Arneson v. Fox

Citation621 P.2d 817,28 Cal.3d 440,170 Cal.Rptr. 778
CourtUnited States State Supreme Court (California)
Decision Date01 December 1980
Parties, 621 P.2d 817 Richard Wendell ARNESON, Jr., Plaintiff and Appellant, v. David H. FOX, as Real Estate Commissioner, Defendant and Respondent. L.A. 31259.

Seltzer Caplan Wilkins & McMahon, Jeffrey L. Mason and Dennis J. Wickham, San Diego, for plaintiff and appellant.

George Deukmejian, Atty. Gen., Arthur C. de Goede, Asst. Atty. Gen., and Edmond B. Mamer, Deputy Atty. Gen., for defendant and respondent.


What are the administrative consequences to a real estate licensee who is convicted of a felony following his plea of nolo contendere? We will conclude that a conviction following such a plea may serve as the basis for administrative discipline, so long as the underlying offense bears a substantial relationship to the qualifications, functions or duties of the licensed business or profession.

Appellant Richard Wendell Arneson, Jr., is licensed by the California Department of Real Estate as a real estate broker. Except for the single conviction under scrutiny here, he has no other criminal convictions or disciplinary record since he was first licensed in 1964. On November 3, 1975, appellant was convicted in federal district court, following a plea of nolo contendere, of conspiracy (18 U.S.C. § 371), a felony. On December 6, 1976, because of his conviction, respondent commissioner filed an accusation against appellant seeking to impose discipline upon him.

Administrative hearings were held, and respondent commissioner found that appellant's federal conviction is "a felony and a crime involving moral turpitude" (see Bus. & Prof. Code, § 10177, subd. (b)) which "is substantially related to the qualifications, functions, or duties" of a real estate licensee (see id., § 490). (All further statutory references are to the Business and Professions Code, unless otherwise indicated.) Respondent also found "by way of mitigation, aggravation or explanation," the following facts regarding appellant's conviction:

"The conviction ... stemmed from the filing of fraudulent reports of earnings with the United States Securities and Exchange Commission by U.S. Financial, a corporation engaged in real estate development, construction and financing. (Appellant) was not an officer or director of U.S. Financial and he did not play a major role in the business affairs of the corporation. He was, however, a willing instrument of the officers of the corporation who made its policies and directed its affairs. (P) (Appellant) was placed on probation for three years and sentenced to serve six months in jail as a result of the conviction, but the term of confinement was subsequently reduced to four months. (P) (Appellant) has been a real estate licensee since 1964. He has no record of prior disciplinary action or criminal conviction. He is presently a partner in a real estate investment and management firm in San Diego from which he derives his main source of income. He is married and is the sole support of his wife and two minor children."

On the basis of the foregoing findings, the commissioner ordered appellant's real estate license revoked, subject to appellant's right to apply for a restricted license pursuant to section 10156.5, and to seek reinstatement pursuant to Government Code section 11522. Thereafter, appellant brought a mandate proceeding in superior court (Code Civ.Proc., § 1094.5) to review the commissioner's decision. The court, following its review of the administrative record, rejected appellant's various contentions and denied mandate. This appeal followed.

1. Relevant Statutory Provisions

Under rule 11(e)(6) of the federal Rules of Criminal Procedure (18 U.S.C.A.), "evidence of ... a plea of nolo contendere, ... is not admissible in any civil or criminal proceeding against the person who made the plea ...." (Italics added.) In parallel fashion, Penal Code section 1016, subdivision 3, referring to nolo contendere pleas, provides in pertinent part that "The legal effect of such a plea shall be the same as that of a plea of guilty, but the plea and any admissions required by the court during any inquiry it makes as to the voluntariness of and factual basis for the plea may not be used against the defendant as an admission in any civil suit based upon or growing out of the act upon which the criminal prosecution is based." (Italics added.)

Although appellant contends that federal rule 11(e)(6) would by its terms bar administrative consideration of a nolo contendere plea, or a conviction based upon that plea, he cites no supporting cases. The rule applies only to subsequent "civil or criminal proceedings," not to administrative hearings. In Cartwright v. Board of Chiropractic Examiners (1976) 16 Cal.3d 762, 129 Cal.Rptr. 462, 548 P.2d 1134; a similar administrative disciplinary proceeding, we recently construed similar wording of the foregoing section 1016, supra, as follows: "This provision makes a plea of nolo contendere equivalent to a guilty plea merely for the purpose of the criminal proceeding. Although it expressly forbids subsequent use of the plea as an admission of guilt in certain civil suits, it does not purport to deal with the effect to be given in a collateral proceeding to a conviction based on the plea and instead leaves such effect open to determination under applicable case law." (16 Cal.3d at p. 772, 129 Cal.Rptr. 462, 548 P.2d 1134, italics added.) Similarly, federal rule 11(e)(6) does not purport to deal with, or enjoin, the use of nolo convictions in collateral administrative proceedings, but impliedly leaves that matter to the laws of the respective states. In the absence of any controlling federal authority on the subject, sound policy suggests that we should construe the federal rule in a manner consistent with our prior interpretation of a similarly worded state law.

In California, prior to legislative clarification of the matter, much litigation arose concerning the propriety of using a nolo contendere plea and subsequent conviction as the basis for administrative discipline. (See Cartwright v. Board of Chiropractic Examiners, supra, 16 Cal.3d 762, 768-774, 129 Cal.Rptr. 462, 548 P.2d 1134.) With respect to real estate licensees, however, the issue has been resolved by section 10177, subdivision (b), which provides in pertinent part that "The commissioner may suspend or revoke the license of any real estate licensee, ... who has .... (b) Entered a plea of guilty or nolo contendere to, or been found guilty of, or been convicted of, a felony or a crime involving moral turpitude, ..." (Italics added.) This section permits imposition of administrative discipline by reason of a nolo contendere plea to, or conviction of, any felony offense whether or not it involves moral turpitude. (See Morris v. Board of Medical Examiners (1964) 230 Cal.App.2d 704, 710, 41 Cal.Rptr. 351; Watkins v. Real Estate Commissioner (1960) 182 Cal.App.2d 397, 398-400, 6 Cal.Rptr. 191.) Section 490 imposes one further requirement applicable to all business and professional licensing boards, namely, that "A board may suspend or revoke a license on the ground that the licensee has been convicted of a crime, if the crime is substantially related to the qualifications, functions, or duties of the business or profession for which the license was issued, ..." (See Pieri v. Fox (1979) 96 Cal.App.3d 802, 805-809, 158 Cal.Rptr. 256; Brandt v. Fox (1979) 90 Cal.App.3d 737, 748-749, 153 Cal.Rptr. 683.)

Bearing in mind the foregoing statutory guidelines, we turn to appellant's various contentions.

2. Propriety of Administrative Discipline Based Upon Conviction Following Nolo Contendere Plea

Appellant acknowledges that, pursuant to section 10177, subdivision (b), the Legislature has authorized the commissioner to impose discipline based upon convictions following nolo contendere pleas (hereafter referred to as nolo convictions). Yet appellant urges that principles of public policy and constitutional law combine to mandate us to construe the section in a manner which would require the agency to reexamine independently the facts which underlie a nolo conviction, thereby permitting the licensee to relitigate before the administrative body the issue of his guilt previously resolved in the criminal court. We disagree.

a. Policy considerations. Appellant emphasizes that there are many potential reasons why an accused might enter a nolo plea, such as a desire to avoid adverse publicity, the complexity or expense of defense, the unavailability of crucial evidence, or an aversion to the revelation of evidence prior to civil litigation, for tactical reasons. (See Estate of McGowan (1973) 35 Cal.App.3d 611, 618, 111 Cal.Rptr. 39; Note, Use of the Nolo Contendere Plea in Subsequent Contexts (1971) 44 So.Cal.L.Rev. 737, 752-753.) Thus, as appellant contends, the nolo plea might have been induced by factors collateral to the issue of guilt. As we recently stated in Cartwright v. Board of Chiropractic Examiners, supra, 16 Cal.3d 762, 773, 129 Cal.Rptr. 462, 548 P.2d 1134, "when the conviction is based on a nolo contendere plea, its reliability as an indicator of actual guilt is substantially reduced, both because of the defendant's reservations about admitting guilt for all purposes and because the willingness of the district attorney to agree to and the court to approve the plea tends to indicate weakness in the available proof of guilt." (Fns. omitted.)

Yet in Cartwright we did not purport to preclude administrative reliance upon nolo convictions where such reliance is statutorily authorized. In Cartwright, the applicable provision (an initiative measure) permitted suspension or revocation of a chiropractor's license for "conviction of a crime involving moral turpitude." No reference was made in the provision to nolo convictions. We first observed that the California courts had adopted the minority view that the...

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