Filed 4/30/13 Ross v. Stranger CA1/2
                      NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication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 TWO


ELIZABETH B. ROSS,
         Plaintiff and Respondent,
                                                                     A130071
v.
GREGORY A. STRANGER,                                                 (Marin County
                                                                     Super. Ct. No. CV 083069)
         Defendant and Appellant.


                                              I. INTRODUCTION
         This case pertains to disputes between Gregory Stranger and Elizabeth Ross
regarding their partnership in a commercial real estate defeasance business.1 A jury
determined that Stranger is liable to Ross for breach of contract, breach of fiduciary duty
and fraud. Ross was awarded $969,849.73 in compensatory damages and $1.5 million in
punitive damages.
         On appeal, Stranger contends (1) the trial court committed prejudicial error by
admitting evidence that he was convicted of a crime in 1995; (2) he is not personally
liable to Ross on any of her contract claims; (3) there was insufficient evidence of a


         1
          A defeasance is “generally defined as a clause in a deed, lease, or other written
instrument the legal effect of which is to defeat, cancel, or annul the instrument in whole
or in part and thus wholly or partly to release the parties from obligations arising under it
upon the happening or not happening of a condition subsequent.” (Ballentine‟s Law
Dictionary (3rd ed. 2010).) In a commercial real estate defeasance transaction, the holder
of a loan on commercial real estate substitutes a portfolio of bonds as collateral for the
loan and then uses cash flow from the portfolio to pay down the mortgage.


                                                             1
fiduciary relationship between him and Ross; and (4) the punitive damages award is
excessive as a matter of law. We reject these contentions and affirm the judgment.
                              II. STATEMENT OF FACTS
A.     The Parties
       Gregory Stranger has a B.A. in economics from the University of Chicago and a
master‟s degree from the Kellogg Graduate School of Management at Northwestern
University. His employment background is in financial services and investment banking.
In early 2006, Stranger was employed at the Boston Consulting Group when he decided
to start a defeasance business. That spring or summer, Stranger formed two companies to
operate the business: (1) Capital Defeasance Group, LLC (CDG), a consulting service
for defeasance customers; and (2) Successor Borrower Services, LLC (SBS), the function
of which was to form successor borrowers related to defeasance transactions. Both CDG
and SBS were owned by SierraCrest Financial, the sole member of which was the
Stranger Family 2003 Trust.
       In 2006, Elizabeth Ross and her family were friends and neighbors with Stranger
and his family. Ross has a B.A. in economics and a master‟s degree in business
administration from Yale. Her employment background is in the commercial real estate
business.
B.     The Business Venture
       In March 2006, Stranger approached Ross as a source of potential defeasance
clients because of her background in commercial real estate. After discussing the project
with Ross, Stranger asked her to become his partner. Ross, who was on maternity leave
at the time, was interested in the opportunity, but she wanted to learn more about the
defeasance industry and she was not ready to return to a full-time job. She offered to
work for the business part-time without compensation for the summer and then let
Stranger know if she would become his partner.
       At the beginning of the summer of 2006, Stranger told Ross that, if she joined the
company full-time, the two of them would be “equal partners.” Stranger said he would
cover the start-up costs because they were not going to be substantial, and he was going


                                             2
to go ahead with the business whether with Ross or with some other partner. Stranger
promised that if Ross did decide to stay, the two of them would split the profits 50/50.
Stranger confirmed these representations after Ross started working for the business,
during a July 6, 2006, dinner party at Ross‟ home.
       In September 2006, Ross told Stranger that she had decided to accept his offer and
join the company full-time. A few days later, Stranger complained that Ross did not
deserve half the company because he had put up all the money and worked full-time over
the summer while Ross only worked part-time. Ross responded that she had entered the
relationship with the understanding they would be equal partners and that was the only
basis under which she was willing to work with him. Stranger indicated that his
objection was not sharing ownership or operating power but that he was concerned about
how the cash generated by the business would be distributed. Ross said that if Stranger
wanted a return on his up front investment, they could structure a deal which gave him
more cash up front, but that she wanted to get to a point where they would share equally
in the cash.
       On September 12, 2006, Ross sent Stranger an e-mail and attachment outlining a
proposed partnership structure which would give Stranger a higher percentage of initial
cash distributions to compensate him for his preliminary work and initial funding outlay.
Stranger sent a reply that it probably was “not best” to discuss the matter via e-mail. A
few weeks later, on or around October 6, 2006, Ross and Stranger reached an agreement
that they would (1) be 50/50 partners in the business; (2) have equal operating power; and
(3) share the profits based on a structured payout.
       The terms of the structured payout were summarized in a document dated October
6, 2006, which was titled “SierraCrest Financial, LLC Member financial agreement” (The
October 2006 Agreement). The October 2006 Agreement consists primarily of a
spreadsheet reflecting that the first $1,625,000 of profits would be split 70 percent to
Stranger, 30 percent to Ross, the next $3,250,000 would be split 60 percent to Stranger
and 40 percent to Ross, and any profits beyond that would be split 50/50 between
Stranger and Ross. The October 2006 Agreement also contains cryptic notes including


                                             3
that “GS to invest $100,000 equity.” Both Stranger and Ross signed their names to this
agreement. Stranger said he would contact CDG‟s outside counsel, Chris Henrich, to
draft an ownership agreement for them.
       In the fall of 2006, Stranger was sued for stealing trade secrets by Commercial
Defeasance Group, a client of his former employer. Subsequently, CDG was named as a
defendant in that case and counsel was retained to represent both the company and
Stranger individually. Legal fees for this litigation were paid by CDG.
       Meanwhile, Stranger and Ross continued to develop their business. They both
signed and personally guaranteed a lease for office space in Novato. They also worked
together to generate biographies and other marketing materials which stated that Stranger
and Ross were co-founders and principals of CDG. Stranger also told potential
customers that Ross was his partner. In late October 2006, Stranger and Ross closed their
first transaction with Matteson Realty, a client that was retained through a business
contact Ross supplied and that went on to complete a total of five transactions with
Stranger and Ross.
       On January 5, 2007, Chris Henrich, CDG‟s outside counsel, sent an e-mail to
Stranger and Ross. Henrich stated that Stranger had “sketched out” their “understanding”
for him, and that he wanted to outline the relevant issues and pose some thoughts and
questions. The first issue Henrich addressed was the “unwinding of ownership” of CDG
and SBS. Henrich stated that the plan was to eliminate the holding company structure
whereby “at least on paper” SierraCrest owned all of the equity in CDG and SBS, and to
transfer those interests to Ross and Stranger. He also advised that they could make the
equity transfer to Ross without creating a tax event by backdating the new operating
agreements for CDG and SBS. Henrich addressed other issues pertaining to the new
ownership structure and operating agreements and raised questions for further discussion.
       Around this same time, the legal fees for the trade secret litigation had become so
large that CDG did not have funds to cover them. Stranger asked Ross if she would loan
the company money to pay the fees. Ross declined this request; knowing a new
defeasance business would not generate profits for a few years, she was concerned about


                                             4
repayment. Instead, Ross offered to make an equity investment in the company which
would match Stranger‟s prior equity contribution. Stranger resisted that offer, although
he would not say why, and continued to press Ross for a loan.
       In early March 2007, Stranger gave Ross a draft operating agreement which was
titled “LIMITED LIABILITY COMPANY AGREEMENT OF                          ,” and was dated
“as of __________, 2006.” The form agreement was incomplete and had not been
individualized to a specific company. However, it did incorporate a “SCHEDULE A”
and an “EXHIBIT A,” reflecting that Stranger and Ross owned equal shares in, and were
the two “Managing Members” of the Company. Ross testified at trial that Stranger gave
her this draft agreement to assure her that she was an equal partner in the business so that
she would agree to make a loan to cover the trade secret litigation fees. However, Ross
would not loan the company any money, telling Stranger that she was concerned the
company would not survive because CDG could not pay the legal fees. A few days later,
Stranger agreed that Ross could make a $100,000 investment, that the two would remain
equal owners, and that they would split the profits equally between them. Again,
Stranger said he would work with Henrich to get the agreements finalized.
       The next several months were a very busy period for the business; both partners
were traveling and closing many deals. Several of those defeasance transactions required
an Indemnity and Guaranty Agreement from the successor borrower established by SBS.
Pursuant to these agreements, Stranger and Ross both acted as personal guarantors for the
successor borrower. In August 2007, Ross made the $100,000 equity investment in the
business by writing a check to SBS. The following month, Ross followed up with
Henrich about issues he raised in his January 2007 e-mail. A few days later, on
September 18, 2007, new operating agreements and transfer of ownership documents
dated as of September 2006 were finalized and ready to sign.
       On November 5, 2007, after four or five unsuccessful attempts to get Stranger to
finalize the ownership documents, Ross sent Stranger an e-mail in which she emphasized
that getting the agreements signed was a priority for her and asked again that Stranger
make time to go through the drafts that Henrich had provided. After Stranger responded


                                             5
that he had other priorities, Ross sent another e-mail on November 6, which stated, in
part: “I have worked for almost 18 months without pay. In addition, I wrote a check for
$100,000 over 2 months ago on good faith that we would get our agreement showing that
I own 50 percent of both companies down in writing shortly thereafter.”
       When Ross arrived at her office on the morning of November 7, she found a check
for $100,000 on her office chair. She went to ask Stranger about it and he said that she
seemed concerned about her money so he was returning it to her, but that was all she was
going to get. Ross returned the check, telling Stranger that this was not their deal, that
she had not been paid for 18 months, and that she wanted to adhere to their agreement. A
day or two later, Stranger told Ross that he was not going to honor their agreement and
that he was not sure what she planned to do about it. The two agreed to seek assistance
from Henrich. Each spoke separately with him, but when Ross attempted to have them
all sit down together, Stranger put her off again.
       On December 12, 2007, Ross finally left the company. She was not reimbursed
for her outstanding work expenses. Furthermore, Stranger did not respond to overtures
from Ross‟s husband to attempt to resolve the dispute, although he did offer to purchase
Ross‟s interest in the defeasance business for $1.
C.     The Present Action
       In June 2008, Ross filed this action against Stranger, Stranger‟s wife, The Stranger
Family Trust, CDG and SBS. Stranger‟s wife and The Stranger Family Trust were
dismissed from the action without prejudice prior to trial. At some time not disclosed in
the record, CDG filed for Chapter 7 bankruptcy and, as best we can determine, never
participated in this case. Although SBS filed for Chapter 11 bankruptcy, Ross obtained
relief from the automatic bankruptcy stay and settled her claims with the Chapter 11
trustee.
       In her initial complaint, Ross alleged causes of action against Stranger for breach
of contract, declaratory and injunctive relief, unjust enrichment, breach of the covenant of
good faith and fair dealing, intentional and negligent misrepresentation, breach of
fiduciary duty, conversion, and securities law violations.


                                              6
D.     Stranger’s 1995 Criminal Conviction
       After she filed this action, Ross discovered that, in November 1995, Stranger pled
guilty to the crime of creating a false market while he was living and working in England.
After she discovered this prior conviction, Ross filed a fifth amended complaint, the
operative pleading, which added a cause of action for fraudulent nondisclosure.
       At trial, Stranger admitted his prior conviction and also stipulated to the admission
of a document pursuant to which an officer of the Crown Court of England “certified”
that, on November 10, 1995, Stranger was “upon his own confession convicted upon
indictment of CREATING A FALSE OR MISLEADING IMPRESSION AS TO THE
MARKET IN, OR VALUE OF, AN INVESTMENT WITH THE PURPOSE OF
CREATING THAT IMPRESSION,” that he was sentenced to one year imprisonment,
and that he was ordered to pay 20,000 pounds toward prosecution costs within three
months time.
       When asked at trial about the circumstances that led him to plead guilty, Stranger
claimed he did not understand the question. After prompting from the trial judge,
Stranger offered this testimony: “Oh, the—what was alleged was that I—as a market
maker you make prices in—these were warrants that I had made a price that was
incorrect; price that was too high, or a price that was too low; didn‟t reflect the value. So
we were buyers and the sellers in this marketplace for the bank, and the—what I plead
guilty to was creating a false or misleading impression as to the market in one of these
securities.” Stranger denied any “personal gain” from the transaction that led to his
conviction. When asked whether he signed a consent decree, Stranger responded that
“[t]hat was not part of my conviction,” and testified that he did not have an understanding
as to what a consent order is. Stranger also testified that he appealed the monetary fine
but he left the country before his appeal was decided and he thus never paid the fine.2


       2
         The trial court excluded evidence of the content of the British Crown Court
decision denying Stranger‟s appeal of the fine imposed on him in connection with this
conviction. That appellate decision contains a factual summary which reflects, among
other things, that (1) Stranger‟s illegal trading activity garnered him a personal profit of

                                              7
       Stranger never disclosed his prior conviction to Ross during the time they worked
together. Rather, Stranger told Ross that he stopped working as a trader in London
because friends told him that the job made him arrogant and so he decided to change
careers. After she filed this lawsuit, Ross learned that the real reason that Stranger
stopped working as a trader was because he went to jail. Ross testified that, had she
known about the conviction, she never would have left her prior employment or gone into
business with Stranger. Nor would she have invested $100,000 in the business, signed a
lease with Stranger, or entered into the indemnity agreements that she and Stranger
signed on behalf of the company.
       Kathryn O‟Neal, who worked for several years in the commercial real estate
department of Wells Fargo Bank, testified at trial as an expert in the area of defeasance
transactions and banking standards relating to defeasance transactions. O‟Neal testified
that, based on her review of the evidence, Stranger had not disclosed his conviction to
servicers who conducted business with CDG and SBS and, had that conviction been
disclosed, those service providers would not have done business with these companies.
Jack Blumenthal, plaintiff‟s expert in the field of certified public accounting and
standards governing certification of defeasance transactions, testified that no accounting
firm that provides the certification services that are required to close a defeasance
transaction would have accepted CDG as a client had it known of Stranger‟s prior
conviction.
E.     The Judgment Against Stranger
       In August 2010, the legal claims against Stranger were resolved by a jury. On
August 20, the jury returned a general verdict holding Stranger liable to Ross for breach
of contract, breach of the covenant of good faith and fair dealing, fraudulent
misrepresentation, fraudulent failure to disclose and breach of fiduciary duty. Ross was


3,821,000 Swiss francs or 1.9 million pounds; (2) an injunction was issued to freeze this
money, which Stranger had transferred into his Swiss bank account; and (3) Stranger
signed a consent order pursuant to which he returned all of the money he made by this
illegal trading activity.


                                              8
awarded $969,849.73 in damages and an additional $1.5 million in punitive damages. A
subsequent court trial, conducted in October 2010, resulted in a judgment for Ross on her
equitable claims against Stranger.
                                     III. DISCUSSION
A.     The Prior Conviction Evidence
       Stranger contends that the trial court committed reversible error by admitting
evidence of his 1995 conviction. “Trial court rulings on the admissibility of evidence,
whether in limine or during trial, are generally reviewed for abuse of discretion.” (Pannu
v. Land Rover North America, Inc. (2011) 191 Cal.App.4th 1298, 1317.) As we will
explain, the trial court did not abuse its discretion by admitting evidence of the 1995
conviction because that evidence was admissible for two independent reasons: (1) to
prove fraud; and (2) to impeach Stranger‟s credibility as a witness.
       1.     Fraud
       As reflected in our factual summary, Ross‟s fraudulent concealment claim was
tried to the jury. “ „[T]he elements of an action for fraud and deceit based on
concealment are: (1) the defendant must have concealed or suppressed a material fact, (2)
the defendant must have been under a duty to disclose the fact to the plaintiff, (3) the
defendant must have intentionally concealed or suppressed the fact with the intent to
defraud the plaintiff, (4) the plaintiff must have been unaware of the fact and would not
have acted as he did if he had known of the concealed or suppressed fact, and (5) as a
result of the concealment or suppression of the fact, the plaintiff must have sustained
damage.‟ [Citation.]” (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 748.)
       The trial evidence regarding Stranger‟s 1995 conviction was directly relevant to
prove these elements of Ross‟s nondisclosure fraud claim, which was based on
allegations that Stranger had a duty to disclose his prior conviction to Ross because it was
material to their joint business venture, that Ross would not have gone into business with
Stranger had she known about the conviction, and that she suffered damage as a result of
Stranger‟s concealment of his criminal past.



                                               9
       On appeal, Stranger does not actually dispute that the prior conviction evidence
was relevant to the fraudulent non-disclosure claim.3 Instead, he attempts to skirt the
issue entirely by arguing that the trial court admitted evidence of his prior conviction
solely for the limited purpose of impeaching his credibility. However, Stranger does not
identify any trial court order to that effect.
       Furthermore, the record clearly shows that the trial court did admit evidence
regarding this prior conviction for purposes other than impeachment. Evidence Code
section 788 (section 788) provides that “[f]or the purpose of attacking the credibility of a
witness, it may be shown by the examination of the witness or by the record of judgment
that he has been convicted of a felony . . . .” Here, the evidence regarding Stranger‟s
conviction was not limited to an examination of the witness and a record of the judgment,
but also included percipient and expert testimony supporting the plaintiff‟s fraud claim.
Indeed, the trial court overruled an objection to the expert testimony by Mr. Blumenthal
on the following ground: “In this lawsuit one of the causes of action, I believe, is for
fraud and the issue of whether Mr. Stranger willfully concealed a criminal conviction is
an element of that, and it certainly would have affected the entire business, including Ms.
Ross‟ participation in it. . . .”
       Ignoring the evidence itself, Stranger contends that his prior conviction was
admitted for a limited purpose because the jury received this instruction: “You have
heard that the defendant in this trial has been convicted of a crime. You were told about
the conviction only to help you decide whether you should believe the defendant. You
must not consider it for any other purpose.” However, this jury instruction is not the
equivalent of or a substitute for an evidentiary ruling. In other words, the propriety of
this jury instruction presents a fundamentally different inquiry for a court of review.
       Indeed, because the prior conviction evidence was relevant to the fraud claim, the
error Stranger seeks to exploit in this appeal is in the instruction itself and not in the


       3
        At oral argument before this court, Stranger‟s appellate counsel expressly
conceded that the prior conviction evidence was relevant to Ross‟s fraud claims.


                                                 10
admission of evidence. This instruction is a version of CACI No. 211, the model Judicial
Council of California Civil Jury Instruction regarding the use of a prior felony conviction
to impeach the credibility of a witness. The use note for this instruction states that the
court should “include the word „only‟ unless the court has admitted the evidence for some
other purpose,” in which case the court should omit that word, delete the last sentence of
the instruction, and specify the other purpose for which the evidence is admitted. The
record does not explain how or why the trial court failed to make these appropriate
modifications. Regardless, the error does not constitute a ground for reversal in this case
because it did not prejudice Ross,4 and it could only have benefited Stranger by
improperly limiting the jury‟s consideration the prior conviction evidence.
       2.     Impeachment
       Stranger contends that, even if the conviction evidence was admissible to prove
fraud, the trial court committed reversible error by allowing the evidence to be used for
the additional purpose of impeaching his credibility.
       As noted above, section 788 provides that the credibility of a witness in a civil
action may be impeached with evidence that he suffered a prior felony conviction. Here,
Stranger contends that his 1995 British conviction is not the equivalent of a California
felony.
              a.     Background
       William Locke, an attorney who has practiced criminal law in California and
England, was retained by Ross to provide an expert opinion regarding the nature of
Stranger‟s British conviction. Prior to trial, Locke gave a deposition in which he
testified, among other things, that “the offense of which Mr. Stranger was convicted is
the equivalent of a felony under California law.”
       In formulating his opinion, Locke reviewed documentary evidence regarding
Stranger‟s prior conviction which showed, among other things, that Stranger was

       4
          During closing argument, both parties discussed whether the evidence pertaining
to the prior conviction was sufficient to support the nondisclosure claim, and, in the end,
the jury entered a verdict in favor of Ross on that claim.


                                             11
convicted pursuant to an indictment of creating a false or misleading market, and that he
was sentenced to a year imprisonment. In his deposition, Locke testified that the crime
Stranger committed was a provision of The Financial Services Act of 1986 (the Act).5
Locke opined that Stranger‟s violation of the Act was the equivalent of a felony under
California law, which defines a felony as an offense for which a state prison sentence can
be imposed.
       According to Locke, “the differentiation between indictable and summary offenses
in England is effectively the same distinction as we make between misdemeanors and
felonies in California.” Locke‟s research showed that, prior to 1967, British law used the
terms “felony” and “misdemeanor” to “differentiate major and minor offenses.”
However, after 1967 those terms were abandoned and, under current law, more serious
offenses are called “indictable offenses” and less serious crimes are called “summary
offenses.” Locke also noted, among other things, that a summary offense is tried in a
magistrate‟s court by a lay person and the maximum sentence for such an offense is six
months. “An indictable offense, on the other hand, goes to a Crown Court judge and can
draw a sentence as designated by statute. [¶] In the indictable offenses, an accused
person is provided an opportunity and a right to have their case tried by a jury.”
       Prior to trial, Stranger filed an in-limine motion to exclude Locke‟s testimony on
the ground that the documentary evidence that he suffered a British conviction in 1995
was inadmissible hearsay. The trial court denied that motion of the following ground:
“Defendant‟s objection to the evidence of the prior conviction is overruled. The




       5
         This court granted Stranger‟s request to take judicial notice of the relevant
provisions of the Act. Section 47(2) of the Act states: “Any person who does any act or
engages in any course of conduct which creates a false or misleading impression as to the
market in or the price or value of any investments is guilty of an offense if he does so for
the purpose of creating that impression and of thereby inducing another person to acquire,
dispose of, subscribe for or underwrite those investments or to refrain from doing so or to
exercise, or refrain from exercising, any rights conferred by those investments.”


                                             12
Defendant admitted his conviction in sworn testimony.[6] It appears Mr. Locke has the
credentials necessary to establish the fact of the Defendant‟s British felony conviction.
We all know under Evidence Code 788, evidence of a prior felony conviction whether or
not it involved moral turpitude can be used to impeach a defendant or any witness‟s
credibility.”
       Throughout trial, Stranger vigorously opposed the admission of any evidence
pertaining to his 1995 conviction, and he made at least two additional motions to exclude
Locke‟s testimony. Ultimately, near the end of the trial, the court granted a motion by
Stranger to exclude Locke‟s testimony pursuant to Evidence Code section 352. Ross
objected that Locke‟s testimony was relevant and admissible to establish that Stranger‟s
prior conviction was equivalent to a felony under California law. However, the trial court
agreed with Stranger that Locke‟s testimony was cumulative and irrelevant since the jury
had already heard evidence which proved that Stranger had suffered the prior conviction.
The court also opined that since the previously admitted evidence proved the prior
conviction was for a crime of moral turpitude, the question whether the conviction was
for a felony or a misdemeanor was no longer material and that Locke‟s testimony was
more prejudicial than probative.
                b.   Analysis
       The appellate record contains substantial evidence that Stranger‟s prior conviction
is the equivalent of a California felony. Evidence admitted at trial shows that Stranger
was convicted upon an indictment of making a false market and that he was sentenced to
a year imprisonment for his crime. Under California law, “[a] felony is a crime that is
punishable . . . by imprisonment in the state prison.” (Pen. Code, § 17, subd. (a).) The
trial evidence also shows that Stranger created a false market in a security by engaging in

       6
          The sworn testimony was given during a hearing in the SBS bankruptcy case.
At that hearing, Stranger testified that he was accused of “making a mistake in the price
of a market of a security” while working in London as a trader for a bank. Stranger
admitted he was criminally prosecuted in the United Kingdom in 1994, and that he
pleaded guilty to a crime, but testified that he did not know what crime he plead guilty to,
or if he was actually convicted.


                                            13
illegal trading activity. As Stranger expressly concedes on appeal, under California law,
trading activity designed to create a false or misleading market can be prosecuted as a
felony. (See Corp. Code, §§ 25500, 25540.) Finally, although Locke was not permitted
to testify at trial, his deposition testimony was before the trial court when it ruled that the
prior conviction evidence could be used for impeachment. Locke‟s expert testimony
established that an indictable offense under British law is the equivalent of a California
felony.
       On appeal, Stranger argues that the record does not support a finding that his prior
conviction was the equivalent of a felony because Locke‟s expert opinion and supporting
conclusions “were incorrect as a matter of law.” We reject this argument for several
reasons. First, even if we do not consider Locke‟s deposition testimony, the trial
evidence referenced above supports a finding that Stranger‟s British conviction was the
equivalent of a California felony.
       Second, as reflected in our background summary above, Locke was precluded
from testifying at trial about his opinions pursuant to Stranger‟s Evidence Code section
352 motion. To the extent Stranger now contends that Locke‟s expert opinion was
somehow lacking or deficient, trial testimony from Locke would not have been
cumulative or irrelevant. Furthermore, although potentially damaging to Stranger‟s
credibility, that testimony would not have been unduly prejudicial. In other words, Locke
was erroneously precluded from fully articulating and explaining his expert opinion to the
trial court. “A party who has prevented proof of a fact by his erroneous objection will not
be permitted to take advantage of his own wrong, and a reviewing court will assume that
the fact was duly proved. [Citation.]” (Watenpaugh v. State Teachers’ Retirement
System (1959) 51 Cal.2d 675, 680; see also Kessler v. Gray (1978) 77 Cal.App.3d 284,
290.) Here, Stranger cannot exploit the erroneous evidentiary ruling regarding Locke‟s
testimony to create a ground for appeal.
       Third, Stranger fails to identify any actual flaw in Locke‟s analysis. Instead, he
purports to articulate a “better approach” for determining whether a foreign crime can be
used for impeachment. Stranger proposes to ignore all evidence of what he actually did


                                              14
and to limit the relevant inquiry to an analysis of “the elements of the offense of the
foreign jurisdiction and determine whether, if committed here, said offense would qualify
as a felony.” Purporting to employ this better approach, Stranger attempts to show that
the elements of the offense he committed are most analogous to Penal Code section 395
(section 395), which states: “Every person who willfully makes or publishes any false
statement, spreads any false rumor, or employs any other false or fraudulent means or
device, with intent to affect the market price of any property, is guilty of a misdemeanor.”
       Again, this theory is not properly raised on appeal. The doctrine of implied waiver
applies to a claim of error based on a theory that was never asserted in the trial court.
(Greenwich S.F., LLC v. Wong (2010) 190 Cal.App.4th 739, 767; Eisenberg et al., Cal.
Practice Guide: Civil Appeals and Writs (The Rutter Group 2011) ¶¶ 8:229, 8:236, pp. 8-
155, 8-157.) Here, Stranger consistently challenged the admissibility of evidence
pertaining to his prior conviction. But, we find no permeation of that argument in which
he even suggested that he could not be impeached with the prior conviction because it
was the equivalent of a section 395 misdemeanor. Furthermore, Stranger has provided us
with no case authority or sound reasoning as to why his self-serving analysis is better
than the expert opinion and conclusions that Locke provided to the trial court in this case.
That expert testimony and other evidence before the trial court supports the conclusion
that Stranger‟s 1995 conviction qualifies as a felony under California law.
       Stranger also makes the separate claim that the trial court committed reversible
error by allowing the prior conviction to be used as impeachment evidence pursuant to
section 788 notwithstanding the fact that the court expressly refused to find that the 1995
conviction was actually a felony. As our background summary reflects, it does appear
that, after considering this issue several times, the trial court expressed the opinion that it
did not matter whether Stranger‟s prior conviction was a felony because it was clearly a
crime of moral turpitude. Even if this comment could be construed as an actual ruling, it
only benefited Stranger because it led the trial court to preclude trial witnesses and trial
counsel from explicitly characterizing Stranger‟s prior conviction as a felony.



                                              15
B.     Stranger’s Contract Liability
       Stranger contends that, as a matter of law, he is not personally liable for breach of
contract or breach of the implied covenant of good faith and fair dealing because he was
not a party to any partnership contract with Ross. We disagree.
       By its general verdict, the jury made an implicit finding that Stranger did
personally enter into a contract with Ross. The evidence summarized in our factual
summary substantially supports the jury‟s finding. That evidence shows, among other
things, that in the beginning of the summer of 2006, Stranger offered to make Ross a
50/50 partner in his defeasance business if Ross worked part time without pay over the
summer and then agreed to take on the responsibilities of a full-time partner. Ross
worked part-time over the summer, accepted the offer of a 50/50 partnership in the
defeasance business, and worked with Stranger as his partner to develop their business
through the operation of two companies, CDG and SBS.
       There is also evidence that one term of the oral partnership contract between these
individuals was modified twice. In October 2006, Ross and Stranger agreed to a different
structure for sharing profits. That modification was memorialized in a writing which
Ross and Stranger signed as individuals. In March 2007, the oral partnership contract
was modified a second time when Stranger agreed to split profits equally in exchange for
Ross‟s equity investment of $100,000. This second modification was reflected in a draft
operating agreement dated March 1, 2007, which was prepared by CDG‟s outside
counsel, Chris Henrich. Though never executed, this draft agreement identifies the
contracting parties as “Greg Stranger („Stranger‟), Elizabeth __ Ross („Ross‟), and other
persons (if any) listed on Schedule A hereto (collectively, the „Members‟).” Attachments
to this draft agreement include a Schedule A, which identifies Stranger and Ross as equal
owners, and an Exhibit A which identifies them as the two management members of the
company.
       Stranger‟s theories as to why the trial evidence does not establish his personal
contract liability are confusing to say the least. As best we can determine, he makes two
primary claims. First, Stranger contends that the trial court violated the parol evidence


                                             16
rule by admitting extrinsic evidence which is inconsistent with the terms of the October
2006 agreement. “ „Under the parol evidence rule, extrinsic evidence is not admissible to
contradict express terms in a written contract or to explain what the agreement was.
[Citation.]‟ ” (Cerritos Valley Bank v. Stirling (2000) 81 Cal.App.4th 1108, 1115-1116.)
According to Stranger, the October 2006 agreement was the only contract Ross ever
signed and it did not give her an ownership interest in the defeasance business.
       In making this argument, Stranger simply ignores the evidence establishing that he
and Ross entered into an oral partnership agreement. “ „ “[W]hen the respective parties
orally agree upon all the terms and conditions of a contract with the mutual intention that
it shall thereupon become binding, the mere fact that a formal written agreement to the
same effect is to be thereafter prepared and signed does not alter the binding validity of
the original contract.” ‟ ” (Woodard v. Schwartz (1960) 181 Cal.App.2d 360, 363.)
Furthermore, in such a case, the question whether the parties “intended their oral
agreement to be immediately effective or only to become binding on the execution of the
writing, is ordinarily a question of fact to be resolved by the trial court or jury in the light
of all the surrounding circumstances.” (McKeon v. Giusto (1955) 44 Cal.2d 152, 158.)
       Stranger‟s second theory is that undisputed evidence establishes that, if there was
a partnership agreement, that contract was between Ross and The Stranger Family Trust
and, as a matter of law, he is not personally liable for a breach of contract committed by
the Trust. According to Stranger, the only evidence regarding the identity of the parties
to the partnership agreement was the draft operating agreement which, although never
signed, “clearly identified” the owners and members of CDG and SBS as Ross and The
Stranger Family Trust. Thus, Stranger concludes “[u]nder the operating agreements Greg
Stranger, personally, would not have been a party to any agreement with Ross and had no
legal obligation to perform under the terms of documents which Ross contended
described her contractual relationship with him.”
       First, the draft operating agreement is obviously not the only evidence of the oral
partnership contract between these two individuals. Second, Stranger fails to
acknowledge that the version of the draft operating agreement that identifies the Trust as


                                               17
a member/owner was prepared by Henrich in September 2007, after the partnership
agreement between Stranger and Ross was made and modified for the last time. Third,
Stranger conveniently ignores the fact that a different version of the draft operating
agreement, the one he gave to Ross in March 2007 before she made her equity
contribution to the business, named Stranger and Ross individually as the co-owners and
co-members of the companies.7
       In any event, all versions of the draft operating agreements are just drafts. They
are not contracts and they simply do not establish the identity of the contracting parties as
a matter of law. Nor do they undermine the substantial evidence supporting the jury‟s
implicit finding that Ross and Stranger entered into an oral partnership agreement.
C.     Breach of Fiduciary Duty and Concealment
       Stranger contends that the trial evidence was insufficient to establish that he and
Ross were in a fiduciary relationship and, absent such evidence, the judgment against him
for both breach of fiduciary duty and fraudulent concealment must be reversed.
       A fiduciary relationship is “ „ “any relation existing between parties to a
transaction wherein one of the parties is in duty bound to act with the utmost good faith
for the benefit of the other party. Such a relation ordinarily arises where a confidence is
reposed by one person in the integrity of another, and in such a relation the party in
whom the confidence is reposed, if he voluntarily accepts or assumes to accept the
confidence, can take no advantage from his acts relating to the interest of the other party
without the latter‟s knowledge or consent. . . .” ‟ [Citations.]” (Wolf v. Superior Court
(2003) 107 Cal.App.4th 25, 29.) “Traditional examples of fiduciary relationships in the
commercial context include trustee/beneficiary, directors and majority shareholders of a
corporation, business partners, joint adventurers, and agent/principal. [Citations.]” (Id.
at p. 30.)

       7
          We note for the record that a copy of the March 2007 draft operating agreement,
which was introduced into evidence at trial, was supplied to us in the Respondent‟s
Appendix. Stranger failed to include this document in his Appellant‟s Appendix for the
stated reason that “Appellant‟s counsel could not locate a copy” of it.


                                             18
       Here, there is substantial evidence of a fiduciary relationship between Ross and
Stranger which arose pursuant to their relationship as business partners in the defeasance
business. That evidence shows that Ross placed her trust and confidence in Stranger by
becoming his business partner and investing her time and money in their joint business
venture. That evidence also shows that Stranger voluntarily accepted and assumed that
confidence by accepting Ross‟s work and money, holding her out as his partner and co-
founder, and taking full advantage of his partnership with her to develop and grow their
joint enterprise.
       On appeal, Stranger contends that he could not have been in a fiduciary
relationship with Ross even if she did acquire some ownership interest in the defeasance
business because he was not personally a member of CDG and SBS. Stranger provides
no authority supporting this theory and, as a purely factual matter, this argument is
patently unconvincing. The fact that Stranger did not name himself as a member of the
operating companies is hardly dispositive of the question whether he and Ross were
business partners or members of a joint venture.
D.     Punitive Damages
       Stranger contends that the punitive damages award of $1.5 million is excessive as
a matter of law. “ „Whether punitive damages should be awarded and the amount of such
an award are issues for the jury and for the trial court on a new trial motion. All
presumptions favor the correctness of the verdict and judgment. [Citation.]‟ [Citation.]
„ “Juries . . . have a wide discretion in determining what is proper. [Citation.]”
[Citation.]‟ [Citation.]” (Bankhead v. ArvinMeritor, Inc. (2012) 205 Cal.App.4th 68, 78
(Bankhead).) Accordingly, on appeal, we do not reweigh the credibility of witnesses or
resolve conflicts in the evidence. (Id. at p. 77.) And, we will not “ „reverse the jury‟s
determination unless the award as a matter of law is excessive or appears so grossly
disproportionate to the relevant factors that it raises a presumption it was the result of
passion or prejudice. [Citations.]‟ [Citation.]” (Ibid.)




                                              19
       1.     Issue Presented
       “Under California law, a punitive damages award must be based on three factors:
(1) the reprehensibility of the defendant‟s conduct; (2) the amount of compensatory
damages awarded to or actual harm suffered by the plaintiff; and (3) the defendant‟s
financial condition. [Citations.]” (Bullock v. Philip Morris USA, Inc. (2008) 159
Cal.App.4th 655, 690, fn. 18; see also Adams v. Murakami (1991) 54 Cal.3d 105, 110.) 8
       In the present case, Stranger focuses exclusively on the third factor, the wealth of
the defendant. Stranger contends that the dearth of evidence regarding his personal
financial condition raises a presumption that the punitive damages award was the product
of passion or prejudice and establishes that the award is excessive as a matter of law.
       The wealth of the defendant is an important consideration when determining
whether a punitive damages award is excessive. The deterrent function of punitive
damages “ „will not be served if the wealth of the defendant allows him to absorb the
award with little or no discomfort‟; conversely, „the function of punitive damages is not
served by an award which, in light of the defendant‟s wealth and the gravity of the
particular act, exceeds the level necessary to properly punish and deter.‟ [Citation.]”
(Rufo v. Simpson (2001) 86 Cal.App.4th 573, 620.) Accordingly, an award that is
reasonable in light of the nature of the defendant‟s conduct and the degree of injury to the
plaintiff may nevertheless be so disproportionate to the defendant‟s ability to pay that it is
“ „excessive‟ for that reason alone.” (Bankhead, supra, 205 Cal.App.4th at p. 78.)
       2.     Background
       When the jury returned the liability verdicts in this case, it also found that Stranger
acted with malice, oppression or fraud. A few days later, on August 23, 2010, the jury




       8
          The federal due process clause places different “constraints on state court
awards of punitive damages.” (Roby v. McKesson Corp. (2009) 47 Cal.4th 686, 712-713;
see also Johnson v. Ford Motor Co. (2005) 35 Cal.4th 1191, 1201; State Farm Mut. Auto.
Ins. Co. v. Campbell (2003) 538 U.S. 408, 418.) However, Stranger does not allege a due
process violation in this case.


                                             20
heard additional evidence to assist it in determining the amount of punitive damages, if
any, to assess against Stranger.
       During this second phase of the jury trial, Ross introduced evidence of a “financial
statement” of assets and liabilities that Stranger prepared and submitted to Wells Fargo
Bank in March 2007.9 The assets that Stranger disclosed included cash, non-taxable
accounts, private investments, a fishing boat, ownership interests in CDG and SBS, and
several real property assets. According to this March 2007 financial statement, the total
value of Stranger‟s assets was $9,568,000, and his total net worth was $4,745, 383. At
trial, Stranger testified to the accuracy of his March 2007 financial statement, although he
claimed it did not reflect his current financial situation.
       Ross also presented evidence that, in March 2008, Stranger opened an account
with a company called Interactive Brokers, and that more than $900,000 was transferred
from SBS accounts into the Interactive Brokers account. Stranger testified that the
Interactive Brokers account was an SBS investment account and that he did not
personally receive any money from that account. During his testimony, Stranger also
denied having any offshore accounts, but he admitted that he previously maintained bank
accounts in both Switzerland and England. Stranger also acknowledged that in 1993, the
year before he engaged in illegal trading activity, his employer paid him more than $1.1
million in compensation, and that he did have a Swiss bank account at that time.
       Stranger produced evidence of a second “financial statement” that he prepared a
few days before he testified at the punitive damages phase of the trial. Stranger testified
that this new financial statement reflected his current assets and net worth. According to
that new document, Stranger‟s net worth at the time of trial was negative $3,389,000. To
explain changes in his financial situation since 2007, Stranger testified, among other
things, that the total value of his real property assets had fallen from approximately $8
million to $4,552,000, which he attributed to a downturn in the market for these


       9
       Stranger has not included a copy of this trial exhibit in his Appellant‟s
Appendix, once again claiming that his counsel cannot locate the document.


                                              21
properties. Stranger also claimed that he had incurred additional significant personal
liability for unpaid services rendered to CDG and SBS and for the unpaid credit card bills
of these companies Stranger admitted that several of the figures that he used to calculate
his current financial position were estimates, made by himself or by his wife, and that
they were not supported by any third party “statement.” Stranger also admitted that
several of the items he listed as personal debts on his current summary were also reported
as company debts in the SBS bankruptcy case.
       3.     Analysis
       Preliminarily, Stranger contends that there is no evidence establishing his ability to
pay the $1.5 million award. We disagree. The 2007 financial statement constitutes
substantial evidence that Stranger‟s personal assets are worth more than $9 million and
that his net worth is at least half of that amount. At trial, Stranger claimed that his assets
had lost much of their value, that he had significantly more liabilities than he did in 2007,
and that he had a negative net worth. However, the verdict necessarily demonstrates that
the jury did not find Stranger to be a credible witness.
       Stranger also argues that “even when the evidence is viewed in the light most
favorable to [Ross], the punitive damages awarded were over 31% of Stranger‟s 2007,
net worth, and therefore excessive as a matter of law.” According to Stranger, “it is
generally accepted” that an award that exceeds 10 percent of the defendant‟s net worth is
excessive as a matter of law.
       First, we question whether this theory is properly before us on appeal. As we
discussed earlier, as a general rule “theories not raised in the trial court cannot be asserted
for the first time on appeal.” (Eisenberg, et al., Cal. Practice Guide, supra, ¶ 8:229, pp. 8-
155 to 8-156.) In his motion for a new trial, Stranger argued that the punitive damages
award was excessive because he could not afford to pay it. But Stranger did not argue
that the award was improper because it exceeded 10 percent of his net worth.10

       10
         In his memorandum in support of the new trial motion, Stranger made the
following argument: “defendant requests that [the] court find the $1,500,000 in punitive
damages excessive, or that the evidence was in sufficient to support this verdict. The

                                              22
       Second, there is no rule in California that a punitive damages award that exceeds
10 percent of the defendant‟s net worth is excessive as a matter of law. (Bankhead,
supra, 205 Cal.App.4th at p. 83.) To the contrary, relevant authority establishes that net
worth is only one potential measure of a defendant‟s wealth and it can be potentially very
misleading because it is subject to easy manipulation. (Id. at pp. 78-83, and authority
discussed therein.) As our colleagues in Division Four of this court recently explained in
Bankhead, supra, the issue on appeal is not whether the award exceeds some specified
percentage of the defendant‟s net worth, but rather whether the trial court abused its
discretion by finding that the amount of the jury‟s award was not the product of passion
or prejudice. (Id. at p. 83.) “Our task is simply to determine whether, „[c]onsidering all
the factors, the punitive damages award, “in light of the defendant‟s wealth and the
gravity of the particular act,” . . . exceed[s] “the level necessary to properly punish and
deter.” [Citation.]‟ [Citation.]” (Ibid.)
       When considered in context, Stranger‟s 2007 financial statement, including his
reported net worth at that time, was relevant, but it was not the only indicator of his
financial condition. There was also evidence that: Stranger had personal access to
profits generated by the defeasance business; since 2008, close to $1 million was
transferred out of SBS accounts; and Stranger had a history of holding funds in bank
accounts outside this country. From this and other evidence presented at trial, the jury
could have concluded not only that Stranger‟s financial condition is stronger that
reflected in his 2007 financial statement but also that Stranger intentionally obfuscated
the evidence regarding his net worth and financial resources.
       For all of these reasons, we conclude that the trial evidence regarding Stranger‟s
financial condition does not compel the conclusion that the punitive damages award
exceeds the amount necessary to properly deter and punish Stranger‟s wrongful conduct.
Therefore, we reject Stranger‟s contention that the award is excessive as a matter of law.

overwhelming weight of the evidence was that defendant Stranger does not have the
financial ability to pay punitive damages.” This ground for a new trial was not discussed
at all at the hearing on Stranger‟s motion.


                                             23
                                 IV. DISPOSITION
     The judgment is affirmed.




                                            _________________________
                                            Haerle, J.


We concur:


_________________________
Kline, P.J.


_________________________
Lambden, J.




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