Judge Curtis A. Kin, Case Number: 22STCP03985, Date: 2024-01-30 Tentative Ruling

Petitioner Maria De Jesus Abundis petitions for a writ of mandate directing respondent California Department of Real Estate, Douglas R. McCauley, Real Estate Commissioner to set aside the October 10, 2022 final decision to deny petitioner’s application for a Mortgage Loan Originator license and to issue said license.

On July 17, 2004, the Department of Real Estate (“DRE”) issued petitioner Maria De Jesus Abundis a salesperson license.[1] (AR 68.) In October 2005, petitioner got a listing to sell a home. (AR 67, 400:18-20, 408.) The sellers called her on the phone telling her they wanted to sell their home. (AR 143, 207-08, 399, 403.) Petitioner prepared the paperwork for the transaction and spoke to her broker about it. (AR 404-05.) At least one of the sellers followed up with petitioner asking about the status of the transaction, as the seller was looking for money to feed their children during the holidays. (AR 404:25-405:9.) Petitioner spoke English and Spanish with her clients, the sellers. (AR 400.)

At the time, petitioner was 29 years of age. (AR 10 [no. 12], 408.) Petitioner was an independent contractor fulfilling a one-year commitment to broker Gerardo Montelongo. (AR 355-57, 396:21-25.) According to petitioner, Montelongo told her to close the transaction as soon as possible. (AR 404:20-24.) Petitioner did not receive a commission from the transaction. (AR 407:22-25.)

In February 2007, petitioner’s former clients sued her and Montelongo for fraud, among other causes of action, related to the sale of their home. (AR 143-59, 258-83.) The civil complaint alleged that petitioner, while working for employer-broker Montelongo, deceived her clients into participating as sellers of their property in an illusory real estate transaction involving a “straw man” buyer who was a friend of petitioner. The employer-broker was a broker for both sides of the transaction, acted as the loan agent, and received a commission for the transaction. After the transaction was consummated, the straw man buyer reconveyed the “sold” property back to the seller’s wife as a “gift.” In connection with facilitating the transaction, petitioner was accused of making false representations to the sellers that they would obtain a lower interest rate and lower monthly payments, whereas the payments and interest rate instead increased after the transaction. (AR 8, 146-47 [First Amended Complaint for Damages ¶12].)

In February 2010, petitioner appeared in pro se to defend herself at the bench trial in the civil fraud action. (AR 130, 132.) Montelongo did not appear at trial. (AR 130.) In August 2010, the court entered its statement of decision in favor of plaintiff sellers and against petitioner and her former broker. (AR 131-32.) In September 2010, the court entered judgment awarding $135,000 in damages against petitioner and her former broker “jointly and severally” for “fraud and breach of fiduciary duties,” $142,245.50 in attorney’s fees, and $11,959.00 in costs. (AR 130-32.)

The DRE suspended petitioner’s license and lifted it less than a month later after she paid $50,400 ($50,000 damages + $400 interest) to the DRE Recovery Account Program. The DRE had become the assignee of the judgment after paying the civil fraud plaintiffs $50,000 for assignment of the plaintiffs’ judgment rights. (AR 8-9, 68, 76, 123 [ROA 239], 409:2-7.) A partial satisfaction of judgment was subsequently filed. (AR 124 [ROA 247], 127, 350, 382.)

In July 2017, the judgment was renewed for the total sum of $426,563.22. (AR 78-82, 125 [ROA 253], 127, 352-54, 382-83.) No additional payments have been made toward satisfying the judgment. (AR 10 [¶ 12], 409:11-13 [petitioner stipulated that judgment remains outstanding less credit of $50,000].)

On June 20, 2012, the DRE issued a broker license to petitioner. (AR 68.) Other than the civil judgment discussed above, petitioner has not received any complaints or been subject to disciplinary action from the DRE. (AR 68.)

Since the civil judgment, petitioner has been active in her church. (AR 335.) Petitioner leads counseling groups at retreats and church events, where she teaches about “justice, honesty, and integrity.” (AR 335.) Petitioner’s church hired her to assist with its lease contracts. (AR 335.)

Several of petitioner’s religious and professional colleagues wrote letters supporting her character. (AR 333-42.) Petitioner contends that at least five of these colleagues were aware of petitioner’s civil liability. (AR 386:24-389:10.) Rosa Baltazar, a member of petitioner’s church, remarked how petitioner “[g]ives everyone an equal opportunity” and “treat[s] her clients…with respect, honesty, and

integrity.” (AR 336.) Kay Wilson-Bolton, president of Real Estate Magic, Inc. and former colleague of petitioner, wrote that petitioner was “one of the gems in the real estate business with a stellar career as a business leader.” (AR 338.) Miguel Guzman, who petitioner represented in the purchase of a house, described how petitioner provided him with excellent service for over a year to help his family secure a dream home. (AR 334.) Guzman, also a member of petitioner’s church, stated that she was a “role model for others at church and in the community.” (AR 334.)

Petitioner has completed various training programs and vocational courses related to real estate transactions. In 2020, petitioner completed four consumer protection courses with Real Estate Trainers, Inc. as part of her continuing education, covering subjects like real estate red flags, real estate contracts, and disclosure obligations. (AR 347.) Petitioner has successfully completed her Realtor Code of Ethics Training with the National Association of Realtors. (AR 346, 348.)

Petitioner has also completed various ethics and morals courses in her church, on subjects like citizenship, charity, and integrity. (AR 383:12-384:21.)

In 2021, petitioner applied for a Mortgage Loan Originator (“MLO”) license endorsement to help Latina families in underserved communities secure home ownership. (AR 69, 71, 77, 410:23-411:14.) Petitioner disclosed the outstanding judgment. (AR 74 [D], 76, 77.) In her sworn application, petitioner stated she had been sued for a “real estate listing.” (AR 76-77.) Petitioner also stated: “[T]he judgment was given to the DRE and the DRE paid my enemy $50,000, so DRE suspended my license until I was able to pay the DRE back the $50,000.” (AR 76.)

After receiving petitioner’s application for an MLO endorsement, the DRE issued a Statement of Issues finding cause to deny the application and requested a hearing. (AR 51-55, 59-66.) Petitioner requested an evidentiary hearing. (AR 51-56, 58.)

On July 13, 2022, an evidentiary hearing was held. (AR 5, 358-62.) The DRE’s exhibits were received in evidence by stipulation. (AR 22, 26-330 [exhibits 1-7], 361, 363.) Most of petitioner’s exhibits were received in evidence without limitation. (AR 22, 342-354 [exhibits B-D], 361, 379-85.) Petitioner’s character reference letters (AR 333-341 [exhibit A],) however, were received in evidence, but considered “as administrative hearsay.” (AR 23-24 and 379:6-17.)

Petitioner denied committing fraud. (AR 390:9-10 [“[Q]: Did you commit fraud? THE WITNESS: No”].) When asked if she did anything wrong, petitioner blamed the broker:

A: No. I was following the instructions of the broker. He was my broker. It was my first listing.

When asked about her claimed rehabilitation, petitioner took no responsibility for what happened and instead faulted others and suggested she herself was a victim. (AR 389.)

A: From -- from -- from the -- from the -- I felt defrauded. I felt like -- like a child that -- that is lied to. From -- from all the lies and deceit. And also it was very hard. And actually it has been very hard. It’s been hindering my -- well, you know, my person for a long time.

(AR 389:16-22.) When again asked whether she had done anything wrong, petitioner testified that she was “naïve” and “too trusting” and apologized “for that.” (AR 406:10-407:12.)

On August 3, 2022, Administrative Law Judge (“ALJ”) Eileen Cohn issued a proposed decision denying petitioner’s application of an MLO license endorsement. (AR 5-16.)

The ALJ acknowledged that petitioner, as a then new mother, made payment to the DRE Recovery Account “at great sacrifice to her and her young family.” (AR 10 [¶ 12].) Montelongo, the broker, has never made any payment. (AR 10 [¶ 12].) The ALJ acknowledged that petitioner’s real estate license has not been disciplined by the DRE, petitioner’s act of fraud and conviction were in the “distant past,” petitioner was the only defendant in the case to make restitution to the DRE, petitioner has a stable family life, and petitioner was active in her church and community. (AR 9-11 [summarizing mitigating and rehabilitation evidence], 15 [¶ 10].)

Nevertheless, the ALJ cited the civil case filed against petitioner as cause for denial. (AR 14 [¶ 7].) The proposed decision related that, given the stringent requirements for an MLO license endorsement, and the attention to detail required for such an endorsement, petitioner failed to provide sufficient evidence that the public would be protected by giving her the endorsement. (AR 6.) Despite having received certain evidence of rehabilitation, the ALJ ultimately concluded: “On the other hand, the civil judgment established a degree of carelessness in real estate transactions involving Spanish-speaking clients, the very clients [petitioner] intends to serve.” (AR 15 [¶ 10].) The ALJ concluded as follows:

[Petitioner’s] evidence in mitigation and rehabilitation establishes her to be a trustworthy and competent real estate broker, but her activities as a real estate broker are segregated from the MLO, and given the circumstances of the civil judgment, there is insufficient evidence the public, especially the Spanish-speaking community she intends to serve, will be adequately protected by allowing her to combine her skills as a broker with that of a MLO which requires an attention to financial details.

On September 20, 2022, Douglas R. McCauley, the Real Estate Commissioner (“Commissioner”), adopted the proposed decision, which became effective October 10, 2022. (AR 3-20.) The decision’s findings included, among other things, that: (1) denial of the application was based on the fraud civil judgment; (2) the judgment held petitioner jointly and severally liable for fraud; and (3) petitioner was 29 years of age at the time of the transaction, which resulted in the civil judgment against her. (AR 6-10.)

On October 6, 2022, the Commissioner denied petitioner’s petition for reconsideration. (AR 1-2.)

On November 7, 2022, petitioner Maria De Jesus Abundis filed a Verified Petition for Writ of Mandate. On November 30, 2023, respondent California Department of Real Estate, Douglas R. McCauley, Real Estate Commissioner filed an Answer. On November 29, 2023, petitioner filed an opening brief. On December 21, 2023, respondent filed an opposition. On January 12, 2024, petitioner filed a reply. The Court has received the administrative record lodged by respondent.

Under CCP § 1094.5(b), the pertinent issues are whether the respondent has proceeded without jurisdiction, whether there was a fair trial, and whether there was a prejudicial abuse of discretion. An abuse of discretion is established if the agency has not proceeded in the manner required by law, the decision is not supported by the findings, or the findings are not supported by the evidence. (CCP § 1094.5(b).)

“An attempt to obtain a license to engage in a profession or business does not involve a fundamental vested right.” (Harrington v. Department of Real Estate (1989) 214 Cal.App.3d 394, 404.) “Where no fundamental vested right is involved, the superior court’s review is limited to examining the administrative record to determine whether the adjudicatory decision and its findings are supported by substantial evidence in light of the whole record.” (JKH Enterprises, Inc. v. Department of Industrial Relations (2006) 142 Cal.App.4th 1046, 1057.) Because the administrative decision at issue concerns the denial of a license, the Court reviews the DRE’s decision for substantial evidence.

Substantial evidence is “relevant evidence that a reasonable mind might accept as adequate to support a conclusion” (California Youth Authority v. State Personnel Board (2002) 104 Cal.App.4th 575, 584-85), or evidence of ponderable legal significance which is reasonable, credible and of solid value (Kuhn v. Department of General Services (1994) 22 Cal.App.4th 1627, 1633). “Courts may reverse an [administrative] decision only if, based on the evidence…a reasonable person could not reach the conclusion reached by the agency.” (Sierra Club v. California Coastal Com. (1993) 12 Cal.App.4th 602, 610.)

An agency is presumed to have regularly performed its official duties. (Evid. Code § 664.) A reviewing court “will not act as counsel for either party to an appeal and will not assume the task of initiating and prosecuting a search of the record for any purpose of discovering errors not pointed out in the briefs.” (Fox v. Erickson (1950) 99 Cal.App.2d 740, 742.) When an appellant challenges “‘the sufficiency of the evidence, all material evidence on the point must be set forth and not merely their own evidence.’ [Citation.]” (Toigo v. Town of Ross (1998) 70 Cal.App.4th 309, 317.)

“On questions of law arising in mandate proceedings, [the Court] exercise[s] independent judgment.’” (Christensen v. Lightbourne (2017) 15 Cal.App.5th 1239, 1251.) The interpretation of statute or regulation is a question of law. (See State Farm Mut. Auto. Ins. Co. v. Quackenbush (1999) 77 Cal.App.4th 65, 71.)

Mortgage loan originators are individuals “who take[] a residential mortgage loan application or offers or negotiates terms of a residential mortgage loan for compensation or gain.” (Bus. & Prof. Code § 10166.01(b)(1).)[2] A real estate salesperson may not engage in business as an MLO without obtaining and maintaining an MLO license endorsement. (§ 10166.02(b)(2).)

The DRE administers the MLO license endorsement. (§ 10151(e).) The Commissioner “has full power to regulate and control the issuance…all licenses to be issued….” (§ 10071.) “Protection of the public shall be the highest priority for the Department of Real Estate in exercising its licensing, regulatory, and disciplinary functions. Whenever the protection of the public is inconsistent with other interests sought to be promoted, the protection of the public shall be paramount.” (§ 10050.1.)

The Commissioner shall not issue an MLO endorsement unless the Commissioner finds that the applicant “has demonstrated such financial responsibility, character, and general fitness as to command the confidence of the community and warrant a determination that the mortgage loan originator will operate honestly, fairly, and efficiently….” (§ 10166.05(c).) This finding required of the Commissioner “relates to any matter, personal or professional, that may impact upon an applicant's propensity to operate honestly, fairly, and efficiently when engaging in the fiduciary role” of an MLO. (10 C.C.R. § 2758.3.) If an applicant’s personal history includes any judgments for fraud, misrepresentation, or dishonest dealing, the applicant “may” be precluded from obtaining an MLO endorsement. (Id. § 2758.3(a)(1).)

The DRE is required to consider whether an applicant has made a showing of rehabilitation. (§ 482.) The following factors are relevant to the instant proceeding and considered in determining whether an applicant is rehabilitated for purposes of issuing a license are:

The applicant for a license has the burden of proof in application proceedings. (Martin v. Alcoholic Beverage Control Appeals Bd. of Cal. (1959) 52 Cal.2d 259, 265.) “[T]he more serious the misconduct and the bad character evidence, the stronger the applicant's showing of rehabilitation must be.” (In re Gossage (2000) 23 Cal.4th 1080, 1096.)

Petitioner was found liable for fraud in a civil action. (AR 8, 146-47 [¶ 12], 159, 131-32.) Under Business and Professions Code § 2758.3(a)(1), petitioner may be precluded from obtaining an MLO license endorsement.

Petitioner contends that the licensing requirements for a real estate license are analogous to the MLO requirements. Business and Professions Code § 10177(j) allows the Commissioner to deny a real estate license to an applicant if the applicant engaged in fraud or dishonest dealing. (§ 10177(j).) According to petitioner, the DRE cannot claim that petitioner satisfies the requirements of a salesperson or broker license, but not an MLO license endorsement. (AR 68.) However, the requirements to obtain a non-MLO related license are not at issue here. The Court’s analysis here is whether, under the statutes pertaining to the MLO license endorsement, substantial evidence supports the findings and decision of the ALJ.

Petitioner maintains that she has rehabilitated. However, petitioner did not make a sufficient showing that her attitude has changed since entry of the civil judgment against her. (10 C.C.R. § 2911(14).) “Fully acknowledging the wrongfulness of [one’s] actions is an essential step towards rehabilitation.” (Seide v. Committee of Bar Examiners (1989) 49 Cal.3d 933, 940.) In petitioner’s application for an MLO license endorsement, she referred to the plaintiffs in whose favor the civil judgment was entered as “my enemy.” (AR 76, 130-32.) Further, during the administrative hearing, instead of admitting any responsibility, petitioner blamed the broker and denied committing fraud. (AR 390:9-10, 390:12-14.) During the hearing, petitioner admitted speaking to the sellers and preparing paperwork for the transaction. (AR 400, 404-05.) This is significant in that plaintiffs in the civil fraud action alleged they entered into the transaction under the belief their mortgage payments would decrease by “follow[ing] the instructions and advice of [petitioner].” (AR 147.)

The contrition petitioner expressed during the administrative hearing was her apology for being naïve and too trusting. (AR 406:10-407:12.) That is neither an apology nor acknowledgment of her conduct. It certainly does not address the civil plaintiffs’ claims of fraud, namely, that the defendants, including petitioner, had represented to the sellers that their loan payments would be reduced if they sold their home to a “straw man.” (AR 146-47 [¶12].) Petitioner cannot be said to have fully acknowledged the wrongfulness of her actions leading to the civil judgment.

Moreover, petitioner has not demonstrated that she has made any bona fide attempts to make payments to satisfy the judgment. (AR 10 [¶ 12], 409:11-13; 10 C.C.R. § 2911(a)(2), (a)(10).) She made the required $50,400 payment to reverse the suspension of her salesperson license. (AR 8-9, 68, 76, 123 [ROA 239], 409:2-7.) Even though the broker with whom she was affiliated has not made any payment of the judgment, petitioner remains jointly and severally liable under the judgment. (AR 130-32.) Petitioner has not demonstrated that she is incapable of making even minimal installment payments to further satisfy the judgment. Further, the timing and amount of petitioner’s partial satisfaction of the judgment is as consistent with her self-interest in obtaining her suspended license as it is with rehabilitation and making amends for her actions.

With respect to the other factors listed in the section above, the Court recognizes the evidence discussed in section I.B above could weigh in favor of a finding that petitioner has rehabilitated. Indeed, the ALJ also found that petitioner had provided “compelling evidence in mitigation and rehabilitation.” (AR 6.) Even crediting such evidence, however, full acknowledgment of the wrongfulness of the acts leading to the civil judgment is “essential” toward rehabilitation. (Seide, 49 Cal.3d at 940.) For the reasons stated above, petitioner has failed to fully acknowledge any wrongdoing. Accordingly, applying the “substantial evidence” standard of review, a reasonable person could find, as the ALJ did, that the civil judgment against petitioner evidences a carelessness and inattention to financial details that could harm the public, especially the Spanish-speaking community petitioner intends to serve, should the DRE approve an MLO license endorsement. (AR 15 [¶¶ 10, 11].)

Because substantial evidence supports the denial of petitioner’s application for an MLO license endorsement, this Court does not disturb the decision. (Northern Inyo Hospital v. Fari Employment Practices Comm’n (1974) 38 Cal.App.3d 14, 24 [under substantial evidence standard, trial court may not disregard or overturn the agency finding “for the reasons that it is considered that a contrary finding would have been equally or more reasonable”].)

The petition for writ of mandate is DENIED. Pursuant to Local Rule 3.231(n), respondent California Department of Real Estate, Douglas R. McCauley, Real Estate Commissioner shall prepare, serve, and ultimately file a proposed judgment.

[1] Petitioner was formerly known as Maria De Jesus Navarro, her name before marriage. (AR 7, 68, 284.)

[2] All further references are to the Business and Professions Code, unless otherwise noted.