Hasso v. Hapke ( 2014 )


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  • Filed 7/15/14 (unmodified opn. attached)
    CERTIFIED FOR PUBLICATION
    IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
    FOURTH APPELLATE DISTRICT
    DIVISION THREE
    RONALD HASSO, as Trustee, etc.,
    Plaintiff and Appellant,                         G047495
    v.                                          (Super. Ct. No. 30-2009-00333066)
    JOHN HAPKE,                                         ORDER MODIFYING OPINION
    AND DENYING PETITION FOR
    Defendant and Appellant;                        REHEARING
    [CHANGE IN JUDGMENT]
    CHARLES FISH INVESTMENTS, INC.,
    et al.,
    Defendants and Respondents
    _________________________________
    RONALD HASSO, as Trustee, etc.,
    Plaintiff and Appellant,
    v.                                            G047588
    ROCKWATER AMERICAN                                   (Super. Ct. No. 30-2009-00333066)
    MUNICIPAL FUND, LLC, et al.,
    Defendants and Appellants.
    Appellant John Hapke has filed a petition for rehearing in which he
    requests that we modify our opinion filed on June 19, 2014 to direct the trial court to
    enter judgment in his favor in accordance with Code of Civil Procedure section 629. We
    GRANT his request for modification.
    The opinion filed in this case on June 19, 2014 is hereby ORDERED
    modified as follows:
    1.   On page 60 of the opinion, in the third full paragraph, delete the following
    sentence: “The order denying his motion for judgment notwithstanding the verdict is
    moot.”
    2.   Substitute the following new sentence in its place: “The trial court shall
    enter judgment in his favor.”
    This modification changes the judgment.
    The petition for rehearing filed on July 3, 2014 is DENIED.
    MOORE, J.
    WE CONCUR:
    O’LEARY, P. J.
    RYLAARSDAM, J.
    2
    Filed 6/19/14 (unmodified version)
    CERTIFIED FOR PUBLICATION
    IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
    FOURTH APPELLATE DISTRICT
    DIVISION THREE
    RONALD HASSO, as Trustee, etc.,
    Plaintiff and Appellant,                        G047495
    v.                                          (Super. Ct. No. 30-2009-00333066)
    JOHN HAPKE,                                         OPINION
    Defendant and Appellant;
    CHARLES FISH INVESTMENTS, INC.,
    et al.,
    Defendants and Respondents
    _________________________________
    RONALD HASSO, as Trustee, etc.,
    G047588
    Plaintiff and Appellant,
    (Super. Ct. No. 30-2009-00333066)
    v.
    ROCKWATER AMERICAN
    MUNICIPAL FUND, LLC, et al.,
    Defendants and Appellants.
    Appeals from a judgment and orders of the Superior Court of Orange
    County, Richard W. Luesebrink, Judge. (Retired judge of the Orange Super. Ct. assigned
    by the Chief Justice pursuant to art. VI, § 6 of the Cal. Const.) Affirmed in part and
    reversed in part.
    Winget, Spadafora & Schwartzberg, Brandon S. Reif, Marc S. Ehrlich and
    Kelsey L. Hotchkiss for Plaintiff and Appellant Ronald Hasso as trustee of the 2006 May
    S. Hasso Serrano Family Trust and as trustee of the 2006 Norman Hasso Family Trust.
    Robert D. Feighner for Defendants and Appellants Rockwater American
    Municipal Fund, LLC, Rockwater Municipal Advisors, LLC and Bryan Williams.
    Brown Rudnick, Joel S. Miliband and Stephen R. Cook for Defendant and
    Appellant John Hapke.
    Krause, Kalfayan, Benink & Slavens, Vincent D. Slavens and Mary K.
    Wyman for Defendants and Respondents Charles Fish Investments, Inc. and Charles
    Fish.
    *             *             *
    As they say, timing is everything. In August 2007, the initial trustee of two
    family trusts invested millions in the Rockwater American Municipal Fund, LLC (RAM
    Fund)—a hedge fund engaged in municipal arbitrage.1 The RAM Fund was managed by
    Rockwater Municipal Advisors, LLC (RMA), its managing member. In November 2007,
    Charles Fish Investments, Inc. (CFI) transferred its assets to Rockwater CFI, LLC, a
    wholly owned subsidiary of RMA, in exchange for a 15 percent interest in RMA. CFI
    had an option to unwind the transaction, if its interest in RMA did not meet certain
    benchmark values. The RAM Fund was devastated by the stock market crash and the
    trust investments were largely wiped out by 2008. CFI exercised its option to unwind the
    1      A marketing brochure described the RAM Fund as “a multi-manager municipal
    arbitrage fund for high net worth and institutional clients.” It explained: “Municipal
    arbitrage is an investment strategy that creates two ownership interests in the same
    municipal bond to take advantage of the spread between long-term and short-term
    municipal bond interest rates.”
    2
    transaction with RMA and Rockwater CFI, LLC, and obtained a return of the assets
    originally belonging to it.
    The successor trustee of the trusts sued the RAM Fund, RMA, Bryan
    Williams (Williams), who was the founder of the RAM Fund and the chief executive
    officer of RMA, John Hapke (Hapke), who was the chief financial officer of the RAM
    Fund, CFI, and Charles Fish (Fish), who was the chairman and chief executive officer of
    CFI. After it had seen clips from the movie Wall Street 2 (Twentieth Century Fox 2010)
    and a power point presentation with eight screens captioned “Greed,” a jury awarded the
    successor trustee a $4,640,380 judgment against the RAM Fund, RMA, Williams, and
    Hapke.2 The successor trustee was unsuccessful in his attempt to obtain a judgment
    against CFI and Fish. The RAM Fund, RMA, and Williams (collectively, the Rockwater
    Defendants), on the one hand, and Hapke, on the other hand, have each filed an appeal
    claiming the RAM Fund was simply the victim of the market crash. The successor
    trustee has appealed as well, seeking to hold liable CFI and Fish, the defendants who “got
    away.”
    The judgment against RMA and Williams for actual and constructive
    fraudulent transfer is reversed and the judgment in favor of CFI and Fish on those causes
    of action is affirmed. There is no substantial evidence to show that RMA and Williams
    made a fraudulent transfer, within the meaning of the Uniform Fraudulent Transfer Act
    (Civil Code section 3439 et seq.) (UFTA), in returning CFI’s assets upon unwinding.
    To the extent the judgment holds the Rockwater Defendants and Hapke
    liable on the causes of action for fraud by intentional misrepresentation, fraud by
    concealment, and/or negligent misrepresentation, it is reversed. Even if the Rockwater
    Defendants or Hapke had made any material misrepresentations or omissions, and even if
    the initial trustee of the trusts had relied thereon, any such reliance would have been
    2      The defendants made a collective motion for a mistrial based on the power point
    presentation regarding “Greed.” The denial of that motion is not at issue on appeal.
    3
    unreasonable. For the same reason, the judgment in favor of CFI and Fish on those
    causes of action is affirmed.
    The judgment against the RAM Fund and Hapke for breach of fiduciary
    duty and professional negligence is reversed, because there is no substantial evidence to
    show that they were investment advisers within the meaning of Corporations Code
    section 25009. However, the judgment against RMA and Williams on those causes of
    action is affirmed because there is substantial evidence to show that they were investment
    advisers and that they breached their fiduciary duties to the initial trustee. The judgment
    in favor of CFI and Fish on the breach of fiduciary duty cause of action is affirmed
    because there is substantial evidence to show that they did not breach any fiduciary duty.
    The court’s finding that CFI was not the alter ego of RMA is supported by
    substantial evidence. Consequently, we affirm the ruling that CFI was not liable for the
    debts of RMA. The ruling that Fish was not liable for the debts of CFI is moot, inasmuch
    as the judgment in favor of CFI on all causes of action is affirmed.
    I
    FACTS
    A. BACKGROUND:
    (1) Agreement between CFI and RMA—
    CFI, Fish, RMA, and its wholly-owned subsidiary, Rockwater CFI, LLC,
    entered into a contribution agreement in November 2007. The contribution agreement
    provided that CFI would contribute certain assets to Rockwater CFI, LLC. In
    consideration therefor, Rockwater CFI, LLC agreed to assume certain obligations of CFI
    and RMA agreed to issue to CFI certain “Class B Units, representing approximately 15%
    of the issued and outstanding membership interests” of RMA. The contribution
    agreement gave CFI the option to unwind the deal as early as January 1, 2010, if its
    interest in RMA was worth less than certain threshold figures.
    4
    Also in November 2007, Fish, RMA and Rockwater CFI, LLC entered into
    an employment agreement, pursuant to which RMA employed Fish as a managing
    principal. At the same time, RMA hired CFI vice president Betsy Shelton as well.
    The parties ultimately agreed to an early termination of their arrangement.
    An unwind agreement dated April 15, 2009 was executed by CFI, Fish, Shelton, RMA,
    and Rockwater CFI, LLC. The unwind agreement provided that the contribution
    agreement was rescinded and terminated effective May 1, 2009. As of that date, CFI and
    RMA returned their respective property to each other and CFI agreed to pay RMA
    $56,000 in settlement.
    (2) The Trusts—
    The two irrevocable trusts involved in this matter are the 2006 May S.
    Hasso Serrano Family Trust, created for the benefit of the descendants of May S. Hasso
    Serrano (Serrano), and the 2006 Norman Hasso Family Trust, created for the benefit of
    the descendants of Norman Hasso. Serrano and Norman Hasso are brother and sister.
    The 2006 May S. Hasso Serrano Family Trust was funded by Serrano’s
    parents. Serrano herself was neither the trustor nor the trustee. Rather, Bart Colson
    (Colson) was the initial trustee of each trust. He was a long-time family friend and
    business associate. At the end of 2009, Serrano’s nephew Ronald Hasso (Hasso) took
    over as successor trustee.
    (3) Serrano’s Characterization of Events—
    Hasso’s case was built largely on Serrano’s testimony, which we describe
    hereinafter.
    Serrano has a bachelor’s degree with an economics major from UCI, an
    MBA from UCLA, and a law degree from Pepperdine. She passed the bar exam, but
    never practiced law.
    5
    One day when Serrano was visiting Attorney Wayne Casey on an unrelated
    matter, he mentioned an interesting investment opportunity. Serrano asked for
    information about the investment.
    Sometime thereafter, in April 2007, Hapke telephoned her. According to
    Serrano, Hapke explained that Attorney Casey had referred him and “that he had a
    background in investment advice” and he thought they “might be interested in some tax-
    free investments” for the trusts. Serrano told him that the trust was for the benefit of her
    young children and that the primary objective was to have a safe investment and preserve
    capital.
    Serrano accepted the offer of Williams and Hapke to make a presentation to
    her at her home. In advance of the meeting, Hapke sent her a package of materials
    including an investment proposal for the 2006 May S. Hasso Serrano Family Trust,
    which she reviewed before the meeting, and a RAM Fund marketing brochure. The
    investment proposal allocated assets to three classifications—liquid investments,
    traditional municipal bonds, and the RAM Fund.
    Serrano and her husband were present at the May 29, 2007 meeting, along
    with Williams and Hapke. Williams and Hapke gave a power point presentation and
    provided a hard copy of it to Serrano. According to Serrano, Williams and Hapke told
    her there were a lot of risks, but that they had methods for managing and minimizing
    them. She also said they repeatedly told her the proposed investment was low risk and
    appropriate for the trusts.
    Williams and Hapke provided an explanation of municipal arbitrage.
    Serrano testified to her understanding that the bond was split into two component parts,
    one being the feature that paid interest over time and the other being the remainder of the
    bond, and that each of the two parts was sold to a different party. She understood that the
    remainder of the bond was to go to the RAM Fund sub-manager. Williams and Hapke
    did not go into detail on the identity of the sub-manager.
    6
    Serrano understood that the RAM Fund was a hedge fund. She said
    Williams and Hapke told her she could get an 8 to 10 percent return, but that the return
    was actually more beneficial than that because it was tax exempt. According to Serrano,
    Williams said, “‘In the worst case scenario you could lose 10 percent.’” That was
    supposed to be “‘if the world fell apart.’”
    After the meeting, Hapke sent Serrano an email stating: “‘Our proposed
    investment strategy is designed to deliver attractive returns with nominal risk, a result
    that seems ideally suited to the trusts.’” Within a day or two after the meeting, Serrano
    sent an email to Williams and Hapke telling them she was going to recommend to Colson
    that he follow their proposal and make an investment.
    Williams sent, in care of Serrano, a letter dated June 6, 2007 addressed to
    Colson. The letter included a copy of the private placement memorandum with respect to
    the RAM Fund. Serrano confirmed that she received the letter and the copy of the private
    placement memorandum.
    After receiving the documents, Serrano met in person with Colson.
    According to Serrano, she was the one who made the decision to invest, and Colson
    relied on her decision.
    In mid-June, 2007, Colson executed subscription agreements for investment
    in the RAM Fund. However, before the trust money was wired in, Serrano’s mother
    contacted her and expressed concern that some hedge funds were collapsing. She
    suggested that Serrano check into whether the hedge fund the trusts were investing in was
    affected. Serrano then contacted Hapke, and asked whether the investment had become
    more risky because of an unstable market.
    In response, Hapke sent Serrano a June 25, 2007 e-mail with a market
    update attached and the two of them also spoke. According to Serrano, Hapke reassured
    her that everything was alright and the investment was still safe and appropriate for the
    trusts.
    7
    Colson wired the trust money around August 6 or 8, 2007. By the
    following month, Serrano learned that the investment of each trust had already lost
    money. Around February 2008, Serrano asked for a return of principal. However, the
    investments were subject to a two-year lockup and could not then be returned.
    Serrano and Williams met in March 2008. She then found out that there
    had been leveraging and margin calls and the trust investments basically had been wiped
    out. Sometime in 2009, Serrano learned that a decision had been made to wind up the
    RAM Fund. She thought the trusts had lost roughly $2.5 million apiece.
    (4) Trust Investment Documentation—
    On June 13, 2007, Colson as trustee executed a RAM Fund subscription
    agreement for each trust. He invested $3,000,000 in the RAM Fund on behalf of each of
    the two trusts. The RAM Fund signed the subscription agreements on August 1, 2007.
    Colson only invested trust monies in the RAM Fund. He did not invest in any traditional
    bonds or liquid investments managed by CFI.
    B. PROCEDURAL HISTORY:
    Hasso filed a second amended complaint on behalf of the trusts. He alleged
    that the defendants engaged in investment fraud and related wrongful activity by enticing
    Colson, the prior trustee of the trusts, to invest $3 million of each trust’s assets into the
    RAM Fund. He further alleged that the nature of the RAM Fund was misrepresented,
    that it was not a suitable investment for the trusts, and that each trust lost at least $2.4
    million, or 80 percent.
    The case was tried in three phases. In the first phase, a jury trial was held
    on causes of action for: (1) breach of fiduciary duty; (2) fraud by intentional
    misrepresentation; (3) fraud by concealment; (4) actual fraudulent conveyance; (5)
    constructive fraudulent conveyance; (6) professional negligence; and (7) negligent
    misrepresentation. The jury found in favor of CFI and Fish on all causes of action
    8
    against them. It found all other defendants liable on multiple causes of action. In short,
    Hasso prevailed on each cause of action as against more than one defendant, excluding
    CFI and Fish.
    In the second phase, the issue of whether to award punitive damages
    against either Williams or RMA was tried before a jury. The jury awarded no punitive
    damages. In the third phase, the issues of alter ego and/or single enterprise liability with
    respect to Fish and CFI were tried before the court. The court held that CFI and RMA
    were not a single enterprise and that CFI was not the alter ego of Fish.
    The judgment held the Rockwater Defendants and Hapke jointly and
    severally liable in the amount of $4,640,380. It further held that Hasso take nothing from
    either CFI or Fish.
    The Rockwater Defendants filed both a motion for judgment
    notwithstanding the verdict and a new trial motion. The court denied the motion for
    judgment notwithstanding the verdict. It granted the new trial motion as to the causes of
    action for actual and constructive fraudulent conveyance, but as to damages issues only.
    Hapke also filed both a motion for judgment notwithstanding the verdict
    and new trial motion. The court denied both of Hapke’s motions.
    Hasso filed a motion for judgment notwithstanding the verdict to set aside
    the portion of the judgment in favor of CFI and Fish. He also filed a new trial motion
    with respect to CFI and Fish. The court denied each of Hasso’s motions.
    Hasso filed a notice of appeal from: (1) the portions of the judgment in
    favor of CFI and Fish and denying Hasso’s equitable claims; (2) the order denying
    Hasso’s motion for judgment notwithstanding the verdict; (3) the order denying Hasso’s
    new trial motion; and (4) the order granting in part the new trial motion of the Rockwater
    Defendants with respect to the causes of action for actual and constructive fraudulent
    conveyance.
    9
    The Rockwater Defendants filed a cross-appeal from the judgment and
    from the orders denying their motion for judgment notwithstanding the verdict and
    denying in part their new trial motion.
    Hapke filed a notice of appeal from the judgment, the order denying his
    motion for judgment notwithstanding the verdict, and the order denying his new trial
    motion. However, in his opening brief on appeal, he challenges only the judgment and
    the order denying his motion for judgment notwithstanding the verdict.
    This court, on its own motion, consolidated the appeals.
    II
    DISCUSSION
    A. STANDARDS OF REVIEW:
    “The trial court’s power to grant a motion for judgment notwithstanding the
    verdict is the same as its power to grant a directed verdict. (Code Civ. Proc., § 629.) ‘A
    motion for judgment notwithstanding the verdict may be granted only if it appears from
    the evidence, viewed in the light most favorable to the party securing the verdict, that
    there is no substantial evidence in support.’ [Citations.] On appeal from the denial of a
    motion for judgment notwithstanding the verdict, we determine whether there is any
    substantial evidence, contradicted or uncontradicted, supporting the jury’s verdict.
    [Citations.] If there is, we must affirm the denial of the motion. [Citations.] If the
    appeal challenging the denial of the motion for judgment notwithstanding the verdict
    raises purely legal questions, however, our review is de novo. [Citation.]” (Wolf v. Walt
    Disney Pictures & Television (2008) 
    162 Cal. App. 4th 1107
    , 1138.)
    “We defer to the trial court’s factual determination when the court grants a
    motion for new trial, not when the court denies such a motion. When the court denies the
    motion, we presume the jury’s verdict is correct. [Citation.]” (Mammoth Lakes Land
    Acquisition, LLC v. Town of Mammoth Lakes (2010) 191 Cal.App.4th 435,473.)
    10
    “Code of Civil Procedure section 657 states: ‘A new trial shall not be
    granted upon the ground of insufficiency of the evidence to justify the verdict or other
    decision, nor upon the ground of excessive or inadequate damages, unless after weighing
    the evidence the court is convinced from the entire record, including reasonable
    inferences therefrom, that the court or jury clearly should have reached a different verdict
    or decision.’ A trial court has broad discretion in ruling on a new trial motion, and the
    court’s exercise of discretion is accorded great deference on appeal. [Citation.]”
    (Fassberg Construction Co. v. Housing Authority of City of Los Angeles (2007) 
    152 Cal. App. 4th 720
    , 751-752.)
    B. PRELIMINARY MATTER—EFFECT OF HASSO’S ABANDONMENT OF APPEAL
    FROM ORDER GRANTING NEW TRIAL AS TO DAMAGES ONLY:
    The Rockwater Defendants filed a cross-appeal from the judgment and
    from the orders denying their motion for judgment notwithstanding the verdict and
    denying in part their new trial motion.
    Hasso entreats us to ignore the cross-appeal of the Rockwater Defendants.
    He reminds us that, in his own notice of appeal, he challenged the court’s order granting,
    with respect to damages issues only, the motion of the Rockwater Defendants for a new
    trial on the fraudulent transfer claims.3 However, as Hasso readily admits, he has not
    challenged the order in his opening brief on appeal. Consequently, his challenge to that
    order is deemed abandoned. (G.R. v. Intelligator (2010) 
    185 Cal. App. 4th 606
    , 610, fn.
    1.) Hasso argues that because he is not pursuing an appeal from the order for a partial
    3      The court in Cobb v. University of So. California (1996) 
    45 Cal. App. 4th 1140
    addressed the situation where there has been a “grant of a partial new trial after
    determination of all issues in a matter.” (Id. at p. 1144.) It stated: “If a new trial is
    ordered as to some issues but not as to others (for example, to retry the issue of damages
    but not of liability), the order granting the new trial is appealable by any party aggrieved
    by the order, including the moving party who sought a new trial as to all issues.
    [Citations.]” (Ibid.)
    11
    new trial on damages, and the Rockwater Defendants to do not appeal from it either, their
    protective cross-appeal is moot. He cites Marshall v. Brown (1983) 
    141 Cal. App. 3d 408
    and Sandco American, Inc. v. Notrica (1990) 
    216 Cal. App. 3d 1495
    .
    The Rockwater Defendants, however, assert that even though no one is
    challenging that particular order on appeal, this court still has jurisdiction over their
    appeal from the order denying their motion for judgment notwithstanding the verdict and
    from the order denying their new trial motion as to liability issues. As stated in Saxena v.
    Goffney (2008) 
    159 Cal. App. 4th 316
    , “An appeal may be taken from an order denying a
    motion for JNOV even where the trial court has granted, or denied, a new trial motion.
    [Citations.]” (Id. at p. 324.) Furthermore, they emphasize that where the allegations and
    evidence are insufficient to establish liability, the court may resolve the protective cross-
    appeal in the interests of judicial economy. They cite Adams v. City of Fremont (1998)
    
    68 Cal. App. 4th 243
    , wherein the court stated: “When parties file both an appeal from an
    order granting a new trial and a protective appeal from the judgment, we generally
    consider the appeal from the new trial order first. [Citations.] However, where the
    appeal from the judgment shows that the allegations and proof of the plaintiff are
    insufficient to establish liability, we may depart from this normal procedure because
    affirmance of the order granting new trial will simply continue wasteful litigation, while
    reversal of the judgment will terminate it on the merits. [Citation.]” (Id. at p. 261, fn.
    15.)
    The foregoing rule applies in this instance. For reasons we shall show, the
    judgment holding RMA and Williams liable on the fraudulent conveyance causes of
    action must be reversed. Consequently, the issues pertaining to the award of damages on
    those causes of action are moot. We will address the issues the Rockwater Defendants
    raise in their protective cross-appeal.
    12
    C. FRAUDULENT CONVEYANCE:
    (1) Allegations and Procedural History—
    Hasso’s causes of action for actual and constructive fraudulent conveyance
    were based on the unwinding of the contribution agreement between CFI, Fish, RMA,
    and Rockwater CFI, LLC. Hasso alleged that CFI and Fish paid no consideration for the
    unwinding of the contribution agreement. His second amended complaint stated: “. . .
    CFI and Fish were able to unwind the merger, transfer RMA property and clients to CFI
    and effectively strip RMA of all of its assets and revenue sources rendering RMA
    insolvent. Such acts were done with the intent to hinder, delay or defraud Plaintiffs of
    their investment capital, commissions, placement fees, management fees, performance
    fees, service charges and other fees.”
    The jury found that RMA and Williams were liable on both the actual and
    constructive fraudulent conveyance causes of action, but that CFI and Fish were not
    liable on either cause of action. It found that the value of the property transferred was
    “$1,937,201.53 annually.” (Boldface omitted.)
    Hasso, in his motion for judgment notwithstanding the verdict and new trial
    motion, argued: (1) inasmuch as the jury found RMA and Williams liable for actual and
    constructive fraudulent conveyance, it was necessarily required to find CFI and Fish
    liable as well; and (2) the evidence compelled a finding that CFI and Fish were liable for
    actual and constructive fraudulent conveyance. Hasso renews his arguments on appeal,
    contending CFI and Fish should be held liable for actual and constructive fraudulent
    conveyance.
    In their motion for judgment notwithstanding the verdict, the Rockwater
    Defendants argued: (1) there was no substantial evidence of an asset transfer under the
    UFTA because income not yet earned under a management agreement is not an asset; and
    (2) there was no substantial evidence of the value of the property transferred because
    there was no evidence of the amount of fees CFI charged under the management
    13
    agreements. In their new trial motion, the Rockwater Defendants reiterated the foregoing
    arguments and added that the finding of a fraudulent conveyance was contrary to law.
    On appeal, the Rockwater Defendants maintain that the judgment on the
    fraudulent conveyance claims cannot stand because: (1) the future management fees of
    CFI were not an asset within the meaning of the UFTA; and (2) there was insufficient
    evidence to support the damages award.
    (2) Uniform Fraudulent Transfer Act—
    Under the UFTA, “a transfer of assets made by a debtor is fraudulent as to a
    creditor, whether the creditor’s claim arose before or after the transfer, if the debtor made
    the transfer (1) with an actual intent to hinder, delay or defraud any creditor, or (2)
    without receiving reasonably equivalent value in return, and either (a) was engaged in or
    about to engage in a business or transaction for which the debtor’s assets were
    unreasonably small, or (b) intended to, or reasonably believed, or reasonably should have
    believed, that he or she would incur debts beyond his or her ability to pay as they became
    due. (Civ. Code, § 3439.04[, subd. (a)(1),(2)]; [citation].) A transfer by a debtor is
    fraudulent as to creditors whose claims arose before the transfer if the debtor made the
    transfer (1) without receiving reasonably equivalent value in exchange, and (2) either (a)
    was insolvent at the time of the transfer, or (b) became insolvent as a result of the
    transfer. (Civ. Code, § 3439.05.)” (Monastra v. Konica Business Machines, U.S.A., Inc.
    (1996) 
    43 Cal. App. 4th 1628
    , 1635.) A transfer described in Civil Code section 3439.04,
    subdivision (a)(1) is characterized as actual fraud, and a transfer described in either Civil
    Code section 3439.04, subdivision (a)(2) or Civil Code section 3439.05 is characterized
    as constructive fraud. (Cf. Mejia v. Reed (2003) 
    31 Cal. 4th 657
    , 661, 664; Civ. Code,
    § 3439.04, as amended by Stats. 2004, ch. 50, § 1.)
    “A creditor who is damaged by a transfer described in either Civil Code
    section 3439.04 or Civil Code section 3439.05 can set the transfer aside or seek other
    appropriate relief under Civil Code section 3439.07 [Citation.] A transfer that would
    14
    otherwise be voidable as intentionally fraudulent under section 3439.04, subdivision
    (a)[(1)], is not voidable against a transferee who took in good faith and for a reasonably
    equivalent value. (Civ. Code, § 3439.08, subd. (a).)” (Monastra v. Konica Business
    Machines, U.S.A., 
    Inc., supra
    , 43 Cal.App.4th at pp. 1635-1636.)
    (3) Evidence of Transfer—
    According to Hasso, the property transferred was the business that
    generated management fees, as he puts it, “the management fees on CFI investor assets.”
    He claims the management of those investor assets was collusively transferred “back to
    CFI” upon a premature unwinding of the contribution agreement, and that the creditors of
    RMA were thereby denied an income stream upon which to levy.
    The parties say little about the evidence pertaining to the nature of the
    property transferred either to or from RMA. However, we observe that Williams testified
    on the point.
    Williams testified that when RMA acquired the assets of CFI, in November
    2007, it made no payments to the owners of the company. The only consideration for the
    transaction was providing those owners with an equity interest in RMA. He further
    stated that after the transaction took place, Fish continued “running the assets that came
    over from CFI.”
    Williams made clear that, upon rewinding, RMA did not pay anything to
    CFI for the return of CFI’s ownership interest in RMA, which he said still had some
    value. And, CFI did not pay anything for the retrieval of the assets it had previously
    contributed. Williams further testified that the unwind transaction was simply the
    returning to CFI of the “the clients and the desks and the copiers back to them. . . .
    Because they were what went in, and they were what went out.” In terms of cash outlay,
    Williams himself put in several hundred thousand dollars of his own to meet payroll and
    assist with other things and CFI agreed to pay a share of that, amounting to $56,000.
    15
    And, let us not forget that the right to unwind was a negotiated provision of the
    contribution agreement.
    (4) Evidence of Value—
    In their motions, the Rockwater Defendants argued that Hasso had failed to
    present any evidence whatsoever to show that the management agreements had value.
    They said that the jury’s finding that the property transferred was “$1,937,201.53
    annually” was derived from the rebuttal argument Hasso’s counsel made before the jury.
    (Boldface omitted.) Counsel argued that CFI’s assets under management had a value of
    $553,486,150 and that CFI charged 35 basis points (35/100 of one percent) for its
    management fee. So, counsel argued, the value of CFI’s total annual management fees
    was $1,937,201.53.
    The Rockwater Defendants asserted in their motions that there was no
    evidence whatsoever to support counsel’s argument. CFI and Fish, in their oppositions to
    Hasso’s motions, also called the argument of counsel “baseless.” The parties renew their
    arguments on appeal. Indeed, Hasso has not cited any evidence that supports the figure
    his counsel put to the jury.
    However, Hasso points out that the record is not devoid of any evidence
    relevant to a determination of the amount of annual management fees generated on CFI
    investor assets. Williams testified that CFI had about $440 million in investor assets that
    it was managing before it transferred its assets to RMA. Also, when Williams and Hapke
    made their presentation to Serrano and her husband, the proposal they presented showed
    that CFI would charge 35 basis points for any assets they were to manage for the trusts,
    with fees to be paid quarterly in advance. At trial, Fish was asked whether the proposal
    provided to Serrano on May 29, 2007 described “the fee structure for CFI at that time,”
    and Fish replied that it did.
    The foregoing evidence does not establish the amount of investor assets
    transferred back to CFI on unwinding. It also does not establish whether the fee structure
    16
    available to new clients in May 2007 was the same as the fee structure in effect with
    respect to all investor accounts, some of which may have been opened many years earlier.
    It certainly does not quantify the amount of fees that were earned during the period
    between the date of the actual unwinding and the date originally set in the contribution
    agreement, arguably the only relevant period of time. However, it does dispel the notion
    that Hasso failed to present any evidence whatsoever pertaining to the value of annual
    management fees on CFI investor assets.
    In any event, given the lack of substantial evidence to support the damages
    award, the court granted the new trial motion as to damages. The court stated “the
    evidence supporting the damage award was confused and inadequate and the jury was
    inadequately instructed on the law concerning the measure and amount of damages
    recoverable as a result of the fraudulent conveyances . . . .” It did not, however, either
    grant the motion for a new trial as to liability or the motion for judgment notwithstanding
    the verdict.
    The rulings and the judgment are unsupportable absent an implied finding
    that the portfolio of management agreements must necessarily have had some value, even
    though the evidence was insufficient to establish what that value was. That begs the
    question, however: How can it be determined that there was a transfer of an asset
    without the receipt of reasonably equivalent value in exchange therefor if there is
    insufficient evidence to establish the value of the asset transferred (not to mention the
    value of the assets received in exchange)? (Civ. Code, §§ 3439.04, 3439.05.)
    (5) Definition of Asset—
    Issues of value aside, the Rockwater Defendants, CFI and Fish contend that
    Hasso failed to prove that any asset, within the meaning of the UFTA, was transferred to
    CFI. Citing Mejia v. 
    Reed, supra
    , 
    31 Cal. 4th 657
    , they say Hasso based his claim of
    fraudulent transfer on the purported transfer of management fees, but that management
    fees are not assets within the meaning of the UFTA.
    17
    In Mejia v. 
    Reed, supra
    , 
    31 Cal. 4th 657
    , a husband had transferred certain
    property to his wife pursuant to a marital settlement agreement. The court addressed,
    inter alia, whether property transferred pursuant to a marital settlement agreement was
    subject to the UFTA. The court held that it was. (Id. at p. 661.) It further addressed
    whether the husband was rendered insolvent by the transfer of property to his wife. The
    issue was whether solvency should be determined by weighing the husband’s future child
    support obligations, discounted to present value, against his future earnings. (Id. at pp.
    670-671.) In this context, the court stated, “Income not yet earned . . . is not an asset
    under the UFTA unless it is subject to levy by a creditor, as would be the case if, for
    example, the transferor possessed a promissory note payable at a future date. (See Civ.
    Code, § 3439.01, subd. (a)(2); [citation].) Thus, Husband’s future earnings, or his future
    earning capacity, would not appear on the balance sheet to offset his child support
    obligation.” (Mejia v. 
    Reed, supra
    , 31 Cal.4th at p. 671.)
    Notice that the question in Mejia v. 
    Reed, supra
    , 
    31 Cal. 4th 657
    was not
    whether the husband’s future earnings could be levied upon. The court did not decide
    that issue. The Rockwater Defendants quote the portion of the sentence stating “[i]ncome
    not yet earned . . . is not an asset under the UFTA,” but they omit the qualifier “unless it
    is subject to levy by a creditor . . .” and the court’s citation to Civil Code section 3439.01,
    subdivision (a)(2). (Mejia v. 
    Reed, supra
    , 31 Cal.4th at p. 671.) Civil Code section
    3439.01, subdivision (a)(2) provides that the term “asset,” within the meaning of the
    UFTA, excludes property “generally exempt under nonbankruptcy law.” The court
    implied that one cannot levy upon wages that have not yet been earned. (Mejia v. 
    Reed, supra
    , 31 Cal.4th at p. 671.) Query whether the same is true as to fees generated under
    existing management agreements.
    The Rockwater Defendants, CFI and Fish do not specifically address this
    issue. That does not mean, however, that they have failed to address the statutes that
    answer the question of whether, under the facts of this case, the transfer of the portfolio
    18
    of management agreements, together with future fees to be earned thereon, constituted
    the transfer of an asset within the meaning of the UFTA.
    Civil Code section 3439.01, subdivision (i) defines a “transfer,” for the
    purposes of the UFTA, as a “mode . . . of disposing of . . . an asset . . . .” Section
    3439.01, subdivision (a)(1) defines an “asset” as “property of a debtor” excluding
    “[p]roperty to the extent it is encumbered by a valid lien.” Civil Code section 3439.01,
    subdivision (f), in turn, defines a “lien” as “a charge against or an interest in property to
    secure . . . performance of an obligation, and includes a security interest created by
    agreement, a judicial lien obtained by legal or equitable process or proceedings, a
    common-law lien, or a statutory lien.”
    CFI and Fish argued in opposition to Hasso’s motions that CFI’s option to
    unwind the contribution agreement and receive a return of its assets was tantamount to a
    lien against those assets.4 In other words, the property returned to CFI did not constitute
    an “asset” within the meaning of the UFTA, because it was subject to a lien. (Civ. Code,
    § 3439.01, subds. (a)(1),(f).) They renew this argument on appeal.
    Hasso argues that the jury must have found there was no lien, or it could
    not have held RMA and Williams liable. It is equally arguable that the very reason the
    jury did not hold Fish or CFI liable is because it did indeed find there was a lien. In any
    event, the interpretation of the statutes at issue and their application to the contribution
    agreement and the unwind agreement are questions of law we determine de novo.
    (Wimberly v. Derby Cycle Corp. (1997) 
    56 Cal. App. 4th 618
    , 625, fn. 3; Wolf v. Walt
    Disney Pictures & 
    Television, supra
    , 162 Cal.App.4th at p. 1138; Harbor Island
    Holdings v. Kim (2003) 
    107 Cal. App. 4th 790
    , 794.)
    4       Interestingly, we see no indication that the Rockwater Defendants, in their
    motions, made the same argument—that they released property that was in effect subject
    to a lien in favor of CFI. However, the Rockwater Defendants did cite Civil Code section
    3439.01, as well as related sections 3439.03, 3439.04 and 3439.05, albeit without much
    analysis of the same.
    19
    We conclude that the interpretation of CFI and Fish is correct. When CFI
    entered into the transaction with RMA, it contributed its assets in exchange for an
    ownership interest in RMA coupled with a right to a return of assets if the value of its
    ownership interest in RMA was compromised. It clearly had a documented right,
    supported by consideration, to seize those assets, a right that predated both the financial
    calamity that gave rise to this lawsuit and, indeed, the lawsuit itself. We construe CFI’s
    right as “an interest in property to secure . . . performance of an obligation,” or a “lien,”
    within the meaning of Civil Code section 3439.01, subdivision (f).
    Because property subject to a valid lien does not constitute an “asset”
    within the meaning of Civil Code section 3439.01, subdivision (a)(1), and a “transfer”
    within the meaning of Civil Code section 3439.01, subdivision (i) means the transfer of
    an “asset,” there was no “transfer” to trigger the application of Civil Code sections
    3439.04 and 3439.05. Consequently, there was no evidence to show either that RMA and
    Williams made a fraudulent transfer of assets within the meaning of the UFTA or that
    CFI received assets pursuant to such a fraudulent transfer.
    The judgment against RMA and Williams for actual and constructive
    fraudulent conveyance must be reversed. The orders on the motions of the Rockwater
    Defendants for judgment notwithstanding the verdict and for new trial as to the
    fraudulent transfer causes of action are moot. The judgment in favor of CFI and Fish
    with respect to the fraudulent transfer causes of action must be affirmed. The orders
    denying Hasso’s motions for judgment notwithstanding the verdict and new trial on those
    causes of action, must be affirmed.
    D. FRAUD AND MISREPRESENTATION:
    (1) Causes of Action—
    We first note the elements of the various fraud and misrepresentation
    causes of action at issue here. A cause of action for fraud contains “the following
    20
    elements: (1) a knowingly false representation by the defendant; (2) an intent to deceive
    or induce reliance; (3) justifiable reliance by the plaintiff; and (4) resulting damages.
    [Citation.]” (Service by Medallion, Inc. v. Clorox Co. (1996) 
    44 Cal. App. 4th 1807
    ,
    1816.)
    “[T]he elements of an action for fraud . . . based on concealment are: (1)
    the defendant must have concealed or suppressed a material fact, (2) the defendant must
    have been under a duty to disclose the fact to the plaintiff, (3) the defendant must have
    intentionally concealed or suppressed the fact with the intent to defraud the plaintiff, (4)
    the plaintiff must have been unaware of the fact and would not have acted as he did if he
    had known of the concealed or suppressed fact, and (5) as a result of the concealment or
    suppression of the fact, the plaintiff must have sustained damage. [Citation.]”
    (Marketing West, Inc. v. Sanyo Fisher (USA) Corp. (1992) 
    6 Cal. App. 4th 603
    , 612-613.)
    The elements of negligent misrepresentation are: “‘[M]isrepresentation of a
    past or existing material fact, without reasonable ground for believing it to be true, and
    with intent to induce another’s reliance on the fact misrepresented; ignorance of the truth
    and justifiable reliance on the misrepresentation by the party to whom it was directed;
    and resulting damage. [Citation.]’ [Citation.]” (Shamsian v. Atlantic Richfield Co.
    (2003) 
    107 Cal. App. 4th 967
    , 983.)
    (2) Introduction—
    The jury found Hapke and each of the Rockwater Defendants liable for
    fraud by intentional misrepresentation and for negligent misrepresentation. It also found
    Hapke, RMA, and Williams (but not the RAM Fund) liable for fraud by concealment. It
    did not find either CFI or Fish liable on any of these causes of action.
    Hasso appeals from the judgment in favor of CFI and Fish, claiming they
    were liable for the material misrepresentations and omissions of their colleagues. In
    addition, he appeals from the orders denying a judgment notwithstanding the verdict and
    a new trial with respect to the judgment in favor of CFI and Fish.
    21
    Hapke and the Rockwater Defendants also appeal, claiming the judgment
    against them on the fraud and misrepresentation causes of action was erroneous because:
    (1) Colson, as the trustee who made the investments on behalf of the trusts, did not rely
    on any representations; (2) any reliance would not have been reasonable; (3) Hasso, as
    successor trustee and plaintiff, failed to show causation; and (4) Hasso failed to present
    evidence in support of damages.
    Hasso says there was substantial evidence to show that Hapke and the
    Rockwater Defendants misrepresented the risks and the characteristics of the RAM Fund
    to Serrano as Colson’s representative, and that this worked a fraud upon Colson under
    both agency and indirect misrepresentation theories. Hasso also claims that each of
    Serrano and Colson reasonably relied on the misrepresentations and that the
    misrepresentations were the proximate cause of the investment losses.
    (3) Effect of Representations Made to Serrano—
    We start with the question of how representations made to Serrano could
    work a fraud on Colson, the trustee who made the trust investments.
    (a) Agency theory
    Hasso claims the purported misrepresentations to Serrano worked a fraud
    upon the trusts under agency principles, because Colson had appointed her his
    representative to evaluate the investment proposal and make recommendations thereon.
    He further contends this would be true even if Serrano had never actually communicated
    the misrepresentations to Colson. In support of this position he cites Grinnell v. Charles
    Pfizer & Co. (1969) 
    274 Cal. App. 2d 424
    , Toole v. Richardson-Merrell Inc. (1967) 
    251 Cal. App. 2d 689
    , and Roberts v. Salot (1958) 
    166 Cal. App. 2d 294
    .
    Grinnell v. Charles Pfizer & 
    Co., supra
    , 
    274 Cal. App. 2d 424
    and Toole v.
    Richardson-Merrell 
    Inc., supra
    , 
    251 Cal. App. 2d 689
    were each cases arising out of
    lawsuits against drug manufacturers with respect to the sale and marketing of dangerous
    drugs. In each case the doctors who prescribed or administered the drugs relied upon
    22
    misinformation about their safety. The doctors were construed as the agents of the
    patient-plaintiffs. The triers of fact were permitted to infer that the doctors read the
    package inserts at issue and relied thereon in prescribing the drugs for the patients.
    However, the doctors were the ones who made the ultimate decisions and took action in
    response to the representations. (Grinnell v. Charles Pfizer & 
    Co., supra
    , 274
    Cal.App.2d at p. 441; Toole v. Richardson-Merrell 
    Inc., supra
    , 251 Cal.App.2d at p.
    707.)
    Those cases are distinguishable from the one before us. In Grinnell v.
    Charles Pfizer & 
    Co., supra
    , 
    274 Cal. App. 2d 424
    and Toole v. Richardson-Merrell 
    Inc., supra
    , 
    251 Cal. App. 2d 689
    , the agent to whom the communications were made was the
    one who evaluated the information and took action upon it, in the form of prescribing the
    drugs. Contrast the situation before us where the purported agent, Serrano, was an
    intermediary who gathered information for Colson—the one who reviewed and evaluated
    the documentation provided to him before taking action upon it in the form of executing
    the subscription agreements and transmitting the investment monies.
    Roberts v. 
    Salot, supra
    , 
    166 Cal. App. 2d 294
    is also distinguishable from
    the case before us. There, a 70-year-old infirm man with limited education borrowed
    against his property in order to assist his daughter, who apparently needed money. The
    daughter was responsible for repaying the loan. When she fell behind in her payments
    and a foreclosure was scheduled, the father left it to the daughter to address the matter
    and find a replacement loan. The daughter fell in with a shyster who prepared documents
    by which he ultimately divested the father of the property. The shyster made false
    representations to the daughter, who relied upon them, took the documents to her father,
    and had him sign them. (Id. at p. 297.) The court stated in a cursory way that a fraud had
    been worked against the daughter, and thus her father, inasmuch as she was his agent in
    the transaction. (Id. at p. 300.) However, there was no discussion of whether any
    misrepresentations were communicated to the father, whether the father relied upon any
    23
    misrepresentations, or even whether he knew the nature of the documents he was signing.
    Contrast the case before us, where Serrano gathered information and relayed it to Colson,
    a competent, highly successful businessman who discussed the investment with Serrano
    and reviewed the written documentation, including the private placement memorandum,
    executed the subscription agreement, and forwarded the funds.
    As more recent cases show, liability for a fraud worked on an agent is
    imposed where it is the agent who not only places reliance on the misrepresentations, but
    also makes the decision and takes action based upon the misrepresentations. (See City of
    Industry v. City of Fillmore (2011) 
    198 Cal. App. 4th 191
    , 212-213 [State Board of
    Equalization as agent allocated insufficient share of sales tax to plaintiff cities based on
    misrepresentations]; Thrifty-Tel, Inc. v. Bezenek (1996) 
    46 Cal. App. 4th 1559
    , 1567-1568
    [computer system as agent accepted improperly obtained access codes and permitted long
    distance calls].) As stated in Lovejoy v. AT&T Corp. (2001) 
    92 Cal. App. 4th 85
    , “a
    fraudulent misrepresentation is actionable if it was communicated to an agent of the
    plaintiff and was acted upon by the agent to the plaintiff’s damage.” (Id. at p. 95, italics
    added.) That rule is inapplicable here. In the present case, it was not Serrano, but Colson
    as trustee, who was responsible for evaluating the information, and who took action by
    executing the necessary documents and transmitting the funds.
    (b) Indirect misrepresentation theory
    That is not the end of the analysis, however. Hasso offers another rule of
    law that does apply here. As he observes, Mirkin v. Wasserman (1993) 
    5 Cal. 4th 1082
    provides the following rule with respect to indirect misrepresentations, as alleged in the
    matter before us: “‘The maker of a fraudulent misrepresentation is subject to liability for
    pecuniary loss to another who acts in justifiable reliance upon it if the misrepresentation,
    although not made directly to the other, is made to a third person and the maker intends
    or has reason to expect that its terms will be repeated or its substance communicated to
    the other, and that it will influence his conduct in the transaction or type of transactions
    24
    involved.’” (Id. at p. 1095; accord, Gawara v. United States Brass Corp. (1998) 
    63 Cal. App. 4th 1341
    , 1350.)
    (i) intention for representations to reach Colson
    Williams testified that, at the time of the initial meeting with Serrano and
    her husband, he hoped that the information he provided would be forwarded to Colson
    and that Colson would invest in the RAM Fund. Following the meeting, he sent a letter
    dated June 6, 2007 addressed to Colson, in care of Serrano. In that letter he included
    copies of: (1) a private placement memorandum; (2) an investment questionnaire; (3) an
    investor information sheet; and (4) a subscription agreement. It is clear Williams
    intended that his representations regarding the RAM Fund to be transmitted to Colson,
    through Serrano, and that Colson rely thereon in investing in the RAM Fund.
    The same is true with respect to Hapke. Hapke testified that he was aware
    Colson was the trustee of the trusts and that he thought of Serrano as the contact person
    for the trusts who would evaluate investments and make recommendations to Colson as
    trustee.      The next question then, is whether Serrano conveyed the representations to
    Colson.
    (ii) conveyance of representations to Colson
    Colson said that Serrano called him about the investment after she met with
    Williams and Hapke, and that he and Serrano got together. He acknowledged that he
    received copies of the investment proposal, the power point presentation, the private
    placement memorandum, an investment questionnaire, an investor information sheet, and
    a subscription agreement.
    Colson testified: “I think what gave me the most comfort was the amount
    of time that [Serrano] spent working on this and the level she felt she understood what
    she was told and was represented by RAM and CFI.” Colson said the two of them
    “talked about [the investment] for six to eight weeks.” He further stated that he would
    not have made any investment without Serrano’s approval. Given this testimony, the jury
    25
    could properly infer that Serrano, who met with Colson, transmitted the written
    documentation to him, and talked to him about the investment for six to eight weeks, also
    conveyed to him the various oral representations of Williams and Hapke.
    (4) Reliance—
    (a) Actual reliance
    We turn then, to the question of actual reliance. As the California Supreme
    Court has stated plainly enough: “. . . California law does not permit plaintiffs to state a
    cause of action for deceit without pleading actual reliance . . . .” (Mirkin v. 
    Wasserman, supra
    , 5 Cal.4th at p. 1100.) “Reliance exists when the misrepresentation or
    nondisclosure was an immediate cause of the plaintiff’s conduct which altered his or her
    legal relations, and when without such misrepresentation or nondisclosure he or she
    would not, in all reasonable probability, have entered into the contract or other
    transaction. [Citations.]” (Alliance Mortgage Co. v. Rothwell (1995) 
    10 Cal. 4th 1226
    ,
    1239.)
    The Rockwater Defendants insist there is no evidence that Colson relied on
    any of the purported misrepresentations. However, Serrano testified that Colson asked
    her to look at the investments on his behalf. She further testified that she was the one
    who made the decision to invest, and that Colson relied on her decision. Colson did not
    put it that way. However, Colson testified that while he had not asked Serrano to act as a
    financial adviser to the trusts, he told her if she was comfortable with the investment
    based on the research she had done, then he was comfortable with it. From this, the jury
    could have inferred that Colson relied on Serrano’s analysis, based on everything she had
    heard, including information she had obtained from Williams and Hapke. (Cf. Gormly v.
    Dickinson (1960) 
    178 Cal. App. 2d 92
    , 105.)
    (b) Reasonable reliance
    That brings us to the question of whether Colson’s reliance on the indirectly
    conveyed representations was reasonable. “[A] plaintiff who hears an alleged
    26
    misrepresentation indirectly must still show ‘justifiable reliance upon it . . . .’ [Citation.]”
    (Mirken v. 
    Wasserman, supra
    , 5 Cal.4th at p. 1096, fn. omitted; accord, Gawara v.
    United States Brass 
    Corp., supra
    , 63 Cal.App.4th at p. 1350.) “[T]he reasonableness of
    the reliance is ordinarily a question of fact. [Citations.] However, whether a party’s
    reliance was justified may be decided as a matter of law if reasonable minds can come to
    only one conclusion based on the facts. [Citation.]” (Guido v. Koopman (1991) 
    1 Cal. App. 4th 837
    , 843.) “In determining whether one can reasonably or justifiably rely on
    an alleged misrepresentation, the knowledge, education and experience of the person
    claiming reliance must be considered. [Citations.]” (Id. at pp. 843-844; accord, OCM
    Principal Opportunities Fund, L.P. v. CIBC World Markets Corp. (2007) 
    157 Cal. App. 4th 835
    , 856.)
    We must, of course, take a look at the purported misrepresentations and
    omissions before we can determine whether Colson’s reliance was reasonable.
    (i) characterization of market
    There was a point at which Serrano paused to double check whether it was
    appropriate to make the investment at all. Hasso points out that, before Colson wired the
    monies to the RAM Fund, Serrano, on the advice of her mother, asked Hapke about the
    stability of the market.
    In response, Hapke sent Serrano a June 25, 2007 e-mail with a market
    update attached, and the two of them also spoke. The market update, prepared by
    Williams,5 had to do with the “recent Bear Stearns market event” (capitalization omitted)
    and it distinguished between the municipal arbitrage market and the mortgage
    5      In preparing this market update, Williams relied on information from two sources.
    One was Ben Bernanke, the head of the Federal Reserve. According to Williams,
    Bernanke had said in testimony before Congress “that he believed that the subprime
    market problems were contained.” Also, Williams learned from a conference call with
    the chief financial officer of one of the largest bond insurers that the subprime problem
    was “‘not going to be a problem with [his] company’s reserves.’” Given the information
    from these two sources, Williams believed everything was okay.
    27
    collateralized debt obligation market. It stated: “The current fiscal health of states and
    municipalities that issue tax-exempt debt is very strong . . . .” According to Serrano,
    Hapke assured her that that everything was alright and the investment was still safe and
    appropriate for the trusts, but that turned out not to be the case.
    Expert witness Christopher Taylor said what had happened at the time of
    the June 25, 2007 e-mail “was two Bear Stearns Funds that invested in mortgage-backed
    securities, not munis, mortgage-backed securities, had collapsed.” According to Taylor,
    the collapse did not affect the municipal bond arbitrage market at all at that point. Taylor
    thought the market update provided in response to Serrano’s e-mail “was a very good
    discussion of what was going on at the time.” He also testified to his belief that none of
    the statements in the market update were incorrect. Given the testimony of Taylor, there
    is simply no indication that Williams or Hapke made any misrepresentations at all in
    communicating with Serrano concerning the perceived stability of the market at that
    moment in time.
    (ii) leverage
    Hasso asserts that the Rockwater Defendants failed to explain, at the May
    29, 2007 meeting, that the RAM Fund would invest in sub-funds which employed
    leveraged municipal arbitrage strategies with leverage up to a factor of 12 times.
    However, there is simply no question that the Rockwater Defendants disclosed that the
    RAM Fund invested in sub-funds which employed leveraged municipal arbitrage
    strategies. They disclosed it repeatedly, in the power point presentation discussed at the
    May 29, 2007 meeting, in the marketing brochure and in the private placement
    memorandum.
    The power point presentation, for example, included a slide entitled
    “Municipal Arbitrage Risks,” that enumerated seven risks which were also identified in
    the marketing brochure. The enumerated risks included leverage. Both the power point
    presentation and the marketing brochure provided a specific example of leverage, where
    28
    the sub-manager would use $1 million toward the purchase of a $10 million bond, and
    obtain the other $9 million from an investor.
    Williams testified that the sub-funds in which the RAM Fund invested ran a
    spectrum of risk, from those that were very conservative, with leverage to a factor of
    about 2.5, to those that were highly leveraged, with leverage to a factor of about 11.9.
    But Serrano testified that Williams and Hapke omitted to disclose to her that the sub-
    funds utilized leverage up to a factor of 12. Indeed, the Rockwater Defendants cite no
    testimony to contradict this.
    That notwithstanding, both the power point presentation and the marketing
    brochure, as we have stated, disclosed the use of leverage. In addition, the power point
    presentation encouraged the viewer to ask questions. Serrano testified that the meeting
    lasted about an hour and a half and that she and her husband, who also has an MBA,
    asked a lot of questions, mainly about risks. They had every opportunity to ask about the
    degree of leverage utilized.
    Furthermore, we observe the very first page of the marketing brochure
    stated: “An investment in the [RAM] Fund should be considered speculative and
    involves certain risks. Please refer to the RAM Private Placement Memorandum . . . for
    more detailed risk information.” And, when Williams sent his June 6, 2007 letter to
    Colson, via Serrano, he included a copy of the private placement memorandum. That
    letter stated with respect to the private placement memorandum: “This provides you with
    information regarding . . . the Fund’s investments and strategy . . . . It also discusses the
    risk of investing in the Fund. You should read the Memorandum carefully.”
    The private placement memorandum contained two full paragraphs devoted
    to leverage. It specifically warned: “Due to the highly leveraged nature of the residual
    certificates, it is possible that these obligations of the Sub Fund would exceed the
    proceeds from the sale of the municipal bonds, resulting in a loss of all or substantially all
    of the Sub Fund’s value.” It also stated: “There is no restriction on the amount of
    29
    leverage that a Sub Manager may employ for a Sub Fund and, at any given time, such
    leverage may be large in relation to the Sub Fund’s capital. [¶] . . . As a general matter,
    the prices of leveraged instruments can be highly volatile, and investments in leveraged
    instruments may, under certain circumstances, result in losses that exceed the amounts
    invested.” (Italics added.)
    Colson acknowledged that he read the private placement memorandum.
    Therefore, he should have seen that there was no upper limit to the amount of leverage
    that could be used. He could have asked about the greatest amount of leverage then in
    use had he chosen to do so. Indeed, the private placement memorandum stated that any
    questions should be directed to Williams, and it provided his telephone number.
    However, Colson admitted that he never spoke with Williams about the investment.
    (iii) risk management techniques
    Hasso also contends that the Rockwater Defendants misdescribed the RAM
    Fund as having built-in measures designed to minimize risks. However, minimizing risks
    and eliminating them are two different things. The RAM Fund’s risk-minimizing
    measures were described in the power point presentation, the marketing brochure and the
    private placement memorandum.
    The power point presentation and the marketing brochure each identified
    seven risks, together with seven corresponding methods of managing those risks. For
    example, the risk associated with interest rates was managed by hedging. The risk arising
    out of net asset value fluctuations was tempered by the use of a multi-manager strategy,
    described elsewhere in the brochure as “[t]he blending of multiple managers with
    differing expertise and multiple investment styles . . . .” In addition, the page of the
    marketing brochure addressing the risks and corresponding risk management techniques
    again stated: “Please refer to the RAM Private Placement Memorandum . . . for more
    detailed risk information.”
    30
    Although Hasso claims the Rockwater Defendants misrepresented the
    existence of risk-minimizing measures, it would appear that the unarticulated problem is
    more fundamentally that the described risk-minimizing measures were not foolproof.
    They did not save the RAM Fund from catastrophic loss when the global economy
    collapsed. But Colson knowingly invested in a hedge fund, not a money market account.
    And, the private placement memorandum specifically warned about “the risk that the
    Fund’s or Sub Fund’s investment strategies and/or investment techniques may not work
    as intended[.]” (Boldface omitted.)
    It stated more particularly with respect to hedging, for example: “The
    success of a Sub Fund’s hedging transactions is subject to the Sub Manager’s ability to
    correctly predict movements in and the direction of interest rates. Therefore, while a Sub
    Fund may enter into such transactions to seek to reduce risk, unanticipated changes in
    interest rates may result in a poorer overall performance of the Sub Fund than if it had not
    engaged in any such hedging transaction.”
    (iv) proprietary algorithm
    Continuing on, Hasso asserts that Serrano was falsely told the RAM Fund
    utilized a proprietary algorithm to generate an enhanced return. At trial, Williams
    described at length the methods he used to select the sub-funds in which the RAM Fund
    invested. At one point he was asked, “Can you tell us where the secret algorithm comes
    in . . . ?” Williams replied, “What I withheld was the names of the funds. I didn’t want
    to use the specific names of [the funds] for competitive reasons.” He explained that he
    liked to keep the names of the sub-funds secret at the first meeting, because otherwise
    prospective clients sometimes just went out and purchased those funds directly, without
    making a purchase in the RAM Fund. As for why he used the term “algorithm,”
    Williams further explained: “[T]he selection of the funds is a process. And the selection
    of the funds, you might call that an algorithm.”
    31
    The Pocket Oxford American Dictionary (2d ed. 2008) at page 18 defines
    an “algorithm” as “a process or set of rules used in calculations or other problem-solving
    operations.” Here, Williams testified at length to the process he used to attack the
    problem of sub-fund selection. While he did not use calculus, he did apply a process and
    the use of the term “algorithm” does not appear to have been improper.
    (v) identity of sub-managers
    On a related point, Hasso asserts that, at the May 29, 2007 meeting, the
    Rockwater Defendants failed to articulate that the sub-fund managers were not RAM
    Fund employees. Indeed, the power point presentation described the RAM Fund as a
    “Multi-manager fund of funds” and noted the use of “‘Best-in-class’ municipal arbitrage
    sub-managers,” without identifying the particular sub-managers.
    The marketing brochure was more specific. It stated that “RAM deploy[ed]
    capital to professional municipal arbitrage managers . . .” and that its assets were invested
    “in private investment funds and separate accounts managed by top-tier professional
    money managers . . . .” These statements indicate that the RAM Fund, as a fund-of-
    funds, invested its assets in other funds, not in house.
    The language of the private placement memorandum was even more
    specific. The private placement memorandum warned of “the risks associated with the
    Manager’s use of third-party investment management firms.” (Boldface omitted.)
    Furthermore, under the topic of management risk, the private placement memorandum
    stated, in part: “The Fund ordinarily will not have custody or control over the assets it
    allocates to Sub Funds. As a result, it may be difficult for the Manager to protect the
    Fund from the risk of Sub Manager fraud, misrepresentation or simple bad judgment.
    Among other things, a Sub Manager could divert or abscond with the assets allocated to
    it, fail to follow its stated investment strategy and restrictions, issue false reports or
    engage in other misconduct. This could result in serious losses to the Fund.” This
    32
    language could not make more plain the fact that the assets were allocated to sub-funds
    controlled by third party managers, not in-house personnel.
    (vi) margin trading
    Hasso claims the Rockwater Defendants failed to explain, at the May 29,
    2007 meeting, that the RAM Fund assets could be subject to margin calls. We first note
    that Hasso’s record references do not really support this assertion. He cites a portion of
    Serrano’s testimony wherein she commented about the investment: “But the problem is,
    they had it so highly leveraged that I guess they got margin calls and all the assets are
    gone.” This statement simply does not address whether Williams and Hapke did or did
    not disclose, at the May 29, 2007 meeting, the possible use of buying on margin. We
    could end our discussion of the point here.
    However, we observe the private placement memorandum warned: “In the
    futures markets, margin deposits typically range between 2% and 15% of the value of the
    futures contract purchased or sold. Because of these low margin deposits, futures trading
    is inherently highly leveraged. As a result, a relatively small price movement in a futures
    contract may result in immediate and substantial losses to the trader.” So, even if the
    topic of buying on margin did not come up at the May 29, 2007 meeting, it is not true that
    there were no disclosures made on the topic. It was mentioned in the private placement
    memorandum, which also disclosed risks regarding, inter alia, callable certificates, short
    sales, options, hedging and leveraging.
    (vii) low-risk investment
    Hasso complains that, after the meeting, Hapke sent Serrano a follow-up
    email stating: “Our proposed investment strategy is designed to deliver attractive returns
    with nominal risk, a result that seems ideally suited for the trusts.” Despite Hasso’s
    intimation, however, it does not appear that this e-mail was intended to describe the RAM
    Fund itself as being low risk. Rather, Hapke testified that his e-mail referred to the
    overall investment proposal, which contained three combined components: (1) the liquid
    33
    portion, which was very low risk; (2) the CFI-managed core portfolio, which was low
    risk; and (3) the RAM Fund, which was higher risk. Since the wording of the e-mail
    refers to the “proposed investment strategy” and not the RAM Fund, this would appear to
    be a fair characterization of the e-mail.
    Moreover, we observe that the investment proposal suggested investing
    only 50 percent of the trusts’ total investment in the RAM Fund, not 100 percent. The
    proposal allocated 40 percent of the trusts’ total investment to the traditional municipal
    bond portfolio, to be managed by CFI, and 10 percent to the liquid portfolio, also to be
    managed by CFI. But Colson ignored the recommendation and invested 100 percent in
    the RAM Fund, thereby exposing the trusts’ investments to a higher risk than
    recommended.
    In any event, Hasso’s primary complaint appears to be that Williams and
    Hapke nonetheless opined at the May 29, 2007 meeting that the RAM Fund was a
    suitable, conservative investment with nominal risk, one appropriate for the preservation
    of trust assets. According to Serrano, Williams said, “‘In the worst case scenario you
    could lose 10 percent.’” That was supposed to be “‘if the world fell apart.’”
    Against this backdrop of an apparently wholehearted endorsement of the
    RAM Fund, we have the more particular disclosures contained in the various written
    documents, many of which we have described already. However, there are a few more
    notable disclosures to round out the picture.
    The introduction to the investment brochure stated: “RAM’s investment
    strategy and investment techniques involve significant risks. . . . [¶] An investment in the
    Fund should be considered speculative . . . . Please refer to the RAM Private Placement
    Memorandum . . . for more detailed risk information.” (Italics added.)
    The first page of the private placement memorandum stated: “An
    investment in the Fund should be considered speculative and involves substantial risk
    . . . . You should not invest in the Fund unless you . . . are fully able to sustain the loss of
    34
    all or a significant part of your investment. In light of this financial risk, you should
    consider an investment in the Fund only for an appropriate portion of your overall
    portfolio. [¶] The Manager and the Fund urge you to carefully consider the special
    considerations and risk factors relating to an investment in the Fund, as described in § 6,
    ‘RISK FACTORS,’ and in other sections of this Memorandum . . . .” (Boldface omitted.)
    The risk factors identified in section 6 of the private placement
    memorandum included, among others, “the risk of deterioration in an entire market, such
    that all or most of the Sub Managers concentrating in that market incur large losses.”
    (Boldface omitted.) The private placement memorandum further warned: “The ability of
    issuers of municipal bonds to make timely payments of interest and principal may be
    diminished during general economic downturn . . . .” It also said: “Due to the highly
    leveraged nature of the residual certificates, it is possible that these obligations of the Sub
    Fund would exceed the proceeds from the sale of the municipal bonds, resulting in a loss
    of all or substantially all of the Sub Fund’s value.”
    Clearly, the marketing brochure and the private placement memorandum
    contained extensive warnings that the RAM Fund could sustain massive losses,
    particularly in a general economic downturn. When Colson signed the subscription
    agreements, he represented that he had read the private placement memorandum and that
    he had relied on it and not on any oral representation inconsistent with it. Furthermore, in
    both the subscription agreements and a confidential investor qualification questionnaire,
    Colson further represented that he personally had sufficient knowledge and experience in
    business and financial matters to be capable of evaluating the risks and merits of an
    investment in the RAM Fund, and that he was able to suffer a complete loss of the
    35
    investment.6 Colson testified at trial that he read the representations before he signed the
    document, that each of the representations was accurate, and that he knew “Rockwater”
    would rely on those representations.
    (viii) analysis
    As the foregoing discussion shows, there is no indication that Hapke and
    the Rockwater Defendants made any misrepresentations to either Serrano or Colson.
    While Hasso emphasizes that certain things were not mentioned in the May 29, 2007
    meeting, that was an introductory meeting not a seminar addressing every facet of the
    RAM Fund and every conceivable risk of investing therein. Moreover, on each point
    with respect to which Hasso said information was lacking, information was provided in
    the marketing brochure provided to Serrano weeks in advance of the meeting and/or in
    the private placement memorandum provided before the investment was made. Charles
    Hartman, Hasso’s own expert witness, testified that he saw no misrepresentations in the
    private placement memorandum and Colson testified that he read it. Furthermore,
    questions were encouraged and contact information for Williams was provided, but
    Colson did not contact him for additional information.
    The closest thing we have to a misrepresentation is the expression of
    opinion by Williams and Hapke that the investment was low risk and suitable for the
    trusts, and the puffery that the most money that could be lost was 10 percent “if the world
    fell apart.” However, Colson acknowledged that, to describe himself modestly, he was a
    “very, very successful” businessman with a net worth exceeding nine figures. He stated
    6       Expert witness Taylor testified: “The investor questionnaire is a document that is
    sent to the investor for the purpose of determining whether the investor qualifies under an
    exemption in the securities law that allows the sale of this security to the individual. . . .
    [P]rivate placements are available to those that have the means to assess them
    independent of the broker. And in effect, you have to have the wealth, the understanding,
    and everything else that goes with it. So for this transaction to take place, Rockwater had
    to make sure that the trusts had met certain criteria that allowed them to be an investor in
    a private placement. That’s [what] the investor questionnaire is designed to do.”
    36
    he was familiar with financial and business analysis. He represented to the RAM Fund in
    multiple documents that he had the requisite business savvy to understand the nature and
    risks of the RAM Fund and that the trusts could withstand a loss of 100 percent. Colson
    admitted at trial that any investment could result in a significant loss and that he knew
    that was true with respect to the RAM Fund investment. He further acknowledged that
    he knew there was no guarantee the most the trust could lose on the RAM Fund
    investment was 10 percent and that there was the possibility that the entire investment
    could be lost.
    Given the foregoing, the suggestion that Colson could have reasonably
    relied on such puffery as the risks of investing in the RAM Fund were so minimal that an
    investment in the RAM Fund could not lose more than 10 percent, is untenable.7 The
    judgment against Hapke and the Rockwater Defendants must be reversed to the extent
    they are held liable for fraud by intentional representation, fraud by concealment, and
    negligent misrepresentation. The judgment in favor of CFI and Fish on those causes of
    action must be affirmed. The orders denying Hasso’s new trial motion and motion for
    judgment notwithstanding the verdict with respect to the fraud and misrepresentation
    causes of action against CFI and Fish must be affirmed.
    E. BREACH OF FIDUCIARY DUTY:
    7       It is irrelevant whether Serrano herself may reasonably have relied on the
    representations in question, inasmuch as she was not the trustee, did not invest the trusts’
    assets, and is not the plaintiff. However, we note that inasmuch as she had a bachelor’s
    degree with a major in economics, an MBA, and a juris doctor, and was a paid trustee
    herself, we have a hard time accepting the notion that she reasonably relied on any
    representation that the investment could not lose more than 10 percent even “if the world
    fell apart.”
    37
    (1) Introduction—
    “‘The elements of a cause of action for breach of fiduciary duty are the
    existence of a fiduciary relationship, its breach, and damage proximately caused by that
    breach. [Citation.]’ [Citation.]” (Knox v. Dean (2012) 
    205 Cal. App. 4th 417
    , 432.)
    “[B]efore a person can be charged with a fiduciary obligation, he must
    either knowingly undertake to act on behalf and for the benefit of another, or must enter
    into a relationship which imposes that undertaking as a matter of law. [Citation.]”
    (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 
    35 Cal. 3d 197
    ,
    221, superseded by statute on other grounds.) “Fiduciary duties are imposed by law in
    certain technical, legal relationships such as those between partners or joint venturers
    [citation], . . . trustees and beneficiaries, principals and agents, and attorneys and clients
    [citation].” (GAB Business Services, Inc. v. Lindsey & Newsom Claim Services, Inc.
    (2000) 
    83 Cal. App. 4th 409
    , 416, disapproved on other grounds in Reeves v. Hanlon
    (2004) 
    33 Cal. 4th 1140
    , 1154.) The investment adviser/client relationship is one such
    relationship, giving rise to a fiduciary duty as a matter of law. (Cf. Securities & E.
    Com’n v. Capital Gains Research Bur. (1963) 
    375 U.S. 180
    , 191, 194.) A fiduciary duty
    under common law may arise “when one person enters into a confidential relationship
    with another.” (GAB Business Services, Inc. v. Lindsey & Newsom Claim Services, 
    Inc., supra
    , 83 Cal.App.4th at p. 417.) It is a question of fact whether one is either an
    investment adviser (James De Nicholas Associates, Inc. v. Heritage Constr. Corp. (1970)
    
    5 Cal. App. 3d 421
    , 427) or a party to a confidential relationship that gives rise to a
    fiduciary duty under common law (GAB Business Services, Inc. v. Lindsey & Newsom
    Claim Services, 
    Inc., supra
    , 83 Cal.App.4th at p. 417; see also Brown v. Wells Fargo
    Bank, N.A. (2008) 
    168 Cal. App. 4th 938
    , 960-962).
    Here, Hapke and the Rockwater Defendants each correctly observe that this
    case was tried on the theory they were investment advisers. However, they assert that
    they were not in fact investment advisers. In addition, the Rockwater Defendants claim
    38
    the jury instructions were erroneous in that they failed to require the jury to even make
    findings as to whether they were investment advisers. Finally, the Rockwater Defendants
    contend the finding that they breached fiduciary duties could not be sustained under the
    common law inasmuch as the jury had never been instructed on the common law.
    In retort, Hasso maintains that each of the parties was indeed an investment
    adviser within the meaning of California statutory law and that, even if this were not the
    case, the judgment in his favor should be upheld under common law. He further
    maintains that he should have prevailed on his breach of fiduciary duty cause of action
    against CFI and Fish.
    As we shall show, it is correct that Hapke was not an investment adviser
    within the meaning of California statutory law. To the extent the jury instructions were
    defective for failure to require the jury to make a determination as to whether each
    defendant was an investment adviser, the error was not prejudicial, at least with respect to
    RMA and Williams. Given the evidence in the record, even if the jury had specifically
    been instructed to determine whether RMA and Williams were investment advisers, it is
    not reasonably probable that the jury would have found that RMA and Williams were not
    investment advisers. The record contains substantial evidence to show that they were.
    However, there is no evidence to show that the RAM Fund was an investment adviser.
    Moreover, because the jury was not instructed in the common law, we do not now apply
    the common law to determine whether the RAM Fund could have been found to owe a
    fiduciary duty to Colson. Finally, there is substantial evidence to support the jury’s
    finding that CFI and Fish did not breach any fiduciary duty.
    (2) Hapke—
    Corporations Code section 25009, subdivision (a), provides in pertinent
    part: “‘Investment adviser’ means any person who, for compensation, engages in the
    business of advising others, either directly or through publications or writings, as to the
    value of securities or as to the advisability of investing in, purchasing or selling
    39
    securities, or who, for compensation and as a part of a regular business, publishes
    analyses or reports concerning securities. ‘Investment adviser’ does not include. . . (3) an
    associated person of an investment adviser . . . .”
    Hapke says he does not meet the foregoing definition for three separate
    reasons: (1) he is excluded from the definition because he is “an associated person of an
    investment adviser”; (2) he does not provide investment advisory services for
    compensation; and (3) he does not engage in the business of advising others.
    (a) Associated person
    Corporations Code section 25009.5, subdivision (a) defines an “associated
    person of an investment adviser” as “any partner, officer, director of . . . or other
    individual, . . . who is employed by or associated with, or subject to the supervision and
    control of, an investment adviser . . . , and who does any of the following: [¶] (1) Makes
    any recommendations or otherwise renders advice regarding securities. [¶] . . . [¶] (3)
    Determines which recommendation or advice regarding securities should be given. [¶]
    (4) Solicits, offers, or negotiates for the sale or sells investment advisory services. . . .”
    Hapke says it is undisputed that RMA is an investment adviser and that he
    was RMA’s chief financial officer, so he is an “associated person of an investment
    adviser” and as such is expressly excluded from the definition of an “investment adviser.”
    Actually, the Rockwater Defendants do dispute whether RMA is an investment adviser,
    but RMA’s own written materials show that it is.8 And, no one disputes that Hapke was
    RMA’s chief financial officer. That leaves the question of whether Hapke undertook any
    of the actions enumerated in section 25009.5, subdivision (a). Hapke overlooks this
    8       To be precise, the investment proposal submitted at the May 29, 2007 meeting
    stated that Rockwater Hedge, LLC was an investment advisory firm registered with the
    Department of Corporations. An RMA business plan dated June 15, 2008 stated that
    “Rockwater Hedge” had joined forces with CFI, through the contribution agreement, and
    “[t]he new entity [had] been re-named Rockwater Municipal Advisors LLC (RMA).”
    Hapke confirmed that Rockwater Hedge, LLC became known as RMA, in 2007. The
    business plan also described RMA as “an investment advisory firm.”
    40
    question, but it is one we can dispose of simply enough. Hasso’s cause of action against
    Hapke is predicated on the assertion that he rendered advice regarding securities and
    offered the sale of investment advisory services. For the purposes of this analysis, Hasso
    is stuck with that assertion.
    So, Hapke satisfies all criteria for the definition of an “associated person of
    an investment adviser” such that he is excluded from the definition of “investment
    adviser” for the purposes of Corporations Code section 25009, subdivision (a). Hasso
    provides no reason to dispute this.
    However, Hasso claims that the exclusion does not save Hapke from
    liability for breach of fiduciary duty because, irrespective of the fact that Hapke was an
    officer of RMA, he was nevertheless an investment adviser in his own right. In other
    words, Hasso argues that because Hapke rendered investment advisory services, he
    should held to be an investment adviser in his own right, even though Corporations Code
    section 25009.5, subdivision (a) specifically states that officers who render investment
    advisory services are not construed as investment advisers themselves. The obvious
    import of the statute is to hold liable entity registered investment advisers, but not their
    officers. Even were we to assume that Hasso’s interpretation of the statute is correct,
    however, we could not conclude that Hapke is an investment adviser in his own right, for
    reasons we shall show.
    (b) Compensation
    Hapke maintains that he was not an investment adviser, within the meaning
    of Corporations Code section 25009, subdivision (a), because he was not compensated as
    such. We agree.
    Hapke was chief financial officer of RMA. He was responsible for
    accounting, tax returns, and books and records, and was involved in the preparation of
    financial projections, cash flow analysis and the like. He received a flat salary from
    RMA for his services. Williams testified that neither he nor Hapke received commissions
    41
    for soliciting investments in the RAM Fund and, more specifically, that Hapke received
    no compensation for soliciting Colson’s investment in the RAM Fund.
    The only evidence that Hasso cites in support of the assertion that Hapke
    was compensated for rendering investment advisory services is evidence that, in January
    2008, Hapke’s role changed and his salary was cut in half. At that point, Williams put
    Hapke on commission and asked him to do business development work for the municipal
    bond business managed by Fish. A couple of months later, Hapke left the company.
    This evidence only shows that, after RMA and the RAM Fund were
    shattered by losses, Williams cut Hapke’s salary and asked him to undertake a different
    job function with respect to the portion of RMA that was still functional—CFI’s bond
    business. It does not show that Hapke was compensated by commission for business
    development before Colson invested in the RAM Fund in August 2007. There is simply
    no evidence to show that, at the time of the May 29, 2007 meeting, Hapke was one who
    received compensation for rendering investment advisory services, so as to qualify him as
    an investment adviser within the meaning of Corporations Code section 25009.
    Hasso disagrees, citing U.S. v. Elliott (1995) 
    62 F.3d 1304
    . True enough,
    that case, arising under the Investment Advisors Act of 1940 (15 U.S.C. § 80b-1 et seq.)
    (hereafter Investment Advisors Act), stated that it was unnecessary for customers to “pay
    a discrete fee specifically earmarked as payment for investment advice” in order for the
    defendant to be considered an investment adviser within the meaning of the federal
    statute. (U.S. v. 
    Elliott, supra
    , 62 F.3d at p. 1311.) Although the two defendants there
    did not receive separate investment adviser’s fees, they were, nonetheless, essentially
    compensated for providing investment advice. They solicited investments through a
    Ponzi scheme and were compensated through either the commingling of investor funds
    and personal funds, in the case of one defendant, or the receipt of commissions, in the
    case of the other defendant. (Id. at pp. 1305-1306.) We need not belabor the distinction
    between this form of “compensation” and the receipt of a salary by the chief financial
    42
    officer of a company. Hasso has failed to prove his point.
    (c) Business of advising others
    Hapke also says he was not an investment adviser within the meaning of
    Corporations Code section 25009, subdivision (a), because he did not engage in the
    business of advising others. Indeed, as we have seen, the evidence showed he was the
    chief financial officer of RMA and, as such, performed functions pertaining to
    accounting, tax returns, books and records, financial projections, cash flow analysis, and
    the like.
    At the same time, Hapke acknowledged that Williams would occasionally
    ask him to touch base with some of his contacts, such as Attorney Casey, to see if he
    could introduce the person to the RAM Fund and set up a meeting with Williams. Such a
    contact resulted in the situation we have here, where Williams and Hapke met with
    Serrano and pitched a three-tiered investment strategy, in which they hoped to obtain
    investments in the RAM Fund and CFI.
    Even so, for one to be considered an investment adviser, it is generally
    thought that the individual must provide investment advice on something more than
    “rare, isolated and nonperiodic” occasions. (U.S. v. 
    Elliott, supra
    , 62 F.3d at p. 1310.)
    Put another way, “[t]he giving of advice need only be done on such a basis that it
    constitutes a business activity occurring with some regularity . . . .” (Ibid.) Here, there is
    no indication that Hapke participated in presentations of this nature with any regularity.
    In any event, even if we were to assume that Hapke’s client contacts were
    more than isolated, this would not change the fact that there is no evidence that he was
    compensated for providing investment advisory services, such that he could properly be
    found to be an investment adviser. Rather, he was an officer of RMA, and as such was,
    as we have said, excluded from the definition of investment adviser himself. (Corp.
    Code, §§ 25009, 25009.5.)
    (3) Rockwater Defendants—
    43
    (a) Jury instructions
    The Rockwater Defendants, as we have noted, contend that they could not
    properly be held liable for a breach of fiduciary duty unless the jury specifically found
    that they were each investment advisers as defined in Corporations Code section 25009,
    which was quoted nearly verbatim in the jury instructions. They also argue that the jury
    instructions were such that the jurors were unfairly led to simply assume that each
    Rockwater Defendant was an investment adviser, rather than to understand that they had
    to first determine whether each individual defendant was an investment adviser at all
    before even considering whether the respective defendants were liable for breach of
    fiduciary duty. In addition, the Rockwater Defendants correctly observe that objections
    were timely made regarding the failure of the instructions to ask the jury to determine
    whether each individual defendant was an investment adviser before addressing the
    elements of a breach of fiduciary duty claim.
    The jury instructions with respect to breach of fiduciary consisted of five
    pages. The first page stated in pertinent part: “To establish the claim, the plaintiffs must
    prove each of the following elements is more likely true than not true: [¶] 1. That
    plaintiffs were clients or prospective clients of the defendants. [¶] 2. That the defendant
    acted on behalf of the plaintiffs for purposes of obtaining an investment in the RAM
    Fund. [¶] 3. That the defendants failed to act as a reasonably careful investment advisor
    would have acted under the same or similar circumstances. [¶] 4. That the plaintiffs were
    harmed. [¶] 5. That the Defendants’ conduct was a substantial factor in causing the
    plaintiffs’ harm.” The jury instructions immediately thereafter continued, on page two:
    “An investment adviser owes what is known as a fiduciary duty to its clients and
    prospective clients. . . .” A definition of the term “investment adviser,” consistent with
    Corporations Code sections 25009 and 25009.5, was not provided until the fourth page of
    the instructions on breach of fiduciary duty.
    It is possible to construe the instructions as meaning that as long as the
    44
    plaintiffs were prospective clients of the defendants, and the defendants were soliciting
    plaintiffs’ investment in the RAM Fund, the defendants owed the plaintiffs the duty to act
    the way a reasonably careful investment adviser would. Under this construction, the jury
    was not required to make a determination as to whether the Rockwater Defendants were
    investment advisers. However, even assuming the jury instructions were erroneous as
    given, this does not mean that the Rockwater Defendants have shown reversible error.
    “A judgment may not be reversed on appeal, even for error involving
    ‘misdirection of the jury,’ unless ‘after an examination of the entire cause, including the
    evidence,’ it appears the error caused a ‘miscarriage of justice.’ (Cal. Const., art. VI,
    § 13.) When the error is one of state law only, it generally does not warrant reversal
    unless there is a reasonable probability that in the absence of the error, a result more
    favorable to the appealing party would have been reached. [Citation.]” (Soule v. General
    Motors Corp. (1994) 
    8 Cal. 4th 548
    , 574.) Put another way, instructional error in a civil
    case requires reversal “‘where it seems probable’ that the error ‘prejudicially affected the
    verdict.’ [Citations.]” (Id. at p. 580.)
    Crucial here is the question whether there is a reasonable probability that,
    had the jury been specifically instructed it must make a finding as to whether each
    defendant was an investment adviser before proceeding to address the stated elements of
    a cause of action for breach of fiduciary duty, a result more favorable to the Rockwater
    Defendants would have been reached. The Rockwater Defendants say the answer is
    “yes.” The Rockwater Defendants contend the evidence clearly showed they were not in
    fact investment advisers, given that: (1) they never executed an investment advisers
    contract; (2) they did not engage in the investment adviser business; and (3) they were
    not compensated for providing investment advice. We turn to those issues now.
    (i) lack of investment advisory contract
    45
    The Rockwater Defendants cite Kassover v. UBS AG (S.D.N.Y 2008) 
    619 F. Supp. 2d 28
    and Norman v. Salomon Smith Barney Inc. (S.D.N.Y. 2004) 
    350 F. Supp. 2d 382
    in support of their argument that because the parties here did not enter into an
    investment advisory contract, the Rockwater Defendants were not investment advisers.
    However, we do not read more into those cases than they say. They say only that one
    who is not a party to an investment advisory contract cannot avail himself or herself of
    the remedies under the Investment Advisors Act. (Kassover v. UBS 
    AG, supra
    , 619
    F.Supp.2d at p. 32; Norman v. Salomon Smith Barney 
    Inc., supra
    , 350 F.Supp.2d at p.
    388; but see U.S. v. 
    Elliott, supra
    , 62 F.3d at pp. 1311-1312 [investment adviser contract
    not required under federal statutes].) Kassover and Norman do not say that one who is
    not a party to an investment advisory contract cannot assert a viable breach of fiduciary
    duty claim under other provisions of law or cannot be an investment adviser within the
    meaning of California Corporations Code section 25009. Along the same lines, the
    Rockwater Defendants do not state that Hasso’s breach of fiduciary duty cause of action
    is based on any provision of the Corporate Securities Law of 1968 (Corp. Code, § 25000
    et seq.) that is analogous to a provision of the Investment Advisors Act. As an aside, we
    also observe that the Rockwater Defendants do not say they requested that the term
    “investment adviser” be defined for the jury to include only those persons who were
    parties to investment advisory contracts. (See Metcalf v. County of San Joaquin (2008)
    
    42 Cal. 4th 1121
    , 1130-1131.) For these various reasons, the failure to sign an investment
    advisory contract is not determinative for our purposes.
    (ii) rendering investment advice
    The Rockwater Defendants also argue they are not investment advisers
    because they do not “engage[] in the business of advising others . . . as to the value of
    securities or as to the advisability of investing in, purchasing or selling securities . . .”
    within the meaning of Corporations Code section 25009, subdivision (a).
    In support of this assertion, they cite evidence regarding the function of
    46
    Williams in attending the May 29, 2007 meeting. Williams testified that he was at the
    meeting to speak about the RAM Fund, not to act as an investment adviser. Similarly,
    expert witness Taylor, called by the Rockwater Defendants, and expert witness Lisa
    Roth, called by CFI and Fish, each opined that Williams was at the meeting giving a sales
    pitch, not providing investment advice. However, this opinion was contrary to the one
    expressed by expert witness Hartman, called by Hasso.
    So, what we have here is the battle of the expert witnesses with respect to
    the function of Williams in attending the May 29, 2007 meeting. However, the simple
    fact of his attendance is not the only evidence we have.
    The first page of the investment proposal stated: “The unique
    characteristics and objectives of the [2006 May S. Hasso Serrano Family Trust] require a
    customized and thoughtful investment strategy, a strategy best executed by combining the
    focused expertise and experience of two specialty investment management firms. [¶] As
    such, this proposal is presented by the combined investment management firms of
    [RMA] and [CFI]. [¶] [RMA] and CFI are pleased to present this proposal to provide
    comprehensive investment services to the Trust.”
    The proposal presented a “three-tiered investment strategy” combining a
    “laddered portfolio of diversified traditional municipal bonds,” an “investment in a tax-
    advantaged multi-manager arbitrage strategy,” and “[a] smaller, but vital, liquidity
    portfolio made up primarily of tax-exempt bonds and notes with an average weighted life
    of fewer than two years.” The proposal allocated 40 percent of the trusts’ total
    investment to the traditional municipal bond portfolio, to be managed by CFI, 50 percent
    to the RAM Fund, and 10 percent to the liquid portfolio, also to be managed by CFI.
    The investment proposal stated: “After 25 years of investment experience
    serving high net worth clients, Bryan Williams formed Rockwater in 2005 as the
    investment advisor to the [RAM Fund]. Bryan Williams is also the founder, President
    and CEO of The Rockwater Group, formed in 1998 as an investment advisory firm to
    47
    high net worth and institutional clients. Both Rockwater and The Rockwater Group are
    Registered investment Advisory firms registered with the California Department of
    Corporations.” It further stated: “CFI was founded in 1984 and is a Registered
    Investment Advisor registered with the Securities and Exchange Commission under the
    investment action of 1940 and the California Department of Corporations.” The proposal
    stated RMA and CFI offered a “highly personalized service” and sought to meet at least
    annually “to review the performance of the portfolio, confirm goals and objectives, and
    discuss the investment outlook.” The proposal concluded by stating RMA and CFI were
    “delighted with the opportunity to present [their] proposal to provide investment
    management services to the Trust.”
    In short, Williams was pitching a “three-tiered investment strategy” at the
    same time as he was trying to sell the trusts on making an investment in the RAM Fund
    as one component part of that ongoing investment strategy. It is difficult to characterize
    this as something other than rendering investment advice.
    (iii) lack of compensation
    The Rockwater Defendants maintain that they could not be found to be
    investment advisers within the meaning of Corporations Code section 25009, subdivision
    (a), because they did not receive compensation for providing investment advice. In
    support of this assertion, the Rockwater Defendants cite the testimony of Serrano, who
    stated the reason she chose a two-year lockup period on the RAM Fund investment was
    that with a two-year lockup, no management fees were paid unless there was a profit.
    However, this evidence bears only upon compensation to RMA, and even at that the
    Rockwater Defendants are very narrow in their citation to the evidence.
    Both the investment proposal and the private placement memorandum
    specifically addressed the manner in which RMA would receive its compensation. They
    stated that RMA, as the managing member of the RAM Fund, received compensation
    from the RAM Fund. Whether that compensation was paid as a management fee or as a
    48
    profit allocation depended on the class of interest being managed. The private placement
    memorandum explained that Class A Interests were subject to a two-year lockup and
    Class B Interests were subject to a one-year lockup. The RAM Fund paid a 1 percent
    annual management fee on Class B Interests, plus a percentage of profits. It paid no
    management fee on Class A Interests, but it paid a higher percentage of profits.
    So the private placement memorandum showed that while no management
    fee per se was paid with respect to interests subject to a two-year lockup, a percentage of
    profits was paid with respect to those interests. This is still compensation. And, in
    determining whether a person is an investment adviser, this type of compensation can
    suffice. (S.E.C. v. Saltzman (E.D.Pa. 2000) 
    127 F. Supp. 2d 660
    , 669 [profit-based
    performance fee constitutes compensation]; see also U.S. v. 
    Elliott, supra
    , 62 F.3d at p.
    1311 [discrete fee for investment advice not required].) In short, the record is not devoid
    of evidence that the RAM Fund investment was structured so as to provide compensation
    to RMA, even though we have no evidence to show that either Williams or the RAM
    Fund received compensation based on the investment.
    However, when it comes to the determination of whether they were
    investment advisers, Williams and RMA forget three critical points: (1) Williams
    testified9 that he was a registered investment adviser; (2) section 2 of the private
    placement memorandum stated: “Mr. Bryan Williams has over 25 years of successful
    investment management experience as an investment advisor in Southern California”;
    and (3) as noted previously, the written materials provided to Serrano stated that RMA
    9      Williams explained that “[a]n investment adviser is one who registers with a
    regulatory body in a statement called the form ADV that says what it is that you do and
    how you get paid for it.” He further stated that you generally give a copy to investors.
    Williams regarded the trusts as potential investors in the RAM Fund and potential clients
    of CFI. However, the form ADV that was given to the trusts was the form ADV for CFI,
    not the form ADV for Williams, even though Williams admitted to being a registered
    investment advisor.
    49
    was an investment adviser.
    (iv) conclusion
    Given the totality of the evidence, it is not reasonably probable that, had the
    jury been instructed that it must make a finding as to whether each individual defendant
    was an investment adviser, the outcome with respect to the breach of fiduciary duty cause
    of action would have been more favorable to either RMA or Williams. They were
    registered investment advisers presenting a comprehensive investment strategy in hopes
    of obtaining investment monies from the trusts.
    However, there is a reasonable probability that the outcome would have
    been more favorable with respect to the RAM Fund. The May 29, 2007 presentation was
    given by RMA, not the RAM Fund, even though the RAM Fund was one of the available
    investments described at the meeting. Williams testified that the RAM Fund was not an
    investment adviser, that it was only a fund. Indeed, this is what the private placement
    memorandum reflects. We have seen no evidence to the contrary—nothing to show that
    the RAM Fund itself was in the business of rendering investment advisory services for
    compensation.
    (b) Colson’s testimony
    Separate and apart from their arguments based upon the jury instructions
    and Corporations Code section 25009, the Rockwater Defendants claim the finding that
    they breached their fiduciary duties must be reversed because of Colson’s testimony
    alone. Colson testified that while he was empowered by the terms of the trusts to hire
    investment advisers, he nonetheless had not chosen to hire any investment advisers.
    Also, Colson testified more specifically that he had not retained either Williams or Hapke
    as an investment adviser and, for that matter, he had never spoken with either one of them
    about the risks associated with the RAM Fund investment.
    However, the Rockwater Defendants cite no authority to support the
    50
    proposition that Colson’s testimony standing alone is dispositive. To the contrary, the
    Rockwater Defendants are essentially making a substantial evidence argument. As we
    have shown already, there is substantial evidence to show that RMA and Williams were
    investment advisers who sought and obtained investments from Colson, and thus owed
    him a fiduciary duty. At the same time, there is no substantial evidence to show that the
    RAM Fund was an investment adviser.
    (c) Common law
    Hasso argues that, even if this court holds the Rockwater Defendants were
    not investment advisers within the meaning of Corporations Code section 25009, we
    should nonetheless affirm the judgment against the Rockwater Defendants on the breach
    of fiduciary duty cause of action because they were fiduciaries under common law.
    Given our holding with respect to RMA and Williams, we need only consider this
    argument with respect to the RAM Fund.
    The Rockwater Defendants argue that the common law on fiduciary duty
    should not be applied in this matter because the jury was not asked to determine whether
    a fiduciary relationship arose based on common law. They have a good point. As we
    have stated, it is a question of fact whether, given the circumstances of the case, there
    exists a confidential relationship giving rise to a common law fiduciary duty. (GAB
    Business Services, Inc. v. Lindsey & Newsom Claim Services, 
    Inc., supra
    , 83 Cal.App.4th
    at p. 417; see also Brown v. Wells Fargo Bank, 
    N.A., supra
    , 168 Cal.App.4th at pp. 960-
    962.)
    However, the jury was not asked to determine whether such a confidential
    relationship existed. Rather, as the Rockwater Defendants correctly point out, the jury
    instructions addressed the cause of action only in the context of the fiduciary duty of an
    investment adviser. Moreover, each party must propose complete and comprehensive
    jury instructions supporting his or her theory of the case. (Metcalf v. County of San
    
    Joaquin, supra
    , 42 Cal.4th at pp. 1130-1131.) The Rockwater Defendants are correct
    51
    that, to the extent Hasso desired that the jury consider a common law theory of breach of
    fiduciary duty, he should have offered jury instructions on the point. We will not
    consider a common law theory on which to base liability for breach of fiduciary duty, due
    to Hasso’s failure to offer jury apposite instructions.
    (d) Breach
    We could end our discussion of the breach of fiduciary duty cause of action
    against RMA and Williams right here. However, we nonetheless choose to show why the
    evidence did not support a cause of action for fraud but did support a cause of action for
    breach of fiduciary duty—a point RMA and Williams do not discuss.
    Expert witness Hartman opined that there was a breach of fiduciary duty in
    connection with the May 29 meeting and the materials discussed at that time. He stated
    that the investment advisers had a duty, at the May 29 meeting, to provide a balanced
    presentation as to the advantages and disadvantages of the proposed investment and to
    make sure the prospective client fully understood the nature of the services being
    proposed. He further said that the investment proposal and the power point presentation
    provided a better disclosure of the advantages than of the disadvantages, and that the
    risks were understated. In particular, he said the materials presented at the meeting failed
    to disclose the amount of leverage.
    On a related note, Hartman expressed his understanding that Serrano had
    made plain that the trusts’ investment objective was capital preservation and that there
    was a willingness to take conservative risk to obtain an enhanced return to the extent
    consistent with that objective. However, he explained that an investment adviser who
    makes a recommendation not in conformity with a prospective client’s objectives has a
    duty to explain the risks fully to make certain the client understands the risks. He
    reiterated that, in this case, the investment proposal and the presentation failed to fully
    explain the risks in terms of the amount of leverage.
    Indeed, as we have noted, Williams testified that the sub-funds were
    52
    leveraged from 2.5 to 11.9 times. However, Serrano said she was not told that the
    investment would be leveraged up to 12 times. Serrano repeatedly testified that she told
    Williams and Hapke that the objective was capital preservation and that she understood
    based on their presentation that the investment was a low-risk investment well suited for
    the trusts. Given the totality of Serrano’s testimony, the jury could infer that had the
    amount of leverage been disclosed in the meeting, Serrano would not have recommended
    to Colson that he make an investment in the RAM Fund, Colson would not have invested,
    and the trust monies would not have been lost.
    (4) CFI and Fish—
    In his appeal, Hasso argues he should have prevailed against CFI and Fish
    on the breach of fiduciary duty cause of action. He asserts that the court erred in failing
    to grant his motions for judgment notwithstanding the verdict and for a new trial with
    respect to the breach of fiduciary duty cause of action as against CFI and Fish.
    In order to prevail on his cause of action for breach of fiduciary duty, Hasso
    had the burden to prove the existence of a fiduciary relationship, a breach of that duty,
    and damages proximately caused by the breach. (Knox v. 
    Dean, supra
    , 205 Cal.App.4th
    at p. 432; Oasis West Realty, LLC v. Goldman (2011) 
    51 Cal. 4th 811
    , 820-821.) We first
    observe there is no dispute that CFI was a registered investment adviser. Consequently, it
    owed a fiduciary duty to its clients and prospective clients. (Cf. Securities & E. Com’n
    v. Capital Gains Research 
    Bur., supra
    , 375 U.S. at pp. 191, 194.)
    Hasso says both CFI and Fish owed fiduciary duties to Colson because the
    May 29, 2007 presentation was made on behalf of RMA and CFI jointly and the
    investment proposal pitched investments in both the RAM Fund and CFI. Consequently,
    he argues, Colson, as the intended recipient of the investment proposal, was not only the
    prospective client of CFI, but after investing in the RAM Fund, was also the actual client
    of CFI. He says CFI and Fish “breached their fiduciary duty by crafting the deceptive
    presentation” and persuading Colson “to invest $6 million in the RAM Fund, whose
    53
    leveraged municipal arbitrage strategy was antithetical to [the] goals of capital
    preservation and safe, tax-advantaged yield.” Hasso maintains that it is irrelevant that
    Fish did not attend the presentation or that Colson did not invest in any assets managed
    by CFI.
    We first note that the May 29, 2007 presentation was given about six
    months before CFI officially joined up with RMA pursuant to the contribution
    agreement. Nonetheless, the investment proposal itself stated that it was “presented by
    the combined investment management firms of [RMA] and [CFI].” And, the investment
    proposal clearly recommended investments in both the RAM Fund, managed by RMA,
    and traditional municipal bonds and liquid short-term investments, managed by CFI.
    Similarly, the investment proposal showed that RMA would be compensated with respect
    to the portion of the portfolio invested in the RAM Fund and CFI would earn a
    management fee on the portions of the portfolio it managed.
    In weighing this information, the jury nonetheless did not find either CFI or
    Fish liable for breach of fiduciary duty. Neither Fish nor any other representative of CFI
    attended the meeting or made any verbal representation to Serrano. True, one could infer
    that because CFI was listed as a presenter of the investment proposal, it recommended all
    investments mentioned in that proposal, both those it would manage and with respect to
    which it would earn fees and those it would not manage and with respect to which it
    would earn no fees. However, one could also infer that CFI recommended only the
    investments that it would manage and with respect to which it would earn fees. It is not
    up to this court to reweigh the evidence. (In re Marriage of Balcof (2006) 
    141 Cal. App. 4th 1509
    , 1531.) Here, substantial evidence supports the implied finding that
    CFI and Fish breached no duty in connection with the May 29, 2007 meeting and the
    investment proposal. (Virtanen v. O’Connell (2006) 
    140 Cal. App. 4th 688
    , 709.)
    Consequently, Hasso has failed to meet his burden to show error in the
    54
    judgment on the breach of fiduciary duty claim against CFI and Fish or in the order
    denying the motion for judgment notwithstanding the verdict on that claim. (Wolf v. Walt
    Disney Pictures & 
    Television, supra
    , 162 Cal.App.4th at p. 1138.) Similarly, he has
    failed to show that the court abused its discretion in denying the new trial motion on that
    claim. (Fassberg Construction Co. v. Housing Authority of City of Los 
    Angeles, supra
    ,
    152 Cal.App.4th at pp. 751-752.)
    F. PROFESSIONAL NEGLIGENCE:
    “The elements of a cause of action for professional negligence are (1) the
    existence of the duty of the professional to use such skill, prudence, and diligence as
    other members of the profession commonly possess and exercise; (2) breach of that duty;
    (3) a causal connection between the negligent conduct and the resulting injury; and (4)
    actual loss or damage resulting from the professional negligence. [Citation.]” (Oasis
    West Realty, LLC v. 
    Goldman, supra
    , 51 Cal.4th at p. 821.)
    The professional negligence cause of action was tried on the theory that
    Hapke and the Rockwater Defendants were investment advisers who failed “to use the
    skill and care that a reasonably careful investment advisor would have used in similar
    circumstances.” Because the breach of fiduciary duty cause of action was also based on
    the assertion that Hapke and the Rockwater Defendants were investment advisers, they
    and Hasso offer perfunctory arguments that essentially state the professional negligence
    cause of action should rise or fall the same way as the breach of fiduciary duty cause of
    action.
    As we have already stated, Hapke and the RAM Fund were not investment
    advisers. This being the case, they are not liable for professional negligence based on the
    duties of an investment adviser any more than they are liable for breach of the duty of an
    investment adviser. That leaves Williams and RMA.
    Williams and RMA say that given the lack of either reliance or reasonable
    55
    reliance on their conduct, any negligence on their part could not have been a substantial
    factor in causing harm to the trusts. In so stating, they provide no citations to legal
    authority and no citations to the record. Perhaps they expect this court to extrapolate
    from their arguments under the fraud topic headings and apply those arguments in the
    professional negligence context. We decline to do so.
    As we have already discussed, the evidence does not support a cause of
    action based on fraudulent misrepresentation or omission, but does support a cause of
    action based on breach of fiduciary duty. We noted that expert witness Hartman testified
    as to the nature of an investment adviser’s fiduciary duty and the breach of that duty in
    this case. Williams and RMA make no mention of Hartman’s testimony on these points
    and certainly do not tell us whether there should be any distinctions in the context of
    professional negligence. We do not intend to research the matter on our own. (Paterno
    v. State of California (1999) 
    74 Cal. App. 4th 68
    , 106.) Inasmuch as Williams and RMA
    have failed to provide record references or citations to authority in support of their
    argument, their argument is waived. (Roden v. AmerisourceBergen Corp. (2010) 
    186 Cal. App. 4th 620
    , 648.)
    G. HASSO’S EQUITABLE CLAIMS REGARDING CFI AND FISH:
    (1) Introduction—
    In his appeal, Hasso requests this court to: (1) reverse the portion of the
    judgment regarding the ruling on his equitable theories of alter ego and single enterprise;
    and (2) remand the matter to the trial court with directions to enter new findings that
    RMA and CFI are jointly and severally liable to him, and that CFI and Fish are jointly
    and severally liable to him. In other words, Hasso seeks to have CFI held liable to the
    same extent as RMA, on the basis of single enterprise liability, and then to have Fish held
    liable to the same extent as CFI, on the basis of alter ego liability. As we shall show,
    substantial evidence supports the trial court’s finding that RMA and CFI were not a
    56
    single enterprise, so CFI was not liable for the debts of RMA. Furthermore, inasmuch as
    we affirm the judgment in favor of CFI on all grounds, we need not address whether the
    court erred in finding that Fish was not the alter ego of CFI.
    (2) Principles of law—
    “In California, two conditions must be met before the alter ego doctrine
    will be invoked. First, there must be such a unity of interest and ownership between the
    corporation and its equitable owner that the separate personalities of the corporation and
    the shareholder do not in reality exist. Second, there must be an inequitable result if the
    acts in question are treated as those of the corporation alone. [Citations.] ‘Among the
    factors to be considered in applying the doctrine are commingling of funds and other
    assets of the two entities, the holding out by one entity that it is liable for the debts of the
    other, identical equitable ownership in the two entities, use of the same offices and
    employees, and use of one as a mere shell or conduit for the affairs of the other.’
    [Citations.] Other factors which have been described in the case law include inadequate
    capitalization, disregard of corporate formalities, lack of segregation of corporate records,
    and identical directors and officers. [Citations.] No one characteristic governs, but the
    courts must look at all the circumstances to determine whether the doctrine should be
    applied. [Citation.] Alter ego is an extreme remedy, sparingly used. [Citation.]”
    (Sonora Diamond Corp. v. Superior Court (2000) 
    83 Cal. App. 4th 523
    , 538-539; see also
    Greenspan v. LADT LLC (2010) 
    191 Cal. App. 4th 486
    , 510-513.)
    “‘Generally, alter ego liability is reserved for the parent-subsidiary
    relationship. However, under the single-enterprise rule, liability can be found between
    sister companies. The theory has been described as follows: “‘In effect what happens is
    that the court, for sufficient reason, has determined that though there are two or more
    personalities, there is but one enterprise; and that this enterprise has been so handled that
    it should respond, as a whole, for the debts of certain component elements of it. . . .’”’
    [Citations.]” (Greenspan v. LADT 
    LLC, supra
    , 191 Cal.App.4th at p. 512.)
    57
    Whether alter ego has been established “‘is primarily a question of fact
    which should not be disturbed when supported by substantial evidence.’ [Citation.]”
    (Greenspan v. LADT 
    LLC, supra
    , 191 Cal.App.4th at p. 512.)
    (3) Statement of decision—
    The court stated at the outset that Hasso had failed to prove that either Fish
    or CFI had acted in bad faith or engaged in misconduct so as to justify the application of
    either the alter ego or the single enterprise doctrine. Citing Sonora Diamond Corp. v.
    Superior 
    Court, supra
    , 83 Cal.App.4th at page 539, the court held that without evidence
    of wrongdoing by Fish or CFI, one of the two essential elements of the alter ego doctrine
    could not be established. The court noted that in phase I, the jury had found in favor of
    Fish and CFI on causes of action for fraud, concealment, breach of fiduciary duty, and
    professional negligence. It further stated that in phase III, Hasso had failed to present
    sufficient evidence of bad faith.
    The court also found that Hasso had failed to show that the failure to hold
    Fish or CFI liable would result in injustice or inequity. Finally, the court found that
    Hasso had failed either to present sufficient evidence of a unity of interest between CFI
    and RMA to establish single enterprise liability or to present sufficient evidence of a
    unity of interest between CFI and Fish to establish alter ego liability.
    With regard to the purported unity of interest between CFI and RMA, the
    court summarized the testimony of Hasso’s expert witness, certified public accountant
    and certified fraud examiner Michael Spindler, in the following manner: “Plaintiffs’
    expert witness . . . testified that CFI did not dominate or control RMA. He did not find
    that CFI and RMA shared common ownership or that CFI used RMA as a mere conduit
    for its affairs. He further testified that after the Contribution Agreement, Defendant
    Bryan Williams was the President, managing member and controlling shareholder of
    RMA. Spindler further agreed that CFI was not involved in RMA’s business operations.
    “Spindler, a forensic accountant, also testified that he found no evidence
    58
    that CFI and RMA commingled assets. CFI maintained separate bank accounts, separate
    credit card accounts, separate accounting books and filed its own tax returns. CFI and
    RMA maintained their own legal formalities. CFI maintained its corporate status with
    the California Secretary of State, it maintained a board of directors, it held board of
    directors meetings, and board members voted on important corporate actions. In
    addition, dealings between CFI and RMA involved written contracts (i.e., Contribution
    Agreement), and CFI and RMA were each represented in such transactions by separate
    counsel. None of the factors Spindler identified in support of Plaintiffs’ single enterprise
    claim show that CFI held itself out as liable for RMA’s debts. CFI and RMA did not
    share ownership of any assets. CFI and RMA did not share obligations for any liabilities.
    CFI never held any of Plaintiffs’ assets. CFI never agreed to pay any of RMA’s
    liabilities. None of RMA’s controlling shareholders or managing members has ever been
    a CFI employee or a member of CFI’s board of directors. Finally, Spindler found no
    evidence that RMA was undercapitalized.” (Record references omitted.)
    (4) Substantial Evidence Regarding RMA and CFI—
    We have reviewed the testimony of Spindler in its entirety and see that it
    fully supports the court’s characterization. However, we also observe that the foregoing
    testimony notwithstanding, Spindler opined that CFI and RMA were a single enterprise,
    as least from the time they entered into the contribution agreement and until the time of
    the unwind agreement. As he put it, after the contribution agreement was signed, “CFI . .
    . and RMA essentially became one.” In addition, he provided certain testimony that
    would support factors in favor of a finding of a unity of interest between CFI and RMA.
    Nonetheless, we need not detail all that testimony here. Suffice it to say, as
    the trial court well showed, Spindler provided ample testimony in support of factors
    contrary to a finding of a unity of interest, so much so, that we need not even address the
    testimony of Professor Hugh Friedman, the expert witness of Fish and CFI. Without
    question, the testimony of Spindler alone provided substantial evidence in support of the
    59
    court’s finding that there was a lack of unity of interest between CFI and RMA, such that
    CFI was not liable for the debts of RMA on the basis of single enterprise liability.
    III
    DISPOSITION
    The judgment against RMA and Williams for fraud by intentional
    misrepresentation, fraud by concealment, negligent misrepresentation and actual and
    constructive fraudulent conveyance is reversed. The judgment against RMA and
    Williams for breach of fiduciary duty and professional negligence is affirmed.
    The orders on the Rockwater Defendants’ motions for new trial and for judgment
    notwithstanding the verdict are moot.
    The judgment against the RAM Fund is reversed.
    The judgment against Hapke is reversed. The order denying his motion for
    judgment notwithstanding the verdict is moot.
    The judgment in favor of CFI and Fish is affirmed. The orders denying
    Hasso’s motions for judgment notwithstanding the verdict and for new trial are affirmed.
    Hapke, CFI and Fish shall receive their costs on appeal. Hasso and the
    Rockwater Defendants shall bear their own costs on appeal.
    MOORE, J.
    WE CONCUR:
    O’LEARY, P. J.
    RYLAARSDAM, J.
    60