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Court Overturns California Department of Real Estate Suspension of Broker’s License Based on Fraud Judgment
The California Department of Real Estate (Real Estate Commissioner) suspended the real estate broker’s license of the Grubb Company based on a civil fraud judgment arising from a dispute between the buyer and seller of a residence.
Business and Professions Code section 10177.5 authorizes discipline based on a civil judgment for misrepresentation, fraud or deceit. The Department of Real Estate suspended Grubb’s real estate broker’s license based solely on the court record showing the judgment. Grubb appealed.
On May 4, 2011, the California Court of Appeal overturned the license suspension because the constitution requires proof of misconduct by clear and convincing evidence before a government agency can revoke, suspend or impose other discipline against a licensed business or professional. In civil actions, the standard of proof is lower—by a preponderance of the evidence. Therefore, a licensing agency cannot generally rely on a civil judgment as a basis for discipline. Instead, the agency has to prove the alleged misconduct by clear and convincing evidence.
See The Grub Company, Inc. v. Department of Real Estate, California Court of Appeal Case No. A125875, decided May 4, 2011.