Ford v. Mortgage Loan Specialists

Filed 4/10/07 Ford v. Mortgage Loan Specialists CA1/2

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION TWO

I. INTRODUCTION

John J. Ford III and Katherine L. Ford (plaintiffs or the Fords) brought this action against Mortgage Loan Specialists, Inc. (MLS), Richard E. Warren, Jr. (Warren), Myles Hubers and Michelle Renee Hubers (the Hubers), for alleged wrongs arising from two agreements plaintiffs assertedly executed with Warren as they faced foreclosure on real property they owned in Napa County.

This court has affirmed an order as to Warren on a prior appeal in this action, but Warren is not a party to this appeal by plaintiffs, which is from summary judgment granted to MLS and a dismissal of the Hubers granted after the court sustained, without leave to amend, the Hubers special and general demurrer to plaintiffs complaint.

The trial court also denied plaintiffs motion to reconsider.

The scope of our review is not fully explored by the parties, but the trial courts first ground for denying reconsideration, we note, was: Substantively, this court is without jurisdiction to consider plaintiffs motion [filed March 9, 2006], as judgment was entered as to the Hubers on February 3, 2006 and as to MLS on February 28, 2006. (APRI Ins. Co. v. Superior Court (1999) 76 Cal.App.4th 176, 181 [court loses jurisdiction to consider motion for reconsideration after judgment entered].) An untimely motion for reconsideration would not defeat the timeliness of plaintiffs March 30, 2006, notice of appeal from the judgments, which was filed within the normal 60 days not extended by a motion (Cal. Rules of Court, rule 8.104(a)), but could moot an attack on the merits of the reconsideration ruling. The court also cited plaintiffs failure to serve the motion 16 court days before the hearing (Code Civ. Proc.,  1005, subd. (b)), failure to file it 10 days after being served written notice of entry of the demurrer order (id., subd. (a)), and other procedural defects, none of which are addressed by plaintiffs.

From plaintiffs failure to address those questions and their focus on agency issues relating to the demurrer and summary judgment rulings, we conclude they do not fault the handling of the reconsideration motion itself. We review accordingly and, finding no error in the earlier rulings, affirm.

II. FACTUAL AND PROCEDURAL BACKGROUND

A. Allegations and Demurrer

In a first amended complaint (FAC) filed in September 2003, plaintiffs alleged, in seven causes of action, breach of duties by Warren as a foreclosure consultant (first; Civ. Code,  2945 et seq.), MLSs liability for his acts based on respondeat superior and breach of its own duties as foreclosure consultant and holder of a brokers license under which Warren acted as its salesperson (second; Civ. Code,  1714, subd. (a), 2945 et seq.; Bus. & Prof. Code,  10177, subd. (h)), liability by MLS and Warren, based again on a broker/salesperson relationship, for breaches of loyalty and good faith, plus deceit, fraud, and other wrongs (third), common law and statutory by MLS for failure to supervise Warren (fourth), fraud by Warren and MLS in the second agreement (fifth), abuse by Warren and MLS of an elder or disabled person (sixth; Welf. & Inst. Code,  15657; Civ. Code,  3345), and declaratory relief, against Warren, as to both agreements (seventh).

We summarized those claims when the case was before us on plaintiffs appeal from a June 2004 order granting Warren relief from a default judgment (Ford v. Warren (A107580, Sept. 29, 2005) [nonpub. opn.]) (Ford I). MLS and the Hubers were not parties to that appeal but do not dispute the summary in our opinion affirming the order: According to the FAC, in October 2001, [plaintiffs] acquired joint tenancy title to what was apparently a large and valuable piece of property located at 1030 Borrette Lane in Napa. However, simultaneously, they also assumed two deeds of trust on the property and, [a]s part of their acquisition of the Property, a third deed of trust was placed on it. The total principal amount of all three deeds of trust was $1,595,000. [Plaintiffs] were unable to make the payments due on the second of the three deeds of trust and, as a result, on December 3, 2001, the holder of that deed of trust recorded a notice of default under Civil Code section 2924.

[At this point plaintiffs] commenced negotiations with MLS and Warren, its agent, regarding refinancing of the property. These negotiations resulted in an agreement dated December 7, 2001, a copy of which was attached to the FAC [hereafter the December 2001 agreement. By it, Warren agreed to advance to [plaintiffs] such sums as are required to maintain [the property] free from any Notice of Default and in operable condition until [plaintiff] John Ford (who, the FAC recites several times, had suffered a stroke in mid-2001) received an anticipated distribution from the estate of a deceased uncle in a probate proceeding pending in San Francisco Superior Court but in no event later than June 1, 2002. In exchange, [plaintiffs] agreed to pay eight percent (8%) interest to Warren on any funds advanced by him and to transfer to him an undivided one-half interest in the Borrette Lane property.

Subsequent to the December 2001 agreement, the FAC continued, Warren obtained extensions of time to cure the default from the holding of the second deed of trust, although that notice was never withdrawn or cancelled. He also got two appraisals of the property in 2002, both allegedly valuing the property at $2,600,000.

On August 2, 2002, a notice of default was filed and recorded on the first deed of trust held on the property. A little over two months later, on October 7, 2002, Warren and [plaintiffs] entered into a second agreement (the October 2002 agreement). This agreement, which explicitly superseded the December 2001 agreement and was also attached to the FAC, provided inter alia, that [plaintiffs ] would transfer full title to the property to Warren so as to remove the pending Notice of Default on the First Deed of Trust and the Notice of Sale on the Second Deed of Trust. [Fn. omitted.] In exchange, Warren allegedly agreed (1) to pay [plaintiffs] $50,000 on close of escrow (i.e., an escrow account set up in connection with the October 2002 agreement), (2) to execute a promissory note for $600,000 in favor of [plaintiffs] forgivable in the events of credits or unreimbursed expenses, (3) to execute a promissory note for another $50,000, unsecured by any deed of trust, payable within six months from the close of escrow or upon any sale of the property, whichever occurred earlier, (4) to make a house in St. Helena available rent-free to [plaintiffs] for not more than six months after [plaintiffs] surrendered possession of the property to Warren, and (5) granted [plaintiffs] a [Right of First Refusal to repurchase the Borrette Lane property at fair market value at any time within three years from the close of escrow. For their part, [plaintiffs] agreed to vacate the property within 30 days from the close of escrow.

By their FAC, [plaintiffs] alleged that the October 2002 agreement was not a refinancing at all, as represented to them by Warren, but simply a transfer of all right, title and interest in the Property to Warren. They alleged that they had no choice but to the sign this second agreement, because not to do so would mean they would be home-less pending the distribution of John Fords uncles estate. (Fn. reference to Estate of Ford (2004) 32 Cal.4th 160, omitted.)

The FAC went on to set forth an allegedly contentious October 29, 2002, closing of the transaction set out in the October 2002 agreement. Among other things, according to the FAC (1) Warren advised [plaintiffs] that [there] would be, and there was, deducted from the sales price some $229,957 for CreditMtgPmts/Operation Expense, (2) Warren also advised [plaintiffs] that, if they did not agree to this, he would allow the foreclosure sale, then scheduled for the next day, to go ahead, (3) [plaintiffs], and not Warren, were charged with all closing costs, (4) the $600,000 promissory note which Warren placed into escrow was unsecured, contrary to [plaintiffs] . . . expectations, and also contained an allegedly unexpected . . . clause allowing Warren to deduct from the $600,000 any otherwise unreimbursed costs to him associated with the upkeep, operating expenses, etc., of the Borrette Lane property subsequent to December 7, 2001, and (5) that note even seemed to provide that [plaintiffs] would be unable to collect at all on it, even if those expenses were less than $600,000. In conclusion regarding this note, [plaintiffs] alleged that [t]he $600,000 note is completely worthless, although they did not realize such until August 30, 2003.

The FAC also alleged similar modifications made by Warren at the closing regarding the agreed-upon $50,000 note.

The Statement of Facts portion of the FAC concluded by alleging that Warren made no payments on either the $600,000 or $50,000 notes, although he had moved into the Borrette Lane property after [plaintiffs] had, on or about November 1, 2002, vacated it and moved into the St. Helena property offered them by Warren. As a result, [they] alleged, they had been damaged by Warrens fraud and other torts in the amount of the difference between the value of the property less its encumbrances, i.e., $1,005,000, minus a little over $16,000 paid to [plaintiffs] by Warren.

General allegations in the FAC, as examined in Ford I, alleged responsibility of MLS for the acts of Warren, but without specifics or having yet named the Hubers as defendants. Nothing specifically showed involvement or funding by MLS in either of the two agreements, either, and neither agreement (as attached to the FAC) mentioned MLS. Rather, general allegations claimed, on information and belief, that all defendants were the agents, employers, joint venturers, etc., of one another, acting at all times within the course and scope of those relationships. It was also alleged that MLS was a licensed real estate broker responsible for supervising Warren, its asserted salesperson (not himself a licensed broker). At unspecified times before the date of the first agreement, Warren allegedly represented to Plaintiffs that he was a licensed real estate salesperson for MLS, a licensed real estate broker, gave them promotional materials regarding MLS, and told them that MLS was a major organization with offices throughout California and that, as MLSs salesperson, he had the ability and intention to obtain loans for the refinancing of the Property. Entry into the two agreements by plaintiffs and Warren, and ensuing events, are then described in detail but without mention of MLS being involved or discussed.

Allegations in the FACs second cause of action, as examined in Ford I, likewise provided no details of MLSs involvement but asserted liability for Warrens acts based on respondeat superior, the alleged broker/salesperson relationship under which Warren allegedly acted, a duty to supervised Warren as its salesperson, common law duty to supervise and prevent him from entering into the two agreements, and MLSs liability for acts of its representative under foreclosure consultant statutes. Again without specifics or dates, MLS allegedly gave Warren actual, ostensible or apparent authority as its salesperson, and Warren acted within the scope of his position as such and held himself out as a real estate salesperson for MLS with the ability to obtain loans for the refinancing of the Property through MLS. Some similar allegations appeared in the third through seventh causes of action.

In March 2004, pending Ford I, plaintiffs named the Hubers in their FAC by substituting them for Does 1 and 2 (the first Doe amendments), denominating Myles as the president of MLS acting as the delegated representative of the licensed individual broker, Michelle Renee Hubers, and Michelle as MLSs designated officer (California Department of Real Estate broker license #01081297) . . . . The aim was to render the Hubers liable on the five causes of action (second through sixth) directed against MLS.

The Hubers sought relief, in part, by demurring generally to the amended FAC as lacking facts sufficient to state causes of action against either of them. The court sustained the demurrer after argument at a hearing on August 22, 2005, at which plaintiffs sought leave to amend as to Michelle Hubers. For reasons explained in a tentative decision, the court sustained the demurrer evidently without leave to amend as to Myles but with such leave as to Michelle.^[1]

Plaintiffs second Doe amendments were not confined to Michelle Hubers. She was allegedly a licensed real estate broker having the statutory duty of supervision of MLS salespersons, including Warren, and both Hubers were MLS officers, directors and shareholders. Myles, as chief executive officer and president, had the delegated responsibility for supervising MLSs licensed real estate salespersons . . . . Both Hubers were liable for all of Warrens acts alleged herein under the common law doctrines of respondeat superior, piercing the corporate veil, alter ego, and the recently defined doctrine of strict liability set forth in Holley v. Crank[, supra,] 400 F.3d 667 . . . . Again, no personal role or knowledge of the agreements was alleged, but Michelle was allegedly liable because she was an officer, director and shareholder of, and the Licensed and Designated California real estate broker of MLS. Myles was liable because he was an officer, director and shareholder of MLS to whom Michelle had delegated the responsibility for supervision of MLS salespersons.

The Hubers demurred again to the twice-amended FAC, as lacking facts sufficient to state causes of action. The matter was argued on November 18, 2005, and the court sustained the demurrer without leave to amend, adopting a tentative ruling that tracked its earlier ruling.^[2]

B. Summary Judgment

MLSs motion for summary judgment, like one of its affirmative defenses, stressed that any wrongful acts of Warren were outside the scope of his express, implied or ostensible authority as an agent of MLS. The motion argues that MLS had no knowledge of or involvement in any of the alleged wrongful acts or agreements that Warren and plaintiffs entered. The facts adduced on the motion, summarized below, were in large part undisputed.

Myles Huber declared as president of MLS (seven months before plaintiffs would claim in their Doe amendments to have discovered his identity) that MLS was in the business of providing mortgage loans, secured by residential realty, under a California brokers license. MLS originated residential mortgage loans through a network of branch offices. It sometimes brokered loans out to other lenders, where others offered programs more suited to a borrowers needs, but was not in the business of making loans to owners of residential real property, specifically to stop or postpone foreclosure sales or assisting homeowners in any manner with funding after foreclosure proceedings have been initiated by the recording of a Notice of Default.

At all times that plaintiffs allegedly dealt with Warren, Warren and MLS worked under a signed independent contractor agreement (IC agreement) that specified that Warren was an independent loan agent for purposes of originating residential loans secured by deeds of trust for MLS, that any agreements Warren entered into with third parties were understood to be in his individual capacity and not binding on MLS, that he had no authority, actual or ostensible, to bind MLS to any such agreements, and that he was responsible for paying all of his own expenses, including overhead and rent. The IC agreement did not preclude Warren from engaging in other business activities on his own account. It was in effect from November 2000 until terminated by MLS in April 2004, due to inactivity. Warren was the sole individual performing services for MLS in the St. Helena/Napa area during the times alleged in the complaint and, during the total 41-plus months of the IC agreement, worked part-time, with MLS funding only nine loans that he placed with it.

Warren recounted first meeting plaintiffs in November 2001 to explore the possibility of his arranging a refinancing of their property. He initially considered doing this through MLS and, at their first meeting, gave them an MLS loan portfolio containing a blank loan application and standard MLS disclosure and reporting forms. After discussing their financial situation, he informed them that a traditional refinancing would be difficult and would depend entirely on the equity in their property and their current credit scores, a loan typically known as a no income/no asset verification, or NINA loan. Plaintiffs asked that a credit report be run on Katherine Fords current credit score, and it was 646, which would make a NINA loan difficult to obtain. Plaintiffs agreed to try and improve the score, but, when checked again, it had dropped to 569. The drop, regardless of an appraisal valuation set on the property, would preclude a traditional NINA. Warren had repeatedly asked plaintiffs to fill out the loan application form and supporting documents for MLS processing to commence. They never did so, and hence no processing was ever undertaken by MLS.

Shortly after their meeting, John Ford asked Warren to meet with them to discuss their situation. At a subsequent lunch meeting, plaintiffs proposed that he personally make a series of loans to them until John Ford received the proceeds of an estate estimated at $600,000. The ensuing agreements were between plaintiffs and Warren in his individual capacity and not as an agent or employee for MLS. Warren never told plaintiffs that MLS was involved in any way, and the agreements did not mention MLS. John Ford had also been a California attorney for 30 years, resigning his bar membership in 1989 (with charges pending), and plaintiffs would have known, since they never returned the MLS loan application, that MLS was not involved.

Warren never apprised MLS of the agreements or transactions, and MLS had no knowledge or record of them, nor any loan application. MLS never authorized or funded the transactions and never acquired any interest in the property. Warren declared, At no time did I ever inform the Fords verbally or in writing that I was acting on behalf of MLS with respect to the agreements and/or transactions alleged in the [FAC].

In opposition to MLSs statement of undisputed facts, plaintiffs relied on theories of liability and agency as a matter of law, asserted that certain documents had referred to MLS, and relied heavily on excerpts from their own depositions. Defendants objected that the various documents were not themselves in evidence and that, while deposition testimony of an adverse party may be admissible evidence for consideration on summary judgment (citing former Code Civ. Proc.,  2025, subd. (u), now  2025.620, subd. (b)), plaintiffs here improperly offered their own deposition testimony in lieu of admissible declarations.^[3]

The summary judgment motion was filed in July 2004, but a ruling was deferred pending the appeal in Ford I. MLS renoticed its motion in December 2005, after our opinion and remittitur, also objecting on numerous grounds to then newly filed declarations by plaintiffs in further opposition to the motion. Those declarations were evidently offered to overcome their attempted prior reliance on their own depositions, a flaw which seems well grounded (Code Civ. Proc.,  2025.620, subd. (b); Alvarez v. Felker Mfg. Co. (1964) 230 Cal.App.2d 987, 1002 [depositions are admissible to impeach and, when the deposition of an adverse party, may be used for any purpose, meaning both as substantive evidence and to contradict or impeach the witness]) and which plaintiffs do not argue against on appeal. The court ultimately sustained plaintiffs objections to the new declarations, which included an objection that they were untimely filed.^[4]

The Fords counsel clarified at the hearing they were not contending that MLS was a party to the transaction involved between Mr. Warren and the Fords. The court granted summary judgment, saying that it was sympathetic to plaintiffs claims of apparent wrongdoing, but that the contracts that form the basis of the Fords action were entered into between the Fords and Warren as an individual, and the wrongful conduct that is complained of here is solely attributable to Warren. The court also adopted a tentative ruling that expounded: MLS has presented undisputed evidence that it played no part at all in the transactions between plaintiffs and defendant Richard Warren. The mere fact that Warren was a part time loan agent for MLS and initially considered a refinance loan for plaintiffs through MLS does not create a triable issue of material fact as to MLSs liability toward plaintiffs. . . . The authority cited by plaintiffs does not support the conclusion that MLS can or should be held liable for Warrens conduct as an individual.

III. DISCUSSION

A. Review Standards

A defendants motion for summary judgment (Code Civ. Proc.,  437c) should be granted if no triable issue exists as to any material fact and the defendant is entitled to a judgment as a matter of law. [Citation.] The burden of persuasion remains with the party moving for summary judgment. [Citation.] When the defendant moves for summary judgment, in those circumstances in which the plaintiff would have the burden of proof by a preponderance of the evidence, the defendant must present evidence that would preclude a reasonable trier of fact from finding that it was more likely than not that the material fact was true [citation], or the defendant must establish that an element of the claim cannot be established, by presenting evidence that the plaintiff does not possess and cannot reasonably obtain, needed evidence. [Citation.] We review the record and the determination of the trial court de novo. [Citation.] (Kahn v. East SideUnionHigh School Dist. (2003) 31 Cal.4th 990, 1002-1003.) The trial court, in deciding the motion, rules on any evidentiary objections the parties raise and does not consider evidence to which objections have been made and sustained (Code Civ. Proc.,  437c, subd. (c)). When challenged, those evidentiary rulings are reviewed deferentially, for abuse of discretion. (Walker v. Countrywide Home Loans, Inc. (2002) 98 Cal.App.4th 1158, 1169; Jackson v. County of Los Angeles (1997) 60 Cal.App.4th 171, 192, fn. 15; Aguimatang v. California State Lottery (1991) 234 Cal.App.3d 769, 797-798.)

A defendants burden on summary judgment is to negate theories of liability as alleged in the complaint (Tsemetzin v. Coast Federal Savings & Loan Assn. (1997) 57 Cal.App.4th 1334, 1342-1343), and thus summary judgment necessarily includes a test of the sufficiency of the pleadings (Johanson Transportation Service v. Rich Pik'd Rite, Inc. (1985) 164 Cal.App.3d 583, 588-589). That aspect of review therefore mimics review of the demurrer here (cf. Everest Investors 8 v. Whitehall Real Estate Limited Partnership XI (2002) 100 Cal.App.4th 1102, 1106, fn. 3), albeit as to the Hubers rather than MLS, and we observe that plaintiffs do propose any amendments to the FAC that might overcome defects exposed by the demurrer.

B. Actual or Ostensible Authority

Plaintiffs rely on actual and ostensible authority, and agency as a matter of law. Generally: Unless required by or under the authority of law to employ that particular agent, a principal is responsible to third persons for the negligence of his agent in the transaction of the business of the agency, including wrongful acts committed by such agent in and as a part of the transaction of such business, and for his willful omission to fulfill the obligations of the principal (Civ. Code,  2338); [a] principal is responsible for no other wrongs committed by his agent than those mentioned in the last section, unless he has authorized or ratified them, even though they are committed while the agent is engaged in his service (id.,  2339). Important in this case is the requirement that, for the principal to be liable, the agent must be acting within the course of the principals business.

We begin with what there is no room to debatethat Warren was not actually authorized by MLS or the Hubers to enter into either of the two agreements, or the related transactions, that form the alleged wrongs committed by Warren. Undisputed evidence shows that defendants were, in fact, unaware at the time of the transactions or contact between Warren and plaintiffs. MLS was not in the business of averting foreclosures, only offering ordinary mortgages secured by residential realty, and the agreements between Warren and plaintiffs were not products that MLS offered. As noted above, plaintiffs counsel clarified at the hearing that MLS was not a party to the transactions.

For ostensible authority, plaintiffs urge that MLS gave [Warren] ostensible authority to act upon its behalf and thus, it induced prospective customers . . . to believe they were dealing with MLS when they dealt with Warren. Indeed, [plaintiffs] consulted him about obtaining a real estate loan, the very business MLS is in. But for his being there as MLSs agent, [plaintiffs] never would have sought him out. Thus they see a triable issue of fact precluding summary judgment. We do not.

 To establish ostensible authority in an agent, it must be shown the principal, intentionally or by want of ordinary care has caused or allowed a third person to believe the agent possesses such authority. [Citations.] Ostensible authority must be established through the acts or declarations of the principal and not the acts or declarations of the agent. [Citation.] . . . [W]here the principal knows that the agent holds himself out as clothed with certain authority, and remains silent, such conduct on the part of the principal may give rise to liability. [Citation.] [Citation.] (Gulf Ins. Co. v. TIG Ins. Co. (2001) 86 Cal.App.4th 422, 439.)

Here, of course, there is no evidence that MLS did anything to cause or allow plaintiffs to believe MLS was involved, or that MLS was remiss. Fundamentally, MLS never knew about the transactions or, as far as we know, that Warren had done this kind of thing before. Warren also declared that, while he initially considered securing a mortgage loan or NINA through MLS and gave plaintiffs the MLS paperwork needed to start the process, plaintiffs never finished the paperwork and soon ran into credit problems that ruled out MLS financing. Plaintiffs offered their own, somewhat different view of their interactions with Warren, but did so not through declarations, but instead through improper resort to their own deposition testimony (fn. 3, ante). MLS objected, and plaintiffs delayed attempt to cure this deficiency with actual declarations gained nothing, for the court sustained MLS objections, including one that the declarations were not timely filed. Even if the evidence had been considered, however, it would not raise triable issues of fact as to ostensible authority. Plaintiffs conceded a lack of direct contact with MLS and claimed, instead, vague understandings or impressions from Warrens acts that MLS might be involved.  Ostensible authority must be established through the acts or declarations of the principal and not the acts or declarations of the agent. [Citation.]  (Gulf Ins. Co. v. TIG Ins. Co., supra, 86 Cal.App.4th at p. 439.) There is no evidence, again, that MLS even knew of Warrens contact with plaintiffs.

Further, plaintiffs cannot credibly argue that MLS induced prospective customers like themselves to believe they were dealing with MLS when they dealt with Warren. The only evidence is that MLS employed Warren as a sales agent and that he produced two to three loans per year, on average, over a period of 41 months.

Next, plaintiffs distort the doctrine of respondeat superior liability by saying of Warren, But for his being there as MLSs agent, they never would have sought him out. That may be so, but [t]he nexus required for respondeat superior liabilitythat the [negligent or intentional] tort be engendered by or arise from the workis to be distinguished from but for causation. That the employment brought tortfeasor and victim together in time and place is not enough. . . . [T]he incident leading to injury must be an outgrowth of the employment [citation]; the risk of tortious injury must be  inherent in the working environment.  [citation] or  typical of or broadly incidental to the enterprise [the employer] has undertaken.  [Citation.] (Lisa M. v. Henry Mayo Newhall Memorial Hospital (1995) 12 Cal.4th 291, 298, fn. omitted.) We have no evidence at all that Warrens behavior in personally financing property to help a potential but unqualified MLS borrower avoid foreclosure was inherent in, typical of, or broadly incidental to the enterprise of being MLSs sales agent.

Finally, while plaintiffs devote much briefing to criticizing the IC agreement between MLS and Warren as contrary to public policy, and hence void, we do not deem the agreement determinative to our, or the trial courts, determinations of authority. Case law has said: [A] salesman, insofar as his relationship with the broker who employs him is concerned, cannot be classed as an independent contractor. Accordingly, any contract which purports to change that relationship from that of agent to independent contractor is invalid as being contrary to the provisions of the Real Estate Law. (Gipson v. Davis Realty Co. (1963) 215 Cal.App.2d 190, 207 (Gipson).) Thus in Gipson, for example, a jury should have been instructed, in a personal injury action arising from a car accident, that a driver, a salesperson operating under a real estate firms brokers license was an agent as a matter of law, even though a contract between him and the firm designated him an independent contractor. (Id. at pp. 200-203, 206.) The court deemed regulatory laws in this area indicative of a legislative intent to create by statute, as between a real estate broker and the salesman licensed under such broker, respectively, the relationship of principal and agent. (Id. at p. 206.)

We accept that the IC agreement in this case might run afoul of legislative policy in some applications (but see Bus. & Prof. Code,  10032, subd. (b) [real estate broker and salesperson licensed under broker may contract between themselves as independent contractors or as employer and employee, for purposes of their legal relationship with and obligations to each other), but the agreement does not control whether Warren was actually or ostensibly authorized to engage in private funding with plaintiffs. In Gipson, the salesperson worked for and in the offices of the realtor, and there seems to have been no question that the noon hour accident occurred during the salespersons work day. (Gipson, supra, 215 Cal.App.2d at p. 195.) Argument on the other side was not that the salesperson was acting outside the scope of his employment at the time of the accident but, rather, that the leased space arrangement and other circumstances, like a low degree of control exercised over him, showed that there was no employer/employee relationship at all. (Id. at pp. 200, 204.)

We accept, from the very agreement of which plaintiffs complain, that Warren worked as a sales agent for MLS and, to that extent, operated at those times under the licensed broker, MLS, which as a matter of law held the license for its salespersons. (See Grand v. Griesinger (1958) 160 Cal.App.2d 397, 405.) The question is whether the transactions at issue here were made within the course and scope of that agency, and the overwhelming proof is that they were not. Contrary to plaintiffs arguments, this conclusion also does not turn on whether we deem Warren a part time employee. The label part time is not conferred by the IC agreement, but is a recognition, from the few loans Warren procured for MLS, that Warren apparently spent most of his work time doing other things. We assume, moreover, that the IC agreement, which did not preclude other employment, allowed Warren to act as MLSs agent as much or as little as he chose. The issue is not even whether the role of Warren, at those times, was independent contractor or employee. It is only whether there is a triable issue of fact whether he was acting in the course and scope of that relationship during the transactions of which plaintiffs complain. There was no triable issue in that regard.

Because of the lack of an agency relationship, MLS is not liable to plaintiffs for breach of fiduciary duties (Roberts v. Lomanto (2003) 112 Cal.App.4th 1553, 1562-1564) arising out of such a relationship.

C. Agency as a Matter of Law

We reject all of plaintiffs efforts to establish agency as a matter of law. First, their cited cases characterizing the broker/salesperson relationship as agency as a matter of law, rather than fact, do not involve factual disputes whether a salesperson was acting in the court and scope of the agency when he or she acted. (Gipson v. Davis Realty Co., supra, 215 Cal.App.2d at pp. 200, 205; cf. Grand v. Griesinger, supra, 160 Cal.App.2d at pp. 405). Carried to its illogical conclusion, plaintiffs insistence that Warren is an agent as a matter of law, regardless of whether he acted in the course and scope of his agency relationship, would make any broker a guarantor for its salespersons, whatever their acts.

Second, plaintiffs fail in trying to discredit, as wrongly decided, this Divisions decision in Boquilon v. Beckwith (1996) 49 Cal.App.4th 1697 (Boquilon), which is highly analogous. The plaintiff couple there, the Boquilons, disputed a trial court finding that a real estate agent, Beckwith, was not acting as an agent of Panda Realty, where Beckwith had her office, when she made personal, unsecured loans to plaintiffs and eventually took title to their property. (Id. at pp. 1703-1708.) We upheld the finding, explaining: [T]here is no real dispute that the loans made to Mr. Boquilon to pay off his gambling debts were made by Beckwith acting in her individual capacity. The funds came from Beckwiths personal checking account, and the loans were evidenced by a note and (an unrecorded) deed of trust executed in favor of Beckwith personally. More importantly, however, it is undisputed that the Boquilons conveyed their residence to Beckwith personally, not to Panda Realty (or to Beckwith in some representative capacity), and that there was no subsequent transfer to Panda Realty as an entity. (Id. at p. 1720.)

Plaintiffs urge that to apply Boquilon here runs afoul of the law and legislative policy underlying broker/salesperson regulation, but we disagree. Boquilon is consistent with the law set out earlier in this opinion, and on a policy level, plaintiffs do not dispute MLSs apparently correct observations that the personal transactions by Warren in this case, who acted as a principal rather than an agent for anothers interests, did not require a brokers license. [A] license is required if a person is acting as an agent for another person. The license law only applies when the broker or salesperson is acting as an agent for another; it is not applicable when the person is clearly acting as a principal. (2 Miller & Starr, Cal. Real Estate (3d ed. 2000)  4.4, p. 10, fn. omitted.) The license law is not offended. Indeed, it appears that this would be so even if Warren had held a brokers license himself. (Horning v. Shilberg (2005) 130 Cal.App.4th 197, 204.)

Plaintiffs raise a similar policy argument by arguing that there are triable issues as to whether Warren or MLS was a foreclosure consultant, as defined and regulated for the protection of consumers (Civ. Code,  2945 and 2945.1 et seq.), but this appears to rest on the unsupported assumption that Warren was acting within the authority of his relationship with MLS. Since MLS had no direct dealings with plaintiffs, it seems that its only conceivable liability would be vicarious, as some sort of representative of Warren under the relevant statutes (id.,  2945.9, subd. (b)).^[5]We see no factual basis for this.

D. Piercing the Corporate Veil

Plaintiffs urge that they should be allowed to pierce the corporate veil of MLS to hold the Hubers liable. This raises issues about the scope and correctness of observations by the Ninth Circuit in Holley v. Crank, supra, 400 F.3d 667, and by the federal Supreme Court in Meyer v. Holley (2003) 537 U.S. 280, on the state of California law in this area (see fn. 3, ante). We need not decide those questions. A more basic deficiency is that plaintiffs amended FAC does not contain sufficient allegations to support piercing the corporate veil. For this equitable theory, plaintiffs must plead, as well as prove, such a unity of interest and ownership that the separate personalities of the corporation and the individuals do not exist, and that an inequity will result if the corporate entity is treated as the sole actor. [Citations.] (Vasey v. California Dance Co. (1977) 70 Cal.App.3d 742, 749.) Nothing of the sort is pleaded here, only that the Hubers hold shares in MLS (their degree of ownership unspecified) and are corporate officers and/or wield authority under a brokers license.

As for other allegations of responsibility on the part of the Hubers for the acts of Warren or MLS, plaintiffs bare allegations that the Hubers are corporate officers fall far short of overcoming settled law that a corporate officer, short of personal involvement, cannot be held vicariously liable for the torts of the corporation or its agents. (Frances T. v. Village Green Owners Assn. (1986) 42 Cal.3d 490, 503-505.) Plaintiffs do not show error in the demurrer rulings.

IV. DISPOSITION

The judgments are affirmed.

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Haerle, J.

We concur:

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Kline, P.J.

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Lambden, J.

Publication Courtesy of California attorney referral.

Analysis and review provided by Vista Property line Lawyers.

^[1] The written tentative ruling stated in pertinent part: The Hubers demur to the FAC as amended on the ground that it contains no charging allegations against them, and does not, as a matter of law, state a claim against them. This court agrees, and finds that the facts alleged in the FAC establish that the Hubers cannot be held personally liable for Warrens acts, and that in opposing the demurrer plaintiffs have not proposed any facts they could allege that would render the Hubers personally liable. . . .

As to Michelle Hubers, the amendment states that she is a licensed real estate broker and the designated officer of MLS. Under California law, a real estate agent can only act through a licensed broker, and where the real estate agent is employed directly by the broker, that broker can be held liable to third persons for the agents tortious acts. (See Cal. Real Est., Miller & Starr (3d ed.) [ 3:19], pp. 100-102.) Where, however, the agent is employed by a corporate broker, which acts through a qualified broker who is the responsible managing employee, the corporation can be held liable to third persons for the agents tortious acts, and the qualified broker/supervisor can be administratively disciplined for failing to adequately supervise the agent, but, absent personal misconduct by the qualified broker/supervisor, he or she cannot be held personally liable to the injured third parties for his or her failure to adequately supervise. (Id. at  3:19, p. 104 and 4:23, p. 52, both citing Walters v. Marler (1978) 83 Cal.App.3d 1, 25.)

As pled, plaintiffs FAC and amendment provide no basis for imposing liability upon Michelle Hubers, personally. No facts are alleged to suggest that she, herself, was guilty of any misconduct and plaintiffs have not suggested that they possess any such facts. Rather, plaintiffs argue that under the Ninth Circuit case Holley v. Crank [(9th Cir. 2005)] 400 F.3d 667, a qualified broker/supervisor can be held liable for the torts of the supervised real estate agent. The court cannot agree for two fundamental reasons. First, Holley involved liability under the Federal Fair Housing Act, not California law. Second, even assuming the Holley decision is broad enough to encompass the issues presented here, the federal decision is not binding on this court and, to the extent it is inconsistent with the authorities cited above, the court declines to follow it.

As to Myles Hubers, the amendment states that he is the president of MLS. In evaluating the allegations as to him, the court must look to the general law concerning the extent to which corporate officers may be held personally liable for the torts of the corporation. It is well settled that corporate directors cannot be held vicariously liable for the corporations torts in which they do not participate. Their liability, if any, stems from their own tortious conduct, not form their status as directors or officers of the enterprise. (Frances T. v. Village Green Owners Assoc. (1986) 42 Cal.3d 490, 503.)

Again, the complaint contains no specific allegations that would render Myles Hubers personally liable to plaintiffs, nor have plaintiffs proposed any allegations they could include to cure the defect. . . .

^[2] The tentative read: For the reasons previously expressed in the courts August 22, 2005 ruling, which allowed plaintiffs leave to amend the complaint, the court now sustains the demurrer without leave to amend. The court has again fully reviewed Holley v. Crank[, supra,] 400 F.3d 667 and the reference made to it in the 2006 Miller & Starr supplement. The court remains satisfied with its original decision not to follow the Federal case, particularly in light of California authority to the contrary. The court will note that plaintiffs suggestion that the United States Supreme Court decision in Meyer v. Holley (2003) 537 U.S. 280 supports their position is inaccurate. The Supreme Court did not rule on the issues addressed in Holley v. Crank and relied on by plaintiffs here.

We have taken judicial notice of that action, filed in September 2005, and of the courts ultimate disposition of it by the sustaining of a demurrer without leave to amend based on res judicata, finding that plaintiffs tried to state a new cause of action (Bus. & Prof. Code,  17200 [unfair business practices]), against Michelle Huber, based on the same primary right involved here.

^[3] In deposition, John Ford conceded, in essence, that he had no representations or writings indicating that MLS was involved in funding or arranging the transactions at issue here, that the agreements did not mention MLS, that credit problems foiled initial plans to use MLS, that he and his wife filled out MLS paperwork only to the extent of furnishing social security numbers to start a credit check and that he, as an attorney with real estate experience and word processing ability, helped Warren draft the agreements that did not mention MLS. Nevertheless, he said, he assumed or understood, because of the MLS paperwork and mention early in the process, and because he felt that appraisals were prepared for MLS, that all of Warrens ensuing actions were somehow connected with MLS. He even taunted: Warren was a representative of MLS. If Warren was taking title in his own name as a part of MLS, that was between him and MLS. If he was doing it ultra vires and MLS didnt know about it, then MLS is liable for failing to supervise those kind of activities. [] So, one way or another, you lose. Katherine Ford was more vague on any details of the agreements. Only through Mr. Warren did she understand that MLS was involved, but she did feel that an appraisal was done on MLSs behalf and asserted: MLS and Warren were the same thing as far as I knew. Thats the company he was representing.

^[4] The court, in its adopted tentative ruling, sustained the objections but went on to state that, even if the statements were considered, they would not create a triable issue of material fact to support liability against MLS. Plaintiffs do not challenge any part of the ruling sustaining MLSs objections, and since this included the root objection that the declarations should be stricken altogether as untimely, there is no reason to set out the contents of the proffered declarations.

^[5] (a) A foreclosure consultant is liable for all damages resulting from any statement made or act committed by the foreclosure consultants representative in any manner connected with the foreclosure consultants (1) performance, offer to perform, or contract to perform any of the services described in subdivision (a) of Section 29545.1, (2) receipt of any consideration or property from or on behalf of an owner, or (3) performance of any act prohibited by this article.

(b) Representative for the purposes of this section means a person who in any manner solicits, induces, or causes (1) any owner to contract with a foreclosure consultant, (2) any owner to pay any consideration or transfer title to the residence in foreclosure to the foreclosure consultant, or (3) any member of the owners family or household to induce or cause any owner to pay any consideration or transfer title to the residence in foreclosure to the foreclosure consultant. (Civ. Code,  2945.9.)