Opinion
B312599
01-04-2023
AGL BRENTWOOD, INC., Plaintiff and Appellant, v. CBRE, INC., Defendant and Respondent.
Leonard, Dicker & Schreiber, Richard C. Leonard and Kevin S. Dicker for Plaintiff and Appellant. Ellis George Cipollone O'Brien Annaguey, Maribeth Annaguey and Kathryn L. McCann for Defendant and Respondent.
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of Los Angeles County No. 19STCV46334, Mark V. Mooney, Judge. Reversed.
Leonard, Dicker & Schreiber, Richard C. Leonard and Kevin S. Dicker for Plaintiff and Appellant.
Ellis George Cipollone O'Brien Annaguey, Maribeth Annaguey and Kathryn L. McCann for Defendant and Respondent.
ROTHSCHILD, P. J.
Appellant AGL Brentwood, Inc., dba Keller Williams Brentwood-LA (AGL) and respondent CBRE Inc. (CBRE) are both licensed real estate brokers. The instant appeal is from a judgment of dismissal of AGL's breach of contract and breach of fiduciary duty lawsuit against CBRE, seeking to collect, pursuant to the terms of a co-broker agreement between CBRE and AGL, a portion of the commission CBRE received from the lease of a commercial building.
Theodore Brenneman, a real estate salesperson employed by AGL, signed the co-broker agreement on AGL's behalf and performed AGL's obligations thereunder. In sustaining CBRE's demurrer, the trial court concluded the co-broker agreement is unenforceable because Brenneman's actions violated Business and Professions Code section 10137. Section 10137 deems certain acts "unlawful" unless they are performed by someone who is a "licensed real estate broker, or a real estate salesperson licensed under the responsible broker retaining or compensating him or her." (§ 10137; see § 10131 [identifying acts requiring real estate broker license].) At all times relevant to AGL's claims, Brenneman was not himself licensed as a broker. Nor was he "licensed under" AGL's broker's license, because AGL had not reported its retention of Brenneman to the Department of Real Estate (DRE) in the manner required for proper licensure through a responsible broker. (See § 10161.8.)
All further citations and statutory references are to the Business and Professions Code.
Although we conclude that AGL's performance under the agreement violated section 10137, under California Supreme Court precedent, this does not render the agreement between the two commercial real estate brokers unenforceable on the facts presented. Thus, the court erred in sustaining the demurrer on the ground that the agreement was unenforceable.
We are not persuaded by CBRE's alternative argument that the demurrer is equally sustainable on the basis that Brenneman, who signed the co-broker agreement between CBRE and AGL on AGL's behalf, did not have authority to bind AGL. In so arguing, CBRE points to conflicting evidence regarding Brenneman's authority that is beyond the scope of a demurrer analysis. On the facts alleged and those of which we may take judicial notice, Brenneman had authority to sign the co-broker agreement.
Accordingly, we reverse the judgment in CBRE's favor and remand the matter for further proceedings consistent with this opinion.
BACKGROUND
A. Relevant Licensing Requirements
California law itemizes various activities for which one requires a real estate broker license. (§ 10131.) These activities include "[l]eas[ing] or rent[ing] or offer[ing] to lease or rent, . . . or negotiat[ing] the sale, purchase, or exchanges of leases on real property." (Id., subd. (b).) A licensed real estate salesperson may also perform these activities if the salesperson is doing so while "licensed under" a "responsible broker" that has retained and is supervising the salesperson. (§ 10137; see § 10015.1 [" '[r]esponsible broker'" means the real estate broker responsible for the exercise of control and supervision of real estate salespersons]; § 10016 [" '[r]eal estate salesperson' means a natural person licensed as a salesperson . . . and who, for a compensation or in expectation of a compensation, is retained by a real estate broker to do one or more of the acts" for which real estate broker license is required].)
Section 10137 provides that "[i]t is unlawful for any licensed real estate broker to retain, [or] compensate, directly or indirectly, any person for performing any of the acts" for which the law requires a broker's license, unless that person is himself "a licensed real estate broker, or a real estate salesperson licensed under the responsible broker retaining or compensating him or her." (§ 10137.) "For a violation of [section 10137], the [DRE] commissioner may temporarily suspend or permanently revoke the license of the real estate licensee." (Ibid.)
A real estate salesperson becomes "licensed under" a responsible broker after the employing broker reports its affiliation with the salesperson to the DRE as required by section 10161.8. (§ 10161.8, subd. (b) ["[w]henever a responsible broker retains a real estate salesperson to conduct activities requiring a license, the responsible broker shall notify the commissioner in a manner specified by the commissioner"].) Failure to so report a responsible broker-salesperson relationship not only results in the salesperson not being duly "licensed under" the broker to perform broker activities, but it is also a basis on which "the [DRE] commissioner may temporarily suspend or permanently revoke the license of the real estate licensee." (§ 10165.) Under the California Code of Regulations, the broker must so notify the DRE within five days of his employment. (Cal. Code. Regs., tit. 10, § 2752, subd. (a) ["Whenever a real estate salesperson or real estate broker is retained by a responsible broker, the responsible broker shall notify the Commissioner of that fact within five days. This notification shall be given on a form prepared by the Department and shall be signed by the responsible broker and the salesperson or broker retained to act as a salesperson."].)
The real estate salesperson also must notify the DRE of the business address of his or her responsible broker. (§ 10161.8, subd. (e) ["[w]henever a real estate licensee acquires a business address different from the address shown in the records maintained by the commissioner, the licensee shall notify the commissioner in a manner specified by the commissioner"]; Cal. Code. Regs., tit. 10, § 2715 ["[a] real estate salesperson shall maintain on file with the Commissioner his current mailing address, and when applicable, the address of the principal business office of the broker to whom the salesperson is at the time licensed"].)
B. Factual Allegations in AGL's Operative Complaint
Consistent with our standard of review of a trial court's order sustaining a demurrer, we accept as true all properly pleaded material facts in the operative complaint and matters of which judicial notice may be taken. (Mathews v. Becerra (2019) 8 Cal.5th 756, 768.) The following factual background is therefore based on such allegations and judicially noticeable facts.
On March 16, 2022, CBRE filed in this court a request for judicial notice of DRE documents related to AGL's use of fictitious business names and the fictitious business names associated with its license. AGL opposed CBRE's request for judicial notice. Because these documents are not germane to our resolution of the appeal, we deny CBRE's request for judicial notice.
In June 2017, AGL, a licensed real estate broker, hired Brenneman, a licensed real estate salesperson. AGL did not notify the DRE of its affiliation with Brenneman (and Brenneman did not notify the DRE of his new business address), as required by section 10161.8 and related regulations cited above, at any point relevant to the claims alleged in this action. As a result, the DRE's license history for Brenneman does not reflect an affiliation with AGL as the responsible broker during the relevant time period.Nevertheless, AGL agreed to act as Brenneman's responsible broker when it hired him, and supervised Brenneman's work at all times relevant to this lawsuit.
In connection with its demurrer to the first amended complaint, CBRE requested judicial notice of the DRE's license history certification for Brenneman. AGL did not oppose the request for judicial notice. The trial court took judicial notice of the certification, which is included in the record on appeal.
Shortly after AGL hired Brenneman, AGL decided to partner with defendant CBRE to find properties for WeWork, a company with which Brenneman had a preexisting business relationship. On July 10, 2017, CBRE, as the principal broker, and AGL, as the co-broker, entered into a written co-broker agreement to share any real estate commission paid to CBRE for the lease or purchase of real property by WeWork. Under the agreement, which is an exhibit to the operative first amended complaint, CBRE agreed to pay AGL 50 percent of any such commission. Brenneman signed the agreement on behalf of AGL, expressly representing he had "full authority to sign [it] on behalf of the party for whom he . . . sign[ed]."
AGL does business under the fictitious business name Keller Williams Brentwood-LA. The co-broker agreement lists the co-broker simply as "Keller Williams." To avoid confusion, we refer to AGL as the party to the co-broker agreement. Although CBRE mentions issues related to AGL's fictitious business name in a brief footnote, CBRE does not argue that the co-broker agreement is unenforceable based on its listing Keller Williams Brentwood-LA, as opposed to AGL, as a party.
For the next several months after Brenneman signed the agreement, Brenneman and a CBRE broker worked to find a property for WeWork. As part of these efforts, Brenneman toured a property referred to as the Lantana property and participated in preliminary negotiations with its owner regarding a potential lease for WeWork.
On May 11, 2018, the employment relationship between AGL and Brenneman terminated for reasons not disclosed in the record. In October 2018, the real estate director at WeWork with whom Brenneman had been collaborating left WeWork. At that point, CBRE stopped communicating with AGL regarding WeWork's property search.
CBRE continued to negotiate a lease of the Lantana property for WeWork and, in February 2019, WeWork entered into a lease agreement for that property. CBRE received a commission in excess of $2,000,000 for its work in connection with the lease. CBRE has not paid any of the commission to AGL.
AGL's allegations regarding CBRE's continued efforts and commission are on information and belief.
In October 2019, AGL apparently rehired Brenneman as a salesperson and notified the DRE for the first time that Brenneman was affiliated with AGL and that AGL was Brenneman's responsible broker. Approximately a year later-after the parties' lawsuit was well underway-AGL, "through its counsel, wrote a letter to the DRE advising it of [AGL's] failure timely to register Brenneman as a salesperson working under its license [from 2017-2018] and requested that Brenneman's license history be updated to reflect his employment with [AGL] during the period June 27, 2017 to May 11, 2018. The letter states, in pertinent part, 'We recognize that [AGL]'s error constitutes a technical violation of the Business & Professions Code, and [AGL] is willing to take whatever steps are necessary to resolve this matter.'" The record does not contain any indication that the DRE ever responded to the letter or took any action in response to the letter.
C. Proceedings Below
1. AGL Sues CBRE
AGL filed suit against CBRE, alleging CBRE breached the co-broker agreement and CBRE's fiduciary duties to AGL by refusing to share the commission CBRE received for the lease of the Lantana property. AGL sought its "share of the [c]ommission under [the co-broker] [a]greement," punitive damages for the breach of fiduciary duty, and attorney fees and costs.
2. CBRE First Raises Brenneman's Licensure in an Unsuccessful Motion for Terminating Sanctions
After conducting discovery, CBRE filed a motion for terminating sanctions and attorney fees under Code of Civil Procedure section 128.7, asserting the verified complaint was factually and legally frivolous. Citing to the DRE license history certification for Brenneman, CBRE argued that the co-broker agreement Brenneman signed on behalf of AGL was unenforceable because Brenneman had conducted activities requiring a broker's license at a time when he was neither himself licensed as a broker, nor properly "licensed under" AGL or another licensed broker (the licensure issue). Specifically, CBRE argued that Brenneman had executed an agreement regarding real estate commissions and negotiated the lease of real property, both of which require a broker's license. Thus, CBRE continued, the agreement was unenforceable because it was unlawful in two respects: its execution involved an unlawful act, and AGL's performance thereunder was also unlawful.
In opposing the motion, AGL argued that its failure to report its responsible broker affiliation with Brenneman during times relevant to the co-broker agreement was "due to an inadvertent clerical error by [AGL]." AGL argued the co-broker agreement nonetheless was enforceable, because, as set forth in a declaration of AGL's chief executive officer (CEO), AGL authorized Brenneman to sign the agreement and at all relevant times supervised Brenneman's activities thereunder. Attached to the CEO's declaration, however, is a June 27, 2017 independent contractor agreement between AGL and Brenneman, which provides that Brenneman "will have no authority to incur obligations on [AGL Brentwood]'s behalf and promises . . . not to sign any contract, agreement, lease or note in the name of [AGL Brentwood]."
The trial court denied CBRE's motion for terminating sanctions without prejudice to CBRE raising the same legal arguments in a motion for judgment on the pleadings or a motion for summary judgment.
3. CBRE's Motion for Judgment on the Pleadings and Demurrer to the First Amended Complaint Again Raise the Licensure Issue and Question Brenneman's Authority To Execute the Co-Broker Agreement
In October 2020, CBRE filed a motion for judgment on the pleadings based on two arguments. First, CBRE argued there is no valid contract between CBRE and AGL to share the commission because, under the independent contractor agreement between AGL and Brenneman, Brenneman had no authority to sign the co-broker agreement on behalf of AGL (the authority issue). Second, CBRE again raised the licensure issue. The trial court granted CBRE's motion for judgment on the pleadings, but allowed AGL leave to amend.
AGL filed a first amended complaint (the FAC)-the operative complaint in this action-asserting the same causes of action as the initial complaint and seeking the same relief. The FAC contained six new paragraphs under the heading "Plaintiff's Compliance with the Real Estate Licensing Statutes," the substance of which is reflected in the above factual summary.
CBRE demurred to the FAC based on the authority issue and the licensure issue. AGL opposed the demurrer, but did not request leave to further amend the complaint.
4. The Court Sustains the Demurrer Based on the Licensure Issue and Enters Judgment for CBRE
The trial court sustained CBRE's demurrer without leave to amend based on the licensure issue. Specifically, the court concluded the co-broker agreement is unenforceable, because signing an agreement to share real estate commissions is an activity that requires a broker's license under sections 10137 and 10138, and Brenneman "was not a licensed real estate broker and no responsible broker affiliation was reported to the [DRE]" at the time he signed the co-broker agreement.
The court entered judgment in favor of CBRE, dismissing the FAC with prejudice and stating CBRE is entitled to an award of attorney fees and costs. AGL filed a timely notice of appeal.
DISCUSSION
In this appeal, AGL asks us to reverse the judgment in favor of CBRE. AGL argues that neither the licensure issue, nor the authority issue, nor any other deficiency in the FAC provides a basis on which to sustain CBRE's demurrer.
On August 6, 2021, after granting CBRE's motions for attorney fees and costs, the trial court issued an amended judgment awarding CBRE $185,017 in attorney fees and $1,037.07 in costs as well. AGL argues that reversal of the original judgment would also require reversal of the attorney fees and costs award, but does not separately challenge CBRE's entitlement to attorney fees and costs, should we affirm the judgment. Nor does AGL challenge the amended judgment or the amount of attorney fees and costs awarded.
" 'In reviewing an order sustaining a demurrer, we examine the operative complaint de novo to determine whether it alleges facts sufficient to state a cause of action under any legal theory.'" (Mathews v. Becerra, supra, 8 Cal.5th at p. 768.)" 'We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. [Citation.] We also consider matters which may be judicially noticed.' [Citation.] Further, we give the complaint a reasonable interpretation, reading it as a whole and its parts in their context. [Citation.] When a demurrer is sustained, we determine whether the complaint states facts sufficient to constitute a cause of action. [Citation.]" (Blank v. Kirwan (1985) 39 Cal.3d 311, 318; Zelig v. County of Los Angeles (2002) 27 Cal.4th 1112, 1126.)
We conclude that the FAC alleges facts establishing that Brenneman's performance under the co-broker agreement on AGL's behalf violated section 10137, but that this does not prevent the FAC from stating sufficient facts to support the causes of action. We further conclude that, although Brenneman's authority to sign the co-broker agreement on behalf of AGL may be the subject of conflicting evidence outside the scope of our demurrer analysis, the facts alleged and those of which we may take judicial notice do not provide a basis on which to conclude that Brenneman lacked such authority. Accordingly, and for reasons we discuss more fully below, the court erred in sustaining CBRE's demurrer and entering judgment in CBRE's favor.
A. Brenneman's Performance Under the Co-Broker Agreement on Behalf of AGL Violated Section 10137
Part of AGL's performance under the co-broker agreement was that Brenneman participated in negotiations for a lease of the Lantana property. This is an activity for which the code requires a real estate broker's license. (See § 10131, subd. (b) [real estate broker is one who, inter alia, "solicits listings of places for rent, or solicits for prospective tenants, or negotiates the sale, purchase, or exchanges of leases on real property"], § 10137.) At the time Brenneman participated in the Lantana property lease negotiations, Brenneman was neither a licensed broker nor duly "licensed under" AGL, because neither AGL nor Brenneman had notified the DRE that AGL had employed and was supervising Brenneman. AGL's performance under the co-broker agreement violated section 10137 to the extent it comprised Brenneman's negotiating the Lantana property lease.
B. Although AGL's Consideration Under the Co-Broker Agreement Violated Section 10137, This Does Not Render the Agreement Void or Unenforceable
Because we conclude that, despite AGL's consideration under the co-broker agreement being in part in violation of section 10137, the agreement was not void or unenforceable, we need not and do not address AGL's arguments that the agreement is enforceable because AGL substantially complied with section 10137.
"Generally a contract made in violation of a regulatory statute is void. [Citation.] . . . [Citations.] This rule is based on the rationale that 'the public importance of discouraging such prohibited transactions outweighs equitable considerations of possible injustice between the parties.' [Citation.]" (Asdourian v. Araj (1985) 38 Cal.3d 276, 291 (Asdourian).) But" '[t]he illegality of contracts [on these bases] constitutes a vast, confusing and rather mysterious area of the law.' [Citation.] 'One of the reasons for the apparent confusion is the fact that illegality may appear in many forms and in varying degrees. . . . Another source of confusion seems to be the tendency of some courts to speak in terms of absolute rules, and others in terms of numerous exceptions. . . . [¶] Civil Code sections 1598 and 1608 are not always applied literally; in many cases they have simply been overlooked or ignored. [Citation.] In any event the courts have fashioned exceptions and qualifications to the seemingly unequivocal statutory mandate of unenforceability." (R. M. Sherman Co. v. W. R. Thomason, Inc., supra, 191 Cal.App.3d at p. 564.)
The language quoted above references Civil Code section 1608. Civil Code section 1608 provides: "If any part of a single consideration for one or more objects, or of several considerations for a single object, is unlawful, the entire contract is void." CBRE does not rely on this as a primary authority for its position that the co-broker agreement is unenforceable. Nor does it appear to have been an impediment to Courts of Appeal declining to find an agreement unenforceable despite unlawful consideration. (See, e.g., R. M. Sherman Co. v. W. R. Thomason, Inc. (1987) Cal.App.3d 559, 564.) Moreover, as we discuss further below, our state Supreme Court has repeatedly acknowledged that such broad general rules are not without exception. (See, e.g., Asdourian, supra, 38 Cal.3d at p. 291; Lewis & Queen v. N.M. Ball Sons (1957) 48 Cal.2d 141, 151 (Lewis & Queen).)
Our state Supreme Court has expressly recognized that the rule against enforcing agreements requiring or reflecting an illegality is far from absolute. Specifically, in Asdourian, supra, 38 Cal.3d 276, the Supreme Court held that although "[n]ormally, courts will not' "lend their aid to the enforcement of an illegal agreement or one against public policy[,] . . .'" [citations] . . . [citation] [¶] . . . 'the rule is not an inflexible one to be applied in its fullest rigor under any and all circumstances. A wide range of exceptions has been recognized.' [Citation.] For example, . . . [citations] . . . illegal contracts will be enforced to avoid unjust enrichment to the defendant at the expense of the plaintiff." (Id. at p. 291.) "In some cases, . . . the statute making the conduct illegal, in providing for a fine or administrative discipline excludes by implication the additional penalty involved in holding the illegal contract unenforceable; or effective deterrence is best realized by enforcing the plaintiff's claim rather than leaving the defendant in possession of the benefit; or the forfeiture resulting from unenforceability is disproportionately harsh considering the nature of the illegality. In each such case, how the aims of policy can best be achieved depends on the kind of illegality and the particular facts involved." (Lewis & Queen, supra, 48 Cal.2d at p. 151.) Under this precedent, there is no bright line rule rendering all contracts involving an illegality unenforceable; rather,"' "the extent of enforceability and the kind of remedy granted depend upon a variety of factors, including the policy of the transgressed law, the kind of illegality and the particular facts." '" (Asdourian, supra, at p. 292.)
The contracts in Asdourian to which the court applied these principles were home improvement contracts between a contractor (defendant) and real estate investors (plaintiffs), to have the contractor perform improvements on a property owned by the investors. The agreements were oral, and thus violated section 7159, which requires such contracts be in writing. At the time Asdourian was decided, "[a] violation of section 7159 [was] punishable as a misdemeanor. Defendants [the real estate investors] contend[ed] that since the agreement[ ] . . . did not conform to the requirements of section 7159, [it was] illegal and unenforceable as violative of public policy." (Asdourian, supra, 38 Cal.3d at p. 290.) The court agreed that section 7159 clearly applied and rendered the contract illegal. (Asdourian, supra, at pp. 290-291.) Despite such illegality, however, the court applied the three factors it identified in the Lewis & Queen excerpt above, and held the agreement was enforceable.
The Supreme Court's analysis in applying these three factors to the facts at issue in Asdourian is highly instructive for the instant appeal. Specifically, the court in Asdourian identified the policy of section 7159-"encourag[ing] written contracts for home improvements in order to protect unsophisticated consumers"- and noted "defendants [the real estate investors] are not members of the group primarily in need of the statute's protection. In this context, the misdemeanor penalties provided in the statute should be sufficient. It will not defeat the statutory policy to allow plaintiff to recover for the reasonable value of the work performed." (Asdourian, supra, 38 Cal.3d at p. 292.) The court next noted that "a contract made in violation of section 7159 does not involve the kind of illegality which automatically renders an agreement void. The contracts at issue here were not malum in se. They were not immoral in character, inherently inequitable or designed to further a crime or obstruct justice. [Citation.] . . . Rather, the contracts were malum prohibitum, and hence only voidable depending on the factual context and the public policies involved." (Asdourian, supra, at p. 293, italics omitted.) Finally, the court concluded the specific facts of the case favored enforcement, namely that "[d]efendant[s] [are] real estate investor[s], not an unsophisticated homeowner or tenant. Further, because plaintiff and defendants were friends, who had had business dealings in the past, the failure to comply with the strict statutory formalities is, perhaps, understandable. [Citation.] Plaintiff fully performed according to the oral agreements. Defendants accepted the benefits of the oral agreements. If defendants are allowed to retain the value of the benefits bestowed by plaintiff without compensating him, they will be unjustly enriched." (Ibid.)
Here, as in Asdourian,"' "the policy of the transgressed law, the kind of illegality and the particular facts" '" (Asdourian, supra, 38 Cal.3d at p. 292) all weigh in favor of enforcing the agreement, notwithstanding that AGL's performance thereunder, to the extent it was comprised of Brenneman's efforts to negotiate a lease of the Lantana property, violated section 10137. "The purpose of the real estate licensing statutes is to protect the public from the perils incident to dealing with incompetent or untrustworthy real estate practitioners." (Preach v. Monter Rainbow (1993) 12 Cal.App.4th 1441, 1455 (Preach).) Nothing in the allegations suggests Brenneman (or AGL, for that matter) were incompetent or untrustworthy. Nor is CBRE-itself a real estate broker-a member of the general public, unknowledgeable about real estate and in need of protection from incompetent or untrustworthy real estate advice or assistance."' "Real estate brokers are licensed as such only after they have demonstrated a knowledge of the laws relating to real estate transactions [citation], and it would seem that they would thus require less protection against pitfalls encountered in transactions regulated by those laws." '" (See Phillippe v. Shapell Industries (1987) 43 Cal.3d 1247, 1260 (Phillippe).) CBRE thus is "not [a] member[ ] of the group primarily in need of [section 10137's] protection"-namely, the general public, primarily comprised of people who must rely on a real estate broker to understand real estate transactions. (Asdourian, supra, 38 Cal.3d at p. 292.) "In this context, the . . . penalties provided in the statute"-potential loss of the broker and/or salesperson's license- "should be sufficient. It will not defeat the statutory policy to allow [AGL] to recover for the reasonable value of the work [Brenneman and AGL] performed." (See ibid.) Of course, even sophisticated brokers like CBRE would benefit from assuring that the real estate professionals with whom they collaborate in providing services for which a broker's license is required are in fact duly licensed to perform those services. The Supreme Court in Asdourian acknowledged this-specifically, it noted that "even experienced real estate investors [like the defendants in that case] will benefit from the protection offered by section 7159"-and the court nevertheless concluded that, because the defendants were not part of the general pool of individuals the statute was intended to benefit and would most benefit, this weighed against treating noncompliance with the statute as voiding the contract. (Asdourian, supra, at pp. 290-291.)
Also as in Asdourian, the action Brenneman engaged in that was prohibited by section 10137 was not inherently wrong, immoral, or illegal, but rather illegal by virtue of the specific reporting requirements in the statute-that is, "malum prohibitum." (Asdourian, supra, 38 Cal.3d at p. 293.) Relatedly, unlike the statute at issue in Phillippe, supra, 43 Cal.3d 1247, a decision on which the dissent relies, the statute violated here does not expressly require invalidation of a contract as a result of the conduct it addresses. (See id. at p. 1259 [rejecting equitable estoppel as a basis for real estate broker to enforce an oral commission agreement, notwithstanding the Civil Code section declaring such contracts invalid].) To the contrary, the Legislature chose to address the conduct section 10137 renders unlawful differently: through suspension or loss of one's real estate license. (§ 10137.) The Legislature could have deemed invalid all contracts involving violations of section 10137, but chose not to do so. Of course, this does not foreclose the possibility that, under the line of cases we discuss above, a court may conclude a particular contract involving a violation of section 10137 should be unenforceable as a matter of public policy. But, as our Supreme Court acknowledged in Asdourian, that rule is not without exception, and thus does not present the same scenario as a statute expressly declaring a contract unenforceable. Indeed, the California Supreme Court in Phillippe distinguished Asdourian on this very basis. Specifically, it noted: "[Civil Code] [s]ection 1624[,] [subdivision] (d) [(the statute of frauds)] expressly provides that oral contracts are 'invalid.' . . . [S]ection 7159, the statute construed in Asdourian, merely requires oral home improvement contracts to be in writing; section 7159 does not expressly state that they are invalid. The Asdourian court emphasized that there was no indication the Legislature intended contracts in violation of . . . section 7159 to be unenforceable. ([Asdourian, supra,] 38 Cal.3d at pp. 291-292.) By contrast, the Legislature expressly provided in [Civil Code] section 1624[,] [subdivision] (d) that oral contracts for brokerage commissions are invalid, i.e., unenforceable." (Phillipe, supra, at p. 1266, fn. 12, italics omitted.)
Finally, nonenforcement would result in" 'a disproportionately harsh penalty upon [AGL]'" who caused no actual harm to CBRE, and so would be forfeiting a million dollars for failing to comply with reporting requirements. (Asdourian, supra, 38 Cal.3d at p. 292.) Although these reporting requirements are important, the same can be said for the statutory requirement and defendants in Asdourian. Yet here, as in Asdourian, "[t]he penalty which would result from the denial of relief would be disproportionately harsh in relation to the gravity of the violations." (Id. at p. 294.)
In sum, an exception to the general rule that contracts involving an illegality are unenforceable applies on the facts alleged. Accordingly, we cannot affirm the lower court's decision sustaining the demurrer on the basis that the contract was necessarily unenforceable. The cases the dissent cites in which real estate licensing violations rendered an agreement unenforceable reflect conclusions that, on facts materially different from those alleged here, such an exception did not apply. (See Preach, supra, 12 Cal.App.4th 1441; Firpo v. Murphy (1925) 72 Cal.App. 249; Hahn v. Hauptman (1930) 107 Cal.App. 739, 740-741.) They thus do not provide a basis for denying that possibility in this case.
C. The Authority Issue Is Not a Basis for Affirming
Finally, we address the authority issue and CBRE's argument that we must affirm the judgment on the independently sufficient basis that Brenneman was not authorized to execute the co-broker agreement on AGL's behalf, and thus the agreement cannot provide a basis for AGL's claims.
The question of whether AGL had bestowed upon Brenneman the requisite authority for Brenneman's signature to bind AGL depends on general agency principles. Under these principles, the properly pleaded facts and facts of which the court may take judicial notice do not establish that Brenneman lacked such authority. To the contrary, the allegations that Brenneman was a real estate salesperson employed by AGL suggest that he did have such authority. (See, e.g., California Real Estate Loans, Inc. v. Wallace (1993) 18 Cal.App.4th 1575, 1581 ["[i]t is settled that for purposes of liability to third parties for torts, a real estate salesperson is the agent of the broker who employs him or her"]; Grubb & Ellis Co. v. Spengler (1983) 143 Cal.App.3d 890, 895 ["[i]t seems clear that for purposes of the administration of the real estate law, the salesperson is the employee and agent of the broker"]; People v. Asuncion (1984) 152 Cal.App.3d 422, 425 ["a real estate salesman is an agent of his broker-employer as a matter of law . . . [citations] . . . [citation] . . . [and] the salesman . . . is strictly the agent of the broker"].)
CBRE points to evidence outside the scope of what the court could consider on a demurrer-for example, the declaration of AGL's CEO and the independent contractor agreement between AGL and Brenneman, which conflict as to whether Brenneman was authorized to execute the co-broker agreement on AGL's behalf. How to resolve the conflicting evidence on this issue is a question for another day. Resolving such a conflict in the evidence is neither the proper subject of appellate review, nor relevant in a demurrer analysis. Based on what we may properly consider in a demurrer analysis, the trial court could not sustain a demurrer based on Brenneman's purported lack of authority.
CBRE's other arguments on the authority issue focus on licensure. But CBRE has not identified, nor are we aware, of any authority requiring a particular licensure in order for an individual to sign an agreement on behalf of a real estate broker, if signing that agreement is not itself an act for which a specific license is required. (See Civ. Code, § 2296 ["[a]ny person having capacity to contract may appoint an agent, and any person may be an agent"].) And although, as CBRE notes, "entering into an agreement to accept a commission for" activities requiring a broker's license is itself an act for which the code requires a broker's license, Brenneman did not agree to himself accept such a commission by signing the co-broker agreement. Rather, he agreed on AGL's behalf that AGL, a licensed real estate broker, would accept such a commission.
DISPOSITION
The judgment is reversed. Appellant is awarded its costs on appeal.
I concur: MORI, J. [*]
CHANEY, J.
I respectfully dissent.
As I explain below, I conclude the co-broker agreement between AGL Brentwood, Inc. dba Keller Williams Brentwood-LA (AGL) and CBRE, Inc. (CBRE) is unenforceable because the agreement is unlawful under Business and Professions Code section 10137. AGL cites no case that has upheld an agreement that violates section 10137, and I am aware of none (prior to the present case). Cases AGL cites that were decided under the Contractors State License Law (§§ 7000 et seq.) are not persuasive here in the context of real estate brokers, for reasons I discuss below. Because the causes of action in AGL's first amended complaint arise from an agreement (the co-broker agreement) that I conclude is unenforceable, I believe the trial court properly sustained CBRE's demurrer without leave to amend. I would therefore affirm the judgment dismissing this action.
Undesignated statutory references are to the Business and Professions Code.
A. The Co-Broker Agreement Is Unlawful and Unenforceable Because the Real Estate Salesperson Who Signed and Performed Under the Agreement on Behalf of AGL Was Not Licensed Under AGL
Theodore Brenneman, a licensed real estate salesperson, worked for AGL, a licensed real estate broker, for 10 and a half months, from June 27, 2017 to May 11, 2018. During that entire period, AGL allowed Brenneman to perform the duties of a real estate broker (see § 10131), although Brenneman was not licensed as one. Among other things, Brenneman engaged in preliminary negotiations for a lease of real property and signed a co-broker agreement on behalf of AGL to share any commission for the lease of the property with CBRE-duties of a real estate broker.
Section 10137 provides, in pertinent part: "It is unlawful for any licensed real estate broker to retain, compensate, directly or indirectly, any person for performing any of the acts within the scope of this chapter who is not a licensed real estate broker, or a real estate salesperson licensed under the responsible broker retaining or compensating him or her . . . ." In California, a real estate salesperson becomes licensed under a responsible broker after the employing broker notifies the Department of Real Estate (DRE) of its affiliation with the salesperson pursuant to section 10161.8. This change to a salesperson's license is then reflected in the salesperson's license history with the DRE.
More specifically, a "responsible broker [who] retains a real estate salesperson to conduct activities requiring a license" (§ 10161.8, subd. (b)), must notify the DRE within five days of the real estate salesperson's employment, on a form prepared by the DRE and signed by the responsible broker and the salesperson. (Cal. Code Regs., tit. 10, § 2752, subd. (a).) Moreover, the real estate salesperson must notify the DRE of the business address of his or her responsible broker. (§ 10161.8, subd. (e); Cal. Code Regs., tit. 10, § 2715 ["A real estate salesperson shall maintain on file with the Commissioner his current mailing address, and when applicable, the address of the principal business office of the broker to whom the salesperson is at the time licensed"].)
At the time AGL retained Brenneman in June 2017, Brenneman was licensed under a responsible real estate broker who is not a party to this action, as reflected in the DRE's License History Certification for Brenneman. A few days after Brenneman's employment with AGL commenced, Brenneman's affiliation with the responsible broker was discontinued. Although AGL alleges it agreed to act as Brenneman's responsible broker and supervised his work during the 10-and-a-half-month period of Brenneman's employment, AGL never took the required action of licensing Brenneman under AGL, so Brenneman could lawfully sign and perform under the co-broker agreement. Nor did Brenneman take the required action of notifying the DRE of the principal business address of his new employer, AGL.
AGL does not dispute that the DRE's License History Certification for Brenneman was properly before the trial court in connection with CBRE's demurrer to AGL's first amended complaint.
In July 2019, more than a year after his employment with AGL terminated, however, Brenneman notified the DRE that he had a new mailing address, as reflected in the DRE's License History Certification for Brenneman.
AGL argues section 10137 is inapplicable here and does not render the co-broker agreement unenforceable because at all relevant times, AGL was a licensed broker, Brenneman was a licensed real estate salesperson, and AGL supervised Brenneman's work. Section 10137 does not provide that engaging in the activities of a real estate broker is lawful so long as the salesperson is licensed as a real estate salesperson and supervised by a licensed broker. The statute states it is unlawful for a salesperson to engage in the activities of a real estate broker unless the salesperson is licensed under the responsible broker (or is a licensed real estate broker him- or herself). Mere supervision of a salesperson by a broker cannot render a salesperson licensed under a responsible broker. The broker must take the steps outlined above to license the real estate salesperson under the responsible broker. AGL failed to license Brenneman under AGL during the 10 and a half months of Brenneman's employment. Thus, the DRE had no record that Brenneman was working for AGL and engaging in the activities of a real estate broker under AGL.
AGL acknowledges that violations of section 10137 have rendered commission sharing agreements unenforceable. AGL concedes, for example, that if Brenneman had been an unlicensed real estate salesperson at the time he signed the co-broker agreement and performed under it on AGL's behalf (with AGL's supervision), the co-broker agreement would be unenforceable under section 10137. (See, e.g., Hahn v. Hauptman (1930) 107 Cal.App. 739, 740-741 (Hahn) [licensed real estate broker whose unlicensed employee "exhibit[ed] the property . . . and talked . . . about it" with the purchaser could not recover a commission under an agreement because the employee's negotiations with the purchaser were "expressly forbidden by law" and "one may not recover as upon contract for services rendered in the commission of acts which are malum prohibitum, this upon the ground of an enlightened public policy"]; Preach v. Monter Rainbow (1993) 12 Cal.App.4th 1441, 1446-1449, 1454-1458 (Preach) [citing Hahn with approval and concluding licensed real estate broker could not recover under commission agreement to the extent the broker used an unlicensed person to engage in negotiations requiring a broker's license].) As AGL notes, there is no caselaw interpreting section 10137 in the context of the circumstances presented in this case where a licensed real estate salesperson engages in the activities of a real estate broker while his salesperson's license does not reflect an affiliation with a responsible broker.
Firpo v. Murphy (1925) 72 Cal.App. 249, though decided under a prior statutory scheme, is closest to the situation presented here and speaks to the importance of requiring that the real estate salesperson's license reflect the affiliation with the responsible broker in ensuring the public protection purpose of the real estate licensing laws. Prior to enactment of the current statutory scheme, a real estate salesperson's license was canceled and needed to be reissued each time the salesperson commenced employment with a new real estate broker. (Id. at p. 253.) In Firpo, the Court of Appeal held an agreement providing for a real estate broker's commission was void because it violated a statute "contemplate[ing] that no business can be conducted by a broker through a salesman acting in his behalf until a license is procured by him or reissued when there has been a change in the employment of the salesman." (Ibid., italics added; see also White v. Chicago Title and Trust Co. (1981) 99 Ill.App.3d 323, 324, 333, 425 N.E.2d 1017, 1018, 1024 [an agreement providing for a real estate broker's commission was unenforceable where a real estate salesperson did not timely transfer his certificate of registration as a salesperson to the broker prior to executing an option agreement for the purchase of real property on behalf of the broker, thereby violating the Illinois Real Estate Brokers and Salesmen License Act].)
Although the current statutory scheme does not require cancelation and reissuance of a real estate salesperson's license when he or she is retained by a real estate broker, current law requires that the real estate salesperson's license record reflect any affiliation with a responsible broker, as discussed above. Section 10137 does not indicate it is any more wrongful for a broker to retain and supervise an unlicensed salesperson than for a broker to retain and supervise a licensed salesperson who is not licensed under the broker; neither may lawfully perform the activities of a real estate broker. As AGL acknowledges, the former conduct by a broker renders a commission sharing agreement unenforceable under section 10137, as reflected in prevailing caselaw. Why should the latter unlawful conduct by a broker not similarly render a commission sharing agreement unenforceable in this case of first impression?
"The purpose of the real estate licensing statutes is to protect the public from the perils incident to dealing with incompetent or untrustworthy real estate practitioners." (Preach, supra, 12 Cal.App.4th at p. 1455.) AGL's failure to license Brenneman under AGL over a period of 10 and a half months was incompetence at best. Enforcing a commission sharing agreement in a case like this one renders meaningless the phrase "licensed under the responsible broker retaining or compensating him or her" in section 10137. To avoid the usual consequence of engaging in unlawful conduct under section 10137-voidance of an agreement-a broker may simply allege it supervised the salesperson when he or she engaged in the activities of a real estate broker, as AGL does here. On the other hand, if a broker wants to void an agreement not in its favor, it may allege in its defense that the salesperson was not authorized to engage in the activities of a real estate broker because the salesperson was not licensed under a responsible broker within the meaning of section 10137, and the salesperson was only hired and authorized to engage in the activities of a salesperson.
Civil Code section 1608 provides, "If any part of a single consideration for one or more objects, or of several considerations for a single object, is unlawful, the entire contract is void." The allegations in the operative first amended complaint and matters subject to judicial notice demonstrate unequivocally that the co-broker agreement is entirely unlawful. Brenneman, the person who signed it and performed under it on behalf of AGL, was precluded from doing both under section 10137. By using the language "[i]t is unlawful for" in section 10137, in describing the conduct AGL engaged in here, it is clear the Legislature did not view the conduct as a mere technical violation of a licensing statute. Accordingly, I conclude the co-broker agreement is void and AGL is precluded from recovering under it in this action as a matter of law. I would therefore affirm the judgment dismissing this action.
The cases AGL cites in the real estate context involve different statutory provisions and do not shed light on whether the co-broker agreement is enforceable in light of AGL's violation of section 10137. (See, e.g., Schantz v. Ellsworth (1971) 19 Cal.App.3d 289, 291-293 [Court of Appeal rejected the defendants' argument that the plaintiff broker's action to recover commissions for two leases was barred under section 10136- which required the plaintiff to prove he was a duly licensed real estate broker in order to bring an action to recover the commissions-where the plaintiff demonstrated he had a broker license, but he failed to prove he was licensed for the branch office or the fictitious name he used in the lease transactions, under other provisions of the real estate licensing laws]; Estate of Baldwin (1973) 34 Cal.App.3d 596, 603-606 [section 10136 was not a bar to plaintiff broker's action to recover a commission where the plaintiff was a licensed broker but signed a commission agreement in the name of his alter ego corporation which did not have a broker license].)
I recognize that section 10137 includes a remedy for violation of the statute: "[T]he commissioner may temporarily suspend or permanently revoke the license of the real estate licensee." Nothing in the statute indicates this remedy is exclusive. Based on caselaw in the context of real estate brokers, I conclude that an agreement that is entirely unlawful under section 10137-like the co-broker agreement here-is unenforceable.
B. Cases Decided Under the Contractors State License Law Are Not Persuasive Here
AGL argues, if this court concludes the co-broker agreement is unlawful under section 10137, this court should nonetheless enforce the co-broker agreement under the doctrine of substantial compliance and to avoid unjust enrichment to CBRE. The caselaw AGL cites in support of these arguments is not persuasive here.
AGL's citation to caselaw decided under the Contractors State License Law (§§ 7000 et seq.) in support of its substantial compliance argument is misplaced. (See, e.g., Asdourian v. Araj (1985) 38 Cal.3d 276 (Asdourian) [home improvement contractor substantially complied with licensing laws although he contracted in his own name rather than in the name of his licensed sole proprietorship because his name was on the sole proprietorship's license as the responsible managing party, and his competence and experience formed the basis of the license issued to the sole proprietorship].) The Contractors State License Law now expressly incorporates a doctrine of substantial compliance into the statutory scheme. (§ 7031, subd. (e) ["the court may determine that there has been substantial compliance with licensure requirements under this section if it is shown at an evidentiary hearing that the person who engaged in the business or acted in the capacity of a contractor (1) had been duly licensed as a contractor in this state prior to the performance of the act or contract, (2) acted reasonably and in good faith to maintain proper licensure, and (3) acted promptly and in good faith to remedy the failure to comply with the licensure requirements upon learning of the failure"].) California's real estate licensing statutory scheme does not similarly incorporate the doctrine of substantial compliance. Even if it did, it is not clear how the doctrine of substantial compliance would apply here where neither AGL nor Brenneman made any attempt to ensure Brenneman was licensed under AGL for the 10-and-a-half month period at issue during which Brenneman was employed by AGL. During that time, the DRE had no record that Brenneman was working for AGL and engaging in the activities of a real estate broker under AGL.
Beginning in 1991, the Legislature amended the Contractors State License Law to incorporate a doctrine of substantial compliance. (Assem. Bill No. 1382 (1991-1992 Reg. Sess.) Stats. 1991, ch. 632, § 1.) The Legislature has made no similar amendment to the real estate licensing laws at issue here.
AGL also relies on Asdourian in support of its unjust enrichment argument. There, our Supreme Court held oral home improvement contracts were enforceable notwithstanding violation of a statute that requires such contracts in excess of $500 to be in writing (§ 7159). (Asdourian, supra, 38 Cal.3d at p. 294.) At the time the Supreme Court decided Asdourian, a violation of section 7159 was punishable as a misdemeanor. (Asdourian, at p. 290.)
The Supreme Court in Asdourian noted: "Generally a contract made in violation of a regulatory statute is void. [Citation.] Normally, courts will not' "lend their aid to the enforcement of an illegal agreement or one against public policy . . . .'" [Citations.] This rule is based on the rationale that 'the public importance of discouraging such prohibited transactions outweighs equitable considerations of possible injustice between the parties.'" (Asdourian, supra, 38 Cal.3d at p. 291.) The Court also noted, however, "In compelling cases, illegal contracts will be enforced in order to 'avoid unjust enrichment to a defendant and a disproportionately harsh penalty upon the plaintiff.' [Citation.]' "In each case, the extent of enforceability and the kind of remedy granted depend upon a variety of factors, including the policy of the transgressed law, the kind of illegality and the particular facts." '" (Id. at p. 292.)
Applying the factors, the Supreme Court concluded the oral home improvement contracts in Asdourian were enforceable despite their illegality. First, the real estate investor defendants were not the type of "unsophisticated consumers" section 7159 was meant to protect, so allowing the plaintiff to recover for the reasonable value of work performed would not defeat the statutory policy, and "the misdemeanor penalties provided in the statute should be sufficient." (Asdourian, supra, 38 Cal.3d at p. 292.) "Second, a contract made in violation of section 7159 does not involve the kind of illegality which automatically renders an agreement void. The contracts at issue here were not malum in se. They were not immoral in character, inherently inequitable or designed to further a crime or obstruct justice. [Citation.] There was nothing 'intrinsically illegal' about the agreements between plaintiff and defendant to repair and remodel the residential property. Rather, the contracts were malum prohibitum, and hence only voidable depending on the factual context and the public policies involved." (Id. at p. 293.) Third, the facts of the case supported enforcement of the oral agreements: "Defendant [sic] is a real estate investor, not an unsophisticated homeowner or tenant. Further, because plaintiff and defendants were friends, who had had business dealings in the past, the failure to comply with the strict statutory formalities is, perhaps, understandable. [Citation.] Plaintiff fully performed according to the oral agreements. Defendants accepted the benefits of the oral agreements. If defendants are allowed to retain the value of the benefits bestowed by plaintiff without compensating him, they will be unjustly enriched." (Ibid.)
Two and a half years after Asdourian, our Supreme Court reached the opposite conclusion regarding the enforceability of an oral commission agreement between a licensed real estate broker and a corporate real property buyer that was also a licensed real estate broker. (Phillippe v. Shapell Industries (1987) 43 Cal.3d 1247, 1252 (Phillippe).) The oral agreement violated the statute of frauds, Civil Code section 1624, which "provides that an agreement authorizing or employing an agent, broker, or any other person to purchase or sell real estate is invalid unless the agreement or some note or memorandum of the agreement is in writing and subscribed by the party to be charged or by his agent." (Phillippe, at p. 1255, fn. omitted.)
The Supreme Court in Phillippe rejected the plaintiff's argument that the defendant "should be estopped from asserting the statute of frauds as a defense" so as "to avoid unconscionable injury or unjust enrichment that would result from refusal to enforce" an invalid oral agreement. (Phillippe, supra, 43 Cal.3d at p. 1259.) The Court concluded that licensed brokers may not "invoke equitable remedies to avoid the sometimes harsh results of the statute of frauds." (Id. at p. 1260.)" 'The rationale for the rigorous application of the statute of frauds to bar claims by licensed real estate brokers is related to the statutory licensing requirements. "Real estate brokers are licensed as such only after they have demonstrated a knowledge of the laws relating to real estate transactions [citations], and it would seem that they would thus require less protection against pitfalls encountered in transactions regulated by those laws." '" (Ibid.) Quoting from another of its cases, the Supreme Court explained:" '" 'Plaintiff is a licensed real estate broker and, as such, is presumed to know that contracted for real estate commissions are invalid and unenforceable unless put in writing and subscribed by the person to be charged. [Citations.] Nevertheless, plaintiff failed to secure proper written authorization to protect itself in the transaction. Rather it assumed the risk of relying upon claimed oral promises of defendant, and it has no cause for complaint if its efforts go unrewarded.'" '" (Id. at p. 1261.)
The Supreme Court in Phillippe concluded the defendant's nonpayment of a commission "under an unenforceable oral contract" did not constitute unjust enrichment of the defendant: "[The plaintiff] has not shown any unjust enrichment of [the defendant]. The most [the plaintiff] has shown is that [the defendant] did not pay for his services." (Phillippe, supra, 43 Cal.3d at p. 1263.) Nor did the fact the plaintiff "was the procuring cause of the sale" to the defendant establish unjust enrichment. (Ibid.)
In declining to enforce the oral commission agreement in Phillippe, the Supreme Court reasoned: "It is not unfair to require licensed brokers to comply with the statute of frauds. Only those persons licensed by the [DRE] may lawfully act as real estate brokers in this state. [Citation.] To bring an action to recover a real estate commission, a broker must plead and prove that he was duly licensed at the time his cause of action arose. [Citation.] The effect of these laws is obvious-only a person duly licensed may earn and recover compensation as a real estate broker. It is not too much to ask in return for that valuable privilege that a licensed broker comply with the statute of frauds." (Phillippe, supra, 43 Cal.3d at p. 1267.)
The Supreme Court in Phillippe acknowledged and distinguished Asdourian in a footnote as follows: "(1) [Former Civil Code s]ection 1624(d) [now Civil Code section 1624, subd. (a)(4)] expressly provides that oral contracts are 'invalid.' Business and Professions Code section 7159, the statute construed in Asdourian, merely requires oral home improvement contracts to be in writing; section 7159 does not expressly state that they are invalid. The Asdourian court emphasized that there was no indication the Legislature intended contracts in violation of Business and Professions Code section 7159 to be unenforceable. [Citation.] By contrast, the Legislature expressly provided in [Civil Code] section 1624(d) that oral contracts for brokerage commissions are invalid, i.e., unenforceable. (2) Violation of Business and Professions Code section 7159 [was, at the time Asdourian was decided,] a misdemeanor punishable by fine and/or imprisonment. The Asdourian court explained that such penalties should be sufficient to serve the underlying legislative policy of that statute. [Citation.] [Civil Code s]ection 1624(d), however, does not provide for criminal penalties so it is even more important to preserve the statute's efficacy by strict enforcement. (3) There are significant differences between home improvements and brokerage commissions. Home improvements are tangible and can be relatively easily verified and appraised to determine their reasonable value. Such was the case in Asdourian, in which the contractor recovered the reasonable value of his services. A broker's services do not result in a tangible product so it is more likely that there will be disputes as to what the broker has done and what such services may be worth. As in Asdourian, a home improvement dispute will typically involve only a single contractor seeking to recover. Due to the nature of the real estate business, however, several competing brokers may claim a commission for a single transaction. Written contracts help minimize such confusion." (Phillippe, supra, 43 Cal.3d at p. 1266, fn. 12.)
In Asdourian, in enforcing the unlawful oral home improvement agreements, the Supreme Court focused on the fact that the defendants-who sought to invalidate the oral agreement-were not the type of unsophisticated consumers the statute was meant to protect. In Phillippe, in contrast, in declining to enforce the unlawful oral commission agreement between two real estate brokers, the Supreme Court focused on the fact the plaintiff-who sought to enforce the oral agreement- was a real estate broker who was presumed to know the law and took the risk when he violated the law that the agreement would be held unenforceable.
Although the present case does not involve an oral agreement or an assertion of equitable estoppel, Phillippe demonstrates why AGL's unlawful conduct renders the co-broker agreement unenforceable and why AGL's equitable claim of unjust enrichment is unavailing. AGL knew the steps it needed to take to license Brenneman under AGL, so Brenneman could lawfully sign and perform under the co-broker agreement. What AGL characterizes as a mere clerical error, turned into a 10-and-a-half-month violation of section 10137-the duration of Brenneman's employment with AGL. Under the Supreme Court's rationale in Phillippe, AGL, a licensed real estate broker, should not be heard to claim unjust enrichment because CBRE declined to pay a commission under an unlawful agreement, regardless of whether AGL was the procuring cause of the lease for which it seeks the commission. AGL knew the law and violated it at its own peril, allowing Brenneman to engage in the activities of a real estate broker for the entirety of his employment with AGL, although Brenneman was not a licensed real estate broker or licensed under one, and the DRE had no knowledge of Brenneman's employment with AGL.
I would affirm the judgment in favor of CBRE.
Having concluded the Co-Broker Agreement is unenforceable because Brenneman signed it and performed under it when he was not licensed under a responsible broker in violation of section 10137, I would not address the other basis for CBRE's demurrer-whether Brenneman had authority to sign the Co-Broker Agreement under the Independent Contractor Agreement between AGL and Brenneman.
[*] Judge of the Los Angeles County Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.