Court Opinion

ID: 4661409
Source: CourtListenerOpinion
Date Created: 2021-02-19 01:02:09.87086+00
Date Added: 2024-06-11T08:02:13.308692
License: Public Domain

Filed 2/18/21 Smith v. Ahlfeldt CA2/3

  NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                        SECOND APPELLATE DISTRICT

                                     DIVISION THREE

CATHERINE GILMOUR SMITH,                                        B289483

      Plaintiff and Respondent,                                 Los Angeles County
                                                                Super. Ct. No. EC062581
      v.

GARY AHLFELDT et al.,

      Defendants and Appellants.

      APPEAL from a judgment of the Superior Court of Los
Angeles County, Donna Fields Goldstein and Benny C. Osorio,
Judges. Affirmed as modified, and remanded with directions.
      Carlson & Nicholas, Francisco J. Nicholas; Law Offices of
Gregory R. Ellis, Gregory R. Ellis and Peter Gold for Defendants
and Appellants.
      Law Offices of James A. Gallo and James A. Gallo for
Plaintiff and Respondent.
            _______________________________________
                        INTRODUCTION

       By all accounts, Brian Harrington is a very persuasive con
man.1 We are concerned here with his plan to defraud plaintiff
and respondent, Catherine Gilmour Smith (Gilmour), a woman
he described unflatteringly as “a gold mine.”
       From 2007 to 2011, Harrington pretended to be, among
other things, a wealthy and successful investor. He lured the
recently-divorced Gilmour into a romantic relationship and
progressively extracted approximately $325,000 from her by
offering to invest the money. Instead of investing the money,
Harrington used it to support his lavish lifestyle—and the lavish
lifestyle of another woman. But Harrington could not have
executed this scheme successfully without laundering Gilmour’s
money. For that, he turned to the defendants and appellants
Gary Ahlfeldt and his company, Madison Financial, Inc.
(Madison Financial).
       Ahlfeldt and Madison Financial (defendants) appeal from a
judgment in favor of Gilmour following a bench trial in which the
court found defendants liable of conspiring with Harrington to
commit fraud. The court awarded Gilmour $325,000 in
compensatory damages plus prejudgment interest, as well as
punitive damages of $500,000 each against defendants.2 The total
award was approximately $1.5 million, jointly and severally.

1At least he was. He is currently serving a 17-year prison term
resulting from some of the events relating to this appeal.
2As we explain post, Gilmour’s actual damages are somewhat lower
than the amount calculated by the court.

                                  2
        Defendants contend Gilmour’s fraud claim is barred by the
statute of limitations because, they argue, the evidence
establishes as a matter of law that Gilmour either knew or
should have known that something was amiss before June 2011,
i.e., three years before she filed her complaint. We conclude the
evidence is not as clear as defendants suggest and therefore
reject the argument.
        Further, defendants challenge both the statutory basis and
the rate of the court’s prejudgment interest award. We conclude
that Gilmour is entitled to prejudgment interest at a rate of
seven percent and will remand to the trial court for recalculation
of prejudgment interest.
        Finally, defendants argue the court’s punitive damages
award should be reversed. We conclude the court’s finding that
defendants acted with malice, oppression, or fraud is supported
by substantial evidence. We reduce the amount of the award,
however, in light of the evidence of defendants’ financial
circumstances and ability to pay the award.

                   FACTUAL BACKGROUND3

      During the time of the events described here, Harrington
successfully represented himself to be an ex-Navy SEAL, a
consultant for the CIA, a graduate of The Wharton School, a real
estate mogul, and a wealthy and successful investor.

3 The parties generally agree on the facts of the case and defendants
have not challenged the court’s factual findings. Accordingly, in stating
the facts, we rely upon the court’s thorough statement of decision on
liability.

                                   3
      Gilmour is a divorced, single mother of two boys and a part-
time model. Her modeling career began after she was crowned
Rose Queen at the age of 17. Through modeling, she had
accumulated a life savings of $400,000 to $500,000.
      Ahlfeldt owns Madison Financial, a company that provided
property management services and, at one time, mortgage
brokering services. Ahlfeldt has been a licensed real estate broker
since 1984. He is the sole shareholder, officer, and director of
Madison Financial, a business he founded in 2005 so that he
could work with Harrington to broker mortgages. Harrington had
a considerable book of business and generated nearly all of
Madison Financial’s income. Harrington was good at his job and,
in some years, earned as much as $800,000 in commissions.
Ahlfeldt paid Harrington in cash or by writing checks to third
parties specified by Harrington to pay his expenses.
      Harrington began wooing Gilmour in 2007, shortly after
her divorce from a successful businessman and restaurant owner.
Gilmour and Harrington spent an increasing amount of time
together and after a few months began a romantic relationship.
Harrington was particularly kind to her young children.
      Gilmour was impressed by Harrington’s manner of dress
and apparent wealth. He had a driver and appeared well-
connected among successful people in the Pasadena area.
Harrington told Gilmour that he was a partner at Madison
Financial, a thriving investment firm, and she believed him.4
Early on in their relationship, Harrington invited Gilmour to

4   Madison Financial did not engage in the business of investing.

                                     4
invest her savings with Madison Financial and allow him to
manage her funds. She did.
       Between October 2007 and March 2011, Madison Financial
received $325,000 from Gilmour. Gilmour believed she was
investing in gold, foreclosed properties, and real estate. For
example, in October 2007, Gilmour gave Harrington $20,000
which he said he would use for a real estate investment in the
Linda Vista area. The following month, she gave Harrington
$35,000 to invest in a rental property in Aspen, Colorado. And in
January 2008, Gilmour gave Harrington $100,000 to invest in the
gold market. Gilmour continued writing checks to Madison
Financial or to cash, as directed by Harrington, through early
2011. In all, Gilmour wrote checks to Madison Financial for
investments totaling $238,000. An additional $87,000 was taken
via forged checks written by Harrington from Gilmour’s account
and made payable to Madison Financial. Throughout this period,
Harrington reassured Gilmour about the performance of her
investments. Meanwhile, he removed bank statements and other
financially-related correspondence from Gilmour’s mailbox while
she was not home.
       Harrington did not invest one penny of Gilmour’s money.
Instead, he took Gilmour’s checks to Ahlfeldt. Ahlfeldt either
cashed the checks and gave the money to Harrington or deposited
the checks into Madison Financial’s operating account and then
wrote checks from Madison Financial to persons and businesses
as directed by Harrington. Harrington used the funds to support
himself and another woman, Claudia Fisher. Ahlfeldt also used
some of Gilmour’s money for his own benefit by paying his

                               5
mortgage, paying off debts, and transferring money to accounts
he used for property management business.5
       Ahlfeldt knew that Gilmour did not have a business
relationship with Madison Financial. Ahlfeldt had also been
advised in 2003 by a private detective that Harrington was a
convicted felon and a con man. But when Harrington began to
present checks in large amounts from Gilmour, Ahlfeldt neither
questioned Harrington nor reached out to Gilmour. He simply
accepted Harrington’s explanation that Gilmour gave Harrington
the money to spend as he wished.
       Ahlfeldt even concealed the scam from Gilmour at one
point. In mid-2010, Gilmour contacted Ahlfeldt, who she had
previously met in passing while she was with Harrington, and
asked to meet with him. During a brief conversation at a coffee
shop, Gilmour asked Ahlfeldt how her investments were
performing. She had “invested” more than $300,000 at that point.
Ahlfeldt told Gilmour that he was “unaware” of her investments.
When Gilmour later confronted Harrington, he assured her that
Madison Financial was a large company with many investors.

5By this point, Madison Financial had a very limited legitimate
business purpose. Between January 2008 and October 2011, more than
half of the money in the company’s operating account came from
Gilmour. During that time, only two percent of the expenditures from
the operating account related to the business of Madison Financial.
The vast majority of disbursements benefitted Fisher, Harrington, and
Ahlfeldt. In addition, Ahlfeldt did not maintain standard business
records for the company such as a bank register, general ledger, or any
other means of tracking cash flow in and out of the company. Ahlfeldt
kept check stubs but they often—and particularly with respect to
payments directed by Harrington—contained only a few cryptic
notations about their purpose.

                                  6
Ahlfeldt could not be expected to know about her accounts
because Harrington was managing them himself.
      Toward the end of 2010, the romantic relationship between
Gilmour and Harrington began to wane. Gilmour thought she
might prefer to be friends rather than intimates but she trusted
Harrington as a businessman and wanted him to continue
managing her investments. In September 2011, the couple
attempted to rekindle their relationship by spending a weekend
together in Santa Barbara.
      Everything changed, however, on October 4, 2011. Gilmour
and Harrington dined at a restaurant together but after
Harrington drank heavily and became abusive, Gilmour left the
restaurant and demanded that Harrington’s driver take her
home. When Gilmour and Harrington arrived at Gilmour’s home,
she told Harrington she did not want him to come into her house.
Harrington eventually forced his way inside where he assaulted
and raped Gilmour.
      Harrington was arrested the next day. While in custody,
Harrington conspired with another inmate to kill Gilmour and
her children. Luckily, the plot was foiled when a bomb was
discovered in Gilmour’s car. Harrington’s criminal felony trial
took place in 2014 and he was sentenced to a 17-year prison term.
      After Harrington’s violent attack, Gilmour became
concerned about her investments. She immediately visited her
bank to obtain copies of all the checks written from her account
and discovered that Harrington had been forging checks. She
eventually learned that her “investments” were not invested at
all and had been used to benefit Harrington, Fisher, and Ahlfeldt.

                                7
                      PROCEDURAL HISTORY

      Gilmour filed the instant suit against Harrington, Ahlfeldt,
Madison Financial, and others in June 2014.6 The operative
complaint contained 10 causes of action, of which three relate to
defendants and the present appeal: fraud and deceit, conspiracy,
and common counts (money had and received.) The court
conducted an 11-day bench trial in May 2017 and issued a 35-
page statement of decision containing its extensive factual
findings and conclusions of law.
      Briefly stated, the court found Gilmour to be a credible
witness who was genuinely taken in by Harrington’s fraudulent
scheme. As to Ahlfeldt, the court found his testimony—in which
he claimed he had no knowledge of Harrington’s ploy and was
just another victim of Harrington’s—not credible. The court also
found that Ahlfeldt was the alter ego of Madison Financial.
      The court found Harrington liable on Gilmour’s fraud claim
and found that Ahlfeldt was also liable for fraud under a
conspiracy theory. Alternatively, the court found Ahlfeldt and
Madison Financial liable for a common count (money had and
received). The court found that defendants took $325,0007 from
Gilmour by and through their fraudulent scheme.
      The issue of punitive damages was tried over two days in
October 2017 and the court again issued a detailed statement of
decision. As to Ahlfeldt, the court found that his actions were
reprehensible to a high degree as he had knowledge that

6   Harrington defaulted and was imprisoned at the time of trial.
7As we explain, the correct amount of the compensatory award is
$266,899.

                                     8
Harrington was a con man, and that Gilmour wrote checks to
Madison Financial but had no business with the company. That
knowledge notwithstanding, Ahlfeldt deposited and/or cashed
Gilmour’s checks for Harrington and disbursed the money
according to his instructions. Ahlfeldt also concealed the scheme
from Gilmour when she asked him directly about her investments
with Madison Financial. Additionally, Ahlfeldt benefitted
financially from the fraudulent scheme.
      The court initially planned to award Gilmour $100,000 in
punitive damages. But after the hearing, in which counsel
focused on defendants’ reprehensible conduct and their
intentionally chaotic document production regarding net worth,
the court ultimately imposed punitive damages of $500,000 each
against Ahlfeldt and Madison Financial, jointly and severally.
      The court signed a judgment on February 16, 2018,
awarding Gilmour $325,000 in compensatory damages plus
prejudgment interest pursuant to Civil Code section 3291
running from the date of Gilmour’s settlement offer to
February 15, 2018. In addition, the court awarded $1,000,000 in
punitive damages. The court determined the total award was
$1,505,030.63, plus costs. The judgment, including punitive
damages, was made against Ahlfeldt individually, Ahlfeldt as the
alter-ego of Madison Financial, and Madison Financial, jointly
and severally. Defendants timely appealed.
      As we explain in detail below, the court entered a second,
corrected judgment on April 20, 2018, nunc pro tunc, effective
February 15, 2018. That judgment eliminated the reference to
Civil Code section 3291 but was otherwise identical in substance
to the previously entered judgment, awarding “the sum of
$505,030.63, consisting of compensatory damages plus interest

                               9
through February 15, 2018; $1,000,000, as and for punitive
damages, for a total of $1,505,030.63, plus costs[.]” Again,
defendants timely appealed.
      At defendants’ request, we consolidated the two appeals for
all purposes on June 11, 2019.

                         DISCUSSION

       Defendants offer three main arguments in this appeal.
First, in challenging the judgment on the fraud/conspiracy cause
of action, defendants contend that Gilmour’s claim is barred by
the statute of limitations. Second, with respect to the amount of
the judgment, defendants assert Gilmour is only entitled to
prejudgment interest under Civil Code section 3291 and any
interest awarded should be calculated at seven percent per year
rather than the 10 percent awarded by the court. And third,
defendants assert the court’s punitive damages award must be
reversed because it is unsupported by substantial evidence and,
in any event, is constitutionally excessive. We address these
issues in turn.
1.    Gilmour’s fraud claim is not barred by the statute of
      limitations.
      Defendants assert Gilmour’s fraud claim is barred by the
statute of limitations because she was on inquiry notice of the
fraud more than three years before she filed her complaint. They
also argue that the court applied the wrong legal standard in
assessing the limitations issue. We disagree.

                               10
         1.1.   Legal Principles and Standard of Review
       The statute of limitations for fraud is three years. (Code
Civ. Proc., § 338, subd. (d).)8 Section 338, subdivision (d), “ ‘also
codifies the delayed discovery rule, providing that a cause of
action for fraud “ ‘is not to be deemed to have accrued until the
discovery, by the aggrieved party, of the facts constituting the
fraud or mistake.’ ” [Citation.]’ ” (Britton v. Girardi (2015) 235
Cal.App.4th 721, 733.) “Under the discovery rule, the statute of
limitations begins to run when the plaintiff suspects or should
suspect that her injury was caused by wrongdoing, that someone
has done something wrong to her. … [T]he limitations period
begins once the plaintiff ‘ “ ‘has notice or information of
circumstances to put a reasonable person on inquiry ... .’ ” ’
[Citations.] A plaintiff need not be aware of the specific ‘facts’
necessary to establish the claim; that is a process contemplated
by pretrial discovery. Once the plaintiff has a suspicion of
wrongdoing, and therefore an incentive to sue, she must decide
whether to file suit or sit on her rights. So long as a suspicion
exists, it is clear that the plaintiff must go find the facts; she
cannot wait for the facts to find her.” (Jolly v. Eli Lilly & Co.
(1988) 44 Cal.3d 1103, 1110–1111 (Jolly).)
       Resolution of a statute of limitations issue is normally a
question of fact, unless the uncontradicted facts are susceptible of
only one legitimate inference and the issue becomes a question of
law. (Cf. Jolly, supra, 44 Cal.3d at p. 1112) [noting statute of
limitations issue is typically question of fact but may be resolved

8   All undesignated statutory references are to Code of Civil Procedure.

                                     11
by summary judgment where undisputed facts support only one
inference].)
      1.2.   Substantial evidence supports the court’s finding
             that the fraud claim was timely.
       The court found that Gilmour did not learn of Harrington’s
fraudulent activities until October 2011, after Harrington had
raped and assaulted her and she became concerned about the
investments she believed Harrington was managing for her. This
factual conclusion is unchallenged and is supported by
substantial evidence. Gilmour filed her complaint in June 2014,
well within the three-year limitations period.
       But as we have said, the statute of limitations may begin to
run when the plaintiff is on inquiry notice, i.e., has an actual
suspicion of wrongdoing or has knowledge of facts that would
cause a reasonably prudent person to investigate. (Jolly, supra,
44 Cal.3d at pp. 1110–1111.) Although the court did not explicitly
address the issue of inquiry notice in its ruling, the court made
numerous factual findings bearing on the issue in considering
whether Gilmour justifiably relied on Harrington’s
representations.
       For instance, the court found that Harrington convincingly
represented himself as an experienced businessman with an
MBA from The Wharton School. He had a driver and appeared to
be wealthy based on his lifestyle. Harrington also appeared to be
well-connected with many successful people in Pasadena. And at
least four witnesses testified at trial that they had been taken in
by Harrington on one or sometimes multiple occasions. These
findings support the court’s conclusion that Gilmour was not
alone in believing that Harrington was what he represented
himself to be and support the court’s implied finding that a

                                12
reasonably prudent person could have been taken in by
Harrington’s deception.
       As for the specific deception Harrington employed on
Gilmour, we note that “[t]he fraudulent concealment doctrine will
also toll the statute of limitations under section 338,
subdivision (d). ‘[T]he ground of relief is that the defendant,
having by fraud or deceit concealed material facts and by
misrepresentations hindered the plaintiff from bringing an action
within the statutory period, is estopped from taking advantage of
his own wrong.’ (Pashley v. Pacific Elec. Ry. Co. (1944) 25 Cal.2d
226, 231.) To take advantage of this doctrine ‘ “the plaintiff must
show ... the substantive elements of fraud ... and ... an excuse for
late discovery of the facts.” ’ (Snapp & Associates Ins. Services,
Inc. v. Robertson (2002) 96 Cal.App.4th 884, 890.)”
(Prakashpalan v. Engstrom, Lipscomb & Lack (2014) 223
Cal.App.4th 1105, 1123.)
       As described ante, there was substantial evidence that a
great deal of information was concealed from Gilmour and
prevented her from learning the truth about Harrington’s
scheme. Harrington stole Gilmour’s bank statements and other
materials from her mailbox as evidenced by the fact that he
maintained a large file of her bank records and other financial
documents at his office. Harrington also repeatedly told Gilmour
that her investments were performing well and showed her
market reports purportedly documenting that fact. And
Harrington was not the only person concealing information. In
June 2010, Ahlfeldt rebuffed Gilmour’s inquiry about her
investments by saying he was “unaware” of her investments—
even though he had already cashed checks from her worth more
than $300,000. Harrington explained away Ahlfeldt’s purported

                                13
lack of knowledge as well, assuring Gilmour that Madison
Financial was a large company with many investors and Ahlfeldt
could not be expected to know about her accounts in particular.
Such false reassurances also mitigated Gilmour’s duty to
investigate. (See, e.g., Filosa v. Alagappan (2020) 59 Cal.App.5th
772, 773 [patient who received false reassurances from physician
about his symptoms was not on inquiry notice of his illness and
injury].)
      1.3.   Defendants’ arguments are not persuasive.
       Defendants offer two related arguments as to why they
think Gilmour’s fraud claim was untimely. First, they claim that
undisputed facts establish as a matter of law that Gilmour
actually suspected Harrington of some misconduct prior to
June 2011. As noted, a plaintiff’s actual suspicion of wrongdoing
or injury may be sufficient to trigger the limitations period.
(Jolly, supra, 44 Cal.3d at pp. 1110–1111.) Defendants offer only
one fact in support of their argument, however. Specifically, they
assert that Gilmour scheduled a meeting with Ahlfeldt in 2010
“because she began to question her investments in Madison
Financial,” and after the meeting she was “more ‘confused than
before the meeting.’ ” Defendants then interpret her actions as
follows: “This is an example of Gilmour having an actual
suspicion that something was wrong, which led her to set up the
meeting with Ahlfeldt, which in turn intensified her initial
concern.” They also suggest that “presumably she had decided to
talk directly to Ahlfeldt in the first place because she did not
want to rely on Harrington’s assurances.”
       We disagree with defendants’ claim that these facts lead to
only one reasonable inference, i.e., that Gilmour suspected
Harrington was defrauding her. As the court noted, Gilmour was

                                14
inexperienced and ill-equipped to manage her finances.
Therefore, any “confusion” she may have experienced after the
meeting with Ahlfeldt does not necessarily mean that she
suspected any wrongdoing. Further, Gilmour may have reached
out to Ahlfeldt for any number of reasons. Perhaps she wanted a
second opinion about her investments. Or perhaps Harrington
took a demeaning tone with her when discussing her investments
and she felt uncomfortable about her lack of knowledge, causing
her to seek out someone else for routine advice. Certainly, and
contrary to defendants’ assertion, the facts are not so clear that
we can conclude as a matter of law that Gilmour actually
suspected some wrongdoing prior to June 2011.
       Alternatively, defendants assert that even if the facts do
not require us to conclude that Gilmour actually suspected
Harrington of wrongdoing, the undisputed facts establish that
Gilmour was on inquiry notice more than three years before she
filed her complaint. In other words, defendants claim, again as a
matter of law, that any reasonable person would have suspected
wrongdoing and investigated Harrington’s actions before
June 2011.
       Not surprisingly, defendants do not discuss the entire
record in making this claim and instead cherry-pick a few facts
they contend are favorable to their position in an attempt to
couch the issue as a matter of law. Importantly, however, the
facts of this case were not entirely undisputed and many of the
court’s factual findings rest firmly on its credibility assessments
of the witnesses—assessments we will not disturb. (See, e.g.,
Conservatorship of O.B. (2020) 9 Cal.5th 989, 1008 (O.B.) [noting
the appellate court “must indulge reasonable inferences that the
trier of fact might have drawn from the evidence; it must accept

                                15
the fact finder’s resolution of conflicting evidence; and it may not
insert its own views regarding the credibility of witnesses in
place of the assessments conveyed by the judgment”].) In any
event, and as discussed ante, substantial evidence supports the
court’s finding that Gilmour was not on inquiry notice of
Harrington’s fraudulent activity more than three years before she
filed her complaint.
       Finally, defendants emphasize the court’s description of
Gilmour9 and suggest the court failed to apply an objective,
reasonable person standard as required in analyzing the inquiry
notice issue. They assert, for example, “the court decided that
under the facts adduced at trial, a reasonable person would not
have fallen for Harrington’s deceit but that intrinsically, Gilmour
was not the reasonably prudent person, so the court would
therefore excuse her from the operation of the statute of
limitations.”
       This assertion is not supported by the record. The court
was plainly aware that Gilmour had little experience with and
was ill-equipped to handle financial matters. But as we have
already detailed, the court also observed that other friends and
acquaintances of Harrington’s—even people much more
sophisticated than Gilmour—were taken in by Harrington,
sometimes on multiple occasions.

9Defendants cite to the court’s statement of decision in which the court
describes Gilmour as “uneducated,” “gullible,” “extremely naïve,” “not
an intelligent woman,” and “unknowledgeable about business or her
own finances.”

                                  16
       In sum, we cannot say as a matter of law that Gilmour was
on either actual or inquiry notice more than three years before
she filed her complaint.
2.    Gilmour is entitled to prejudgment interest pursuant
      to Civil Code section 3287, subdivision (a), at a rate of
      seven percent per year.
       The next issue for our consideration relates to the
prejudgment interest calculation on the compensatory damages
award. Defendants contend that two judgments were entered,
one in February 2018 and another in April 2018, and only the
judgment entered in February 2018 is valid. Defendants argue
further that even if the judgment entered April 2018 is valid and
is the final judgment, it must be reversed because the interest
rate set by the court (10 percent per year) is incorrect. We agree
with defendants’ second point and will remand for recalculation
of prejudgment interest.
      2.1.   Additional Facts
       As noted, the court issued its final statement of decision on
liability on September 18, 2017. Therein, the court found that
approximately $325,000 of Gilmour’s funds were deposited into
Madison Financial’s bank accounts for the benefit of all the
defendants. The court did not explicitly state the amount of
compensatory damages it intended to award on the fraud and
conspiracy claims nor did it address the issue of prejudgment
interest. But the court noted that, by stipulation of the parties,
Exhibit 101 contained 53 checks written on Gilmour’s account
which were deposited into Madison Financial’s bank account.

                                 17
Gilmour later calculated the total of those checks to be
$266,899.10
       At the final hearing of the bifurcated trial on punitive
damages, the court indicated it would issue a brief statement of
decision. The court also indicated that it would award Gilmour
prejudgment interest on the compensatory damages award.
Specifically, the court said the judgment should include
prejudgment interest of 10 percent on each check written from
Gilmour’s account “from the time it was taken,” i.e., the day each
check was deposited until the day judgment was to be entered.
The court’s statement of decision on punitive damages ordered
Gilmour to prepare a final judgment.
       In mid-January 2018, Gilmour submitted a proposed
judgment and a bench brief regarding the calculation of
compensatory damages and prejudgment interest, noting that the
actual total of the 53 checks in Exhibit 101 was $266,899.
Gilmour included a spreadsheet reflecting interest calculations at
a rate of 10 percent running from the date each check was cashed
to January 22, 2018. Defendants objected to the proposed
judgment, suggesting that prejudgment interest should be
awarded under Civil Code section 3291, and would therefore not
begin to accrue until the date of Gilmour’s settlement offer.
       Although the defendants’ position was contrary to the
court’s previous statements from the bench, the court was
persuaded by defendants. In a minute order, the court stated that
if Gilmour elected to proceed by tort, the amount of compensatory

10The court eliminated several checks written by Gilmour from its
award because those checks had been written in 2007 but the bank
records from Madison Financial which were introduced began in 2008.

                                18
damages was $325,000 and interest would be calculated under
Civil Code section 3291 from the date of her settlement offer. If
Gilmour elected to proceed on the common count, her damages
were $275,000 and interest would be calculated under Civil Code
section 3287. In either case, the court said, the applicable interest
rate was 10 percent. The court directed Gilmour to prepare a new
proposed judgment consistent with its minute order.
       Due to several factors not relevant here, Gilmour submitted
a document titled “second revised [proposed] judgment after
bench trial” (second revised proposed judgment) which did not
reflect the court’s minute order. Gilmour also submitted a revised
interest calculation spreadsheet (still calculating interest at
10 percent.) The second revised proposed judgment states, as
pertinent here:
       “IT IS THEREFORE ADJUDGED that:
       “1. Plaintiff, CATHERINE GILMOUR SMITH recover
judgment against Defendants GARY E. AHLFELDT,
individually, and GARY E. AHLFEDLT, as the alter-ego of
MADISON FINANCIAL, INC., and MADISON FINANCIAL,
INC., jointly and severally, the sum of $505,030.63, consisting of
compensatory damages plus interest through February 15, 2018;
$1,000,000.00, as and for punitive damages, for a total of
$1,505,030.63, plus costs[.]”
       It appears that the court signed this document (the
February judgment) on February 16, 2018, which defendants
represent is the same day the trial judge retired. It also appears
that the court modified the paragraph by interlineation11 to read:

11The court’s insertions are in brackets and in italics. The court’s
strike-outs are so represented.

                                   19
       “1. Plaintiff, CATHERINE GILMOUR SMITH recover
judgment against Defendants GARY E. AHLFELDT,
individually, and GARY E. AHLFEDLT, as the alter-ego of
MADISON FINANCIAL, INC., and MADISON FINANCIAL,
INC., jointly and severally, the sum of $505,030.63, consisting of
[$325,000] compensatory damages plus interest [plus [sic]
pursuant to CC § 3291 from date of CCP § 998 offer to 2/15/2018]
through February 15, 2018; $1,000,000.00, as and for punitive
damages, for a total of $1,505,030.63, plus costs[.]”
       Gilmour filed a motion to correct the February judgment
under Section 663, noting the court had previously ruled from the
bench that with respect to the compensatory damages award,
prejudgment interest would be calculated separately for each
check written from Gilmour’s account, and would begin accruing
on the date the check had been deposited. Gilmour requested that
the court sign the second revised proposed judgment as originally
submitted, consistent with the court’s ruling from the bench.
       Defendants also filed a motion to correct the February
judgment. They asserted that the total amount of that
judgment—$1,505,030.65—was inconsistent with the legal basis
for the interest calculation as interlineated by the court. A correct
calculation—10 percent interest on $325,000 from January 22,
2016 (the date of Gilmour’s settlement offer) to February 15,
2018—would be approximately $65,000 and would bring the total
judgment to $1,390,000.
       Ultimately, the court (with a new trial judge assigned)
heard these motions concurrently and determined that the total
amount of compensatory damages was $266,899, as calculated by
Gilmour. Further, the court reviewed the transcript from the
final hearing on punitive damages and found that, according to

                                 20
the court’s ruling from the bench, Gilmour was entitled to
prejudgment interest under Civil Code section 3287,
subdivision (a) at a rate of 10 percent, beginning when each check
was deposited and continuing until February 15, 2018. On both
points, the court found, Gilmour’s second revised proposed
judgment—as originally submitted—was correct and should be
signed, effective as of February 15, 2018. The court signed a copy
of the second revised proposed judgment. It was filed on April 20,
2018 and entered nunc pro tunc as of February 15, 2018.
         2.2.   Analysis
      Initially, we note that the parties disagree as to which of
the two possible “judgments” is the final judgment properly
before us—the judgment signed by the court on
February 16, 2018 or the judgment signed by the court on
April 20, 2018 and made effective nunc pro tunc as of
February 15, 2018. As our analysis indicates, however, both
proffered judgments contain errors that require modification. We
therefore find it unnecessary to resolve the question and move
directly to defendants’ assertions of error.12
         2.2.1. Gilmour is entitled to prejudgment interest
                under Civil Code section 3287, subdivision (a).
      The dispute about which judgment is the operative final
judgment is, at its core, a dispute about the statutory basis for
the court’s prejudgment interest award.
      Defendants seek to enforce the court’s February 7, 2018
minute order, reflected by the interlineations in the February

12   As noted, defendants timely appealed from both possible judgments.

                                    21
judgment, which stated that Gilmour was entitled to
prejudgment interest under Civil Code section 3291. Under that
provision, interest on the compensatory damages award would
not begin to accrue until January 22, 2016, the date Gilmour
served her offer to compromise under section 998. (Civ. Code,
§ 3291.) But the statute expressly states that it is applicable only
in tort actions brought to recover damages for personal injury.
This is not a personal injury case and the court therefore erred in
awarding prejudgment interest under that section.
       The court was partially correct the first time it addressed
the prejudgment interest issue, however. As noted, the court
initially stated from the bench that Gilmour was entitled to
prejudgment interest running from the date each of her checks
was cashed by defendants to the date judgment was entered.
Civil Code section 3287 supports the court’s ruling. Specifically,
that section provides in subdivision (a) that “[a] person who is
entitled to recover damages certain, or capable of being made
certain by calculation, and the right to recover which is vested in
the person upon a particular day, is entitled also to recover
interest thereon from that day, except when the debtor is
prevented by law, or by the act of the creditor from paying the
debt.” Damages are deemed certain or capable of being made
certain within Civil Code section 3287, subdivision (a), where
there is essentially no dispute between the parties concerning the
basis of imposition of damages that are recoverable but where the
dispute centers on the issue of liability giving rise to the
damages. (Stein v. Southern Cal. Edison Co. (1992) 7 Cal.App.4th
565, 571.) “Two tests apply in deciding the certainty required by
section 3287, subdivision (a): (1) whether the debtor knows the
amount owed or (2) whether the debtor would be able to compute

                                22
the damages, i.e., whether they are reasonably calculable.” (Id. at
pp. 571–572.) Both tests are plainly satisfied here. The amounts
taken from Gilmour are definite in amount, as reflected by the
checks she wrote. And the date of each harm is also certain, as
reflected by banking records from Madison Financial showing
when Gilmour’s checks were cashed and/or deposited, enabling a
certain calculation of Gilmour’s damages.
       Accordingly, Gilmour is entitled to prejudgment interest
under Civil Code section 3287, subdivision (a).
      2.2.2. The court erred in setting the rate of interest at
             10 percent per year.
       Alternatively, defendants argue that if prejudgment
interest is to be awarded, it is capped at seven percent per year.
We agree.
       Whether the proper interest rate was applied is a question
of law. (See Michelson v. Hamada (1994) 29 Cal.App.4th 1566,
1585.) The California Constitution sets the rate of interest on
judgments at seven percent per year. (Cal. Const., art. XV, § 1.)
The Legislature is permitted to set a different rate, not to exceed
10 percent per year and has, for example, raised the rate of
postjudgment interest to 10 percent per year. (§ 685.010,
subd. (a).) But there is no legislative act specifying the rate of
prejudgment interest for a fraud claim, and therefore the
constitutional rate of seven percent applies here. (Cal. Const.,
art. XV, § 1; Michelson, at pp. 1585–1586; Continental Airlines,
Inc. v. McDonnell Douglas Corp. (1989) 216 Cal.App.3d 388, 434.)
The court therefore erred in setting the prejudgment interest rate

                                23
at 10 percent and we will remand for recalculation of
prejudgment interest at the appropriate rate.13
3.    The punitive damages award must be reduced because
      it is unconstitutionally excessive.
      Defendants challenge the punitive damages award on two
grounds: lack of substantial evidence of malice, oppression, or
fraud, and unconstitutional excessiveness. We conclude the
finding of malice, oppression or fraud is supported by substantial
evidence. But in light of the evidence of defendants’ financial
circumstances, we conclude the punitive damages award is
excessive and must be reduced.
      3.1.   Additional Facts
      As noted, the court held a bifurcated trial on punitive
damages over several days in October 2017 and later issued a
detailed statement of decision. The court revisited its findings
from the trial on liability, noting that it had previously found by
clear and convincing evidence that Harrington, Madison
Financial, and Ahlfeldt “engaged in an intentional, oppressive,
malicious and fraudulent conspiracy to steal funds from”
Gilmour14 and use those funds for the benefit of Harrington,

13In making that calculation, the court should refer to Exhibit 101:1-
53 and the interest calculation spreadsheet submitted to the court by
Gilmour on February 15, 2018 in support of her reply to the court’s
minute order of February 7, 2018.
14 We reject defendants’ claim that the court “never actually made a
finding of malice, oppression, or fraud as to Ahlfeldt or Madison
Financial.” The judgment on liability expressly found that Harrington
was liable for fraud and deceit, that he acted with malice, oppression
and fraud, that Ahlfeldt was also liable for fraud as a co-conspirator,

                                  24
Fisher, and to a lesser extent Ahlfeldt and Madison Financial.
Further, “[a]lthough Ahlfeldt’s and Madison Financial’s gain was
smaller than Harrington’s and Fisher’s, the Court found that
Ahlfeldt and Madison Financial fully participated in the
conspiracy to acquire these funds by fraud and misrepresentation
and to use the funds for their own financial purposes.” In
particular, Ahlfeldt had used Madison Financial illegally as a
front for Harrington to launder Gilmour’s money.
       The court summarized the legal principles governing an
award of punitive damages noting that the court had wide
discretion to award punitive damages for the purpose of
punishing and deterring future unlawful conduct by a defendant.
The court correctly identified relevant legal factors including the
degree of reprehensibility of a defendant’s conduct, the harm to
the plaintiff, and the defendant’s wealth and ability to pay. The
court also noted that a punitive damages award must generally
be in some reasonable proportion to the actual damage suffered
by the plaintiff.
       As to Ahlfeldt, the court found a high degree of
reprehensibility in his conduct. Specifically, Ahlfeldt knew that
Harrington was a convicted felon and con man. He also knew, as
the sole shareholder and owner of Madison Financial, that
Gilmour had no business relationship with Madison Financial.
Notwithstanding that knowledge, Ahlfeldt accepted Gilmour’s
checks from Harrington, deposited them, disbursed the funds as
Harrington directed, and used some of the funds to benefit

and that Ahlfeldt was “liable for all damages to which Gilmour is
entitled.”

                                  25
himself. Ahlfeldt continued this pattern over the course of four
years and laundered more than 50 checks worth $325,000, even
after he knew, following a meeting with Gilmour in June 2010,
that she believed her money was being invested—a fact that
directly contradicted Harrington’s claim that Gilmour was
“taking care of him.” And perhaps worst of all, Ahlfeldt concealed
all these facts from Gilmour when she asked him directly about
the performance of investments she believed were held by
Madison Financial. The court also observed that defendants stole
the majority of Gilmour’s life savings, which she had
painstakingly earned from a part-time modeling career over more
than 20 years. Given the high degree of reprehensibility, the
court concluded that a punitive damages award should be a
multiple of the actual damages caused.
       As to defendants’ financial condition, the court heard
evidence from Gilmour’s financial expert that the financial
records produced by Ahlfeldt and Madison Financial were
produced in substantial disarray. “Repeatedly the photo copy of a
front page of a credit card bill dated one month, had an unrelated
bill from a different month and year and at times a different
company photocopied on the back side. Two sided copies, all in no
monthly or yearly order from front to back or manner of
production, was the norm. There were four boxes of such records
making it impossible for a forensic CPA to make hide nor hair of
the documents.” In addition, the records produced were grossly
incomplete (e.g., no balance sheets, no income statements, no
general ledger) and what was produced indicated that Madison
Financial operated outside conventional business standards and
failed to use generally accepted accounting practices. As a result
of what the court found was “a successful effort at obfuscation” by

                                26
defendants, Gilmour’s expert was unable to estimate defendants’
net worth with any degree of certainty.
      The materials produced by Ahlfeldt and others did provide
some relevant information, however. Using the available
information, including records produced by a real estate company
for whom Ahlfeldt sometimes worked, the court made the
following factual findings:
      ◦   Between 2011 and 2017, not including 1099
          income, Ahlfeldt deposited $1,072,567.09 into his
          personal accounts.
      ◦   During that period, the real estate company
          records show Ahlfeldt received $491,557 in
          reported (1099) commissions.
      ◦   Ahlfeldt received unreported commissions of
          $375,000 (2014), $7,800 (2015), and $120,337.50
          (2016).
      ◦   Ahlfeldt expected to receive a commission of
          $219,260 shortly after the trial and had recently
          received a check for $237,000 which he said was a
          reimbursement.
      ◦   Ahlfeldt’s annual expenses (rent, insurance,
          miscellaneous) are approximately $67,000.
      The court also found that “[g]iven Ahlfeldt’s long record of
success as a real estate broker and in property lease and
management, his prospects for continued future earning are good
to excellent.”
      At the final hearing on punitive damages, the court
indicated that its tentative ruling was to award a total of

                                27
$100,000 in punitive damages, payable over three years. The
court said that it believed this ruling was appropriate in light of
all the factors, including that Ahlfeldt appeared to earn in the
neighborhood of $200,000 to $225,000 each year. Gilmour’s
counsel urged the court to raise the award to a multiple of the
compensatory award, citing the reprehensibility of Ahlfeldt’s
conduct as well as his intentional obfuscation of the financial
condition issue. Ultimately, in its final statement of decision, the
court awarded punitive damages of $500,000 each against
Ahlfeldt and Madison Financial, jointly and severally.
      3.2.   Substantial evidence supports the court’s finding
             that Ahlfeldt acted with malice, oppression, or
             fraud.
       Defendants assert that the court’s finding that Ahlfeldt
(and by extension Madison Financial) acted with malice,
oppression, or fraud in conspiring with Harrington to commit
fraud is not supported by substantial evidence. We disagree.
       To support a punitive damages award, the plaintiff must
prove by clear and convincing evidence that the “defendant has
been guilty of oppression, fraud, or malice[.]” (Civ. Code, § 3294,
subd. (a).) Malice is defined as “conduct which is intended by the
defendant to cause injury to the plaintiff or despicable conduct
which is carried on by the defendant with a willful and conscious
disregard of the rights or safety of others.” (Id., subd. (c)(1).)
“ ‘Oppression’ means despicable conduct that subjects a person to
cruel and unjust hardship in conscious disregard of that person’s
rights.” (Id., subd. (c)(2).) “ ‘Despicable conduct’ is conduct that is
‘ “so vile, base, contemptible, miserable, wretched or loathsome
that it would be looked down upon and despised by most ordinary
decent people.” ’ [Citation.]” (Butte Fire Cases (2018) 24

                                  28
Cal.App.5th 1150, 1159.) Typically, such conduct has “the
character of outrage associated with crime.” (Ibid.) Finally,
“ ‘[f]raud’ means an intentional misrepresentation, deceit, or
concealment of a material fact known to the defendant with the
intention on the part of the defendant of thereby depriving a
person of property or legal rights or otherwise causing injury.”
(Civ. Code, § 3294, subd. (c)(3).)
        Malice and oppression may be proven through direct
evidence or inferred from the circumstances surrounding the
defendant’s conduct. (Monge v. Superior Court (1986) 176
Cal.App.3d 503, 511.) Because malice, oppression, or fraud must
be proven by clear and convincing evidence, we review the court’s
finding to determine “whether the record, viewed as a whole,
contains substantial evidence from which a reasonable trier of
fact could have made the finding of high probability demanded by
this standard of proof.” (O.B., supra, 9 Cal.5th at p. 1005.) We
therefore view “the record in the light most favorable to the
prevailing party below and give due deference to how the trier of
fact may have evaluated the credibility of witnesses, resolved
conflicts in the evidence, and drawn reasonable inferences from
the evidence.” (Id. at p. 996.)
        The court concluded that defendants acted with malice,
oppression, and fraud. Defendants, however, contend none of
those factors is present in this case and characterize the evidence
of their wrongdoing as “not particularly strong,” and certainly not
sufficient for the court to find they acted with the requisite intent
by clear and convincing evidence.
        We begin, and end, with defendants’ claim that “concerning
‘fraud,’ the record does not support a finding by clear and
convincing evidence that Ahlfeldt intentionally made any

                                 29
misrepresentations to Gilmour, or deceived or concealed a known
material fact from her with the intent of causing injury.” Our
Supreme Court has held that “[p]unitive damages are recoverable
in those fraud actions involving intentional, but not negligent,
misrepresentations. [Citations.]” (Alliance Mortgage Co. v.
Rothwell (1995) 10 Cal.4th 1226, 1241.) Here, we need only look
to the June 2010 meeting between Gilmour and Ahlfeldt to find
intentional fraudulent misrepresentation and concealment. As
discussed ante, when Gilmour asked Ahlfeldt about her
investments with Madison Financial, he said only that he was
“not aware” of her investments. We agree with the court’s finding
that “[a]t the very least, this conversation was a red flag and put
Ahlfeldt on notice that Gilmour believed she had investments
with Madison Financial.” But the evidence also demonstrates
that Ahlfeldt intentionally concealed the truth from Gilmour. He
knew, but did not disclose, that Madison Financial did not make
investments for clients and was not investing money for her. He
knew, but did not disclose, that Harrington was spending
Gilmour’s money—more than $300,000 at the time of their
meeting in June 2010—on himself and others, including Ahlfeldt.
And Ahlfeldt knew, but did not disclose, that he had been told
many years earlier by a private detective that Harrington was a
convicted felon and a con man.
       This conduct by Ahlfeldt was not negligent. It was not an
oversight. It was intentional, it was designed to perpetuate the
fraudulent scheme, and it was designed to harm Gilmour for
Harrington’s (and Ahlfeldt’s) benefit. This conduct provides more
than sufficient evidence to support the court’s finding, by clear
and convincing evidence, that Ahlfeldt acted with a fraudulent
intent within the meaning of Civil Code section 3294.

                                30
     3.3.   The punitive damages award is
            unconstitutionally excessive.
      Defendants next contend that the punitive damages award
is excessive and should be reversed. We agree but conclude that
the court’s initial assessment of punitive damages, as stated in
the court’s tentative and from the bench, is supported by
substantial evidence.
      Courts may impose punitive damages to further a state’s
interest in punishing and deterring unlawful conduct. (State
Farm Mut. Auto Ins. Co. v. Campbell (2003) 538 U.S. 408, 416
(State Farm).) But the Fourteenth Amendment’s due process
clause places limitations on the amount of punitive damages
awards, prohibiting the imposition of grossly excessive or
arbitrary punishments on tortfeasors. (Ibid.; see also Roby v.
McKesson Corp. (2009) 47 Cal.4th 686, 712 (Roby) [the due
process clause restricts the amount of punitive damages courts
may award].) “ ‘[E]lementary notions of fairness enshrined in our
constitutional jurisprudence dictate that a person receive fair
notice not only of the conduct that will subject him to
punishment, but also of the severity of the penalty that a State
may impose.’ ” (State Farm, at pp. 416–417.)
      In BMW of North America, Inc. v. Gore (1996) 517 U.S. 559,
(Gore), the United States Supreme Court outlined three
“guideposts” that courts should use to determine whether a
punitive damages award is excessive under the due process
clause: (1) the degree of reprehensibility of the defendant’s
misconduct; (2) the disparity between the actual or potential
harm suffered by the plaintiff and the punitive damages award;
and (3) the difference between the punitive damages awarded by
the jury and the civil penalties authorized or imposed in

                               31
comparable cases.15 (Id. at p. 575; see also State Farm, supra, 538
U.S. at p. 418; Roby, supra, 47 Cal.4th at p. 712.)
       We review the constitutionality of a punitive damages
award de novo. (Simon v. San Paolo U.S. Holding Co., Inc. (2005)
35 Cal.4th 1159, 1172.) Nevertheless, we review “findings of
historical fact” for substantial evidence. (Ibid.)
       First Guidepost: Degree of Reprehensibility
       “Of the three guideposts that the high court outlined in
State Farm, supra, 538 U.S. at page 418, the most important is
the degree of reprehensibility of the defendant’s conduct. On this
question, the high court instructed courts to consider whether
‘[1] the harm caused was physical as opposed to economic; [2] the
tortious conduct evinced an indifference to or a reckless disregard
of the health or safety of others; [3] the target of the conduct had
financial vulnerability; [4] the conduct involved repeated actions
or was an isolated incident; and [5] the harm was the result of
intentional malice, trickery, or deceit, or mere accident.’ (Id. at
p. 419.)” (Roby, supra, 47 Cal.4th at p. 713.)
       The facts pertinent to our assessment of the
reprehensibility of the conduct by Harrington, Ahlfeldt, and
Madison Financial are, for the most part, discussed ante in our
analysis of the court’s finding of malice, oppression, or fraud.
Accordingly, we summarize them briefly. As to the first factor,
Gilmour’s harm was primarily economic16 but the court did find

15Defendants correctly observe that the third factor is not relevant in
this case.
16As to Gilmour’s physical harm, the court concluded Ahlfeldt had no
advance knowledge of Harrington’s assault and rape.

                                   32
that Gilmour suffered “extreme distress and resulting
psychological damages.” Similarly, as to the second factor,
Gilmour’s health and safety (and that of her two children) were
not directly placed at risk by the fraudulent financial scheme,
though as just noted the assault, rape, and theft of her life
savings impacted her health to some extent. The remaining
factors, however, are present to a significant degree in this case.
The third factor—financial vulnerability of the victim—is evident
to a great degree, as already discussed. Gilmour was recently
divorced from a successful businessman, she was uneducated
about finances generally and her own finances in particular, and
as a general matter Gilmour presented as naïve and gullible. As
to the fourth factor—repeated actions versus a single incident—
the scheme here continued over four years and during that time,
Ahlfeldt cashed more than 50 checks from Gilmour. The final
factor—intentional versus accidental conduct—we discussed at
length ante and concluded that Ahlfeldt’s conduct was
intentional. In short, substantial evidence supports the court’s
finding that there is a high degree of reprehensibility here.
       Second Guidepost: Disparity Between Actual Harm and
Award
       Punitive damages must bear a “ ‘reasonable relationship’ ”
to compensatory damages or the plaintiff’s actual harm.
(Gore, supra, 517 U.S. at pp. 580–581.) “Generally, California
courts ‘have adopted a broad range of permissible ratios—from as
low as one to one to as high as 16 to 1—depending on the specific
facts of each case.’ [Citation.]” (Pfeifer v. John Crane, Inc. (2013)
220 Cal.App.4th 1270, 1313 (Pfeifer).) But there is no “bright-line
ratio which a punitive damages award cannot exceed.” (State
Farm, supra, 538 U.S. at p. 425.)

                                 33
       “ ‘[D]ue process permits a higher ratio between punitive
damages and a small compensatory award for purely economic
damages containing no punitive element than [it does] between
punitive damages and a substantial compensatory award for
emotional distress; the latter may be based in part on indignation
at the defendant’s act and may be so large as to serve, itself, as a
deterrent.’ ” (Roby, supra, 47 Cal.4th at p. 718.) Thus, in
evaluating whether a punitive damages award falls within
constitutional limits, reviewing courts should look to whether the
compensatory damages award is punitive in nature, such as a
substantial award for emotional suffering caused only by
economic harm. (Pfeifer, supra, 220 Cal.App.4th at p. 1313.)
       Defendants do not argue the relationship between the
compensatory award and the punitive award is unreasonable.
And they do not contend the punitive award is suggestive of
passion and prejudice on the part of the court. Nor could they.
The only compensatory damages award is reflective of Gilmour’s
actual damages. She received no additional damages for, e.g.,
emotional distress.
       Further, the ratio of punitive damages to compensatory
damages is less than 1.5 to 1, as the court imposed punitive
damages of $500,000 against each defendant, over and above the
compensatory award of $325,000, or less than 1.9 to 1 if the
award is corrected to reflect compensatory damages of $266,899.
And even if we consider that the award was made jointly and
severally, potentially leaving Ahlfeldt to pay the entire
$1 million, the ratio is still less than 4 to 1, well within the range
of awards held to pass constitutional muster where, as here, the
compensatory damages represent a plaintiff’s actual damages.
(See, e.g., Roby, supra, 47 Cal.4th at p. 718 [“ ‘[D]ue process

                                 34
permits a higher ratio between punitive damages and a small
compensatory award for purely economic damages containing no
punitive element than [it does] between punitive damages and a
substantial compensatory award for emotional distress; the latter
may be based in part on indignation at the defendant’s act and
may be so large as to serve, itself, as a deterrent’ ”]; Colucci v. T-
Mobile USA, Inc. (2020) 48 Cal.App.5th 442, 458 [citing State
Farm, supra, and noting that “ ‘in practice, few awards exceeding
a single-digit ratio between punitive and compensatory damages,
to a significant degree, will satisfy due process’ ”].)
       Defendants’ Wealth and Ability to Pay the Award
       The main focus of defendants’ challenge to the punitive
damages award is their asserted inability to pay the award.
Gilmour does not address the issue in her respondent’s brief.
       Under California law, in addition to the factors discussed
above, courts evaluating the possible excessiveness of a punitive
damages award consider “ ‘in view of the defendant[s’] financial
condition, the amount necessary to punish him or her and
discourage future wrongful conduct.’ ” (Baxter v. Peterson (2007)
150 Cal.App.4th 673, 679 (Baxter); see Adams v. Murakami
(1991) 54 Cal.3d 105, 110 (Adams).) “[O]bviously, the function of
deterrence ... will not be served if the wealth of the defendant
allows him to absorb the award with little or no discomfort.
[Citations.] By the same token, of course, 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.” (Neal v.
Farmers Ins. Exchange (1978) 21 Cal.3d 910, 928, fn. 13 (Neal);
see Adams, at p. 110.) “The purpose of punitive damages ‘is not
served by financially destroying a defendant. The purpose is to

                                 35
deter, not to destroy.’ ” (County of San Bernardino v. Walsh
(2007) 158 Cal.App.4th 533, 546 (Walsh); see Soto v. BorgWarner
Morse TEC Inc. (2015) 239 Cal.App.4th 165, 192 (Soto) [punitive
damages award is excessive if “ ‘it destroys, annihilates, or
cripples the defendant’ ”].) “ ‘An appellate court may reverse an
award of punitive damages only if the award appears excessive as
a matter of law or is so grossly disproportionate to the ability to
pay as to raise a presumption that it was the result of passion or
prejudice.’ ” (Behr v. Redmond (2011) 193 Cal.App.4th 517, 535.)
      Generally, “an award of punitive damages cannot be
sustained on appeal unless the trial record contains meaningful
evidence of the defendant’s financial condition.” (Adams, supra,
54 Cal.3d at p. 109; see Soto, supra, 239 Cal.App.4th at p. 192;
Walsh, supra, 158 Cal.App.4th at p. 546 [“a defendant’s ability to
pay a punitive damage award must be based on meaningful and
substantial evidence of his or her financial condition”].) “Without
such evidence, a reviewing court can only speculate as to whether
the award is appropriate or excessive,” and as with compensatory
damages, a punitive damages award “must not be based on
speculation.” (Adams, at pp. 112, 114.) Under Adams, the
plaintiff has the burden of proving the defendant’s financial
condition to obtain punitive damages. (Id. at pp. 119–123.)
      “Our Supreme Court has not prescribed a rigid standard for
measuring a defendant’s ability to pay. [Citations.] Accordingly,
there is no particular type of financial evidence a plaintiff must
obtain or introduce to satisfy its burden of demonstrating the
defendant’s financial condition. Evidence of the defendant’s net
worth is the most commonly used, but that metric is too
susceptible to manipulation to be the sole standard for measuring
a defendant’s ability to pay. [Citations.] Yet the ‘net’ concept of

                                36
the net worth metric remains critical. ‘In most cases, evidence of
earnings or profit alone are not sufficient “without examining the
liabilities side of the balance sheet.” [Citations.]’ [Citations.]
Evidence of a defendant’s income, standing alone, is not
‘ “meaningful evidence.” ’ [Citation.] ‘Normally, evidence of
liabilities should accompany evidence of assets, and evidence of
expenses should accompany evidence of income.’ ” (Soto, supra,
239 Cal.App.4th at p. 194; see Baxter, supra, 150 Cal.App.4th at
p. 680.) “Whether the defendant’s financial prospects are bleak or
bright [also] is relevant to the ultimate issue whether the
damages will ruin him or be absorbed by him.” (Rufo v. Simpson
(2001) 86 Cal.App.4th 573, 622.)
       As noted above, the court heard evidence relating to
Ahlfeldt’s income and found that on average, he earned
approximately $225,000 per year. Although defendants’ precise
calculations differ slightly from the court’s, the $225,000 annual
income figure is supported by the evidence and defendants do not
contend otherwise. The court also found that “[g]iven Ahlfeldt’s
long record of success as a real estate broker and in property
lease and management, his prospects for continued future
earning are good to excellent.” Defendants do not challenge that
finding and the record supports it.
       As noted above, however, earnings and a bright future are
typically not sufficient, standing alone, to establish a defendant’s
ability to pay a punitive damages award. And although Ahlfeldt
plainly made the examination of his financial records difficult,
the records and his undisputed testimony show that Ahlfeldt has
a modest amount of assets. He owns no real estate, having lost
his home to foreclosure. And his remaining assets—a selection of
stocks and investment accounts—total just under $300,000, not

                                 37
including a limited number of shares of stock with uncertain
value. These facts gave the court some sense of Ahlfeldt’s
individual wealth and even if the court believed the picture was
incomplete, it was still required to tether its award to the facts in
evidence. (Adams, supra, 54 Cal.3d at pp. 112, 114 [a punitive
damages award “must not be based on speculation”].)
      The more difficult assessment relates to Madison Financial.
Gilmour’s forensic accountant emphasized that Ahlfeldt had not
produced the sort of financial records that would typically be
used in assessing a company’s net worth—a general ledger, profit
and loss statements, business records documenting cash flow—
and she was therefore unable to assess Madison Financial’s net
worth with any degree of certainty. But the court heard evidence
that those records were never created and maintained by Ahlfeldt
because the company had very little legitimate business and was
being used primarily to launder money for Harrington. None of
the testimony presented suggested that Madison Financial owned
any real property or other assets. Ahlfeldt testified that the
company generated revenue of $9,600 in 2017. And Madison
Financial’s banking records showed that the company had
approximately $600 in its account.
      In short, the record does not support the court’s finding
that Ahlfeldt and Madison Financial can reasonably pay a
$1 million punitive damages award in addition to the
compensatory award. That amount is more than three times the
value of Ahlfeldt’s known assets and more than four times his
average annual income. Typically, punitive damages awards
relate to a percentage of a defendant’s assets—not a multiple.
      We agree with the court that some award of punitive
damages is appropriate, however, particularly in light of the facts

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we have already described. After examining the record, we
conclude that the court’s tentative ruling—in which the court
indicated it would award punitive damages of $100,000 payable
over three years—is supported by the evidence and we reduce the
award accordingly.

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                         DISPOSITION

       The judgment is modified to provide that plaintiff
Catherine Gilmour Smith is entitled to compensatory damages of
$266,899 plus prejudgment interest pursuant to Civil Code
section 3287, subdivision (a), and at a rate of seven percent per
year. The judgment is further modified to provide a punitive
damages award against Gary Ahlfeldt and Madison Financial,
Inc., jointly and severally, in the total amount of $100,000. As so
modified the judgment is affirmed and the cause remanded to the
trial court for calculation of prejudgment interest. Catherine
Gilmour Smith shall recover her costs on appeal.

 NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

                                                     LAVIN, J.
WE CONCUR:

      EDMON, P. J.

      EGERTON, J.

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