Tonja Lynn Demoff vs. Wayne Bell

Opposition

Cal. Super. - 4th Dist.December 21, 2016

10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Exempt from Filing Fees Pursuant to Government Code § 6103 XAVIER BECERRA Attorney General of California STEPHEN LEW, State Bar No. 81205 Supervising Deputy Attorney General ELECTRONICALLY FILED Superior Court of California, VAN-DZUNG Vv. NGUYEN County of Orange State Bar No. 222832 10132017 qT 300 South Spring Street, Suite 1702 at 11:17:00 Ad Los Angeles, CA 90013 Clerk of the Superior Court Telephone: (213) 897-5677 By & Clev:Teyary Ble Fax: (213) 897-5775 E-mail: van-dzung.nguyen@doj.ca.gov Attorneys for Respondents Wayne J. Bell, Real Estate Commissioner of the State of California, and Bureau of Real Estate of the State of California SUPERIOR COURT OF THE STATE OF CALIFORNIA COUNTY OF ORANGE CENTRAL JUSTICE CENTER Case No. 30-2016-00893938-CU-WM-CJC TONYA LYNN DEMOFF, Petitioner, Assigned to Hon. Geoffrey T. Glass, Dept. C32 RESPONDENTS’ OPPOSITION TO FIRST ’ AMENDED PETITION FOR WRIT OF MANDATE OR OTHER APPROPRIATE WAYNE J. BELL, REAL ESTATE COMMISSIONER FOR THE STATE OF RELIEF FILED BY PETITIONER TONYA CALIFORNIA, the BUREAU OF REAL LYNN DEMOFF ESTATE of the STATE OF CALIFORNIA and DOES 1 through 5 inclusive, Date: November 13, 2017 Time: 9:00 a.m. KEMERY BLAIR-YEAKEL, AKA KEMERY [Pept C32 Action Filed: December 21, 2016 Respondents. Real Party in Interest. 1 Respondents’ Opposition to First Amended Petition for Writ of Mandate or Other Appropriate Relief (30-2016-00893938-CU-WM-CJC) 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 TABLE OF CONTENTS Page INTRODUCTION seommummanessmsmmesmomcsmmonssossessnmsnss se so smo, sas s s a ssa 5 STATEMENT OF FACTS ooo steer eae sree sae eee 6 LL The Judgment Against Petitioner Was A Final Judgment Based On Fraud Relating To Real Estate Activities cwmsssmmasmmmenmsmmsmmmemmmmrmssssmmscomemomsmaesess 6 PROCEDURAL HISTORY c.count see sree eee see see ene 9 ARGUMENT oicerecta see sae eb eee bese ee snes ens 9 LL Stara gre, Of REVISIT wmnunss svssusmonssums ios snsssns oss soma a0 sess ss 51s ass mm su aps Ee ws 9 II. The Requirements For Payment From The CRA Were Satisfied........cc.cccceviininiencnnens 10 A. Under The Weight Of The Evidence, Ms. Day Met The Specific Criteria Por Payment From: The CR Au cesses assmmossnss sommes 10 1. The Fraud Judgment Against Petitioner Was Based On Licensed Real Estate ACtIVItIES. .....cccuevieriirieirieiiecie niece 12 2. Ms. Day Diligently Pursued Collection Efforts Against PELILIONET. ..niiiiiiieeiiiccectecesceseeeeeeeeceseeeere 14 B. Notice Was Properly Served Under Section 10471. 1. ...ccccoovevveiennennnnne. 14 C. The Payment Amount Is Consistent With The Governing Statutes.......... 15 II. The Service Provisions Of Section 10471.1 Are Consistent With Due Process............... 16 IV. The Commissioner Is Not Prohibited From Granting A CRA Application When An Earlier Application Was Denied Because It Was Incomplete..........ccccceoueeieninnennne 17 V. The Automatic Suspension Of A License Upon Payment From The Recovery Account Does Not Violate Due Process .........cocceuvvieiinieiiininenincciinecieecie nec s 18 LUE ILE IEC [1] ON 19 2 Respondents’ Opposition to First Amended Petition for Writ of Mandate or Other Appropriate Relief (30-2016-00893938-CU-WM-CJC) 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 TABLE OF AUTHORITIES Page CASES Baughman v. Medical Board (LOO) AU Cal AGIA BOB 0.05500 50555555,75.5505570 5508545505555 40.5505, 6550550.505585. 5555 455 AREA SA 5.5.55 17 Buccella v. Mayo 102 Cal. APP.3A 315 oot eee este steer ene sheen 14 Cook v. Bryson (1928) 8 Cal. APD. 445... eee ete eee esate sates ete st eae eben eaene 12 Coshow v. City of Escondido (ZOU) 180 Cl. BE ACh, GR csmnsmssornnssomsmmsossssns. nm sssms im s 5000s samen sss Sus sess wns 19 Dominey v. Department of Personnel Administration (1998) 205 Cal. APP-3A 729... eee teeta tebe steers 10 Evans v. Department of Motor Vehicles (1994) 21 Cal APP.Ath O58 «ooo sa ene eens 17 Hansen v. Board of Registered Nursing (2012) 208 Cal. APP.-Ath 064 .......oeeeieieeee sees seees tte ee ate eeee tebe sree eae 17 Huntington Park Redevelopment Agency v. Duncan (1983) 142 Cal. APP-3A 171i sete sate shee eee steers seen 10 Miller Family Home v. Dept. Social Services CLOT) BT Cal LGA ARR 0.505505 575555,75.050570 5508545505555 40.5505, 6505 0.505585 5558 4555 AR A SEA 5.5.55 17 Rodriguez v. Department of Real Estate (1996) 51 Cal. APP.Ath1289 wooo sree sree 9,10, 18, 19 The Grubb Company v. Department of Real Estate (2011) 194 Cal. APP.Ath 1494 oom eee sees esas seen 18 Vangel v. Vangel CLOSE) 116 a]. ll 715 cmsossonsnesncoesososcsmssssotos tees 0M 5, SA R03 12 STATUTES Bus. & Prof. Code, § T0131 o.oo e eevee sabe ee eaae ee eaae earns 12 Bus. & Prof. Code, § 10133 ooo ieee eects eee eaters eae e sears este earns 12 Bus. & Prof. Code, § 10162 ......c.oiiieieeeee cee eects eters sees eee eaae ee eaae ee eaae senna s 17 Respondents’ Opposition to First Amended Petition for Writ of Mandate or Other Appropriate Relief (30-2016-00893938-CU-WM-CJC) 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 TABLE OF AUTHORITIES (continued) Page Bus. & Prof. Code, § 10177.5 eee eects eee eee e saree sabe eens 18 Bus. & Prof. Code, § 10470 ......cuiiieee cies ete eee eters eee e eres erase a eaae ee erae ens 5,10 Bus. & Prof. Code, § T0471... eee eee eee sees eres aae as 11, 15,16 Bug. & Prof. Code, § ATL] ceases 14, 15, 16, 17 Bus. & Prof. Code, § 10471.5 neces eee eee eee etter erases eer esas ee eabe ee nae es 15 Bus. & Prof. Code, § T0472 .....coomiiiiiiieecierece recesses sete sees 10, 16,17, 18 BUS. KE DEOL TOME, § TOR TH 5 m0 5.0m wm 5500500515055 5550550555050. 550884. 55 FHT 558 15 Bus. & Prof. Code, § 10475... cece eee eee eae eee eeeaae ee eaae ee saae sean s 18 Code Civ. PTOC., § 1085 «ooo eee cette eee cree erases sate eesabe ee sabe ee etae ee esae ee esne ans 10 Code Civ. Proc., § 1094.5 ....oooeeeee eee eee ee sees eee eae eate seers ee eaae eens 9,10 Code Civ. ProcC., § 685.010 ....iiieiieiie eee eee eee eee eee eee erase ee etree eres sates estar ee erae ee eabe ee eane ans 16 Code Civ. Proc., § 685.020 ....cceeeiieiee eee eee eee eee eae e sate eesaae ee saae ee etae ee eaae ee eane ans 16 COIP. Code § 25200 «viet e ee ebeeeeeeeaeteeeerebeeerene 12,13 REGULATIONS Cal. Code Regs, title 10 § 3100 ....cccuieiiiieiieiiieiieeiie eects eerste sbae sabe eneeas 10, 11 Cal. Code Rens, title: 10 § 3 TDD 1c. mms sunesis.mssmsnn sums onus mmm 550050 5055565055555 5550555 55 55555 508555555 11 4 Respondents’ Opposition to Amended Petition for Writ of Mandate or Other Appropriate Relief (30-2016-00893938-CU-WM-CJC) 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Respondents Wayne J. Bell, Real Estate Commissioner for the State of California, and Bureau of Real Estate of the State of California (collectively, “BRE”) submit this Opposition to the Opening Brief in Support of the Petition for Writ of Mandate or Other Appropriate Relief (“Petition”) filed by petitioner Tonya Lynn Demoff (‘“Petitioner” or “Demoft”). INTRODUCTION The Petition seeks to invalidate the BRE’s decision to grant an application for payment to third-party claimant, Kemery Blair-Yeakel also known as Kemery Day (“Claimant” or “Ms. Day”), of a judgment debt for fraud owed by Petitioner to Ms. Day, from the Consumer Recovery Account (“CRA”). The Petition also seeks to “set aside” the automatic suspension of Petitioner’s real estate license that results upon payment from the CRA. The CRA is a fund administered by the BRE pursuant to Business and Professions Code section 10470 ef seq., and is intended to provide limited compensation to those defrauded by a real estate licensee unable to pay the judgment debt. There are specific procedures and criteria for payment. A license that is automatically suspended can be reinstated if the debt is paid back to the fund with interest. Petitioner challenges the BRE’s payment from the CRA on the following grounds. First, Petitioner argues that the criteria for payment were not met because the transactions at issue did not involve licensed real estate activities; Ms. Day did not diligently pursue collection efforts; Ms. Day did not properly serve notice of her CRA Application on Petitioner; and Petitioner did not receive actual notice of the application in violation of her due process rights. As discussed below, the weight of the evidence, however, supports that the criteria for payment were in fact met, including service of notice of the application. Courts have also held that due process does not require actual notice where the method of service is reasonably calculated to provide notice. Second, Petitioner argues that the BRE exceeded its authority in granting the CRA Application when the BRE had denied an application by Ms. Day several years ago. But, Ms. Day’s earlier CRA Application was premature and incomplete, not based on a final judgment. There is no prohibition on a later application upon a final judgment, and it would be illogical to require Ms. Day to pursue a premature and incomplete application and then prohibit her from later applying for payment upon obtaining a big judgment. Respondents’ Opposition to First Amended Petition for Writ of Mandate or Other Appropriate Relief (30-2016-00893938-CU-WM-CJC) 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Finally, Petitioner argues that the BRE’s act of suspending Petitioner’s license required proof of fraud by the “clear and convincing evidence” standard, which is not the same standard for a civil fraud claim which serves as the basis for Ms. Day’s CRA Application. This Petition, however, does not involve a disciplinary proceeding against Petitioner where the Commissioner has the burden to prove fraud to suspend or revoke a license. Rather, the license suspension is automatic — a collateral effect — upon the BRE’s determination that payment from the CRA is warranted and, thus, the standards for disciplinary actions do not govern here. For the reasons stated herein, the BRE requests that the Court deny the Petition. STATEMENT OF FACTS I. THE JUDGMENT AGAINST PETITIONER WAS A FINAL JUDGMENT BASED ON FRAUD RELATING TO REAL ESTATE ACTIVITIES. In March 2008, Ms. Day filed a lawsuit in the Orange County Superior Court entitled, Kemery Day et al. v. Tonja Demoff et al., Case No. 30-2008-00103768, against Petitioner and several of Petitioner’s entities, referred to collectively as the “TDCO.”! (AR, Vol. II 00270- 289.)> The lawsuit alleged several claims, including a cause of action for fraud arising from real estate activities, as discussed below. (/d.) On or about July 15, 2009, the trial court granted a motion to enter default against all defendants after Petitioner and her counsel failed to appear for trial. (AR, Vol. I1 00477; Vol. III 00835.) On September 2, 2009, the trial court entered judgment for Ms. Day in the amount of $1,254,242.7 (the “September 2, 2009 Default Judgment”). (AR, Vol. III 00835.) The trial court later denied motions to set aside the default judgment (AR, Vol. III 00835-7), with the first appeal filed on February 3, 2010. (AR, Vol. III 00835-37.) On or about May 25, 2011, the Court of ! The entities include: (1) TDCO, LLC, a California limited liability company; (2) TDCO Realty, LLC, a Nevada limited liability company; (3) TDCO Realty, Inc., a California corporation; (4) Financial Freedom Seminar Systems, LLC, a California corporation; (5) TDCO, LLC, a Nevada limited liability company; (6) Financial Freedom Seminar Systems, LLC, a Nevada limited liability company; and (7) 04 Ocean LLC, a California limited liability company (collectively, “TDCO”). Tobey Maloney, the lifetime partner of Petitioner, was also named. 2 “AR” refers to the Administrative Record lodged by Petitioner and are cited by reference to the AR, Vol. and applicable page number(s), omitting the prefix “BRE” for the BRE records. 6 Respondents’ Opposition to First Amended Petition for Writ of Mandate or Other Appropriate Relief (30-2016-00893938-CU-WM-CJC) 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Appeal reversed the order denying the motion to vacate the judgment and remanded the case. (AR, Vol. III 00846.) A bench trial was commenced on April 29, 2013. (AR, Vol. III 00970-992.) On May 24, 2013, the trial court issued a minute order in favor of Ms. Day on all causes of action. (AR, Vol. IIT 00965-66.) On July 30, 2013, the trial court issued its Statement of Decision (AR, Vol. III 00970-92), stating, “[a]s an initial matter, the court notes that [Demoff] was not a credible witness at trial for a variety of reasons, and the Court did not believe much of her testimony.” (AR, Vol. 100971.) The court’s factual findings and conclusions of law are summarized below. The TDCO Transactions In March 2006, Ms. Day and Petitioner formed a joint venture agreeing to combine efforts to profit in real estate ventures. (AR, Vol. III 00973.) Petitioner’s “elaborate plan involved Ms. Day and other investors investing money into real estate through TDCO.” (AR, Vol. III 00974.) Petitioner convinced Ms. Day to loan 50,000 to TDCO, which was later characterized as a $1,000 payment for a partnership interest and a $49,000 loan to TDCO. (AR, Vol. II1 00974.) Petitioner later also promised Ms. Day that she would pay Ms. Day 25% commission on the sale or purchase of any property for TDCO. Petitioner represented that she would close dozens of properties. (AR, Vol. III 00975.) In December 2006, Petitioner convinced Ms. Day to loan to TDCO another $200,000, which Petitioner promised to pay back with interest. (/d.) The LHP Transactions Around the same time, Petitioner convinced Ms. Day to invest in three properties referred to as the LHP Properties. (AR, Vol. III 00975; Vol. IV 001548-49.) Petitioner promised to equally contribute to the properties’ mortgage, taxes, and maintenance. (/d.) Ms. Day purchased the LHP Properties with Petitioner acting as a dual real estate agent for the seller and Ms. Day. ({/d.) Undisclosed to Ms. Day, Petitioner had an ownership interest in the properties. (/d.) Petitioner had earlier purchased the notes at a discounted rate, and was later able to pay off the notes with Ms. Day’s purchase of the properties. (Id.) Petitioner eventually ceased contributing to the mortgage and taxes, and Ms. Day lost the LHP Properties through foreclosure. (/d.) 7 Respondents’ Opposition to First Amended Petition for Writ of Mandate or Other Appropriate Relief (30-2016-00893938-CU-WM-CJC) 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 The Clinton Transactions Petitioner also persuaded Day and others to invest in a condominium conversion project in — the Clinton Properties, which she represented to Day and others as a “real estate investment.” (AR, Vol. II1 00977.) Petitioner earned a commission of approximately $2 million for the transaction. (/d.) Petitioner promised Ms. Day that if she purchased four of the condominium units, that Ms. Day would make a substantial profit for owning the units. (/d.) Petitioner misled Ms. Day by misrepresenting the investment value and that Petitioner was also purchasing four units at the same price. As a result, Ms. Day lost the properties in foreclosure. (/d.) As to each of the transactions, the court concluded that Petitioner and TDCO committed fraud on Ms. Day. (AR, Vol. IIT 00985.) Specifically, the Court found that Petitioner made material misrepresentations with the intent to cause Ms. Day to enter into ventures with Petitioner and to loan Petitioner $250,000. (/d.) Not only did Petitioner make misrepresentations regarding the repayment of Ms. Day’s $250,000 loan but also concealed material facts from Ms. Day. (AR, Vol. III 00986.) In addition, Petitioner “persuaded” Ms. Day to purchase the LHP and Clinton properties. (Id.) “[Petitioner] acted as the agent in both transactions and received substantial commissions and misrepresented to Day that she held no interests in the LHP properties,” when she did, in fact, and received undisclosed profits. (/d.) Petitioner further misrepresented that the LHP and Clinton properties “would carry themselves,” meaning that they would build equity without any investment risk, but in reality, Petitioner “knew” that the properties “were ripe for failure.” (Id.) The court further found that Petitioner and the TDCO Companies are the alter egos of one another. (AR, Vol. IIT 00986-87.) As a result of Petitioner’s fraud, the court ruled that Ms. Day was entitled to recover: (1) $250,000 for the loans to Petitioner and TDCO; (2) $64,112 for unpaid commissions on the LHP properties; (3) $113,062 in down payments lost on the LHP properties less money received from partners; (4) $264,231 for lost down payments on the Clinton properties; and (5) $40,000 for unpaid commissions on the Clinton properties. (AR, Vol. IIT 00988.) Petitioner filed an appeal solely seeking reversal of the alter ego liability. On December 10, 2014, the Court of Appeal affirmed the trial Sout judgment. (AR, Vol. IV 1544-54.) Respondents’ Opposition to First Amended Petition for Writ of Mandate or Other Appropriate Relief (30-2016-00893938-CU-WM-CJC) 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 On March 19, 2015, the trial court entered the Fourth Amended Judgment, a final judgment, which awarded to Ms. Day $903,625.28 in damages, in addition to attorneys’ fees and costs, against Petitioner and TDCO jointly and severally. (AR, Vol. 1 00163-68.) PROCEDURAL HISTORY On or about August 25, 2010, Ms. Day submitted her first CRA Application, designated as BRE File Number R-4510 (the “First CRA Application”). (AR, Vol. VI 00088-287.) The First CRA Application was based on the September 2, 2009 Default Judgment (AR, Vol. VI 00089), which, as discussed above, at the time was pending appeal and a bankruptcy proceeding by Petitioner. The application was thus premature and incomplete and denied by the BRE. (AR, Vol. VI 00020; 00047-50.) Five years later, on or about August 4, 2015, after obtaining the Fourth Amended Judgment, Ms. Day submitted a new CRA Application (AR, Vol. I, 00227-Vol. IV 01769), designated as BRE File Number R-5414 (the “Second CRA Application” or “CRA Application”). On August 25, 2016, the BRE granted payment on the CRA Application. (AR, Vol. 100041.) Upon payment, the BRE sent a Notice of Suspension to Petitioner. (AR, Vol. 1 00011; 0021-22.) On December 21, 2016, Petitioner filed this action — a Petition for Writ of Mandate or Other Appropriate Relief under sections 1085 and 1094.5 of the Code of Civil Procedure (“CCP”), which Petitioner amended on or about January 26, 2017. Upon a motion by Petitioner, the Court granted a stay of Petitioner’s license suspension under CCP section 1094.5(g) pending review of the Petition. ARGUMENT I. STANDARD OF REVIEW Petitioner asserts that the Court should apply the independent judgment standard in reviewing the BRE’s decision to grant Ms. Day’s CRA Application and make payment from the CRA. The Court of Appeal in Rodriguez v. Department of Real Estate (“Rodriguez”) (1996) 51 Cal.App.4th 1289, 1300, however, made clear that the suspension of a license upon payment from the CRA is automatic; that the Commissioner has a “duty to suspend” the judgment debtor’s real estate license. “No factual determination nor exercise of discretion occurs” and the “the exercise 9 Respondents’ Opposition to First Amended Petition for Writ of Mandate or Other Appropriate Relief (30-2016-00893938-CU-WM-CJC) 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 of quasi-judicial power are absent from this process.” (I/d.) Thus, the act of suspending the license is “ministerial not quasi-judicial in nature” and judicial review is subject to ordinary mandamus under Code of Civil Procedure (“CCP”) section 1085, not administrative mandamus under CCP section 1094.5. (Id. at 1300 n. 6.) Likewise, as to the Commissioner’s decision to grant the CRA Application, Rodriguez held, “[t]he law sets out specific criteria for payment eligibility, which the judgment creditor must explain in his or her claim for payment. . . . The commissioner exercises no discretion, determining only whether the judgment qualifies for payment under the statute.” (Rodriguez, 51 Cal.App.4th at 1298.) Accordingly, there being no exercise of discretion, the Court’s review is under CCP 1085 and the “arbitrary and capricious” standard of review applies. (Dominey v. Department of Personnel Administration (1998) 205 Cal.App.3d 729, 736.) “It is well-settled in mandamus proceedings (Code Civ. Proc., § 1085) that the party seeking review must make some showing that the body invested with discretion has acted arbitrarily, capriciously, fraudulently, or without due regard for his rights and that the action was prejudicial to him.” (Huntington Park Redevelopment Agency v. Duncan (1983) 142 Cal. App.3d 17, 25 [internal quotations omitted].) Petitioner cannot meet this heavy burden. Petitioner asserts that Section 10472(a) requires the independent judgment standard. However, Section 10472(a) plainly provides that the independent judgment standard applies only when there has been a denial of a CRA application and the “claimant” petitions the court for a reversal of the denial. Here, the Petition to the Court is not by a claimant seeking a reversal of a denial. Rather, the Petition is by the judgment debtor (Demoff) seeking judicial review of the BRE’s payment from the CRA. Nevertheless, even under the independent judgment standard, as discussed below, the weight of the evidence supports the BRE’s payment from the CRA. II. THE REQUIREMENTS FOR PAYMENT FROM THE CRA WERE SATISFIED A. Under The Weight Of The Evidence, Ms. Day Met The Specific Criteria For Payment From The CRA. The application procedures and requirements for payment from the CRA are set forth in Business and Professions Code sections 10470 ef seq. and title 10 of the Code of Regulations 10 Respondents’ Opposition to First Amended Petition for Writ of Mandate or Other Appropriate Relief (30-2016-00893938-CU-WM-CJC) 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 sections 3100 et seq.> The application must be made on a form prescribed by the BRE and be verified by the claimant.* (Bus. & Prof. Code, §10471(c), (e).) There are specific criteria for payment. (Bus. & Prof. Code, §10471, subd. (a)-(f).) For instance, the claimant must have obtained a “final judgment” in a court against defendant (judgment debtor) based upon the defendant’s “fraud, misrepresentation, or deceit, made with intent to defraud or conversion of trust funds, arising directly out of any transaction in which the defendant, while licensed under this part, performed acts for which a real estate license . . . was required . . .” (Bus. & Prof. Code, § 10471, subd. (a).) The claimant must also file the CRA application with the BRE no later than one year after the judgment has become final. The claimant must show that he or she “diligently pursued collection efforts,” but that the judgment remains unpaid. (Bus. & Prof. Code, § 10471, subd. (¢)(7)(E).) The claimant’s application must attach documentary evidence, pleadings, court rulings, and discovery from the underlying litigation. (Bus. & Prof. Code, § 10471, subd. (e); Cal. Code Reg. title 10, § 3102.) In addition, if the judgment debtor holds “an unexpired and unrevoked license” issued by the BRE, the claimant must provide proof that notice of and a copy of application was served on the judgment debtor “at the latest of the business or residence on file with the [BRE] by certified mail. (Bus. & Prof. Code, § 10471.1(b).) The BRE may accept and grant a CRA application based on a “substantially complete.” (Cal. Code Reg, title 10, § 3102.) The judgment debtor may submit a written response to a CRA application. If there is no response, the right to object is waived and BRE need not provide notice to the judgment debtor of any intended or proposed action to be taken by the BRE. (Bus. & Prof. Code, § 10471.1(d), (f).) In this case, Petitioner disputes that the following criteria were met: (1) that the fraud judgment was based on activities that required a real estate license, (2) that Ms. Day diligently pursued collection efforts against Petitioner, and (3) that the notice of the CRA Application was properly served on Petitioner. Each of these arguments will be discussed below. 3 As used herein, “Section” refers to sections of the Business and Professions Code. “Regulation” refers to sections in title 10 of the Code of Regulations. 4 The form is available at: http://www.bre,ca.gov/files/pdf/forms/re807a.pdf. Respondents’ Opposition to First Amended Petition for Writ of Mandate or Other Appropriate Relief (30-2016-00893938-CU-WM-CJC) 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 1. The Fraud Judgment Against Petitioner Was Based On Licensed Real Estate Activities. Petitioner argues that the fraud judgment against her “is based in part on activities that do not require a real estate license and where Petitioner was acting as principal.” Section 10131 defines a real estate broker as a “person who, for a compensation or in expectation of a compensation, regardless of the form or time of payment, does or negotiates to do one or more of the following acts for another or others:” Sells or offers to sell, buys or offers to buy, solicits prospective sellers or purchasers of, solicits or obtains listings of, or negotiates the purchase, sale or exchange or real property or a business opportunity. Solicits borrowers or lenders for or negotiates loans or collects payments or performs services for borrowers or lenders or note owners in connection with loans secured directly or collaterally by liens on real property or on a business opportunity. (Bus. & Prof. Code, § 10131, subds. (a), (d).) Section 10133(a) further provides: The acts described in Section 10131 are not acts for which a real estate license is required if performed by: (1) A regular officer of a corporation or a general partner of a partnership with respect to real property owned or leased by the corporation or partnership, respectively, or in connection with the proposed purchase or leasing of real property by the corporation or partnership, respectively, if the acts are not performed by the officer or partner in expectation of special compensation.’ (Bus. & Prof. Code, § 10133, subd. (a) [emphasis added].) In addition, under Section 10131.3, “[a] real estate broker . . . is also a person who, for another or others, for compensation or in expectation of compensation, issues or sells, solicits prospective sellers or purchasers of, solicits or obtains listings of, or negotiates the purchase, sale, or exchange of securities as specified in Section 25206 of the Corporations Code.” Section 25206 of the Corporations Code provides that a licensed real estate broker is exempted from the requirement of a broker-dealer certificate when engaged in “transactions in any interest in any general or limited partnership, joint venture” formed for the purpose investment or “gain from an interest in real property, including but not limited to, a sale, > “Special compensation” is money received that is above and beyond the regular profit or risk sharing of the partner. (See Cook v. Bryson (1928) 89 Cal.App. 445, 447; Vangel v. Vangel (1953) 116 Cal.App.2d 615, 631.) 12 Respondents’ Opposition to First Amended Petition for Writ of Mandate or Other Appropriate Relief (30-2016-00893938-CU-WM-CJC) 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 exchange, trade or development.” (Corp. Code, § 25206.) Here, as the trial court found and the evidence shows, Petitioner committed fraud in connection with the TDCO, LHP and Clinton transactions, which involved real estate activities for which a license was required. As the trial court found, Petitioner represented and promoted herself as a “real estate and investment guru.” (AR, Vol. IIT 00973.) A joint venture was eventually formed “whereby the parties agreed to combine efforts and resources to make a profit in a variety of real estate ventures.” (AR Vol. III, 00973.) An “Agreement of Understanding” executed by the members of TDCO, including Ms. Day and Petitioner, expressly represented that “Tonja Demoff is a Real Estate Agent in the state of California and will be performing real estate related duties for the following people. . ..” The “following people” included Ms. Day and other members of TDCO. (AR, Vol. III 00866-77.) Further, under an “Agent Commission Agreement,” Petitioner, as the Company’s agent, was to receive 60% net commission for her agent services, while TDCO received 40%. (AR, Vol. III 00974; 00862.) Thus, not only was it expressed that Petitioner would engage in licensed real estate activities on behalf of Ms. Day and others, but that Petitioner would receive special compensation for her services. Moreover, Petitioner’s solicitation of the $250,000 loan from Ms. Day for TDCO’s operations in exchange for a 15% membership interest in TDCO constitutes the solicitation and sale of a security interest (AR, Vol. III 00870), which consists of licensed real estate activities under Sections 10131.3 and Corporations Code section 25206. With respect to the LHP transactions, Petitioner acted as a real estate agent between the seller of LHP properties and the buyers (Ms. Day and others). Petitioner solicited Ms. Day and others to purchase the properties, facilitated the transaction and earned a commission. (AR, Vol. IIT 00975-78.) As to the Clinton transactions, Petitioner located the condominiums and represented to the TDCO members that it was a good investment, and then Petitioner negotiated the price for the purchase of the units. (/d.) Accordingly, the BRE’s determination that the activities underlying the fraud judgment against Petitioner involved licensed activities is supported by the weight of the evidence. Moreover, Petitioner argues that Ms. Day is not Fntiflod to recovery because she was also a real Respondents’ Opposition to First Amended Petition for Writ of Mandate or Other Appropriate Relief (30-2016-00893938-CU-WM-CJC) 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 estate licensee. But, as discussed above, the evidence shows that Ms. Day was defrauded in her capacity as a principal in TDCO and client of Petitioner, who acted as her real estate agent. Ms. Day therefore is an “aggrieved person” entitled to recovery under the CRA. See Buccella v. Mayo, 102 Cal. App.3d 315, 327 [concluding that a “defrauded licensee who was acting as a principal in the transaction and whose conduct did not require a real estate license is not precluded from recovery against the [CRA] by virtue of the fact that he or she is a licensee”].) 2. Ms. Day Diligently Pursued Collection Efforts Against Petitioner. The evidence in the record includes a sworn statement by Ms. Day identifying her diligent collection efforts. These efforts included Ms. Day’s attempt to serve notice of and take the debtor examination of Petitioner, but Petitioner evaded service. (AR, Vol. 100246-47.) Ms. Day also took third party debtor examinations of Susan Cavanaugh and Susan Novak, individuals who previously worked with Petitioner, in an effort to locate Petitioner and any collectable joint assets. (1d.) Ms. Day further recorded an Abstract of Judgment with the Fresno County Recorder, and Ms. Day obtained writs of execution in several counties. (/d.) Petitioner claims that Ms. Day “lied” in representing that she had diligently pursued collection efforts because there was an attempt by Petitioner to “settle the civil matter.” However, under the CRA statutes, Ms. Day is not required to accept a “settlement” for less than the judgment amount and forego her right to collect the total judgment. Nor would it be sensible for, or fair to require, Ms. Day to accept another “promise” by Petitioner to pay a debt, when, as the trial court found, Petitioner had repeatedly made misrepresentations to Ms. Day. Thus, the weight of the evidence supports that Ms. Day diligently pursued collection efforts. B. Notice Was Properly Served Under Section 10471.1. Petitioner argues that the CRA application should have been denied because notice of the CRA application to her was not in compliance with Section 10471.1. Section 10471.1 provides: (b) If the judgment debtor holds an unexpired and unrevoked license issued by the bureau, service of the notice and a copy application may be made by certified mail addressed to the judgment debtor at the latest of the business or residence on file with the bureau. . . . (c) If the application is served upon the judgment debtor by certified mail, service is complete five days after mailing if the place of address is within the State . . . 14 Respondents’ Opposition to First Amended Petition for Writ of Mandate or Other Appropriate Relief (30-2016-00893938-CU-WM-CJC) 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 (Bus. & Prof. Code, § 10471, subds. (b)-(c).) Here, there is no dispute that Petitioner (the judgment debtor) held an unexpired and unrevoked license issued by the BRE at the time of Ms. Day CRA Application or that Petitioner’s latest business address on file with the BRE was 6621 E. Pacific Coast Highway #140, Long Beach, CA 90803. (See AR, Vol. VII A001-02.%) The weight of evidence shows that, in compliance with the statute, Ms. Day sent by certified mail a notice and copy of her CRA Application to Petitioner at her last address on file, 6621 E. Pacific Coast Highway #140, Long Beach, CA 90803. Although the proof of service contains a typographical error, not including the directional notation of “E” Pacific Coast Highway (AR, Vol. I 00154), the mailing label clearly had the address: 6621 E. Pacific Coast Highway #140, Long Beach, CA 90803. (AR, Vol. 1 00157.) And the mailing label shows that the CRA Application was sent by certified mail to that address. (/d.) In addition, the USPS tracking record shows that delivery was attempted twice and that notice for Petitioner to pick up the mail were left. (AR, Vol. 100158.) Petitioner asserts that she never received the CRA application and that therefore service of the notice was invalid. However, actual receipt is not required. Under Section 10471.1(c), service of the notice and application is deemed “complete five days after mailing if the place of address is within the State of California.” Moreover, as discussed below, courts have long held that where a statute permits service of notice by certified mail, such as Section 10471.1, actual notice or actual receipt of the service package is not required. (See Section IIL, supra.) C. The Payment Amount Is Consistent With The Governing Statutes. The maximum payment from the CRA is $50,000 per transaction and $250,000 per licensee, and limited to amounts unpaid on the judgment that represents actual and direct loss. (Bus. & Prof. Code, §§ 10474, subd. (c); 10471, subd. (a).) The BRE’s payment of $242,929.52 to Ms. Day is in compliance with the statutes. The payment can be calculated as follows: ’ ® The BRE stipulated to allow Petitioner to augment the record with her evidence in Vol. VII of the AR, which does not support invalidating the BRE’s decision to grant payment. 7” The Notice of Decision to Petitioner need not provide details on the calculation. (Bus. & Prof. Code, § 10471.5, subd. (¢).) 15 Respondents’ Opposition to First Amended Petition for Writ of Mandate or Other Appropriate Relief (30-2016-00893938-CU-WM-CJC) 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 For the TDCO Transactions: Transaction No. 1: $50,000 (Initial capital contribution/loan) (AR, Vol. III 00868; Vol. IV 01704-09); PLUS $7,205.48 (10% post judgment interest)®; LESS $34,224.62 (Offset) = $22,980.86 (Total Loss with Offset). Maximum Payment from CRA: $22,980.86 Transaction No. 2: $200,000 (Loan) (AR, Vol. III 00873, 00906; Vol. IV 01704-09); PLUS $28,821.92 (10% post judgment interest); LESS $34,224.62 (Offset) = $194,597.30 (Total Loss with Offset). Maximum Payment from CRA: $50,000 For the LHP Properties Transactions: Transaction No. 1: $113,062 (down payment) (AR, Vol. IV 01704-09; Vol. III 00976-77); PLUS $16,293.32 (10% post judgment interest); LESS $34,224.62 (Offset) = $95,130.70 (Total Loss with Offset). Maximum Payment from CRA: $50,000 For the Clinton Properties Transactions: Transaction No. 1 (Unit #101): $57,418.58 (closing costs) (AR, Vol. 100179; Vol. IV 01704-09); PLUS $8,274.57 (10% post judgment interest); LESS $34,224.62 (Offset) = $31,468.53 (Total Loss with Offset). Maximum Payment from CRA: $31,468.53 Transaction No. 2 (Unit #106): $57,418.52 (closing costs) (/d.); PLUS $8,274.57 (10% post judgment interest); LESS $34,224.62 (Offset) = $31,468.53 (Total Loss with Offset). Maximum Payment from CRA: $31,468.53 Transaction No. 3 (Unit #107): $57,097.94 (closing costs) (/d.); PLUS $8,228.36 (10% post judgment interest); LESS $34,224.62 (Offset) = $31,101.68 (Total with Offest). Maximum Payment from CRA: $31,101.68 Transaction No. 4 (Unit #108): $52,560.18 (closing cost) (/d.); PLUS $7,574.43 (10% post judgment interest); LESS $34,224.62 (Offset) = $25,909.99 (Total Loss with Offset). Maximum Payment from CRA: $25,909.99 Accordingly, consistent with the limits of Sections 10471 and 10474, the BRE paid to Ms. Day $242,929.52 from the CRA for the seven transactions at issue. III. THE SERVICE PROVISIONS OF SECTION 10471.1 ARE CONSISTENT WITH DUE PROCESS Petitioner argues that Section 10471.1(b), which permits service of notice of the CRA application by certified mail, denies due process. Petitioner further argues that “[t]he point of the regulatory scheme is to provide actual notice . . .” and that despite the plain language of Section 10471.1, the BRE should require mailing via U.S. Mail or certified mail with proof of receipt. 8 Post judgment interest is awarded and calculated from March 19, 2015 (date of Fourth Amended Judgment) to August 26, 2016. (Code Civ. Proc., §§ 685.010, 685.020.) ? The offset is calculated as follows: $230,000 settlement from a third party (REMAX) plus $9,572.34 from a writ of attachment and then divided by seven transactions for an offset of $34,224.62 per transaction. (See AR Vol. I 00165.) Respondents’ Opposition to First Amended Petition for Writ of Mandate or Other Appropriate Relief (30-2016-00893938-CU-WM-CJC) 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 The law is clear, however, that while due process generally requires notice and an opportunity to be heard, “to satisfy the demands of due process, actual notice is not required . . .” (Hansen v. Board of Registered Nursing (2012) 208 Cal. App.4th 664, 673-74.) Rather, “it is sufficient that notice be given by means ‘reasonably calculated to reach’ the person to be notified.” (Id.) In cases involving license revocations, courts have repeatedly held that where a licensee is required to keep the agency informed of the licensee’s current address, the method of service of notice by registered or certified mail is “reasonably calculated to give the licensee notice” and therefore satisfies due process even if there is no actual notice. (See Hansen, 208 Cal. App.4th at 674 [actual notice of an accusation resulting in a license revocation is not required where statute only required service of notice by certified mail]; Baughman v. Medical Board (1995) 40 Cal.App.4th 398, 402 [revocation of license proper where notice was served by certified mail to the mailing address in the agency’s records, but the envelope was returned unclaimed]; Evans v. Department of Motor Vehicles (1994) 21 Cal. App.4th 958, 967 [“due process of law does not require actual notice, but only a method reasonably certain to accomplish that end”); Miller Family Home v. Dept. Social Services (1997) 57 Cal.App.4th 488, 492 [same].) Accordingly, here, due process does not require actual notice of the CRA Application. Like in the cases above, Section 10162 requires that every real estate licensee provide to the Commissioner a “current office or mailing address” and to update the Commissioner of changes by no later than 30 days. (Bus. & Prof. Code, § 10162, subds. (c)(1), (2).) Thus, the service provisions of Section 10471.1 permitting certified mail do not violate due process, and there is no basis for requiring the BRE to impose a different method of service. IV. THE COMMISSIONER IS NOT PROHIBITED FROM GRANTING A CRA APPLICATION WHEN AN EARLIER APPLICATION WAS DENIED BECAUSE IT WAS INCOMPLETE Petitioner argues Ms. Day was required to file a court action within 6 months after the BRE denied her First CRA Application under Section 10472, and that the BRE had no ability to grant payment on the Second CRA Application. As discussed above, the First CRA Application was premature and incomplete — based on the September 9, 2009 Default Judgment that was not a final judgment. There is nothing in Section 10472 that prevents Ms. Day from filing a new CRA 17 Respondents’ Opposition to First Amended Petition for Writ of Mandate or Other Appropriate Relief (30-2016-00893938-CU-WM-CJC) 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 application after obtaining a final judgment, or that prohibits the BRE from granting such an application. Section 10472 merely allows a claimant who has been denied payment to seek review by the Court and for payment from the CRA on “the grounds set forth in the application to the commissioner.” Section 10472 clearly contemplates review of the merits of a complete (or substantially complete) application. Not allowing Ms. Day to submit a completed application upon a final judgment, is illogical and could not have been the intent of Section 10472. V. THE AUTOMATIC SUSPENSION OF A LICENSE UPON PAYMENT FROM THE RECOVERY ACCOUNT DOES NOT VIOLATE DUE PROCESS Petitioner argues that the payment from the CRA and the suspension of Petitioner’s license is a disciplinary action which requires proof of fraudulent misconduct based on the “clear and convincing evidence” standard, not the “preponderance of the evidence” standard for a civil fraud claim. The Grubb Company v. Department of Real Estate (“Grubb Company”) (2011) 194 Cal.App.4th 1494, 1503 is inapposite. At issue was Section 10177.5 which permits the Commissioner to initiate formal disciplinary proceedings based upon a civil judgment of fraud against a licensee, and then to suspend or revoke a license upon completion of a hearing. The court found that the Commissioner could not rely on collateral estoppel based on the civil fraud judgment such that the Commissioner would not need to meet his burden to prove fraud by clear and convincing evidence to discipline a licensee in a disciplinary proceeding. Here, at issue was not a license revocation or disciplinary proceeding. Nor was the resulting suspension of Petitioner’s license an adjudicative or discretionary act by the BRE. Rather, all the BRE did was determine whether the criteria for payment from the CRA were satisfied. (See Rodriguez, 51 Cal. App.4th at 1298-1300.'%) The license suspension was automatic upon payment, and the license can be reinstated by repayment to the BRE. (Bus. & Prof. Code, § 10475.) As Rodriguez held, even with the automatic license suspension, procedural 10 The court noted the differences between the two sections stating, “[t]he statutory scheme for determining a claim for payment from the recovery account does not contemplate a formal hearing at which oral evidence may be presented or witnesses may be called” as opposed to Section 10177.5 which “permit[s] [the] commissioner to suspend or revoke a real estate license for fraud, misrepresentation or deceit, but only after hearing.” (Rodriguez, 51 Cal. App.4th at 1294.) 18 Respondents’ Opposition to First Amended Petition for Writ of Mandate or Other Appropriate Relief (30-2016-00893938-CU-WM-CJC) 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 due process does not require that the judgment debtor have a full evidentiary hearing. (/d.) Imposing additional requirements for payment from the CRA would be inconsistent with its goals. As held in Rodriguez, “[t]o require further procedures that would limit judgment creditors’ ability to recover funds from the [CRA] thus would run counter to the intent of the Legislature that such opportunities be enhanced.” (Rodriguez, 51 Cal.App.4th at 1299.) “The [CRA] provides minimum and limited compensation to those who have suffered economic losses at the hands of a licensed real estate broker who has no assets from which a valid judgment may be satisfied. The statutory scheme is to be construed liberally to promote its purpose and protect judgment creditors.” (Id. [internal citations and quotations omitted].)!! CONCLUSION For the foregoing reasons, the Petition should be denied, the temporary stay of the automatic suspension of Petitioner’s license should be lifted, and the suspension reinstated and remain in place until Petitioner repays the debt pursuant to the provisions of the CRA statutes. Dated: October 13, 2017 Respectfully Submitted, XAVIER BECERRA Attorney General of California STEPHEN LEW Supervising Deputy Attorney General Jw roney—— VAN-DZUNG V. NGUYEN Deputy Attorney General Attorneys for Respondents Wayne J. Bell, Real Estate Commissioner of the State of California, and Bureau of Real Estate of the State of California LA2017603177 I Further, substantive due process protects against arbitrary action, requiring that legislation not be unreasonable, arbitrary or capricious, but have a real and substantial relation to the object sought to be attained. (Coshow v. City of Escondido (2005) 132 Cal. App.4th 687, 711.) Here, the CRA statutes have a rational basis to the object sought to be attained, namely the goal to compensate those who have been defrauded by a real estate licensee who is unable to pay its debt and to hold the licensee accountable for repayment to the CRA fund. 19 Respondents’ Opposition to First Amended Petition for Writ of Mandate or Other Appropriate Relief (30-2016-00893938-CU-WM-CJC) DECLARATION OF SERVICE BY E-MAIL and U.S. Mail Case Name: Tonja Lynn Demoff v. Bell, et al. Superior Court of California, County of Orange Case No.: 30-2016-00893938-CU-WM-CJC 1 declare: I am employed in the Office of the Attorney General, which is the office of a member of the California State Bar, at which member's direction this service is made. Iam 18 years of age or older and not a party to this matter. I am familiar with the business practice at the Office of the Attorney General for collection and processing of correspondence for mailing with the United States Postal Service. In accordance with that practice, correspondence placed in the internal mail collection system at the Office of the Attorney General is deposited with the United States Postal Service with postage thereon fully prepaid that same day in the ordinary course of business. On October 13, 2017, I served the attached RESPONDENTS’ OPPOSITION TO FIRST AMENDED PETITION FOR WRIT OF MANDATE OR OTHER APPROPRIATE RELIEF FILED BY PETITIONER TONYA LYNN DEMOFF by transmitting a true copy via electronic mail. In addition, I placed a true copy thereof enclosed in a sealed envelope, in the internal mail system of the Office of the Attorney General, addressed as follows: Frank M. Buda Attorney at Law Law Offices of Frank M. Buda 21243 Ventura Blvd., #102 Woodland Hills, CA 91364 Attorneys for Petitioner E-mail Address: dreguy@aol.com I declare under penalty of perjury under the laws of the State of California the foregoing is true and correct and that this declaration was executed on October 13, 2017, at Los Angeles, California. Norma L. Herrera-Gilbody Nb & sera Declarant Signature ¥ LA2017603177/52663648.docx DECLARATION OF SERVICE BY OVERNIGHT COURIER Case Name: Tonja Lynn Demoff v. Bell, et al. Superior Court of California, County of Orange Case No.: 30-2016-00893938-CU-WM-CJC 1 declare: I am employed in the Office of the Attorney General, which is the office of a member of the California State Bar, at which member’s direction this service is made. [ am 18 years of age or older and not a party to this matter; my business address is: 300 South Spring Street, Suite 1702, Los Angeles, CA 90013. On October 13, 2017, I served the attached RESPONDENTS’ OPPOSITION TO FIRST AMENDED PETITION FOR WRIT OF MANDATE OR OTHER APPROPRIATE RELIEF FILED BY PETITIONER TONYA LYNN DEMOFF by placing a true copy thereof enclosed in a sealed envelope with the FedEx, addressed as follows: Kemery Blair-Yeakel Kemery Blair-Yeakel, AKA Kemery Day 364 Calle Marseille 6475 E. Pacific Coast Highway, Suite 391 Long Beach, CA 90814 Long Beach, CA 90803 Real Party in Interest Real Party in Interest Tracking No.: 8112-8247-5048 Tracking No.: 8§112-8247-5059 I declare under penalty of perjury under the laws of the State of California the foregoing is true and correct and that this declaration was executed on October 13, 2017, at Los Angeles, California. Norma L. Herrera-Gilbody yp. -— v4 serial Declarant Signature F LA2017603177 52663650.docx52663650.DOCX