$8M Verdict: Friend Defrauds Elderly Man in Property Scheme

Case Background

Gary J. Reinero, an 84-year-old lifelong resident of Merced County, California, filed a lawsuit against his longtime friend and business associate Clifford J. Caton in December 2024. The case centered on a 30-acre property at 1897 E. Yosemite Avenue in Merced that Reinero and his late wife Jacqueline owned through their family trust. What began as a friendship forged through drag racing in the early 2000s turned into a bitter legal dispute over allegations of fraud, elder abuse, and usury involving millions of dollars in property sales.

Reinero, who competed in drag racing championships in his sixties, relied on Caton's real estate expertise when he and his wife needed to borrow money against their property and eventually sell it. Caton, who developed a portfolio of over 30 properties spanning 52 acres in the Merced area since 1967, positioned himself as a knowledgeable advisor despite not holding a real estate broker's license. The relationship soured when Caton allegedly used deceptive tactics to transfer ownership of the property to himself in 2014, then sold it nearly a decade later for $8.5 million without accounting for the proceeds to Reinero.

Cause

The central cause of this dispute traced back to a series of loans Caton made to the Reineros between 2001 and 2008, secured by the 30-acre property. Reinero alleged that Caton structured these loans with hidden interest charges disguised as "points" or loan origination fees, pushing the actual interest rates to 17% or 18% annually rather than the stated 8%. According to the complaint, Caton charged between nine and ten points each time a loan renewed or refinanced, effectively collecting additional interest without proper disclosure. On one particularly short-term note from August 2004, which came due in less than four and a half months, the actual interest rate reached approximately 36% annually.

The situation grew more complicated when the City of Merced repeatedly declined to annex the property due to concerns about inadequate sewer capacity. Reinero claimed that Caton knew by 2004 that sewer capacity limitations represented a major obstacle to development and sale, yet continued to structure short-term loans with one-year due dates when selling the property in that timeframe seemed unlikely. Each renewal generated additional points and fees, compounding the debt far beyond the actual money borrowed.

The critical moment came on December 23, 2014, when Reinero signed a grant deed transferring the property from the Reinero Family Trust to Caton's West Main Trust. Caton assured Reinero this transfer would not affect his equity in the property but would simply eliminate interest payments. Reinero later discovered that Caton concealed emerging solutions to the sewer capacity issue and failed to disclose that University Village Merced, LLC showed interest in acquiring the property.

Less than ten months after recording the deed, University Village Merced took an option to purchase the property on October 15, 2015. The option remained in effect until September 30, 2018. In August 2022, Caton subdivided the property into 20-acre and 10-acre parcels without informing Reinero. On December 29, 2022, he sold the 20-acre parcel to University Village Merced for $5 million, which immediately resold it to Golval Investment for $8.475 million. On February 17, 2023, Caton sold the 10-acre parcel to California Rental Properties II, LP for $3.5 million. Caton kept all $8.5 million in proceeds rather than accounting for them under his longstanding oral agreement with Reinero.

Injury

Reinero suffered the loss of his 30-acre property and the entire $8.5 million in sale proceeds. He alleged that most of the debt Caton claimed he owed represented excessive interest charges, finance fees, and compounded interest rather than actual borrowed principal. Reinero estimated that less than 25% of the claimed debt as of June 2014 consisted of money actually borrowed, with the remainder being usurious interest and fees.

Beyond the financial loss, Reinero experienced the betrayal of a decades-long friendship and trust relationship. As an elderly man who relied on Caton's purported expertise in real estate matters, he found himself stripped of a valuable asset through what he alleged were systematic misrepresentations and concealment of material facts. His late wife Jacqueline, who passed away in January 2022, also suffered these losses during her lifetime.

Damages Sought

Reinero requested compensatory damages of $8.5 million, representing the full sale price of the property, minus any amounts proven legitimately due to Caton. Under California's elder abuse statute, he sought to have this amount trebled to $25.5 million. He also demanded treble damages for usurious interest collected throughout the loan relationship, estimated at $2 million in interest payments that would be trebled to $6 million under California's loan sharking penalty statute.

The complaint requested punitive damages to punish Caton's fraudulent conduct. Reinero sought attorney's fees and costs under multiple statutory provisions, including the elder abuse statute, the usury statute, and contractual attorney's fee clauses in the notes and deeds of trust. He demanded $10,000 in unpaid relocation assistance that Caton promised but never paid when University Village Merced purchased the property.

Reinero asked the Court to impose a constructive trust on six properties Caton purchased with proceeds from the sale, including the Bear Creek Galleria at 2840 G Street, where Caton used $3.524 million from the Reinero property sale to pay off a deed of trust in April 2023.

Key Arguments and Proceedings

Legal Representation

Plaintiff: Gary J. Reinero, individually and as trustee of the Reinero Family Trust

·       Counsel for Plaintiff: John Conard | Ari E. Moss | Laurence F. Padway

Defendant: Clifford J. Caton, individually and as trustee of the West Main Trust

·      Counsel for Defendant: Kyle A. Hampton | Paul R. Gaus

Key Arguments or Remarks by Counsel

Claims

Reinero's attorneys argued that Caton systematically deceived their client over more than a decade. They emphasized that the "points" charged on each loan refinancing constituted disguised interest that pushed the true interest rate far beyond California's constitutional maximum of 10% per year. By labeling these charges as loan origination fees rather than interest, Caton concealed the usurious nature of the loans from the unsophisticated Reineros, who lacked familiarity with such financing mechanisms.

Counsel highlighted Caton's letters from 2012 and 2014, arguing they contained deliberate falsehoods designed to create a false sense of urgency. When Caton claimed he was "keeping the mortgage current" and "making payments on my end," he fabricated the existence of a third-party lender to whom he owed money. In reality, he was the lender, and no payments to outside parties were necessary. This manufactured pressure, combined with understating the property's value and overstating the debt, pushed the elderly Reineros into surrendering their property.

The attorneys contended that Caton breached his fiduciary duty by concealing crucial information about the property's development potential. By December 2014, low-flow toilet and water conservation standards made the City of Merced's sewer capacity calculations obsolete, yet Caton never revealed this solution to the annexation problem that blocked development. He also failed to disclose University Village Merced's interest in the property, even though he owed the Reineros a duty to share such information under their long-standing arrangement.

Reinero's counsel emphasized the elder abuse aspects of the case. Their client crossed the threshold into legal "elder" status on his 65th birthday in August 2005, and Caton took advantage of this vulnerable senior citizen's trust. The pattern of deception, the use of complex financial instruments to hide excessive charges, and the pressure tactics employed against an 84-year-old man demonstrated the willful misconduct that California's elder abuse statute targets.

Defense

Caton's attorneys denied any fraudulent conduct or misrepresentation. They characterized the relationship as a straightforward lending arrangement between friends, with Caton making substantial loans to help the Reineros over many years. The notes and deeds of trust were prepared by professional title companies, properly documented all terms including interest rates and loan origination fees, and were voluntarily signed by the Reineros with full knowledge of their contents.

Defense counsel disputed that any fiduciary relationship existed between the parties. While Caton and Reinero were friends who shared an interest in drag racing, Caton never assumed any formal duty to manage the property or act as Reinero's agent in selling it. The loans were arm's-length transactions between parties who understood real estate financing.

On the usury allegations, Caton's attorneys argued that the loan origination fees, or points, represented legitimate compensation for making private loans secured by real property. These fees are standard in real estate financing and do not constitute additional interest under California law when properly disclosed in the loan documents. The title company closing statements clearly showed all fees charged, and the Reineros signed the documents acknowledging these terms.

Jury Verdict

On October 23, 2025, the jury returned its verdict after deliberating on the fraud, elder abuse, and related claims. The jury found in favor of Gary J. Reinero and awarded him $8,000,000 in punitive damages for fraud by intentional misrepresentation and fraud by concealment or elder abuse. This substantial punitive award reflected the jury's determination that Clifford Caton's conduct warranted significant punishment beyond mere compensation for Reinero's losses.

The verdict represented a complete vindication of Reinero's allegations that his longtime friend systematically deceived him, took advantage of his trust and advanced age, and ultimately stripped him of his valuable property through fraudulent means. The eight-million-dollar punitive damages award sent a clear message about the seriousness of exploiting elderly individuals and breaching relationships built on decades of friendship and mutual reliance.

Court documents are available upon request at jurimatic@exlitem.com