Opinion
A155414
10-31-2019
TJWAN D. SIE et al., Plaintiffs and Appellants, v. WAYNE S. BELL, Defendant and Respondent.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Alameda County Super. Ct. No. RG16818354)
We are asked to decide whether the trial court erred in denying the application of plaintiffs and appellants Tjwan D. Sie and Mabel Giok Sie (plaintiffs) for an order directing the Real Estate Commissioner (Commissioner) to make a payment to them from the California Department of Real Estate Consumer Recovery Account. Because appellants have shown no error, we affirm the order.
The Bureau of Real Estate became the Department of Real Estate two weeks before the judgment was entered. (See Stats, 2017, ch. 828.) Because every party referred to it as the Bureau of Real Estate (BRE) during the course of this litigation up to then, and to avoid confusion with various documents which will be quoted during the course of this opinion, we will continue to call it a bureau instead of a department.
FACTUAL AND PROCEDURAL BACKGROUND
At all relevant times, the Bureau of Real Estate was administered by the Real Estate Commissioner (Bus. & Prof. Code, § 10050; subsequent statutory references are to this code), who issues the licenses for every person acting as either a real estate salesperson or a real estate broker. (§§ 10150, 10151.) The Commissioner also has the power to revoke those licenses upon specified grounds, one of which is that the person licensed has engaged in conduct which constitutes fraud. (§ 10177, subd. (j).)
In certain situations and with certain limitations, a person who has suffered injury at the hands of a person licensed by the Commissioner may have recourse to a statutory fund. An "aggrieved person" who obtains "a final judgment . . . against a defendant based upon the defendant's fraud . . . arising directly out of any transaction in which the defendant, while licensed [as a real estate licensee], performed acts for which a real estate license . . . was required," may file an application with the Department of Real Estate for payment from the Consumer Recovery Account "of the amount unpaid on the judgment . . . ." (§ 10471, subd. (a).)
Superior Court Complaint
In November 2011, plaintiffs filed a complaint in Alameda County superior court in which they alleged that they had been defrauded by licensed broker James K. Price (and others) as a result of a joint venture to purchase and develop parcels of real property for sale.
The details alleged were that in June 2005, Price, "knowing that Plaintiffs [had] just sold a rental property in American Canyon and were looking to shelter the gain through a '§ 1031 Exchange,' offered . . . to exercise a purchase option [Price and his wife] had on two adjacent lots . . . located at Longcroft Drive" in Oakland. Price "represented to Plaintiffs that ownership of the Longcroft Lots could be part of a Joint Venture" between plaintiffs and the Prices. Price "would develop the Longcroft Lots and build two homes," one of which would be kept by the Prices and the other would be sold. Plaintiffs purchased Price's option, and then the two lots, and thereafter expended considerable sums to the project. In 2007, plaintiffs "sold another rental property in Martinez . . . which they again needed to shelter through another § 1031 Exchange." The sale proceeds were deposited into Price's "trust account." Price withdrew the proceeds. The Longcroft lots were never developed or sold.
On April 9, 2013, plaintiffs obtained a default judgment against Price (and the others) for approximately $412,000.
BRE Disciplinary Hearing Against Price
Meanwhile, in January 2013, in a separate BRE disciplinary proceeding against Price, the Commissioner adopted the findings and proposed decision of an administrative law judge (ALJ) and revoked Price's broker's license for inadequate accounting and commingling plaintiffs' money with his own.
Plaintiffs' Application to BRE for Payment from Consumer Recovery Account
In 2014, plaintiffs filed an application to BRE for payment of the judgment from the Consumer Recovery Account. Due to plaintiffs' failure to provide documentation, their claim was not decided until August 2015. The Commissioner denied plaintiffs' application, giving as the "primary reasons" the following:
"A mandatory prerequisite to payment from the Consumer Recovery Account is that the judgment debtor [i.e., Price] was performing acts for which a real estate license is required. (See Section 1047(a) of the Business and Professions Code ('Code').) A real estate licensee is one who on behalf of another for compensation performs acts listed in Section 10131 of the Code; i.e., negotiating the sale of real property, renting and leasing property, arranging loans, etc.
"Section 10133(a)(1) of the Code provides an exemption from the real estate license requirement if the acts are performed by a general partner of a partnership with respect to real property owned by the partnership and if the acts are not performed by the partner in expectation of special compensation.
"Although Judgment Debtor held a real estate license at the time of the transaction, Claimants entered into a joint venture/partnership with Judgment Debtor to purchase, manage and develop two adjacent lots located at 2761 and 2764 Longcroft Drive, Oakland, California ('Partnership Properties'). Claimants and Judgment Debtor, as partners, did not agree to pay Judgment Debtor compensation for managing and developing the Partnership Properties. Although requested by the Bureau of Real Estate, Claimants were unable to provide any evidence showing Judgment Debtor acted on Claimants' behalf in expectation of special compensation.
"The harm Judgment Debtor caused Claimants was not done in the capacity as a real estate licensee, but as a general partner exempt from the real estate license requirement. The Consumer Recovery Account may not be ordered to pay damages remaining unpaid upon a judgment against a real estate licensee for fraud, where the conduct does not require a real estate license. (Buccella v. Mayo (1980) 102 Cal.App.3d 315, 324.)" (Fn. omitted.)
Plaintiffs Obtain an "Amended" Default Judgment
Plaintiffs then returned to the trial court which entered the judgment (Judge Robert McGuinness), and which, upon their ex parte motion, filed an "Order Clarifying And Amending Default Judgment Nunc Pro Tunc" that "The judgment heretofore entered is based upon the fraudulent acts and omissions of Defendant, JAMES KENNETH PRICE, while acting in the capacity of licensed real estate broker." This order was filed January 12, 2016, about 2 and one-half years after the original default judgment.
The process by which plaintiffs obtained this amended and clarifying order is puzzling. The ex parte motion attached a copy of the findings and decision in the BRE disciplinary action against Price and claimed that the application was in the nature of a request to correct "clerical errors" in the judgment under Code of Civil Procedure section 473, subdivision (d), the error being that trial counsel should have made the court aware of the "defalcations of Defendants upon which the license revocations were based" and the default judgment should have "specified the factual basis in the judgment, but did not." This omission "caused Plaintiffs to suffer a denial" when they applied to the Consumer Recovery Account, and that was the "rationale" for the ex parte motion.
Plaintiffs Apply to Superior Court for Order Directing Payment from Consumer Recovery Account
On June 6, 2016, as authorized by section 10472, plaintiffs then filed an "Application For Order Directing Payment Out Of Consumer Recovery Account Of Real Estate Fund" in the amount of $250,000. Treating the application as a petition for traditional mandamus, and noting that plaintiffs "do not argue that the Commissioner made an error of law," only "that the Commissioner's decision is not supported by substantial evidence," the trial court decided there was only one issue—whether substantial evidence "supports the Commissioner's factual finding that the judgment did not 'arise directly out of a transaction in which [Price] while licensed under this part, performed acts for which a real estate license . . . was required.' " The court resolved that issue as follows:
"The judgment in the underlying case arose directly out of the Longcroft Project. There is also substantial evidence that the Sies and Price were joint venturers in the Longcroft Project [citations to the administrative record] and agreed to split the profits 50/50 [citation to the administrative record]. A person in a partnership is acting in the capacity as a broker only if they are to receive 'special compensation' for that work. (Bus. & Prof. [Code, § ]1033(a)(1).) The Sies have not identified evidence that Price was to receive 'special compensation' for his work on the joint venture.
"The judgment in the underlying case arose incidentally from the [first] 1031 Exchange [which led to the Longcroft Project]. 'Incidentally' does not meet the 'arising directly out of' requirement of Bus. & Prof. [Code, § ]10471(a).) There is substantial evidence that Price was a 'qualified intermediary' in the 1031 Exchange. [Citation to administrative record.] A 'qualified intermediary' in a 1031 Exchange cannot be a real estate broker for the taxpayer. (26 CFR 1.1031(k)-1, subds. (g)(4)(iii) and (k)(2).)
"The Sies rely in substantial part on the ALJ's findings in the BRE disciplinary proceeding against Price. [Citation to administrative record.] The disciplinary proceedings had a wider scope than the underlying lawsuit. The findings in the disciplinary proceeding that Price was a broker in the Martinez transaction are not relevant to the underlying case and to the claim against the Commissioner's Consumer Recovery Account."
The court entered a judgment in favor of the Commissioner, whereupon plaintiffs perfected this timely appeal.
DISCUSSION
Our review has been complicated by two factors.
The first is that the trial court apparently misperceived its role. The court was not, as it apparently believed, confined to determining whether the Commissioner's denial of plaintiffs' recovery application had the support of substantial evidence in the administrative record. Instead, the court was statutorily directed to make "a de novo review of the merits of the application as contained in the administrative record." (§ 10472.1, subd. (b).) However, the error is not prejudicial to our review, which is to decide whether the court's decision is supported by substantial evidence. (Worthington v. Davi (2012) 208 Cal.App.4th 263, 277-278.) This does not require this court to examine the administrative record as if we were the trial court, because "[r]eview for substantial evidence is not trial de novo." (OCM Principal Opportunities Fund v. CIBC World Markets Corp. (2007) 157 Cal.App.4th 835, 866.) But most significantly, as we describe below, plaintiffs here, contrary to the rules governing appeals, failed to summarize the contents of the administrative record, let alone refer to it in their opening brief.
In a prehearing filing, the Commissioner had informed the trial court of the correct standard for reviewing the Commissioner's decision.
The second complication is that it is not easy to discern the precise focus of plaintiffs' opening brief. They identify the "Issues On Appeal" as "1. Does Commissioner Bell's Argument Have Merit? [¶] 2. Did Trial Court Err by Failing to Grant the Relief Requested?" Then, under the heading "Standard of Review," plaintiffs recite the principles governing review after a general demurrer has been sustained. They assail the "incompetence of their former Counsel," whom they advise is "currently facing disbarment." His purported error was that he "failed to argue that the Commissioner made an error of law and instead claimed that the Commissioner's decision is not supported by substantial evidence," an omission that, according to plaintiffs, "tainted the very foundation of this lawsuit." Plaintiffs also assert "there were errors with discovery."
In arguing their first "Issue[] on Appeal," plaintiffs speak of a written contract, how it is to be interpreted, followed by the intimation that this was an illegal contract, concluding with the assertion "There was no contract . . . of a joint venture between the Sies and Bell."
In arguing their second "Issue[] on Appeal," plaintiffs return to attacking an illegal contract. They then insist their complaint states a cause of action. ~(AOB 12)~
Then, plaintiffs introduce a new "Issue[] on Appeal," namely, "The Trial Court Err [sic: Erred] In Failing To Afford Appellants Due Process Of Law Under The Trial Court's Equitable Powers." They argue the trial court's "discretionary . . . rulings are reviewed under the 'abuse of discretion' standard," clearly implying it was an abuse of discretion to deny them relief.
Plaintiffs may not now like the strategy adopted by the former counsel, but they cannot simply adopt a new one. "The rule is well settled that the theory upon which a case is tried must be adhered to on appeal. A party is not permitted to change his position and adopt a new and different theory on appeal. To permit him to do so would not only be unfair to the trial court, but manifestly unjust to the opposing litigant." (Ernst v. Searle (1933) 218 Cal. 233, 240-241; accord, Cable Connection, Inc. v. DIRECTV, Inc. (2008) 44 Cal.4th 1334, 1350, fn. 12; 9 Witkin, Cal. Procedure (5th ed. 2008) Appeal, § 407, pp. 466-467.) Similarly, " 'issues not raised in the trial court cannot be raised for the first time on appeal.' " (Johnson v. Greenelsh (2009) 47 Cal.4th 598, 603.) Accordingly, we are not concerned with the quality of trial counsel's performance, the sufficiency of any pleading, or the meaning of any contract—written or otherwise—plaintiffs may have had with Price.
The most fundamental principle of appellate review is that "a trial court judgment is ordinarily presumed to be correct and the burden is on an appellant to demonstrate, on the basis of the record presented to the appellate court, that the trial court committed an error that justifies reversal of the judgment." (Jameson v. Desta (2018) 5 Cal.5th 594, 608-609; accord, 9 Witkin, Cal. Procedure, supra, Appeal, § 355, p. 409.) Similarly, "abuse of discretion is never presumed and it must be affirmatively established." (Wilder v. Wilder (1932) 214 Cal. 783, 785.)
Moreover, "[e]ach brief must . . . [¶] . . . State each point under a separate heading or subheading summarizing the point, and support each point by argument, and . . . citation of authority." (Cal. Rules of Court, rule 8.204(a).) "Failure to provide proper headings forfeits issues that may be discussed in the brief but are not clearly identified by a heading." (Pizarro v. Reynoso (2017) 10 Cal.App.5th 172, 179.) Many of the points fleetingly asserted by plaintiffs are vulnerable on this ground.
As part of the presumption of correctness, reviewing courts also assume that all express or implied findings in support of the challenged action are themselves supported by substantial evidence. (E.g., In re Marriage of Arceneaux (1990) 51 Cal.3d 1130, 1133-1134; In re Marriage of Fink (1979) 25 Cal.3d 877, 887; Foreman & Clark Corp. v. Fallon (1971) 3 Cal.3d 875, 881.)
An appellant challenging the sufficiency of the evidence to support a finding is required to state in the opening brief all evidence pertinent to that point. If not done, the reviewing court may treat the issue as waived. (In re Marriage of Fink, supra, 25 Cal.3d at p. 887; Foreman & Clark Corp. v. Fallon, supra, 3 Cal.3d at p. 881.)
Plaintiffs have not satisfied these rules. Nowhere in plaintiffs' opening brief is there an attempt to meet the trial court's decision on its own terms. They have not summarized the contents of the administrative record, which is where a reviewing court would look to find substantial evidence to support the Commissioner's decision. Indeed, there is not a single reference in plaintiffs' opening brief to the administrative record. They make no effort to demonstrate why the evidence cited in the trial court's decision is insufficient to support the Commissioner's decision. In their opening brief, plaintiffs do not rely on the post-judgment "clarification" filed January 12, 2016 and rightly so, for it was made without the benefit of the administrative record considered by the ALJ and then the Commissioner.
Plaintiffs cite to no evidence that Price was involved in the sale of either of plaintiffs' rental properties. Plaintiffs cite to no evidence that, following their acquisition of the Longcroft lots, that either or both were in fact sold, or that Price was involved in such sale. Plaintiffs do not point to any evidence in the administrative record demonstrating that in the acquisition or development of the Longcroft lots Price was to receive, or did in fact receive, any "special compensation." Plaintiffs likewise fail to cite to any evidence that Price was not a "qualified intermediary," thus removing the statutory exemption that Price was not acting in a licensed capacity. Plaintiffs have therefore failed to establish either that Price "performed any acts for which a real estate license was required" (§ 1047, subd. (a)), and that consequently the Commissioner's denial of their application was improper.
In their reply brief, plaintiffs argue for the first time that the trial court erred in denying their motion for preference. We decline to address an argument raised for the first time in reply. (Provost v. Regents of University of California (2011) 201 Cal.App.4th 1289, 1295.)
DISPOSITION
The order is affirmed.
/s/_________
Miller, J. We concur: /s/_________
Kline, P.J. /s/_________
Richman, J.