the market. The defendants presented no evidence to the contrary. Therefore, the jury could reasonably rely on those prices as representative of the fair market value of the grapes.
The applicable measure of damages has nothing to do with the plaintiff's cost in producing or acquiring the property of which he was defrauded, and Vallis and Empire cite no authority according to which it would. Their argument, which Rodriguez rightly describes as bordering on frivolity at best, seems to be that the expression "out of pocket" sounds like it must refer to cost, since the plaintiff's cost is what would have come out of his pocket. But if it did, a plaintiff defrauded of property he or she received as a gift would be entitled to no damages (assuming consequential damages were not a factor) and the fraudfeasor would get off scot-free. This is not correct.
Vallis and Empire also argue that the damages were awarded erroneously because they were benefit-of-the-bargain damages. Benefit-of-the-bargain damages would be "'the difference in value between what the plaintiff actually received and what he was fraudulently led to believe he would receive.'" (Alliance Mortgage Co. v. Rothwell (1995) 10 Cal.4th 1226, 1240.) This measure of damages does not apply to a fraud claim in California, as Vallis and Empire correctly point out. (Ibid.) Thus, if the fraudulently promised price were greater than the fair market value, the plaintiff's damages would still be limited to a calculation based on the fair market value, i.e., to the out-of-pocket loss. Vallis and Empire argue that Rodriguez sought benefit-of-the-bargain damages because his compensatory damages claim was based on the price he was fraudulently promised. Where, as here, the evidence supported the finding that this price was the same as the fair market value, however, the two measures of damages would be the same. That is no reason for saying the out-of-pocket calculation was incorrect.
For the first time in their reply brief, Vallis and Empire argue that even if fair market value is the correct damages measure, Rodriguez could not have gotten the prices Vallis quoted him, because Rodriguez was selling through a middleman (i.e., Empire), not directly to a wholesale buyer. "It is axiomatic that arguments made for the first time in a reply brief will not be entertained because of the unfairness to the other party." (People v. Tully (2012) 54 Cal.4th 952, 1075.)
This argument would fail even if we did consider it. Vallis and Empire cite no evidence in the record that would have prevented the jury from reasonably concluding that if Empire could find buyers willing to pay the quoted prices, Rodriguez could have found them as well. If there had been any evidence relevant to a price differential for a seller in Empire's position versus a seller in Rodriguez's position, our conclusion might be different. As it is, there is no reason why the jury could not rely on the only evidence of fair market value that was actually presented.
Also for the first time in their reply brief, Vallis and Empire argue that, assuming fair market value is the correct measure of damages, and assuming the prices shown on Rodriguez's invoices reflect fair market value, the jury still miscalculated the damages and should have awarded a smaller amount. Specifically, Vallis and Empire say that even if there was evidence to support the price of $19.55 per box for the clamshell packs, there was no such evidence for the lower prices Rodriguez invoiced for the other packing styles. Vallis and Empire contend that the jury should have calculated damages for the clamshell packs only, which they say would result in an award of about $95,000.
Again, we will not entertain this argument because it was raised for the first time in a reply brief. If we did consider it, we would reject it, as there was evidence the jury could properly rely on under the substantial evidence standard. Rodriguez testified that Empire quoted prices to him daily. The jury could reasonably infer that Rodriguez's invoices reflected those quotes, and could also reasonably infer that the prices quoted were based on market information.
For these reasons, we reject Vallis and Empire's contention that the jury's compensatory damages award was not supported by sufficient evidence. II. Punitive damages
A. Propriety of punitive damage award against Vallis despite lack of compensatory award against him
Vallis argues that it was error to award punitive damages against him because the jury wrote "$0" on the line of the verdict form where it was asked to assign liability for the compensatory award to him. We disagree.
"[I]t is settled in California that punitive damages cannot be awarded unless actual damages were suffered." (6 Witkin, Summary of Cal. Law (11th ed. 2017) Torts, § 1780, p. 1204.) Mother Cobb's Chicken T., Inc. v. Fox (1937) 10 Cal.2d 203 is a case often cited for this rule. There, the defendants marketed a product similar to the plaintiff's, using a similar name, and having a purpose of confusing the public. The plaintiff sued for unfair competition. An injunction was entered by stipulation, and the trial court found the elements of unfair competition were proved, except that it expressly found the defendants' action did not cause any actual harm to the plaintiff. Nevertheless, it awarded $500 in exemplary damages. (Id. at pp. 204-205.) Our Supreme Court reversed the award. It stated: "'The foundation for the recovery of punitive or exemplary damages rests upon the fact that substantial damages have been sustained by the plaintiff. Punitive damages are not given as a matter of right, nor can they be made the basis of recovery independent of a showing which would entitle the plaintiff to an award of actual damages. Actual damages must be found as a predicate for exemplary damages." (Id. at p. 205.) Further, "[t]he acts complained of, though actuated by spiteful or resentful motives, did not, as expressly found, result in any damage to [the] plaintiff. Evil thoughts or acts, barren of result, are not the subject of exemplary damages." (Id. at p. 206.) The court reaffirmed this rule more recently in Kizer v. County of San Mateo (1991) 53 Cal.3d 139, 147: "[A]ctual damages are an absolute predicate for an award of exemplary or punitive damages."
A case applying the rule and having some commonalities with the present case is Cheung v. Daley (1995) 35 Cal.App.4th 1673. The defendant was successfully sued by neighbors for creating a nuisance on a parcel of real property. Just as the nuisance judgment was about to be obtained, the defendant sought to evade the judgment by transferring the property to his mother. The neighbors sued again, alleging a violation of the Uniform Fraudulent Transfer Act. A jury found a violation and found the defendant acted with fraud, oppression or malice; but, as the neighbors had already obtained a damages judgment in the prior action, the jury found the compensatory damages to which the neighbors were entitled to be "'0.00.'" In spite of this, the jury awarded the neighbors $92,000 in punitive damages, which were reduced by remittitur to $62,000. (Cheung v. Daley, supra, at pp. 1674-1675.) Rejecting some California appellate decisions declining to apply the rule of Mother Cobb's, and relying on more recent authority reaffirming the rule, the Court of Appeal reversed the award. (Cheung v. Daley, supra, at pp. 1675-1677.) The court considered the argument that in some instances, a verdict appearing superficially to award only punitive damages has in reality both punitive and compensatory components. It concluded that the verdict before it did not admit of such an interpretation, however. (Id. at p. 1677.)
The above authorities would seem to point at first glance to the conclusion that there can be no punitive damages award against Vallis because there was no compensatory award against him. There is a complicating factor, however. Considered in light of the evidence, the verdict exhibited an apparent ambiguity or inconsistency. The only possible basis for a tort judgment against Empire, in light of the evidence, was the tortious conduct of its agents Vallis and Mark—primarily Vallis—because there was no evidence of tortious conduct by any other individuals. Further, it was only Vallis and Empire that the jury found to have acted with fraud, oppression or malice. The only tenable inference is that the jury found that Vallis's conduct was the origin of the fraud liability. Yet the jury assigned $0 in compensatory damages to him and over $200,000 in compensatory damages to Empire. As the court observed, the assignment of no liability to Vallis appears illogical.
The apparent confusion might have been caused by the jury instructions and the verdict form. In accordance with CACI No. 3933, the jury was instructed as follows:
"In this case Rafael Rodriguez seeks damages for more than one defendant. You must determine the liability of each defendant to Rafael Rodriguez separately. If you determine that more than one defendant is liable to
Rafael Rodriguez for damage[s], you'll be asked to find Rafael Rodriguez'[s] total damages and the comparative fault of each defendant.
"In deciding the amount of damages, consider only Rafael Rodriguez'[s] claimed losses. Do not attempt to divide the damages among the defendants. The allocation of responsibility for payment of damages among multiple defendants is to be done by the Court after you reach your verdict."
The verdict form did not clearly conform to these instructions. Instead of asking for one figure for Rodriguez's total damages, and then asking the jury to find the comparative fault (percentage of fault) of each defendant, the form asked the jury to state the total damages and then to "assign liability for your award separately" for each defendant. The jury understood the latter part of these instructions to be asking for dollar values, yet it could not give a dollar value for each defendant without violating the instruction not to attempt to divide the damages among the defendants (unless it tried, counterintuitively, to assign values that added up to more than the total, by, for instance, assigning the whole amount to two or more defendants). This could be why it re-entered the total amount on the top line and zero on the remaining lines.
Under these circumstances, the trial court was allowed and obligated to try to interpret the jury verdict to resolve the apparent ambiguity or inconsistency. (Singh v. Southland Stone, U.S.A., Inc. (2010) 186 Cal.App.4th 338, 358 [where verdict appears inconsistent and no party asks for jury to be ordered to clarify, trial court "must interpret the verdict in light of the jury instructions and the evidence and attempt to resolve any inconsistency"].) That is what it did when it found the jury verdict supported a punitive award against Vallis even though it assigned compensatory damages only against Empire, as the court's written order explained. In the trial court's view, the jury must have believed Vallis was responsible for the actual harm to Rodriguez, as there was no other way for the evidence to support the liability of Empire, given the finding that Vallis and not Mark acted with fraud, oppression or malice. In other words, as reasonably interpreted by the trial court, the jury's verdict did find that Rodriguez suffered actual tort damages at Vallis's hands, even though it wrote a non-zero dollar value for these damages only on the line for Empire.
We are not called upon to answer the question of whether the trial court could have gone further and found the jury intended to award the compensatory damages against Empire and Vallis jointly and severally.
In so ruling, and despite appearances, the trial court conformed to the rule of Mother Cobb's: Punitive damages are available only if actual injury to the plaintiff by the defendant is sustained, proven and found. The trial court determined that the jury's verdict, properly understood, made the necessary finding.
We find no error in the trial court's solution. Where findings in a special verdict are claimed on appeal to be inconsistent with one another, we review the verdict de novo to determine whether it really contains logically irreconcilable findings. (Singh, supra, 186 Cal.App.4th at p. 358.) If it does, we are not empowered to choose between the inconsistent findings; the inconsistency is reversible error and the remedy is a new trial. (Ibid.) Our conclusion here, however, is that the inconsistency is only apparent, and the trial court successfully resolved the apparent inconsistency by correctly determining the real meaning of the jury's verdict (so far as the only point at issue on appeal is concerned) in light of the evidence and the jury instructions.
B. Sufficiency of evidence of Vallis's financial condition
Vallis argues that the award of punitive damages against him was unsupported by sufficient evidence because Rodriguez did not prove Vallis's net worth. His argument fails for two reasons. First, in the punitive damages context, evidence of the defendant's financial condition is relevant because an award that is too great relative to the defendant's ability to pay would be excessive in light of the policy goals of punitive damages. In his opening and reply briefs in this appeal, Vallis never once argues that the punitive award of $50,000—a fraction of the actual harm caused by his fraudulent conduct—is excessive. This leads to the conclusion that Vallis has forfeited his claim about the sufficiency of the evidence.
Second, Rodriguez was not required to prove Vallis's net worth. A plaintiff seeking punitive damages must present evidence of the defendant's financial condition for the purpose of showing the defendant's ability to pay the punitive award, but there is no rule that the plaintiff must in every case pin down the defendant's net worth. Here the court received evidence of Vallis's financial condition sufficient to show his ability to pay the $50,000 punitive damages award.
1. Background
In Neal v. Farmer's Ins. Exchange (1978) 21 Cal.3d 910, the California Supreme Court explained that when the amount of a punitive damages award is challenged, a reviewing court must determine whether the award is excessive as a matter of law. This determination is made with reference to the public purposes of punitive damages, which are to punish wrongdoing and deter future misconduct. Three criteria must be considered to ensure that the award is not excessive in light of these purposes: (1) the nature and severity of the defendant's wrongdoing; (2) the amount of the compensatory damages; and (3) the wealth of the defendant. (Id. at p. 928.)
Adams v. Murakami (1991) 54 Cal.3d 105 (Adams) is the leading California Supreme Court authority on the third criterion. The court stated in unequivocal terms the necessity of evidence of the defendant's "financial condition," explaining that the defendant's ability to pay must be determined before it can be known whether a punitive damages award is excessive. "A reviewing court cannot make a fully informed determination of whether an award of punitive damages is excessive unless the record contains evidence of the defendant's financial condition." (Id. at p. 110.) "Even if an award is entirely reasonable in light of the other two factors in Neal," the court stated, "the award can be so disproportionate to the defendant's ability to pay that the award is excessive for that reason alone." (Adams, supra, 54 Cal.3d at p. 111.) "[T]he purpose of punitive damages is not served by financially destroying a defendant. The purpose is to deter, not to destroy." (Id. at p. 112.) "Absent evidence of a defendant's financial condition, a punitive damages award can financially annihilate him." (Id. at p. 113.)
Throughout its discussion of this issue, the Adams court refers consistently to the necessity of "evidence" of the defendant's "financial condition." It never refers to proof of the defendant's net worth and never suggests that such proof is needed. Instead, it suggests that the evidence of the defendant's financial condition is sufficient if it shows the punitive award is not "disproportionate to the defendant's ability to pay." (Adams, supra, 54 Cal.3d at p. 111.)
2. Forfeiture
In arriving at its holding in Adams, our Supreme Court rejected several prior cases holding that a punitive damages award could be upheld over an excessiveness challenge even if there was no evidence of the defendant's financial condition. One of these was Hanley v. Lund (1963) 218 Cal.App.2d 633. Apart from applying the wrong rule, Hanley had a "'unique'" feature that is important for our purposes: The defendant did not mount the relevant type of challenge in the first place. The defendant "'did not contend . . . that in fact the award made was excessive in light of his financial status.'" (Adams, supra, 54 Cal.3d at p. 115.) Consequently, the Hanley court could have avoided the substantive issue that led it into error by holding that the matter was not properly raised on appeal.
The present case is exactly parallel to Hanley in this regard. The whole point of the requirement of evidence of a defendant's financial condition is to ensure that a punitive award is not excessive in relation to the defendant's ability to pay. But Vallis never claims in his appellate briefs that the $50,000 award is excessive in relation to his ability to pay. He does not say the award will destroy, annihilate, or even severely harm him financially. The issue of excessiveness is not raised expressly or implicitly. Everything Vallis says in his briefs is consistent with his being able to bear the burden of the punitive award without excessive financial strain. But if the award is not claimed to be excessive, the question of whether the evidence of his financial condition was sufficient is academic. We conclude that Vallis has forfeited the issue.
3. Sufficiency of evidence of financial condition
If Vallis had not forfeited his claim that the punitive award was excessive, we would hold that the trial court received sufficient evidence of his financial condition to support the award.
Rodriguez's expert testified that the business Vallis and his wife owned had a net value of $779,000, a figure derived from calculations based in part on the company's revenue for 2014 of about $2 million. The expert's conclusion was based in part on the fact that counterparties within the industry, including a grape producer and a box manufacturer, had found the company sound enough to extend substantial credit to it. For instance, the grape producer provided a line of credit of $1.8 million. Regarding his personal assets apart from the company, Vallis testified that he and his two sisters owned an office building which he employed as collateral for credit used in financing the business.
It is true, as Vallis emphasizes, that this evidence did not show his net worth, since it did not include evidence of his liabilities for purposes of comparison with the value of his interest in the company and other assets. The Supreme Court used the expression "evidence of financial condition" rather than "proof of net worth" in this context for good reason, however. An individual with substantial income, cash flow, and access to credit can have a high level of financial resilience, even if his or her net worth is small, nonexistent, or negative. A person in such a situation may be better positioned to withstand a financial impact—such as a judgment—than one who has positive net worth, but small income and poor creditworthiness. This is a phenomenon well known to many a consumer who has a good job, a high credit score, and substantial debt. Seen from this perspective, it is clear to us that the evidence presented to the trial court was sufficient to show that a $50,000 judgment would not financially "destroy" or "annihilate" Vallis (Adams, supra, 54 Cal.3d at pp. 112-113), who was proprietor of a company with multimillion-dollar cash flow and substantial positive net worth, and who had access to credit based on personal assets. The court could reasonably find the judgment would be within his ability to pay.
Vallis cites Kelly v. Haag (2006) 145 Cal.App.4th 910, implying it stands for the proposition that evidence of financial condition can never be sufficient unless it includes evidence of all the defendant's liabilities, making a net worth calculation possible. Kelly does not stand for that proposition, however; and if it did, it would be in error, since Adams requires only sufficient evidence of financial condition relevant to ability to pay.
Kelly also fails to support Vallis's position on its facts. There the trial court assessed $159,000 against Haag in compensatory damages and $75,000 in punitive damages, finding Haag's net worth to be at least $750,000. (Kelly, supra, 145 Cal.App.4th at p. 914.) The difficulty identified by the Court of Appeal was that the trial court's finding regarding Haag's financial condition was based exclusively on information obtained long before trial regarding his equity in two parcels of real property. (Id. at pp. 914, 916-917.) This did not constitute "meaningful evidence of Haag's financial condition" because there was no evidence that Haag even still owned the properties, let alone any evidence of encumbrances at the time of trial or any other facts about Haag's finances. (Id. at p. 917.) The case before us is not similar.
In light of the foregoing discussion, we need not address Vallis's argument that because the alter-ego issue was not litigated by the parties at trial, the trial court acted improperly if it relied on an alter-ego finding when it imposed punitive damages on him.
C. Sufficiency of evidence of fraud , oppression or malice
Vallis and Empire argue that the punitive damages award should be reversed because the evidence was insufficient to show fraud, oppression or malice under the clear and convincing evidence standard. We disagree.
Code of Civil Procedure section 3294, subdivision (a), provides that punitive damages may be awarded in a tort case "where it is proven by clear and convincing evidence that the defendant has been guilty of oppression, fraud, or malice." "'The words "oppression, fraud, or malice" in Civil Code section 3294 being in the disjunctive, fraud alone is an adequate basis for awarding punitive damages.'" (Walker v. Signal Companies, Inc. (1978) 84 Cal.App.3d 982, 996.) To show fraud, a plaintiff must prove (1) misrepresentation, (2) knowledge of the falsity of the representation, (3) intent to induce reliance, (4) justifiable reliance, and (5) resulting damage. (OCM Principal Opportunities Fund v. CIBC World Markets Corp. (2007) 157 Cal.App.4th 835, 845.) One of the types of misrepresentation recognized by the Civil Code is the making of a promise with no intent to perform it. (Civ. Code, §§ 1572, 1709, 1710.)
Rodriguez testified that he, Vallis, and Mark orally agreed that Empire would buy grapes from Rodriguez at stated prices. When the 14-day payment term for the first delivery expired and Rodriguez requested payment, Vallis did not say terms of 14 days from delivery made no sense because he had taken the grapes on consignment and could not pay until the grapes were sold. He also did not say he would not know how much to pay until a buyer had given him a price. Instead, he simply asked for an extension to 21 days. When, weeks later, Vallis claimed for the first time that the agreement had been for Empire to take the grapes on consignment, Rodriguez believed he had been tricked: Vallis had offered high prices on a cash sale basis just so Rodriguez would deliver the grapes, intending all along to pay less and claim the deal was for consignment. Vallis and Mark told a different story. In closing argument, each side accused the other of fabricating evidence to support false assertions. It was up the jury to decide whom to believe. The evidence adequately supported its decision to believe Rodriguez and find the elements of fraud were present under the clear-and-convincing standard.
Vallis and Empire also suggest that the judgment in this case somehow contravened the principle that punitive damages are never available for breach of contract. This contention is meritless. It is clear beyond cavil that tort remedies are available where a defendant has fraudulently induced a plaintiff to enter into a contract. (Civ. Code, § 1572.) It is true that only one compensatory award can be granted when all the damages from fraud and breach of contract arise from the same facts (Walker, supra, 84 Cal.App.3d at pp. 995-996), but there was only one compensatory award in this case. In any event, in this case, there was no breach of contract finding with which the tort remedies could in any way conflict. The jury evidently found no contract was formed. What we have here is simply a fraud judgment.
DISPOSITION
The judgment is affirmed. Defendants Peterangelo Vallis and Empire Grape Co. are to pay plaintiff Rafael Rodriguez's costs on appeal.
/s/_________
SMITH, J. WE CONCUR: /s/_________
PEÑA, Acting P.J. /s/_________
ELLISON, J.
Retired judge of the Fresno Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution. --------