ENDLER v. SCHUTZBANK (1967)

This is an appeal from an order of dismissal of an action for declaratory relief, injunction, and writ of mandate. The order states that the action is dismissed ‘under the provisions of Section 581(3)’ of the Code of Civil Procedure. Section 581, subdivision 3, of that code provides that an action may be dismissed (1) when either party fails to appear on the trial and the other party appears and asks for a dismissal, or (2) when a demurrer is sustained without leave to amend, or (3) when, after a demurrer to the complaint has been sustained with leave to amend, the plaintiff fails to amend within the time allowed. It cannot be determined from the record on appeal (consisting of the clerk's transcript) which ‘provisions' of said code section constituted the basis for the order of dismissal. Since the record does not show that there was a trial, it is to be assumed that the dismissal was not based upon failure of a party to appear on the trial. The record shows that there was a demurrer to the first amended complaint, and that points and authorities in support of and in opposition to the demurrer were filed. It does not appear from the record what disposition was made of the demurrer—whether the demurrer was sustained without leave to amend, or with leave to amend and that plaintiff failed to amend.

The first amended complaint alleged in substance as follows: For 14 1/2 years prior to November 12, 1965, plaintiff was employed in finance business by various personal property brokers in California. He earned his livelihood almost exclusively in that field, and his ability to earn a livelihood will be impaired seriously unless he is permitted to obtain employment from a personal property broker without interference by defendant. About November 12, 1964, plaintiff became employed as office manager for Huntington Finance Corporation, a corporation, which is a licensed personal property broker with its place of business in Westminster, California. Some time prior to September 17, 1965, the defendant commissioner notified Huntington Finance Corporation that certain charges had been made against plaintiff by a former employer and that Huntington Finance should discontinue plaintiff's employment, and the defendant advised said employer that unless plaintiff's employment was terminated, an accusation would be filed against it to revoke or suspend its broker's license. At said time the defendant had not undertaken or completed its own investigation of the charges made against plaintiff, but acted solely upon the basis of the uninvestigated charges made by one of plaintiff's former employers. Plaintiff requested an opportunity to present evidence in his behalf but none was afforded him. Huntington Finance refused to discharge plaintiff. A copy of a letter, addressed to defendant, setting forth Huntington's position is attached to the amended complaint and incorporated therein by reference. About October 6, 1965, the commissioner of corporations issued an accusation against Huntington Finance Corporation, a copy of which is attached to the amended complaint and incorporated therein by reference. Huntington Finance filed a special defense to the accusation, a copy of which is attached to the amended complaint and incorporated therein. Thereafter the Huntington Finance Corporation was purchased by State Loan and Finance Management Corporation. As a result of the accusation filed against Huntington Finance, the purchaser terminated plaintiff's employment about November 12, 1965, and the accusation was dismissed about November 26, 1965. Prior to December 14, 1965, the commissioner offered plaintiff an informal hearing, in order to permit the commissioner to pass upon the charges made against plaintiff, with the understanding that the informal hearing was not pursuant to statutory authority or administrative procedure, and would be without prejudice to the rights of the parties. It was further indicated that, unless a favorable decision was made, the defendant would continue to threaten disciplinary action against any of its licensees who employed plaintiff. Defendant commissioner has taken the position that any personal property broker who employs plaintiff in any capacity will be subjected to disciplinary action by said commissioner. As a result, it has become impossible for plaintiff to obtain employment in California with a personal property broker. Defendant continues to act arbitrarily in directing Huntington Finance Corporation and State Loan and Finance Corporation not to employ plaintiff on threat of revocation or suspension of their licenses as brokers. In this regard, plaintiff incorporates herein the grounds set forth in its special defense to the accusation attached hereto. A controversy exists between plaintiff and defendant in that plaintiff contends that defendant has no authority to direct personal property brokers to refrain from employing plaintiff on threat of disciplinary action, and that defendant contends that he has authority to so direct such brokers. It is defendant's intention to advise such brokers that they will be subjected to disciplinary action if they employ plaintiff. Plaintiff will suffer irreparable injury if defendant is permitted to so advise such brokers. Plaintiff has no adequate or speedy remedy at law.

As a second cause of action the first amended complaint alleged that it incorporated therein the allegations of the first cause of action, except the last two paragraphs thereof (which alleged an existing controversy between plaintiff and defendant). That plaintiff seeks a writ of mandate or other appropriate relief to enjoin ‘respondent’ from intervening with prospective employers of plaintiff who are licensees of defendant and threatening said licensees with proceedings to suspend or revoke their licenses.

The accusation by the commissioner against the Huntington Finance Corporation, dated October 6, 1965, and filed in the Office of Administrative Procedure (and attached to the complaint), stated: That pursuant to section 22615, subdivision (c), of the Financial Code, the commissioner made application to revoke or suspend Huntington's license. A condition exists which, if it had existed at the time of the filing of Huntington's application for a license, would reasonably have warranted the commissioner in refusing originally to issue the license. About December 11, 1964, Huntington employed Bernard J. Endler as manager, and it continues to employ him. On February 24, 1964, Endler forged the name of Millard Pellum on a promissory note for $890 and on a chattel mortgage. On the reverse side of the mortgage Endler signed a statement, as a notary public, that Donna Ellis swore that she witnessed the signing of the document by Millard Pellum. On said February 25 Endler prepared and signed a check on behalf of the Family Finance Company in the amount of $877.40, payable to Mark Downing Ford, and induced the payee to him (Endler). On March 4, 1964, Endler filed a creditor's claim with Mutual Benefit Life Insurance Company stating that the loan from Family Finance Company to Pellum was made on November 25, 1963. In support of the claim Endler filed a certificate of death of Pellum. The insurance company paid the claim. On January 31, 1964, Endler forged the name of E. G. Wetzler on a promissory note for $818.03, and on the reverse side thereof Endler signed a statement, as a notary public, that D. Brogdon swore that he witnessed the signing of the note by Wetzler. On February 12, 1964, Endler caused to be prepared a check of Family Finance Company payable to Mark Downing Ford, in the amount of $806.40. Because an audit of Family Finance Company was being made at that time, Endler became apprehensive and did not process the loan to completion. Endler is not a person who will command the confidence of the community and warrant belief that the business will be operated honestly, fairly and efficiently within the purposes of the Personal Property Brokers Law. Because Huntington continues to employ Endler in an executive position where the greatest business character is required, the financial responsibility, character and general fitness of Huntington are not such as to command the confidence of the community and warrant belief that the business will be operated honestly, fairly and efficiently within the purposes of the Personal Property Brokers Law. Millard Pellum died on February 20, 1964.

Huntington's special defense to the accusation (attached to the complaint) stated in substance, as follows: Huntington objects to the accusation on the ground that it does not state acts or omissions upon which the commissioner may proceed. Said section 22206 of the Financial Code, which Huntington contends prescribes the limit of the commissioner's authority, does not confer upon the commissioner the right to grant or withhold a license based upon any investigation of any employees of applicant who are not either officers or directors. It is not alleged in the accusation that Endler is an officer or director of the applicant.

Appellant contends that the Personal Property Brokers Law does not authorize the respondent commissioner to discipline a corporate licensee for the conduct of its office manager. The asserted basis for this contention is that section 22206 of the Financial Code (which relates, among other things, to the commissioner's duty to investigate a corporate applicant for a license) provides specifically for determining the general fitness of the corporation's ‘officers and directors,’ and does not mention the word ‘managers.’ That section provides: ‘Upon the filing of the application and the payment of the fees * * * the commissioner shall investigate the facts, and if he finds that the financial responsibility, experience, character, and general fitness of the applicant, and its members if the applicant is a copartnership or association, and its officers and directors if the applicant is a corporation, are such as to command the confidence of the community and to warrant belief that the business will be operated honestly, fairly, and efficiently within the purposes of this division, he shall issue and deliver a license to the applicant * * *.’ Said section 22206, which refers specifically to ‘officers and directors' of a corporate applicant, is not the only basis of the commissioner's authority and duty to investigate the fitness of an applicant for such a license. Section 22201 of the Financial Code provides, among other things, that applications for such a license shall state ‘The names of the persons who are to make loans and the names of the persons who are to be in charge of the place of business of the applicant.’ Section 22202 of said code states that ‘At the time of making the application, the applicant shall pay to the commissioner the sum of one hundred dollars ($100) as a fee for investigating the application * * *.’ (Italics added.) It thus appears that under section 22201 the name of the person who is to be manager must be stated in the application; and that under said sections 22202 and 22206 the commissioner has the duty to investigate the application and the facts therein. In view of those statutory provisions, it is apparent that the commissioner is authorized to consider information regarding the manager (as well as information regarding officers and directors) in determining whether to issue the license. Furthermore, regulations of the California Administrative Code provide in effect that managers are subject to the same standards of fitness required of officers and directors. Section 22400 of the Financial Code authorizes the commissioner to ‘make general rules and regulations' for the enforcement of the Personal Property Brokers Law ‘within the general purposes of’ that law. The general purpose of such regulation is to protect the public from fraud, deceit, and sharp practices in the making of loans. (In re Fuller, 15 Cal.2d 425, 428–431, 102 P.2d 321.) Regulation 1433 requires a licensee to maintain with the commissioner a current list of officers, directors, and employees ‘who are to make loans' or ‘who are to be in charge of the place of business.’ Regulation 1434 is to the effect that the ‘commissioner shall hold the finance company responsible under the acts and under these rules for the acts of all its officers, directors and employees.’ Regulation 1440 provides that any subterfuge engaged in by a finance company, its officers, employees, or any other person to violate the wording or spirit of the Personal Property Brokers Law or any of the rules or regulations shall be grounds for suspension or revocation of the license of such finance company. Under such statutory and Administrative Code sections, the commissioner is empowered to discipline a personal-property-broker licensee with reference to acts of the licensee's office manager.

In the present case, as above stated, plaintiff Endler became office manager for Huntington Finance Corporation in November 1964. About October 1965 the commissioner issued an accusation against that corporation seeking to revoke its license on the ground that a condition existed which, if it had existed at the time Huntington applied for a license, would reasonably have warranted the commissioner in refusing originally to issue the license. The condition so referred to was alleged in the accusation, as hereinabove set forth, to the effect that Endler, while employed by Family Finance Company, forged the name of Millard Pellum on a promissory note and mortgage, signed as a notary public a false statement on the mortgage, and by a false creditor's claim obtained payment of the note from the proceeds of Mr. Pellum's life insurance policy. Also, while Endler was so employed, he forged the name of E. G. Wetzler on a promissory note, and signed as a notary public a false statement on the back of the note; he drew a check on behalf of the Family Finance Company, payable to a Ford agency, and induced the agency to cash the check for him; and he drew another check on behalf of that company, payable to the Ford agency, but because an audit was in progress at that time he did not complete the transaction. The Huntington Finance Corporation, against which the accusation was filed, had employed Endler after said alleged fraudulent acts had been committed by Endler during his employment by Family Finance Company. The commissioner notified Huntington that certain charges had been made against Endler by a former employer and that unless Huntington terminated Endler's employment an accusation would be filed to revoke or suspend Huntington's license. Huntington refused that demand, and the accusation was filed. Thereafter Huntington was purchased by State Loan and Finance Corporation, which purchaser terminated Endler's employment.

Section 22615, subdivision (c), of the Financial Code provides that the commissioner may discipline a licensee for any condition which if it had existed at the time of applying for a license would have justified the commissioner in refusing the license. In the present case the commissioner had made an investigation and had concluded, as indicated by his, accusation, that he had probable cause to believe that Endler was unqualified and unsuitable to be manager of a licensee under the provisions of the Personal Property Brokers Law. If Huntington, in its original application for a license had recited that Endler would be its manager, and if the commissioner after investigating the application had probable cause to believe that Endler was unfit to be the manager (by reason of prior misconduct including forgery, embezzlement, and false representations), the commissioner could have denied the application for a license. Under the circumstances as shown herein, the accusation was validly filed against the licensee Huntington when Endler became its manager. Of course, the issue presented by Huntington's refusal to discharge Endler was not brought to trial, for the reason that Huntington was thereafter purchased by another loan company which discharged Endler.

As purported material contentions, appellant makes further statements to the effect that he has a constitutional right to earn a livelihood; that a statute is unconstitutional if it bars a person from lawful employment without affording him a hearing; and that the commissioner may be enjoined from unlawfully interfering with plaintiff's employment opportunities. These assertions are abstract legal principles that have no application under the administrative proceeding involved herein. No one is contending contrary to those assertions—that is, no one is asserting that plaintiff does not have a right to earn a livelihood, or that a statute may bar a person from lawful employment without a hearing, or that the commissioner may not be enjoined from unlawfully interfering with plaintiff's employment opportunities. Appellant is attempting to inject herein the constitutional issue of due process of law by claiming that a hearing must be granted to him before the commissioner can proceed to take disciplinary action against the licensee. The administrative accusation herein was directed to the licensee corporation which was subject to disciplinary action, after proper notice, for having in its employ a manager who was allegedly unfit for such position. It was the licensee corporation which was entitled to a hearing, not the unlicensed employee Endler. There is no provision in law for licensing managers of such loan companies. If the purchaser of the Huntington company had not discharged Endler, probably the issue as to whether Endler had committed forgery, embezzlement, and other frauds while formerly employed by a loan company would have been tried—and thereby he would have been afforded an opportunity for a hearing in that matter. The commissioner was not required to afford Endler a hearing, regarding his alleged misconduct, before the commissioner could validly file the accusation against the licensee. The acts of the commissioner herein did not deprive Endler of due process of law or any right.

Appellant's contentions are not sustainable.

The order of dismissal is affirmed.

WOOD, Presiding Justice.

FOURT and LILLIE, JJ., concur.