Opinion
For Opinion on Rehearing see, 90 Cal.Rptr. 144.
Opinion on pages 407 to 420 omitted
REHEARING GRANTED
See 11 Cal.App.3d 285 for resulting opinion.
[85 Cal.Rptr. 859]Harold B. Edwards, in pro. per.
Kilpatrick, Peterson & Ely, Vallejo, for respondents.
MOLINARI, Presiding Justice.
Defendant appeals from an order granting plaintiffs' application for an order directing payment of a prior judgment for compensatory damages against defendant out of the Real Estate Education, Research and Recovery Fund. (Bus. & Prof.Code, §§ 10470-10483. )
The Real Estate Education, Research and Recovery Fund will hereafter be referred to as the 'Fund.'
Unless otherwise indicated, all statutory references hereinafter made are to the Business and Professions Code.
Statement of the Case
On July 10, 1967, plaintiffs obtained a judgment against defendant, a licensed real estate broker, in an action sounding in fraud for $4,025 compensatory damages and $2,500 punitive damages. No appeal was taken from that judgment within the prescribed time and it has, therefore, become final. Thereafter, on November 1, 1967, plaintiffs filed, pursuant to section 10471, and in the same action in which the judgment was entered, a verified application for an order directing payment out of the Fund of the damages awarded in the judgment. A hearing was conducted upon such application following service of the application upon the Real Estate Commissioner. At this hearing defendant was personally present and was called as a witness by the Attorney General who was appearing as attorney for the Commissioner. Following the hearing the court made its order on March 7, 1968 directing the Commissioner to pay out of the Fund the compensatory damages awarded in the judgment to plaintiffs. No appeal from this order was taken by the Commissioner, but an appeal has been taken therefrom by defendant.
Section 10471, as it then read, provided, in pertinent part, as follows: 'When any aggrieved person obtains a final judgment in any court of competent jurisdiction against any person licensed under this part, upon grounds of fraud, misrepresentation or deceit with reference to any transaction for which a license is required under this part * * *, the aggrieved person may, upon termination of all proceedings including reviews and repeals [sic] in connection with the judgment, file a verified application in the court in which the judgment was entered for an order directing payment out of the Real Estate Education, Research and Recovery Fund of the amount of actual damages * * * unpaid upon the judgment.'
Hereinafter referred to as the 'Commissioner.'
Plaintiffs do not contend that the subject order is not an appealable order, but they do contend that defendant has no standing to bring this appeal. Before considering this contention it is appropriate that we discuss the nature of the instant proceeding. Pursuant to section 10471, as it read at the time the instant application was filed, any 'aggrieved person' who obtained a final judgment in any court of competent jurisdiction against any person or persons licensed under the Real Estate Law on [85 Cal.Rptr. 860]grounds of fraud, misrepresentation, or deceit with reference to any transaction for which a license was required could file a verified application in the court in which the judgment was entered for an order directing payment out of the Fund of the amount of actual damages unpaid upon the judgment. None of the pertinent statutes provided that the licensee should be made a party to the proceeding. Moreover, section 10471 provided for service of the application only upon the Commissioner.
Pursuant to section 10472, as it read at the time of the instant application, the 'aggrieved person' was required to show, among other things, that he had obtained a judgment as set out in section 10471; that he had, pursuant to Code of Civil Procedure section 714, previously examined the judgment debtor under oath concerning his property; and that he had made a reasonable and diligent search to ascertain all personal and real property held by the judgment debtor capable of satisfying the judgment. Under section 10473, as it read at the time of the instant proceeding, the Commissioner could defend such an action by any and all appropriate means and, at the hearing, the judgment was only prima facie evidence of the validity of the claim.
Section 10473, in pertinent part, provided: 'Whenever the court proceeds upon an application * * *, the commissioner shall have the right to answer and defend any such action against the * * * Fund on behalf of the fund and in the name of the defendant and shall have recourse to any appropriate method of review on behalf of the fund to include examination of witnesses, introduction of evidence and such other action as may be appropriate * * *. [p] The judgment set forth in the application shall be considered the only prima facie evidence and the findings of fact therein shall not be conclusive * * *.'
The provisions under discussion clearly indicate that the determination to be made at the hearing upon such application was whether the Fund was to be invaded in order to satisfy the 'aggrieved person's' judgment. The pivotal issue was whether the 'aggrieved person' had obtained a judgment as set out insection 10471 and whether he has complied with the provisions of section 10472. Defending against the 'aggrieved person's' application was specifically entrusted to the Commissioner. Section 10473, as it read at the time of the instant proceeding, specifically provided that the Commissioner had the right to defend the Fund and to appear on its behalf. We point out here that the Fund belongs to the state and that the licensee's only connection with the Fund is that it is partially supported by the license fees collected by the Commissioner from licensees. Accordingly, insofar as the payment of monies out the Fund was concerned, the present proceeding was against the Fund and not against the licensee. It was, therefore, a proceeding collateral to, independent of, and severable from the issues in the main action. Furthermore, in this proceeding, the Commissioner, a stranger to the main action, was made a party to the instant proceeding. In this connection, we note that, although section 10471 merely provided that the application was to be filed 'in the court in which the judgment was entered for an order directing payment' out of the Fund, we apprehend that the language of the section contemplates that the application be filed in the same action. This procedure was followed in the instant case.
See sections 10450, 10450.6 and 10470.
Section 10471, as it then read, provided that the application was to be filed after the 'aggrieved person' had obtained a final judgment and 'upon termination of all proceedings including reviews and repeals [sic] in connection with the judgment.'
Although the licensee is not a party to the hearing upon the application, it is clear that he is affected by the order for payment. Section 10475 provides that if the Commissioner is ordered to pay from the Fund, the licensee's license is automatically suspended upon the effective date of the order and until the amount paid from the Fund on his account is repaid to the Fund [85 Cal.Rptr. 861]with 4 percent interent. Our inquiry, then, is whether the judgment debtor licensee is an aggrieved party Code of Civil Procedure section 938 which, at the time of the instant appeal, provided that 'Any party aggrieved many appeal' in cases in which appeals lie from the superior court. In considering this question, we observe, initially, that the appellant's failure to participate in the matter below does not deprive him of his right to appeal. (Guardianship of Copsey, 10 Cal.2d 748, 752, 76 P.2d 691; Estate of Sloan, 222 Cal.App.2d 283, 291, 35 Cal.Rptr. 167.)
Former Code of Civil Procedure section 938 is now section 902 of that code. The latter reads the same as the former.
In Estate of Colton, 164 Cal. 1, 5, 127 P. 643, 645, it was held that '* * * any person having an interest recognized by law in the subject-matter of the judgment, which interest is injuriously affected by the judgment, is a party aggrieved and entitled to be heard upon appeal.' (See also Buffington v. Ohmert, 253 Cal.App.2d 254, 255, 61 Cal.Rptr. 360; Danielson v. Stokes, 214 Cal.App.2d 234, 237, 29 Cal.Rptr. 489; Radunich v. Basso, 235 Cal.App.2d 826, 829, 45 Cal.Rptr. 824.) The appellant's interest must be immediate, pecuniary, and substantial, and not a nominal or remote consequence of the judgment. (Hamilton v. Hamilton, 83 Cal.App.2d 771, 774, 189 P.2d 722; Leoke v. County of San Bernardino, 249 Cal.App.2d 767, 771, 57 Cal.Rptr. 770.) It also appears to be the law in this state that if an appellant would be bound by a ruling of the trial court because of the doctrine of resjudicata, then it is a party sufficiently aggrieved to warrant the right of direct appeal, irrespective of the fact that it was not a party of record in the original proceeding. (Estate of Sloan, supra, 222 Cal.App.2d at p. 292, 35 Cal.Rptr. 167; Butterfield v. Tietz, 247 Cal.App.2d 483, 485, 55 Cal.Rptr. 577; Harris v. Alcoholic Beverage Control Appeals Bd., 245 Cal.App.2d 919, 922-923, 54 Cal.Rptr. 346; see also Leoke v. County of San Bernardino, supra, 249 Cal.App.2d at p. 771, 57 Cal.Rptr. 770.) In this regard we observe, moreover, that although defendant was not a party to the 'record' in the proceedings below, he was a party of record to the action in which the proceedings below were brought. We also observe that the interest of defendant in the subject license appears in the proceedings here under review. As noted in Harris, supra, 'The test * * * is whether the party seeking to appeal has an interest which appears on the record.' (245 Cal.App.2d p. 923, 54 Cal.Rptr. p. 349.) (See Estate of Levy, 4 Cal.2d 223, 226, 48 P.2d 675; Estate of Armstrong, 241 Cal.App.2d 1, 6, 50 Cal.Rptr. 339.)
In the proceedings below the deputy attorney general representing the Commissioner called to the trial court's attention that he was not representing defendant and that if the court made an order granting plaintiffs' application that order would automatically suspend defendant's license to conduct his livelihood as a broker.
Applying these principles to the instant case we conclude that defendant is an 'aggrieved party' entitled to appeal the order made in the proceedings below. There can be no question that defendant's license is recognized as a valuable and vested property right. (Hewitt v. Board of Medical Examiners, 148 Cal. 590, 592, 84 P. 39, 3 L.R.A., N.S., 896; Elder v. Bd. of Medical Examiners, 241 Cal.App.2d 246, 260, 50 Cal.Rptr. 304; Laisne v. Cal. St. Bd. of Optometry, 19 Cal.2d 831, 835, 123 P.2d 457.) His interest in the license was injuriously affected by the order made in the proceedings below since by that order he was automatically deprived of a license in which he had a substantial and pecuniary interest. That interest clearly appears of record as does the fact that defendant is bound by the order since the making of the order automatically suspends his license, and, to that extent is res judicata.
We do not believe that a contrary conclusion is warranted because defendant could have appealed from the judgment in the main action. Defendant may have elected not to appeal that judgment for a [85 Cal.Rptr. 862]variety of reasons. Moreover, the direct effect of that judgment was to impose monetary damages only. It did not, in and of itself, suspend defendant's license but was the basis for the instant proceeding which resulted in a suspension of defendant's license when the court below made its order for payment of the compensatory portion of the judgment for damages. The validity of that order depends upon whether plaintiffs complied with the provisions of section 10471. As a person aggrieved by that order defendant is entitled to show on appeal that the requirements of this statute have not been complied with.
Turning to the merits of the instant appeal, we observe, initially, that defendant attacks the judgment which was rendered on July 10, 1967 and from which no appeal was taken. He asserts that he was unable to introduce certain facts at the trial leading up to that judgment; that his codefendants were not available at the trial; that he did not violate any duty, statutory or at common law, owing to plaintiffs; and that there were gross errors in the findings of fact. In order to have any validity these assertions of error should have been raised by a timely appeal from the July 10, 1967 judgment. We point out here that no notice of appeal has been filed from that judgment. Where no notice of appeal is filed or the notice of appeal is not timely, the appellate court is without jurisdiction to consider the appeal. (Kellett v. Marvel, 6 Cal.2d 464, 472, 58 P.2d 649; Muller v. Muller, 209 Cal.App.2d 704, 708, 26 Cal.Rptr. 337; Niles v. Gonzalez, 152 Cal. 90, 93, 92 P. 74; Stegmann v. Holder, 223 Cal.App.2d 531, 534 36 Cal.Rptr. 1.)
In this appeal we are concerned with the validity of the order made on March 7, 1968. Defendant's primary attack on the order is that the allegation in the application that defendant had been examined as a judgment debtor prior to the filing of the application is not supported by the evidence. Defendant asserts that he was not examined under oath until November 25, 1968.
In their application plaintiffs alleged as follows: '(e) Applicants have obtained issuance of an order pursuant to Section 714 of the Code of Civil Procedure of the State of California and have examined the Judgment debtor under oath concerning his property.'
Pursuant to the provisions of section 10472, as it read at the time the instant application was filed, plaintiffs were required to show, among other facts, that they had obtained issuance of an order pursuant to Code of Civil Procedure section 714 and that they had examined the judgment debtor under oath concerning his property. Additionally, it is provided in section 10480 that 'The failure of an aggrieved person to comply with all of the provisions of this article shall constitute a waiver of any rights hereunder.' Thus, in order for plaintiffs to obtain payment out of the Fund it was necessary for them to allege and prove that, prior to the filing of the application, they had obtained the issuance of such an order and that they had caused defendant to be examined concerning his property under oath pursuant to that order.
We note here that section 10473, as it now reads, states that the court shall order payment out of the Fund 'only upon a determination that the aggrieved party has a valid cause of action within the purview of Section 10471 and has complied with the provisions of Section 10472.'
A perusal of the record discloses that the Attorney General stipulated that the plaintiffs had complied with all of the provisions of section 10472. This included the fact that prior to the filing of the instant proceeding defendant had been examined under oath concerning his property as required by an order of examination issued pursuant to section 714 of the Code of Civil Procedure. The Attorney General made it clear that the only issue in the case was whether the transaction which resulted in the judgment was a real estate transaction for which a license was required. The record discloses, further, that [85 Cal.Rptr. 863]defendant was in fact examined concerning his property prior to the filing of the instant application. It discloses that defendant was examined on September 11, 1967 pursuant to an order of examination issued on August 30, 1967. The instant application was filed on November 1, 1967. Although the record does not affirmatively show that defendant was examined under oath, every presumption is in favor of the regularity of the proceedings. (See People v. O'Connor, 44 Cal.App.2d 301, 304, 112 P.2d 279.) In any event, defendant cannot complain for the first time on appeal that he testified at the examination without being sworn. (Smith v. Smith, 137 Cal.App.2d 512, 514-515, 290 P.2d 609.) It is well estabished that where a witness is permitted to testify without having been previously sworn and that fact is known at the time, any objection that the evidence is incompetent on that basis is waived if not made when the evidence is offered or at least while the defect is capable of being remedied. (Estate of Wilson, 116 Cal.App.2d 523, 526, 253 P.2d 1011; People v. Duffy, 110 Cal.App. 631, 635-636, 294 P. 496; Estate of Sherman, 129 Cal.App.2d 721, 726, 278 P.2d 42; Smith v. Smith, supra; People v. Berry, 260 Cal.App.2d 649, 652-653, 67 Cal.Rptr. 312.)
Defendant next asserts that plaintiff James Slaughter perjured himself in the instant proceedings. Defendant specifies certain items of testimony he claims constitutes perjury. Defendant does not establish perjury but merely makes the bald assertion that said plaintiff perjured himself. What defendant appears to assert is that certain testimony given by James Slaughter was untrue because defendant alleges it is untrue. The record does not affirmatively show that Slaughter perjured himself. The resolution of any conflict between the respective testimony of defendant and Slaughter was for the trial judge.
Defendant's next contention is that the transaction which formed the basis of the judgment for damages for fraud was not a real estate transaction. He also asserts that no fees were offered or paid to defendant; that none were solicited by him, and that the Real Estate Commission has cleared him of any charges. In considering this contention we direct our attention to the evidence in the record most favorable to plaintiffs, as we are obliged to do under appellate procedure. Plaintiffs had decided to build a home in the fall of 1964. They initially dealt with Anchor Homes, a building contractor. In order to finance the construction of the home, Anchor was to obtain a loan from McGinnis Mortgage. The lending agency considered Anchor to be an unsafe risk. While plaintiffs were dealing with Anchor, they were introduced to defendant who told plaintiffs they should tear up their contract with Anchor because Anchor could not get the financing to build the home. In October 1064 defendant stated that if plaintiffs would let his men build the house he would obtain the construction loan. Prior to meeting plaintiffs, defendant had entered into an association with three other men, Clifford Birdwell, David Morris, and Connnel Painter. These associates agreed that Clifford and Birdwell, building contractors, would build homes under the sponsorship of defendant and Painter, a real estate salesman, on land obtained by defendant, and that then defendant would attempt to sell the homes at a profit. Defendant was the only member of this group who was licensed as a real estate broker.
Plaintiffs entered into a building contract with Clifford and Birdwell who agreed that any fees for obtaining the construction loan were to be paid to defendant by the contractors. A second contract was entered into between plaintiffs and defendant whereby defendant agreed to obtain a loan of $14,000 for the construction of a $15,600 house. Subsequently, at defendant's request, plaintiffs made out a check to McGinnis Mortgage for $1,955 in order 'to get the loan through.' This check was delivered to defendant and thereafter the loan was obtained. This loan, [85 Cal.Rptr. 864]although processed by McGinnis Mortgage, was actually made by the Hibernia Bank. The agreement between plaintiffs and the contractors provided that defendant was to be paid a two and one-half percent commission for procuring the loan. In his deposition defendant had testified that he was to receive a consideration for processing the loan. Defendant testified at trial, however, that he did not receive any compensation for processing the loan but that the commission of two and one-half percent was paid to McGinnis and Hibernia Bank.
On or about November 4, 1964, plaintiffs made the first progress payment for the construction of the house. A cashier's check made payable to plaintiff Helen Slaughter, in the sum of $2,932.55, was endorsed by her and was delivered to defendant for transfer to Birdwell and Morris. Defendant delivered the check to Birdwell and Morris, but they were unable to cash it. The check was redelivered by Birdwell and Morris to defendant who endorsed it and deposited it in his broker's trust account. Defendant then wrote checks from his trust account to Birdwell and Morris in the aggregate sum of $1,935. In addition, defendant gave them $600 in cash. He was unable to account for the $400 difference between the $2,932.55 face amount of the cashier's check and the $2,535 paid to the contractors.
In addition to the foregoing evidence adduced at the hearing in the instant proceeding the trial court admitted into evidence the exhibits in the main action and was requested to take judicial notice of the judgment rendred and the findings of fact and conclusions of law made in the main action. As provided in section 10473 at the time of the instant proceedings, the judgment was prima facie evidence of its contents and the findings of fact were not conclusive with respect to these proceedings.
Pursuant to Evidence Code section 452 the trial court could take judicial notice of the records in its own court, and was required to do so under Evidence Code section 453 when requested by plaintiffs, provided sufficient notice of the request was given to the adverse party and the court was furnished with sufficient information to enable it to take judicial notice of the matter. Here the information was in the records of the very same action and no objection was interposed to the court's taking judicial notice.
The judgment in the main action does not disclose the basis for the judgment against defendant but discloses merely that it was for the general and punitive damages hereinabove mentioned. The findings of fact recite, essentially, that defendant, Birdwell and Morris operated a business for profit whereby Birdwell and Morris would construct homes; that defendant, a real estate broker, would attempt to secure the financing of such construction and the sale of such homes; that in this plan of association each of said parties acted as the agent for the other; that in pursuit of this objective these associates agreed to construct a $15,600 house for plaintiffs on land owned by plaintiffs in a workmanlike manner; that these associates represented that Birdwill and Morris were skilled and capable builders and would join with one Redmill, a licensed contractor, in such construction; that plaintiffs relied on these representations and paid defendant, Birdwell and Morris $9,137.26 on account of said construction costs; that Birdwell and Morris were not licensed contractors and that the aforementioned representations were not true; that the associates did not pay materialmen and laborers; and that they abandoned the construction without completing the house. With specific reference to defendant the findings recite that defendant converted to his own use a portion of the aforementioned progress payment in the sum of $882.55; that he solicited progress payments from plaintiffs and converted portions thereof to his own use; that he procured a construction loan from the Hibernia Bank and McGinnis Mortgage Company, which was secured by a deed of trust on the real property on which the house was constructed; [85 Cal.Rptr. 865]that he performed certain services in the processing and disbursing of said loan; that he obtained an extension of credit for material furnished for the construction of the house; and that the services performed by him were for and in expectation of compensation. The findings further recite that the compensatory damages were incurred in the costs of labor and materials to complete the house and attorney fees and costs incident to the removing of the liens of materialmen.
In considering defendant's contentions in the light of the evidence adduced we note, initially, that the fact that no disciplinary action was affirmatively taken by the Real Estate Division is not dispositive of the issues here presented. We observe that pursuant to section 10130 it is unlawful for any person to act as a real estate broker without first obtaining a real estate license. A real estate broker is defined in section 10131 as 'a person who, for a compensation or in expectation of a compensation, does or negotiates to do one or more of the following acts' specified in that section 'for another or others.' Here the only act within the purview of section 10131 is that provided for in subdivision (b) which provides that a real estate broker is a person, who for a compensation or in expectation of a compensation, 'Solicits borrowers or lenders for or negotiates loans or collects payments or performs services for borrowers or lenders or note owners in connection with loans secured directly or collaterally by liens on real property.'
This is the language of subdivision (d) of section 10131 as it read at the time of instant transaction.
In the instant case there is substantial evidence that defendant performed an act provided for in subdivision (d) of section 10131. The record is not only supportive of the inference that defendant did in fact receive compensation for negotiating and processing a loan secured by a deed of trust for plaintiffs, but further that by virtue of his association with Birdwell and Morris he expected a compensation to inure to the benefit of that association. Even though it was for compensation the record is equally clear that no fraud was perpetrated by defendant in the negotiation and processing of the loan in question. Defendant, as a real estate broker, processed the loan for plaintiffs as he represented he would. There was no fraud or misrepresentation involved in this transaction.
As we understand section 10471, the predicate for the proceeding invoked here is that the judgment upon the grounds of fraud or misrepresentation be in reference to any transaction for which a real estate broker's license is required. Here the fraud established does not have reference to a transaction for which such a license is required. It is clear from the findings of fact in the fraud action that the finding of fraud is based on the fact that defendant and his associates would construct the house in question under the applicable contractor's licensing requirements and that they had the ability and capability to erect the house in a workmanlike manner. One need not have a real estate broker's license in order to construct buildings for another person. (See § 10131.) This is particularly true when a person was acting with regard to his own affairs as a contractor engaged in making a profit for his own account rather than for another and for a compensation. (See Williams v. Kinsey, 74 Cal.App.2d 583, 592-593, 169 P.2d 487; 32 Ops.Cal.Atty.Gen. 210.) In the instant case the only act performed by defendant for another and for a compensation was the procuring and processing of the loan for plaintiffs. The record is totally devoid of any fraud with respect to this transaction. As already indicated, the fraud prepetrated was with respect to a transaction in which defendant was acting for his own account. Since in that transaction defendant was acting both on his own account and, as found by the court in its findings of fact, as an agent for his associates Birdwell and Morris, this transaction [85 Cal.Rptr. 866]also includes the alleged appropriation to his own use of part of the progress payments.
The determination made by the court below is apparently based on the fact that defendant is a licensed real estate broker and that since, as such a broker, he was associated with and praticipated in a fraudulent transaction with others, the subject provisions of the Business and Professions Code providing for a resort to the subject Real Estate Education, Research and Recovery Fund are applicable. As we have pointed out, these statutes are not applicable merely because a judgment is obtained against a real estate broker on grounds of fraud or misrepresentation, but the fraud or misrepresentation must have reference to a transaction for which a real estate broker's license is required. Here the fraudulent acts have reference to acts for which such a license is not required.
The order is reversed.
SIMS and ELKINGTON, JJ., concur.