Court Opinion

ID: 6111690
Source: CourtListenerOpinion
Date Created: 2022-01-21 23:01:40.427631+00
Date Added: 2024-06-11T08:54:20.425012
License: Public Domain

Filed 1/21/22 Swamp Capital v. Shaw CA2/5
   NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                         SECOND APPELLATE DISTRICT

                                        DIVISION FIVE

SWAMP CAPITAL, LLC,                                             B298436, B301368

         Plaintiff and Respondent,                              (Los Angeles County
                                                                Super. Ct. No. BC641097)
         v.

JAMES SHAW et al.,

         Defendants and Appellants.

     APPEALS from a judgment of the Superior Court of Los
Angeles County, Gregory W. Alarcon, Judge. Affirmed.
     Reif Law Group, Brandon S. Reif and Marc S. Ehrlich, for
Defendants and Appellants.
     John L. Dodd & Associates and John L. Dodd, for Plaintiff
and Respondent.
                      I. INTRODUCTION

      Defendants James Shaw and Arts District Patients’
Collective, Inc., (ADPC) appeal from a judgment upon jury
verdicts on multiple causes of action in favor of plaintiffs.1 They
contend that there was insufficient evidence to support the
verdicts and that the trial court erred in failing to grant a new
trial based on flaws in the verdict forms. We affirm.

                       II. BACKGROUND

A.    The Parties

      1.    James Shaw and ADPC

      In the early 2000s, Shaw began cultivating cannabis. In
approximately 2005, he started ADPC,2 a cannabis dispensary in
Los Angeles. ADPC held a registration certificate that allowed it

1     In October 2020, this court granted the motion of Swamp
Capital, LLC, the assignee of the judgment which is the subject of
the appeals, to substitute in as the respondent in place of
plaintiffs Sergio Tellez, dba Specialized Development, Polo
Capital and Consulting, LLC, Polo Capital and Consulting, LP,
and California Institute of Cannabis, Inc.

2     ADPC is a California nonprofit mutual benefit corporation.
Shaw operated ADPC under the dba “Arts District Healing
Center.” Shaw also operated another nonprofit mutual benefit
corporation named “Arts District Unity Center, Inc.” Shaw was
the managing director of both corporations. We will refer to the
two corporations and the dba collectively as “ADPC.”

                                 2
to operate with limited immunity from prosecution under then-
existing laws governing the cultivation and sale of cannabis in
the city of Los Angeles (the Immunity Certificate).
      Over the years, Shaw entered into various business
arrangements with others involved in the cultivation of
marijuana. He allowed marijuana cultivators to use ADPC’s
Immunity Certificate to operate and dispense cannabis in Los
Angeles in exchange for a percentage of the cultivators’ crop.
Shaw’s deal-making methods varied; and he often used oral
agreements that he would later memorialize in writing.

      2.    Sergio Tellez

      Sergio Tellez was a licensed general contractor. He began
his construction career building homes and, beginning in 2010,
focused on the construction of facilities for the cultivation and
sale of cannabis. He was also an entrepreneur. In 2014, Tellez
invented “Spliffin,” a “vaporizing product” cartridge for the
consumption of cannabinoids extracted from cannabis plants. 3
Tellez then formed plaintiff Polo Capital and Consulting, LP, as a
vehicle for capital infusion into projects like Spliffin. In January
2015, Nikola Andrejich began working with Tellez to develop
Spliffin and other related businesses.

3    The parties used the term “Spliffin” to describe both the
product and the entity that manufactured and sold it.

                                 3
B.    Shaw’s and Tellez’s Business Relationship

      Tellez and Shaw met in approximately 2014 when Shaw
was looking for capital and support to build a dispensary space.
Shaw presented a “scheme” to Tellez pursuant to which the two
would operate a “health center” that would be exempt from local
and state taxation. Shaw offered Tellez a 50 percent ownership
interest in ADPC. He also offered to serve as a “compliance
expert” for Spliffin, claiming he could help Spliffin operate
lawfully in exchange for a cash payment and a 2.5 percent
ownership interest in the product. Shaw represented that
ADPC’s Immunity Certificate would allow Spliffin to operate
lawfully from Shaw’s dispensary. Tellez, however, had already
arranged to develop Spliffin with another cannabis entity that
held an immunity certificate. He and Shaw therefore did not
agree to work together at that time.

      1.    The Oral Agreement

       In December 2015, Shaw approached Tellez’s business
partner, Andrejich, with a new proposal. Shaw planned to move
ADPC to a large warehouse at 1411 Wilson Street in downtown
Los Angeles (the Wilson site) and to sign a five-year lease for the
facility. According to Tellez, he and Shaw came to a “firm” oral
agreement to start a joint venture at the Wilson site. Tellez
agreed to: “build out” the Wilson site; provide $1.5 million in
funding for the renovation; and operate the facility when it was
finished.
       Shaw agreed to contribute ADPC’s Immunity Certificate to
operate the venture at the Wilson site and to provide his

                                 4
expertise with the retail aspect of the cannabis business. He also
promised Tellez that the two would be 50/50 partners and that
Tellez would immediately receive a 50 percent equity interest in
ADPC. And, Shaw agreed that Tellez could produce Spliffin at
the Wilson site.
      Andrejich participated in the discussions about the joint
venture and the negotiation of the oral agreement that the
parties eventually reached. On December 14, 2015, Andrejich
sent Shaw an e-mail with a draft letter of intent (LOI) that
contained the terms of the oral agreement.
      Tellez would not have proceeded with any agreement with
Shaw had it not been for Shaw’s Immunity Certificate; nor would
he have agreed to the deal if Shaw had not agreed to allow
plaintiffs to produce Spliffin at the Wilson site.

      2.    Management Transfer Agreement (MTA)

       Shortly after entering the oral agreement, Shaw informed
Tellez and Andrejich that they needed to prepare a written MTA
to memorialize their business relationship. Andrejich believed
that the MTA was intended to memorialize the terms of the oral
agreement that Tellez and Shaw had reached. Tellez understood
that the MTA was a legal formality; it was merely a “compliance”
document needed to prove that the parties could legally operate a
cannabis business at the Wilson site under ADPC’s Immunity
Certificate.
       Shaw discouraged Tellez and Andrejich from using their
own lawyer to draft the MTA because he did not want anyone
else to know about the business arrangement. Shaw told them to
hire another lawyer, Jacek Lentz. Shaw claimed that Lentz

                                5
understood how to prepare the type of agreement that they
contemplated.
       On December 16, 2015, Shaw e-mailed Andrejich and
Tellez an introduction to Lentz, informing them that Lentz would
send them a retainer agreement. Tellez paid Lentz $5,000,
believing Lentz would represent his interests. He expected that
Lentz would draft an agreement incorporating the terms of the
oral agreement as described in the LOI.
       During discussions about the MTA, Tellez and Andrejich
asked Shaw to provide them with ADPC’s corporate and financial
records. Shaw declined, saying that he would produce them after
the parties signed the MTA. Tellez and Andrejich also asked
whether ADPC had any outstanding debts or liabilities. Shaw
disclosed none.
       Tellez and Andrejich met with Lentz in early January 2016
to discuss the MTA. Lentz told them that under the MTA, Tellez
would be named a “director” in ADPC rather than being granted
an equity ownership interest because equity ownership could not
be conveyed in ADPC.
       On January 11, 2016, Lentz and Shaw presented a copy of
the MTA to Tellez and Andrejich. Tellez only “briefly went
through this agreement” in Lentz’s office because “there was a
sense of urgency in closing the . . . deal.”
       The MTA included new terms that had not been included in
the oral agreement and omitted other terms to which the parties
had agreed. Specifically, the MTA made the transfer of 50
percent of the managerial and operational control of ADPC to
Tellez conditional upon Tellez’s fulfilling specific terms, including
investing $1.5 million in the build-out of the location; paying
Shaw $2 million during the first two years of the agreement and

                                  6
a monthly salary of $10,000; and transferring $150,000 out of the
venture’s gross receipts every year to fund a “health center”
designed and managed by Shaw. The MTA also gave Shaw
authority to hire and fire all personnel for the venture, appoint
additional directors, and assume control of the management and
operations of the venture. Finally, the MTA included an
integration clause which provided that the MTA represented the
entire agreement and understanding between the parties
governing the subject matter, and superseded all prior
agreements, understandings, and representations.
       When Tellez and Andrejich inquired about the terms of the
oral agreement that had been excluded from the MTA, Shaw
assured them that the agreement would be amended to include
those terms, including the term that allowed Tellez to develop
and operate Spliffin at the Wilson site. Shaw reassured Tellez
that the MTA was a “preliminary” document to “get the ball
moving” so they could begin the venture. Shaw also explained
that the reason the agreement did not include a provision about
Spliffin was that “he didn’t want people to know that.” Tellez
signed the agreement in reliance on Shaw’s promise to amend the
MTA to allow Spliffin to operate at the Wilson site. Tellez would
not have signed the MTA if Shaw had not promised to amend it.

      3.    Construction Phase

      Tellez provided the capital for the renovation of the Wilson
site. He also paid the security deposit and the broker fee and
began paying the monthly rent of $35,000. In February 2016,
construction began at the site.

                                 7
      Although he collected his salary and accumulated various
expenses, Shaw played no role in the renovation.
      In April 2016, Tellez discovered that ADPC had an
outstanding tax obligation of over $1 million, which predated
Tellez’s agreement with Shaw. When Tellez and Andrejich
confronted Shaw about the tax liability, Shaw told them not to
worry. Tellez would not have signed the MTA had he known
about ADPC’s tax liability.
      Throughout this period, Shaw continued to discuss
amending the MTA “many different times,” but he never did so.
In early May 2016, Tellez, through new counsel, made a written
request for modifications to the MTA and ADPC’s corporate
records. Tellez also requested disclosure of the names and
addresses of all ADPC members with voting rights, a copy of the
bylaws, and other information. Shaw did not produce the
records.

C.   The End of the Relationship

       Following the completion of renovations, the Wilson site
included five cultivation rooms, and Tellez began operating
Spliffin at the site.
       During the summer of 2016, Tellez became concerned that
Shaw would not amend the MTA as he had promised. Although
Tellez sent Shaw records to prove that funds had been expended
to renovate the Wilson site, Shaw refused to “acknowledge any of
the expense towards the $1.5 million capital investment . . . .”
Further, Shaw began to complain about the production of Spliffin
at the site. For the first time, Shaw told Tellez that ADPC’s
Immunity Certificate did not authorize producing Spliffin at the

                               8
site. Although he believed that the Immunity Certificate did
permit the production of Spliffin at the site, in August 2016,
Tellez initially agreed to cease Spliffin’s operation. But
production of Spliffin resumed shortly thereafter. 4 Shaw knew
that Tellez had resumed production of Spliffin at the site in fall
2016.
       The first cannabis crop from the Wilson site was harvested
in October and after drying and curing, it would have been ready
for sale in November 2016. On October 27, 2016, however, Shaw
sent Tellez an e-mail accusing Tellez of engaging in the illegal
manufacture of Spliffin. Shaw demanded “veto power”
concerning “every decision and action that occur[red] in the build-
out and operations at [the] Wilson [site].” He also declared his
intent to take over all management decisions.
       On November 1, 2016, Tellez’s attorney responded that
Tellez intended to “immediately enforce all of his available rights
and remedies,” stop work at the site, end payments to Shaw, and
cease payments for rent. Tellez also filed mechanic’s liens
against the landlord of the Wilson site to protect the funds he
spent on the site’s construction.
       On November 4, 2016, Shaw arrived at the Wilson site with
four or five men, who were armed, wore bulletproof vests, and
carried tactical gear. According to one witness, Shaw and the
armed guards “basically busted in like they were the SWAT team
going around clearing rooms.” Shaw informed the employees at
the Wilson site that he was taking over and directed them to

4     Tellez and Andrejich maintained that Spliffin involved
cannabis “processing” which was permitted under the Immunity
Certificate.

                                9
leave immediately. Shaw admitted going to the facility with
“guys with guns” in order to take over the facility, lock Tellez out,
and remove him from managing the operations. The police were
summoned to help resolve the dispute.

D.    Other Evidence

       In addition to Tellez and Andrejich’s testimony above,
plaintiffs presented evidence from several others, including
Shaw’s former business partner Franco Brunetti. Brunetti
testified that he and Shaw had previously entered into a
partnership to develop a cannabis dispensary business based on
an oral agreement. Shaw agreed to give Brunetti an ownership
interest in ADPC and permission to use ADPC’s Immunity
Certificate in exchange for Brunetti developing a dispensary site
and running its operations. After operations commenced, Shaw
insisted that they execute a written agreement that changed the
terms of the deal and excluded the term giving Brunetti an
ownership interest in APDC. Shaw, however, promised to amend
the agreement later to add the term. He never did so and
eventually, without notice, moved his ADPC Immunity
Certificate to another location.
       Shaw also testified at trial. He denied that he and Tellez
entered into an oral agreement that predated the MTA.
According to Shaw, although he and Tellez engaged in a series of
oral negotiations in December 2015, the LOI represented only
Tellez’s opening offer for a deal that the parties continued to
negotiate. Shaw also claimed that the MTA contained the only
terms to which the parties ultimately agreed and denied that he
agreed to amend the MTA. Shaw also denied that he agreed to

                                 10
allow Tellez to operate Spliffin at the Wilson site or agreed to
amend the MTA. Shaw claimed that he made ADPC’s bylaws
available to Tellez and told Tellez about ADPC’s tax liability
before they signed the MTA.

             III. PROCEDURAL BACKGROUND

       On November 18, 2016, plaintiffs filed their initial
complaint. On February 10, 2017, plaintiffs filed the operative
first amended complaint asserting causes of action for (1) fraud
and deceit; (2) breach of oral contract; (3) declaratory relief;
(4) rescission of the MTA; (5) breach of the MTA; (6) breach of the
implied covenant of good faith and fair dealing; (7) negligence;
(8) negligent misrepresentation; (9) breach of fiduciary duty;
(10) quantum meruit; (11) constructive fraud; and (12) specific
performance of the oral agreement.
       Jury trial began on December 7, 2018. Defendants
requested that the trial be transcribed, but their counsel failed to
arrange to have a court reporter present for the first afternoon of
trial proceedings. Thus, the voir dire of the jury, the trial court’s
initial jury instructions, the opening statements, and a portion of
Andrejich’s direct testimony were not transcribed. 5

5     According to plaintiffs, during the portion of Andrejich’s
testimony that was not recorded, Andrejich provided evidence
about (1) his initial contacts with Shaw in late 2015 in which
Shaw made representations about his business and his intent for
the parties’ deal; and (2) the terms of the oral agreement that
Tellez claimed he reached with Shaw. The portion of Andrejich’s
testimony that is in our record is consistent with plaintiffs’
representation.

                                 11
       The jury returned verdicts in favor of plaintiffs for fraud for
$1 million; breach of oral contract for $700,000; breach of the
covenant of good faith and fair dealing for $400,000; negligence
for $300,000; negligent misrepresentation for $600,000; breach of
fiduciary duty for $200,000; quantum meruit for $175,000;
constructive fraud for $175,000; and $750,000 in punitive
damages. On the recission cause of action, the jury returned a
verdict that the MTA “should be” rescinded.
       On January 25, 2019, defendants filed a written objection
to the judgment, arguing that the verdicts were defective. The
trial court overruled the objection, signed the judgment, and
ruled that the court would not enter the judgment on specific
performance of the oral contract until after it conducted an
additional hearing. In March 2019, defendants filed a motion for
new trial.
       On May 9, 2019, the trial court held a hearing on the
motion for new trial and the specific performance remedy. The
court denied the motion for new trial and found that plaintiffs
were entitled to specific performance of the oral contract—an
order granting Tellez equal control and ownership of ADPC. The
court also ordered plaintiffs to choose between contract damages
and specific performance. Plaintiffs elected specific performance
of the oral agreement and agreed to forego the $1,100,000 in
contract damages that the jury awarded on the breach of oral
agreement and breach of the covenant of good faith and fair
dealing causes of action.
       On June 12, 2019, the trial court signed the judgment,
reducing damages to $3,200,000 and requiring defendants to
convey a one-half ownership interest in ADPC to Tellez.
Defendants timely filed a notice of appeal.

                                 12
       On July 16, 2019, defendants filed another motion for new
trial, reasserting their arguments from the first new trial motion
and contending there were flaws in the judgment regarding
specific performance. The trial court denied the motion and
defendants filed a second timely notice of appeal. 6

                        IV. DISCUSSION

A.    Sufficiency of the Evidence

      Defendants contend that the trial evidence failed to support
the judgment on the causes of action for breach of oral contract,
breach of the covenant of good faith and fair dealing, rescission,
fraud, constructive fraud, negligent representation, breach of
fiduciary duty, and negligence, and the award of punitive
damages.

      1.    Standard of Review

       In assessing the sufficiency of the evidence supporting the
jury’s findings of fact, we apply a substantial evidence standard
of review. (In re Marriage of L.R. & K.A. (2021) 66 Cal.App.5th
1130, 1146.) Our task is to decide “‘whether, on the entire record,
there is any substantial evidence, contradicted or
uncontradicted,’ supporting the court’s finding. [Citation.] ‘We
must accept as true all evidence . . . tending to establish the
correctness of the . . . findings . . . , resolving every conflict in
favor of the judgment.’” (Sabbah v. Sabbah (2007) 151

6     We granted defendants’ motion to consolidate the appeals.

                                 13
Cal.App.4th 818, 822–823.) If substantial evidence exists, “‘“it is
of no consequence that the [appellate] court believing other
evidence, or drawing other reasonable inferences, might have
reached a contrary conclusion.”’” (In re Marriage of DeSouza
(2020) 54 Cal.App.5th 25, 33.) “‘“Issues of fact and credibility are
questions for the trial court.” [Citations.]’” (In re S.A. (2010) 182
Cal.App.4th 1128, 1140.)
       The burden is on an appellant to demonstrate, based on the
record presented to the appellate court, that the trial court
committed an error that justifies the reversal of the judgment.
(Denham v. Superior Court (1970) 2 Cal.3d 557, 564 (Denham).)
Further, “‘[i]f any matters could have been presented to the court
below which would have authorized the order complained of, it
will be presumed that such matters were presented.’” (Bennett v.
McCall (1993) 19 Cal.App.4th 122, 127.) “‘[I]f the record is
inadequate for meaningful review, the appellant defaults and the
decision of the trial court should be affirmed.’” (Gee v. American
Realty & Construction, Inc. (2002) 99 Cal.App.4th 1412, 1416;
Hernandez v. California Hospital Medical Center (2000) 78
Cal.App.4th 498, 502 [observing that appellant has the burden of
providing an adequate record and the failure to provide an
adequate record on an issue requires that the issue be resolved
against appellant].)

      2.    Adequacy of the Record

       The threshold problem for defendants’ challenge to the
sufficiency of the evidence is the absence of a reporter’s trial
transcript, or a suitable substitute such as an agreed or settled
statement, from the first afternoon of the trial containing a

                                 14
portion of Andrejich’s testimony. Defendants contend, in their
reply brief, that they have not defaulted their sufficiency of the
evidence arguments because the trial court erred in failing to
grant a new trial based on the absence of the transcript. We need
not reach the merits of this contention as defendants raised it for
the first time in their reply brief. (Varjabedian v. City of Madera
(1977) 20 Cal.3d 285, 295, fn. 11.)
       In any event, we would not reverse on this ground because
defendants’ trial counsel conceded, in his declaration supporting
the new trial motion, that he failed to arrange for the proceedings
to be transcribed on the first afternoon because he calculated that
no relevant trial proceedings would occur then. Thus, defendants
are responsible for the inadequacy of the record on appeal.
       Defendants also argue that any failure to provide a
complete record on appeal is harmless because the record is
adequate for this court to conduct its review, even without
Andrejich’s complete testimony. And, they suggest that
Andrejich’s testimony was not outcome determinative. But
defendants’ suggestion is at odds with their motion for new trial
in which they maintained that Andrejich’s testimony on the first
afternoon of trial was critically important and that its absence
from the record was irreparably prejudicial to their case.
       As we explain below, the inadequate record is fatal to
defendants’ challenge to the sufficiency of the evidence
supporting the verdicts on the breach of oral agreement and
related causes of action and also hampers our ability to review
defendants’ other sufficiency of the evidence arguments.

                                15
      3.    Breach of Oral Agreement

       Defendants contend that there was no evidence of mutual
consent of certain and definite terms to support the breach of oral
agreement verdicts. The record reflects that Andrejich was
present during the meetings and conversations with Shaw that
resulted in the oral and written agreements and was involved
throughout the parties’ business relationship. On the second and
third day of trial, Andrejich authenticated various documents
and testified about his interpretation of the MTA, and about
Tellez’s work and contributions to the development of the Wilson
site, including the amounts Tellez paid to Shaw and his
consultants. But any testimony that Andrejich provided about
his initial conversations with Shaw, and the terms of the oral
agreement that predated the LOI, was not transcribed. Because
the testimony of the author of the LOI and witness to the oral
agreement is not available for review by this court, the record is
inadequate to consider the merits of defendants’ challenge to the
sufficiency of the evidence. (Denham, supra, 2 Cal.3d at p. 564.)
We therefore affirm the verdict on the breach of oral contract
claim.7
      Defendants alternatively argue that even if plaintiffs
proved the existence of an oral agreement, the breach of oral
agreement cause of action would fail because the MTA’s
integration clause extinguished any oral agreement between the

7     We also reject defendants’ challenges to the verdict on the
covenant of good faith and fair dealing and judgment for specific
performance as they depend exclusively on the success of the
challenge to the oral contract cause of action.

                                16
parties. This argument, however, is premised on defendants
prevailing on their challenge to the jury verdict in favor of the
rescission cause of action, an issue we discuss below.
      Having concluded that defendants have failed to provide an
adequate record on appeal, we could reject each of defendants’
other sufficiency arguments on this ground. But, we need not do
so because based on the record that we do have, we conclude
there was sufficient evidence for each of the other challenged
verdicts.

      4.    Rescission of the MTA8

        A contract may be rescinded when “the consent [to the
contract] of the party rescinding . . . was given by mistake[ ] or
obtained through . . . fraud[ ] or undue influence[ ] exercised by
. . . the party as to whom he rescinds . . . .” (Civ. Code, § 1689,
subd. (b)(1).) When a person with the capacity of reading and
understanding an instrument signs it, he is, absent fraud, bound
by its contents, and estopped from contending its provisions are
contrary to his intentions or understanding. (Jefferson v.
Department of Youth Authority (2002) 28 Cal.4th 299, 303.)
When, however, a person is induced to give consent based upon
intentional and material misrepresentations, the contract is
voidable and may be rescinded. (Ibid.; Rosenthal v. Great
Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 415.)

8     The “Rescission” cause of action was pled as an alternative
to the cause of action for breach of the MTA. The jury returned a
verdict finding that the MTA “should be rescinded.”

                                17
       According to defendants, because the material
misrepresentations (which they deny Shaw made) were “‘patently
at odds with the express provisions of the written contract,’” any
reliance by Tellez on these misrepresentations was unreasonable
as a matter of law. We disagree.
       Shaw assured Tellez that the MTA was a “preliminary”
document that was required for operations to begin at the Wilson
site. Further, Shaw promised Tellez and Andrejich that the MTA
would be amended later to include the terms that were important
to Tellez, including that Spliffin could be produced at the
location. He further provided an explanation for why Spliffin was
initially excluded from the MTA, namely, because Shaw “did not
want anyone to know about it.” On this record, the jury could
have reasonably concluded that when Tellez signed the MTA, he
did so in reasonable reliance on these misstatements.
       To the extent defendants’ challenge to the rescission verdict
is based on Shaw’s testimony at trial denying that he made the
misrepresentations, the jury implicitly rejected that testimony.
We do not revisit this finding on appeal. (See Stafford v. Mach
(1998) 64 Cal.App.4th 1174, 1182 [an implied finding rejecting a
witness’s testimony is binding on the appellate court].) Sufficient
evidence therefore supported the jury’s finding that the MTA
should be rescinded.
       Because we affirm the verdict on rescission, the MTA
“‘becomes a nullity; it and each of its terms and provisions cease
to be subsisting or enforceable against the other party.’” (Holmes
v. Steele (1969) 269 Cal.App.2d 675, 677.) Therefore, we also
reject defendants’ argument that the MTA and its integration
clause extinguished the oral agreement between the parties.

                                18
     5.    Fraud

       The elements of intentional fraud and deceit are:
(a) material misrepresentation, concealment, or nondisclosure;
(b) knowledge of falsity; (c) intent to induce reliance;
(d) justifiable reliance; and (e) resulting damage. (Engalla v.
Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 974.)
Unlike actual fraud, constructive fraud depends on the existence
of a fiduciary relationship. (Younan v. Equifax Inc. (1980) 111
Cal.App.3d 498, 516–517.) The elements of constructive fraud
are: (1) fiduciary relationship; (2) nondisclosure (breach of
fiduciary duty); (3) intent to deceive, and (4) reliance and
resulting injury (causation). (Ibid, fn. 14.)
       In challenging the verdict on the fraud cause of action,
defendants contend that there was insufficient evidence that:
Shaw made material misrepresentations or omissions; any
reliance on such misrepresentations or omissions by Tellez was
reasonable; and Tellez was harmed as a result. The evidence at
trial, however, demonstrated that Shaw made numerous
misstatements to Tellez and Andrejich. Indeed, even without a
complete record of Andrejich’s testimony, there was sufficient
evidence that Shaw falsely stated that: he would make Tellez a
50 percent equity owner of ADPC; Tellez was obligated to
contribute only $1.5 million in capital toward the venture; Shaw
would allow Spliffin to be produced at the Wilson site; and Shaw
would amend the MTA.
       Further, the trial evidence demonstrated that Tellez’s
reliance on these misstatements and omissions was justifiable.
In exchange for Shaw’s promises, Tellez agreed to develop the
Wilson site into a cannabis cultivation facility and dispensary;

                               19
provide $1.5 million in funding for the renovation; and operate
the facility when it was finished. Given the significant amount of
money and labor that Tellez agreed to contribute to the venture,
it was not unreasonable for him to rely on Shaw’s promise that he
too would provide significant contributions.
      Finally, that Tellez contributed both money and labor
toward the joint venture was sufficient evidence of harm.
      Defendants raise the same arguments in their challenge to
the verdict on constructive fraud and we reject them for the same
reasons. In addition, they contend that “there [was] no
substantial evidence of a fiduciary or confidential relationship”
between the parties or sufficient evidence of a breach. As
discussed above, there was sufficient evidence that Tellez and
Shaw, as partners in a joint venture, were engaged in a fiduciary
relationship. Plaintiffs also presented sufficient evidence that
Shaw breached his duties throughout the relationship by failing
to participate and cooperate in the development and operation of
the joint venture; by refusing to grant Tellez an equity interest in
ADPC; by refusing to amend the MTA; and by refusing to provide
information to Tellez. Thus, there was sufficient evidence to
support both the actual and constructive fraud verdicts.

      6.    Negligent Misrepresentation

       The elements of negligent misrepresentation are
(1) misrepresentation of a past or existing material fact;
(2) without reasonable ground for believing it to be true; (3) with
intent to induce another’s reliance on the fact misrepresented;
(4) ignorance of the truth and justifiable reliance on the
misrepresentation by the party to whom it was directed; and

                                20
(5) resulting damage. (Hydro-Mill Co., Inc. v. Hayward, Tilton &
Rolapp Ins. Associates, Inc. (2004) 115 Cal.App.4th 1145, 1154.)
Negligent misrepresentation “does not require intent to defraud
but only the assertion, as a fact, of that which is not true, by one
who has no reasonable ground for believing it to be true.”
(Conroy v. Regents of University of California (2009) 45 Cal.4th
1244, 1255.)
       We have already concluded that there was sufficient
evidence to support a finding that Shaw made material
misrepresentations. Defendants additionally contend that the
theories of negligent misrepresentation that were based upon the
allegations that Shaw misrepresented himself as an expert in the
cannabis business cannot survive because Shaw’s statements
about his background were either true or merely statements of
opinion. Actionable misrepresentations arise “(1) where a party
holds himself out to be specially qualified and the other party is
so situated that he may reasonably rely upon the former’s
superior knowledge; (2) where the opinion is by a fiduciary or
other trusted person; (3) where a party states his opinion as an
existing fact or as implying facts which justify a belief in the
truth of the opinion. [Citation.]” (Borba v. Thomas (1977) 70
Cal.App.3d 144, 152; see also Bily v. Arthur Young & Co. (1992) 3
Cal.4th 370, 408 [“When a statement, although in the form of an
opinion, is ‘not a casual expression of belief’ but ‘a deliberate
affirmation of the matters stated,’ it may be regarded as a
positive assertion of fact”].)
       We need not decide the merits of this argument because
there was sufficient evidence that Shaw made numerous other
misstatements that support the verdict on the negligent
misrepresentation cause of action. (See, e.g. Bresnahan v.

                                 21
Chrysler Corp. (1998) 65 Cal.App.4th 1149, 1153–1154 [holding
that verdict will not be disturbed on appeal if a claim is
supported by substantial evidence under any theory, even though
another theory submitted to the jury in support of the claim is
without any evidence to support it].) In any event, the argument
fails on its merits. The evidence at trial demonstrated that Shaw
was a partner, and therefore fiduciary, to Tellez. Further, Shaw
had been engaged in the business of cultivating cannabis since
the early 2000s. Thus, a jury could reasonably conclude that
when Shaw held himself out as an expert on legal compliance
issues related to the cannabis industry, he was making a positive
assertion of fact. A jury could also reasonably conclude that
ADPC’s outstanding tax liability and Shaw’s changing advice on
the legality of operating Spliffin at the Wilson site demonstrated
that Shaw was not in fact an expert on compliance issues.

      7.    Breach of Fiduciary Duty and Negligence

      Defendants next challenge the verdicts on the breach of
fiduciary duty and negligence causes of action on the ground that
there was no evidence of any fiduciary relationship between the
parties that gave rise to any duties. In the alternative, Shaw
argues that even if such a fiduciary relationship existed, there
was insufficient evidence that he breached it. We have already
rejected both arguments above.

      8.    Punitive Damages

     Defendants complain that there was no evidence that they
engaged in conduct that would warrant punitive damages and

                                22
that the trial court therefore erred in failing to grant a new trial
based on excessive punitive damages. An award of punitive
damages is appropriate where the evidence shows the defendant
acted with “oppression, fraud, or malice.” (Civ. Code, § 3294,
subd. (a), italics added.) In this context, “malice” is defined as
conduct that the defendant intends 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., § 3294, subd. (c)(1).) “Oppression” is
“despicable conduct that subjects a person to cruel and unjust
hardship in conscious disregard of that person’s rights.” (Id.,
§ 3294, subd. (c)(2).)
       The evidence in support of the fraud and constructive fraud
causes of action also support the awarding of punitive damages.
(Civ. Code, § 3294, subd. (a).) In addition, Shaw’s intentional
conduct in taking over the Wilson site with armed guards was
sufficient evidence of “a willful and conscious disregard of the
rights or safety of others” that supported punitive damages under
Civil Code section 3294. Plaintiffs presented evidence that
Shaw’s takeover of the facility was so dangerous, chaotic, and
frightening that the police were summoned. (Taylor v. Superior
Court (1979) 24 Cal.3d 890, 894 [recognizing “‘[w]here the
defendant’s wrongdoing has been intentional and deliberate, and
has the character of outrage frequently associated with crime, all
but a few courts have permitted the jury to award in the tort
action “punitive” or “exemplary” damages . . .”].) Consequently,
we conclude there was substantial evidence to support the
punitive damages award.

                                23
B.    Challenges to Verdict Form

      We next consider defendants’ argument that the trial court
erred in failing to grant a new trial on the grounds that the
verdict form was defective and that flaws in the verdict form
resulted in an award of excessive damages.

      1.    Background

       Neither party had submitted a proposed verdict form to the
trial court when trial began on December 7, 2018. The trial court
therefore requested that the parties submit their respective
proposed verdict forms no later than the morning of
December 14, 2018. Defendants’ counsel agreed to comply with
the request, but there is no indication in the record that he did
so. Plaintiffs’ counsel proposed general verdicts, but defendants
wanted to use special verdicts. The verdict form was still not
finalized when the court released the jurors to begin deliberations
on December 17, 2018. Defendants’ counsel had submitted his
form in the wrong format, so the court clerk returned it. When
the court inquired if the parties would agree to use the general
verdict form, defendants’ counsel insisted on special verdicts.
The court directed counsel to work together to prepare the verdict
form. Counsel did so and the form they jointly deemed acceptable
was given to the jury.
       After the verdicts were announced, the jurors were polled
and they confirmed the verdicts. At that time, defendants’
counsel did not object to the verdicts, and the trial court
discharged the jury.

                                24
      In their motion for a new trial, defendants argued, among
other things, that the verdicts were ambiguous and defective
because they failed to require the jury to make factual findings
on each cause of action, failed to apportion liability between the
defendants, and permitted the jury to award excessive damages.
The trial court disagreed, concluding that defendants forfeited
any objection to the form of the verdict by stipulating to the form
used and failing to object before the jury was discharged. The
court also concluded that defendants failed to demonstrate any
error regarding the verdict form.

      2.    Analysis

       Defendants argue that the trial court erred in denying their
motion for new trial because they had no meaningful opportunity
to present their verdict form or object to the one presented to the
jury. The record belies their contention. Defendants had ample
time to prepare the verdict form prior to trial and even after it
began. Yet they failed to submit their verdict form until shortly
before the jury began deliberating and then submitted their
verdict form in an improper format. When the court provided
them yet another opportunity to prepare a verdict form,
defendants worked with opposing counsel to prepare and submit
the verdict form. At that point, the court inquired of counsel
whether they both agreed to the form of the verdicts, and
defendants’ counsel affirmed his agreement. Under these
circumstances, defendants cannot now complain about the form
of the verdicts that they submitted. (See Heppler v. J.M. Peters
Co. (1999) 73 Cal.App.4th 1265, 1287 [claim that special verdict
form did not adequately address defendant’s negligence was

                                25
waived when plaintiffs failed to submit special verdict form
addressing the alleged negligence]; see also Morales v. 22nd Dist.
Agricultural Assn. (2016) 1 Cal.App.5th 504, 534–535 [objection
to the form of questions in a verdict must be timely raised in the
trial court or the issue is waived on appeal].)
       Moreover, after the jury rendered its verdicts and was
polled, defendants did not raise any concern about the verdicts
with the trial court. Nor did they ask to have the jury correct or
clarify the verdicts before the court discharged them. (Code Civ.
Proc., § 619 [“When the verdict is announced, if it is informal or
insufficient, in not covering the issue submitted, it may be
corrected by the jury under the advice of the court, or the jury
may be again sent out”].) When a purported defect in the verdict
form is apparent at the time the jury renders its verdict, the
failure to object and request clarification or further deliberation
before the court discharges the jury precludes a party from later
challenging the validity of the verdict. (See Taylor v. Nabors
Drilling USA, LP (2014) 222 Cal.App.4th 1228, 1242–1243
[challenge to jury’s skipping questions on confusing verdict form
forfeited where “appellant did not raise the defective verdict issue
until after the jury had been discharged”].)
       In arguing against forfeiture, defendants cite Saxena v.
Goffney (2008) 159 Cal.App.4th 316 (Saxena), for the proposition
that “courts have declined to apply the waiver rule ‘where the
record indicates that the failure to object was not the result of a
desire to reap a “technical advantage” or engage in a “litigious
strategy.”’” (Id. at pp. 327–328.) Saxena, however, is
distinguishable. The defendant in that case did not challenge the
“verdict form as such . . . [but] merely argue[d] the verdict form
submitted by plaintiffs, and the verdict returned by the jury [did]

                                26
not support entry of judgment on a battery theory.” (Ibid.)
Further, the court concluded that the defendant had not waived
his argument on appeal because he had raised it in a demurrer
and objection to jury instructions. (Ibid.)
      Even if we were to consider the merits of defendants’
challenge to the verdict form, we would reject it. Defendants
complain that the purported “special verdict form” failed to ask
the jury to make certain findings. Contrary to defendants’
characterization, the verdict form here was a general one. It did
not ask the jury to make findings on the elements of the
underlying causes of action, but instead generally asked the jury
to make conclusions on each cause of action and, when the
conclusion was in plaintiffs’ favor, to award damages. (Shaw v.
Hughes Aircraft Co. (2000) 83 Cal.App.4th 1336, 1347, fn. 7.) It
therefore implied a finding in favor of the prevailing party of
every fact essential to support that party’s action or defense, and
we will indulge all inferences in favor of a general verdict.
(Baxter v. Peterson (2007) 150 Cal.App.4th 673, 678; see Wilson v.
County of Orange (2009) 169 Cal.App.4th 1185, 1193.)
      Finally, we reject defendants’ related claim that the flawed
verdict form resulted in excessive damages because it allowed for
a double recovery on the causes of action.9 Here, the tort and
contract claims were supported by multiple facts and
independent evidence. Plaintiffs presented evidence that Shaw

9      We observe that defendants do not claim that the amount
of the damages awarded are excessive because sufficient evidence
does not support them. Instead, they argue that the damages are
excessive because the verdict form permitted the jury to award
duplicative damages.

                                27
made numerous misrepresentations and breached his agreement
with Tellez in various ways. Thus, the jury had multiple distinct
grounds upon which to reach a verdict on each of the causes of
action. Because the causes of action are not necessarily based on
a single event or the same evidence of misconduct, and because
the verdicts are general, defendants have not demonstrated that
the damages awarded resulted in an improper double recovery.
(Tavaglione v. Billings (1993) 4 Cal.4th 1150, 1155 [“by reason of
the ‘general verdict rule,’ it is unnecessary to determine whether
every count or theory of recovery is legally valid and supports the
general verdict, but only whether any one such theory is valid
and supports that verdict”].) Further, the jury was instructed
that “[p]laintiffs seek damages from [defendants] under more
than one legal theory. However, each item of damages may be
awarded only once regardless of the number of theories alleged.”
We assume that the jury followed that instruction (People v.
Sanchez (2001) 26 Cal.4th 834, 851) when it awarded different
damage awards.

                                28
                      IV. DISPOSITION

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

      NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

                                          KIM, J.

We concur:

             RUBIN, P. J.

             BAKER, J.

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