Endler v. Schutzbank

Citation436 P.2d 297,65 Cal.Rptr. 297,68 Cal.2d 162
CourtUnited States State Supreme Court (California)
Decision Date26 January 1968
Parties, 436 P.2d 297 Bernard J. ENDLER, Plaintiff and Appellant, v. Jerald S. SCHUTZBANK, as Commissioner of Corporations, etc., Defendant and Respondent. L.A. 29458.

Thomas C. Lynch, Atty. Gen., and H. Warren Siegel, Deputy Atty. Gen., for defendant and respondent.

TOBRINER, Justice.

After nearly 15 years in the finance business, plaintiff finds himself unable to obtain employment in his chosen field because the Commissioner of Corporations, having labelled him a criminal on the basis of unproved accusations, threatens disciplinary action against anyone who might employ him. Plaintiff seeks an opportunity to confront his accusers and to defend his innocence; he urges that, until his guilt has been adjudicated in proper proceedings, the Constitution guarantees his right to pursue a lawful occupation unburdened by an official badge of criminality. We hold that the alleged conduct of the commissioner, rendering the plaintiff unemployable without affording him a full hearing on the charges against him, transgresses the fundamental principle that the state may deprive no man of liberty or property without due process of law. Accordingly, we conclude that the plaintiff has stated a case for declaratory and injunctive relief and that the trial court erred in dismissing his complaint upon the commissioner's general demurrer.


Given the procedural posture of this case, we must accept as accurate the factual allegations of plaintiff's complaint. (Rosenfield v. Malcolm (1967) 65 Cal.2d 559, 563, 55 Cal.Rptr. 505, 421 P.2d 697; Stanton v. Dumke (1966) 64 Cal.2d 199, 201, 49 Cal.Rptr. 380, 411 P.2d 108; Stigall v. City of Taft (1962) 58 Cal.2d 565 For 14 1/2 years prior to November 1965, plaintiff was employed by various financial institutions in California. He has earned his livelihood almost exclusively in the finance business and his ability to support his family will be seriously imparied unless he is permitted to hold a position with a personal property broker licensed by the state. 1

[436 P.2d 300] 567--568, 25 Cal.Rptr. 441, 375 P.2d 289; Flores v. Arroyo (1961) 56 Cal.2d 492, 497, 15 Cal.Rptr. 87, 364 P.2d 263.) For present purposes, therefore, we treat the following facts as undisputed:

In mid-November 1964, plaintiff secured such a position as office manager for Huntington Finance Corporation. At some time prior to mid-September 1965, the commissioner informed Huntington that one of plaintiff's former employers had charged him with forgery and embezzlement and that, unless Huntington would terminate plaintiff's employment, the commissioner would take steps to revoke or suspend Huntington's license as a personal property broker. At the time the commissioner so notified Huntington, his office had undertaken no independent investigation of the accusations lodged against plaintiff. Plaintiff requested an opportunity to present evidence in his own behalf, but the commissioner refused at that time to hold a hearing of any kind.

Huntington informed the commissioner that plaintiff was a 'capable, conscientious and thoroughly honest employee' who had been 'of great assistance to the company' and that the employer who had allegedly accused the plaintiff of wrongdoing had told Huntington that plaintiff was a 'very honest man and * * * a good worker and well versed in the finance business.' Huntington concluded that 'it would (therefore) be unconscionable of us to dismiss (plaintiff) on the basis of your verbal request, unsupported by independent investigation, and based upon charges made by a man who had previously given (plaintiff) a warm recommendation.' Huntington added: 'If we were to comply with your request, and each new employer were to do likewise (plaintiff) would be forever barred from employment in his chosen field without ever being given a hearing or a chance to clear his name. We consider this to be fundamentally at odds with his basic rights. We do not think it is the proper way to treat a trusted employee who has rendered faithful and effective service on our behalf.'

Several weeks after Huntington addressed this communication to him, the commissioner instituted proceedings to revoke Huntington's license because of its refusal to discharge plaintiff. Although Huntington resisted the commissioner's attempt, its efforts proved futile. Huntington was purchased by State Loan and Finance Management Corporation. Unwilling to risk the commissioner's disfavor, State Loan terminated plaintiff's employment in early November 1965. Two weeks later, the commissioner dismissed the proceedings against Huntington's successor.

Shortly thereafter, the commissioner offered to conduct an 'informal hearing' on the charges urged against plaintiff 'with the understanding that said informal hearing was not undertaken pursuant to any specified statute or statutory authority, was not to be in accordance with administrative procedures applicable to formal hearings, and would be without prejudice to the righs of the parties thereto.' The commissioner indicated that, unless he were favorably disposed after such a hearing The commissioner then embarked upon a policy of 'directing its licensees * * * not to employ plaintiff on threat or revocation or suspension of their personal property broker's license' with the result that 'it has become impossible for plaintiff to obtain employment anywhere in the State of California with a licensed pesonal property broker or with any other licensee of the office of the Commissioner of Corporations.'

[436 P.2d 301] he 'would continue to threaten disciplinary action against any * * * licensees who employed plaintiff.' Plaintiff did not agree to subject himself to the proposed proceeding.

Alleging that he would suffer irreparable injury if the commissioner were permitted to persist in directing others not to employ him, the plaintiff sought declaratory, injunctive, and mandatory relief, together with whatever other relief the court might deem proper. The commissioner demurred on the ground that the complaint failed to state facts sufficient to constitute a cause of action. In June 1966, the trial court sustained the demurrer without leave to amend and ordered plaintiff's action dismissed. Plaintiff then instituted this appeal.


At the threshold, we are met by the Attorney General's contention that, having failed to exhaust the administrative remedy offered to him in late 1965, plaintiff cannot now seek judicial protection. The argument does not require extended discussion. We have recently held that an opportunity for administrative review does not constitute the sort of 'remedy' which a party must exhaust before invoking the assistance of the courts unless the statute or regulation under which such review is offered 'establishes clearly defined machinery for the submission, evaluation and resolution of complaints by aggrieved parties. (Rosenfield v. Malcolm, supra, 65 Cal.2d at 566, 55 Cal.Rptr. at 509, 421 P.2d at 701; see the cases discussed at 566--567; see also People v. Broad (1932) 216 Cal. 1, 7--8, 12 P.2d 941.)

We recognize that the issue in Rosenfield turned on whether or not a well-defined remedy Existed, wheras in the instant case a remedy of sorts Was offered. The commissioner, however, proposed only a manifestly defective 'hearing.' Without pausing to consider its more technical shortcomings, 2 we need only recall that the commissioner suggested a hearing that would be 'without prejudice to the rights of the parties' and that would bind the commissioner only at his own discretion. Thus, if the hearing confirmed the commissioner's suspicions, he would continue to induce brokers not to hire the plaintiff; if the hearing vindicated the plaintiff's claims of innocence, the commissioner reserved the right to disregard it and to proceed as though the plaintiff had been found guilty. However, we might view the niceties of the exhaustion of remedies doctrine, we cannot reconcile the Fourteenth Amendment's requirement of due process with this sort of heads-I-win, tails-you-lose procedure.


Having passed the exhaustion hurdle, we come to the Attorney General's suggestion that 'the sole issue in this case is whether a licensee may be disciplined for * * * employing a person whose acts indicate he is unqualified to be a loan company manager.' We have no doubt that such discipline falls well within the commissioner's statutory authority, 3 In approaching this question, we note at the outset that the Fourteenth Amendment protects the pursuit of one's profession from abridgement by arbitrary state action. 4 We therefore begin with the settled proposition that a '(s)tate cannot exclude a person from any * * * occupation in a manner or for reasons that contravene the Due Process or Equal Protection Clause of the Fourteenth Amendment. (Footnote and citations omitted.)' (Schware v. Board of Bar Examiners (1957) 353 U.S. 232, 238--239, 77 S.Ct. 752, 756, 1 L.Ed.2d 796; Konigsberg v. State Bar (1957) 353 U.S. 252, 77 S.Ct. 722, 1 L.Ed.2d 810; Slochower v. Board of Higher Education (1956) 350 U.S. 551, 76 S.Ct. 637, 100 L.Ed. 692; Wieman v. Updegraff (1952) 344 U.S. 183, 73 S.Ct. 215, 97 L.Ed. 216; Blumenthal v. Board of Medical Examiners, supra, 57 Cal.2d 228, 18 Cal.Rptr. 501, 368 P.2d 101.

[436 P.2d 302] but that is Not the issue currently before us. On the contrary, the issue here is whether the commissioner may pemanently bar the plaintiff from employment in his chosen field on the basis of partially investigated charges without ever affording the plaintiff an opportunity to be heard in a formal proceeding accompanied by the safeguards ordinarily required by due process of law.

Although the state may of course regulate the qualifications of individuals employed by licensed business establishments...

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