10470-10481
BUSINESS AND PROFESSIONS CODE
SECTION 10470-10481
10470. If, on June 30 of any year, the balance remaining in the
Recovery Account in the Real Estate Fund is less than two hundred
thousand dollars ($200,000), every licensed broker, when obtaining or
renewing any broker license within four years thereafter, shall pay,
in addition to the license fee, a fee of seven dollars ($7), and
every licensed salesperson, when obtaining or renewing such license
within four years thereafter, shall pay, in addition to the license
fee, a fee of four dollars ($4). The fees from both broker and
salesperson licensees shall be paid into the State Treasury and
credited to the Recovery Account.
10470.1. (a) In addition to the amount paid into the Recovery
Account as set forth in Section 10450.6, the Real Estate Commissioner
may authorize the transfer from the Real Estate Fund to the Recovery
Account of any amounts as are deemed necessary.
(b) If the balance remaining in the Recovery Account contains more
than four hundred thousand dollars ($400,000), the commissioner may
authorize the transfer of all or part of the surplus amount into the
Real Estate Fund.
(c) The commissioner may authorize the return to the Recovery
Account of all or any amount previously transferred to the Real
Estate Fund under this section.
10471. (a) When an aggrieved person obtains (1) a final judgment in
a court of competent jurisdiction, including, but not limited to, a
criminal restitution order issued pursuant to subdivision (f) of
Section 1202.4 of the Penal Code or Section 3663 of Title 18 of the
United States Code, or (2) an arbitration award that includes
findings of fact and conclusions of law rendered in accordance with
the rules established by the American Arbitration Association or
another recognized arbitration body, and in accordance with Sections
1281 to 1294.2, inclusive, of the Code of Civil Procedure where
applicable, and where the arbitration award has been confirmed and
reduced to judgment pursuant to Section 1287.4 of the Code of Civil
Procedure, against a defendant 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, the aggrieved person
may, upon the judgment becoming final, file an application with the
Department of Real Estate for payment from the Recovery Account,
within the limitations specified in Section 10474, of the amount
unpaid on the judgment that represents an actual and direct loss to
the claimant in the transaction. As used in this chapter, "court of
competent jurisdiction" includes the federal courts, but does not
include the courts of another state.
(b) The application shall be delivered in person or by certified
mail to an office of the department not later than one year after the
judgment has become final.
(c) The application shall be made on a form prescribed by the
department, verified by the claimant, and shall include the
following:
(1) The name and address of the claimant.
(2) If the claimant is represented by an attorney, the name,
business address, and telephone number of the attorney.
(3) The identification of the judgment, the amount of the claim
and an explanation of its computation.
(4) A detailed narrative statement of the facts in explanation of
the allegations of the complaint upon which the underlying judgment
is based.
(5) (A) Except as provided in subparagraph (B), a statement by the
claimant, signed under penalty of perjury, that the complaint upon
which the underlying judgment is based was prosecuted conscientiously
and in good faith. As used in this section, "conscientiously and in
good faith" means that no party potentially liable to the claimant in
the underlying transaction was intentionally and without good cause
omitted from the complaint, that no party named in the complaint who
otherwise reasonably appeared capable of responding in damages was
dismissed from the complaint intentionally and without good cause,
and that the claimant employed no other procedural means contrary to
the diligent prosecution of the complaint in order to seek to qualify
for the Recovery Account.
(B) For the purpose of an application based on a criminal
restitution order, all of the following statements by the claimant:
(i) The claimant has not intentionally and without good cause
failed to pursue any person potentially liable to the claimant in the
underlying transaction other than a defendant who is the subject of
a criminal restitution order.
(ii) The claimant has not intentionally and without good cause
failed to pursue in a civil action for damages all persons
potentially liable to the claimant in the underlying transaction who
otherwise reasonably appeared capable of responding in damages other
than a defendant who is the subject of a criminal restitution order.
(iii) The claimant employed no other procedural means contrary to
the diligent prosecution of the complaint in order to seek to qualify
for the Recovery Account.
(6) The name and address of the judgment debtor or, if not known,
the names and addresses of persons who may know the judgment debtor's
present whereabouts.
(7) The following representations and information from the
claimant:
(A) That he or she is not a spouse of the judgment debtor nor a
personal representative of the spouse.
(B) That he or she has complied with all of the requirements of
this chapter.
(C) That the judgment underlying the claim meets the requirements
of subdivision (a).
(D) A description of searches and inquiries conducted by or on
behalf of the claimant with respect to the judgment debtor's assets
liable to be sold or applied to satisfaction of the judgment, an
itemized valuation of the assets discovered, and the results of
actions by the claimant to have the assets applied to satisfaction of
the judgment.
(E) That he or she has diligently pursued collection efforts
against all judgment debtors and all other persons liable to the
claimant in the transaction that is the basis for the underlying
judgment.
(F) That the underlying judgment and debt have not been discharged
in bankruptcy, or, in the case of a bankruptcy proceeding that is
open at or after the time of the filing of the application, that the
judgment and debt have been declared to be nondischargeable.
(G) That the application was mailed or delivered to the department
no later than one year after the underlying judgment became final.
(d) If the claimant is basing his or her application upon a
judgment against a salesperson, and the claimant has not obtained a
judgment against that salesperson's employing broker, if any, or has
not diligently pursued the assets of that broker, the application
shall be denied for failure to diligently pursue the assets of all
other persons liable to the claimant in the transaction unless the
claimant can demonstrate, by clear and convincing evidence, either
that the salesperson was not employed by a broker at the time of the
transaction, or that the salesperson's employing broker would not
have been liable to the claimant because the salesperson was acting
outside the scope of his or her employment by the broker in the
transaction.
(e) The application form shall include detailed instructions with
respect to documentary evidence, pleadings, court rulings, the
products of discovery in the underlying litigation, and a notice to
the applicant of his or her obligation to protect the underlying
judgment from discharge in bankruptcy, to be appended to the
application.
(f) An application for payment from the Recovery Account that is
based on a criminal restitution order shall comply with all of the
requirements of this chapter. For the purpose of an application based
on a criminal restitution order, the following terms have the
following meanings:
(1) "Judgment" means the criminal restitution order.
(2) "Complaint" means the facts of the underlying transaction upon
which the criminal restitution order is based.
(3) "Judgment debtor" means any defendant who is the subject of
the criminal restitution order.
The amendments to this section made at the July 1997-98 Regular
Session shall become operative July 1, 2000.
10471.1. (a) The claimant shall serve a copy of the notice
prescribed in subdivision (e) together with a copy of the application
upon the judgment debtor by personal service, by certified mail, or
by publication, as set forth in subdivision (b).
(b) If the judgment debtor holds an unexpired and unrevoked
license issued by the department, service of the notice and a copy of
the application may be made by certified mail addressed to the
judgment debtor at the latest business or residence address on file
with the department. If the judgment debtor does not hold an
unexpired and unrevoked license issued by the department and personal
service cannot be effected through the exercise of reasonable
diligence, the claimant shall serve the judgment debtor by one
publication of the notice in each of two successive weeks in a
newspaper of general circulation published in the county in which the
judgment debtor was last known to reside.
(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 of California, 10 days after
mailing if the place of address is outside the State of California
but within the United States, and 20 days after mailing if the place
of address is outside the United States. Personal service is complete
on the date of service. Service by publication is complete upon
completion of the second week of publication.
(d) If a judgment debtor wishes to contest payment of an
application by the commissioner, he or she shall mail or deliver a
written response to the application addressed to the department at
its headquarters office within 30 days after service of the notice
and application, and shall mail or deliver a copy of the response to
the claimant. If a judgment debtor fails to mail or deliver a timely
response, he or she shall have waived his or her right to present
objections to payment.
(e) The notice served upon the judgment debtor shall include the
following statement:
"NOTICE: Based upon a judgment entered against
you in favor of ____________________________,
(name of claimant)
application for payment from the the Recovery
Account of the Real Estate Fund is being made
to the Department of Real Estate.
"If payment is made from the Recovery Account,
all licenses and license rights that you have
under the Real Estate Law will be automatically
suspended on the date of payment and cannot be
reinstated until the Recovery Account has been
reimbursed for the amount paid plus interest at
the prevailing rate.
"If you wish to contest payment by the Real
Estate Commissioner, you must file a written
response to the application addressed to the
Department of Real Estate at ___________ within
30 days after mailing, delivery, or publication
of this notice and mail or deliver a copy of
that response to the claimant. If you fail to
do so, you will have waived your right to
present your objections to payment."
(f) If a judgment debtor fails to mail or deliver a written
response to the application with the department within 30 days after
personal service, mailing, or final publication of the notice, the
judgment debtor shall not thereafter be entitled to notice of any
action taken or proposed to be taken by the commissioner with respect
to the application.
10471.2. (a) If the commissioner determines that the application as
submitted by the claimant fails to comply substantially with the
requirements of Section 10471 or with the requirements of a
regulation adopted by the commissioner under authority of Section
10080, the commissioner shall, within 15 days after receipt of the
application, mail an itemized list of deficiencies to the claimant.
(b) The time within which the commissioner is required to act
under Section 10471.3 shall be measured from the date of receipt by
the department of an application that is substantially complete. In
the event of an irreconcilable dispute between the claimant and the
commissioner on the question of whether the application is
substantially complete, the claimant may immediately file the claim
with the court pursuant to Section 10472.
10471.3. (a) The commissioner shall render a final written decision
on the application within 90 days after a completed application has
been received unless the claimant agrees in writing to extend the
time within which the commissioner may render a decision. If the
commissioner fails to render a written decision in response to the
claim within 90 days after its receipt or within the extended period
agreed to by the claimant, the claim shall be deemed to have been
denied by the commissioner on the final day for rendering the
decision.
(b) The commissioner may deny or grant the application or may
enter into a compromise with the claimant to pay less in settlement
than the full amount of the claim. If the claimant refuses to accept
a settlement of the claim offered by the commissioner, the written
decision of the commissioner shall be to deny the claim or it shall
be deemed denied if a written decision is not rendered within the
time specified in subdivision (a). Evidence of settlement offers and
discussions between the commissioner and the claimant shall not be
competent evidence in judicial proceedings undertaken by the claimant
pursuant to Section 10472.
10471.4. In its consideration and investigation of an application,
the department shall have recourse to all appropriate means of
investigation and discovery available to it under Article 2
(commencing with Section 11180) of Chapter 2 of Part 1 of Division 3
of Title 2 of the Government Code.
10471.5. (a) The commissioner shall give notice of a decision
rendered with respect to the application to the claimant and to a
judgment debtor who has filed a timely response to the application in
accordance with Section 10471.1.
(b) If the application is denied, the notice to the claimant and
judgment debtor shall include the following:
"Claimant's application has been denied. If the claimant wishes to
pursue the application in court, the claimant must file the
application as follows in a superior court of this state not later
than six months after receipt of this notice, pursuant to Section
10472 of the Business and Professions Code. If the underlying
judgment is a California state court judgment, the application shall
be filed in the court in which the underlying judgment was entered.
If the underlying judgment is a federal court judgment, the
application shall be filed in the superior court of any county within
California that would have been a proper venue if the underlying
lawsuit had been filed in a California state court, or in the
Superior Court of the County of Sacramento."
(c) If the decision of the commissioner is to make a payment to
the claimant out of the Recovery Account, the following notice shall
be given to the judgment debtor along with a copy of the decision of
the commissioner:
"The decision of the Real Estate Commissioner on the application
of ____ is to pay $____ from the Recovery Account. A copy of that
decision is enclosed.
"Pursuant to Section 10475 of the Business and Professions Code,
all of your licenses and license rights under the Real Estate Law
will be suspended effective on the date of the payment, and you will
not be eligible for reinstatement of any license issued under
authority of the Real Estate Law until you have reimbursed the
Recovery Account for this payment plus interest at the prevailing
legal rate."
"If you desire a judicial review of the suspension of your
licenses and license rights, you may petition the superior court for
a writ of mandamus. If the underlying judgment is a California state
court judgment, the petition shall be filed in the court in which the
judgment was entered. If the underlying judgment is a federal court
judgment, the petition shall be filed in the superior court of any
county within California that would have been a proper venue if the
underlying lawsuit had been filed in a California state court, or in
the Superior Court of the County of Sacramento. To be timely, the
petition must be filed with the court within 30 days of receipt of
this notice."
10471.6. If, at any time prior to the rendering of a decision on an
application, the commissioner makes a preliminary determination that
the aggregate valid applications of all aggrieved persons against
that licensee are likely to exceed the limits of liability in Section
10474, the commissioner shall, in lieu of further administrative
proceedings, initiate a proration proceeding pursuant to Section
10474.5 in a superior court of any county in this state that would be
a proper court for the filing of a denied application or writ of
mandamus pursuant to Section 10471.5.
10472. (a) A claimant against whom the commissioner has rendered a
decision denying an application pursuant to Section 10471 may, within
six months after the mailing of the notice of the denial, file a
verified application in superior court for an Order Directing Payment
Out of the Recovery Account based upon the grounds set forth in the
application to the commissioner. If the underlying judgment is a
California state court judgment, the application shall be filed in
the court in which the underlying judgment was entered. If the
underlying judgment is a federal court judgment, the application
shall be filed in the superior court of any county within California
that would have been a proper venue if the underlying lawsuit had
been filed in a California state court, or in the Superior Court of
the County of Sacramento.
(b) A copy of the verified application shall be served upon the
commissioner and upon the judgment debtor. A certificate or affidavit
of service shall be filed by the claimant with the court. Service on
the commissioner may be made by certified mail addressed to the
headquarters office of the department. Service upon a judgment debtor
may be made in accordance with Section 10471.1. The notice served
upon the judgment debtor shall read as follows:
"NOTICE: An application has been filed with the court for a
payment from the Recovery Account that was previously denied by the
Real Estate Commissioner.
"If the Department of Real Estate makes a payment from the
Recovery Account pursuant to court order, all of your licenses and
license rights under the Real Estate Law will be automatically
suspended until the Recovery Account has been reimbursed for the
amount paid plus interest at the prevailing rate.
"If you wish to defend in court against this application, you must
file a written response with the court within 30 days after having
been served with a copy of the application. If you do not file a
written response, you will have waived your right to defend against
the application."
10472.1. (a) The commissioner and the judgment debtor shall each
have 30 days after being served with the application in which to file
a written response. The court shall thereafter set the matter for
hearing upon the petition of the claimant. The court shall grant a
request of the commissioner for a continuance of as much as 30 days
and may, upon a showing of good cause by any party, continue the
hearing as the court deems appropriate.
(b) The claimant shall have the burden of proving compliance with
the requirements of Section 10471 by competent evidence at an
evidentiary hearing. The claimant shall be entitled to a de novo
review of the merits of the application as contained in the
administrative record.
(c) If the judgment debtor fails to file a written response to the
application, the application may be compromised or settled by the
commissioner at any time during the court proceedings and the court
shall, upon joint petition of the claimant and the commissioner,
issue an order directing payment out of the Recovery Account.
10473. Whenever the court proceeds upon an application under
Section 10472, it shall order payment out of the Recovery Account
only upon a determination that the aggrieved party has a valid cause
of action within the purview of Section 10471, and has complied with
Section 10472.
The commissioner may defend any such action on behalf of the
Recovery Account and shall have recourse to all appropriate means of
defense and review, including examination of witnesses and the right
to relitigate any issues material and relevant in the proceeding
against the Recovery Account which were determined in the underlying
action on which the judgment in favor of the applicant was based. If
the judgment in favor of the applicant was by default, stipulation,
consent, or pursuant to Section 594 of the Code of Civil Procedure,
or whenever the action against the licensee was defended by a trustee
in bankruptcy, the applicant shall have the burden of proving that
the cause of action against the licensee was for fraud,
misrepresentation, deceit, or conversion of trust funds. Otherwise,
the judgment shall create a rebuttable presumption of the fraud,
misrepresentation, deceit, or conversion of trust funds by the
licensee, which presumption shall affect the burden of producing
evidence.
The commissioner may move the court at any time to dismiss the
application when it appears there are no triable issues and the
petition is without merit. The motion may be supported by affidavit
of any person or persons having knowledge of the facts, and may be
made on the basis that the petition, and the judgment referred to
therein, does not form the basis for a meritorious recovery claim
within the purview of Section 10471; provided, however, the
commissioner shall give written notice at least 10 days before the
motion.
The commissioner may, subject to court approval, compromise a
claim based upon the application of an aggrieved party. The
commissioner shall not be bound by any compromise or stipulation of
the judgment debtor.
10473.1. The judgment debtor may defend an action against the
Recovery Account on his or her own behalf and shall have recourse to
all appropriate means of defense and review, including examination of
witnesses. All matters, including, but not limited to, the issues of
fraud, misrepresentation, deceit, or conversion of trust funds,
finally adjudicated in the underlying action are conclusive as to the
judgment debtor and the applicant in the proceeding against the
Recovery Account.
10474. Notwithstanding any other provision of this chapter and
regardless of the number of persons aggrieved or parcels of real
estate involved in a transaction or the number of judgments against a
licensee, the liability of the Recovery Account shall not exceed the
following amounts:
(a) Except as provided in subdivision (b), causes of action which
occurred on or after January 1, 1980, twenty thousand dollars
($20,000) for any one transaction and one hundred thousand dollars
($100,000) for any one licensee.
(b) For applications for payment from the Recovery Account filed
on or after January 1, 2009, fifty thousand dollars ($50,000) for any
one transaction and two hundred fifty thousand dollars ($250,000)
for any one licensee.
(c) When multiple licensed real estate personnel are involved in a
transaction and the individual conduct of two or more of the
licensees results in a judgment meeting the requirements of
subdivision (a) of Section 10471, the claimant may seek recovery from
the Recovery Account based on the judgment against any of the
licensed real estate personnel, subject to the limitations of this
section and subparagraph (E) of paragraph (7) of subdivision (c) of
Section 10471.
10474.5. If the amount of liability of the Recovery Account as
provided for in Section 10474 is insufficient to pay in full the
valid claims of all aggrieved persons by whom claims have been filed
against any one licensee, the amount shall be distributed among them
in the ratio that their respective claims bear to the aggregate of
the valid claims, or in any other manner as the court deems
equitable. Distribution of any moneys shall be among the persons
entitled to share therein, without regard to the order of priority in
which their respective judgments may have been obtained or their
claims have been filed. Upon petition of the commissioner, the court
may require all claimants and prospective claimants against one
licensee to be joined in one action, to the end that the respective
rights of all claimants to the Recovery Account may be equitably
adjudicated and settled.
10475. Should the commissioner pay from the Recovery Account any
amount in settlement of a claim or toward satisfaction of a judgment
against a licensed broker or salesperson, the license of the broker
or salesperson shall be automatically suspended upon the date of
payment from the Recovery Account. No broker or salesperson shall be
granted reinstatement until he or she has repaid in full, plus
interest at the prevailing legal rate applicable to a judgment
rendered in any court of this state, the amount paid from the
Recovery Account on his or her account. A discharge in bankruptcy
shall not relieve a person from the penalties and disabilities
provided in this chapter.
10476. If, at any time, the money deposited in the Recovery Account
is insufficient to satisfy any duly authorized claim or portion
thereof, the commissioner shall, when sufficient money has been
deposited in the Recovery Account, satisfy the unpaid claims or
portions thereof, in the order that the claims or portions thereof
were originally filed, plus accumulated interest at the rate of 4
percent a year.
10477. Any sums received by the commissioner pursuant to any
provisions of this chapter shall be deposited in the State Treasury
and credited to the Recovery Account.
10478. It shall be unlawful for any person or the agent of any
person to file with the commissioner any notice, statement, or other
document required under the provisions of this chapter which is false
or untrue or contains any willful, material misstatement of fact.
Such conduct shall constitute a public offense punishable by
imprisonment in the county jail for a period of not more than one
year or a fine of not more than one thousand dollars ($1,000), or
both.
10479. When, the commissioner has paid from the Recovery Account
any sum to the judgment creditor, the commissioner shall be
subrogated to all of the rights of the judgment creditor and the
judgment creditor shall assign all of his or her right, title, and
interest in the judgment to the commissioner and any amount and
interest so recovered by the commissioner on the judgment shall be
deposited to the Recovery Account.
10480. The failure of an aggrieved person to comply with all of the
provisions of this chapter shall constitute a waiver of any rights
hereunder.
10481. Nothing in this chapter limits the authority of the
commissioner to take disciplinary action against any licensee for a
violation of the Real Estate Law, or of Chapter 1 (commencing with
Section 11000) of Part 2, or of the rules and regulations of the
commissioner; nor shall the repayment in full of all obligations to
the Recovery Account by any licensee nullify or modify the effect of
any other disciplinary proceeding brought pursuant to the Real Estate
Law.