This was a great life lesson Mike, and other than the stress related internal organ damage, as well as lip damage, that might have happened, you handled it very well.
You know this, but I'll say it:
Are you still getting positive feedback from customers?
How does that branch look "on the books"?
I can say from spending a couple of days with Davis and Ely that I'd let them clean for my mother and I'd leave a blank check on the table.
The good thing that came from this screw up is that it forced you to examine everything the California branch does and how it could be improved.
Even more importantly, remember this:
Over time, that company will change in bad ways and good. Davis isn't you, and its not his job to be you (unless you really want to screw the young man up....which I know you don't)
You just need to guide him to be the best "Davis" he can be, both as an employer and a father.
Thus far, you've done a damn good job.