Filed 11/29/17

CERTIFIED FOR PARTIAL PUBLICATION*

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION TWO

QDOS, INC.,

Plaintiff and Appellant,

v.

SIGNATURE FINANCIAL, LLC,

et al.,

Defendants and Respondents.

 B279475

 (Los Angeles County

 Super. Ct. No. BC566521)

APPEAL from a judgment of the Superior Court of Los 

Angeles County. Rita Miller and Victor Chavez, Judges. 

Affirmed.

Law Offices of Damian D. Capozzola, Damian D. Capozzola 

and Timothy R. Laquer for Plaintiff and Appellant.

Kolar & Associates, Elizabeth L. Kolar & Benjamin T. 

Runge for Defendants and Respondents.

* * * * * *

* Pursuant to California Rules of Court, rules 8.1100 and 

8.1110, only the Factual and Procedural Background, Part I of 

the Discussion, and the Disposition are certified for publication.
2

A bank or merchant has a common law duty, when 

conducting a transaction with its customer that also involves a 

third party, (1) not to ignore “red flags” or “suspicious” 

circumstances that may indicate the third party is being 

defrauded, and in that instance (2) not to proceed with the 

transaction without doing some investigation. (E.g., Sun ’n Sand, 

Inc. v. United California Bank (1978) 21 Cal.3d 671, 693 (Sun ’n

Sand), superseded on other grounds by Cal. U. Com. Code, 

§ 3404; Burns v. Neiman Marcus Group, Inc. (2009) 173 

Cal.App.4th 479, 489 (Burns).) Can the third party sue a 

merchant for negligence in breaching these duties when the 

merchant sells a high-end sports car to its customer and the 

customer pays for most of the car with two checks the third party 

made out to the merchant? In other words, is a customer’s 

payment with a check not in the customer’s own name, by itself, a 

red flag? We conclude the answer is “no,” and affirm the trial 

court’s grant of summary adjudication dismissing the third 

party’s negligence and related claims against the merchant. In 

the unpublished portion of our decision, we further conclude that 

the trial court did not err (1) in excluding evidence of the 

merchant’s alleged negligence during the trial against the car’s 

current owners to declare who owns the car, and (2) in declining 

to award punitive damages against the merchant’s customer after 

a default judgment was entered against him. Accordingly, we 

affirm the judgment.

FACTS AND PROCEDURAL BACKGROUND

I. Facts

Plaintiff and appellant QDOS, Inc. (QDOS) is in the 

business of offering team-specific, sports-related content over the 
3

Internet and on mobile devices. QDOS does business as 

“DeskSite.” Richard Gillam (Gillam) is DeskSite’s CEO.

In early 2011, DeskSite asked Fazliq Dean Kader (Kader) 

to raise funds for its business, although DeskSite never hired him 

as an employee. In late 2011, Kader secured a $3 million 

investment.

In December 2011, Kader approached Gillam with a 

“unique business proposal”—namely, DeskSite would put up the 

money to buy a 2012 Lamborghini Aventador and then 

immediately resell the car for a profit of at least $200,000, and 

the profit would be deemed additional fundraising revenue for 

DeskSite. Kader suggested buying the car from The Auto 

Gallery, which was operated by defendant and respondent 

Motorcars West, LLC. Kader was one of The Auto Gallery’s 

“preexisting client[s],” and Kader had previously told The Auto 

Gallery’s employees that he owned “hundreds of companies.” 

Gillam agreed to the proposal. Because Gillam “trusted” Kader, 

Gillam did not at that time put anything in writing and just 

orally told Kader to vest title to the car in DeskSite’s name. The 

exact nature of DeskSite’s funding of the car purchase was 

disputed by Gillam himself: Contemporaneously, he referred to 

the money used to buy the car as a “loan,” but after litigation 

started, said it was “not . . . a loan.”

Gillam and Kader moved forward with their plan. Kader 

put down a $15,000 deposit using his own personal check. Gillam 

then authorized two checks drawn on QDOS/DeskSite’s account 

to be made out to The Auto Gallery—the first for $300,000, and 

the second for $216,000—and then Gillam signed those checks. 

In the memo line, both checks noted “Auto DKL,” which Gillam 

said stood in part for “Dean Kader.” Consistent with Kader’s 
4

statements to The Auto Gallery that he owned QDOS and that he 

would be buying the car with company checks, Kader personally 

handed both QDOS/DeskSite checks to The Auto Gallery’s 

employees. Kader did not give The Auto Gallery any 

QDOS/DeskSite business cards or letterhead with his name on it. 

However, at no point during this transaction did QDOS/DeskSite 

contact The Auto Gallery directly or otherwise instruct The Auto 

Gallery to place title to the car in its name or to place a lien on 

the car in its favor. Because The Auto Gallery received no special 

instructions and had received payment in full, in December 2011, 

it placed title to the car in the name of Kader and his wife and 

listed no liens.

In July 2012, Kader sold the car back to The Auto Gallery 

for $428,111 and a trade-in car. Two weeks later, The Auto 

Gallery sold the car to defendant and respondent Premier 

Financial Services, LLC (Premier), who financed its purchase 

with a loan from defendant and respondent Signature Financial, 

LLC (Signature). Premier then leased the car to defendant and 

respondent Rick Jenkins, M.D., Inc. (Jenkins).

II. Procedural Background

A. QDOS/DeskSite’s Operative Complaint

In the operative first amended complaint, DeskSite sued 

Kader, The Auto Gallery, Premier, Signature, and Jenkins. 

Specifically, DeskSite sued Kader for (1) breach of contract, 

(2) breach of fiduciary duty, (3) fraud, (4) fraudulent concealment, 

(5) conversion (of the car), and (6) conversion (of an additional 

$150,000 that DeskSite loaned Kader so Kader could obtain a 

loan to pay off DeskSite’s $516,000 investment in the car). 

DeskSite sued The Auto Gallery for (1) aiding and abetting 

Kader’s breach of fiduciary duty, (2) aiding and abetting Kader’s 
5

fraud, (3) aiding and abetting Kader’s fraudulent concealment, 

(4) aiding and abetting Kader’s conversion of the car, and 

(5) negligence. All of the those claims were premised on The Auto 

Gallery’s conduct in “helping” Kader with the transaction and/or 

not investigating why Kader was paying with QDOS/DeskSite’s 

checks. DeskSite sued Premier, Signature, and Jenkins for 

declaratory relief—specifically, a declaration that DeskSite’s title 

to the car was superior to theirs.1

B. Kader’s Default

Kader did not respond to DeskSite’s operative complaint, 

and the trial court entered a default against him.

C. Motion for Summary Adjudication

The Auto Gallery, Premier, Signature, and Jenkins filed a 

motion for summary judgment and/or summary adjudication. 

After full briefing and a hearing, the trial court granted summary 

adjudication as to all five claims against The Auto Gallery, but 

denied summary adjudication as to the declaratory relief claim 

against Premier, Signature, and Jenkins (collectively, the 

remaining defendants). With regard to the claims against The 

Auto Gallery, the court ruled that The Auto Gallery had no “legal 

duty to [DeskSite] to investigat[e] whether Kader’s statements to 

[The] Auto Gallery were true.” Specifically, the court rejected the 

notion that “every car dealer has to check to make sure the name 

on the check exactly matches the name on the title” because such 

1 The Auto Gallery, Premier, Signature, and Jenkins filed a 

counter-complaint against DeskSite, but the trial court sustained 

DeskSite’s demurrer to that counter-complaint without leave to 

amend, and that ruling was never appealed. The Auto Gallery, 

Premier, Signature, and Jenkins also filed a cross-complaint 

against Kader for implied indemnity, apportionment of fault, and 

declaratory relief; that action is also not before us on appeal.
6

a rule would create “a new burden . . . that . . . would throw . . . 

any other business where [a merchant is] selling things or, at 

least, large price tagged things into total disarray.” With regard 

to the declaratory relief claim, the court found that the remaining 

defendants had “failed to meet their burden” of showing 

entitlement to summary adjudication.

D. Trial on Declaratory Relief Claim

In anticipation of the trial on DeskSite’s declaratory relief 

claim, the remaining defendants filed motions in limine to 

exclude evidence regarding (1) any alleged negligence by The 

Auto Gallery, and (2) DeskSite’s claims against The Auto Gallery. 

The trial court granted both motions. At the hearing on the 

motions, DeskSite acknowledged that the question whether The 

Auto Gallery was negligent and the question whether Kader was 

a “thief” incapable of passing title (hence entitling DeskSite to 

declaratory relief) were “totally separate questions,” but 

nevertheless urged that “one could inform the other.” The trial 

court was unpersuaded, ruling that it would not “allow testimony 

about [The] Auto Gallery [because] [t]hey’re not” in the case.

After a multi-day trial, a jury returned a special verdict in 

favor of the remaining defendants. Specifically, the jury found 

that (1) Kader did not commit theft;2 (2) Kader had the “apparent 

authority to buy the [car] with title in his own name”; and (3) the 

remaining defendants were “bona fide purchasers for value.”

2 DeskSite subsequently asked the court to “clarify” that the 

jury’s special verdict pertained only to Kader’s theft of the car 

(rather than the $150,000 DeskSite loaned him to buy back the 

car), but the trial court denied the motion.
7

E. Default Judgment Against Kader

Several weeks after the jury returned its verdict, the trial 

court held a hearing for DeskSite to prove up its damages against 

Kader. In the proposed default judgment it lodged with the 

court, DeskSite sought $901,098 in compensatory damages and 

an equal amount in punitive damages. At the conclusion of the 

hearing, the trial court ruled that DeskSite had proven up 

$901,098 in compensatory damages, but declined to award any 

punitive damages. DeskSite introduced evidence that Kader was 

involved with one “active” corporation and two expired 

corporations; that he was renting an “extremely opulent house”; 

that he had bought an Audi for his wife at The Auto Gallery at 

some point; and that he “maintains a flamboyant lifestyle.” 

However, DeskSite was “not able to come up with any assets” 

owned by Kader. This was consistent with DeskSite’s prior 

representations to the court that it thought it was “unlikely 

that . . . Kader has assets.” What DeskSite offered was its

investigator’s opinion that “[s]ince [the investigator] was not able 

to find any such assets, . . . Kader has employed methods to 

prevent his assets from being located and traced to him.” The 

trial court found this showing to be insufficient: “You got no 

evidence. All you are giving me is rhetoric. I have to hear 

evidence of some net worth, and I haven’t heard it.”

F. Judgment and Appeal

Following the trial court’s entry of judgment, DeskSite filed 

this timely appeal.

DISCUSSION

DeskSite raises three challenges to the trial court’s 

judgment, arguing that the trial court (1) erred in concluding that 

The Auto Gallery owed it no duty, and thus in granting summary 
8

adjudication to The Auto Gallery, (2) erred in granting the 

motions in limine excluding evidence of The Auto Gallery’s 

alleged negligence during the remaining defendants’ declaratory 

relief trial, and (3) erred in awarding no punitive damages 

against Kader after the default prove-up hearing. We discuss 

each challenge in turn.

I. Merchant’s Duty To Investigate

Summary adjudication, like summary judgment, is 

appropriate when the moving party shows “[it] is entitled to a 

judgment as a matter of law” (Code Civ. Proc., § 437c, subd. (c)) 

because, among other things, the nonmoving party (here, 

DeskSite) cannot establish “[o]ne or more of the elements of [its] 

cause of action” (Code Civ. Proc., § 437c, subd. (o)(1); see id., 

subd. (p)(2)). (Tustin Field Gas & Food, Inc. v. Mid-Century Ins. 

Co. (2017) 13 Cal.App.5th 220, 226; State of California 

v. Continental Ins. Co. (2017) 15 Cal.App.5th 1017, 1031

[summary adjudication is “‘procedurally identical to [a] motion[] 

for summary judgment . . .’”].) “‘“[T]he existence of a duty”’” of 

care running from the defendant to the plaintiff is “‘“[t]he

threshold element of a cause of action for negligence.”’” 

(Paz v. State of California (2002) 22 Cal.4th 550, 559, italics 

added.) Because DeskSite does not argue that The Auto Gallery 

knew of Kader’s fraudulent misuse of DeskSite’s money, the 

viability of DeskSite’s negligence as well as aiding and abettingbased claims against The Auto Gallery turns solely on whether 

The Auto Gallery unreasonably failed to uncover Kader’s fraud 

and hence on whether The Auto Gallery had a duty to 

investigate. Whether a duty of care exists is a question of law for 

our independent review. (Quelimane Co v. Stewart Title 

Guaranty Co. (1998) 19 Cal.4th 26, 57 (Quelimane).) We also 
9

independently review a trial court’s grant of summary 

adjudication. (Jacks v. City of Santa Barbara (2017) 3 Cal.5th 

248, 273.)

“The general rule in California is that ‘[e]veryone is 

responsible . . . for an injury occasioned to another by his or her 

want of ordinary care or skill in the management of his or her 

property or person . . . .’” (Cabral v. Ralphs Grocery Co. (2011) 

51 Cal.4th 764, 771 (Cabral), quoting Civ. Code, § 1714, subd. 

(a).) In the business context, however, “[r]ecognition of a duty 

[under negligence law] to manage business affairs so as to 

prevent purely economic loss to third parties in their financial 

transactions is the exception, not the rule.” (Quelimane, supra, 

19 Cal.4th at p. 58; Summit Financial Holdings, Ltd. 

v. Continental Lawyers Title Co. (2002) 27 Cal.4th 705, 715 

(Summit Financial).) Whether a court will nevertheless 

recognize such a duty does not turn on privity of contract. 

(Centinela Freeman Emergency Medical Associates v. Health Net 

of California, Inc. (2016) 1 Cal.5th 994, 1013 (Centinela 

Freeman); Quelimane, at p. 58.) Instead, it turns on whether 

“‘public policy . . . dictate[s] the existence of a duty to third 

parties.’” (Centinela Freeman, at p. 1013; Cabral, at p. 771 

[“courts should create [a duty] only where ‘clearly supported by 

public policy’”].)

To assess whether public policy dictates the recognition of a 

duty of care, courts “balanc[e] . . . a number of policy 

considerations.” (Sun ‘n Sand, supra, 21 Cal.3d at p. 695.) The 

considerations most relevant in the “business context” are set 

forth in Biakanja v. Irving (1958) 49 Cal.2d 647, 650 (Biakanja). 

(See Centinela Freeman, supra, 1 Cal.5th at pp. 1013-1014; 

Summit Financial, supra, 27 Cal.4th at p. 715; Quelimane, supra, 
10

19 Cal.4th at p. 58.) The Biakanja considerations are: (1) “the 

extent to which the transaction was intended to affect the 

plaintiff,” (2) “the foreseeability of harm to [the plaintiff],” (3) “the 

degree of certainty that the plaintiff suffered injury,” (4) “the 

closeness of the connection between the defendant’s conduct and 

the injury suffered,” (5) “the moral blame attached to the 

defendant’s conduct,” and (6) “the policy of preventing future 

harm.” (Biakanja, at p. 650.) Among these factors, foreseeability 

is the “‘“chief factor”’” (Pedeferri v. Seidner Enterprises (2013) 216 

Cal.App.4th 359, 366 (Pedeferri)), but “[f]oreseeability of financial 

injury to third persons alone is not a basis for imposition of 

liability for negligent conduct” (Quelimane, at p. 58; Bily 

v. Arthur Young & Co. (1992) 3 Cal.4th 370, 399).

The Biakanja considerations are similar to, but not 

identical with, the policy considerations set forth in Rowland 

v. Christian (1968) 69 Cal.2d 108 (Rowland) that bear on the 

recognition of a duty of care among persons not parties to a 

business or financial transaction. Rowland enumerates seven 

considerations: The first five Rowland considerations are 

identical to second through sixth Biakanja considerations. (See 

Rowland, at pp. 112-113.) Where the list of considerations differs 

is that (1) Rowland does not consider “the extent to which the 

transaction was intended to affect the plaintiff” (because there is 

no transaction), and (2) Rowland adds two further considerations 

that flesh out “the policy of preventing future harm” 

consideration—namely, (a) “the extent of the burden to the 

defendant and consequences to the community of imposing a duty 

to exercise care with resulting liability for breach,” and (b) “the 

availability, cost, and prevalence of insurance for the risk 

involved.” (Rowland, at p. 113.) Whether a court uses the 
11

Biakanja factors, the Rowland factors, or an amalgamation of 

both, the “factors are evaluated at a relatively broad level of 

factual generality.” (Cabral, supra, 51 Cal.4th at p. 772; Ballard 

v. Uribe (1986) 41 Cal.3d 564, 573-572, fn. 6.)

As a general rule, courts have recognized that a person or 

entity—whether it be a bank or a merchant—engaged in a 

financial transaction with a person has a duty (1) not to ignore 

“red flags” or “suspicious” “circumstances” that may indicate that 

a third party involved in that transaction3 is being defrauded, 

and, in that instance, (2) not to proceed with the transaction 

without first doing some investigation to dispel those suspicions. 

(Sun ‘n Sand, supra, 21 Cal.3d at pp. 693, 695; Burns, supra, 

173 Cal.App.4th at p. 489; Joffe v. United California Bank (1983) 

141 Cal.App.3d 541, 556 (Joffe); Karen Kane, Inc. v. Bank of 

America (1998) 67 Cal.App.4th 1192, 1195, 1198 (Karen Kane); 

Software Design, supra, 49 Cal.App.4th at pp. 480-481, 483; 

Chazen v. Centennial Bank (1998) 61 Cal.App.4th 532, 545.)

Courts have sorted the circumstances that constitute red 

flags from those that do not. Red flags include: (1) when a bank’s 

3 In the absence of “‘extraordinary and specific facts,’” banks 

and merchants generally do not owe complete strangers to a 

transaction any duty to investigate the suspicious activities of the 

bank’s or merchant’s customers. (Gil v. Bank of America, N.A.

(2006) 138 Cal.App.4th 1371, 1381; Software Design & 

Application, Ltd. v. Hoefer & Arnett, Inc. (1996) 49 Cal.App.4th 

472, 479 (Software Design); Casey v. U.S. Bank Nat. Assn. (2005) 

127 Cal.App.4th 1138, 1148-1151.) Courts are more reluctant to 

recognize duties in this context because such duties run the risk 

of “‘violat[ing]’” the bank’s or merchant’s “‘customers’ right to 

privacy’” and of “‘forc[ing] [the bank or merchant] to act as the 

guarantor of’” their customers’ transactions. (Casey, at p. 1149.)
12

customer tries to have the proceeds of the third party’s check that 

was made out to someone else placed in the customer’s own 

personal account (Sun ‘n Sand, supra, 21 Cal.3d at pp. 693-695; 

E. F. Hutton & Co. v. City National Bank (1983) 149 Cal.App.3d 

60, 68 (E. F. Hutton); Sehremelis v. Farmers & Merchants Bank 

(1992) 6 Cal.App.4th 767, 772-776 (Sehremelis)); or (2) when a 

bank’s customer tries to have the proceeds of the third party’s 

check that was made out to an escrow account placed in the 

customer’s own personal account in contravention of the escrow 

notation on the face of the check (Joffe, supra, 141 Cal.App.3d 

at pp. 547-548, 556). Red flags do not include: (1) when a checkcashing business’s customer presents a check endorsed by hand 

(rather than with a stamp) (Karen Kane, supra, 67 Cal.App.4th 

at p. 1198-1199); (2) when a check-cashing business’s customer 

seeks to cash a business-to-business check (id. at pp. 1198, 1202-

1203); (3) when a brokerage firm’s customer has frequent 

transactions involving large sums of money (Software Design,

supra, 49 Cal.App.4th at p. 483); or (4) when a bank’s customer 

opens up an account in a name other than her own (Rodriguez

v. Bank of the West (2008) 162 Cal.App.4th 454, 466 (Rodriguez)).

Because Kader presented two checks payable to The Auto 

Gallery and bearing Gillam’s valid signature on behalf of 

DeskSite, this case presents the question: Is it a red flag when a 

merchant receives payment for merchandise through a check 

from a person or entity other than its customer, such that the 

merchant owes the drawer of the check some duty to investigate 

whether the check is somehow fraudulent and whether the 
13

check’s maker wants the merchant to follow special instructions 

regarding the sale of the merchandise?4

We conclude that the answer to this question is “no,” and 

do so for two reasons.

First, the policy considerations set forth in Biakanja and 

Rowland counsel against the recognition of such a duty.

Foreseeability is the “chief” determinant of duty because 

three of the considerations enumerated in Biakanja and Rowland

address it—namely, the foreseeability of harm to the plaintiff, the 

degree of certainty that the plaintiff suffered injury, and the 

closeness of the connection between the defendant’s conduct and 

the injury suffered by the plaintiff. (Vasilenko v. Grace Family 

Church (Nov. 13, 2017, S235412) __ Cal.5th __ [2017 Cal. Lexis

8738, at p. *9].) However, where, as here, a merchant is 

presented with a check that is made out to the merchant, is 

validly endorsed, and on its face contains no restrictions or 

special instructions, the merchant has no reason to foresee—from 

the fact, by itself, that the check is drawn on the account of 

someone other than the merchant’s customer—that the check is 

not valid, that the check is subject to restrictions or instructions, 

or that the customer will not convey or otherwise adhere to any

restrictions or instructions he has agreed to with the check’s 

maker. (Accord, Burns, supra, 173 Cal.App.4th at p. 489 

4 DeskSite also points to the deposition testimony of some 

employees of The Auto Gallery, who noted that Kader “portrayed 

himself as a big shot” and a “pretentious” “wannabe,” but 

DeskSite does not contend that these views of Kader’s penchant 

for self-promotion are red flags that he was deceitful, particularly 

in light of Kader’s presentation of a bona fide check from 

DeskSite to The Auto Gallery with a memo line bearing Kader’s 

initials.
14

[merchant has no reason for foresee injury to third party because 

merchant had no reason to foresee that the third party’s bank 

would not detect the fact that a check was unauthorized].)

The remaining factors also counsel against recognizing any 

duty. In evaluating “‘the extent to which the transaction [is] 

intended to affect the plaintiff,’” we must ascertain the “‘primary 

purpose’” of the transaction and ask whether the plaintiff’s 

interest is central or “‘collateral’” to that purpose. (Summit 

Financial, supra, 27 Cal.4th at p. 715; Biakanja, supra, 49 Cal.2d 

at p. 650 [looking to the “‘end and aim’” of the transaction].) 

Here, the primary purpose of a merchant’s sale of merchandise to 

its customer is (obviously) to sell merchandise; verifying that 

checks made out to the merchant that on their face appear valid 

are, in fact, valid and free of any special conditions would seem to 

be collateral to that primary purpose. No “moral blame” attaches 

to the merchant’s conduct because the merchant is simply 

accepting a check validly made payable to it. (Burns, supra, 

173 Cal.App.4th at p. 490 [noting that “the person deserving of 

moral blame” is the dishonest customer, “not” the merchant].) 

And the “policy of preventing future harm” strongly counsels 

against imposing this duty to investigate upon merchants 

because the burdens it would impose far outweigh any benefits. 

Requiring an investigation whenever a check not in the 

customer’s name is presented means that merchants “would have 

to stop [their] business every time [they] received such a check in 

order to make an independent inquiry of the” check’s maker. 

(Burns, at pp. 489-490.) This would “substantially impede[]” “the 

flow of commerce.” (Karen Kane, supra, 67 Cal.App.4th at 

p. 1199.) Burdening the merchant with investigating whether a 

valid check from someone other than the customer has strings 
15

attached and with thereafter enforcing those strings—rather 

than having the check’s maker make those strings known and 

enforce those strings itself—also places the burden on the wrong 

party. “It is that person who has the most control and the most 

to win or lose . . . with whom the investigative tasks should rest.” 

(Software Design, supra, 49 Cal.App.4th at p. 483; Karen Kane, 

at p. 1199.)

Second, Burns has already held, in a similar but slightly 

different context, that “the fact that an account payment came 

from a third party is not enough to put [a merchant] on notice of 

a potential fraud.” (Burns, supra, 173 Cal.App.4th at pp. 486, 

488.) There, the plaintiff’s secretary paid off her Neiman Marcus 

credit card debt using checks she forged from plaintiff’s bank 

account. (Id. at pp. 483-486) Plaintiff sued Neiman Marcus for 

negligence on the ground that its customer’s use of checks not in 

her name to pay her credit card bills was a red flag that triggered 

a duty to investigate. After evaluating the policy considerations 

set forth in Rowland, Burns refused to recognize and impose such 

a duty upon a retail merchant. (Id. at pp. 487-492.) Burns’s logic 

applies with equal force here, such that a merchant’s customer’s 

use of a third party check, by itself, also triggers no duty to 

investigate.

DeskSite raises four sets of arguments in response.

First, it urges a different weighing of the pertinent policy 

considerations. More specifically, DeskSite argues that we may 

not consider its own negligence in failing to monitor Kader’s use 

of its money because doing so would run afoul of the rule that a 

party’s contributory negligence is no longer a bar to tort relief in 

California. (E.g., City of Santa Barbara v. Superior Court (2007) 

41 Cal.4th 747, 779.) However, courts that are balancing the 
16

policy considerations set forth in Biakanja and Rowland are not 

considering a plaintiff’s negligence for the purpose of imposing a 

bar to relief against the plaintiff in that specific case. Instead, 

they are considering the plaintiff’s negligence as a proxy for 

whether the class of people in the plaintiff’s position are better 

poised to avoid the complained-of injury than the class of people 

in the defendant’s position. This is valid part of assessing “the 

extent of the burden to the defendant and consequences to the 

community of imposing a duty to exercise care with resulting 

liability for breach.” (Rowland, supra, 69 Cal.2d at p. 113.) 

Indeed, the statute governing the scope of duties of care 

specifically provides that no duty of care will lie where the 

putative plaintiff “has, willfully or by want of ordinary care, 

brought the injury upon himself or herself.” (Civ. Code, § 1714, 

subd. (a).)

DeskSite next argues that the burden can be lessened if the 

duty to investigate is limited to merchants who receive third 

party checks that are used to pay for a substantial portion of 

bigger ticket items. However, this argument poses more 

questions than it answers: What is a bigger ticket item? What is 

a substantial portion of the item’s price? More to the point, this 

narrowing at most reduces the universe of merchants or 

transactions so burdened, but in no way alters our analysis of the 

other Biakanja and Rowland factors as to that smaller universe, 

all of which counsel against recognizing a duty.

DeskSite further asserts that merchants can buy general 

purpose insurance to cover any liability they might incur if they 

do not investigate or, even if they investigate, if they do not 

successfully ferret out restrictions or special instructions

accompanying third party checks. This assertion speaks only to 
17

the potential availability of insurance, but not to its “cost” or 

“prevalence.” (Rowland, supra, 69 Cal.2d at p. 113.) It does not 

alter our analysis.

Second, DeskSite contends that Sun ‘n Sand, supra, 

21 Cal.3d 671 and its progeny (namely, Joffe, supra, 

141 Cal.App.3d 541, E. F. Hutton, supra, 149 Cal.App.3d 60, and 

Sehremelis, supra, 6 Cal.App.4th 767) dictate a result in its favor. 

They do not. As explained above, the transactions in those cases 

involved a bank customer’s attempt to deposit the proceeds from 

a check made out to someone else into the customer’s personal

account or an attempt to deposit into the customer’s own account

the proceeds from a check with an escrow account restriction on 

its face. (Sun ‘n Sand, at pp. 693-695; Joffe, at pp. 547-548, 556; 

E. F. Hutton, at p. 68; Sehremelis, at pp. 772-776.) These are 

circumstances far more suspicious, and far less common, than the 

simple use of third party’s check to buy merchandise. Indeed, 

Sun ‘n Sand itself acknowledged that the duty it was recognizing 

was “narrowly circumscribed.” (Sun ‘n Sand, at p. 695.) We are 

loathe to ignore our Supreme Court’s own advice. DeskSite 

acknowledges that the decision in Burns, supra, 173 Cal.App.4th 

479 refutes the logic of its position, but declares that Burns was

wrongly decided. For the reasons set forth above, we disagree.

Third, DeskSite urges that the trial court erred in refusing 

to consider the testimony of its expert witness that merchants 

like The Auto Gallery have “a duty to” “investigat[e] and 

conduct[] appropriate due diligence” whenever “one party is 

paying and another party is receiving title” to merchandise. We 

need not consider whether DeskSite, by challenging the trial 

court’s refusal to consider this testimony for the first time in its 

reply brief, waived the issue on appeal (Raceway Ford Cases
18

(2016) 2 Cal.5th 161, 178) because it is well settled that “expert 

testimony is incompetent on the . . . question whether [a legal] 

duty [of care] exists because this is a question of law for the court 

alone” to decide (Carleton v. Tortosa (1993) 14 Cal.App.4th 745, 

755; Benavidez v. San Jose Police Dept. (1999) 71 Cal.App.4th 

853, 864-865).

Lastly, DeskSite posits that money laundering is a “known 

concern” within the automobile industry, especially with highend exotic cars. Even if we accept this to be true, the use of a 

third party’s check to pay for a car by itself is still not a red flag

of money laundering, particularly where, as here, the check 

contains a memo line with the customer’s initials on it. Further, 

courts have refused to fashion new duties to deal with similar 

endemic problems such as identity theft and have justified that 

refusal with reasoning that is equally applicable here: “Given the 

scope of the problem and the consequences to the community of 

imposing a noncontractual duty with resulting liability for 

breach, a decision to shift the burden of loss from the actual 

victim to a third party duped by the thief is one to be made, if at 

all, by the Legislature, not the judiciary.” (Rodriguez, supra, 

162 Cal.App.4th at p. 466.)

In sum, we independently conclude that The Auto Gallery 

owed DeskSite no duty of care and, in the absence of such a duty 

and any evidence indicating The Auto Gallery’s actual knowledge 

of the oral agreement between DeskSite and Kader regarding 

who should hold title to the car, the trial court properly granted 

summary adjudication to The Auto Gallery on all of DeskSite’s 

claims against it.
19

II. Rulings on Motions in Limine

As a general rule, “a thief cannot pass title to stolen 

property.” (People v. Hernandez (2009) 172 Cal.App.4th 715, 722; 

Suburban Motors, Inc. v. State Farm Mut. Auto. Ins. Co. (1990) 

218 Cal.App.3d 1354, 1361; Kelley Kar Co. v. Maryland Casualty 

Co. (1956) 142 Cal.App.2d 263, 264; Schumann-Heink & Co. 

v. United States Nat’l Bank (1930) 108 Cal.App. 223, 230.) More 

to the point, such “a thief cannot convey valid title to an innocent 

purchaser of stolen property.” (Naftzger v. American Numismatic 

Society (1996) 42 Cal.App.4th 421, 432-433.) Given this 

precedent, a central question to be resolved by the jury during 

the trial on DeskSite’s claim for declaratory relief against the 

remaining defendants regarding the title of the Lamborghini was 

whether Kader was a thief: If he was, DeskSite would be entitled 

to title to the car; if he was not, then the remaining defendants 

would prevail if they could establish that they were bona fide 

purchasers for value. (See Melendrez v. D & I Investment, Inc.

(2005) 127 Cal.App.4th 1238, 1251 [defining “bona fide purchaser 

for value”].)

Prior to the declaratory relief trial, the trial court excluded

evidence regarding whether The Auto Gallery was negligent in 

failing to investigate whether the DeskSite checks Kader 

presented to buy the car came with any restrictions or special 

conditions. DeskSite challenges that ruling on appeal. We 

review a trial court’s evidentiary rulings for an abuse of 

discretion. (People v. Clark (2016) 63 Cal.4th 522, 597.)

The court did not abuse its discretion in excluding evidence 

of The Auto Gallery’s negligence. That is because whether Kader 

was a thief turned on (1) the nature of the agreement between 

Kader and DeskSite, and (2) whether Kader violated that 
20

agreement. What The Auto Gallery suspected or should have 

suspected regarding that agreement and Kader’s violation of it 

sheds no light on the agreement itself or Kader’s compliance with 

it. As a result, the evidence was irrelevant and properly 

excluded. (Evid. Code, § 210.)

DeskSite raises three objections on appeal. First, it notes 

that the trial court found this evidence to be relevant and 

excluded the evidence because The Auto Gallery was no longer in 

the case and “is not here to defend [itself].” However, our task is 

to review the trial court’s ruling, not its reasoning. (People 

v. Chism (2014) 58 Cal.4th 1266, 1295, fn. 12.) Its ruling is 

sound. Second, DeskSite asserts that the trial court effectively 

and impermissibly granted a nonsuit for the remaining 

defendants when it excluded this evidence. To be sure, a court 

may not grant a motion in limine on the ground that a plaintiff 

cannot prove its case (Pantoja v. Anton (2011) 198 Cal.App.4th 

87, 123-124) or use such motions to weigh evidence rather than 

adjudicate admissibility (R & B Auto Center, Inc. v. Farmers 

Group, Inc. (2006) 140 Cal.App.4th 327, 332-333). But the court 

here committed neither of these sins. Lastly, DeskSite notes that 

embezzlement is a form of theft (Pen. Code, § 490a; People 

v. Gonzales (2017) 2 Cal.5th 858, 869 [so noting]), and urges that 

it does not matter whether Kader committed theft or 

embezzlement. We need not address this issue because whether 

Kader committed theft or embezzlement still turns on his 

agreement with DeskSite, not on what The Auto Gallery knew or 

should have known about that agreement.
21

III. Refusal to Award Punitive Damages in Default 

Judgment Against Kader

When a defendant in a civil case does not answer or 

otherwise respond to a complaint with a procedurally appropriate 

filing, the defendant is in default. (Code Civ. Proc., §§ 580, subd. 

(a) & 585.) Where the relief sought by the plaintiff turns on “the 

exercise of judgment to ascertain (such as emotional distress 

damages, pain and suffering, or punitive damages),” the trial 

court—rather than the clerk—must be the one to enter the 

default judgment. (Kim v. Westmoore Partners, Inc. (2011) 

201 Cal.App.4th 267, 287; Code Civ. Proc., § 585, subd. (b).) In 

such instances, “the plaintiff must affirmatively establish [its] 

entitlement to the specific judgment requested” by making a 

“prima facie case” for the relief sought. (Kim, at p. 287; Johnson 

v. Stanhiser (1999) 72 Cal.App.4th 357, 361-362; Code Civ. Proc., 

§ 585, subds. (b) & (d).) The court may only award relief “as 

appears by the evidence to be just” (Code Civ. Proc., § 585, subd. 

(b)), and the defaulting defendant’s absence imposes upon the 

court a “duty . . . to act as gatekeeper, ensuring that only the

appropriate claims get through” (Heidary v. Yadollahi (2002) 

99 Cal.App.4th 857, 868; Electronic Funds Solutions, LLC 

v. Murphy (2005) 134 Cal.App.4th 1161, 1179).

In evaluating whether to award punitive damages, a court 

must consider “(1) the reprehensibility of the defendant’s conduct; 

(2) the actual harm suffered; and (3) the wealth of the defendant.” 

(Zaxis Wireless Communications, Inc. v. Motor Sound Corp.

(2001) 89 Cal.App.4th 577, 581-582, citing Neal v. Farmers Ins. 

Exchange (1978) 21 Cal.3d 910, 928.) Because the purpose of 

punitive damages is “to punish wrongdoing,” “the key question 
22

before [a] reviewing court is whether the amount of damages 

‘exceeds the level necessary to properly punish and deter.’” 

(Adams v. Murakami (1991) 54 Cal.3d 105, 110 (Adams), quoting 

Neal, at p. 928.) Evidence of a defendant’s wealth or financial 

condition is essential in evaluating whether a punitive damages 

award is excessive; “[w]ithout such evidence,” the reviewing court 

cannot do its job. (Adams, at pp. 111-112.) The plaintiff seeking 

punitive damages bears the burden of presenting evidence of the 

defendant’s financial condition. (County of San Bernardino 

v. Walsh (2007) 158 Cal.App.4th 533, 546.)

There is no one measure of a defendant’s financial 

condition. The key is “the defendant’s ability to pay” the punitive 

damages award. (Adams, supra, 54 Cal.3d at p. 112.) A 

defendant’s net worth is the most common measure of that 

ability, but it is not “the only permissible measurement.” 

(Cummings Medical Corp. v. Occupational Medical Corp. (1992) 

10 Cal.App.4th 1291, 1299.) A defendant’s earnings are generally 

insufficient by themselves because they do not take into 

consideration debts and liabilities. (Lara v. Cadag (1993) 

13 Cal.App.4th 1061, 1064-1065.) The courts are split on 

whether the profits wrongfully gained by the defendant are a 

sufficient measure. (Robert L. Cloud & Associates, Inc. 

v. Mikesell (1999) 69 Cal.App.4th 1141, 1152 [noting split].)

DeskSite challenges the trial court’s finding that DeskSite 

failed to introduce sufficient evidence of Kader’s financial 

condition. We review the damages awarded (or not awarded) in 

default prove-up proceedings to see whether they are “so 

disproportionate to the evidence as to suggest that the [judgment] 

was the result of passion, prejudice, or corruption” or “so out of 

proportion to the evidence that it shocks the conscience.” (Uva 
23

v. Evans (1978) 83 Cal.App.3d 356, 363-364.) “Damages for 

which there is no substantial evidence, a fortiori, satisfy this 

standard.” (Ostling v. Loring (1994) 27 Cal.App.4th 1731, 1746.)

The trial court’s refusal to award punitive damages was 

supported by substantial evidence because DeskSite presented no 

evidence of Kader’s financial condition. DeskSite offered no 

evidence of Kader’s net worth or even any assets that he owned, 

as DeskSite frankly admitted. Instead, DeskSite offered its 

expert’s opinion that his inability to find any assets was proof 

that Kader was hiding his assets. Like the trial court, we reject 

as speculative an expert’s opinion that the lack of evidence of a 

fact is itself evidence of that fact. (E.g., People v. Brooks (2017) 

3 Cal.5th 1, 120 [“‘speculation is not substantial evidence’”].)

DeskSite raises two further arguments. First, it asserts a 

court may ignore the absence of any evidence of Kader’s financial 

condition in light of his “failure to obey a court order to produce 

his financial records.” (Mike Davidov Co. v. Issod (2000) 

78 Cal.App.4th 597, 610.) However, this is not a case where 

Kader willfully ignored a court order to produce his records; this 

is a case where Kader defaulted. We decline to hold that there is 

no cap to punitive damages in default cases. Second, DeskSite 

contends that it is seeking a modest punitive damages award 

that equals the amount of compensatory damages. The modesty 

of the award does not compensate for the absence of any evidence 

to support it.
24

DISPOSITION

The judgment is affirmed. The Auto Gallery, Signature, 

Premier, and Jenkins are entitled to their costs on appeal.

CERTIFIED FOR PARTIAL PUBLICATION.

______________________, J.

HOFFSTADT

We concur:

_________________________, Acting P. J.

ASHMANN-GERST

_________________________, J.*

GOODMAN

* Retired judge of the Los Angeles Superior Court, assigned 

by the Chief Justice pursuant to article VI, section 6 of the 

California Constitution.