Brown v. Gordon

• Decision Date: 09 March 1966
• Court: California Court of Appeals Court of Appeals
• Parties: Douglas Pierce BROWN, Plaintiff and Respondent, v. Milton G. GORDON, Real Estate Commissioner of the State of California, Defendant and Appellant. Civ. 22608.

Page 901

49 Cal.Rptr. 901

240 Cal.App.2d 659

Douglas Pierce BROWN, Plaintiff and Respondent, v. Milton G. GORDON, Real Estate Commissioner of the State of California, Defendant and Appellant.

Civ. 22608.

District Court of Appeal, First District, Division 1, California.

March 9, 1966.

As Modified on Denial of Rehearing April 1, 1966.

Hearing Denied May 4, 1966.

Thomas C. Lynch, Atty. Gen., Eldon M. Johnson, Deputy Atty. Gen., San Francisco, for appellant.

Clifford J. Krueger, San Francisco, for respondent.

MOLINARI, Justice.

This is an appeal by the Real Estate Commissioner of the State of California, from the judgment of the superior court ordering that a writ of mandate be issued to compel the Commissioner to vacate his decision revoking the real estate broker's license of Douglas Pierce Brown and to reconsider this decision and determine the proper penalty, if any, to be imposed upon Brown.

On August 3, 1962 an accusation was filed before the Commissioner charging Brown with an act constituting grounds for disciplinary action under sections 10176, subdivisions (e) and (i), and 10177, subdivision (f), of the Business and Professions ¹ Code. Specifically the accusation alleged that Brown received $1,000 from one Edwin Hoch as a deposit on an offer to purchase a piece of real property and that instead of depositing and maintaining this money in a trust account with a bank or other recognized depository, Brown commingled this money with his own and converted it to his own use and benefit without the knowledge and consent of Hoch. A hearing was had on June 6, 1963 and on June 7, 1963 the hearing officer rendered his proposed decision recommending that Brown's license be revoked. In this proposed decision the hearing officer made the following findings of fact: 'III On or about March 9, 1962, while performing acts for which a real estate license is required, respondent took and received in trust from Edwin Hoch (hereinafter referred to as buyer) the sum of $1,000 as a deposit on an offer to purchase certain real property known as 340 Grove Street, San Francisco, California. IV Respondent deposited said $1,000 in his trust account and withdrew the same on the same day. He thereafter failed to maintain said $1,000 in a trust account with a bank or other recognized depository but, without the knowledge and consent of buyer, commingled said funds with his own and converted them to his own use and benefit.' This proposed decision was adopted by the Commissioner on June 12, 1963, to be effective on July 3, 1963, ² whereupon the instant mandate proceeding ensued.

Following the issuance of the alternative writ and the Commissioner's return to the writ by way of answer, the matter came on for hearing before the court below and was submitted upon the record of the proceedings before the Commissioner. The court thereafter made its decision by way of findings of fact in relevant part as follows: 'VII That petitioner did, on or about March 9, 1962, receive in trust from Edwin Hoch, the sum of $1,000.00 as a deposit on an offer to purchase certain real property commonly known as 340 Grove Street, San Francisco, California. That petitioner deposited said $1,000.00 in his trust account and withdrew the sum on the same day, and that thereafter, petitioner failed to maintain said $1,000.00 in a trust account with a bank or other recognized depository. VIII That the petitioner did not intentionally misappropriate the $1,000.00 deposited with him by Edwin Hoch. That petitioner only showed bad judgment as to his handling of said $1,000.00 deposit. That the decision of the Commissioner to revoke petitioner's license is a prejudicial abuse of discretion, is arbitrary and capricious, in that the findings show petitioner only used bad judgment in handling the sum of $1,000.00 deposited with him by Edwin Hoch, and the penalty of revocation is excessive.' From these facts the trial court concluded: 'II That the Commissioner acted arbitrarily and capriciously and prejudicially abused his discretion in revoking the real estate license of petitioner, and the Court may remand this matter to the Commissioner for reconsideration of his decision to revoke the license of petitioner.'

Pursuant to these findings and conclusions of law the trial court entered its judgment ordering that a peremptory writ be granted 'vacating the decision of the Commissioner and remanding the submission of this case and ordering the Real Estate Commissioner to reconsider his decision of revoking the petitioner's license as a Real Estate Broker, and to take such evidence as is necessary to determine the proper penalty, if any, to be imposed upon the petitioner.' From this judgment the Commissioner has filed this appeal.

Although the judgment purports to vacate the decision of the Commissioner in its entirety, it is apparent from its import, in the light of the trial court's findings and conclusions of law, that it only vacates that portion of the decision which imposed the penalty of revocation. Its effect is to command the Commissioner to reconsider the penalty imposed. The 'finding' that Brown did not intentionally misappropriate the said sum of $1,000 and that he only exercised 'bad judgment' in 'handling' said deposit is directed to the question of penalty rather than to the question of culpability. In essence, therefore, the trial court's judgment amounted to an adjudication that Brown was guilty of unprofessional conduct under the cited sections of the Business and Professions Code but that the Commissioner abused his discretion in imposing the penalty of revocation.

In view of the foregoing the sole issue which confronts us is whether the trial court correctly determined that the Commissioner abused his discretion in revoking Brown's license. We are thus called upon to determine whether the circumstances of this case warrant the penalty imposed in the light of applicable principles. We first consider the circumstances as disclosed by the record.

In February 1962 Hoch became interested in trading two of his properties, one on Page Street and the other on Oak Street in San Francisco, for an apartment house on Grove Street in San Francisco. The transaction was to be handled for Hoch by Brown in his capacity as a licensed real estate broker. On March 9, 1962, after Hoch's initial offer had been rejected by the seller, who was represented by Alberton Realty, Hoch authorized Brown to make another offer of exchange. Hoch then signed the original and carbon copy of an 'Agreement of Exchange,' which provided that Hoch, as the first party, would exchange his two properties for the Grove Street property and would in addition pay to the second party, 'the vested owner of record' of the Grove Street property, the sum of $79,500. At the same time Hoch gave Brown a check for $1,000. On the face of this check appeared the words 'Deposit--Grove St. Property.' On that same day Brown approached Alberton with this offer of exchange. Alberton, however, rejected the offer, whereupon Brown made a second offer to Alberton, which, as far as Alberton was concerned, was a straight cash purchase of the Grove Street property by one William Zietzke for $185,000. This offer was accepted by Alberton on March 9, 1962 and on the same day a 'Uniform Agreement of Sale and Deposit Receipt' was signed by Brown on behalf of Zietzke as purchaser and by William J. Lowenberg, as agent for Alberton Realty.

After Alberton had accepted this cash offer, Brown signed Zietzke's name as second party to the carbon copy of the 'Agreement of Exchange' which Hoch had signed that morning. Brown then contacted Hoch and informed him that "The deal is accepted. We have you a true and direct trade, and everything will be all right." Later that day Brown deposited the $1,000 check from Hoch in his trust account at the Sunset Branch of the Bank of America. On the same date Brown withdrew from this account, which had a deficit balance of $59.38 prior to the $1,000 deposit, six checks totaling $420. These checks were for Brown's personal expenses. Shortly after March 9, 1962 Hoch refused to proceed with the transaction and the prospective exchange collapsed. Brown refused to return the $1,000 deposit to Hoch and these disciplinary proceedings followed. The $1,000 was, however, ultimately returned to Hoch by Brown on March 7, 1964.

At the administrative hearings Brown admitted that he put the $1,000 deposit into his trust account on March 9, 1962 and on the same day withdrew $420 from this account for personal expenses. Brown gave the following explanations for his conduct: He was using his trust account as a personal account to avoid possible attachment of the account as a result of a civil litigation in which he was involved; by immediately cashing the check, he felt that Hoch would be less likely to renege on his offer; he was entitled to the $1,000 as earned commission; and he gave the $1,000 to Zietzke as a principal, thus allegadly complying with section 2832 of Title 10 of the California Administrative Code which allows trust funds to be placed in the hands of a principal. ³ As to this defense, Brown and Zietzke testified at the hearings that on March 9, 1962 Brown went to the home of Zietzke, his father-in-law, and gave Zietzke $1,000 in cash, ⁴ indicating to Zietzke that he was the buyer and seller in a deal. According to Brown, this $1,000 which he gave to Zietzke was not the same $1,000 which he had received from Hoch, but was a parallel $1,000 that Brown had available to him. Zietzke testified that after the trade collapsed he retained one-half of the $1,000 and gave $500 back to Brown, although Zietzke was not able to particularize any reason for his keeping $500 or for his returning $500 to Brown.

It is apparent from the evidence summarized above that Brown was guilty of unprofessional conduct in violation of the cited sections of the Business and Professions Code. However, the...