Fox v. Prime Ventures, Ltd.

Opinion

SCOTT, J.

This action arises out of the Real Estate Education, Research and Recovery Act (Bus. & Prof. Code, § 10470 et seq.),

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which under certain circumstances provides compensation to persons defrauded by real estate licensees. The liability of the Real Estate Fund (hereafter Fund) is limited to $10,000 per transaction (§ 10471), and $20,000 per licensee for causes of action occurring between July 1, 1964 and January 1, 1975 (§ 10474, subd. (a)). The limit is $40,000 for causes of action occurring after January 1, 1975 (§ 10474, subd. (b)).

The cause of action in the instant case accrued in 1973, placing the maximum liability of the Fund at $20,000 per licensee. The issue on appeal is whether the limit for one or two licensees is applicable. Each of the respondents, Prime Ventures, Ltd., Keys Marina, Inc. and Wesley

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Mart, obtained a final and uncollectible fraud judgment against Charles Heneveld and Sather Gate Mortgage Co., Inc. The obtaining of such a judgment is a prerequisite for the presentation of a valid application for payment from the Fund (§ 10471). At the time of the fraud in question, both Heneveld and Sather Gate were licensed as real estate brokers by the Department of Real Estate. Heneveld was the designated officer of Sather Gate, pursuant to section 10211. The aggregate amount of the judgment against Heneveld and Sather Gate awarded the three respondents herein far exceeded any amounts payable by the Fund pursuant to the act. Upon receipt of respondents’ application for payment the appellant, Real Estate Commissioner of the State of California (Commissioner), responded by filing a petition, pursuant to section 10474.5, for a proration of the Fund’s maximum liability on Heneveld’s and Sather Gate’s licenses.

The trial court determined, upon the basis of the stipulated facts, that respondents were entitled to recover upon the license of Heneveld and the license of Sather Gate. The stipulated facts provide, in essence, that Heneveld purchased the corporation, Sather Gate Mortgage Co., Inc., without any capital investment by pledging the corporate assets to secure the purchase price, and intended to use the corporate shell as a means of inducing the belief by respondents that the corporation was an established business concern. In 1973, respondents deposited in corporate trust accounts sizeable sums of money, which thereafter were fraudulently withdrawn by Heneveld for his personal use. The monies in question were deposited with Sather Gate pursuant to a written agreement with the corporation, and withdrawn by Heneveld in violation of that agreement. Heneveld was the president of Sather Gate; real estate licenses were held by both Heneveld and Sather Gate.