Opinion ID: 788125
Heading Depth: 2
Heading Rank: 2

Heading: Designated Officer/Broker

Text: 14 Under general principles of corporate liability, a corporate employee acts on behalf of the corporation, not its owner or officer; as a result, liability in the typical employment relationship runs between the corporation and the salesperson and between the corporation and the supervisor, but not between the salesperson and the supervisor. See Meyer, 537 U.S. at 286, 123 S.Ct. 824. Here, however, the real estate corporation and employment relationship at issue are atypical because California law makes the designated real estate broker of a real estate corporation personally responsible for the supervision of the corporation's salespersons. Because Meyer remained Triad's designated real estate broker, he remained personally responsible for the supervision of the corporations's salespersons. When Meyer delegated this responsibility to Crank, he created an agency relationship between himself and Crank, which made Meyer vicariously liable as the principal for the discriminatory actions of Crank as his agent. 15 Meyer has been the sole owner and officer/broker of Triad, a small real estate agency since 1978. In California, as in most states, the real estate profession is highly regulated. 16 It is unlawful for any person to engage in the business, act in the capacity of, advertise or assume to act as a real estate broker or a real estate salesman within this state without first obtaining a real estate license from the department. 17 Cal. Bus. & Prof.Code § 10130. In California, a corporation may hold a real estate broker's license, but only if it designates an officer who is qualified to hold a broker's license to serve as officer/broker of the corporation. Cal. Bus. & Prof.Code §§ 10158 and 10211. A California corporate real estate broker operates only through and because of the license of its designated officer. Amvest Mortgage Corp. v. Antt, 58 Cal.App.4th 1239, 1243, 68 Cal.Rptr.2d 457 (1997). No acts for which a real estate license is required may be performed for, or in the name of, a corporation when there is no designated corporate officer/ broker. Cal. Code Regs. Title X, § 2740; see also Amvest Mortgage Corp., 58 Cal.App.4th at 1243, 68 Cal.Rptr.2d 457. In this case Triad held a corporate real estate broker's license and Meyer was licensed as its designated officer/broker. Meyer was the only such broker affiliated with Triad. Crank and the other Triad agents were salesmen not brokers. 18 The statute provides that the officer/broker designated by a corporate broker licensee 19 shall be responsible for the supervision and control of the activities conducted on behalf of the corporation by its officers and employees as necessary to secure full compliance with the provisions of this division, including the supervision of salespersons licensed to the corporation in the performance of acts for which a real estate license is required. 20 Cal. Bus. & Prof.Code § 10159.2(a). Among the officer/broker's obligations for supervision is the establishment of policies, rules, procedures and systems to review, oversee, inspect and manage ... [f]amiliarizing salespersons with the requirements of federal and state laws relating to the prohibition of discrimination. Cal.Code Regs. Title X, § 2725. For a corporate real estate broker to operate lawfully, it must conduct[] its brokerage business if at all under the active aegis of its designated broker. Milner v. Fox, 102 Cal.App.3d 567, 575, 162 Cal.Rptr. 584 (1980). The designated officer/broker, not the corporate entity itself, is charged with the responsibility to assure corporate compliance with the real estate law. Norman v. Dep't. of Real Estate, 93 Cal.App.3d 768, 776-77, 155 Cal.Rptr. 715 (1979) (Such a real estate broker must reasonably be charged with responsibility for the corporate compliance with the Real Estate Law, for otherwise with no such fixed responsibility, the statutory purpose would be frustrated. (internal citation omitted)). 21 The conclusion that the designated officer/broker is personally responsible for supervising the salesperson's compliance with the law is supported by the legislative history of the Business and Professions Code § 10159.2. The staff analysis for the Senate Committee on Business and Professions, which related the background and purpose of the proposed enactment of that section in 1979 stated: 22 BACKGROUND: The Business and Professions Code stipulates that a person or persons applying for a corporate license to practice real estate must designate in the application an officer of the proposed corporation who holds a valid real estate broker's license. That person becomes the designated officer of the corporation. The purpose of this provision is to provide the public, in its dealings with real estate corporations, the same licensing protections afforded it in dealing with non-corporate real estate concerns. 23 As currently worded, however, there is no stipulation in the law as to the designated officer's control or supervisory responsibilities over the corporation.... 24 PROPOSED LEGISLATION: AB 985 stipulates that the designated officer named on the corporate license application assumes responsibility for the officer's, employee's and salesperson's compliance with the provisions of the Real Estate Law.... 25 COMMENTS: AB 985 attempts to insure licensed supervision of real estate corporation activity by holding designated officers personally responsible for that supervision. 26 Cal. Bus. & Prof.Code § 10159.2: Hearings on AB 985 before the Senate Committee on Business and Professions (July 11, 1979). 27 The Assembly Committee on Labor, Employment and Consumer Affairs related similar objectives of the proposed legislation: 28 The only way that the active participation of the licensed individual may be ensured is by piercing the corporate veil and making the individual licensee vulnerable to action on account of corporate misdeeds, or on account of failure to fulfill corporate responsibilities.... The granting of the corporate license is predicated upon the qualifications of the designated officer in the first place. It is no injustice to demand that the person standing for the corporation at licensing continue to stand for the corporation. That is an implicit assumption of the law anyway. 29 Cal. Bus. & Prof.Code § 10159.2: Hearings on AB 985 before the Assembly Committee on Labor, Employment and Consumer Affairs (April 24, 1979). 30 The supporting analysis of the Department of Real Estate stated succinctly the reasons for the proposal: REASONS FOR PROPOSAL 31 1. The real estate law places the responsibility for supervision of salespersons and employees upon a real estate broker. Even though a corporate real estate licensee is itself a broker, the corporate entity is not as qualified as a natural person to exercise the supervision necessary to insure public protection. 32 2. Lack of active supervision by a designated officer has resulted in abuses and injury. 33 3. Since a corporate license is issued based upon the qualifications, experience and good character of the designated officer, that officer should continue to take an active role in the conduct of corporate real estate acts. 34 Cal. Bus. & Prof.Code § 10159.2: Hearings on AB 985 before the Department of Real Estate R-15. 35 The statutory provisions regulating the real estate profession, particularly after the 1979 amendment with its legislative history, places a direct, personal responsibility on the designated officer/broker of a real estate corporation to supervise the salespersons to assure compliance with the state and federal laws. This personal obligation is independent from that of the normal responsibilities of a corporate officer or of the corporation itself. This is a direct personal responsibility on the part of the officer/broker that is subject to disciplinary action affecting that officer/broker's personal broker's license. 36 C. Crank as an Agent of Meyer in Fulfilling his Officer/Broker Obligation Under California Law 37 Generally, for an agency relationship to exist, a principal must consent to the agent acting on his behalf and subject to his control, and the agent must consent to act for the principal. See Restatement (2d) of Agency § 1. Principals are liable for the torts of their agents committed within the scope of their agency. Here, there is sufficient evidence that Meyer and Crank consented to an agency relationship when Meyer delegated his personal duty as an officer/broker to Crank to overcome the summary judgment. 38 We review a grant of summary judgment de novo. Oliver v. Keller, 289 F.3d 623, 626 (9th Cir.2002). On a motion for summary judgment, the court must view the evidence in the light most favorable to the nonmoving party and determine whether there are any genuine issues of material fact and whether the district court has correctly applied the relevant substantive law. Id. [I]f a rational trier of fact might resolve the issues in favor of the nonmoving party, summary judgment must be denied. T.W. Elec. Serv., Inc. v. Pacific Elec. Contractors Ass'n, 809 F.2d 626, 631 (9th Cir.1987). 39 In this case, viewing the evidence in the light most favorable to the plaintiffs, there was evidence that Meyer intended to turn the real estate business over to Crank so that Meyer could pursue another career. Crank was not a licensed real estate broker, and thus would have been unable to continue with the corporation without a licensed real estate broker as the designated officer/broker. Therefore, it was agreed that Meyer would remain Triad's designated officer/broker until Crank got his own broker's license. Meyer understood that by remaining Triad's designated officer/broker he continued to have personal responsibilities under California law. He understood that he had the personal duty to make sure that our agents were acting lawfully, that the standards of the Department of Real Estate are upheld, that the contracts were reviewed (and) that people were treated fairly. (ER 199.) Meyer agreed to delegate those responsibilities to Crank so that Crank could continue to run Triad as a real estate brokerage. There is evidence that both Meyer and Crank understood Meyer's personal responsibility as the designated officer/ broker and that Crank agreed to carry out this duty on behalf of Meyer subject to Meyer's ultimate control. This is the only manner in which the Triad Corporation could have continued to operate as a real estate business. There is therefore evidence of an agreement to delegate this personal duty as an officer/broker, to be filled on a day to day basis by Crank, to assure that state and federal laws were being observed in the operation of Triad's real estate business. 40 The Holleys also contend that Crank acted within the scope of his agency when he committed the act of discrimination. They are correct. The alleged discrimination occurred when Crank was supervising another Triad agent, Terry Stump. Such supervision was Meyer's duty under California law and therefore was within the scope of the duty he delegated to Crank. There was thus evidence under the general common law of agency that Meyer had a personal duty as officer/broker to supervise the salesmen so as to assure compliance with federal and state law, that this duty was delegated to Crank to carry out, and that Crank's actions with regard to the alleged discrimination against the Holleys were within the scope of his agency and sufficient to impose liability on Meyer as the principal for the failure of his agent Crank to fulfill the duties of officer/broker.