Dodge v. National Surety Co.

California Court of Appeal Dec 24, 1930 No. Docket No. 7711.Published

Before: Nourse

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Holding. The court held that a real estate broker's surety is liable for the fraudulent acts of the broker's licensed salesman committed within the scope of his employment, regardless of whether the broker had personal knowledge of the fraud.

Issues

Whether a complaint failing to allege that a broker acted for compensation is fatally defective when raised for the first time on appeal.
Whether a surety bond covering a broker's faithful performance extends to the fraudulent acts of the broker's licensed employees.
Whether the Real Estate Act's provisions regarding license revocation for an agent's default limit the civil liability of a broker for an agent's wrongs.

Disposition. Affirmed

Quotations verified verbatim against the opinion

“The surety having undertaken to insure the faithful performance of the brokers’ duties under the act the bond included the acts of the brokers’ agents who were employed, and licensed under the same act, to perform those duties.”

“These provisions of the Real Estate Act are penal and are confined to the punishment that may be inflicted on the broker by the real estate commissioner. They have no application to the civil liability of the broker for the wrongs of his agent.”

NOURSE, P. J.

Plaintiffs sued for damages for fraud in relation to a real estate transaction. Defendant Surety Company was joined as the surety on the bond of Lloyd and McElmeel, who were real estate brokers. Defendant Hughes was an employee and salesman for the brokers. Plaintiffs had judgment against the Surety Company on its bond for $2,000 and that defendant appeals on a typewritten clerk’s transcript.

The appeal being on the judgment-roll, no question of fact is involved. The trial court found that Hughes, while acting in the scope of his employment by the brokers, induced the plaintiffs to purchase real property in the state of Nebraska through fraudulent misrepresentations, resulting in damage to plaintiffs in the sum of $2,000.

The first attack on the judgment is that the complaint fails to state a cause of action because it does not allege that Hughes was acting for a compensation. This, it is argued, is necessary because a.real estate broker is defined in the statute (Stats. 1919, p. 1252, sec. 2), as one “who, for a compensation, sells, or offers for sale, buys, or offers to buy, or negotiates the purchase or sale or exchange of real estate”. The complaint alleges that Lloyd and McElmeel were copartners duly licensed as real estate brokers under the fictitious name of West Coast Colonization Company and that Hughes was employed by them as a duly licensed real estate salesman. It is then alleged that, while acting as such salesman and agent, Hughes conducted the transactions complained of. By stipulation of the parties there has been added to the record a written agreement under which plaintiffs promised to pay a commission to Hughes when the Nebraska land was sold.

At the outset we may concede that pleadings of this character are not to be approved. If the point had been raised on demurrer the defect might have been easily remedied, and, so far as we may know from the record

[620]

brought up, this might have been done during the course of the trial. When the objection to the complaint may be cured by stipulation or by the admission of proof without objection we may assume that it has been cured when the point is raised for the first time on an appeal based on the judgment-roll alone. We so held in

Dodge v. National Surety Co.

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NOURSE, P. J.

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